exv10w1



 





Ds.Execution Version








 

 




CREDIT AGREEMENT




Dated as of February 24, 2006




among




CONCHO RESOURCES INC.

as the Borrower,




JPMORGAN CHASE BANK, N.A.,

as Administrative Agent, Swing Line Lender

and

L/C Issuer,




BANK OF AMERICA, N.A.,

as Syndication Agent




and




WACHOVIA BANK, NATIONAL ASSOCIATION




and




BNP PARIBAS,

as Documentation Agents




and




The Other Lenders Party Hereto




J.P. MORGAN SECURITIES INC.

and

BANC OF AMERICA SECURITIES LLC,

as

Joint Lead Arrangers and Joint Book Managers




 

 






	 	 	 
	

	 	
















 






TABLE OF CONTENTS




	 	 	 	 	 	 	 	 	 	 	 
	 	 	 	 	 	 	 	 	Page
	 
	ARTICLE I DEFINITIONS AND ACCOUNTING TERMS	 	 	3	 
	 

	 	 	1.01	 	 	Defined Terms
	 	 	3	 
	 

	 	 	1.02	 	 	Other Interpretive Provisions
	 	 	27	 
	 

	 	 	1.03	 	 	Accounting Terms
	 	 	27	 
	 

	 	 	1.04	 	 	Rounding
	 	 	27	 
	 

	 	 	1.05	 	 	Times of Day
	 	 	28	 
	 

	 	 	1.06	 	 	Letter of Credit Amounts
	 	 	28	 
	 

	 	 	1.07	 	 	Classifications of Loans and Borrowings
	 	 	28	 
	 

	 	 	1.08	 	 	Oil and Gas Definitions
	 	 	28	 
	ARTICLE II THE COMMITMENTS AND CREDIT EXTENSIONS	 	 	28	 
	 

	 	 	2.01	 	 	Revolving Loans
	 	 	28	 
	 

	 	 	2.02	 	 	Loans and Borrowings
	 	 	28	 
	 

	 	 	2.03	 	 	Requests for Revolving Borrowings
	 	 	29	 
	 

	 	 	2.04	 	 	Letters of Credit
	 	 	30	 
	 

	 	 	2.05	 	 	Swing Line Loans
	 	 	34	 
	 

	 	 	2.06	 	 	Funding of Borrowings
	 	 	35	 
	 

	 	 	2.07	 	 	Interest Elections
	 	 	35	 
	 

	 	 	2.08	 	 	Termination or Reduction of Commitments; Reduction of Borrowing Base
	 	 	37	 
	 

	 	 	2.09	 	 	Repayment of Loans
	 	 	37	 
	 

	 	 	2.10	 	 	Optional Prepayment of Loans
	 	 	38	 
	 

	 	 	2.11	 	 	Mandatory Prepayment of Loans
	 	 	38	 
	 

	 	 	2.12	 	 	Fees
	 	 	39	 
	 

	 	 	2.13	 	 	Interest
	 	 	40	 
	 

	 	 	2.14	 	 	Alternate Rate of Interest
	 	 	41	 
	 

	 	 	2.15	 	 	Increased Costs
	 	 	42	 
	 

	 	 	2.16	 	 	Break Funding Payments
	 	 	43	 
	 

	 	 	2.17	 	 	Taxes
	 	 	43	 
	 

	 	 	2.18	 	 	Payments Generally; Pro Rata Treatment; Sharing of Set-offs
	 	 	44	 
	 

	 	 	2.19	 	 	Mitigation Obligations; Replacement of Lenders
	 	 	46	 
	ARTICLE III BORROWING BASE AND CONFORMING BORROWING BASE	 	 	47	 






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	 	 	 	 	 	 	 	 	Page
	 
	 

	 	 	3.01	 	 	Initial Borrowing Base and Initial Conforming Borrowing Base
	 	 	47	 
	 

	 	 	3.02	 	 	Scheduled Redeterminations of the Borrowing Base; Procedures and Standards	 		47	 
	 

	 	 	3.03	 	 	Special Redeterminations
	 	 	49	 
	 

	 	 	3.04	 	 	Notice of Redetermination
	 	 	49	 
	 

	 	 	3.05	 	 	Special 2006 Redetermination
	 	 	49	 
	ARTICLE IV CONDITIONS PRECEDENT TO CREDIT EXTENSIONS	 	 	49	 
	 

	 	 	4.01	 	 	Conditions of Initial Credit Extension
	 	 	49	 
	 

	 	 	4.02	 	 	Conditions to all Credit Extensions
	 	 	52	 
	ARTICLE V REPRESENTATIONS AND WARRANTIES	 	 	53	 
	 

	 	 	5.01	 	 	Existence, Qualification and Power; Compliance with Laws
	 	 	53	 
	 

	 	 	5.02	 	 	Authorization; No Contravention
	 	 	53	 
	 

	 	 	5.03	 	 	Governmental Authorization; Other Consents
	 	 	54	 
	 

	 	 	5.04	 	 	Binding Effect
	 	 	54	 
	 

	 	 	5.05	 	 	Financial Statements; No Material Adverse Effect
	 	 	54	 
	 

	 	 	5.06	 	 	Litigation
	 	 	54	 
	 

	 	 	5.07	 	 	No Default
	 	 	55	 
	 

	 	 	5.08	 	 	Ownership of Property; Liens
	 	 	55	 
	 

	 	 	5.09	 	 	Environmental Compliance
	 	 	55	 
	 

	 	 	5.10	 	 	Insurance
	 	 	55	 
	 

	 	 	5.11	 	 	Taxes
	 	 	55	 
	 

	 	 	5.12	 	 	ERISA Compliance
	 	 	55	 
	 

	 	 	5.13	 	 	Subsidiaries; Equity Interests
	 	 	56	 
	 

	 	 	5.14	 	 	Margin Regulations; Investment Company Act
	 	 	56	 
	 

	 	 	5.15	 	 	Disclosure
	 	 	56	 
	 

	 	 	5.16	 	 	Compliance with Laws
	 	 	57	 
	 

	 	 	5.17	 	 	Licenses, Permits and Franchises
	 	 	57	 
	 

	 	 	5.18	 	 	Liens Under the Security Instruments
	 	 	57	 
	 

	 	 	5.19	 	 	Mortgages with Respect to Borrowing Base Properties
	 	 	57	 
	 

	 	 	5.20	 	 	Solvency
	 	 	57	 






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	 	 	 	 	 	 	 	 	Page
	 
	 

	 	 	5.21	 	 	Direct Benefit
	 	 	57	 
	ARTICLE VI AFFIRMATIVE COVENANTS	 	 	58	 
	 

	 	 	6.01	 	 	Financial Statements
	 	 	58	 
	 

	 	 	6.02	 	 	Certificates; Other Information
	 	 	59	 
	 

	 	 	6.03	 	 	Notices
	 	 	61	 
	 

	 	 	6.04	 	 	Payment of Obligations
	 	 	61	 
	 

	 	 	6.05	 	 	Preservation of Existence, Etc
	 	 	62	 
	 

	 	 	6.06	 	 	Maintenance of Properties
	 	 	62	 
	 

	 	 	6.07	 	 	Maintenance of Insurance
	 	 	62	 
	 

	 	 	6.08	 	 	Compliance with Laws
	 	 	62	 
	 

	 	 	6.09	 	 	Books and Records
	 	 	62	 
	 

	 	 	6.10	 	 	Inspection Rights
	 	 	62	 
	 

	 	 	6.11	 	 	Use of Proceeds
	 	 	63	 
	 

	 	 	6.12	 	 	Additional Guarantors
	 	 	63	 
	 

	 	 	6.13	 	 	Operations
	 	 	63	 
	 

	 	 	6.14	 	 	Delivery of Title Opinions
	 	 	64	 
	 

	 	 	6.15	 	 	Minimum Hedging
	 	 	64	 
	 

	 	 	6.16	 	 	Further Assurances
	 	 	64	 
	ARTICLE VII NEGATIVE COVENANTS	 	 	65	 
	 

	 	 	7.01	 	 	Liens
	 	 	65	 
	 

	 	 	7.02	 	 	Investments
	 	 	66	 
	 

	 	 	7.03	 	 	Indebtedness
	 	 	67	 
	 

	 	 	7.04	 	 	Fundamental Changes
	 	 	67	 
	 

	 	 	7.05	 	 	Dispositions
	 	 	68	 
	 

	 	 	7.06	 	 	Restricted Payments
	 	 	69	 
	 

	 	 	7.07	 	 	Change in Nature of Business
	 	 	69	 
	 

	 	 	7.08	 	 	Transactions with Affiliates
	 	 	69	 
	 

	 	 	7.09	 	 	Burdensome Agreements
	 	 	69	 
	 

	 	 	7.10	 	 	Use of Proceeds
	 	 	70	 
	 

	 	 	7.11	 	 	Financial Covenants
	 	 	70	 






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	 	 	 	 	 	 	 	 	Page
	 
	 

	 	 	7.12	 	 	Swap Contracts
	 	 	70	 
	 

	 	 	7.13	 	 	Limitation on Sale/Leasebacks
	 	 	71	 
	 

	 	 	7.14	 	 	Disqualified Stock
	 	 	71	 
	ARTICLE VIII EVENTS OF DEFAULT AND REMEDIES	 	 	71	 
	 

	 	 	8.01	 	 	Events of Default
	 	 	71	 
	 

	 	 	8.02	 	 	Remedies Upon Event of Default
	 	 	73	 
	 

	 	 	8.03	 	 	Application of Funds
	 	 	73	 
	 

	 	 	8.04	 	 	Production Proceeds
	 	 	74	 
	ARTICLE IX ADMINISTRATIVE AGENT	 	 	75	 
	 

	 	 	9.01	 	 	Appointment and Authority
	 	 	75	 
	 

	 	 	9.02	 	 	Rights as a Lender
	 	 	75	 
	 

	 	 	9.03	 	 	Exculpatory Provisions
	 	 	75	 
	 

	 	 	9.04	 	 	Reliance by Administrative Agent
	 	 	76	 
	 

	 	 	9.05	 	 	Delegation of Duties
	 	 	77	 
	 

	 	 	9.06	 	 	Resignation of Administrative Agent
	 	 	77	 
	 

	 	 	9.07	 	 	Non-Reliance on Administrative Agent and Other Lenders
	 	 	77	 
	 

	 	 	9.08	 	 	No Other Duties, Etc
	 	 	78	 
	 

	 	 	9.09	 	 	Administrative Agent May File Proofs of Claim
	 	 	78	 
	 

	 	 	9.10	 	 	Collateral and Guaranty Matters
	 	 	78	 
	ARTICLE X MISCELLANEOUS	 	 	79	 
	 

	 	 	10.01	 	 	Amendments, Etc
	 	 	79	 
	 

	 	 	10.02	 	 	Notices; Effectiveness; Electronic Communication
	 	 	80	 
	 

	 	 	10.03	 	 	No Waiver; Cumulative Remedies
	 	 	82	 
	 

	 	 	10.04	 	 	Expenses; Indemnity; Damage Waiver
	 	 	82	 
	 

	 	 	10.05	 	 	Payments Set Aside
	 	 	84	 
	 

	 	 	10.06	 	 	Successors and Assigns
	 	 	84	 
	 

	 	 	10.07	 	 	Treatment of Certain Information; Confidentiality
	 	 	87	 
	 

	 	 	10.08	 	 	Right of Setoff
	 	 	88	 
	 

	 	 	10.09	 	 	Interest Rate Limitation
	 	 	89	 
	 

	 	 	10.10	 	 	Counterparts; Integration; Effectiveness
	 	 	89	 






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	 	 	 	 	 	 	 	 	Page
	 
	 

	 	 	10.11	 	 	Survival of Representations and Warranties
	 	 	89	 
	 

	 	 	10.12	 	 	Severability
	 	 	89	 
	 

	 	 	10.13	 	 	[Reserved]
	 	 	90	 
	 

	 	 	10.14	 	 	Governing Law; Jurisdiction; Etc
	 	 	90	 
	 

	 	 	10.15	 	 	Waiver of Jury Trial
	 	 	91	 
	 

	 	 	10.16	 	 	Hedging Agreements and Collateral
	 	 	91	 
	 

	 	 	10.17	 	 	USA PATRIOT Act Notice
	 	 	91	 
	 

	 	 	10.18	 	 	ENTIRE AGREEMENT
	 	 	91	 




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	SCHEDULES
	 	 
	 
	 

	 	1.01 Security Instruments
	 

	 	1.02 Existing Swap Contracts
	 

	 	2.01 Commitments and Applicable Percentages
	 

	 	5.06 Litigation
	 

	 	5.13 Subsidiaries, Other Equity Investments; Equity Interests in the Borrower
	 

	 	7.01 Existing Liens
	 

	 	7.03 Existing Indebtedness
	 

	 	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







-vi-








 





CREDIT AGREEMENT




     This CREDIT AGREEMENT (“Agreement”) is entered into as of February 24, 2006, among
CONCHO RESOURCES INC., a Delaware corporation (the “Borrower”), each lender from time to
time party hereto (collectively, the “Lenders” and individually, a “Lender”),
JPMORGAN CHASE BANK, N.A., as Administrative Agent, Swing Line Lender and L/C Issuer, BANK OF
AMERICA, N.A., as Syndication Agent, and WACHOVIA BANK, NATIONAL ASSOCIATION and BNP PARIBAS, as
Documentation Agents.



     A. The Borrower, Concho Equity Holdings Corp., Chase Oil Corporation, Caza Energy LLC and
certain other signatories thereto have entered into a Combination Agreement dated as of February
24, 2006 (the “Combination Agreement”), pursuant to which certain stockholders of Concho
Equity Holdings Corp. will exchange approximately 98% of the issued and outstanding capital stock
of Concho Equity Holdings Corp. for capital stock of the Borrower, and Chase Oil Corporation, Caza
Energy LLC and certain other individuals will transfer certain oil and gas properties to the
Borrower in exchange for common stock of the Borrower and cash payments of $400,000,000 (such
transaction, herein the “Combination”).



     B. To finance a portion of the Combination and its business activities, the Borrower, the
Administrative Agent, the Swing Line Lender, the L/C Issuer and the Lenders intend to execute and
deliver this Credit Agreement.



     C. The Borrower is engaged directly in the acquisition, exploration, production and
development of oil and gas properties.



     D. The Borrower desires to obtain commitments from the Lenders pursuant to which (1) revolving
loans may be made to the Borrower from the Lenders from time to time during the Availability Period
and (2) letters of credit may be issued by the L/C Issuer from time to time prior to the Letter of
Credit Expiration Date for the account of the Borrower and for the benefit of the Borrower and the
other Loan Parties and under the several responsibilities of the Lenders.



     E. The Lenders, the L/C Issuer and the Swing Line Lender are willing, on the terms and subject
to the conditions hereinafter set forth (including ARTICLE IV), to extend such commitments, make
such loans and issue and participate in such Letters of Credit.



     F. The proceeds of loans and letters of credit hereunder will be used to fund the Combination,
for general corporate purposes (including working capital and support for the Letters of Credit),
and for the acquisition of oil and gas properties and related assets and other purposes related to
the exploration, production and development of oil and gas properties.



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



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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,
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.



     “Adjustment Percentage” means, at any date prior to September 1, 2007, the quotient,
expressed as a percentage, of the Conforming Borrowing Base divided by the Borrowing Base.



     “Administrative Agent” means JPMorgan Chase Bank, 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.



     “Aggregate Credit Exposure” means, as of any date of determination, the aggregate
amount of the Revolving Credit Exposure of all of the Lenders as of such date.



     “Agreement” means this Credit Agreement, dated as of February 24, 2006, 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 greatest of
(a) the Prime Rate in effect on such day, (b) the Base CD Rate in effect on such day plus 1% and
(c) 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.



-2-









 





     “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 Commitments represented by such Lender’s
Commitment at such time. If the commitment of each Lender to make Loans and the obligation of the
L/C Issuer to make L/C Credit Extensions have been terminated pursuant to Section 8.02 or if the
Aggregate Commitments have expired, then the Applicable Percentage of each Lender shall be
determined based on the Applicable Percentage of such Lender most recently in effect, giving effect
to any subsequent assignments. The initial Applicable Percentage of each Lender is set forth
opposite the name of such Lender on Schedule 2.01 or in the Assignment and Assumption
pursuant to which such Lender becomes a party hereto, as applicable.



     “Applicable Rate” means, for any day, with respect to any ABR Loan or Eurodollar Loan,
or with respect to the Unused Commitment Fees, as the case may be, the applicable rate per annum
set forth below under the caption “ABR Spread” , “Eurodollar Spread” or “Unused Commitment Fee
Rate”, as the case may be, based upon the Borrowing Base Usage as set forth below:



	 	 	 	 	 	 	 	 	 	 	 	 	 
	Borrowing	 	Eurodollar	 	 	 	 
	Base Usage	 	Spread	 	ABR Spread	 	Commitment Fee
	3110%
	 	 	2.25	%	 	 	1.25	%	 	 	0.50	%
	>100% and
<110%
	 	 	2.00	%	 	 	1.00	%	 	 	0.50	%
	390% and
£100%
	 	 	1.75	%	 	 	0.75	%	 	 	0.50	%
	375% and
<90%
	 	 	1.50	%	 	 	0.50	%	 	 	0.375	%
	350% and
<75%
	 	 	1.25	%	 	 	0.25	%	 	 	0.375	%
	<50%
	 	 	1.00	%	 	 	0.00	%	 	 	0.25	%






     “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.



     “Arrangers” means, collectively, J.P. Morgan Securities Inc. and Banc of America
Securities LLC, in their capacities as joint lead arrangers and joint book managers.



