Document:

exv10w53

Exhibit 10.53

EXECUTION VERSION

 

$30,000,000

AMENDED AND RESTATED TERM LOAN AGREEMENT

dated as of

June 5, 2008

between

Contango Oil & Gas Company,

as Borrower

and

Centaurus Capital LLC,

as Lender

 

 

 

TABLE OF CONTENTS

	 	 	 	 	 
	 	 	Page
	 
	 	 	 	 
	Article 1

	Definitions

	 
	 	 	 	 
	1.1 Defined Terms
	 	 	1	 
	1.2 Terms Generally
	 	 	11	 
	1.3 Accounting Terms
	 	 	11	 
	 
	 	 	 	 
	Article 2

	Loan

	 
	 	 	 	 
	2.1 The Loan
	 	 	12	 
	2.2 Repayment of Loan
	 	 	13	 
	2.3 Prepayment of Loan; Reduction of Amount of Loan
	 	 	13	 
	2.4 Interest
	 	 	13	 
	2.5 Payments Generally
	 	 	13	 
	2.6 Increased Costs
	 	 	14	 
	2.7 Break Funding Payments
	 	 	15	 
	2.8 Taxes
	 	 	15	 
	 
	 	 	 	 
	Article 3

	Representations and Warranties

	 
	 	 	 	 
	3.1 Organization
	 	 	17	 
	3.2 Authority Relative to this Agreement
	 	 	17	 
	3.3 No Violation
	 	 	17	 
	3.4 Financial Condition
	 	 	18	 
	3.5 Litigation
	 	 	18	 
	3.6 No Default
	 	 	18	 
	3.7 Ownership of Property; Liens
	 	 	18	 
	3.8 Intellectual Property
	 	 	18	 
	3.9 Taxes
	 	 	19	 
	3.10 Federal Reserve Regulations
	 	 	19	 
	3.11 ERISA
	 	 	19	 
	3.12 Subsidiaries
	 	 	19	 
	3.13 Environmental Matters
	 	 	19	 
	3.14 No Material Misstatements
	 	 	20	 
	3.15 Insurance
	 	 	20	 
	3.16 Future Commitments
	 	 	20	 
	3.17 Investment Company Status
	 	 	21	 
	 
	 	 	 	 
	Article 4

	Conditions

	 
	 	 	 	 
	4.1 Effective Date
	 	 	21	 
	4.2 Conditions to each Subsequent Advance of the Loan
	 	 	22	 

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	 	 	Page
	 
	 	 	 	 
	Article 5

	Affirmative Covenants

	 
	 	 	 	 
	5.1 Financial Statements; Other Information
	 	 	22	 
	5.2 Notices of Material Events
	 	 	24	 
	5.3 Existence; Conduct of Business
	 	 	25	 
	5.4 Payment of Obligations
	 	 	25	 
	5.5 Maintenance of Properties; Insurance
	 	 	25	 
	5.6 Books and Records; Inspection Rights
	 	 	25	 
	5.7 Compliance with Laws
	 	 	25	 
	5.8 Reserved
	 	 	26	 
	5.9 Use of Proceeds
	 	 	26	 
	5.10 Collateral/Guarantors
	 	 	26	 
	 
	 	 	 	 
	Article 6

	Negative Covenants

	 
	 	 	 	 
	6.1 Debt
	 	 	26	 
	6.2 Liens
	 	 	26	 
	6.3 Fundamental Changes
	 	 	27	 
	6.4 Disposition of Assets
	 	 	27	 
	6.5 Investments
	 	 	27	 
	6.6 Restricted Payments
	 	 	27	 
	6.7 Transactions with Affiliates
	 	 	28	 
	6.8 Restrictive Agreements
	 	 	28	 
	6.9 Reserved
	 	 	28	 
	6.10 Organizational Documents
	 	 	28	 
	6.11 Nature of Business
	 	 	29	 
	6.12 Accounting Changes
	 	 	29	 
	6.13 Working Capital
	 	 	29	 
	6.14 Debt Coverage
	 	 	29	 
	6.15 Dutch and Mary Rose Interests
	 	 	29	 
	 
	 	 	 	 
	Article 7

	Events of Default and Remedies

	 
	 	 	 	 
	7.1 Events of Default
	 	 	29	 
	 
	 	 	 	 
	Article 8

	Miscellaneous

	 
	 	 	 	 
	8.1 Notices
	 	 	31	 
	8.2 Amendments; Waivers
	 	 	32	 
	8.3 Successors and Assigns
	 	 	33	 
	8.4 Survival
	 	 	33	 
	8.5 Counterparts
	 	 	33	 
	8.6 Expenses; Indemnity; Damage Waiver
	 	 	33	 
	8.7 Severability
	 	 	34	 
	8.8 Governing Law
	 	 	34	 
	8.9 WAIVER OF JURY TRIAL
	 	 	35	 
	8.10 Headings
	 	 	36	 

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	 	 	Page
	 
	8.11 Confidentiality
	 	 	36	 
	8.12 Usury Savings Clause
	 	 	36	 
	8.13 No Oral Agreements
	 	 	37	 
	8.14 USA Patriot Act
	 	 	37	 

EXHIBITS:

Exhibit 1.1  —  Form of Note

Exhibit 2.1  —  Form Request for Advance

SCHEDULES:

Schedule 3.12 — Subsidiaries

Schedule 3.13 — Environmental Matters

Schedule 3.16 — Future Commitments

Schedule 6.1 — Existing Debt

Schedule 6.2 — Existing Liens

Schedule 6.5 — Loans, Advances and Investments

 iii

 

 

AMENDED AND RESTATED TERM LOAN AGREEMENT

     AMENDED AND RESTATED TERM LOAN AGREEMENT (this “Agreement”) dated as of June 5, 2008, between
Contango Oil & Gas Company, a Delaware corporation (the “Borrower”), and Centaurus
Capital LLC (the “Lender”).

WITNESSETH:

     WHEREAS, Borrower and the Lender entered into that certain Term Loan Agreement dated as of
January 30, 2007 (as amended or modified from time to time prior to the date hereof, the “Existing
Loan Agreement”), whereby Lender agreed to make available to Borrower a credit facility upon the
terms and conditions set forth therein; and

     WHEREAS, Borrower has requested that the Existing Loan Agreement be amended and restated, in
its entirety, and Lender has agreed to so amend and restate the Existing Loan Agreement in
accordance with the terms and provisions set forth herein.

     In consideration of the mutual covenants, rights and obligations contained herein, the
benefits to be derived therefrom, and other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the parties agree that the Existing Loan Agreement is
hereby amended and restated, in its entirety, as follows:

ARTICLE 1

DEFINITIONS

     1.1 Defined Terms. As used in this Agreement, the following terms have the meanings
specified below:

     “Adjusted Eurodollar Rate” means, with respect to any Interest Period, an interest rate per
annum (rounded upwards, if necessary, to the next 1/16 of 1%) equal to (a) the LIBO Rate for such
Interest Period multiplied by (b) the Statutory Reserve Rate.

     “Affiliate” means, with respect to a 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 specified Person.

     “Agreement” has the meaning set forth in the introductory paragraph hereof.

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

     “Borrower” means Contango Oil & Gas Company, a Delaware corporation, and its successors and
permitted assigns.

     “Business Acquisition” means (a) an Investment by Borrower or any other Contango Entity in any
other Person pursuant to which such Person shall become a Subsidiary or shall be merged into or
consolidated with Borrower or such Contango

 

 

Entity or (b) an acquisition by Borrower or any other Contango Entity of the property and
assets of any other Person that constitute substantially all of the assets of such Person or any
division or other business unit of such Person.

     “Business Day” means any day that is not a Saturday, Sunday or other day on which commercial
banks in Houston, Texas, are authorized or required by Law to remain closed.

     “Capital Lease Obligations” of any Person means the obligations of such Person to pay rent or
other amounts under any lease of (or other arrangement conveying the right to use) real or personal
property, or a combination thereof, which obligations are required to be classified and accounted
for as capital leases on a balance sheet of such Person under its method of accounting, and the
amount of such obligations shall be the capitalized amount thereof determined in accordance with
its method of accounting.

     “Cash Equivalents” means:

     (a) direct obligations of, or obligations the principal of and interest on which are
unconditionally guaranteed or insured by, the United States of America (or by any agency thereof to
the extent such obligations are backed by the full faith and credit of the United States of
America), in each case maturing within one year from the date of acquisition thereof;

     (b) investments in commercial paper maturing within one year from the date of acquisition
thereof and having, at such date of acquisition, a credit rating of at least A-1 from Standard &
Poor’s Rating Service (“S&P”) and P-1 from Moodys Investor’s Service, Inc. (“Moodys”);

     (c) investments in certificates of deposit, banker’s acceptances and time deposits maturing
within one year from the date of acquisition thereof issued or guaranteed by or placed with, and
money market deposit accounts issued or offered by, any domestic office of any commercial bank
organized under the Laws of the United States of America or any State thereof that has a combined
capital and surplus and undivided profits of not less than $500,000,000;

     (d) fully collateralized repurchase agreements with a term of not more than 30 days for
securities described in clause (a) above and entered into with a financial institution satisfying
the criteria described in clause (c) above;

     (e) money market funds that (i) comply with the criteria set forth in Securities and Exchange
Commission Rule 2a-7 under the Investment Company Act of 1940, (ii) are rated or invest solely in
the assets described in clauses (a) through (d) above and (iii) have portfolio assets of at least
$5,000,000,000;

     (f) marketable direct obligations issued by any state of the United States of America or any
political subdivision of any such state or any public instrumentality thereof, in each case
maturing within one year after the date of acquisition and having, at such date, the highest rating
obtainable from either S&P or Moodys; and

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     (g) other securities, instruments, bonds and obligations rated at least AA by S&P or Aa by
Moodys.

     “Change in Control” means (a) any Person or “group” of Persons (within the meaning of Rules
13d-3 and 13d-5 under the Exchange Act) other than Kenneth R. Peak shall have (i) acquired,
directly or indirectly, beneficial ownership (within the meaning of Rule 13d-3 under the Exchange
Act) of securities representing 30% or more of the combined voting power of all outstanding voting
securities of the Borrower or (ii) obtained the power (whether or not exercised) to elect a
majority of the Borrower’s directors, (b) individuals who were directors of the Borrower on the
date hereof, and individuals elected as directors by not less than two-thirds of the individuals
who were directors of the Borrower on such date, shall cease to constitute a majority of the
members of the board of directors of the Borrower, or (c) Kenneth R. Peak shall cease to be an
executive officer of the Borrower or shall otherwise cease to be active in the day to day
management of the Borrower’s operations and activities.

     “Change in Law” means (a) the adoption of any Law after the date of this Agreement, (b) any
change in any Law or in the interpretation or application thereof by any Governmental Authority
after the date of this Agreement or (c) compliance by the Lender 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.

     “Closing Date” means June 5, 2008, or such other date as the Borrower and the Lender shall
agree.

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

     “Contango Entity” means the Borrower or any of its Subsidiaries.

     “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.

     “Debt” of any Person means, without duplication, (a) all obligations of such Person for
borrowed money or with respect to deposits or advances of any kind, (b) all obligations of such
Person evidenced by bonds, debentures, notes or similar instruments, (c) all obligations of such
Person upon which interest charges are customarily paid, (d) all obligations of such Person under
conditional sale or other title retention agreements relating to property acquired by such Person,
(e) all obligations of such Person in respect of the deferred purchase price of property or
services (excluding current accounts payable incurred in the ordinary course of business that are
due not more than 90 days from the creation thereof), (f) all Debt of others secured by (or for
which the holder of such Debt has an existing right, contingent or otherwise, to be secured by) any
Lien on property owned or acquired by such Person, whether or not the Debt secured thereby has been
assumed, (g) all guarantees by such Person of Debt of others, (h) all Capital Lease Obligations of
such Person, (i) all obligations, contingent or otherwise, of such Person as

3

 

an account party in respect of letters of credit and letters of guaranty, (j) all obligations,
contingent or otherwise, of such Person in respect of bankers’ acceptances, and (k) any other items
required to be listed as a liability under the Borrower’s method of accounting, other than accounts
payable not more than 90 days from date, incurred in the ordinary course of business. The Debt of
any Person shall include the Debt of any other entity (including any partnership in which such
Person is a general partner) to the extent such Person is liable therefor as a result of such
Person’s ownership interest in or other relationship with such entity, except to the extent the
terms of such Debt provide that such Person is not liable therefor.

     “Default” means any event or condition that constitutes an Event of Default or that upon
notice, lapse of time or both would, unless cured or waived, become an Event of Default.

     “Disposition” means with respect to any asset (including an Equity Interest or any portion
thereof), a sale, assignment, transfer, conveyance, gift, exchange or other disposition of such
asset, whether such disposition be voluntary, involuntary or by operation of Law, including, but
not limited to, the following: (a) in the case of an asset owned by a natural Person, a transfer
of such asset upon the death of its owner, whether by will, intestate succession or otherwise; (b)
in the case of an asset owned by a Person other than a natural Person, (i) a merger or
consolidation of such Person (whether or not such Person is the survivor thereof), or (ii) a
distribution of such asset, including in connection with the dissolution, liquidation, winding-up
or termination of such Person; and (c) a disposition in connection with, or in lieu of, a
foreclosure of a Lien.