     “Assessment Rate” means, for any day, the annual assessment rate in effect on such day
that is payable by a member of the Bank Insurance Fund classified as “well-capitalized” and within
supervisory subgroup “B” (or a comparable successor risk classification) within the
meaning of 12 C.F.R. Part 327 (or any successor provision) to the Federal Deposit Insurance
Corporation for insurance by such Corporation of time deposits made in Dollars at the offices of
such member in the United States; provided that if, as a result of any change in any law,
rule or regulation, it is no longer possible to determine the Assessment Rate as aforesaid, then
the



-3-









 







Assessment Rate shall be such annual rate as shall be determined by the Administrative Agent to
be representative of the cost of such insurance to the Lenders.



     “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.



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



     “Audited Financial Statements” means the audited consolidated balance sheet of Concho
Holdings and its Subsidiaries for the fiscal year ended December 31, 2005, and the related
consolidated statements of income or operations, shareholders’ equity and cash flows for such
fiscal year of Concho Holdings and its Subsidiaries, including the notes thereto.



     “Availability Period” means the period from and including the Closing Date to the
earliest of (i) the Maturity Date, (ii) the date of termination of the Aggregate Commitments
pursuant to Section 2.08, and (iii) the date of termination of the commitment of each Lender to
make Loans and of the obligation of the L/C Issuer to make L/C Credit Extensions pursuant to
Section 8.02.



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



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



     “Borrowing” means (a) Revolving 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 or (b) a Swing Line Loan.



     “Borrowing Base” means, at any time, an amount equal to the amount determined pursuant
to Section 3.01, as the same may be redetermined, adjusted or reduced from time to time pursuant to
Section 3.02, 3.03 and 3.05 or as otherwise, subject to any adjustment occurring since the most
recent prior Evaluation Date or the Closing Date, as the case may be, pursuant to Section 7.05(c);
provided, however, that in no event shall the Borrowing Base on any date exceed the
Maximum Facility Amount.



     “Borrowing Base Properties” means, at any time, the properties and reserves (which
properties and reserves shall be free of any Liens other than Permitted Encumbrances) of
Borrower and its Restricted Subsidiaries that were evaluated in the most recent Engineering
Report delivered to the Administrative Agent pursuant to this Agreement and other information
provided by the Borrower pursuant to Section 3.01 for the calculation of the Borrowing Base in
effect at such time.



-4-









 





     “Borrowing Base Usage” means, as of any date and for all purposes, other than as set
forth in the following proviso, the quotient, expressed as a percentage, of (i) the Aggregate
Credit Exposure as of such date, divided by (ii) the Borrowing Base; provided that, with
respect to the determination of the Applicable Rate prior to September 1, 2007, “Borrowing Base
Usage” means the quotient, expressed as a percentage, of (x) the quotient calculated pursuant
to the foregoing clauses (i) and (ii), divided by (y) the Adjustment Percentage.



     “Borrowing Request” means a request by the Borrower for a Revolving 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
Illinois 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.



     “Capitalized Lease” shall mean (a) any lease of property, real or personal, the
obligations under which are capitalized on the consolidated balance sheet of the Borrower, and (b)
any other such lease to the extent that the then present value of the minimum rental commitment
thereunder should, in accordance with GAAP, be capitalized on a balance sheet of the lessee. Oil,
gas and mineral leases shall not, however, constitute Capitalized Leases.



     “Cash Collateralize” means the pledge and deposit with or delivery to the
Administrative Agent of, for the benefit of the L/C Issuer and the Lenders, as collateral for the
L/C Obligations, cash or deposit account balances pursuant to Section 2.04(j) and documentation in
form and substance satisfactory to the Administrative Agent and the L/C Issuer (which documents are
hereby consented to by the Lenders).



     “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;




     (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




     (i) at any time after the IPO Date:




     (d) 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



-5-









 







35% of the aggregate
ordinary voting power represented by the issued and outstanding Equity Interests of the
Borrower; or




     (e) 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




     (f) 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 the L/C Issuer (or, for purposes of Section 10.09), by any lending
office of such Lender or by such Lender’s or the L/C Issuer’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 Assets” means, collectively, the Chase Assets, the Caza Assets and the WI
Assets, each as defined in the Combination Agreement.



     “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.



     “Chase Operating Statements” means the unaudited lease operating statements with
respect to the Chase Group Assets and related information for the ten month period ended October
31, 2005.



     “Class” where used in reference to any Loan or Borrowing, refers to whether such Loan,
or the Loans comprising such Borrowing, are Revolving Loans or Swing Line Loans.



     “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.



-6-









 





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



     “Combination Agreement” is defined in Recital A.



     “Commitment” means, as to each Lender, its obligation to (a) make Revolving Loans to
the Borrower pursuant to Section 2.01, (b) purchase participations in L/C Obligations, and (c)
purchase participations in Swing Line Loans, in an aggregate principal amount (with respect to
clauses (a) through (c)) at any one time outstanding not to exceed such Lender’s
Applicable Percentage of the lesser of (x) the Maximum Facility Amount, and (y) the Borrowing Base,
in each case, as such amounts may be adjusted from time to time in accordance with this Agreement.
The initial amount of each Lender’s Commitment is set forth in Schedule 2.01, or in the Assignment
and Assumption pursuant to which such Lender shall have assumed its Commitment, as applicable.



     “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.



     “Conforming Borrowing Base” means, at any time an amount equal to the amount
determined in accordance with Section 3.01, as the same may be redetermined, adjusted or reduced
from time to time pursuant to Section 3.02, 3.03 and 3.05.



     “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



-7-









 







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
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 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.



-8-









 





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



     “Credit Extension” means each of the following: (a) a Borrowing and (b) the issuance
of a Letter of Credit by the L/C Issuer.



     “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
Revolving Loans, participations in L/C Obligations or participations in Swing Line 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 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.



     “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, the L/C Issuer and the Swing Line Lender, and (ii) unless an Event of Default has



-9-









 







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 value attributed to the Borrowing Base Properties for
purposes of the most recent Redetermination of the Borrowing Base pursuant to ARTICLE III (or for
purposes of determining the Initial Borrowing Base in the event no such Redetermination has
occurred), based upon the discounted present value of the estimated net cash flow to be realized
from the production of hydrocarbons from the Borrowing Base Properties as set forth in the most
recent Engineering Report.



     “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.



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



-10-









 





     “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).



     “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.



     “Escrow Agreement” has the meaning specified in the Combination Agreement.



     “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.



     “Evaluation Date” means




     (a) June 30 and December 31 of each year; and




     (b) each date which either the Borrower or the Required Lenders, at its or their
respective options, specifies as a date as of which the Borrowing Base is to be
redetermined, provided that (1) each such date must be the first or last date of a calendar
month not earlier than ninety (90) days prior to the date of such specification, and (2)
except as provided in subparagraph (c) below, the Borrower and the Required Lenders shall
each be entitled to request only one such redetermination per calendar year; and




     (c) April 30, 2006.



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



     “Excluded Taxes” means, with respect to the Administrative Agent, any Lender, the L/C
Issuer 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



-11-









 







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).



     “Existing Swap Contracts” means the Swap Contracts of COG Oil & Gas in effect on the
Closing Date and set forth on Schedule 1.02.



     “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.



     “Fee Letter” means the agreement, dated February 16, 2006 among Concho Holdings, the
Administrative Agent, Bank of America and the Arrangers.



     “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 of its business.



     “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) and that, in the case of the Borrower and its Subsidiaries, are applied for all periods
after the date hereof in a manner consistent with the manner in which such principles and
practices were applied to the Initial Financial Statements and, after preparation and delivery
of the Audited Financial Statements, the Audited Financial Statements (except for changes concurred
with by Borrower’s independent public accountants). 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



-12-









 







Consolidated Leverage
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,
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.



-13-









 





     “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 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, which 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 the proved oil and gas reserves of
Concho Holdings and its Subsidiaries as of December 31, 2005, as audited by Netherland, Sewell &
Associates, Inc. and (ii) that certain report furnished to the Administrative Agent prior to the
Closing Date estimating the proved oil and gas reserves of the Chase Group in Eddy and Lea
Counties, New Mexico, as of December 31, 2005, as audited by Cawley, Gillespie & Associates, Inc.



     “Initial Financial Statements” means the unaudited consolidated and consolidating
balance sheet of Concho Holdings and its Subsidiaries for the fiscal quarter and the
inception-to-date period ended September 30, 2005, and the related consolidated and consolidating
statements of income or operations, and consolidated statements of shareholders’ equity and cash
flows for such fiscal quarter and for the nine-month period then ended of Concho Holdings and its
Subsidiaries, including the notes thereto.



-14-









 





     “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 either in
an underwritten (firm commitment) initial public offering registered under the Securities Act of
1933, as amended or pursuant to Rule 144A, with gross proceeds to the Borrower of not less than
$300,000,000, resulting in the listing of the Borrower’s common stock on a nationally recognized
stock exchange, including without limitation, the NASDAQ National Market System.



     “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 or six months thereafter, 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 date on which such Borrowing is
made 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.




-15-









 





     “ISP” means, with respect to any Letter of Credit, the “International Standby
Practices 1998” published by the Institute of International Banking Law & Practice (or such later
version thereof as may be in effect at the time of issuance).



     “Issuer Documents” means with respect to any Letter of Credit, the Letter Credit
Application, and any other document, agreement and instrument entered into by the L/C Issuer and
the Borrower (or any Subsidiary) or in favor the L/C Issuer and relating to any such Letter of
Credit.



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



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



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



     “L/C Exposure” means, at any time, the sum of (a) the aggregate undrawn amount of all
outstanding Letters of Credit at such time plus (b) the aggregate amount of all L/C Disbursements
that have not yet been reimbursed by or on behalf of the Borrower at such time. The L/C Exposure
of any Lender at any time shall be its Applicable Percentage of the total L/C Exposure at such
time.



     “L/C Issuer” means JPMorgan Chase Bank in its capacity as the issuer of Letters of
Credit hereunder, and its successors in such capacity as provided in Section 2.04(i). The L/C
Issuer may, in its discretion, arrange for one or more Letters of Credit to be issued by Affiliates
of the L/C Issuer, in which case the term “L/C Issuer” shall include any such Affiliate with
respect to Letters of Credit issued by such Affiliate.



     L/C Obligations” means, as at any date of determination, the aggregate amount
available to be drawn under all outstanding Letters of Credit plus the aggregate of all L/C
Disbursements at such time. For purposes of computing the amount available to be drawn under any
Letter of Credit, the amount of such Letter of Credit shall be determined in accordance with
Section 1.06. For all purposes of this Agreement, if on any date of determination a Letter of
Credit has expired by its terms but any amount may still be drawn thereunder by reason of the
operation of Rule 3.14 of the ISP, such Letter of Credit shall be deemed to be “outstanding” in the
amount so remaining available to be drawn.



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     “Lenders” means the Persons listed on Schedule 2.01, including, as the context
requires, the Swing Line Lender, and 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.



     “Lender Counterparty” means any Lender or any Affiliate of a Lender that is
counterparty to a Swap Contract with any Loan Party.



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



     “Letter of Credit Application” means an application and agreement for the issuance or
amendment of a Letter of Credit in the form from time to time in use by the L/C Issuer.



     “LIBO Rate” means, with respect to any Eurodollar Borrowing for any Interest Period,
the rate appearing on Page 3750 of the Dow Jones Market Service (or on any successor or substitute
page of such Service, or any successor to or substitute for such Service, providing rate quotations
comparable to those currently provided on such page of such Service, 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 an extension of credit by a Lender to the Borrower under ARTICLE II in
the form of a Revolving Loan or a Swing Line Loan.



     “Loan Documents” means this Agreement, each Note, each Issuer Document, 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.



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     “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,
(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 February 24, 2010.



     “Maximum Facility Amount” means $750,000,000.



     “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, with respect to the sale of Borrowing Base Properties by
any Borrower or any Restricted Subsidiary, the excess, if any, of (a) the sum of cash and cash
equivalents received in connection with such sale, but only as and when so received, over (b) the
sum of (i) the principal amount of any Indebtedness that is secured by such asset and that is
required to be repaid in connection with the sale thereof (other than the Loans), and (ii) the
out-of-pocket expenses incurred by such Borrower or such Restricted Subsidiary in connection with
such sale.



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



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     “Note” means a promissory note made by the Borrower in favor of a Lender evidencing
Revolving Loans or Swing Line Loans, as applicable, 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
or Letter of Credit, whether direct or indirect (including those acquired by assumption), or under
any Swap Contract with any Lender Counterparty (including obligations under the Existing Swap
Contracts and obligations arising under any transaction under any other Swap Contract with any
Person that was, at or after the time such transaction was entered into, a Lender Counterparty),
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 or any Affiliate
thereof 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.



     “Operating Budget” has the meaning given it in Section 6.01(c).



     “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



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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, 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., Copeland
Properties L.P., and Leach Properties, Ltd; provided such partnerships are controlled by Steven L.
Beal, Timothy A. Leach and David W. Copeland, 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;



-20-









 






     (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




     (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.



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



     “Redetermination” means any Scheduled Redetermination or Special Redetermination.



     “Redetermination Date” means (a) with respect to any Scheduled Redetermination, each
April 1 and October 1 of each year, commencing October 1, 2006, and (b) with respect to any



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Special Redetermination, the first day of the first month which is not less than twenty (20)
Business Days following the date of a request for a Special Redetermination.



     “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, 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 having Revolving Credit Exposures and
Unused Commitments representing at least 66-2/3% (or if there are less than four Lenders, at least
75%) of the sum of the Aggregate Credit Exposure and all Unused Commitments of all Lenders at such
time or, if the Aggregate Commitment has been terminated, Lenders having Revolving Credit Exposures
representing at least 66-2/3% (or if there are less than four Lenders, at least 75%) of the sum of
the Aggregate Credit Exposure of all Lenders at such time; provided that the Commitment of and the
Revolving Credit Exposures held or deemed held by any Defaulting Lender shall be excluded for
purposes of making a determination of the Required Lenders.



     “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.



     “Revolving Borrowing” means a borrowing consisting of simultaneous Revolving Loans of
the same Type and, in the case of Eurodollar Loans, having the same Interest Period, made by each
of the Lenders pursuant to Section 2.01.



     “Revolving Credit Exposure” means, with respect to any Lender at any time, the sum of
the outstanding principal amount of such Lender’s Loans, its L/C Exposure and its Swing Line
Exposure at such time.



     “Revolving Loan” has the meaning specified in Section 2.01.



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



     “Scheduled Redetermination” means any redetermination of the Borrowing Base or the
Conforming Borrowing Base pursuant to Section 3.02. When reference is made herein to any interval
or period between Scheduled Redeterminations, the date of this Agreement shall be deemed the first
such Scheduled Redetermination.



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



     “Secured Party” means the Administrative Agent, any Lender, any Lender Counterparty
and any other Person a party to Swap Contract with any Loan Party to the extent that any
Obligations owing to such Person arise from transactions entered into pursuant to such Swap
Contract at a time, or prior to the time, when such Person was a Lender Counterparty.



     “Security Instruments” shall mean the agreements or instruments described or referred
to in Schedule 1.01, 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.



     “Special Redetermination” means any redetermination of the Borrowing Base or the
Conforming Borrowing Base made pursuant to Section 3.03 or Section 3.05.



     “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.



-23-









 





     “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 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 (which may include a
Lender Counterparty).



     “Swing Line Exposure” means, at any time, the aggregate principal amount of all Swing
Line Loans outstanding at such time. The Swing Line Exposure of any Lender at any time shall be its
Applicable Percentage of the total Swing Line Exposure at such time.



     “Swing Line Lender” means JPMorgan Chase Bank, in its capacity as lender of Swing Line
Loans hereunder.



     “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.



     “Three-Month Secondary CD Rate” means, for any day, the secondary market rate for
three-month certificates of deposit reported as being in effect on such day (or, if such day is not
a Business Day, the next preceding Business Day) by the FRB through the public information
telephone line of the Federal Reserve Bank of New York (which rate will, under the current



-24-









 







practices of the Board, be published in Federal Reserve Statistical Release H.15(519) during the
week following such day) or, if such rate is not so reported on such day or such next preceding
Business Day, the average of the secondary market quotations for three-month certificates of
deposit of major money center banks in New York City received at approximately 10:00 a.m., New York
City time, on such day (or, if such day is not a Business Day, on the next preceding Business Day)
by the Administrative Agent from three negotiable certificate of deposit dealers of recognized
standing selected by it.



     “Threshold Amount” means $2,000,000.



     “Transactions” means the execution, delivery and performance by the Loan Parties of
this Agreement and the Loan Documents, the borrowing of Loans, the use of the proceeds thereof, the
issuance of Letters of Credit hereunder, the execution, delivery and performance of the Combination
Agreement and the consummation of the Combination, including the execution and delivery of the
Escrow Agreement.



     “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.



     “Unused Commitment” means, with respect to any Lender at any time, such Lender’s
Commitment at such time minus such Lender’s Revolving Credit Exposure (other than such Lender’s
Swing Line Exposure) at such time.



     “Unused Commitment Fee” has the meaning specified in Section 2.12(a).



     “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
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.



-25-









 





     “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,
applied in a manner consistent with that used in preparing the Initial Financial Statements
and the Audited Financial Statements, except as otherwise specifically prescribed herein.



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     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 Letter of Credit Amounts. Unless otherwise specified herein, the amount of a
Letter of Credit at any time shall be deemed to be the stated amount of such Letter of Credit in
effect at such time; provided, however, that with respect to any Letter of Credit
that, by its terms or the terms of any Issuer Document related thereto, provides for one or more
automatic increases in the stated amount thereof, the amount of such Letter of Credit shall be
deemed to be the maximum stated amount of such Letter of Credit after giving effect to all such
increases, whether or not such maximum stated amount is in effect at such time.