     “Drawdown Termination Date” has the meaning given such term in Section 2.1(a).

     “Dutch and Mary Rose Interests” means, collectively, at least (A) a 47% working interest in
OCS-G 23851 (Eugene Island Area Block 10), (B) a 53% working interest in State of Louisiana Lease
Nos. 18640, 18860, 19261, 19266 and 19396, and (C) a 53% working interest in OCS-G 31362 (Eugene
Island Area Block 11).

     “Environmental Laws” means all Laws, notices or binding agreements issued, promulgated or
entered into by any Governmental Authority, relating in any way to the environment, preservation or
reclamation of natural resources, the management, release or threatened release of any Hazardous
Substance or to health and safety matters.

     “Environmental Permits” means any and all permits, licenses, registrations, notifications,
approvals, exemptions and any other authorization required under any applicable Environmental Law.

     “Equity Interests” means shares of capital stock, partnership interests, membership interests
in a limited liability company, beneficial interests in a trust or other equity ownership interests
in a Person, and any warrants, options or other rights entitling the holder thereof to purchase or
acquire any such equity interest.

4

 

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

     “ERISA Affiliate” means any trade or business (whether or not incorporated) that, together
with the Borrower, is treated as a single employer under section 414(b) or (c) of the Code or,
solely for purposes of section 302 of ERISA and section 412 of the Code, is treated as a single
employer under section 414 of the Code.

     “ERISA Event” means (a) any “reportable event”, as defined in section 4043 of ERISA or the
regulations issued thereunder with respect to a Plan (other than an event for which the 30-day
notice period is waived); (b) the existence with respect to any Plan of an “accumulated funding
deficiency” (as defined in section 412 of the Code or section 302 of ERISA), whether or not waived;
(c) the filing pursuant to section 412(d) of the Code or section 303(d) of ERISA of an application
for a waiver of the minimum funding standard with respect to any Plan; (d) the incurrence by the
Borrower or any of its ERISA Affiliates of any liability under Title IV of ERISA with respect to
the termination of any Plan; (e) the receipt by the Borrower or any ERISA Affiliate from the PBGC
or a plan administrator of any notice relating to an intention to terminate any Plan or Plans or to
appoint a trustee to administer any Plan; (f) the incurrence by the Borrower or any of its ERISA
Affiliates of any liability with respect to the withdrawal or partial withdrawal from any Plan or
Multiemployer Plan; or (g) the receipt by the Borrower or any ERISA Affiliate of any notice, or the
receipt by any Multiemployer Plan from the Borrower or any ERISA Affiliate of any notice,
concerning the imposition of Withdrawal Liability or a determination that a Multiemployer Plan is,
or is expected to be, insolvent or in reorganization, within the meaning of Title IV of ERISA.

     “Event of Default” has the meaning assigned to such term in Article 7.

     “Financial Officer” means the chief financial officer, principal accounting officer, treasurer
or controller of the Borrower.

     “GAAP” means, subject to the qualifications contained in Section 1.3, generally accepted
accounting principles in the United States of America, as in effect from time to time.

     “Governmental Approval” means (a) any authorization, consent, approval, license, waiver,
ruling, permit, tariff, rate, certification, exemption, filing, variance, claim, order, judgment,
decree, sanction or publication of, by or with; (b) any notice to; (c) any declaration of or with;
or (d) any registration by or with, or any other action or deemed action by or on behalf of, any
Governmental Authority.

     “Governmental Authority” means the government of the United States of America or any other
nation, 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.

5

 

     “guarantee” of or by any Person (the “guarantor”) means any obligation, contingent or
otherwise, of the guarantor guaranteeing or having the economic effect of guaranteeing any Debt or
other obligation of any other Person (the “primary obligor”) in any manner, whether directly or
indirectly, and including any obligation of the guarantor, direct or indirect, (a) to purchase or
pay (or advance or supply funds for the purchase or payment of) such Debt or other obligation or to
purchase (or to advance or supply funds for the purchase of) any security for the payment thereof,
(b) to purchase or lease property, securities or services for the purpose of assuring the owner of
such Debt or other obligation of the payment thereof, (c) to maintain working capital, equity
capital or any other financial statement condition or liquidity of the primary obligor so as to
enable the primary obligor to pay such Debt or other obligation or (d) as an account party in
respect of any letter of credit or letter of guaranty issued to support such Debt or obligation;
provided, that the term guarantee shall not include endorsements for collection or deposit in the
ordinary course of business.

     “Hazardous Substances” 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 regulated pursuant to
any applicable Environmental Law.

     “Indemnified Taxes” means Taxes other than, with respect to the Lender, taxes that are imposed
on its overall net income by the United States of America and taxes that are imposed on its overall
net income (and franchise taxes imposed in lieu thereof) by the state or foreign jurisdiction under
the laws of which the Lender is organized or is a resident, or has a fixed place of business or a
permanent establishment, or any political subdivision of any of the foregoing, and taxes that are
imposed on its overall net income (and franchise taxes imposed in lieu thereof) by the state or
foreign jurisdiction of its applicable lending office or any political subdivision thereof.

     “Independent Engineer” means W. D. Von Gonten & Co., William M. Cobb & Associates, Inc., or
another independent engineering firm selected by the Borrower and approved in writing by Lender.

     “Interest Payment Date” means the last day of each Interest Period.

     “Interest Period” means the period commencing on the date of the Loan, or on the last day of
the immediately preceding Interest Period, as applicable, and ending on the numerically
corresponding day in the calendar month that is one month thereafter; provided, that (a) 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 (b) any Interest Period 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.

6

 

     “Investment” means (a) any direct or indirect purchase or other acquisition by the Borrower or
any of its Subsidiaries of, or of a beneficial interest in, any Equity Interests of any other
Person and (b) any loan, advance (other than advances to employees for moving, entertainment and
travel expenses, drawing accounts and similar expenditures in the ordinary course of business) or
capital contribution by the Borrower or any of its Subsidiaries to any other Person. The amount of
any investment shall be the original cost of such investment plus the cost of all additions
thereto, without any adjustments for increases or decreases in value, or write-ups, write-downs or
write-offs with respect to such Investment.

     “Law” means all laws, statutes, treaties, ordinances, codes, acts, rules, regulations,
Governmental Approvals and Orders of all Governmental Authorities, whether now or hereafter in
effect.

     “Lender” means Centaurus Capital LLC.

     “LIBO Rate” means, with respect to any Interest Period, the rate as calculated by the British
Bankers’ Association and obtained through a nationally recognized service such as Dow Jones
(Telerate), Reuters or Bloomberg (the “Service”) and including 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 Lender
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” for such Interest Period shall be the rate reasonably
determined by Lender, at which dollar deposits in the amount of the outstanding Loan and for a
maturity comparable to such Interest Period are offered by major commercial banks 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, with respect to any asset, (a) any mortgage, deed of trust, lien, pledge,
hypothecation, encumbrance, charge or security interest in, on or of such asset, (b) the interest
of a vendor or a lessor under any conditional sale agreement, capital lease or title retention
agreement (or any financing lease having substantially the same economic effect as any of the
foregoing) relating to such asset and (c) in the case of securities, any purchase option, call or
similar right of a third party with respect to such securities.

     “Loan” means all of the loans and advances made by the Lender to the Borrower pursuant to
Section 2.1(a).

     “Loan Documents” means this Agreement, the Note and any other agreement (including, but not
limited to, any fee agreements) entered into in connection with the transactions contemplated by
this Agreement.

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     “Material Adverse Effect” means a material adverse effect on (a) the business, assets,
property, financial condition or results of operations of the Borrower and its Subsidiaries, taken
as a whole, (b) the ability of the Borrower to perform its obligations under the Loan Documents or
(c) the validity or enforceability of the Loan Documents or the validity, perfection, priority or
enforceability of the Liens created thereunder.

     “Material Debt” means Debt (other than the Loan) of the Borrower or any other Contango Entity
in an aggregate principal amount exceeding $1,000,000.

     “Maturity Date” means January 1, 2010.

     “Maximum Rate” has the meaning set forth in Section 8.12.

     “Multiemployer Plan” means a multiemployer plan as defined in section 4001(a)(3) of ERISA.

     “Note” means a note in the form attached hereto as Exhibit 1.1.

     “Oil and Gas Properties” means all oil, gas and/or mineral leases, oil, gas or mineral
properties, mineral servitudes and/or mineral rights of any kind (including, without limitation,
mineral fee interests, lease interests, farmout interests, overriding royalty and royalty
interests, net profits interests, oil payment interests, production payment interests and other
types of mineral interests), and all oil and gas gathering, treating, storage, processing and
handling assets.

     “Order” means a binding order, writ, judgment, award, injunction, decree, ruling or decision
of any Governmental Authority or arbitrator.

     “Organizational Documents” means, with respect to any entity, the articles or certificate of
incorporation, bylaws, partnership agreement or membership agreement or equivalent governing
documents of such entity.

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

     “PBGC” means the Pension Benefit Guaranty Corporation referred to and defined in ERISA and any
successor entity performing similar functions.

     “Permitted Liens” means with respect to any asset or property (a) royalties, overriding
royalties, reversionary interests, production payments and similar burdens; (b) sales contracts or
other arrangements for the sale of production of oil, gas or associated liquid or gaseous
hydrocarbons which would not (when considered cumulatively with the matters set forth in clause (a)
above) deprive Borrower or any of its Subsidiaries of any material right in respect of its assets
or properties (except for rights customarily granted with respect to such contracts and
arrangements); (c) statutory Liens for taxes or other assessments that are not yet delinquent (or
that, if delinquent, are being contested in good

8

 

faith by appropriate proceedings, levy and execution thereon having been stayed and continue
to be stayed and for which Borrower has set aside on its books adequate reserves in accordance with
GAAP); (d) easements, rights of way, servitudes, permits, surface leases and other rights in
respect to surface operations, pipelines, grazing, logging, canals, ditches, reservoirs or the
like, conditions, covenants and other restrictions, and easements of streets, alleys, highways,
pipelines, telephone lines, power lines, railways and other easements and rights of way on, over or
in respect of Borrower’s or any of its Subsidiaries’ assets or properties and that do not
individually or in the aggregate, cause a Material Adverse Effect; (e) materialmen’s, mechanic’s,
repairman’s, employee’s, warehousemen’s, landlord’s, carrier’s, pipeline’s, contractor’s,
sub-contractor’s, operator’s, non-operator’s (arising under operating or joint operating
agreements), and other Liens (including any financing statements filed in respect thereof)
incidental to obligations incurred by Borrower or any of its Subsidiaries in connection with the
construction, maintenance, development, transportation, storage or operation of Borrower’s or such
Subsidiary’s assets or properties to the extent not delinquent (or which, if delinquent, are being
contested in good faith by appropriate proceedings and for which Borrower or such Subsidiary has
set aside on its books adequate reserves in accordance with GAAP); (f) Liens in connection with
workmen’s compensation, unemployment insurance or other social security, old age pension or public
liability obligations; and (g) rights reserved to or vested in any municipality, governmental,
statutory or other public authority to control or regulate Borrower’s or its Subsidiaries’ assets
and properties in any manner, and all applicable laws, rules and orders from any Governmental
Authority.

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

     “Plan” means any employee pension benefit plan (other than a Multiemployer Plan) subject to
the provisions of Title IV of ERISA or section 412 of the Code or section 302 of ERISA, and in
respect of which the Borrower or any ERISA Affiliate is (or, if such plan were terminated, would
under section 4069 of ERISA be deemed to be) an “employer” as defined in section 3(5) of ERISA.

     “Preferred Stock” means any Perpetual Cumulative Convertible Preferred Stock (in any series)
of the Borrower.

     “Price Criteria” means certain price assumptions determined by the Borrower’s then current
hydrocarbon borrowing base lending bank (or, if the Borrower has no such borrowing base lending
bank at such time, The Royal Bank of Scotland plc) used by said bank in the determination of
borrowing base calculations for senior secured oil and gas loans; provided in each instance that
such bank discloses such pricing assumptions, in writing, to Borrower and the Lender; and provided
further that if such price assumptions are not disclosed or otherwise available, “Price Criteria”
shall mean price assumptions determined by Lender pursuant to its then current policies and
procedures used in making senior secured oil and gas loans.

9

 

     “Producing Reserves” means the Proved Reserves from reservoirs that are currently being
produced and sold.

     “Proved Reserves” means the estimated quantities of crude oil, condensate, natural gas and
natural gas liquids from Oil and Gas Properties, as determined by the Borrower’s Independent
Engineer, that geological and engineering data demonstrate with reasonable certainty to be
recoverable in future years from known reservoirs under existing economic and operating conditions
(i.e., prices and costs as of the date the estimate is made), as determined in accordance with
Rule 4-10 of Regulation S-X promulgated by, and other applicable requirements of, the Securities
and Exchange Commission.