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



     1.08 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 CREDIT EXTENSIONS




     2.01 Revolving Loans. Subject to the terms and conditions set forth herein, each
Lender agrees to make one or more Revolving Loans to the Borrower from time to time on any Business
Day during the Availability Period in an aggregate principal amount that will not result in (a)
such Lender’s Revolving Credit Exposure exceeding such Lender’s Commitment or (b) the Aggregate
Credit Exposure exceeding the Aggregate Commitment. Within the foregoing limits and subject to the
terms and conditions set forth herein, the Borrower may borrow, prepay and reborrow Revolving
Loans.



     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



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and no Lender shall be responsible for any other Lender’s failure to make Loans as required.




     (b) Subject to Section 2.14, each Revolving Borrowing shall be comprised entirely of
ABR Loans or Eurodollar Loans as the Borrower may request in accordance herewith. Each
Swing Line Loan shall be an ABR Loan. Each Lender at its option may make any Eurodollar
Loan by causing any domestic or foreign branch or Affiliate of such Lender to make such
Loan; 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.




     (c) At the commencement of each Interest Period for any Eurodollar Revolving 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 Revolving 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; provided that an ABR Revolving Borrowing may be in an
aggregate amount that is equal to the entire unused balance of the Aggregate Commitment or
that is required to finance the reimbursement of an L/C Disbursement as contemplated by
2.04(e). Each Swing Line Loan shall be in an amount that is not less than $100,000.
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 six (6) Eurodollar Revolving Borrowings
outstanding.




     (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 Revolving Borrowings. To request a Revolving Borrowing, the
Borrower shall notify the Administrative Agent of such request by telephone (a) in the case of a
Eurodollar Borrowing, not later than 11:00 a.m. three Business Days before the date of the proposed
Borrowing or (b) in the case of an ABR Revolving Borrowing, not later than 11:00 a.m. on the date
of the proposed Revolving 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. Each 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;




     (iii) whether such Borrowing is to be an ABR Borrowing or a Eurodollar
Borrowing;




     (iv) in the case of a Eurodollar Borrowing, the initial Interest Period to be
applicable thereto, which shall be a period contemplated by the definition of the
term “Interest Period”; and



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     (v) 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.


If no election as to the Type of Revolving Borrowing is specified, then the requested Revolving
Borrowing shall be an ABR Borrowing. If no Interest Period is specified with respect to any
requested Eurodollar Revolving Borrowing, then the Borrower shall be deemed to have selected an
Interest Period of one month’s duration. Promptly following receipt of a 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 Letters of Credit.




     (a) General. Subject to the terms and conditions set forth herein, the
Borrower may request the issuance of Letters of Credit for its own or the account of any
Restricted Subsidiary in a form reasonably acceptable to the Administrative Agent and the
L/C Issuer, at any time and from time to time during the Availability Period. In the event
of any inconsistency between the terms and conditions of this Agreement and the terms and
conditions of any form of letter of credit application or other agreement submitted by the
Borrower to, or entered into by the Borrower with, the L/C Issuer relating to any Letter of
Credit, the terms and conditions of this Agreement shall control.




     (b) Notice of Issuance, Amendment, Renewal, Extension; Certain Conditions. To
request the issuance of a Letter of Credit (or the amendment, renewal or extension of an
outstanding Letter of Credit), the Borrower shall hand deliver or telecopy (or transmit by
electronic communication, if arrangements for doing so have been approved by the L/C Issuer)
to the L/C Issuer and the Administrative Agent (reasonably in advance of the requested date
of issuance, amendment, renewal or extension) a notice requesting the issuance of a Letter
of Credit, or identifying the Letter of Credit to be amended, renewed or extended, and
specifying the date of issuance, amendment, renewal or extension (which shall be a Business
Day), the date on which such Letter of Credit is to expire (which shall comply with
paragraph (c) of this Section), the amount of such Letter of Credit, the name and address of
the beneficiary thereof and such other information as shall be necessary to prepare, amend,
renew or extend such Letter of Credit. If requested by the L/C Issuer, the Borrower also
shall submit a Letter of Credit Application in connection with any request for a Letter of
Credit. A Letter of Credit shall be issued, amended, renewed or extended only if (and upon
issuance, amendment, renewal or extension of each Letter of Credit the Borrower shall be
deemed to represent and warrant that), after giving effect to such issuance, amendment,
renewal or extension (i) the L/C Exposure shall not exceed $20,000,000 and (ii) the
Aggregate Credit Exposure shall not exceed the Aggregate Commitment.




     (c) Expiration Date. Each Letter of Credit shall expire at or prior to the
close of business on the earlier of (i) the date one year after the date of the issuance of
such Letter of Credit (or, in the case of any renewal or extension thereof, one year after
such renewal or extension) and (ii) the date that is five Business Days prior to the
Maturity Date; provided that any Letter of Credit with a one-year tenor may provide for the



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renewal thereof for additional one-year periods (which shall in no event extend beyond the
date referred to in clause (ii) above).




     (d) Participations. By the issuance of a Letter of Credit (or an amendment to
a Letter of Credit increasing the amount thereof) and without any further action on the part
of the L/C Issuer or the Lenders, the L/C Issuer hereby grants to each Lender, and each
Lender hereby acquires from the L/C Issuer, a participation in such Letter of Credit equal
to such Lender’s Applicable Percentage of the aggregate amount available to be drawn under
such Letter of Credit. In consideration and in furtherance of the foregoing, each Lender
hereby absolutely and unconditionally agrees to pay to the Administrative Agent, for the
account of the L/C Issuer, such Lender’s Applicable Percentage of each L/C Disbursement made
by the L/C Issuer and not reimbursed by the Borrower on the date due as provided in
paragraph (e) of this Section, or of any reimbursement payment required to be refunded to
the Borrower for any reason. Each Lender acknowledges and agrees that its obligation to
acquire participations pursuant to this paragraph in respect of Letters of Credit is
absolute and unconditional and shall not be affected by any circumstance whatsoever,
including any amendment, renewal or extension of any Letter of Credit or the occurrence and
continuance of a Default or reduction or termination of the Aggregate Commitments, and that
each such payment shall be made without any offset, abatement, withholding or reduction
whatsoever.




     (e) Reimbursement. If the L/C Issuer shall make any L/C Disbursement in
respect of a Letter of Credit, the Borrower shall reimburse such L/C Disbursement by paying
to the Administrative Agent an amount equal to such L/C Disbursement not later than 2:00
p.m. on the date that such L/C Disbursement is made, if the Borrower shall have received
notice of such L/C Disbursement prior to 10:00 a.m. on such date, or, if such notice has not
been received by the Borrower prior to such time on such date, then not later than 2:00 p.m.
on (i) the Business Day that the Borrower receives such notice, if such notice is received
prior to 10:00 a.m. on the day of receipt, or (ii) the Business Day immediately following
the day that the Borrower receive such notice, if such notice is not received prior to such
time on the day of receipt; provided that the Borrower may, subject to the
conditions to borrowing set forth herein, request in accordance with Section 2.03 that such
payment be financed with an ABR Revolving Borrowing or Swing Line Loan in an equivalent
amount and, to the extent so financed, the Borrower’ obligation to make such payment shall
be discharged and replaced by the resulting ABR Revolving Borrowing or Swing Line Loan. If
the Borrower fails to make such payment when due, the Administrative Agent shall notify each
Lender of the applicable L/C Disbursement, the payment then due from the Borrower in respect
thereof and such Lender’s Applicable Percentage thereof. Promptly following receipt of such
notice, each Lender shall pay to the Administrative Agent its Applicable Percentage of the
payment then due from the Borrower, in the same manner as provided in Section 2.06 with
respect to Loans made by such Lender (and Section 2.06 shall apply, mutatis
mutandis, to the payment obligations of the Lenders), and the Administrative Agent
shall promptly pay to the L/C Issuer the amounts so received by it from the Lenders. Promptly following receipt by the
Administrative Agent of any payment from the Borrower pursuant to this paragraph, the
Administrative Agent shall distribute such payment to the L/C Issuer or, to the extent that
Lenders have made payments pursuant to this paragraph to reimburse the L/C Issuer, then



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to such Lenders and the L/C Issuer as their interests may appear. Any payment made by a Lender
pursuant to this paragraph to reimburse the L/C Issuer for any L/C Disbursement (other than
the funding of ABR Loans or a Swing Line Loan as contemplated above) shall not constitute a
Loan and shall not relieve the Borrower of its obligation to reimburse such L/C
Disbursement.




     (f) Obligations Absolute. The Borrower’s obligation to reimburse L/C
Disbursements as provided in paragraph (e) above shall be absolute, unconditional and
irrevocable, and shall be performed strictly in accordance with the terms of this Agreement
under any and all circumstances whatsoever and irrespective of (i) any lack of validity or
enforceability of any Letter of Credit or this Agreement, or any term or provision therein,
(ii) any draft or other document presented under a Letter of Credit proving to be forged,
fraudulent or invalid in any respect or any statement therein being untrue or inaccurate in
any respect, (iii) payment by the L/C Issuer under a Letter of Credit against presentation
of a draft or other document that does not comply with the terms of such Letter of Credit,
or (iv) any other event or circumstance whatsoever, whether or not similar to any of the
foregoing, that might, but for the provisions of this Section, constitute a legal or
equitable discharge of, or provide a right of setoff against, the Borrower’s obligations
hereunder. Neither the Administrative Agent, the Lenders nor the L/C Issuer, nor any of
their Related Parties, shall have any liability or responsibility by reason of or in
connection with the issuance or transfer of any Letter of Credit or any payment or failure
to make any payment thereunder (irrespective of any of the circumstances referred to in the
preceding sentence), or any error, omission, interruption, loss or delay in transmission or
delivery of any draft, notice or other communication under or relating to any Letter of
Credit (including any document required to make a drawing thereunder), any error in
interpretation of technical terms or any consequence arising from causes beyond the control
of the L/C Issuer; provided that the foregoing shall not be construed to excuse the
L/C Issuer from liability to the Borrower to the extent of any direct damages (as opposed to
consequential damages, claims in respect of which are hereby waived by the Borrower to the
extent permitted by applicable law) suffered by the Borrower that are caused by the L/C
Issuer’s failure to exercise care when determining whether drafts and other documents
presented under a Letter of Credit comply with the terms thereof. The parties hereto
expressly agree that, in the absence of gross negligence or willful misconduct on the part
of the L/C Issuer (as finally determined by a court of competent jurisdiction), the L/C
Issuer shall be deemed to have exercised care in each such determination. In furtherance of
the foregoing and without limiting the generality thereof, the parties agree that, with
respect to documents presented which appear on their face to be in substantial compliance
with the terms of a Letter of Credit, the L/C Issuer may, in its sole discretion, either
accept and make payment upon such documents without responsibility for further
investigation, regardless of any notice or information to the contrary, or refuse to accept
and make payment upon such documents if such documents are not in strict compliance with the terms of such Letter
of Credit.




     (g) Disbursement Procedures. The L/C Issuer shall, promptly following its
receipt thereof, examine all documents purporting to represent a demand for payment under a
Letter of Credit. The L/C Issuer shall promptly notify the Administrative Agent



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and the Borrower by telephone (confirmed by telecopy) of such demand for payment and whether the L/C
Issuer has made or will make an L/C Disbursement thereunder; provided that any
failure to give or delay in giving such notice shall not relieve the Borrower of its
obligation to reimburse the L/C Issuer and the Lenders with respect to any such L/C
Disbursement.




     (h) Interim Interest. If the L/C Issuer shall make any L/C Disbursement, then,
unless the Borrower shall reimburse such L/C Disbursement in full on the date such L/C
Disbursement is made, the unpaid amount thereof shall bear interest, for each day from and
including the date such L/C Disbursement is made to but excluding the date that the Borrower
reimburses such L/C Disbursement, at the rate per annum then applicable to ABR Loans;
provided that, if the Borrower fails to reimburse such L/C Disbursement when due
pursuant to paragraph (e) of this Section, then Section 2.13(c) shall apply. Interest
accrued pursuant to this paragraph shall be for the account of the L/C Issuer, except that
interest accrued on and after the date of payment by any Lender pursuant to paragraph (e) of
this Section to reimburse the L/C Issuer shall be for the account of such Lender to the
extent of such payment.




     (i) Replacement of the L/C Issuer. The L/C Issuer may be replaced at any time
by written agreement among the Borrower, the Administrative Agent, the replaced L/C Issuer
and the successor L/C Issuer. The Administrative Agent shall notify the Lenders of any such
replacement of the L/C Issuer. At the time any such replacement shall become effective, the
Borrower shall pay all unpaid fees accrued for the account of the replaced L/C Issuer
pursuant to Section 2.12(b). From and after the effective date of any such replacement, (i)
the successor L/C Issuer shall have all the rights and obligations of the L/C Issuer under
this Agreement with respect to Letters of Credit to be issued thereafter and (ii) references
herein to the term “L/C Issuer” shall be deemed to refer to such successor or to any
previous L/C Issuer, or to such successor and all previous L/C Issuers, as the context shall
require. After the replacement of an L/C Issuer hereunder, the replaced L/C Issuer shall
remain a party hereto and shall continue to have all the rights and obligations of an L/C
Issuer under this Agreement with respect to Letters of Credit issued by it prior to such
replacement, but shall not be required to issue additional Letters of Credit.




     (j) Cash Collateralization. If any Event of Default shall occur and be
continuing, on the Business Day that the Borrower receives notice from the Administrative
Agent or the Required Lenders (or, if the maturity of the Loans has been accelerated,
Lenders with L/C Exposure representing greater than 66-2/3% of the total L/C Exposure)
demanding the deposit of cash collateral pursuant to this paragraph, the Borrower shall
deposit in an account with the Administrative Agent, in the name of the Administrative Agent and for the benefit of the Lenders, an amount in cash equal to the
L/C Exposure as of such date plus any accrued and unpaid interest thereon, if any;
provided that the obligation to deposit such cash collateral shall become effective
immediately, and such deposit shall become immediately due and payable, without demand or
other notice of any kind, upon the occurrence of any Event of Default with respect to the
Borrower described in clause (f) or (g) of ARTICLE VIII. Such deposit shall be held by the
Administrative Agent as collateral for the payment and performance



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of the obligations of the Borrower under this Agreement. The Administrative Agent shall have exclusive dominion and
control, including the exclusive right of withdrawal, over such account. Other than any
interest earned on the investment of such deposits, which investments shall be made at the
option and sole discretion of the Administrative Agent and at the Borrower’s risk and
expense, such deposits shall not bear interest. Interest or profits, if any, on such
investments shall accumulate in such account. Moneys in such account shall be applied by
the Administrative Agent to reimburse the L/C Issuer for L/C Disbursements for which it has
not been reimbursed and, to the extent not so applied, shall be held for the satisfaction of
the reimbursement obligations of the Borrower for the L/C Exposure at such time or, if the
maturity of the Loans has been accelerated (but subject to the consent of Lenders with L/C
Exposure representing 66-2/3% or more of the total L/C Exposure), be applied to satisfy
other obligations of the Borrower under this Agreement and to the extent any excess remains
after payment in full in cash of all Obligations and the termination of all Commitments,
such excess shall be released to the Borrower. If the Borrower is required to provide an
amount of cash collateral hereunder as a result of the occurrence of an Event of Default,
such amount (to the extent not applied as aforesaid) shall be returned to the Borrower
within three Business Days after all Events of Default have been cured or waived.



     2.05 Swing Line Loans.




     (a) Subject to the terms and conditions set forth herein, the Swing Line Lender agrees
to make Swing Line Loans to the Borrower from time to time during the Availability Period,
in an aggregate principal amount at any time outstanding that will not result in (i) the
aggregate principal amount of outstanding Swing Line Loans exceeding $25,000,000 or (ii) the
Aggregate Credit Exposure exceeding the Aggregate Commitment, provided that the Swing Line
Lender shall not be required to make a Swing Line Loan to refinance an outstanding Swing
Line Loan. Within the foregoing limits and subject to the terms and conditions set forth
herein, the Borrower may borrow, prepay and reborrow Swing Line Loans.




     (b) To request a Swing Line Loan, the Borrower shall notify the Administrative Agent of
such request by telephone (confirmed by telecopy), not later than 11:00 a.m. on the day of a
proposed Swing Line Loan. Each such notice shall be irrevocable and shall specify the
requested date (which shall be a Business Day) and amount of the requested Swing Line Loan.
The Administrative Agent will promptly advise the Swing Line Lender of any such notice
received from the Borrower. The Swing Line Lender shall make each Swing Line Loan available
to the Borrower by means of a credit to the general deposit account of the Borrower with the
Swing Line Lender (or, in the case of a Swing Line Loan made to finance the reimbursement of an
L/C Disbursement as provided in Section 2.04(e), by remittance to the L/C Issuer) by 2:00
p.m. on the requested date of such Swing Line Loan.