     “PV-9 Value” means, with respect to any Oil and Gas Properties, the then present value of the
future net revenues attributable to such Oil and Gas Properties as determined by the Independent
Engineer and using a 9% discount rate and the Price Criteria of the then relevant Reserve Report
under Section 5.1(j), and specifically with respect to the Proved Reserves and the Producing
Reserves owned by the Contango Entities (other than Contango Offshore Exploration, LLC and Republic
Exploration LLC), such value calculated on the basis of the most recent Reserve Report and said
Price Criteria.

     “Reserve Report” means a report separately stated with respect to (a) all Oil and Gas
Properties owned directly or indirectly by the Contango Entities valued in accordance with
Rule 4-10 of Regulation S-X promulgated by, and other applicable requirements of, the United States
Securities and Exchange Commission, and (b) all Oil and Gas Properties owned directly or indirectly
by the Contango Entities valued using the Price Criteria, setting forth, among other things,
(i) the PV-9 Value of such Oil and Gas Properties, (ii) the Proved Reserves attributable to such
Oil and Gas Properties, (iii) the Producing Reserves attributable to such Oil and Gas Properties
and (iv) a projection of the rate of production of the Proved Reserves attributable to such
Properties as of the date of such Reserve Report.

     “Restricted Payment” means any distribution (whether in cash, securities or other property)
with respect to any Equity Interests in the Borrower or any of its Subsidiaries, 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 Equity Interests in the Borrower or any of its Subsidiaries or any option, warrant or other
right to acquire any such Equity Interests in the Borrower or any of its Subsidiaries.

     “Statutory Reserve Rate” means, at any time, 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 in effect at such time (as established by the Board
of Governors of the U.S Federal Reserve System) to which the Lender is subject for Eurocurrency
funding (currently referred to as “Eurocurrency Liabilities” in Regulation D of the Board of
Governors).

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     “Subsidiary” means, with respect to any Person (the “parent”) at any date, any corporation,
limited liability company, partnership, association or other entity (other than Contango Offshore
Exploration, LLC and Republic Exploration LLC), the accounts of which would be consolidated with
those of the parent in the parent’s consolidated financial statements if such financial statements
were prepared in accordance with the Borrower’s method of accounting as of such date, as well as
any other corporation, limited liability company, partnership, association or other entity (a) of
which securities or other ownership interests representing more than 50% of the equity or more than
50% of the ordinary voting power or, in the case of a partnership, more than 50% of the general
partnership interests are, as of such date, owned, controlled or held, or (b) that is, as of such
date, otherwise Controlled, by the parent or one or more Subsidiaries of the parent or by the
parent and one or more Subsidiaries of the parent.

     “Taxes” means any and all present or future taxes, levies, imposts, duties, deductions,
charges or withholdings imposed by any Governmental Authority.

     “Transactions” means the execution, delivery and performance by the Borrower of this Agreement
and the other Loan Documents to which it is a party, the borrowing of the Loan and the use of the
proceeds thereof.

     “Withdrawal Liability” means liability to a Multiemployer Plan as a result of a complete or
partial withdrawal from such Multiemployer Plan, as such terms are defined in Part I of Subtitle E
of Title IV of ERISA.

     1.2 Terms Generally. 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 (a) any definition of or reference to any agreement, instrument or other
document herein 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), (b) any reference herein to any Person
shall be construed to include such Person’s successors and assigns, (c) the words “herein”,
“hereof” and “hereunder”, and words of similar import, shall be construed to refer to this
Agreement in its entirety and not to any particular provision hereof, (d) all references herein to
Articles, Sections, Exhibits and Schedules shall be construed to refer to Articles and Sections of,
and Exhibits and Schedules to, this Agreement and (e) 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.

     1.3 Accounting Terms. Except as otherwise expressly provided herein, all terms of an
accounting or financial nature shall be construed in accordance with Borrower’s method of
accounting, as in effect from time to time; provided that, if the Borrower notifies the Lender that
the Borrower requests an amendment to any provision hereof to eliminate the effect of any change
occurring after the date hereof in its method of accounting or in the application thereof on

11

 

the operation of such provision (or if the Lender notifies the Borrower that it requests an
amendment to any provision hereof for such purpose), regardless of whether any such notice is given
before or after such change in its method of accounting or in the application thereof, then such
provision shall be interpreted on the basis of its method of accounting as in effect and applied
immediately before such change shall have become effective until such notice shall have been
withdrawn or such provision amended in accordance herewith.

ARTICLE 2

LOAN

     2.1 The Loan.

     (a) Subject to the terms and conditions set forth herein, the Lender shall make loans to the
Borrower in the principal amount requested by Borrower up to a maximum principal amount of
$30,000,000. The outstanding principal amount of any loans made to Borrower under the Existing
Loan Agreement shall be and be deemed to be loans made to Borrower on the Closing Date pursuant to
this Subsection 2.1(a) of this Agreement. If less than $30,000,000 is borrowed on the Closing
Date, and subject to the terms and conditions set forth herein, Borrower shall be entitled to
request that additional amounts be advanced to it from time to time in increments of not less than
$1,000,000 provided that the total Loan outstanding shall not exceed a maximum of $30,000,000. All
advances shall require (i) five (5) Business Days prior written notice thereof (for any advance of
$15,000,000 or less), or (ii) ten (10) Business Days prior written notice thereof (for any advance
in excess of $15,000,000), and shall be made pursuant to a Request for Advance in the form of
Exhibit 2.1 hereto. If less than $30,000,000 is advanced by Lender hereunder by the date which is
ten (10) Business Days prior to the Maturity Date (the “Drawdown Termination Date”), the Loan shall
be in the maximum amount outstanding on such date and there shall be no further advances hereunder.
Amounts prepaid or repaid with respect to the Loan may not be reborrowed. The Lender shall make
any advances under the Loan by wire transfer of immediately available funds to the account of the
Borrower set forth in Exhibit 2.1.

     (b) The Borrower shall prepare, execute and deliver to the Lender a Note payable to the order
of the Lender substantially in the form of Exhibit 1.1. Thereafter, the Loan shall at all times
(including after assignment pursuant to Section 8.3) be represented by a Note payable to the order
of the payee named therein.

     (c) The Lender shall maintain an account evidencing the indebtedness of the Borrower to the
Lender resulting from the Loan, including the amounts of principal and interest payable and paid to
the Lender from time to time hereunder. The entries made in such account shall, to the extent
permitted by applicable law, be prima facie evidence of the existence and amounts of the
obligations of the Borrower recorded therein absent manifest error; provided, however, that the
failure of the Lender to maintain any such account or any error therein shall not in any manner
affect the obligation of the Borrower to repay the Loan in accordance with the terms of this
Agreement.

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     2.2 Repayment of Loan. The Borrower hereby unconditionally promises to pay to the
Lender the Loan in full on the Maturity Date.

     2.3 Prepayment of Loan; Reduction of Amount of Loan.

     (a) The Borrower may, upon three Business Days’ notice to the Lender, prepay the Loan in whole
or in part without premium or penalty (other than any amounts which may be due under Section 2.7 as
a result of such prepayment). Any prepayment of principal under this section shall be in the
minimum principal amount of $2,000,000.00 and additional intervals of $1,000,000.00 and shall be
accompanied by all interest then accrued and unpaid on the principal so repaid together with any
amounts due under Section 2.7.

     (b) Subject to Section 8.12, if the Loan is not funded in the full amount at any time during
the period from the Closing Date to the Drawdown Termination Date, the Borrower shall pay to the
Lender a non-use fee in the amount of 1.50% per annum multiplied by such non-funded amount, such
fee to be paid on the last day of each calendar quarter, commencing June 30, 2008 through and
including September 30, 2009, and on the Drawdown Termination Date. For the avoidance of doubt,
the amount of any advance under the Loan that has been prepaid or repaid shall not be subject to
such non-use fee. If the Loan is not fully funded in the amount of $30,000,000 by the Drawdown
Termination Date, the Loan shall be deemed to be fully funded and no further non-use fee shall be
payable.

     2.4 Interest.

     (a) The Loan shall bear interest on each day during the related Interest Period at the
Adjusted Eurodollar Rate in effect on the first day of such Interest Period plus 5.0%.

     (b) Notwithstanding the foregoing, if any principal of or interest on the Loan or any 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 2% plus the rate otherwise applicable to the Loan.

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

     (d) All interest hereunder shall be computed on the basis of a year of 360 days, and in each
case shall be payable for the actual number of days elapsed (including the first day but excluding
the last day).

     2.5 Payments Generally. The Borrower shall make each payment required to be made by
it hereunder (whether of principal, interest, or otherwise) prior to 2:00 p.m., Houston,

13

 

Texas time, 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 Lender, be deemed to have been received on
the next succeeding Business Day for purposes of calculating interest
thereon. All such payments shall be made to the Lender by wire transfer
to such account of Lender as may be designated from time to time in a
notice from Lender to Borrower. 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 U.S. dollars.

     2.6 Increased Costs. (a) If any Change in Law shall:

	 	(i)	 	impose, modify or deem applicable any reserve, special
deposit or similar requirement against assets of, deposits with or for the
account of, or credit extended by, the Lender (except any such reserve
requirement reflected in the Adjusted LIBO Rate); or
	 
	 	(ii)	 	impose on the Lender or the London interbank market any other
condition materially affecting this Agreement or the Loan;

in each case other than as specified in paragraph (b) below, and the result of any of the
foregoing shall be to increase the cost to the Lender of maintaining the Loan or to reduce
the amount of any sum received or receivable by the Lender hereunder (whether of principal,
interest or otherwise), in each case by an amount that the Lender reasonably deems to be
material, then the Borrower shall pay to the Lender, in accordance with paragraph (c) of
this Section 2.6 after the Borrower’s receipt of its written demand accompanied by
documentation specifying in reasonable detail the events and circumstances and the
applicable Change in Law in support of any such reimbursement request, such additional
amount or amounts necessary to compensate the Lender for such additional costs incurred or
reduction suffered.

     (b) If the Lender determines that any Change in Law regarding capital requirements has or
would have the effect of reducing the rate of return on the Lender’s capital or on the capital of
the Lender’s holding company, if any, as a consequence of this Agreement or the Loan made by the
Lender to a level below that which the Lender or the Lender’s holding company could have achieved
but for such Change in Law (taking into consideration the Lender’s policies and the policies of the
Lender’s holding company with respect to capital adequacy) by an amount reasonably deemed by the
Lender to be material, then from time to time upon submission by the Lender to the Borrower of a
written demand therefor accompanied by documentation specifying in reasonable detail the events and
circumstances applicable to such reduction and the applicable Change in Law in support of such
demand, and the amount demanded pursuant hereto, the Borrower will, within 30 days after receipt of
such demand, pay to the Lender such additional amount or amounts necessary to compensate the Lender
or such Lender’s holding company for any such reduction suffered.

14

 

     (c) A certificate of the Lender setting forth the amount or amounts necessary to compensate
the Lender or its holding company, as the case may be, together with the relevant demand and
accompanying documentation, all as specified in paragraph (a) or (b) of this Section 2.6 shall be
delivered to the Borrower and shall be conclusive absent manifest error. The Borrower shall pay
the Lender the amount shown as due on any such certificate within 30 days after receipt thereof.

     (d) Failure or delay on the part of the Lender to demand compensation pursuant to this Section
2.6 shall not constitute a waiver of the Lender’s right to demand such compensation; provided that
the Borrower shall not be required to compensate the Lender pursuant to this Section for any
increased costs or reductions incurred more than 180 days prior to the date that the Lender
notifies the Borrower of the Change in Law giving rise to such increased costs or reductions and of
the Lender’s intention to claim compensation therefor in accordance with this Section; provided
further that, if the Change in Law giving rise to such increased costs or reductions is
retroactive, then the 180-day period referred to above shall be extended to include the period of
retroactive effect thereof.

     2.7 Break Funding Payments. If the Borrower makes any principal payment other than on
the last day of an Interest Period applicable thereto (including as a result of an Event of Default
or any prepayment under Section 2.3(a)), then the Borrower shall compensate the Lender for the
loss, cost and expense attributable to such event. Such loss, cost or expense to the Lender shall
be deemed to include an amount determined by the Lender to be the excess, if any, of (a) the amount
of interest which would have accrued on the amount so prepaid or converted, or not so borrowed,
continued, converted or prepaid at the Adjusted Eurodollar Rate that would have been applicable to
the Loan, for the period from the date of such event to the last day of the then current Interest
Period therefor, over (b) the amount of interest that would have accrued to the Lender on such
principal amount for such period at the interest rate that the 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 interbank Eurodollar market. A certificate of the Lender setting forth any amount or
amounts that the Lender is entitled to receive pursuant to this Section shall be delivered to the
Borrower and shall be conclusive absent manifest error. The Lender shall submit written demand
specifying in reasonable detail the events and circumstances resulting in such payment obligation,
together with a certificate as to any amounts payable pursuant to this Section to the Borrower.
The Borrower shall pay the Lender the amount shown as due on any such certificate within 30 days
after receipt thereof.

     2.8 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 Lender receives an amount equal to the sum it would have received had no such deductions been
made, (ii) the

15

 

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

     (d) As soon as practicable after any payment of Indemnified Taxes or Other Taxes by the
Borrower to a Governmental Authority, the Borrower shall deliver to the Lender 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 Lender.

     (e) If the Lender is entitled to an exemption from or reduction of withholding tax under the
law of the United States, or 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, it shall deliver
to the Borrower, 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) The Lender shall determine if, in its reasonable discretion, 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 a Borrower has paid additional amounts pursuant to this Section 2.8. If it determines that
it has received any such refund, 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 2.8 with respect to the Taxes or Other Taxes giving rise to such refund), net of all
out-of-pocket expenses of the 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 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 Lender in the
event the Lender is required to repay such refund to such Governmental Authority. This Section
shall not be construed to require the Lender to make available its tax returns (or any other
information relating to its taxes that it deems confidential) to the Borrower or any other Person.

16

 

ARTICLE 3

REPRESENTATIONS AND WARRANTIES

     The Borrower represents and warrants to the Lender as follows:

     3.1 Organization. Each Contango Entity (a) is duly organized, validly existing and in
good standing under the Laws of the jurisdiction of its organization, (b) has the requisite power
and authority to conduct its business in each jurisdiction in which its business is conducted and
(c) is duly qualified or licensed to conduct business and is in good standing in each such
jurisdiction except where any failure to be duly qualified or licensed or in good standing could
not reasonably be expected to have a Material Adverse Effect.

     3.2 Authority Relative to this Agreement. The Borrower has the power and authority to
execute and deliver this Agreement and the other Loan Documents to which it is a party and to
perform its obligations hereunder and thereunder. The Transactions have been duly authorized by all
necessary action on the part of the Borrower. This Agreement and the other Loan Documents have been
duly and validly executed and delivered by the Borrower, to the extent a party thereto, and
constitute its legal, valid and binding obligations enforceable against the Borrower, in accordance
with their respective terms, subject to the effect of any applicable bankruptcy, insolvency,
reorganization, moratorium or similar Laws affecting creditors’ rights and remedies generally and
to the effect of general principles of equity (regardless of whether enforcement is considered in a
proceeding at Law or in equity).

     3.3 No Violation. The Transactions will not:

     (a) result in a breach of the Organizational Documents of any Contango Entity;

     (b) result in the imposition of any Lien (other than in favor of Lender) on any Contango
Entity;

     (c) to the knowledge of Borrower, after due inquiry, result in, or constitute an event that
would be, a breach, violation or default under any Governmental Approval held by, or relating to
the business of any Contango Entity, in each case that could reasonably be expected to have a
Material Adverse Effect;

     (d) require any Contango Entity to obtain any consent, waiver, approval, exemption,
authorization or other action of, or make any filing with or give any notice to, any Person except
(i) such as have been obtained or made and are in full force and effect, and (ii) consents,
waivers, approvals, exemptions, authorizations, filings, notices and other actions the failure of
which to obtain or make could not reasonably be expected to have a Material Adverse Effect; or

     (e) violate any Law or Order applicable to any Contango Entity or by which its properties or
assets may be bound, except where such violation could not reasonably be expected to result in a
Material Adverse Effect.

17

 

     3.4 Financial Condition. The audited consolidated balance sheet of the Borrower and
its consolidated Subsidiaries at June 30, 2007, and the related audited consolidated statements of
income, cash flows and stockholder’s equity for the fiscal year ended on such date, together with
the related notes and schedules thereto, reported on by Grant Thornton LLP, and the unaudited
balance sheet and statement of income for the Borrower and its consolidated Subsidiaries of the
quarter ending March 31, 2008, copies of all of which have heretofore been furnished or made
available to the Lender, were prepared in accordance with GAAP consistently applied throughout the
periods presented and present fairly in all material respects the consolidated financial position
of the Borrower and its consolidated Subsidiaries as of such date, and the consolidated results of
their operations and their consolidated cash flows for the period then ended. Neither the Borrower
nor any of its Subsidiaries have any material liability or obligation that is not disclosed in the
foregoing financial statements or in the notes thereto. Since the date of such financial
statements, there has been no development, circumstance or event that has had or could reasonably
be expected to have a Material Adverse Effect.

     3.5 Litigation. No litigation, investigation or proceeding of or before any
arbitrator or Governmental Authority is pending or, to the knowledge of the Borrower, threatened by
or against any Contango Entity or against any of their respective assets (a) with respect to any of
the Loan Documents or any of the Transactions or (b) that could reasonably be expected to have a
Material Adverse Effect.

     3.6 No Default. No Contango Entity is in default under or with respect to any
agreement to which it is a party that could reasonably be expected to have a Material Adverse
Effect. Each Contango Entity is in compliance in all material respects with each covenant
applicable to it under the Loan Documents, and no Default has occurred and is continuing or would
occur as a result of the execution and delivery of this Agreement and the Loan Documents.

     3.7 Ownership of Property; Liens. Each Contango Entity has good and marketable title
to all of its Oil and Gas Properties that are not personal property and good title to all such Oil
and Gas Properties that are personal property and material to the Borrower and its Subsidiaries
taken as a whole, and such imperfections of title as do not in the aggregate materially detract
from the value thereof to, or the use thereof in, the business of the Borrower and its
Subsidiaries. The Borrower or one of its Subsidiaries is entitled to receive a decimal share of
all hydrocarbons produced from, or allocated to, each property described in the most recent Reserve
Report equal to not less than the net revenue interest set forth in such Reserve Report. There are
no “back-in” or “reversionary” interests held by third parties that could materially reduce the
interest of the Borrower and its Subsidiaries in such properties except as provided for in such
Reserve Report.

     3.8 Intellectual Property. Each Contango Entity owns, or is licensed to use, all
trademarks, tradenames, copyrights, technology, know-how and processes necessary for the conduct of
its business as currently conducted except for those the failure to own or license which could not
reasonably be expected to have a Material Adverse Effect (the “Intellectual Property”). No claim
has been asserted and is pending by any Person challenging or questioning the use of any such
Intellectual Property or the validity or effectiveness of any such Intellectual Property which
could reasonably be expected to have a Material Adverse Effect, nor does the

18

 

Borrower know of any valid basis for any such claim which could reasonably be expected to have
a Material Adverse Effect. The use of such Intellectual Property by each Contango Entity does not
infringe on the rights of any Person, except for such claims and infringements that, in the
aggregate, could not reasonably be expected to have a Material Adverse Effect.

     3.9 Taxes. Each Contango Entity has filed all material tax returns that are required
to be filed by it and has paid or caused to be paid all taxes shown on said returns and all
assessments, fees and other governmental charges levied upon it or upon any of its property or
income that are due and payable, other than such taxes, assessments, fees and other governmental
charges, if any, as are being diligently contested in good faith and by appropriate proceedings and
with respect to which there have been established adequate reserves on the books of the Borrower in
accordance with GAAP. To the knowledge of the Borrower, no material tax lien has been filed, and
no material claim is being asserted, with respect to any such taxes or assessments, fees or other
governmental charges.

     3.10 Federal Reserve Regulations. No part of the proceeds of the Loan will be used
for “purchasing” or “carrying” any “margin stock” within the respective meanings of each of the
quoted terms under Regulation U of the Board of Governors of the Federal Reserve System as now and
from time to time hereafter in effect. If requested by the Lender, the Borrower shall furnish to
the Lender a statement to the foregoing effect in conformity with the requirements of FR Form U-1
referred to in said Regulation U. The Loan and other transactions contemplated hereunder will not
violate the provisions of Regulations T and X.

     3.11 ERISA. No ERISA Event has occurred or is reasonably expected to occur that, when
taken together with all other such ERISA Events for which liability is reasonably expected to
occur, could reasonably be expected to result in a Material Adverse Effect. The present value of
all accumulated benefit obligations under each Plan (based on the assumptions used for purposes of
Statement of Financial Accounting Standards No. 87) did not, as of the date of the most recent
financial statements reflecting such amounts, exceed the fair market value of the assets of such
Plan.

     3.12 Subsidiaries. The Persons listed on Schedule 3.12 constitute all of the
Subsidiaries of the Borrower as of the Closing Date. Borrower owns directly, or indirectly through
one or more wholly-owned Subsidiaries, legal and beneficial ownership of all the Dutch and Mary
Rose Interests.

     3.13 Environmental Matters. Except as set forth on Schedule 3.13, and other than
exceptions to any of the following that could not, in the aggregate, reasonably be expected to give
rise to a Material Adverse Effect or materially adversely affect the value of the Oil and Gas
Properties of any Contango Entity taken as a whole:

     (a) Each Contango Entity (i) is, and within the period of all applicable statutes of
limitation has been in compliance with all applicable Environmental Laws; (ii) holds all
Environmental Permits (each of which is in full force and effect) required for any of its current
or planned operations or for any property owned, leased, or otherwise operated by it; and (iii) is,
and within the period of all applicable statutes of limitation has been, in compliance with all of
its Environmental Permits; and no officer of such Contango Entity

19

 

has knowledge of any reason why
its Environmental Permits will not timely be renewed or any new Environmental Permits will not
timely be obtained subject to the conditions and terms that may be applied to them by the relevant
Governmental Authorities.

     (b) To the knowledge of the Borrower, after due inquiry, Hazardous Substances have not been
transported, disposed of, emitted, discharged, or otherwise released or threatened to be released,
to or at any real property presently or formerly owned, leased or operated by any Contango Entity
or at any other location, which could reasonably be expected to (i) give rise to liability of any
Contango Entity under any applicable Environmental Law or (ii) interfere with the continued
operations of any Contango Entity.

     (c) No judicial, administrative, or arbitral proceeding (including any notice of violation or
alleged violation) under or relating to any Environmental Law to which any Contango Entity is, or
to the knowledge of the Borrower will be, named as a party is pending or, to the knowledge of the
Borrower threatened.

     (d) No Contango Entity has received any written request for information, or been notified that
it is a potentially responsible party under any Environmental Law, or with respect to any Hazardous
Substances.

     (e) No Contango Entity has entered into or agreed to any consent decree, order, or settlement,
nor is subject to any judgment, decree, or order, in any judicial, administrative, arbitral, or
other forum, relating to compliance with or liability under any Environmental Law.

     (f) No Contango Entity has assumed or retained, by contract or operation of law, any
liabilities of any kind, fixed, contingent or otherwise, under any Environmental Law other than in
conformity with standard industry practice.

     3.14 No Material Misstatements. All information, reports, financial statements, exhibits and schedules furnished to the
Lender by or on behalf of the Borrower in connection with the negotiation of any Loan Document or
included therein or delivered pursuant thereto, when taken as a whole, did not contain any untrue
statements of a material fact and did not omit to state any material fact necessary in order to
make the statements contained therein, in the light of the circumstances under which they were
made, not materially misleading. All projections and estimates concerning the Borrower and its
Subsidiaries that are or have been made available to the Lender by or on behalf of the Borrower
have been prepared
based on good faith estimates and based upon assumptions believed by the Borrower to be
reasonable in all material respects at the time of such preparation.

     3.15 Insurance. Each Contango Entity carries and maintains with respect to its insurable properties
insurance (including, to the extent consistent with past practices, self-insurance) with
financially sound and reputable insurers of the types, to such extent and against such risks as is
customary with companies in the same or similar businesses.

     3.16 Future Commitments. Except as set forth on Schedule 3.16, on a net basis there are no material gas imbalances,
material take-or-pay or other prepayments with respect to the Oil

20

 

and Gas Properties of any
Contango Entity (or, in the case of Oil and Gas Properties operated by operators other than a
Contango Entity, to the Borrower’s knowledge after reasonable investigation) which would require
such Contango Entity to deliver hydrocarbons produced from Oil and Gas Properties at some future
time without then or thereafter receiving full payment therefor.

     3.17 Investment Company Status. No Contango Entity is an “investment company” as defined in, or subject to regulation
under, the Investment Company Act of 1940, as amended.

ARTICLE 4

CONDITIONS

     4.1 Effective Date. The obligation of the Lender to make the initial advance on the Loan shall be subject to
the satisfaction (or waiver in accordance with Section 8.2) of each of the following conditions:

     (a) The Lender shall have received from the Borrower a counterpart of this Agreement signed on
behalf of such party (which may include electronic transmission of a signed signature page of this
Agreement);

     (b) The Borrower shall have executed and delivered to the Lender the Note in the amount,
maturity and as otherwise provided for herein;

     (c) The Lender shall have received a certificate of a Financial Officer to the effect that (i)
the representation and warranties of the Borrower set forth in Article 3 are true and correct in
all material respects as of the Closing Date, except to the extent such representations and
warranties expressly relate to an earlier date (in which case such representations and warranties
shall be true and correct in all material respects as of such earlier date), (ii) no Default shall
exist either before or after giving effect to the
Transactions, and (iii) no Material Adverse Effect shall have occurred since March 31, 2008;

     (d) The Lender shall have received such documents and certificates as the Lender or its
counsel may reasonably request relating to the organization, existence and good standing of the
Borrower and its Subsidiaries, the authorization of the Transactions, the authority of each natural
Person executing any of the Loan Documents on behalf of the Borrower and any other legal matters
relating to the Borrower, its Subsidiaries, this Agreement or the Transactions, all in form and
substance reasonably satisfactory to the Lender and its counsel;

     (e) The Lender shall have received all fees, accrued and unpaid interest and other amounts due
and payable on or prior to the Closing Date under the Existing Loan Agreement, this Agreement and
any other Loan Document; and

     (f) The Lender shall have received such other documents and certificates as the Lender or its
counsel may reasonably request.