     (c) The Swing Line Lender may by written notice given to the Administrative Agent not
later than 10:00 a.m. on any Business Day require the Lenders to acquire participations on
such Business Day in all or a portion of the Swing Line Loans outstanding. Such notice
shall specify the aggregate amount of Swing Line Loans in



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which Lenders will participate. Promptly upon receipt of such notice, the Administrative Agent will give notice thereof to
each Lender, specifying in such notice such Lender’s Applicable Percentage of such Swing
Line Loan or Loans. Each Lender hereby absolutely and unconditionally agrees, upon receipt
of notice as provided above, to pay to the Administrative Agent, for the account of the
Swing Line Lender, such Lender’s Applicable Percentage of such Swing Line Loan or Loans.
Each Lender acknowledges and agrees that its obligation to acquire participations in Swing
Line Loans pursuant to this paragraph is absolute and unconditional and shall not be
affected by any circumstance whatsoever, including the occurrence and continuance of a
Default or reduction or termination of the Commitments, and that each such payment shall be
made without any offset, abatement, withholding or reduction whatsoever. Each Lender shall
comply with its obligation under this paragraph by wire transfer of immediately available
funds, in the same manner as provided in Section 2.06 with respect to Loans made by such
Lender (and Section 2.06 shall apply, mutatis mutandis, to the payment
obligations of the Lenders), and the Administrative Agent shall promptly pay to the Swing
Line Lender the amounts so received by it from the Lenders. The Administrative Agent shall
notify the Borrower of any participations in any Swing Line Loan acquired pursuant to this
paragraph, and thereafter payments in respect of such Swing Line Loan shall be made to the
Administrative Agent and not to the Swing Line Lender. Any amounts received by the Swing
Line Lender from the Borrower (or other party on behalf of the Borrower) in respect of a
Swing Line Loan after receipt by the Swing Line Lender of the proceeds of a sale of
participations therein shall be promptly remitted to the Administrative Agent; any such
amounts received by the Administrative Agent shall be promptly remitted by the
Administrative Agent to the Lenders that shall have made their payments pursuant to this
paragraph and to the Swing Line Lender, as their interests may appear; provided that any
such payment so remitted shall be repaid to the Swing Line Lender or to the Administrative
Agent, as applicable, if and to the extent such payment is required to be refunded to the
Borrower for any reason. The purchase of participations in a Swing Line Loan pursuant to
this paragraph shall not relieve the Borrower of any default in the payment thereof.



     2.06 Funding of Borrowings.




     (a) Each Lender shall make each Loan to be made by it hereunder on the proposed date
thereof 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; provided that Swing Line Loans shall be made as provided in Section 2.05. 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 applicable Borrowing Request;
provided that ABR Loans made to finance the reimbursement of an L/C Disbursement as
provided in Section 2.04(e) shall be remitted by the Administrative Agent to the L/C Issuer.




     (b) Unless the Administrative Agent shall have received notice from a Lender prior to
the proposed date of any 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 such date in



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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 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) Each Revolving Borrowing initially shall be of the Type specified in the applicable
Borrowing Request and, in the case of a Eurodollar Revolving Borrowing, shall have an
initial Interest Period as specified in such Borrowing Request; provided that all Borrowings
on the Closing Date shall be ABR Borrowings. Thereafter, the Borrower may elect to convert
such Borrowing to a different Type or to continue such Borrowing and, in the case of a
Eurodollar Revolving 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. This Section shall not apply to Swing
Line Borrowings, which may not be converted or continued.




     (b) To make an election pursuant to this Section, the Borrower shall notify the
Administrative Agent of such election by telephone by the time that a Borrowing Request
would be required under Section 2.03 if the Borrower were requesting a Revolving Borrowing
of the Type resulting from such election to be made on the effective date of such election.
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 in compliance with Section 2.03:




     (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);




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     (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.





     (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 Revolving 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 Revolving Borrowing
may be converted to or continued as a Eurodollar Borrowing and (ii) unless repaid, each
Eurodollar Revolving Borrowing shall be converted to an ABR Borrowing at the end of the
Interest Period applicable thereto.



     2.08 Termination or Reduction of Commitments; Reduction of Borrowing Base.




     (a) Unless previously terminated, the Aggregate Commitments shall terminate on the
Maturity Date.




     (b) The Borrower may at any time terminate, or from time to time reduce, the Aggregate
Commitment; provided that (i) each reduction of the Aggregate Commitments shall be
in an amount that is an integral multiple of $5,000,000 and not less than $10,000,000 and
shall be applied ratably to each Lender’s Commitment, and (ii) the Borrower shall not
terminate or reduce the Aggregate Commitments if, after giving effect to any concurrent
prepayment of the Loans in accordance with Section 2.10 and Section 2.11, the Aggregate
Credit Exposure would exceed the Aggregate Commitments.




     (c) The Borrower shall notify the Administrative Agent of any election to terminate or
reduce the Aggregate Commitments under paragraph (b) of this Section at least three Business
Days prior to the effective date of such termination or reduction, specifying such election
and the effective date thereof. Promptly following receipt of any notice, the
Administrative Agent shall advise the Lenders of the contents thereof. Each notice
delivered by the Borrower pursuant to this Section shall be irrevocable; provided



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that a notice of termination of the Aggregate Commitments delivered by the Borrower may
state that such notice is conditioned upon the effectiveness of other credit facilities, in
which case such notice may be revoked by the Borrower (by notice to the Administrative Agent
on or prior to the specified effective date) if such condition is not satisfied. Any
termination of the Aggregate Commitments shall be permanent. Each reduction of the
Aggregate Commitments shall be made ratably among the Lenders in accordance with their
respective Commitment.



     2.09 Repayment of Loans.




     (a) The Borrower hereby unconditionally promises to pay (i) to the Administrative Agent
for the account of each Lender the then unpaid principal amount of each Loan on the Maturity
Date and (ii) to the Swing Line Lender the then unpaid principal amount of each Swing Line
Loan on the earlier of the Maturity Date and the fourteenth day after such Swing Line Loan
is made.




     (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 Class and 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.




     (e) Any Lender or Participant may request that Loans 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 Maximum 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).



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     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. Any prepayment by the Borrower of any Borrowing shall be without premium
or penalty, provided that the Borrower shall be obligated to pay any funding indemnification
amounts due under Section 2.16.




     (b) The Borrower shall notify the Administrative Agent (and, in the case of prepayment
of a Swing Line Loan, the Swing Line Lender) by telephone (confirmed by telecopy) of any
prepayment hereunder (i) in the case of prepayment of a Eurodollar Revolving Borrowing, not
later than 11:00 a.m. on the date of prepayment, (ii) in the case of prepayment of an ABR
Revolving Borrowing, not later than 11:00 a.m. on the date of prepayment or (iii) in the
case of prepayment of a Swing Line Loan, 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; provided
that, if a notice of prepayment is given in connection with a conditional notice of
termination or reduction of the Aggregate Commitment as contemplated by Section 2.08, then
such notice of prepayment may be revoked if such notice of termination or reduction is
revoked in accordance with Section 2.08. Promptly following receipt of any such notice
relating to a Revolving Borrowing, the Administrative Agent shall advise the Lenders of the
contents thereof. Each partial prepayment of any Revolving 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 Revolving 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.



     2.11 Mandatory Prepayment of Loans.




     (a) Except as otherwise provided in Section 2.11(b), in the event a Borrowing Base
Deficiency exists, the Borrower shall, within ten (10) days after written notice from the
Administrative Agent to the Borrower of such Borrowing Base Deficiency, notify the
Administrative Agent that the Borrower intends to take one or more of the following actions:
(i) to provide the Lenders, within 30 days thereafter and by instruments reasonably
satisfactory in form and substance to the Administrative Agent, with additional security
consisting of oil and gas properties with a value and quality satisfactory to the Required
Lenders in their sole discretion to eliminate such Borrowing Base Deficiency, (ii) within 30
days thereafter to prepay, without premium or penalty, the principal amount of the Loans in
an amount sufficient to eliminate such Borrowing Base Deficiency, (iii) to prepay the
principal amount of such Borrowing Base Deficiency in not more than six (6) equal monthly
installments plus accrued interest thereon and to make the first such monthly payment on the
30th day after the Borrower’s receipt of notice of such Borrowing Base Deficiency, or (iv)
by a combination of such additional security and such prepayments, to eliminate such
Borrowing Base Deficiency. Thereafter the Borrower shall timely take the actions it has
elected and in any event within the time specified with respect to the foregoing clauses (i)
and (ii). Any prepayment pursuant to



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this subsection (a) shall be without premium or penalty but subject to any funding
indemnification amounts required by Section 2.16.




     (b) If the Borrower or any Restricted Subsidiary Disposes of any Borrowing Base
Properties at any time a Borrowing Base Deficiency exists or if after giving effect to such
Disposition a Borrowing Base Deficiency would exist, the Borrower shall prepay the
Borrowings in an amount equal to the Net Cash Proceeds received from such Disposition on the
date it or any Restricted Subsidiary receives such Net Cash Proceeds; provided,
however that amounts applied to the payment of Borrowings pursuant to this Section may be
reborrowed subject to and in accordance with the terms of this Agreement. Amounts applied
to the prepayment of Borrowings pursuant to this Section shall be first applied to Swing
Line Borrowings then outstanding and upon payment in full of all outstanding Swing Line
Borrowings, second, ratably to ABR Revolving Borrowings then outstanding and, upon payment
in full of all outstanding ABR Revolving Borrowings, third, to Eurodollar Revolving
Borrowings then outstanding, and if more than one Eurodollar Revolving Borrowing is then
outstanding, to each such Eurodollar Revolving Borrowing beginning with the Eurodollar
Revolving Borrowing with the least number of days remaining in the Interest Period
applicable thereto and ending with the Eurodollar Revolving Borrowing with the most number
of days remaining in the Interest Period applicable thereto, subject to the payment of any
funding indemnification amounts required by Section 2.16 but without penalty or premium.



     2.12 Fees.




     (a) The Borrower agrees to pay to the Administrative Agent, for the account of each
Lender, an unused commitment fee (the “Unused Commitment Fee”) equivalent to the
Applicable Rate times the daily average of the total Unused Commitments. Such Unused
Commitment Fee shall be calculated on the basis of a year consisting of 360 days. The
Unused Commitment Fee shall be calculated as of (and payable within fifteen days after) the
last day of March, June, September and December of each year, commencing with the first such
date to occur after the Closing Date, and on the Maturity Date for any period then ending
for which the Unused Commitment Fee shall not have been theretofore paid; provided
that, the Borrower agrees to pay to the Administrative Agent, for the account of each
Lender, on the date on which the Aggregate Commitment terminates, the pro rata portion of
the Unused Commitment Fee due for the period from the last day of the immediately preceding
March, June, September or December, as the case may be to the date such termination occurs.




     (b) The Borrower agrees to pay (i) to the Administrative Agent for the account of each
Lender a participation fee with respect to its participations in Letters of Credit, which
shall accrue at the same Applicable Rate used to determine the interest rate applicable to
Eurodollar Loans on the average daily amount of each Lender’s L/C Exposure (excluding any
portion thereof attributable to unreimbursed L/C Disbursements) during the period from and
including the Closing Date to but excluding the later of the date on which such Lender’s
Commitment terminates and the date on which such Lender ceases to have any L/C Exposure, and
(ii) to the L/C Issuer a fronting fee, which shall accrue at the rate or rates per annum
separately agreed upon between the



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Borrower and the L/C Issuer, on the average daily amount of the L/C Exposure (excluding
any portion thereof attributable to unreimbursed L/C Disbursements) during the period from
and including the Closing Date to but excluding the later of the date of termination of the
Aggregate Commitment and the date on which there ceases to be any L/C Exposure, as well as
the L/C Issuer’s standard fees with respect to the issuance, amendment, renewal or extension
of any Letter of Credit or processing of drawings thereunder. Participation fees and
fronting fees accrued through and including the last day of March, June, September and
December of each year shall be payable within fifteen days following such last day,
commencing on the first such date to occur after the Closing Date; provided that all
such fees shall be payable on the date on which the Aggregate Commitment terminates and any
such fees accruing after the date on which the Aggregate Commitment terminates shall be
payable on demand. Any other fees payable to the L/C Issuer pursuant to this paragraph
shall be payable within 10 days after demand. All participation fees and fronting fees
shall be computed on the basis of a year of 360 days and shall be payable for the actual
number of days elapsed (including the first day but excluding the last day).




     (c) As required under the Fee Letter, the Borrower agrees to pay (i) 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 and to (ii) Bank of
America, for its own account, fees payable in the amounts and at the times separately agreed
upon between the Borrower and Bank of America.




     (d) All fees payable hereunder shall be paid on the dates due, in immediately available
funds, to the Administrative Agent (or to the L/C Issuer, in the case of fees payable to it)
for distribution, in the case of Unused Commitment Fees and participation fees, to the
Lenders. Fees paid shall not be refundable under any circumstances.



     2.13 Interest.




     (a) The Loans comprising each ABR Borrowing (including each Swing Line Loan) 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.



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     (d) Accrued interest on each Loan shall be payable in arrears on each Interest Payment
Date for such Loan and upon termination of the Aggregate Commitment 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
(other than a prepayment of an ABR Loan prior to the end of the Availability Period at a
time when no Borrowing Base Deficiency exists), 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 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, (i) any Interest Election Request that requests the conversion of any Revolving Borrowing
to, or continuation of any Revolving Borrowing as, a Eurodollar Borrowing shall be ineffective, and
(ii) if any Borrowing Request requests a Eurodollar Revolving Borrowing, such Borrowing shall be
made as 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



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extended by, any Lender (except any such reserve requirement reflected in the
Adjusted LIBO Rate) or the L/C Issuer; or




     (ii) impose on any Lender or the L/C Issuer or the London interbank market any
other condition affecting this Agreement or Eurodollar Loans made by such Lender or
any Letter of Credit or participation therein;


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 the L/C Issuer of participating in, issuing or maintaining any
Letter of Credit or to reduce the amount of any sum received or receivable by such Lender or the
L/C Issuer hereunder (whether of principal, interest or otherwise), then the Borrower will pay to
such Lender or the L/C Issuer, as the case may be, such additional amount or amounts as will
compensate such Lender or the L/C Issuer, as the case may be, for such additional costs incurred or
reduction suffered.





     (b) If any Lender or the L/C Issuer 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 or
the L/C Issuer’s capital or on the capital of such Lender’s or the L/C Issuer’s holding
company, if any, as a consequence of this Agreement or the Loans made by, or participations
in Letters of Credit held by, such Lender, or the Letters of Credit issued by the L/C
Issuer, to a level below that which such Lender or the L/C Issuer or such Lender’s or the
L/C Issuer’s holding company could have achieved but for such Change in Law (taking into
consideration such Lender’s or the L/C Issuer’s policies and the policies of such Lender’s
or the L/C Issuer’s holding company with respect to capital adequacy), then from time to
time the Borrower will pay to such Lender or the L/C Issuer, as the case may be, such
additional amount or amounts as will compensate such Lender or the L/C Issuer or such
Lender’s or the L/C Issuer’s holding company for any such reduction suffered.




     (c) A certificate of a Lender or the L/C Issuer setting forth the amount or amounts
necessary to compensate such Lender or the L/C Issuer 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
or the L/C Issuer, as the case may be, 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 or the L/C Issuer to demand compensation
pursuant to this Section shall not constitute a waiver of such Lender’s or the L/C Issuer’s
right to demand such compensation; provided that the Borrower shall not be required
to compensate a Lender or the L/C Issuer pursuant to this Section for any increased costs or
reductions incurred more than 270 days prior to the date that such Lender or the L/C Issuer,
as the case may be, notifies the Borrower of the Change in Law giving rise to such increased
costs or reductions and of such Lender’s or the L/C Issuer’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.



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     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 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, Lender or L/C Issuer
(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, each Lender and the L/C
Issuer, within 10 days after written demand therefor, for the full amount of any Indemnified
Taxes or Other Taxes paid by the Administrative Agent, such Lender or the L/C Issuer, 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



-43-









 






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 the L/C Issuer, or by the
Administrative Agent on its own behalf or on behalf of a Lender or the L/C Issuer, 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 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, the
Swing Line Lender 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, fees or reimbursement of L/C Disbursements, 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



-44-









 






purposes of calculating interest thereon. All such payments shall be made to the
Administrative Agent at its offices at Mail Code IL1-0634, 21 South Clark Street, Chicago,
Illinois, except payments to be made directly to the L/C Issuer or Swing Line Lender as
expressly provided herein 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, unreimbursed L/C Disbursements,
interest and fees then due hereunder, such funds shall be applied in accordance with Section
8.03.




     (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 or
participations in L/C Disbursements or Swing Line Loans resulting in such Lender receiving
payment of a greater proportion of the aggregate amount of its Loans and participations in
L/C Disbursements and Swing Line 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 and participations in L/C
Disbursements and Swing Line 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 and
participations in L/C Disbursements and Swing Line 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 Agreement or any payment obtained by a Lender as
consideration for the assignment of or sale of a participation in any of its Loans or
participations in L/C Disbursements 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 or the L/C Issuer hereunder that the Borrower will not make such payment, the
Administrative Agent may assume that the Borrower have made such



-45-









 






payment on such date in accordance herewith and may, in reliance upon such assumption,
distribute to the Lenders or the L/C Issuer, as the case may be, the amount due. In such
event, if the Borrower have not in fact made such payment, then each of the Lenders or the
L/C Issuer, as the case may be, severally agrees to repay to the Administrative Agent
forthwith on demand the amount so distributed to such Lender or L/C Issuer 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 2.04(d) or 2.04(e), 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 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 (and if a Commitment is being assigned, the L/C
Issuer), 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 and
participations in L/C Disbursements and Swing Line 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



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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 (i) such Lender shall have received payment of an amount equal to the
outstanding principal of its Loans and participations in L/C Disbursements, 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 (ii) 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 or, in the case of a
Defaulting Lender, such Lender is no longer a Defaulting Lender.