21

 

     4.2 Conditions to each Subsequent Advance of the Loan.

     The obligation to make any advance of the Loan, including the initial advance, is subject to
the further satisfaction of the following conditions:

     (a) timely receipt by Lender of a Request for Advance;

     (b) immediately before and after giving effect to such advance, no Default or Event of Default
shall have occurred and be continuing and the making of such advance shall not cause a Default or
Event of Default;

     (c) the representations and warranties of Borrower contained in this Agreement and the other
Loan Documents shall be true and correct in all material respects on and as of the date of such
advance, except to the extent such representations and warranties expressly relate to an earlier
date (in which case such representations and warranties shall be true and correct in all material
respects as of such earlier date); and

     (d) Lender shall have received a certificate from a Financial Officer certifying that (i)
attached to such certificate is a true and complete copy of the most recent Reserve Report, and
(ii) setting forth in reasonable detail the calculations demonstrating compliance with Section 6.14
of this Agreement based on the reserves and other information set forth in such Reserve Report.

     Each advance of the Loan hereunder shall constitute a representation and warranty by Borrower
that on the date of such advance the statements contained in subclauses (b) and (c) above and the
certificate referenced in subclause (d) above are true.

ARTICLE 5

AFFIRMATIVE COVENANTS

     Until the principal of and interest on the Loan and all other amounts owing by Borrower to
Lender hereunder and under the other Loan Documents shall have been paid in full, the Borrower
covenants and agrees with the Lender as follows:

     5.1 Financial Statements; Other Information. The Borrower shall furnish to the Lender:

     (a) within 90 days after the end of each fiscal year of the Borrower, its audited consolidated
balance sheet and related statements of income, shareholders’ equity and cash flows as of the end
of and for such year, setting forth in reasonable detail, in each case in comparative form the
figures for the previous fiscal year, all reported on by Grant Thornton LLP or other independent
public accountants of recognized national standing (without a “going concern” or like qualification
or exception and without any qualification or exception as to the scope of such audit) to the
effect that such consolidated financial statements present fairly in all material respects the
financial condition and results of operations of the Borrower and its consolidated Subsidiaries on
a

22

 

consolidated basis in accordance with GAAP consistently applied, in each case, as of the date
indicated;

     (b) within 45 days after the end of each of the first three fiscal quarters of each fiscal
year of the Borrower, its consolidated balance sheet and related statements of income and cash
flows as of the end of and for such fiscal quarter and the then elapsed portion of the fiscal year,
setting forth in each case in comparative form the figures for the corresponding period or periods
of (or, in the case of the balance sheet, as of the end of) the previous fiscal year, all certified
by one of its Financial Officers as presenting fairly in all material respects the financial
condition and results of operations of the Borrower and its consolidated Subsidiaries on a
consolidated basis in accordance with GAAP consistently applied, in each case as of the date
indicated, subject to normal year-end audit adjustments and the absence of footnotes;

     (c) concurrently with any delivery of financial statements under clause (a) or (b) above, a
certificate of a Financial Officer of the Borrower (i) certifying as to whether a Default has
occurred and, if a Default has occurred, specifying the details thereof and any action taken or
proposed to be taken with respect thereto, (ii) setting forth reasonably detailed calculations
demonstrating compliance with Section 6.13 and Section 6.14 and (iii) stating whether any change in
GAAP or in the application thereof has occurred since the date of the last audited financial
statements delivered pursuant to Section 5.1(a) and, if any such change has occurred, specifying
the effect of such change on the financial statements accompanying such certificate;

     (d) promptly after the same become available, notice of the filing of (i) all periodic and
other reports, proxy statements and other materials filed by the Borrower or any Subsidiary with
the Securities and Exchange Commission or with any national
securities exchange, or distributed by the Borrower to its shareholders generally, as the case
may be, and (ii) all press releases and other statements made available generally by the Borrower
or any of its Subsidiaries to the public concerning material developments in the business of the
Borrower or any of its Subsidiaries;

     (e) promptly upon receipt of any complaint, order, citation, notice or other written
communication from any Person with respect to, or upon the Borrower obtaining knowledge of, (i) the
existence or alleged existence of a violation of any applicable Environmental Law or any liability
arising under Environmental Laws in connection with any property now or previously owned, leased or
operated by the Borrower or any of its Subsidiaries, (ii) any release of Hazardous Substances on
such property or any part thereof in a quantity that is reportable under any applicable
Environmental Law, and (iii) any pending or threatened proceeding for the termination, suspension
or non-renewal of any permit required under any applicable Environmental Law, in each case in which
there is a reasonable likelihood of an adverse decision or determination that could result in a
Material Adverse Effect. Such notice shall contain a certificate of an executive officer of
Borrower, setting forth, in reasonable detail, such matter and the actions, if any, that Borrower
or such applicable Subsidiary is required or proposes to take;

23

 

     (f) promptly following any request therefor, such other information regarding the operations,
business affairs and financial condition of the Borrower or any Subsidiary, or compliance with the
terms of this Agreement, as the Lender may reasonably request;

     (g) promptly upon receipt thereof, copies of all reports and comment letters from its
independent public accountants to the Borrower or any of its Subsidiaries, their respective Boards
of Directors (or equivalent governing body) or any committee thereof with respect to the financial
statements described in Section 5.1(a);

     (h) within 120 days after the end of each fiscal year, the Borrower will make available to the
Lender material reasonably satisfactory to the Lender describing all material insurance coverage
maintained by the Borrower and its Subsidiaries as of the date of such report;

     (i) prior to September 30 of each year, a copy of the Reserve Report prepared in connection
with the Borrower’s preparation and filing of its annual report on SEC Form 10-K; and

     (j) copies of any reserve reports prepared by the Borrower or its Independent Engineer and
submitted to the Borrower’s then current hydrocarbon borrowing base lending bank promptly following
such submission.

     5.2 Notices of Material Events. The Borrower shall furnish to the Lender promptly, and, in any event, within five Business
Days, written notice of the following:

     (a) the occurrence of any Default of which the Borrower has knowledge;

     (b) the filing or commencement of any action, suit or proceeding by or before any arbitrator
or Governmental Authority against or affecting the Borrower or any Subsidiary thereof that, if
adversely determined, could reasonably be expected to result in a Material Adverse Effect or that
in any manner questions the validity of the Loan Documents;

     (c) the occurrence of any ERISA Event that, alone or together with any other ERISA Events that
have occurred, could reasonably be expected to result in liability of the Borrower and its
Subsidiaries in an aggregate amount exceeding $100,000;

     (d) any default by the Borrower or any of its Subsidiaries of which the borrower has knowledge
under any material contract, together with a description of the nature of such default and any
action taken or proposed to be taken with respect to such default; and

     (e) any other development that results in, or could reasonably be expected to result in, a
Material Adverse Effect.

     Each notice delivered under this Section shall be accompanied by a statement of a Financial
Officer or other executive officer of the Borrower setting forth the details of the event

24

 

or
development requiring such notice and any action taken or proposed to be taken with respect
thereto.

     5.3 Existence; Conduct of Business. The Borrower shall (a) preserve and maintain its legal existence and the rights, licenses,
permits, privileges and franchises material to the conduct of its business except where the failure
to do so could not reasonably be expected to result in a Material Adverse Effect and (b) cause each
of its Subsidiaries to preserve and maintain its legal existence and the rights, licenses, permits,
privileges and franchises material to the conduct of its business; provided that the foregoing
shall not prohibit any merger, consolidation, liquidation or dissolution permitted under Section
6.3.

     5.4 Payment of Obligations. The Borrower shall pay its obligations, including Tax liabilities, before the same shall
become delinquent or in default, except where (a) the validity or amount thereof is being contested
in good faith by appropriate proceedings, (b) the Borrower has set aside on its books adequate
reserves with respect thereto in accordance with its method of accounting and (c) the failure to
make payment pending such contest could not reasonably be expected to result in a Material Adverse
Effect. The Borrower shall cause each of its Subsidiaries to pay its obligations, including Tax
liabilities, before the same shall become delinquent or in default, except where (a) the validity
or amount thereof is being contested in good faith by appropriate proceedings, (b) such Subsidiary
has set aside on its books adequate reserves with respect thereto in accordance with its method of
accounting and (c) the failure to make payment pending such contest could not reasonably be
expected to result in a Material Adverse Effect.

     5.5 Maintenance of Properties; Insurance. The Borrower shall, and shall cause each of its Subsidiaries to (a) maintain all property
material to the conduct of its business in good working order and condition, in accordance with
industry practice, ordinary wear and tear excepted, and (b) maintain, with financially sound and
reputable insurance companies, insurance in such amounts and against such risks as are customarily
maintained by similarly situated companies engaged in the same or similar businesses operating in
the same or similar locations, which insurance shall name Lender, as “additional insured” and as a
“loss payee”, as applicable.

     5.6 Books and Records; Inspection Rights. The Borrower shall, and shall cause each of its Subsidiaries to keep proper books of record
and account in which full, true and correct entries are made of all dealings and transactions in
relation to its business and activities. The Borrower shall, and shall cause each of its
Subsidiaries to permit any representatives designated by the Lender, upon reasonable prior notice,
to visit and inspect its properties, to examine and make extracts from its books and records, and
to discuss its affairs, finances and condition with its officers and independent accountants, all
at such reasonable times and as often as reasonably requested. The Lender shall pay its
out-of-pocket expenses incurred with respect to such visits, inspections, examinations, extracts
and discussions except during the existence of an Event of Default, in which event the Borrower
shall be responsible for such costs reasonably incurred by the Lender.

     5.7 Compliance with Laws. The Borrower shall, and shall cause each of its Subsidiaries to, comply with all Laws and
Orders applicable to it or its property, except where the failure to do so, individually or in the
aggregate, could not reasonably be expected to result in a Material Adverse Effect.

25

 

     5.8 Reserved.

     5.9 Use of Proceeds. The Borrower shall use the proceeds of the Loan for the exploration, development and/or
acquisition of Oil and Gas Properties, for further investment in seismic acquisitions and to make
other Investments which are otherwise permitted under Section 6.5, and for other general working
capital purposes, and shall not use any of such proceeds for any purpose that would violate any of
the regulations of the Board of Governors, including Regulations T, U and X.

     5.10 Collateral/Guarantors.

        Promptly upon the request of Lender, from time to time, Borrower shall (a) cause any
properties or assets of any Contango Entity to be subject to perfected, first priority Liens in
favor of Lender to secure the obligations and indebtedness of Borrower hereunder pursuant to
mortgages, security agreements, pledge agreements and other
collateral documents as may be satisfactory to Lender in its sole discretion, and (b) cause
any Subsidiary, whether currently existing, direct or indirect, which is not currently a guarantor
of Borrower’s obligations and indebtedness under the Loan Documents, to execute and deliver such a
guaranty, in form and substance satisfactory to Lender in its sole discretion.

ARTICLE 6

NEGATIVE COVENANTS

     Until the principal of and interest on the Loan shall have been paid in full, the Borrower
covenants and agrees with the Lender as follows:

     6.1 Debt. The Borrower shall not, and shall not permit any of its Subsidiaries to create, incur, assume
or permit to exist any Debt, except:

     (a) All Debt existing as of the Closing Date and listed on Schedule 6.1 attached hereto;

     (b) Intercompany Debt expressly permitted under Section 6.5; and

     (c) Other Debt not to exceed, in the aggregate for all such other Debt at any time outstanding
an amount equal to $1,000,000.

     6.2 Liens. The Borrower shall not and shall not permit any of its Subsidiaries to, create, incur,
assume or permit to exist any Lien on any of its assets or properties now owned or hereafter
acquired, except for:

     (a) Liens securing the obligations and indebtedness of Borrower hereunder and under the other
Loan Documents;

     (b) All Liens existing as of the Closing Date and listed on Schedule 6.2 attached hereto; and

     (c) All Permitted Liens.

26

 

     6.3 Fundamental Changes. The Borrower shall not, and shall not permit any of its Subsidiaries to merge into or
consolidate with any other Person, or liquidate or dissolve, except that (a) any Subsidiary may
merge with or into Borrower or another Subsidiary, and (b) any Subsidiary may be liquidated or
dissolved.

     6.4 Disposition of Assets. The Borrower shall not, and shall not permit any of its Subsidiaries to sell, lease,
transfer, abandon, assign or otherwise dispose of any of its properties or assets (including,
without limitation, any Equity Interests of Subsidiaries or other Persons) except for (a) sales of
inventory in the ordinary course of business, (b) sales of worn out or obsolete equipment or other
property no longer used or useful in its business, (c) transfers or assignments of assets
(including any Equity Interest of Subsidiaries) by the Borrower or any Subsidiary of the Borrower
to any other Subsidiary of the Borrower, excluding transfers or assignments of (i) Equity Interests
held by the Borrower in Contango Resources Company and (ii) assets of Contango Resources Company,
and (d) other dispositions of assets with an aggregate value not to exceed $5,000,000 during any
fiscal year.