ARTICLE III




BORROWING BASE AND CONFORMING BORROWING BASE




     3.01 Initial Borrowing Base and Initial Conforming Borrowing Base. During the period
from the Closing Date until the first Redetermination after the Closing Date, the Borrowing Base
shall be $475,000,000 and the Conforming Borrowing Base shall be $400,000,000. As soon as
available and in any event by April 1 and October 1 of each year, beginning October 1, 2006, the
Borrower shall deliver to the Administrative Agent and each Lender, in the case of the April 1
determination, an Annual Engineering Report and, in the case of the October 1 redetermination, an
Interim Engineering Report, together with such other information, reports and data concerning the
value of the Borrowing Base Properties as the Administrative Agent shall deem reasonably necessary
to determine the value of such Borrowing Base Properties. Simultaneously with the delivery to the
Administrative Agent and the Lenders of each Engineering Report, the Borrower shall submit to the
Administrative Agent and each Lender the Borrower’s requested amount of the Borrowing Base as of
the next Redetermination Date. Promptly after the receipt by the Administrative Agent of such
Engineering Report and Borrower’s requested amount for the Borrowing Base, the Administrative Agent
shall submit to the Lenders a recommended amount of the Borrowing Base and, with respect to any



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Redetermination prior to September 1, 2007, the Conforming Borrowing Base as of the next
Redetermination Date; provided that no Redetermination of the Conforming Borrowing Base shall be
required on or after September 1, 2007.




     3.02 Scheduled Redeterminations of the Borrowing Base; Procedures and Standards.
Based in part on the Engineering Reports made available to the Administrative Agent and the Lenders
pursuant to Section 3.01, the Lenders shall redetermine the Borrowing Base on or prior to the next
Redetermination Date and, if such Redetermination Date is prior to September 1, 2007, the
Conforming Borrowing Base (or such date promptly thereafter as reasonably possible based on the
engineering and other information available to the Lenders). Any Borrowing Base or Conforming
Borrowing Base which becomes effective as a result of any Redetermination shall be subject to the
following restrictions: (a) such Borrowing Base shall not exceed the Maximum Facility Amount, (b)
such Conforming Borrowing Base shall not exceed such Borrowing Base, (c) to the extent such
Borrowing Base or Conforming Borrowing Base represents an increase in the Borrowing Base or the
Conforming Borrowing Base in effect prior to such Redetermination, such Borrowing Base or
Conforming Borrowing Base, as the case may be, must be approved by all Lenders, and (d) to the
extent such Borrowing Base or Conforming Borrowing Base represents a decrease in the Borrowing Base
or Conforming Borrowing Base in effect prior to such Redetermination or a reaffirmation of such
prior Borrowing Base or Conforming Borrowing Base, such Borrowing Base or Conforming Borrowing Base
must be approved by the Administrative Agent and Required Lenders. If a redetermined Borrowing
Base or Conforming Borrowing Base is not approved by the Administrative Agent and Required Lenders
within twenty (20) days after the submission to the Lenders by the Administrative Agent of its
recommended Borrowing Base and Conforming Borrowing Base pursuant to Section 3.01, or by all
Lenders within such twenty (20) day period in the case of any increase in the Borrowing Base or
Conforming Borrowing Base, the Administrative Agent shall notify each Lender that the recommended
Borrowing Base and Conforming Borrowing Base, as the case may be, has not been approved and request
that each Lender submit to the Administrative Agent within ten (10) days thereafter its proposed
Borrowing Base and proposed Conforming Borrowing Base. Promptly following the 10th day
after the Administrative Agent’s request for each Lender’s proposed Borrowing Base and proposed
Conforming Borrowing Base, the Administrative Agent shall determine the Borrowing Base and
Conforming Borrowing Base for such Redetermination by calculating the highest Borrowing Base and
highest Conforming Borrowing Base then acceptable to the Administrative Agent and a number of
Lenders sufficient to constitute Required Lenders (or all Lenders in the case of an increase in the
Borrowing Base or the Conforming Borrowing Base). Each Redetermination shall be made by the
Lenders in their sole discretion, but based on the Administrative Agent’s and such Lender’s usual
and customary procedures for evaluating oil and gas properties as such exist at the time of such
Redetermination, and including adjustments to reflect the effect of any Swap Contracts of the
Borrower and the Restricted Subsidiaries as such exist at the time of such Redetermination. The
Borrower acknowledges and agrees that each Redetermination shall be based upon the loan collateral
value which the Administrative Agent and each Lender in its sole discretion (using such
methodology, assumptions and discount rates as the Administrative Agent and such Lender customarily
uses in assigning collateral value to oil and gas properties) assigns to the Borrowing Base
Properties at the time in question and based upon such other credit factors consistently applied
(including, without limitation, the assets, liabilities, cash flow, business, properties,
prospects, management and ownership of the Loan Parties) as the Administrative Agent and such



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Lender customarily considers in evaluating similar oil and gas credits. It is expressly
understood that the Administrative Agent and Lenders have no obligation to designate the Borrowing
Base or the Conforming Borrowing Base at any particular amounts, except in the exercise of their
discretion, whether in relation to the Aggregate Commitment or otherwise. If the Borrower does not
furnish all information, reports and data required to be delivered by any date specified in this
ARTICLE III, unless such failure is not the fault of the Borrower, the Administrative Agent and
Lenders may nonetheless designate the Borrowing Base and the Conforming Borrowing Base at any
amounts which the Administrative Agent and Lenders in their reasonable discretion determine and may
redesignate the Borrowing Base and the Conforming Borrowing Base from time to time thereafter until
the Administrative Agent and Lenders receive all such information, reports and data, whereupon the
Administrative Agent and Lenders shall designate a new Borrowing Base and a new Conforming
Borrowing Base, as described above.




     3.03 Special Redeterminations. In addition to Scheduled Redeterminations, the
Borrower shall be permitted to request a Special Redetermination of the Borrowing Base and the
Conforming Borrowing Base once between each Scheduled Redetermination and the Required Lenders
shall be permitted to request a Special Redetermination once between each Scheduled
Redetermination. Any request by the Borrower pursuant to this Section 3.03 shall be submitted to
the Administrative Agent and each Lender and at the time of such request the Borrower shall (1)
notify the Administrative Agent and each Lender of the Borrowing Base requested by the Borrower in
connection with such Special Redetermination, and (2) deliver to the Administrative Agent and each
Lender an Interim Engineering Report prepared as of a date prior to the date of such request that
is reasonably acceptable to the Administrative Agent. Any request by Required Lenders pursuant to
this Section 3.03 shall be submitted to the Administrative Agent and the Borrower. Any Special
Redetermination shall be made by the Administrative Agent and Lenders in accordance with the
procedures and standards set forth in Section 3.02; provided that no Engineering Report is required
to be delivered to the Administrative Agent or the Lenders in connection with any Special
Redetermination requested by the Required Lenders pursuant to this Section 3.03.



     3.04 Notice of Redetermination. Promptly following any Redetermination of the
Borrowing Base or the Conforming Borrowing Base, the Administrative Agent shall notify the Borrower
of the amount of the redetermined Borrowing Base and Conforming Borrowing Base, which Borrowing
Base and Conforming Borrowing Base shall be effective as of the date specified in such notice, and
such Borrowing Base and Conforming Borrowing Base shall remain in effect for all purposes of this
Agreement until the next Redetermination.



     3.05 Special 2006 Redetermination. In addition to any Special Redetermination
pursuant to Section 3.03, the Borrower shall deliver to the Administrative Agent and the Lenders,
on or before June 1, 2006, an Interim Engineering Report as of April 30, 2006 (which may be in an
abbreviated form acceptable to the Administrative Agent) and a Special Redetermination shall be
made by the Administrative Agent and the Lenders in accordance with the procedures and standards
set forth in Section 3.02.




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ARTICLE IV




CONDITIONS PRECEDENT TO CREDIT EXTENSIONS




     4.01 Conditions of Initial Credit Extension. The obligation of the L/C Issuer and
each Lender to make its initial Credit Extension 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:




     (i) executed counterparts of this Agreement and each Initial Guarantor’s
Guaranty 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 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, the L/C Issuer 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, the L/C Issuer and each Lender, as to such matters of New



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Mexico law concerning the Loan Documents as the Administrative Agent may
reasonably request;




     (vii) a certificate of a Responsible Officer of each Loan Party 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 conditions specified in Section 4.02(a) and Section 4.02(b) have been
satisfied, and (B) that there has been no event or circumstance since September 30,
2005 (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, together with evidence of arrangements by Administrative
Agent’s counsel for the completion of all recordings and filings of such Mortgages
as may be necessary or, in the reasonable opinion of Administrative Agent, desirable
effectively to create a valid, perfected and first 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, the L/C Issuer, the Swing Line Lender or the Required
Lenders reasonably may require; and




     (xiii) the Initial Engineering Report.




     (b) The Administrative Agent shall have received evidence or assurances satisfactory to
it that the Combination shall have been (or concurrently with the effectiveness of this
Agreement and the initial Credit Extension hereunder, will be) consummated in accordance
with the terms of the Combination Agreement, without waiver, modification or release of any
of the material conditions thereof other than those waivers, modifications or releases of
material conditions consented to by Administrative Agent and the Administrative Agent shall
have received a copy, certified by the Borrower as being true, correct and complete, of the
Combination Agreement (including the



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exhibits and schedules thereto), together with such other instruments and documents
delivered in connection therewith as Administrative Agent shall request.




     (c) The Administrative Agent shall have received evidence or assurances satisfactory to
it that, concurrently with the Closing Date, all Liens that burden or encumber the Borrowing
Base Properties, other than Permitted Encumbrances, have been or concurrently with the
initial Credit Extensions will be released, together with, if requested by the
Administrative Agent, original executed instruments releasing and terminating any such Liens
in a form suitable for filing in the applicable jurisdiction.




     (d) The Administrative Agent shall have received evidence or assurances satisfactory to
it that Concho Holdings has received a cash equity contribution of at least $40,000,000 in
the aggregate from its shareholders since February 20, 2006.




     (e) The Administrative Agent shall be reasonably satisfied with the progress of the
Borrower toward compliance with the provisions of Section 6.14.




     (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 September 30, 2005, 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) The Administrative Agent shall have received evidence or assurances satisfactory to
it that after giving effect to the Transactions, (i) the Borrowing Base exceeds the
Aggregate Credit Exposure by at least $50,000,000 and (ii) the Control Group owns not less
than 51% of the issued and outstanding Equity Interests of the Borrower.




     (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 a pro forma
consolidated balance sheet of the Borrower and its Restricted Subsidiaries,



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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 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.




     (m) The Closing Date shall have occurred on or before March 31, 2006.



     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.



     4.02 Conditions to all Credit Extensions. The obligation of each Lender to honor any
request for Credit Extension (other than an Interest Election Request requesting only a conversion
of Revolving Loans to the other Type, or a continuation of Eurodollar Loans) is subject to the
following conditions precedent:




     (a) 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 at any time under or in connection herewith or therewith, shall be true and
correct on and as of the date of such Credit Extension, except to the extent that such
representations and warranties specifically refer to an earlier date, in which case they
shall be true and correct as of such earlier date, and except that for purposes of this
Section 4.02, the representations and warranties contained in clause (a) of Section
5.05 shall be deemed to refer to the Borrower and its Subsidiaries and their most recent
statements furnished pursuant to clauses (a) and (b), respectively, of
Section 6.01.




     (b) No Default shall exist, or would result from such proposed Credit Extension or from
the application of the proceeds thereof.




     (c) The Administrative Agent and, if applicable, the L/C Issuer or the Swing Line
Lender shall have received, with respect to a Borrowing, a Borrowing Request in accordance
with the requirements hereof and, with respect to a Letter of Credit, a notice requesting
issuance of a Letter of Credit, or an amendment, renewal or extension of an outstanding
Letter of Credit, as the case may be, in accordance with the requirements hereof.



     Each request for Credit Extension (other than an Interest Election Request requesting only a
conversion of Revolving Loans to the other Type or a continuation of Eurodollar Loans) submitted by
the Borrower shall be deemed to be a representation and warranty that the conditions specified in
Section 4.02(a) and Section 4.02(b) have been satisfied on and as of the date of the applicable
Credit Extension.



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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 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.



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     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 Concho Holdings 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 Concho Holdings 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.




     (c) The Chase Operating Statements (i) were prepared in accordance with standard
industry practice consistently applied throughout the period covered thereby, except as
otherwise expressly noted therein and (ii) fairly present the results of operations of the
properties contributed to the Borrower by Chase for the period covered thereby.



     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. To the Borrower’s knowledge and as of the Closing Date, no
Person party to the Combination Agreement is in default under the Combination Agreement and all
representations and warranties of all such Persons made in the Combination Agreement are true and
correct as of the Closing Date, except to the extent that failure of the same to be true and
correct could not reasonably be expected to have a Material Adverse Effect.



     5.08 Ownership of Property; Liens. Each of the Borrower and each Restricted
Subsidiary has, or upon consummation of the Combination will have, 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.



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     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
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



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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 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). 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 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




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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 L/C Issuer,
the Lenders or the Trustee (as defined in any of the Security Instruments) on behalf of the
Administrative Agent, the L/C Issuer and the Lenders in such Loan Party’s assets pursuant to the
Security Instruments will be validly created, perfected and first 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 initial Credit Extension hereunder and all additional Credit
Extensions 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, any Loan or other Obligation
hereunder shall remain unpaid or unsatisfied, or any Letter of Credit shall remain outstanding, the
Borrower shall, and shall (except in the case of the covenants set forth in 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:



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     (a) as soon as available, but in any event within 90 days after the end of each fiscal
year of the Borrower (commencing with the fiscal year ended December 31, 2006), 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 Required Lenders, 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, 2006) 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, 2007, 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, 2007, an annual operating budget prepared
by the Borrower in reasonable detail, based upon reasonable assumptions made in good faith
by the Borrower, 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 (each an “Operating Budget”); and




     (d) On or before October 1 of each Fiscal Year commencing October 1, 2006 (and in
connection with a Special Redetermination requested by the Borrower, at the



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time of such
request, and in connection with a Special Redetermination pursuant to Section 3.05 at the
time specified in Section 3.05), an engineering report prepared by the Borrower or an
Affiliate of the Borrower, dated as of the preceding June 30 (or the date otherwise
specified in this Agreement), 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) as soon as available, but in any event within 90 days after December 31, 2005, a
consolidated balance sheet of Concho Holdings 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 Required Lenders, 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;




     (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, 2006), a duly completed Compliance Certificate signed by
a Responsible Officer of the Borrower (provided that the Compliance Certificate
delivered for the fiscal quarter ended March 31, 2006, may omit the Borrower’s compliance
with the financial ratios set forth in Section 7.11(a) and 7.11(b));




     (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



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Securities Exchange Act of 1934, and not otherwise required to be delivered to the
Administrative Agent pursuant hereto; and




     (e) [Reserved]; 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.



     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 Arrangers will
make available to the Lenders and the L/C Issuer 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 Arrangers, the L/C Issuer 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



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“Public Investor;” and
(z) the Administrative Agent and the Arrangers 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;




     (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



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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
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 Credit Extensions for general corporate
purposes not in contravention of any Law or of any Loan Document.



     6.12 Additional Guarantors. Cause COG LP to execute and deliver to the Administrative
Agent, on or before March 7, 2006, a Counterpart Agreement and any supplemental or revised
schedules or attachments to the Pledge Agreement required with respect to COG LP’s 99% limited
partnership interest in COG Oil & Gas; notify the Administrative Agent at the time that any
additional Restricted Subsidiary of the Borrower is formed or acquired after the Closing Date; and
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



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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 Credit Party, such Restricted Subsidiary shall be a
Guarantor and shall be as fully a party to the Guaranty as if such Restricted 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) or other security agreement in form and substance acceptable to Administrative Agent
(to the extent it owns personal property) and promptly take such actions to create and perfect
Liens on such Restricted Subsidiary’s assets to secure the Obligations as Administrative Agent, the
L/C Issuer or the Required Lenders shall reasonably request, 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. Any Restricted Subsidiary formed or acquired on or
after the Closing Date shall be a Wholly Owned Subisdiary.



     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 and opinions of counsel (including, if so
requested, title opinions, addressed to the Administrative Agent) and other evidence of title as
the Administrative Agent shall deem necessary or appropriate 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.



     6.15 Minimum Hedging. Deliver to the Administrative Agent within 10 Business Days
after the Closing Date evidence satisfactory to the Administrative Agent demonstrating that the
Borrower and its Restricted Subsidiaries, if applicable, have entered into Swap Contracts with
counterparties reasonably acceptable to the Administrative Agent with respect to not less than 75%
of forecasted production from Borrowing Base Properties constituting proved



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developed producing
(PDP) reserves described in the Initial Engineering Report for all periods through December 31,
2008. Upon the request of the Required Lenders, and to the extent each such Swap Contract allows,
take all actions necessary to cause all of its right, title and interest in each Swap Contract to
which it is a party to be collaterally assigned to the Administrative Agent, for the benefit of the
Secured Parties. Upon the request of the Administrative Agent, the Borrower shall, within thirty
(30) days of such request, provide to the Administrative Agent and each Lender copies of all
agreements, documents, confirmations and instruments evidencing any Swap Contract to which the
Borrower or any Restricted Subsidiary is then a party and not previously delivered to the
Administrative Agent and Lenders, and such other information regarding such Swap Contracts as the
Administrative Agent and Lenders may reasonably request.



     6.16 Further Assurances.




     (a) 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 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, the L/C Issuer 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 first 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



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opinion of
Administrative Agent, desirable to effectively create a valid, perfected and first priority
Lien, subject only to Permitted Encumbrances, 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, any Loan or other Obligation
hereunder shall remain unpaid or unsatisfied, or any Letter of Credit shall remain outstanding, the
Borrower shall not, nor shall it permit any Restricted Subsidiary to, directly or indirectly:



     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



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assets and
(iv) such security interests shall not apply to any other property or assets of any Borrower
or any other Restricted Subsidiaries; and




     (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 with counterparties other than a Lender Counterparty.



     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 date
hereof;




     (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;



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     (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 first priority
security interest in favor of the 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; and




     (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.



     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;



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     (b) Dispositions made between Scheduled Redeterminations of Borrowing Base Properties
having a PV 10 value (present value of such property discounted at 10%, as determined in the
most recent Engineering Report) not exceeding, in the aggregate for the Borrower and its
Restricted Subsidiaries taken as a whole, 5% of the Borrowing Base most recently determined;




     (c) Subject to Section 2.11(b), any other Disposition of Borrowing Base Properties,
provided that:




     (i) at the option of the Required Lenders, (a) Administrative Agent shall
reduce the Borrowing Base by (1) an amount equal to the Net Cash Proceeds of such
sale or transfer, or (2) the Engineered Value attributed by Required Lenders to such
Borrowing Base Properties at the time of the last Borrowing Base Redetermination, or
(b) the Borrower shall have obtained a Redetermination of the Borrowing Base taking
such Disposition into account; in either case, such reduction or Redetermination to
be effective upon the consummation of such Disposition; or




     (ii) the Borrower shall have submitted to the Administrative Agent and the
Required Lenders for inclusion in the Borrowing Base replacement properties which
are acceptable to Required Lenders using the evaluation parameters utilized by the
Lenders for Redeterminations of the Borrowing Base and Conforming Borrowing Base
pursuant to Section 3.02.




     (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 Borrower 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:



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     (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 Closing 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 as of the Closing Date on Concho Holdings’ Preferred Stock in an aggregate
amount not exceeding $2,500,000.



     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 or any other Loan Document) that (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 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 Credit Extension, whether directly or
indirectly, and whether immediately, incidentally or ultimately, to purchase or carry margin
stock (within the meaning of Regulation U of the 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.



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     7.11 Financial Covenants.




     (a) Consolidated Leverage Ratio. Permit the Consolidated Leverage Ratio as of
the last day of any period of four consecutive fiscal quarters (commencing with the four
consecutive fiscal quarter period ended June 30, 2006) of the Borrower to be greater than
3.50 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 at any time.



     For purposes of this Section 7.11, (i) the Borrower’s Consolidated EBITDAX for the period of
four consecutive fiscal quarters ending June 30, 2006, shall be deemed to equal the Borrower’s
Consolidated EBITDAX for the fiscal quarter ending June 30, 2006, multiplied by the number four,
(ii) the Borrower’s Consolidated for the period of four consecutive fiscal quarters ending
September 30, 2006, shall be deemed to equal the Borrower’s Consolidated EBITDAX for the two
consecutive fiscal quarter period ending September 30, 2006, multiplied by the number two, and
(iii) 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.



     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 proven 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 Lender Counterparty, or if not a
Lender Counterparty, 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



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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 any L/C
Obligation, or (ii) within three days after the same becomes due, any interest on any Loan
or on any L/C Obligation, 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




     (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 Indebtedness 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



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in any instrument or agreement evidencing, securing or relating thereto, or any other event occurs,
the effect of which default or other event is to cause, or to permit the holder or holders
of such Indebtedness or the beneficiary or beneficiaries of such 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 (A) 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) or (B) any Termination Event under and as defined in such Swap Contract as to
which the Borrower or any Restricted Subsidiary is an Affected Party (as so defined) and, in
either event, 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 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



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     (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 of Control. There occurs any Change of 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 and any obligation of the L/C
Issuer to make L/C Credit Extensions to be terminated, whereupon such commitments and
obligation shall be terminated;




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




     (c) require that the Borrower Cash Collateralize the L/C Obligations (in an amount
equal to the then outstanding amount of such L/C Obligations); and




     (d) 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 and any obligation of the L/C Issuer to make L/C Credit
Extensions shall automatically terminate, the unpaid principal amount of all outstanding Loans and all
interest and other amounts as aforesaid shall automatically become due and payable, and the
obligation of the Borrower to Cash Collateralize the L/C Obligations as aforesaid shall
automatically become effective, in each case without further act of the Administrative Agent or any
Lender.



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     8.03 Application of Funds. After the exercise of remedies provided for in Section
8.02 (or after the Loans have automatically become immediately due and payable and the L/C
Obligations have automatically been required to be Cash Collateralized as set forth in the proviso
to Section 8.02), any amounts received on account of the Obligations shall be applied by the
Administrative Agent in the following order:



     First, to payment of that portion of the Obligations constituting fees, indemnities,
expenses and other amounts (including fees, charges and disbursements of counsel to the
Administrative Agent and amounts payable under ARTICLE III) 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 and the L/C Issuer
(including fees, charges and disbursements of counsel to the respective Lenders and the L/C Issuer
and amounts payable under ARTICLE III), 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, L/C Disbursements and other Obligations, ratably among the Lenders and the
L/C Issuer 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 and L/C Disbursements or the Swap Termination Value owed to any Lender Counterparty,
ratably among the Lenders, the Lender Counterparties and the L/C Issuer in proportion to the
respective amounts described in this clause Fourth held by them;



     Fifth, to the Administrative Agent for the account of the L/C Issuer, to Cash
Collateralize that portion of L/C Obligations comprised of the aggregate undrawn amount of Letters
of Credit; 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.



Subject to Section 2.02(c), amounts used to Cash Collateralize the aggregate undrawn amount
of Letters of Credit pursuant to clause Fifth above shall be applied to satisfy drawings
under such Letters of Credit as they occur. If any amount remains on deposit as Cash Collateral
after all Letters of Credit have either been fully drawn or expired, such remaining amount shall be
applied to the other Obligations, if any, in the order set forth above.



     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



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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 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 and the L/C Issuer hereby
irrevocably appoints JPMorgan Chase Bank 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, the Lenders and
the L/C Issuer, 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.



     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;




     (b) shall not have any duty to take any discretionary action or exercise any
discretionary powers, except discretionary rights and powers expressly contemplated



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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, a Lender or the L/C Issuer.



     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 a Loan, or the issuance of a
Letter of Credit, that by its terms must be fulfilled to the satisfaction of a Lender or the L/C
Issuer, the Administrative Agent may presume that such condition is satisfactory to such Lender or
the L/C Issuer unless the Administrative Agent shall have received notice to the contrary from such
Lender or the L/C Issuer prior to the making of such Loan or the issuance of such Letter of



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Credit.
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, the L/C Issuer 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 and the L/C Issuer, 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 or the L/C Issuer 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 and the L/C Issuer 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 and the L/C
Issuer 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 and the L/C Issuer 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.



     9.08 No Other Duties, Etc. Anything herein to the contrary notwithstanding, none of
the Bookrunners, the Arrangers, the Syndication Agent or the Documentation Agents 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, a
Lender or the L/C Issuer 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 or L/C Obligation 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, L/C Obligation 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, the L/C Issuer and the Administrative Agent (including any
claim for the reasonable compensation, expenses, disbursements and advances of the Lenders,
the L/C Issuer and the Administrative Agent and their respective agents and counsel and all
other amounts due the Lenders, the L/C Issuer 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 and the L/C Issuer 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 and the L/C Issuer, 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 or the L/C Issuer 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 and the L/C Issuer 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) and the
expiration or termination of all Letters of Credit, (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 Swap Contracts between a Lender or Affiliate of a Lender and a
Loan Party, Letters of Credit or the Fee Letter, each of which shall be modified only in accordance
with their respective 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 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;



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     (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 or mandatory prepayment of principal, interest, fees or other amounts due to the
Lenders (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 the principal of, or the rate of interest specified herein on, any Loan or
L/C Disbursement, or (subject to clause (iv) of the second proviso to this Section 10.01)
any fees or other amounts payable hereunder or under any other Loan Document, or change the
manner of computation of any financial ratio (including any change in any applicable defined
term) used in determining the Applicable Rate that would result in a reduction of any
interest rate on any Loan or any fee payable hereunder without the written consent of each
Lender directly affected thereby; 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 without the written consent of each Lender;




     (f) change any provision of this Section, Section 3.02, the definition of “Borrowing
Base”, 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 (including, without
limitation, any provisions specifying the number or percentage of Lenders required to
approve any Borrowing Base), 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 L/C Issuer in addition to the Lenders required above, affect the rights
or duties of the L/C Issuer under this Agreement or any Issuer Document relating to any Letter of
Credit issued or to be issued by it; (ii) no amendment, waiver or consent shall, unless in writing
and signed by the Swing Line Lender in addition to the Lenders required above, affect the rights or
duties of the Swing Line Lender under this Agreement; (iii) 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 (iv) 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


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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, the Administrative Agent, the L/C Issuer or the Swing
Line Lender, 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.



     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
and the L/C Issuer 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 or the L/C Issuer pursuant to ARTICLE II if such Lender or the L/C Issuer, as
applicable, 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



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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, the Administrative Agent,
the L/C Issuer and the Swing Line Lender 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, the Administrative Agent, the L/C
Issuer and the Swing Line Lender.




     (d) Reliance by Administrative Agent, L/C Issuer and Lenders. The
Administrative Agent, the L/C Issuer and the Lenders shall be entitled to rely and act upon
any notices (including telephonic Borrowing Requests and Swing Line Loan 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, the L/C Issuer, 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.



     10.03 No Waiver; Cumulative Remedies. No failure by any Lender, the L/C Issuer 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), (ii) all reasonable out-of-pocket expenses incurred by the L/C Issuer in
connection with the issuance, amendment, renewal or extension of any Letter of Credit or any
demand for payment thereunder and (iii) 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 or the L/C Issuer (including the fees, charges and disbursements of any counsel for
the Administrative Agent, and, so long as an Event of



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Default has occurred and is
continuing, counsel for any Lender or the L/C Issuer), 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 or Letters
of Credit issued hereunder, including all such out-of-pocket expenses incurred during any
workout, restructuring or negotiations in respect of such Loans or Letters of Credit.




     (b) INDEMNIFICATION BY THE BORROWER. THE BORROWER SHALL INDEMNIFY THE
ADMINISTRATIVE AGENT (AND ANY SUB-AGENT THEREOF), EACH LENDER AND THE L/C ISSUER, 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 LETTER OF
CREDIT OR THE USE OR PROPOSED USE OF THE PROCEEDS THEREFROM (INCLUDING ANY REFUSAL BY THE
L/C ISSUER TO HONOR A DEMAND FOR PAYMENT UNDER A LETTER OF CREDIT IF THE DOCUMENTS PRESENTED
IN CONNECTION WITH SUCH DEMAND DO NOT STRICTLY COMPLY WITH THE TERMS OF SUCH LETTER OF
CREDIT), (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 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



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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), the L/C Issuer or any
Related Party of any of the foregoing, each Lender severally agrees to pay to the
Administrative Agent (or any such sub-agent), the L/C Issuer 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) or the L/C Issuer 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) or L/C Issuer 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 LETTER OF
CREDIT 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 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.




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     (f) Survival. The agreements in this Section shall survive the
resignation of the Administrative Agent and the L/C Issuer, 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, the L/C Issuer or any Lender, or the Administrative
Agent, the L/C Issuer 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, the L/C Issuer 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 and the L/C Issuer 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 and the L/C Issuer
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, the L/C Issuer and the Lenders) any legal or equitable
right, remedy or claim under or by reason of this Agreement.




     (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 (including for purposes of this
subsection (b), participations in L/C Obligations and in Swing Line Loans) at the time owing
to it); provided that



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     (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 $5,000,000, 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 $5,000,000 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 Revolving Loans or the Commitment assigned, except that this clause
(ii) shall not apply to rights of the Swing Line Lender in respect of Swing Line
Loans;




     (iii) any assignment of a Commitment must be approved by the Administrative
Agent, the L/C Issuer and the Swing Line Lender unless the Person that is the
proposed assignee is itself a Lender (whether or not the proposed assignee would
otherwise qualify as an Eligible Assignee); 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 $3,500, and the Eligible Assignee, if it shall not be 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 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,

-87-









 








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 and
L/C Obligations owing to, each Lender pursuant to the terms hereof from time to time (the
“Register”). The entries in the Register shall be conclusive, and the Borrower, the
Administrative Agent and the Lenders may treat each Person whose name is recorded in the
Register pursuant to the terms hereof as a Lender hereunder for all purposes of this
Agreement, notwithstanding notice to the contrary. The Register shall be available for
inspection and copying by each of the Borrower and the L/C Issuer 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 (including such Lender’s participations in L/C Obligations and/or Swing Line
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, the Lenders and the L/C Issuer 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.



-88-









 






     (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 2.15 unless the Borrower is notified
of the participation sold to such Participant and such Participant agrees, for the benefit
of the Borrower, to comply with Section 3.01 as though it were a Lender.




     (f) Certain Pledges. Any Lender may at any time pledge or assign a security
interest in all or any portion of its rights under this Agreement (including under its 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, the Lenders and the L/C Issuer 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, 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, the L/C Issuer or any of their
respective Affiliates on a nonconfidential basis from a source other than the Borrower.



-89-









 





     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, any
Lender or the L/C Issuer 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, the L/C Issuer 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, the L/C Issuer 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 or the L/C Issuer, irrespective of whether or not such Lender or the L/C
Issuer 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 or the L/C Issuer different from the branch or office holding such deposit or obligated
on such indebtedness. The rights of each Lender, the L/C Issuer and their respective Affiliates
under this Section are in addition to other rights and remedies (including other rights of setoff)
that such Lender, the L/C Issuer or their respective Affiliates may have. Each Lender and the L/C
Issuer 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.



-90-









 





     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 Credit Extension, and
shall continue in full force and effect as long as any Loan or any other Obligation hereunder shall
remain unpaid or unsatisfied or any Letter of Credit shall remain outstanding.



     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



-91-









 






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
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, ANY LENDER OR THE L/C ISSUER 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



-92-









 




BY, AMONG OTHER THINGS, THE MUTUAL WAIVERS AND CERTIFICATIONS IN THIS SECTION.




     10.16 Hedging Agreements and Collateral. The benefit of the Security Instruments and
of the provisions of this Agreement relating to the collateral secured hereunder shall also extend
to and be available on a pro rata basis to each Lender or any of its Affiliates to secure
obligations of any Loan Party owed under a Swap Contract to such Lender or its Affiliate, but in
each case, only to the extent such Swap Contract, and the transactions thereunder, are entered into
while such Person or its Affiliate is a Lender or prior to such time. Unless it has actual
knowledge evidenced by way of written notice from any such Lender or an Affiliate of a Lender and
the Borrower to the contrary, the Administrative Agent, in acting in such capacity under the Loan
Documents, shall be entitled to assume that no Swap Contracts or Obligations in respect thereof are
in existence or outstanding between any Lender or Affiliate of a Lender and any Loan Party.



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



     10.18 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.



-93-









 





     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 	 



-94-









 






	 	 	 	 	 



	 	 	 	 	 
	 	JPMORGAN CHASE BANK, N.A.,

as Administrative Agent

 	 
	 	By:  	/s/
Wm. Mark Cranmer 	 
	 	 	Name:  	Wm. Mark Cranmer 	 
	 	 	Title:  	Vice President 	 
	 
	 	JPMORGAN CHASE BANK, N.A.,

as a Lender, L/C Issuer and Swing Line Lender

 	 
	 	By:  	/s/
Wm. Mark Cranmer 	 
	 	 	Name:  	Wm. Mark Cranmer 	 
	 	 	Title:  	Vice President 	 



-95-









 






	 	 	 	 	 



	 	 	 	 	 
	 	BANK OF AMERICA, N.A.,


as Syndication Agent and a Lender

 	 
	 	By:  	/s/
Jeffrey H. Rathkamp 	 
	 	 	Name:  	Jeffrey H. Rathkamp 	 
	 	 	Title:  	Principal 	 



-96-









 







	 	 	 	 	 



	 	 	 	 	 
	 	BNP PARIBAS,

as a Documentation Agent and a Lender

 	 
	 	By:  	/s/ Brian
Malone	 
	 	 	Name:  	Brian
Malone	 
	 	 	Title:  	Managing Director	 
	 
	 	 	 
	 	By:  	/s/ Russell
Otts	 
	 	 	Name:  	Russell Otts	 
	 	 	Title:  	Vice President	 



-97-









 






	 	 	 	 	 



	 	 	 	 	 
	 	WACHOVIA BANK, NATIONAL ASSOCIATION,

as a Documentation Agent and a Lender

 	 
	 	By:  	/s/
Russell Clingman	 
	 	 	Name:  	Russell Clingman	 
	 	 	Title:  	Director	 



-98-









 






	 	 	 	 	 



	 	 	 	 	 
	 	BANK OF SCOTLAND,

as a Lender

 	 
	 	By:  	/s/
Karen Weich	 
	 	 	Name:  	Karen Weich	 
	 	 	Title:  	Assistant Vice President	 



-99-









 






	 	 	 	 	 



	 	 	 	 	 
	 	THE FROST NATIONAL BANK,

as a Lender

 	 
	 	By:  	/s/
John S. Warren	 
	 	 	Name:  	John S. Warren	 
	 	 	Title:  	Senior Vice President	 
	 




-100-









 





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 February 24, 2006, from COG Oil & Gas LP, a Texas limited
partnership, as Mortgagor, to Wm. Mark Cranmer, as Trustee, and JPMorgan Chase Bank, N.A., as
Administrative Agent.
	 