     6.5 Investments. The Borrower will not, and will not allow any of its Subsidiaries to make an Investment in
any other Person, except:

     (a) Cash Equivalents;

     (b) Investments existing on the date hereof and described on Schedule 6.5 attached hereto;

     (c) Investments by (i) any Subsidiary in Borrower, (ii) Borrower in any Subsidiary or by any
Subsidiary in any other Subsidiary;

     (d) Investments consisting of extensions of credit, prepayments, security deposits or similar
transactions entered into in the ordinary course of business consistent with past practice, 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;

     (e) additional Investments from and after the Closing Date in Republic Exploration LLC not to
exceed in the aggregate $5,000,000 during any fiscal year;

     (f) additional Investments from and after the Closing Date in Contango Offshore Exploration,
LLC not to exceed in the aggregate $5,000,000 during any fiscal year; and

     (g) other Investments not to exceed in the aggregate $1,000,000 during any fiscal year.

     6.6 Restricted Payments. The Borrower shall not, and shall not permit any of its Subsidiaries to, declare or make,
or agree to pay or make, directly or indirectly, any Restricted Payment, except:

27

 

     (a) the Borrower may declare and make distributions with respect to its Equity Interests
payable solely in additional Equity Interests;

     (b) any Subsidiary of the Borrower may make a Restricted Payment to the Borrower; and

     (c) if no Default has occurred and is continuing, the Borrower may (i) declare and pay
dividends with respect to any of its Preferred Stock in an amount not to exceed, in the aggregate,
$1,800,000 during any fiscal year, (ii) repurchase up to a maximum of $10,000,000 of its Equity
Interests consisting of common stock and/or stock options in the aggregate for all such repurchases
during the term hereof, and (iii) provided that Contango Resources Company owns all of the Dutch
and Mary Rose Interests, declare and make distributions with respect to its Equity Interests in
Contango Energy Company.

     6.7 Transactions with Affiliates. The Borrower will not, and will not permit any of its Subsidiaries to sell, lease or
otherwise transfer any property or assets to, or purchase, lease or otherwise acquire any property
or assets from, or otherwise engage in any other transactions with, any holder of 10% or more of
its equity securities or any of its Affiliates, except:

     (a) in the ordinary course of business at prices and on terms and conditions not less
favorable to the Borrower or such Subsidiary than could be obtained on an arm’s-length basis from
unrelated third parties;

     (b) any Restricted Payment permitted by Section 6.6 or as otherwise permitted hereunder;

     (c) indemnities in favor of any officer of the Borrower pursuant to the Organizational
Documents of the Borrower or statutory provisions;

     (d) any reasonable employee benefit or compensation plan or arrangement or any reasonable
transaction pursuant to an employment contract; or

     (e) transactions between or among the Borrower and its Subsidiaries which are otherwise
permitted by this Agreement.

     6.8 Restrictive Agreements. The Borrower shall not, and shall not permit any Subsidiary to, directly or indirectly,
enter into, incur or permit to exist any agreement or other arrangement that prohibits, restricts
or imposes any condition upon the ability of any Subsidiary to make any Restricted Payments to or
Investments in Borrower, or create, incur or permit to exist any Lien in favor of Lender upon any
of its property or assets; provided that (a) the foregoing shall not apply to restrictions and
conditions imposed by Law or by this Agreement, and (b) the foregoing shall not apply to customary
provisions in leases and other contracts restricting the assignment thereof.

     6.9 Reserved.

     6.10 Organizational Documents. The Borrower shall not, and shall not permit and of its Subsidiaries to, amend its
Organizational Documents in any manner that would adversely and

28

 

materially affect the rights of the
Lender under this Agreement or any other Loan Document or its ability to enforce the same.

     6.11 Nature of Business. The Borrower and its Subsidiaries shall not engage in any business other than those in
which they are currently engaged and any other business reasonably related thereto.

     6.12 Accounting Changes. The Borrower shall not change the end of its fiscal year from its current date of June
30th or make any changes in its accounting treatment and reporting practices except as
required or permitted in accordance with its method of accounting.

     6.13 Working Capital. The Borrower shall not, as at the end of any fiscal quarter, permit the current assets of
the Borrower and its Subsidiaries, plus any unused availability for advances under this Agreement,
to be less than the current liabilities of the Borrower and its Subsidiaries.

     6.14 Debt Coverage. The Borrower shall not permit the total aggregate Debt of the Borrower and its Subsidiaries
to exceed the lesser of (a) 100% of the PV-9 Value of the Producing Reserves and (b) 70% of the
PV-9 Value of the Proved Reserves, at any time.

     6.15 Dutch and Mary Rose Interests. Borrower shall not undertake or permit the undertaking by any Contango Entity of any
transaction that would result in the Disposition of all or any portion of the Dutch and Mary Rose
Interests to any Person that is not a wholly-owned Subsidiary of Borrower or the Disposition of all
or any portion of the Equity Interests of any Subsidiary of Borrower that owns all or a portion of
the Dutch and Mary Rose Interests to any Person that is not a wholly-owned Subsidiary of Borrower.

ARTICLE 7

EVENTS OF DEFAULT AND REMEDIES

     7.1 Events of Default. If any of the following events (“Events of Default”) shall occur:

     (a) the Borrower shall fail to pay any principal of the Loan when and as the same shall become
due and payable, whether at the due date thereof or at a date fixed for prepayment thereof or
otherwise;

     (b) the Borrower shall fail to pay any interest on the Loan or any other amount (other than an
amount referred to in clause (a) of this Section 7.1) payable under this Agreement or the other
Loan Documents, when and as the same shall become due and payable, and such failure shall continue
unremedied for a period of five days;

     (c) any representation or warranty made or deemed made by or on behalf of the Borrower in or
in connection with this Agreement or any amendment or modification hereof or waiver hereunder, or
in any report, certificate, financial statement, Loan

29

 

Document or other document furnished pursuant
to or in connection with this Agreement or any amendment or modification thereof or waiver
thereunder, shall prove to have been incorrect in any material respect when made or deemed made;

     (d) the Borrower shall fail to observe or perform any covenant, condition or agreement
contained in Section 5.5 or in Article 6, and such failure shall continue unremediated for a
period of five days;

     (e) the Borrower shall fail to observe or perform any covenant, condition or agreement
contained in this Agreement (other than those specified in clause (a), (b) or (d) of this Section
7.1) or in any other Loan Document to which it is a party, and such failure shall continue
unremedied for a period of 30 days;

     (f) the Borrower or any of its Subsidiaries shall fail to make any payment (whether of
principal or interest) in respect of any Material Debt, when and as the same shall become due and
payable or within any applicable grace period;

     (g) any event or condition occurs that results in any Material Debt becoming due prior to its
scheduled maturity or that enables or permits (with or without the giving of notice, the lapse of
time or both) the holder or holders of any Material Debt or any trustee or agent on its or their
behalf to cause any Material Debt to become due, or to require the prepayment, repurchase,
redemption or defeasance thereof, prior to its scheduled maturity; provided that this clause (g)
shall not apply to secured Debt that becomes due as a result of the voluntary sale or transfer of
the property or assets securing such Debt;

     (h) an involuntary proceeding shall be commenced or an involuntary petition shall be filed
seeking (i) liquidation, reorganization or other relief in respect of the Borrower or any of its
Subsidiaries or its debts, or of a substantial part of its assets, under any Federal, state or
foreign bankruptcy, insolvency, receivership or similar law now or hereafter in effect or (ii) the
appointment of a receiver, trustee, custodian, sequestrator, conservator or similar official for
the Borrower or any of its Subsidiaries or for a substantial part of its assets, and, in any such
case, such proceeding or petition shall continue undismissed for 60 days or an order or decree
approving or ordering any of the foregoing shall be entered;

     (i) the Borrower or any of its Subsidiaries shall (i) voluntarily commence any proceeding or
file any petition seeking liquidation, reorganization or other relief under any Federal, state or
foreign bankruptcy, insolvency, receivership or similar law now or hereafter in effect,
(ii) consent to the institution of, or fail to contest in a timely and appropriate manner, any
proceeding or petition described in clause (h) of this Section 7.1, (iii) apply for or consent to
the appointment of a receiver, trustee, custodian, sequestrator, conservator or similar official
for the Borrower or for a substantial part of its assets, (iv) file an answer admitting the
material allegations of a petition filed against it in any such proceeding, (v) make a general
assignment for the benefit of creditors or (vi) take any action for the purpose of effecting any of
the foregoing;

30

 

     (j) the Borrower or any of its Subsidiaries shall become unable, admit in writing its
inability or fail generally to pay its debts as they become due;

     (k) one or more judgments for the payment of money in an aggregate amount in excess of
$100,000 shall be rendered against the Borrower or any of its Subsidiaries and the same shall
remain undischarged for a period of 60 consecutive days during which execution shall not be
effectively stayed, or any action shall be legally taken by a judgment creditor to attach or levy
upon any assets of the Borrower or any of its Subsidiaries to enforce any such judgment;

     (l) an ERISA Event shall have occurred that, in the opinion of the Lender, when taken together
with all other ERISA Events that have occurred, could reasonably be expected to result in a
Material Adverse Effect; or

     (m) a Change in Control shall occur;

then, and in every such event, and at any time thereafter during the continuance of such event, the
Lender may, by notice to the Borrower, take any or all of the following actions, at the same or
different times: (i) declare the Loan then outstanding to be due and payable in whole (or in part,
in which case any principal not so declared to be due and payable may thereafter be declared to be
due and payable), and thereupon the principal of the Loan so declared to be due and payable,
together with accrued interest thereon and all fees and other obligations of the Borrower accrued
hereunder, shall become due and payable immediately, without presentment, demand, protest or other
notice of any kind, all of which are hereby waived by the Borrower; provided, however, that in case
of any event with respect to the Borrower described in Section 7.1(h) or Section 7.1(i), the
principal of the Loan then outstanding, together with accrued interest thereon and all fees and
other obligations of the Borrower accrued hereunder, shall automatically become due and payable,
without presentment, demand, protest or other notice of any kind, all of which are hereby waived by
the Borrower, and (ii) exercise any or all of the remedies available to it under any of the Loan
Documents, at Law or in equity.

ARTICLE 8

MISCELLANEOUS

     8.1 Notices.

     (a) Except in the case of notices and other communications expressly permitted to be given by
telephone (and subject to paragraph (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 telecopy, as follows:

31

 

	 	 	 	 	 
	 

	 	(i)
	 	if to the Borrower, to:
	 
	 	 	 	 
	 

	 	 	 	Contango Oil & Gas Company
	 

	 	 	 	3700 Buffalo Speedway, Suite 960
	 

	 	 	 	Houston, TX 77098
	 

	 	 	 	Attention: Kenneth R. Peak
	 

	 	 	 	Telecopy No.: 713-960-1065
	 

	 	 	 	Telephone No.: 713-960-1901
	 
	 	 	 	 
	 

	 	 	 	with a copy to:
	 
	 	 	 	 
	 

	 	 	 	Morgan, Lewis & Bockius LLP
	 

	 	 	 	300 South Grand Avenue, 22nd Floor
	 

	 	 	 	Los Angeles, CA 90071
	 

	 	 	 	Attention: Richard A. Shortz, Esq.
	 

	 	 	 	Telecopy No.: (213-612-2501
	 

	 	 	 	Telephone No. 213-612-2526
	 
	 	 	 	 
	 

	 	(ii)
	 	if to the Lender, to:
	 
	 	 	 	 
	 

	 	 	 	Centaurus Capital LLC
	 

	 	 	 	3050 Post Oak Blvd., Suite 850
	 

	 	 	 	Houston, Texas 77056
	 

	 	 	 	Attention: Tim Detmering
	 

	 	 	 	Telecopy No.: 713-554-1333
	 

	 	 	 	Telephone No. 713-554-1341
	 
	 	 	 	 
	 

	 	 	 	with a copy to :
	 
	 	 	 	 
	 

	 	 	 	Haynes and Boone, LLP
	 

	 	 	 	1221 McKinney
	 

	 	 	 	Suite 2100
	 

	 	 	 	Houston, Texas 77010
	 

	 	 	 	Attention: Robert Eickenroht, Esq.
	 

	 	 	 	Telecopy No.: 713-236-5619
	 

	 	 	 	Telephone No.: 713-547-2022

     (b) Either party hereto may change its address or telecopy number for notices and other
communications hereunder by written notice to the other parties hereto. All
notices and other communications given to any party hereto in accordance with the provisions
of this Agreement shall be deemed to have been given on the date of receipt.