	2.	 	Guaranty from the Initial Guarantors.






	3.	 	Pledge Agreements dated February 24, 2006, from each of the Loan Parties listed below in
column A, respectively, as Pledgor, to JPMorgan Chase Bank, 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






 









 








SCHEDULE 1.02




EXISTING SWAP CONTRACTS




	 	 	 	 	 	 	 
	Crude Oil	 	 	 	 
	 
	 	 	 	 	 	 
	(1)

	 	Internal Reference:

Counterparty:
	 	06-01

BNP Paribas

	 	Floating price is
Commodity Business
Day monthly average
of closing NYMEX
price. Settlement
due 5th business
day following month
end.
	 
	 	 	 	 	 	 
	 

	 	Counterparty Deal #:
	 	Put: 75249

Call: 75249	 	 
	 

	 	Trade Date:

Start Date:

Maturity Date:

Index:

Volume:

Settlement:

Ceiling Price:

Floor Price:
	 	12/17/04

1/1/06

12/31/06

NYMEX Crude Oil

700 bbls per day

Monthly

$42.65/bbl.

$39.25/bbl.	 	 
	 
	 	 	 	 	 	 
	(2)

	 	Internal Reference:

Counterparty:
	 	07-01

Bank of America

	 	Floating price is
Commodity Business
Day monthly average
of closing NYMEX
price. Settlement
due 5th business
day following month
end.
	 
	 	 	 	 	 	 
	 

	 	Counterparty Deal #:
	 	Put: 409237

Call: 409238	 	 
	 

	 	Trade Date:

Start Date:

Maturity Date:

Index:

Volume:

Settlement:

Ceiling Price:

Floor Price:
	 	12/17/04

1/1/07

12/31/07

NYMEX Crude Oil

650 bbls per day

Monthly

$41.75/bbl.

$37.95/bbl.	 	 
	 
	 	 	 	 	 	 
	Natural Gas	 	 	 	 
	 
	 	 	 	 	 	 
	(1)

	 	Internal Reference:

Counterparty:
	 	06-02

BNP Paribas
	 	Floating price is
first of the month
Inside FERC Gas
Market Report.
Settlement due 5th
business day after
the publishing of
the Inside FERC
Report.
	 
	 	 	 	 	 	 
	 

	 	Counterparty Deal #:
	 	Put: 74780

Call: 74780	 	 
	 

	 	Trade Date:

Start Date:

Maturity Date:

Index:


Volume:

Settlement:

Ceiling Price:

Floor Price:
	 	12/8/04

1/1/06

12/31/06

Inside FERC — EPNG Permian Basin

4,000 MMBtu/day

Monthly

$6.45/MMBtu

$5.28/MMBtu	 	 
	 
	 	 	 	 	 	 
	(2)

	 	Internal Reference:

Counterparty:
	 	07-02

Bank of America
	 	Floating price is
first of the month
Inside FERC Gas
Market Report.
Settlement due 5th
business day after
the publishing of
the Inside FERC
Report.
	 
	 	 	 	 	 	 
	 

	 	Counterparty Deal #:
	 	Put: 408236

Call: 408237	 	 
	 

	 	Trade Date:

Start Date:

Maturity Date:

Index:
	 	12/8/04

1/1/07

12/31/07
	 	 
	 

	 	Volume:
	 	3,500 MMBtu/day	 	 






SCHEDULE 1.02




 









 








	 	 	 	 	 
	 

	 	Settlement:

Ceiling Price:

Floor Price:
	 	Monthly

$6.02/MMBtu

$5.00/MMBtu






 









 







SCHEDULE 2.01




COMMITMENTS

AND APPLICABLE PERCENTAGES




	 	 	 	 	 	 	 	 	 
	 	 	 	 	 	 	Applicable
	Lender	 	Commitment	 	Percentage
	 
	JPMorgan Chase Bank, N.A.
	 	$	122,500,000.00	 	 	 	25.7894737	%
	Bank of America, N.A.
	 	$	122,500,000.00	 	 	 	25.7894737	%
	BNP Paribas
	 	$	75,000,000.00	 	 	 	15.7894737	%
	Wachovia Bank, National Association
	 	$	75,000,000.00	 	 	 	15.7894737	%
	Bank of Scotland
	 	$	50,000,000.00	 	 	 	10.5263158	%
	The Frost National Bank
	 	$	30,000,000.00	 	 	 	6.3157895	%
	 
	 	 	 	 	 	 	 	 
	Total
	 	$	475,000,000.00	 	 	 	100.000000000	%






 









 








SCHEDULE 5.06




LITIGATION




None




 









 







SCHEDULE 5.13




SUBSIDIARIES, OTHER EQUITY INVESTMENTS

AND EQUITY INTERESTS IN THE BORROWER



Part (a). Subsidiaries.





Concho Holdings (owned approximately 98% by the Borrower, but to be contributed by
the Borrower to a newly formed Restricted Subsidiary shortly before the merger of
Concho Holdings and such Restricted Subsidiary, in which merger Concho Holdings will
be the survivor and a Wholly-Owned Subsidiary of the Borrower)




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)


Part (b). Other Equity Investments.





None



 









 







SCHEDULE 7.01




EXISTING LIENS




None.




 









 







SCHEDULE 7.03




EXISTING INDEBTEDNESS




None.




SCHEDULE 7.03





 










 





SCHEDULE 7.08




AFFILIATE AGREEMENTS





	1.	 	Contract Operating Agreement among COG Oil & Gas, COG GP and Mack Energy Corporation.
	 
	2.	 	Salt Water Disposal Well Ownership and Operating Agreement among COG Oil & Gas, COG GP, Mack
Energy Corporation, Chase Oil Corporation, and others.
	 
	3.	 	The Combination Agreement and the ancillary agreements referred to therein.





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):




JPMorgan Chase Bank, N.A.

Mail Code IL1-0010

21 South Clark Street

Chicago, Illinois 60670

Attn: Teresita R. Siao

Telephone: (312) 385-7051

Telecopier: (312) 385-7096

Electronic Mail: teresita.r.siao@jpmchase.com

Account Number: 9008109962

ABA: 021000021




Other Notices as Administrative Agent:




JPMorgan Chase Bank, N.A.

Mail Code IL-0010

21 South Clark Street

Chicago, Illinois 60670

Attn: Teresita R. Siao

Telephone: (312) 385-7051

Telecopier: (312) 385-7096

Electronic Mail: teresita.r.siao@jpmchase.com




with a copy to:




JPMorgan Chase Bank, N.A.




SCHEDULE 10.02




 









 









Mail Code TX1-2448

1717 Main Street

Dallas, Texas 75201

Attn: Wm. Mark Cranmer

Telephone: 214-290-2212

Telecopier: 214-290-2332

Electronic Mail: mark.cranmer@chase.com




L/C ISSUER:




JPMorgan Chase Bank, N.A.

Mail Code IL-0010

21 South Clark Street

Chicago, Illinois 60670

Attn: Teresita R. Siao

Telephone: (312) 385-7051

Telecopier: (312) 385-7096

Electronic Mail: teresita.r.siao@jpmchase.com




SWING LINE LENDER:




JPMorgan Chase Bank, N.A.

Mail Code IL1-0010

21 South Clark Street

Chicago, Illinois 60670

Attn: Teresita R. Siao

Telephone: (312) 385-7051

Telecopier: (312) 385-7096

Electronic Mail: teresita.r.siao@jpmchase.com

Account Number: 9008109962

ABA: 021000021




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 Credit Agreement, dated as of
February [ ], 2006 (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 JPMorgan Chase Bank,
N.A., as Administrative Agent, L/C Issuer and Swing Line Lender.



     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. [Except as otherwise provided in Section 2.09(a) of the
Agreement with respect to Swing Line Loans, a][A]ll 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.



     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	 	 	 	 
	 	 	Type of	 	 	Amount of	 	 	Interest	 	 	Interest Paid	 	 	Balance	 	 	Notation	 
	Date	 	Loan Made	 	 	Loan Made	 	 	Period	 	 	This Date	 	 	This Date	 	 	Made By	 
	 
	 
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	 
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	 
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	 
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	 
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	 
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	 
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	 
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	 
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	 
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 





FORM OF NOTE




EXHIBIT A




 









 








EXHIBIT B




FORM OF COMPLIANCE CERTIFICATE




Financial Statement Date:                     ,



To: JPMorgan Chase Bank, N.A., as Administrative Agent




Ladies and Gentlemen:




     Reference is made to that certain Credit Agreement, dated as of February [   ], 2006 (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, JPMorgan Chase Bank, N.A., as Administrative Agent, L/C Issuer and Swing Line Lender
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: 3.50 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	 	 






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 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 (including, without limitation, the Letters of Credit and
the Swing Line Loans included in such facilities)1 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]2]
	 
	3.	 	Borrower(s):                                                             







 




			
	1	 	Include all applicable subfacilities.
	 
	2	 	Select as applicable.





FORM OF ASSIGNMENT AND ASSUMPTION




EXHIBIT C




 









 






	4.	 	Administrative Agent: JPMorgan Chase Bank, N.A., as the administrative agent under
the Credit Agreement






	5.	 	Credit Agreement: Credit Agreement, dated as of February [ ], 2006, among Concho
Resources Inc., the Lenders from time to time party thereto, JPMorgan Chase Bank, N.A., as
Administrative Agent, L/C Issuer, and Swing Line Lender, and BNP Paribas and Wachovia Bank,
National Association, as Documentation Agents.





6. Assigned Interest:3




	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	 	 	Aggregate	 	 	 	 	 	 	 	 	 	 
	 	 	Amount of	 	 	Amount of	 	 	Percentage Assigned	 	 	 	 
	 	 	Commitment/Loans	 	 	Commitment/Loans	 	 	of	 	 	CUSIP Number	 
	Facility Assigned4	 	for all Lenders5	 	 	Assigned5	 	 	Commitment/Loans6	 	 	(if any)	 
	 
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	 
	 	$	 	 	 	$	 	 	 	 	%	 	 	 	 	 
	 
	 	 	 	 	 	 	 	 	 	 	 	 
	 
	 	$	 	 	 	$	 	 	 	 	%	 	 	 	 	 
	 
	 	 	 	 	 	 	 	 	 	 	 	 
	 
	 	$	 	 	 	$	 	 	 	 	%	 	 	 	 	 
	 
	 	 	 	 	 	 	 	 	 	 	 	 






	7.	 	[Trade Date: _______________]7




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






 




			
	3	 	The reference to “Loans” in the
table should be used only if the Credit Agreement provides for Term Loans.
	 
	4	 	Fill in the appropriate terminology for the
types of facilities under the Credit Agreement that are being assigned under
this Assignment (e.g. “Revolving Credit Commitment”, “Term
Loan Commitment”, etc.).
	 
	5	 	Amount to be adjusted by the counterparties
to take into account any payments or prepayments made between the Trade Date
and the Effective Date.
	 
	6	 	Set forth, to at least 9 decimals, as a
percentage of the Commitment/Loans of all Lenders thereunder.
	 
	7	 	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]8 Accepted:



JPMORGAN CHASE BANK, N.A., as

Administrative Agent

 	 	 
	By:  	 	 	 
	 	Title: 	 	 	 
	 	 	 	 
	 
	[Consented to:]9

 	 	 
	By:  	 	 	 
	 	Title: 	 	 	 
	 	 	 	 
	 





 




			
	8	 	To be added only if the consent of the
Administrative Agent is required by the terms of the Credit Agreement.
	 
	9	 	To be added only if the consent of the
Borrower and/or other parties (e.g. Swing Line Lender, L/C Issuer) 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                      [confirm that
choice of law provision parallels the Credit Agreement].




FORM OF ASSIGNMENT AND ASSUMPTION




EXHIBIT C




 









 





EXHIBIT D




FORM OF GUARANTY




FORM OF GUARANTY




EXHIBIT D




 









 





Execution Version




GUARANTY





     THIS GUARANTY (this “Guaranty”), dated as of February 24, 2006, made by Concho Equity
Holdings Corp., a Delaware corporation (“Concho Holdings”), COG Operating LLC, a Delaware
limited liability company (“COG GP”), 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”) in favor of each of the Lender Parties (as defined below).



WITNESSETH:




     WHEREAS, pursuant to that certain Credit Agreement dated as of February 24, 2006, by and among
Concho Resources Inc., a Delaware corporation (the “Borrower”), JPMorgan Chase Bank, N.A.,
as Administrative Agent (in such capacity, the “Administrative Agent”), Swing Line Lender
and L/C Issuer, Bank of America, N.A., as Syndication Agent, and Wachovia Bank, National
Association and BNP Paribas, as Documentation Agents, 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 “Credit Agreement”), the Lenders have extended Commitments (as
defined in the Credit Agreement) to make Loans to the Borrower and to issue or participate in
Letters of Credit on behalf of the Borrower; and



     WHEREAS, as a condition precedent to the making of the initial Loans or issuing of the initial
Letters of Credit under the 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, the Letters of Credit issued on behalf of the Borrower pursuant to the
Credit Agreement and the Swap Contracts entered into between the Lenders and their Affiliates with
the Borrower or its Subsidiaries;



     NOW THEREFORE, for good and valuable consideration the receipt of which is hereby
acknowledged, and in order to induce the Lenders to make Loans (including the initial Loans) to the
Borrower pursuant to the Credit Agreement and for the L/C Issuer to issue Letters of Credit on
behalf of the Borrower and for the Lenders to acquire participations in such Letters of Credit
pursuant to the Credit Agreement and for the Lenders and their Affiliates to enter into Swap
Contracts with the Borrower or its Subsidiaries, each Guarantor agrees, for the benefit of each
Lender Party, as follows:



Page 1





 









 








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, any L/C Issuer, each of their respective successors, transferees and assigns and any
Affiliate of any of the foregoing from time to time a party to a Swap Contract with the Borrower or
any other Loan Party.



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



     SECTION 1.2 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 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 Credit Agreement, the Notes, the Letter of Credit Applications and each
other Loan Document to which the Borrower is or may become a party, whether for
principal, interest, fees, expenses or otherwise;




     (ii) the payment and performance of any and all present or future obligations
of the Borrower or any Loan Party according to the terms of any present or future
Swap Contract now existing or hereafter entered into between the Borrower, any
Subsidiary of the Borrower or any other Loan Party (other than the Guarantor) and
one or more of the Lender Parties;




     (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,



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(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 Credit
Agreement each Lender Party and each holder of a Note from the Borrower, an Letter of Credit
Application or any interest in an L/C Obligation 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 Credit Agreement.




     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 and all Commitments shall have terminated.
Each Guarantor guarantees that the Obligations of the Borrower will be paid strictly in accordance
with the terms of the 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 Credit Agreement, any
Note, any Letter of Credit Application or any other Loan Document or any portion of any
thereof or (ii) the Credit Agreement, any Note, any Letter of Credit Application or any
other Loan Document or any portion of any thereof being void or voidable;



Page 3





 









 









     (b) the failure of any Lender Party or any holder of any Note, any Letter of Credit
Application, Letter of Credit or any interest therein




     (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 Credit Agreement, any Note, any Letter of Credit
Application, 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, 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 Credit Agreement, any Note, any
Letter of Credit Application, any Letter of Credit 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, any Letter of Credit
Application, any Letter of Credit 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, any Letter of Credit Application or any interest in an L/C
Obligation, 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:



Page 4





 









 









     (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, any Letter of Credit Application, any Letter of Credit 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
Collateral 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 Guarantor in violation of the preceding sentence and the Obligations
shall not have been paid in cash in full and the Commitments have not been terminated, 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 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, Letter of Credit Application, Letter of
Credit or




Page 5





 









 







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 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, Lender or L/C Issuer, 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.



     (c) Indemnification by the Borrower. Each Guarantor shall indemnify the
Administrative Agent, each Lender and the L/C Issuer, 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, such Lender or the L/C Issuer, 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 or the L/C Issuer (with a copy to the Administrative Agent), or by the
Administrative Agent on its own behalf or on behalf of a Lender or the L/C Issuer, 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



Page 6





 









 







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, any Lender or the L/C
Issuer 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, such Lender or
the L/C Issuer, 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, such Lender or the L/C Issuer, 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, such Lender or the L/C Issuer in the
event the Administrative Agent, such Lender or the L/C Issuer is required to repay such refund to
such Governmental Authority. This subsection shall not be construed to require the Administrative
Agent, any Lender or the L/C Issuer 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.



     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



Page 7





 









 






     (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 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.



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 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



Page 8









 







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.



     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.



Page 9









 





ARTICLE V

MISCELLANEOUS PROVISIONS




     SECTION 5.1 Loan Document. This Guaranty is a Loan Document executed pursuant to the
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, an Letter of Credit Application, or an
interest in an L/C Obligation 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 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 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, an Letter
of Credit Application, or an interest in an L/C Obligation 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



Page 10









 







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 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 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 Credit Agreement.



Page 11









 





     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 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



Page 12









 







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.



     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]






Page 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 	 













 






	 	 	 	 	 



	 	 	 	 	 
	 	 	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 E




FORM OF SOLVENCY CERTIFICATE




     The undersigned, as Chief Financial Officer of Concho Resources, Inc., a Delaware corporation
(the “Borrower”), hereby gives this Certificate Regarding Solvency to induce JPMorgan Chase
Bank, N.A., as Administrative Agent for the Lenders (defined below) and the Lenders (the
“Administrative Agent”) to consummate certain financial accommodations pursuant to the
terms and conditions of that certain Credit Agreement dated the date hereof (the “Credit
Agreement”) among the Borrower, certain Subsidiaries of the Borrower, as Guarantors, the
lenders signatory thereto (“Lenders”), and the Administrative Agent, Bank of America, N.A.,
as Syndication Agent and BNP Paribas and Wachovia Bank, National Association, as Documentation
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. The undersigned has reviewed the pro-forma balance sheet of the Borrower, as of the date
thereof (the “Pro-Forma Balance Sheet”), a copy of which is attached as Exhibit
“A”, and the projections previously provided to the Administrative Agent (the
“Projections”). The undersigned is familiar with the process through which the Pro-Forma
Balance Sheet and the Projections were generated.



     3. The Pro-Forma Balance Sheet fairly presents in all material respects the financial position
of the Borrower as of the date thereof after giving effect to the Transactions. Except for the
Transactions, there have been no material adverse changes in Concho Holdings’ assets or liabilities
since September 30, 2005. The Projections are reasonable projections of the balance sheet, income
statement and source and application of funds for the periods covered thereby, based upon the
assumptions set forth therein. The Borrower believes that such assumptions set forth therein are
reasonable in light of current business conditions existing at the time of preparation thereof.
The Projections represent the Borrower’s good faith estimate as of the date thereof of the
Borrower’s future financial performance, it being recognized by the Administrative Agent that such
financial information as it relates to future events is not to be viewed as fact and that actual
results during the period or periods covered thereby may differ from the projected results set
forth therein.



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



FORM OF SOLVENCY CERTIFICATE




EXHIBIT E




 









 








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



	 	 	 	 	 
	 	DATED: February [     ], 2006



CONCHO RESOURCES, INC.,

a Delaware corporation

 	 
	 	By:  	 	 
	 	 	Chief Financial Officer 	 
	 	 	 	 
	 



FORM OF SOLVENCY CERTIFICATE




EXHIBIT E





 









 








EXHIBIT “A”




Pro-Forma Balance Sheet




(see attached)




FORM OF SOLVENCY CERTIFICATE




EXHIBIT E





 









 








EXHIBIT F




FORM OF MORTGAGE




Form of Mortgage




EXHIBIT F





 









 





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. 800364009)




TO




WM. MARK CRANMER, as Trustee,




AND




JPMORGAN CHASE BANK, N.A.,

as Administrative Agent




Dated as of February 24, 2006



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.




Page 1









 







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:




D. Dale Gillette

Gardere Wynne Sewell LLP

1601 Elm Street, Suite 3000

Dallas, Texas 75201





Page 2









 








MORTGAGE, LINE OF CREDIT MORTGAGE, DEED OF TRUST,

ASSIGNMENT, SECURITY AGREEMENT AND FINANCING STATEMENT




     THIS MORTGAGE, LINE OF CREDIT MORTGAGE, DEED OF TRUST, ASSIGNMENT, SECURITY AGREEMENT AND
FINANCING STATEMENT (this “Mortgage”), dated as of February 24, 2006, 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 WM. MARK CRANMER, of Dallas, Texas, as
Trustee (herein the “Trustee”), and JPMORGAN CHASE BANK, N.A., having its principal office
at Mail Code IL1-0634, 21 South Clark Street, Chicago, Illinois 60670 (herein called “JPMorgan
Chase”), 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 Credit Agreement dated as of February 24, 2006, by and among Concho Resources
Inc., a Delaware corporation (the “Borrower”), JP Morgan Chase, as Administrative Agent,
Swing Line Lender and L/C Issuer, Bank of America, N.A., as Syndication Agent, and Wachovia Bank,
National Association and BNP Paribas, as Documentation Agents, 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 Loans to the Borrower and to issue or participate in Letters of Credit for the
account of the Borrower and in the name of the Borrower; provided, however, that at
any time the sum of (a) the aggregate amount of all Loans made by the Lenders to the Borrower
outstanding at such time, plus (b) the amount of the aggregate liability of the Lenders
(including, without limitation, all contingent liability of the Lenders) under and in connection
with those of the Letters of Credit then in effect shall not exceed the lesser of (x)
$750,000,000.00 and (y) the Borrowing Base;



     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 initial Loan under the Credit Agreement
and the issuance of the initial Letter of Credit that the Mortgagor have duly authorized the
execution, delivery and performance of this Mortgage; and



     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 the Lenders and their Affiliates to enter into one or more Swap Contracts
with the Borrower or any Subsidiary of the Borrower, and because the



Page 3









 




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 February 24, 2006,
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.




     (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 L/C Issuer, any Lender, and each of their respective successors, transferees and
assigns, and any Affiliate of any of the foregoing from time to time that is a party to a
Swap Contract with the Borrower or any Subsidiary of the Borrower;




     (f) “Letters of Credit” shall mean, collectively, each Letter of Credit issued
from time to time by a L/C Issuer pursuant to the Credit Agreement;




     (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 February 24, 2006, issued
by the Borrower in the aggregate principal amount not to exceed $750,000,000 and payable to
the order of Lenders and any Swing Line Note dated February 24, 2006, issued by the Borrower
in the aggregate principal amount not to exceed $25,000,000 and payable to the order of the
Swing Line Lender, in each case 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 February 24, 2010, 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;



Page 4









 






     (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;




     (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) “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 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; 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.



Page 5









 





     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,
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,



Page 6









 






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 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



Page 7









 




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, the
L/C Issuer to issue the Letters of Credit, the Lenders and their Affiliates to enter into one or
more Swap Contracts, and the Lenders to participate therein, 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, the Borrower’s obligations under and in connection with each of the
Letters of Credit and each of the applications therefor made by the Borrower to the L/C
Issuer, 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;




          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 Any and all present or future obligations of the Borrower or its Subsidiaries
according to the terms of any present or future Swap Contract now existing



Page 8









 






or hereafter entered into between the Borrower or its Subsidiaries and one or more of
the Lender Parties;



     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 ONE BILLION AND NO/100 DOLLARS ($1,000,000,000.00).



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, the L/C Issuer, the Lenders and the 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 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



Page 9









 




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 Trustee;




          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;




          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;



Page 10









 






          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, (b) other Permitted
Encumbrances and (7) 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 first lien on and prior 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 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



Page 11









 




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.



     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.



Page 12









 





     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.



ARTICLE IV




EVENTS OF DEFAULT




     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



Page 13









 




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
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



Page 14









 




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.



     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.



Page 15









 





     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 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



Page 16









 




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 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

Page 17









 








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.



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 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



Page 18









 




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, 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 first lien upon and prior 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,



Page 19









 




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, 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



Page 20









 




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 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



Page 21









 




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, a L/C Issuer,
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 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



Page 22









 




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]




Page 23









 






     IN WITNESS WHEREOF, the Mortgagor has executed or caused to be executed this 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:  	Curt F. Kamradt 	 
	 	 	Title:  	Vice President and Chief Financial Officer 	 
	 
	 	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





 









 








ACKNOWLEDGMENTS




	 	 	 
	STATE OF TEXAS

	 	§
	 

	 	§
	COUNTY OF DALLAS

	 	§






     This instrument is acknowledged before me this 24th day of February, 2006, by Curt
F. Kamradt, Vice President and Chief Financial Officer 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 A




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

Security Agreement and Financing Statement, dated February 24, 2006, from

COG OIL & GAS LP, as Mortgagor, to

WM. MARK CRANMER, as Trustee, and

JPMORGAN CHASE BANK, 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 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 G




FORM OF PLEDGE AGREEMENT




Form of Pledge Agreement




EXHIBIT G





 









 








Execution Version




PLEDGE AGREEMENT AND IRREVOCABLE PROXY




     THIS PLEDGE AGREEMENT AND IRREVOCABLE PROXY (this “Pledge Agreement”), dated as of
February 24, 2006, 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”), 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 Oil & Gas,
Concho Energy and COG Realty, each a “Pledgor” and, collectively, the “Pledgors”)
in favor of JPMorgan Chase Bank, 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).



WITNESSETH:




     WHEREAS, pursuant to that certain Credit Agreement dated as of February 24, 2006, by and among
the Borrower and JPMorgan Chase Bank, N.A., as Administrative Agent, Swing Line Lender and L/C
Issuer, Bank of America, N.A., as Syndication Agent, and Wachovia Bank, National Association and
BNP Paribas, as Documentation Agents, 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”), the Lenders have extended Commitments to
make Loans to the Borrower and to issue or participate in Letters of Credit on behalf of 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 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 Loans made from time
to time to the Borrower, the Letters of Credit issued on behalf of the Borrower pursuant to the
Credit Agreement and the Swap Contracts entered into between the Lenders and their Affiliates with
the Borrower or its Subsidiaries;



     NOW THEREFORE, for good and valuable consideration the receipt of which is hereby
acknowledged, and in order to induce the Lenders to make Loans (including the initial Loans) to the
Borrower pursuant to the Credit Agreement and for the L/C Issuer to issue Letters of Credit on
behalf of the Borrower and for the Lenders to acquire participations in such Letters of Credit
pursuant to the Credit Agreement and for the Lenders and their Affiliates to enter into Swap



Page 1









 




Contracts with the Borrower or its Subsidiaries, each Pledgor 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 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.



     “Lender Party” means, as the context may require, any Lender, the Administrative
Agent, any L/C Issuer, each of their respective successors, transferees and assigns and any
Affiliate of any of the foregoing from time to time a party to a Swap Contract with the Borrower or
any other Loan Party.



     “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 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 the form or
substantially the form of Exhibit A hereto that are delivered by each Pledgor to the
Administrative Agent as Pledged Property hereunder, or any other promissory notes delivered to



Page 2









 




the Administrative 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
Administrative Agent or may from time to time hereafter be delivered by each Pledgor to the
Administrative 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 Administrative Agent hereunder and all other pledged shares of
capital stock from time to time hereafter delivered by each Pledgor to the Administrative 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. 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 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
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;



Page 3









 






     (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
Administrative 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 Credit Agreement, the Notes, the Letter of Credit Applications, each Guaranty
(including the Pledgors’ Guaranty), any Swap Contract with a Lender Party, 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, 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 Administrative 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 U.C.C.), an “uncertificated security”
(as defined in



Page 4









 






Section 8-102(a)(18) of the U.C.C.) or a “security entitlement” (as defined in Section
8-102(a)(17) of the U.C.C.), each Pledgor shall cause the issuer thereof or the securities
intermediary thereof to take all actions necessary or as requested by the Administrative
Agent to grant “control” (as defined in Section 8-106 of the U.C.C.) of such Collateral to
the Administrative 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 Administrative Agent.



     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 Credit Agreement and Article IX of the Credit 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 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



Page 5









 




provisions of the 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 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 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 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 Administrative Agent of any Collateral, as set forth
in this Article.



Page 6









 





     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.



     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 U.C.C.) to Administrative Agent is effective to create a valid, perfected, first
priority security interest 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 U.C.C. 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, fully
paid, and non-assessable, 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




     (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



Page 7









 




delivered to the Administrative 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 Administrative Agent and promptly delivered to the Administrative 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, are fully paid and non-assessable, 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
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 Credit Agreement, no Pledgor will sell, assign, transfer, pledge, or encumber
in any other manner the Collateral (except in favor of the Administrative Agent hereunder). 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
Administrative Agent may reasonably request, in order to perfect and protect any security



Page 8









 




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. 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.



     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 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 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



Page 9









 






proceeds of the Collateral, all of which shall be held by the Administrative Agent 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 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, THE TERMINATION OR EXPIRATION OF ALL
COMMITMENTS AND THE TERMINATION OR EXPIRATION OF ALL LETTERS OF CREDIT; 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, shall, 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 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:



Page 10









 






     (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 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 Administrative 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 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 U.C.C.



     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



Page 11









 




genuine and shall not be altered. The Pledged Interests at all times shall be duly
authorized, validly registered, fully paid, and non-assessable, 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 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. 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, 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, 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



Page 12









 




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:




     (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 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.



Page 13









 





     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, 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 best 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




     (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



Page 14









 




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. 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 Section 10.04
of the 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 such order as the Administrative Agent shall
elect.



     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 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 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.



Page 15









 





ARTICLE VII

MISCELLANEOUS PROVISIONS




     SECTION 7.1. Loan Document. This Pledge Agreement is a Loan Document
executed pursuant to the 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 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 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 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 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



Page 16









 




and each Lender at their addresses specified on the signature pages to the 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, a Letter of Credit Application, or an interest in an L/C Obligation
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, 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 when counterparts hereof executed on behalf of each 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



Page 17









 




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)
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



Page 18









 




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]




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






 









 





	 	 	 	 	 
	 	JPMORGAN CHASE BANK, N.A.,

as Administrative Agent

 	 
	 	By:  	 	 
	 	 	Name:  	 	 
	 	 	Title:  	 	 
	 
	 	Notice information for Administrative Agent:

JPMorgan Chase Bank, N.A.

Mail Code IL-0634

21 South Clark Street

Chicago, Illinois 60670

Telephone:

Telecopy:
 	 
	 
	 	with a copy to:
 	 
	 
	 	JPMorgan Chase Bank, N.A.

Mail Code TX1-2448

1717 Main Street

Dallas, Texas 75201

Attn: Wm. Mark Cranmer

Telephone: 214-290-2212

Telecopy: 214-290-2332
 	 




 









 





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”), 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 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 February ___, 2006 (the “Pledge Agreement”),
made by the Pledgors for JPMorgan Chase Bank, 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 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 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: February ___, 2006





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 	 
	 
	 	CONCHO LP 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 	 
	 
	 	Address:  	550 W. Texas, Suite 1300 	 
	 	 	Midland, Texas 79701	 
	 	Attention:	Curt F. Kamradt	 
	 	Telephone:	(432) 683-7443	 
	 	Telecopy:	(432) 683-7441	 
	 	 	 
	 	 	 
	 	 	 
	 




 









 








EXHIBIT A




PROMISSORY NOTE




			
	$_________
	 	February [___], 2006






     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 Credit Agreement) has occurred and is
continuing under the 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 Credit Agreement, dated as of February [___], 2006, (together
with all amendments and other modifications, if any, from time to time hereafter made thereto, the
“Credit Agreement”), among Concho Resources Inc., a Delaware corporation, and JPMorgan
Chase Bank, N.A., as Administrative Agent, Bank of America, N.A., as Syndication Agent, and
[_______________], as Documentation 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 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 Credit Agreement.



     Reference is made to the 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 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



A-1









 




(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.




     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:  	 	 



A-2









 






	 	 	 	 	 



GRID





     Intercompany Loans made by _________to ___and payments of principal of such Loans.



	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	 	 	Amount of	 	 	Amount of Principal	 	 	Outstanding	 	 	Notation	 
	Date	 	Intercompany Loan	 	 	Payment	 	 	Principal Balance	 	 	Made By	 
	 
	 	 	 	 	 	 	 	 	 	 	 	 
	 
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	 
	 	 	 	 	 	 	 	 	 	 	 	 
	 
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	 
	 	 	 	 	 	 	 	 	 	 	 	 
	 
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	 
	 	 	 	 	 	 	 	 	 	 	 	 
	 
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	 
	 	 	 	 	 	 	 	 	 	 	 	 
	 
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	 
	 	 	 	 	 	 	 	 	 	 	 	 
	 
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	 
	 	 	 	 	 	 	 	 	 	 	 	 
	 
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	 
	 	 	 	 	 	 	 	 	 	 	 	 
	 
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	 
	 	 	 	 	 	 	 	 	 	 	 	 
	 
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	 
	 	 	 	 	 	 	 	 	 	 	 	 
	 
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	 
	 	 	 	 	 	 	 	 	 	 	 	 
	 
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	 
	 	 	 	 	 	 	 	 	 	 	 	 
	 
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	 
	 	 	 	 	 	 	 	 	 	 	 	 
	 
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	 
	 	 	 	 	 	 	 	 	 	 	 	 
	 
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	 
	 	 	 	 	 	 	 	 	 	 	 	 





A-3









 





ATTACHMENT 1

to Pledge Agreement




Item A. Pledged Shares




	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	 	 	Stock	 	 	 	 	 	% of Shares of
	 	 	Type of	 	 	 	 	 	Shares Owned by	 	Pledgor
	Pledged Share Issuer	 	Stock	 	Pledgor	 	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




	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	% of Interests
	 	 	Interests	 	Interests Owned by	 	of Pledgor
	Pledged Interests Issuer	 	Type of Interest	 	Pledgor	 	Pledgor	 	Pledged
	COG GP
	 	Limited Liability Company Membership	 	Concho Holdings	 	 	100	%	 	 	100	%
	Concho LP LLC, a
Delaware limited liability company
	 	Limited Liability Company Membership	 	Concho Holdings	 	 	100	%	 	 	100	%
	COG Realty
	 	Limited Liability Company Membership	 	Concho Holdings	 	 	100	%	 	 	100	%






 









 






	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	% of Interests
	 	 	Interests	 	Interests Owned by	 	of Pledgor
	Pledged Interests Issuer	 	Type of Interest	 	Pledgor	 	Pledgor	 	Pledged
	Concho Energy
	 	Limited Liability Company Membership	 	COG GP	 	 	100	%	 	 	100	%
	COG Oil & Gas
	 	General Partnership Interest	 	COG GP	 	 	1	%	 	 	100	%







 









 





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 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
	 
	 	 
	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






 









 






EXHIBIT H




COUNTERPART AGREEMENT




     This
COUNTERPART AGREEMENT, dated
[                    ]
(this “Counterpart Agreement”) is delivered
pursuant to that certain Credit Agreement, dated as of February [   ], 2006 (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
JPMORGAN CHASE BANK, N.A., as Administrative Agent (the
“Administrative Agent”), BANK OF AMERICA,
N.A., as Syndication Agent, and WACHOVIA BANK, NATIONAL ASSOCIATION and BNP PARIBAS, as
Documentation Agents.



     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



Form of Counterpart Agreement




EXHIBIT H




 









 





     “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 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 Counterpart 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:



JPMORGAN CHASE BANK, N.A.,

as Administrative Agent

 	 	 
	By:  	 	 	 
	 	Name:  	 	 	 
	 	Title:  	 	 	 
	 



Form of Counterpart Agreement




EXHIBIT H