     8.2 Amendments; Waivers. Neither this Agreement nor any provision hereof may be waived, amended or modified except
pursuant to an agreement or agreements in writing entered into by the Borrower and the Lender. No
failure or delay by the Lender in exercising any right or power hereunder shall operate as a waiver
thereof, nor shall any single or partial exercise of any such right or power, or any abandonment or
discontinuance of steps to enforce such a right or

32

 

power, preclude any other or further exercise
thereof or the exercise of any other right or power. The rights and remedies of the Lender
hereunder are cumulative and are not exclusive of any rights or remedies that it would otherwise
have. No waiver of any provision of this Agreement or consent to any departure by the Borrower
therefrom shall in any event be effective unless the same shall be permitted by this Section, and
then such waiver or consent shall be effective only in the specific instance and for the purpose
for which given. Without limiting the generality of the foregoing, the making of the Loan shall
not be construed as a waiver of any Default, regardless of whether the Lender may have had notice
or knowledge of such Default at the time.

     8.3 Successors and Assigns. 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. The Borrower may not
assign or otherwise transfer any of its rights or obligations hereunder without the prior written
consent of the Lender (and any attempted assignment or transfer by the Borrower without such
consent 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) any legal or equitable right, remedy or claim under or by reason of this
Agreement.

     8.4 Survival. All covenants, agreements, representations and warranties made by the Borrower herein and
in the certificates or other instruments delivered in connection with or pursuant to this
Agreement shall be considered to have been relied upon by the other parties hereto and shall
survive the execution and delivery of this Agreement and the making of the Loan, regardless of any
investigation made by any such other party or on its behalf and notwithstanding that the Lender may
have had notice or knowledge of any Default or incorrect representation or warranty at the time any
credit is extended hereunder, and shall continue in full force and effect as long as the principal
of or any accrued interest on the Loan or any other amount payable under this Agreement is
outstanding and unpaid.

     8.5 Counterparts. This Agreement may be executed in counterparts and may be delivered in original or
facsimile form (and by different parties hereto on different counterparts), each
of which shall constitute an original, but all of which when taken together shall constitute a
single contract.

     8.6 Expenses; Indemnity; Damage Waiver.

     (a) The Borrower shall pay (i) all reasonable out-of-pocket costs and expenses (including,
without limitation, Uniform Commercial Code and lien search fees and charges, fees and expenses
associated with corporate record searches and governmental certificates regarding the status of the
Contango Entities, other filing fees, mortgage or stamp taxes, in each case whether incurred
directly by the Lender or by its legal counsel or other agent or representative on behalf of the
Lender, but excluding, however, any fees of Lender’s legal counsel for services rendered), in
connection with the preparation, negotiation, execution, delivery and administration of this
Agreement and the other Loan Documents, and (ii) all reasonable out-of-pocket expenses incurred by
the Lender, including the fees, charges and disbursements of one primary law firm as counsel, local
counsel as needed and consultants for the Lender, in the enforcement or protection of its rights in
connection with this Agreement and the other Loan Documents, including its

33

 

rights under this
Section, or in connection with the Loan made hereunder, including all such out-of-pocket expenses
incurred during any workout, restructuring or negotiations in respect of the Loan.

     (b) The Borrower shall and hereby does indemnify the Lender, it Affiliates and the directors,
officers, managers, employees, agents and representatives 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 reasonable fees,
charges and disbursements of any counsel for any Indemnitee, incurred by or asserted against any
Indemnitee arising out of, in connection with, or as a result of (i) the execution or delivery of
this Agreement or any agreement or instrument contemplated hereby, the performance by the parties
hereto of their respective obligations hereunder or the consummation of the Transactions or any
other transactions contemplated hereby, (ii) the Loan or the use of the proceeds therefrom, (iii)
any actual or alleged presence or release of Hazardous Substance on or from any real property owned
or operated by the Borrower or any of its Subsidiaries, or any liability arising under
Environmental Laws related in any way to the Borrower or any of its Subsidiaries, or (iv) any
claim, litigation, investigation or proceeding relating to any of the foregoing, whether based on
contract, tort or any other theory and regardless of whether any Indemnitee is a party thereto,
including any such loss, claim, damage or liability caused by the negligence of any 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 are determined by a court of competent
jurisdiction by final and nonappealable judgment to have resulted from the gross negligence or
willful misconduct of such Indemnitee.

     (c) To the 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 or any agreement or
instrument contemplated hereby, the Transactions, the Loan or the use of the proceeds thereof.

     (d) All amounts due under this Section shall be payable promptly after receipt of a request
therefor by the Borrower.

     8.7 Severability. Any provision of this Agreement held to be invalid, illegal or unenforceable in any
jurisdiction shall, as to such jurisdiction, be ineffective to the extent of such invalidity,
illegality or unenforceability without affecting the validity, legality and enforceability of the
remaining provisions hereof; and the invalidity of a particular provision in a particular
jurisdiction shall not invalidate such provision in any other jurisdiction.

     8.8 Governing Law.

     (a) THIS AGREEMENT AND THE OTHER LOAN DOCUMENTS SHALL BE CONSTRUED IN ACCORDANCE WITH AND
GOVERNED BY THE LAW OF THE STATE OF NEW YORK WITHOUT REGARD TO ANY CHOICE-OF-LAW

34

 

PROVISIONS THAT
WOULD REQUIRE THE APPLICATION OF THE LAW OF ANOTHER JURISDICTION.

     (b) EXCEPT TO THE EXTENT REQUIRED FOR THE EXERCISE OF THE REMEDIES PROVIDED IN THE OTHER LOAN
DOCUMENTS, BORROWER HEREBY IRREVOCABLY WAIVES, TO THE FULLEST EXTENT PERMITTED BY LAW, ANY
OBJECTION WHICH IT MAY NOW OR HEREAFTER HAVE TO THE LAYING OF VENUE OF ANY LITIGATION (DEFINED
BELOW) ARISING OUT OF OR IN CONNECTION WITH THIS AGREEMENT OR ANY OF THE LOAN DOCUMENTS BROUGHT IN
DISTRICT COURTS OF HARRIS COUNTY, TEXAS, OR IN THE UNITED STATES DISTRICT COURT FOR THE SOUTHERN
DISTRICT OF TEXAS, HOUSTON DIVISION.

     (c) BORROWER HEREBY IRREVOCABLY CONSENTS TO THE SERVICE OF PROCESS OUT OF ANY OF THE
AFOREMENTIONED COURTS IN ANY SUCH LITIGATION BY THE MAILING OF COPIES THEREOF BY CERTIFIED MAIL,
RETURN RECEIPT REQUESTED, POSTAGE PREPAID, TO BORROWER’S OFFICE. NOTHING HEREIN SHALL AFFECT THE
RIGHTS OF LENDER TO COMMENCE LEGAL PROCEEDINGS OR OTHERWISE PROCEED AGAINST BORROWER IN ANY
JURISDICTION OR TO SERVE PROCESS IN ANY MANNER PERMITTED BY APPLICABLE LAW. TO THE EXTENT THAT
BORROWER HAS OR HEREAFTER MAY ACQUIRE ANY IMMUNITY FROM JURISDICTION OF ANY COURT OR FROM ANY LEGAL
PROCESS (WHETHER
THROUGH SERVICE OR NOTICE, ATTACHMENT PRIOR TO JUDGMENT, ATTACHMENT IN AID OF EXECUTION,
EXECUTION OR OTHERWISE) WITH RESPECT TO ITSELF OR ITS PROPERTY, BORROWER HEREBY IRREVOCABLY WAIVES
SUCH IMMUNITY IN RESPECT OF ITS OBLIGATIONS UNDER THIS AGREEMENT AND THE OTHER LOAN DOCUMENTS. AS
USED HEREIN, THE TERM “LITIGATION” MEANS ANY PROCEEDING, CLAIM, LAWSUIT OR INVESTIGATION (I)
CONDUCTED OR THREATENED BY OR BEFORE ANY COURT OR GOVERNMENTAL DEPARTMENT, COMMISSION, BOARD,
BUREAU, AGENCY OR INSTRUMENTALITY OF THE UNITED STATES OR OF ANY STATE, COMMONWEALTH, NATION,
TERRITORY, POSSESSION, COUNTY, PARISH, OR MUNICIPALITY, WHETHER NOW OR HEREAFTER CONSTITUTED OR
EXISTING, OR (II) PENDING BEFORE ANY PUBLIC OR PRIVATE ARBITRATION BOARD OR PANEL.

     8.9 WAIVER OF JURY TRIAL. EACH PARTY HERETO HEREBY 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 THE TRANSACTIONS CONTEMPLATED HEREBY (WHETHER BASED ON CONTRACT,
TORT OR ANY OTHER THEORY). EACH PARTY HERETO (A) CERTIFIES THAT NO REPRESENTATIVE, AGENT OR
ATTORNEY OF ANY OTHER PARTY HAS REPRESENTED, EXPRESSLY OR OTHERWISE, THAT SUCH OTHER PARTY WOULD
NOT, IN THE EVENT OF LITIGATION, SEEK TO ENFORCE THE FOREGOING WAIVER AND (B) ACKNOWLEDGES THAT IT
AND THE OTHER PARTIES HERETO HAVE

35

 

BEEN INDUCED TO ENTER INTO THIS AGREEMENT BY, AMONG OTHER THINGS,
THE MUTUAL WAIVERS AND CERTIFICATIONS IN THIS SECTION.

     8.10 Headings. Article and Section headings and the Table of Contents used herein are for convenience of
reference only, are not part of this Agreement and shall not affect the construction of, or be
taken into consideration in interpreting, this Agreement.

     8.11 Confidentiality. The Lender shall maintain the confidentiality of the Information (as defined below), except
that Information may be disclosed:

     (a) to its and its Affiliates’ directors, officers, managers, employees and agents, including
accountants, legal counsel and other advisors (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;

     (c) to the extent required by applicable Laws or regulations or by any subpoena or similar
legal process;

     (d) to any other party to this Agreement;

     (e) in connection with the exercise of any remedies hereunder or any suit, action or
proceeding relating to this Agreement or the enforcement of rights hereunder;

     (f) subject to an agreement containing provisions substantially the same as those of this
Section, to any assignee of, or any prospective assignee of, any of its rights or obligations under
this Agreement;

     (g) with the consent of the Borrower; or

     (h) to the extent such Information (i) becomes publicly available other than as a result of a
breach of this Section or (ii) becomes available to the Lender on a nonconfidential basis from a
source other than the Borrower.

For the purposes of this Section, “Information” means all information received from the Borrower
relating to the Borrower or its business, other than any such information that is available to the
Lender on a nonconfidential basis prior to disclosure by the Borrower; provided, in the case of
information received from the Borrower 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.

     8.12 Usury Savings Clause. The Borrower and the Lender intend to contract in strict compliance with all applicable
usury laws from time to time in effect, and no term or provision contained in this Agreement or any
other document or instrument now or hereafter executed in

36

 

connection herewith shall ever create (or
ever be construed to create) a contract to pay for the use, forbearance or detention of money with
interest at a rate in excess of the maximum nonusurious rate of interest that the Lender is
permitted to contract for, charge or receive under applicable law and as to which the Borrower
could not successfully assert a claim or defense of usury (the “Maximum Rate”). For purposes
hereof, “interest” shall include the aggregate of all charges that constitute interest under
applicable law that are contracted for, reserved, taken, charged or received under or in connection
with this Agreement. If the payment of any amounts due hereunder is accelerated by reason of any
election of the Lender resulting from the occurrence of an Event of Default or otherwise, then any
consideration constituting interest may never include more than the maximum nonusurious amount
permitted by applicable law, and excess interest, if any, provided for in or in connection with
this Agreement shall be canceled automatically as of the date of such acceleration, and, if
theretofore paid, shall be credited on the principal balance due and the balance thereof, if any,
refunded to the Borrower. If the Lender shall collect, charge, contract for or receive moneys that
are
interest and/or are deemed to constitute interest at a rate in excess of the Maximum Rate, all
such sums in excess of the Maximum Rate shall be immediately credited against the outstanding
principal balance, and the balance thereof, if any, returned to the Borrower upon such
determination. All calculations of the rate of interest contracted for, charged or received
hereunder or otherwise that are made for the purpose of determining whether such rate exceeds the
Maximum Rate shall be made, to the extent permitted by applicable usury laws, by amortizing,
prorating and spreading in equal parts during the period of the full stated term of payment
obligation all interest at any time contracted for, charged, collected or received by the Lender in
connection herewith. The provisions of this Section 8.12 shall control over all provisions of this
Agreement that may be in apparent conflict herewith, if any.

     8.13 No Oral Agreements. THIS WRITTEN AGREEMENT, THE NOTE AND THE OTHER LOAN DOCUMENTS TOGETHER CONSTITUTE THE FINAL
AGREEMENT OF THE PARTIES IN REGARD TO THE MATTERS DESCRIBED HEREIN 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.

     8.14 USA Patriot Act. To the extent that Lender is now or hereafter becomes subject to the requirements of the
USA Patriot Act (Title III of Pub. L. 107-56 (signed into law October 26, 2001)) (the “Act”),
Lender hereby notifies the Borrower that pursuant to the requirements of the Act, it may be
required to obtain, verify and record information that identifies the Borrower and its
Subsidiaries, which information includes the name and address of the Borrower and its Subsidiaries,
and other information that will allow such Lender to identify the Borrower and its Subsidiaries in
accordance with the Act.

[Signatures on Following Page]

37

 

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

	 	 	 	 	 
	 	BORROWER:

CONTANGO OIL & GAS COMPANY

 	 
	 	By:  	/s/ KENNETH R. PEAK
 	 
	 	 	Name:  	Kenneth R. Peak 	 
	 	 	Title:  	Chairman of the Board, Chief
Executive Officer, President, Chief
Financial Officer, and Secretary 	 
	 
	 	LENDER:

CENTAURUS CAPITAL LLC

 	 
	 	By:  	/s/ KAREN ARNOLD
 	 
	 	 	Name:  	Karen Arnold 	 
	 	 	Title:  	Manager and Vice President 	 
	 

Signature Page to Term Loan Agreement

 

EXHIBIT 1.1

FORM OF

NOTE

			
	 	 	 
	$30,000,000
	 	                                         [                    ], 2008

     For value received, Contango Oil & Gas Company, a Delaware corporation (the
“Borrower”), promises to pay to the order of CENTAURUS CAPITAL LLC (the “Lender”), the
aggregate unpaid principal amount of the Loan made by the Lender to the Borrower pursuant to the
Term Loan Agreement referred to below on the dates and in the amounts specified in such Term Loan
Agreement. All capitalized terms used herein and not otherwise defined have the meanings set forth
in the Term Loan Agreement.

     The Borrower promises to pay interest on the unpaid principal amount of the Loan at the rate
and on the dates set forth in the Term Loan Agreement. Both principal and interest are payable in
same day funds at the office of the Lender set forth in the Term Loan Agreement.

     This Note is the note referred to in, and is entitled to the benefits of, the Amended and
Restated Term Loan Agreement dated as of June 5, 2008 (as amended, restated, modified, supplemented
and in effect from time to time, the “Term Loan Agreement”) between the Borrower and the Lender.
The Term Loan Agreement, among other things, contains provisions for acceleration of the maturity
hereof upon the happening of certain stated events, for prepayments of principal hereof prior to
the maturity hereof upon the terms and conditions therein specified, and for restrictions on the
payment or collection of interest in excess of the Maximum Rate.

     The Borrower and any and all endorsers, guarantors and sureties severally waive grace, demand,
presentment for payment, notice of dishonor, default, acceleration or intent to accelerate, protest
and notice of protest and diligence in collecting and bringing of suit against any party hereto,
and agree to all renewals, extensions or partial payments hereon and to any release or substitution
of security herefor, in whole or in part, with or without notice, before or after maturity.

     This Note is given in renewal of, and in full substitution and replacement for, and not in
novation or discharge of, the Note dated January 17, 2008, in the original principal amount of
$60,000,000, made by the Borrower and payable to the order of the Lender (the “Original Note”) and
any obligations or indebtedness owed by the Borrower to the Lender as of the date hereof under the
Original Note shall be deemed to be obligations and indebtedness owed by the Borrower to the Lender
under this Note.

     This Note shall be governed by and construed under the laws of the State of New York.

Exhibit 1.1

 

 

	 	 	 
	CONTANGO OIL & GAS COMPANY
	 
	 	 
	By:
	 	 
	 

	 	 
	Name:
	 	 
	 

	 	 
	Title:
	 	 
	 

	 	 

Exhibit 1.1

 

 

EXHIBIT 2.1

FORM OF

REQUEST FOR ADVANCE

Centaurus Capital LLC

                                        

                                        

Attention:                     

                    , 200_____

Dear Sirs:

     Reference is made to the Amended and Restated Term Loan Agreement dated as of June 5, 2008 (as
may be further amended and restated, and in effect on the date hereof, the “Loan Agreement”),
between Contango Oil & Gas Company, a Delaware corporation, as Borrower, and Centaurus Capital LLC,
as Lender. Terms defined in the Loan Agreement are used herein with the same meanings. This notice
constitutes a Request for Advance and the Borrower hereby requests an advance under the Loan
Agreement, and in that connection the Borrower specifies the following information with respect to
the Borrowing requested hereby:

          (A) Principal amount of advance:                                         

          (B) Date of advance (which is a Business Day):                                         

          (C) Location and number of Borrower’s account to which proceeds of advance are to be
disbursed:

Contango Oil & Gas Company

Guaranty FSB

ABA No. 314-970-664

Account No. 3801723259

For Further Credit To: Contango Oil & Gas Company

Exhibit 2.1

Page 1

 

 

     The Borrower hereby represents and warrants that no Event of Default has occurred and is
continuing under the Loan Agreement.

	 	 	 	 	 
	 	Very truly yours,

CONTANGO OIL & GAS COMPANY

 	 
	 	By:  	 	 
	 	 	Kenneth R. Peak 	 
	 	 	Chairman of the Board, Chief Executive Officer, President, Chief Financial Officer, and Secretary 	 
	 
	 	 	 
	 	By:  	 	 
	 	 	Sergio Castro 	 
	 	 	Vice President and Treasurer 	 
	 

Exhibit 2.1

Page 2

 

 

Schedule 3.12

Subsidiaries

Indirect and direct wholly-owned Subsidiaries of Contango Oil & Gas Company:

	 	•	 	Contango Resources Company
	 
	 	•	 	Contango Energy Company
	 
	 	•	 	Contango Operators, Inc.
	 
	 	•	 	REX Offshore Corporation
	 
	 	•	 	COE Offshore, LLC
	 
	 	•	 	MOE Offshore Corporation
	 
	 	•	 	Contango Venture Capital Corporation

Partially-owned Subsidiaries of Contango Oil & Gas Company

	 	•	 	Magnolia Offshore Exploration LLC (50% owned by MOE Offshore Corporation)

Schedule 3.12

 

 

Schedule 3.13

Environmental Matters

None.

Schedule 3.13

 

 

Schedule 3.16

Future Commitments

None.

Schedule 3.16

 

 

Schedule 6.1

Existing Debt

None.

Schedule 6.1

 

 

Schedule 6.2

Liens

None.

Schedule 6.2

 

 

Schedule 6.5

Loans, Advances and Investments

Loans and Advances

	•	 	$4,300,000 loan to Contango Offshore Exploration, LLC, made by Contango Energy Company

Investments

	•	 	Investment by REX Offshore Corporation in Republic Exploration, LLC
	 
	•	 	Investment by COE Offshore, LLC in Contango Offshore Exploration, LLC
	 
	•	 	Investment by MOE Offshore Corporation in Magnolia Offshore Exploration, LLC

Schedule 6.5exv10w1

Exhibit 10.1

          UNDERTAKING (this “Undertaking”) entered into this 28th day of August, 2008, by
STARFIRE HOLDING CORPORATION, a Delaware corporation (the “Indemnitor”), for the benefit of
XO Holdings, Inc., a Delaware corporation (“XO”) and its subsidiaries (collectively with
XO, the “Indemnitees” and each of such Indemnitees individually, an “Indemnitee”).

          WHEREAS, on July 25, 2008, XO and certain affiliates of the Indemnitor entered into a Stock
Purchase Agreement (the “Purchase Agreement”), pursuant to which such affiliates of
Indemnitor (collectively, the “Purchasers”) purchased certain securities of XO in
accordance with the terms and conditions of the Purchase Agreement;

          WHEREAS, entities directly or indirectly owned by Carl C. Icahn, including the Indemnitor and
the Purchasers, that are under common control or members of a controlled group, in each case within
the meaning of Section 4001 of the Employee Retirement Income Security Act of 1974, as amended
(“ERISA”) and Section 414 of the Internal Revenue Code of 1986, as amended (the
“Code”) and the rules and regulations promulgated thereunder (the “Controlled
Group”), are subject to certain liabilities under ERISA and the Code with respect to, among
other things, pension plan minimum funding and termination liabilities, excise taxes, and COBRA
liabilities (collectively, the “Liabilities”);

          WHEREAS, as a result of the consummation of the transactions contemplated by the Purchase
Agreement, XO and its subsidiaries have or may become part of the Controlled Group;

          NOW, THEREFORE, in consideration of the premises and other good and valuable consideration,
the receipt and sufficiency of which is hereby acknowledged, the Indemnitor hereby undertakes and
agrees as follows:

          1. Defined Terms. Unless otherwise defined herein, each capitalized term used
herein shall have the meaning attributed to it below:

     “affiliate” shall mean, with respect to any person referred to herein,
any person directly or indirectly controlling, controlled by or under direct or
indirect common control with such other person, where “control” means the
possession, directly or indirectly, of more than fifty percent (50%) of the
outstanding shares, securities or voting interests of a person.

     “Effective Date” shall mean July 25, 2008, the date on which the
transactions contemplated by the Purchase Agreement were consummated such that the
Indemnitees may be deemed under ERISA or the Code to be a member of the Controlled
Group.

     “Entity” shall mean any partnership, limited liability company, joint
venture, corporation, trust or other business entity or vehicle.

 

 

     “Losses” shall mean any and all losses, costs, damages, fees or
expenses (including, without limitation, reasonable attorneys fees and
disbursements) arising from Liabilities incurred by any Indemnitee as a result of
such person being alleged in a written notice from a government agency of competent
authority or in a claim from a multi-employer plan with regard to withdrawal
liability, or deemed, under ERISA or the Code, to be a member of the Controlled
Group, in each case other than any Liabilities of XO or any XO Subsidiary thereof
(now owned or hereafter existing or acquired) in respect of plans and programs
established or maintained or contributed to for the benefit of XO or any XO
Subsidiary thereof (now owned or hereafter existing or acquired).

     “Net Worth” shall mean, as to any Entity, the amount by which its total
assets exceed its total liabilities, all as determined on a consolidated basis in
accordance with generally accepted accounting principles applicable in the United
States of America.

     “Termination Date” shall mean that date, if any, on which the
Indemnitees are no longer subject to any: (x) Liability; or (y) contingency that
could result in the imposition of any Losses upon an Indemnitee.

     “XO Subsidiary” shall mean any direct or indirect subsidiary of XO
other than (x) Indemnitor or any (y) affiliate of Indemnitor which was a direct or
indirect subsidiary or parent corporation of Indemnitor prior to becoming a direct
or indirect subsidiary of XO.

          2. Indemnity. The Indemnitor agrees that from the Effective Date and through
the Termination Date, at its sole cost and expense, it will indemnify and defend and hold harmless,
each Indemnitee, from any and all Losses incurred by any Indemnitee or its assets.

          3. Net Worth. Any Indemnitor that is an Entity agrees that from the Effective Date
and through the Termination Date, such Indemnitor will not make any distributions to its
stockholders or other owners that would reduce its Net Worth to less than $500 million.

          4. Delegation. Any Indemnitor may delegate its duties and obligations under this
Undertaking to Mr. Icahn, or to an Entity affiliated with Mr. Icahn, so long as Mr. Icahn or such
Entity agrees in writing to assume and fully perform all of the obligations of the Indemnitor
hereunder (the “Assumed Obligations”). Any such delegation may be made without the consent
of any Indemnitee. In the case of any such delegation to any Entity, the Entity to which such
delegation is made must have a Net Worth in an amount equal to or greater than $500 million at the
time of such delegation. In the event of any delegation pursuant to this Section 4, Indemnitor
must provide written notice to XO within two (2) business days of the effective date of such
delegation.

          5. Release. Following any delegation in accordance with the terms of
Section 4 of this Undertaking: (i) the delegating Indemnitor shall be, and shall be deemed
to be, released from all of its duties and obligations hereunder and shall have no liability to

 

 

any Indemnitee in respect of this Undertaking, and all of the same shall, for all purposes be
deemed to have been included in the Assumed Obligations; and (ii) thereafter the person or Entity
assuming such duties and obligations shall be deemed for all purposes to be the “Indemnitor”
hereunder (and no other person or Entity shall be deemed to be the Indemnitor for any purpose)
until such time, if any, of a subsequent delegation pursuant hereto.

          6. Effect; Termination. Notwithstanding the other provisions hereof, the duties and
obligations of the Indemnitor hereunder will: (i) be effective and enforceable only from the
Effective Date, if any; and (ii) terminate on the Termination Date, if any.

          7. Enforcement. Each Indemnitee shall be an express third party beneficiary
of this Undertaking and shall be entitled to enforce the same as if it were a party hereto.

          8. Waiver: Amendment. The provisions of this Undertaking may be changed,
waived, discharged or terminated only by an instrument in writing signed by the Indemnitor and XO.

          9. Governing Law. This Undertaking shall in all respects be governed by, and
construed and enforced in accordance with, the laws of the State of New York, without regard to
conflicts of laws principles thereof.

 

 

          IN WITNESS WHEREOF, the Indemnitor has caused this Undertaking to be executed as of
the date first written above.

	 	 	 	 	 
	 	INDEMNITOR:

STARFIRE HOLDING CORPORATION
 	 
	 
	 	By:  	/s/Vincent Intrieri
 	 
	 	 	Name:  	Vincent Intrieri 	 
	 	 	Title:  	Vice President 	 
	 

[SIGNATURE PAGE FOR INDEMNIFICATION UNDERTAKNG BY STARFIRE HOLDLNG CORPORATION IN

FAVOR OF XO HOLDINGS, INC. DATED AUGUST 28, 2008]

Source: [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00147-of-00352.parquet"}, [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00147-of-00352.parquet"}]]