Document:

Exhibit 10.1 

FORM OF STOCKHOLDER VOTING AGREEMENT

                    This
VOTING AGREEMENT, dated as of January 4, 2011 (this “Agreement”), by and
among Rodman & Renshaw Capital Group, Inc., a Delaware corporation (“Parent”),
and the Persons set forth on Schedule A hereto (each, a “Stockholder”,
and collectively, the “Stockholders”).

                    WHEREAS,
concurrently with the execution of this Agreement, Hudson Holding Corporation
(“Target”) and HHC Acquisition, Inc., a Delaware corporation and direct
wholly owned subsidiary of Parent (“Merger Sub”), have entered into an Agreement and Plan of Merger, dated as
of the date hereof (as the same may be amended, supplemented or modified from
time to time, the “Merger Agreement”), pursuant to which the parties
thereto have agreed, upon the terms and subject to the conditions set forth
therein, that Target shall merge with and into Merger Sub, with Merger Sub
continuing as the surviving corporation in such merger (the “Merger”);
capitalized terms used but not defined herein shall have the meanings ascribed
to such terms in the Merger Agreement;

                    WHEREAS,
each Stockholder is the record owner and/or Beneficial Owner (as defined below)
of the number of shares of common stock, par value $0.001 per share, of Target
(“Target Common Stock”), set forth opposite such Stockholder’s name on Schedule
A hereto (such shares of Target Common Stock, the “Owned Shares”,
and together with any other shares of Target Common Stock, or other equity
securities of Target acquired by such Stockholder after the date hereof,
whether by stock dividend, stock split, conversion of shares of convertible
securities, exercise of warrants or options, or otherwise acquired, being
collectively referred to herein as such Stockholder’s “Subject Shares”);
and

                    WHEREAS,
as a condition and inducement to Parent’s willingness to enter into the Merger
Agreement, Parent has requested that the Stockholders agree, and each
Stockholder has agreed, to enter into this Agreement.

                    NOW,
THEREFORE, in consideration of the mutual covenants, representations,
warranties and agreements contained in this Agreement, and other good and
valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, and intending to be legally bound hereby, the parties hereto
agree as follows:

                    Section
1. Representations and Warranties of Each Stockholder. Each Stockholder,
severally and not jointly, hereby represents and warrants as to himself or
itself to Parent as follows:

                    (a)
Authority; Execution and Delivery; Enforceability. Such Stockholder has
all requisite power and authority to execute and deliver this Agreement and to
consummate the transactions contemplated hereby. The execution and delivery by
such Stockholder of this Agreement and the consummation of the transactions
contemplated hereby have been duly authorized by all necessary action on the
part of such Stockholder. Such Stockholder has duly and validly executed and
delivered this Agreement and (assuming its due authorization, execution and
delivery by the other parties hereto other than such Stockholder’s Affiliates),
this Agreement constitutes the legal, valid and binding obligation of such
Stockholder, enforceable against such Stockholder in accordance with its terms
(except as may be limited by bankruptcy, insolvency, fraudulent transfer,
moratorium, reorganization or similar Laws of general applicability relating to
or affecting the rights of creditors generally and subject to general
principles of equity). The execution and delivery by such Stockholder of this
Agreement does not, and the consummation of the transactions contemplated
hereby and compliance with the terms hereof will not, conflict with, or result
in any violation of, or default (with or without notice or lapse of time, or
both) under, or give rise to a right of termination, cancellation or
acceleration of any obligation or to loss of a material benefit under, or
result in the creation of any Lien upon the Subject Shares or upon any of the
properties or assets of such Stockholder, under, (i) any provision of any
Contract to which such 

Stockholder is a party or by which the Subject Shares or any properties
or assets of such Stockholder are bound, (ii) in the case of a Stockholder that
is an entity, such Stockholder’s organizational documents, or (iii) subject to
the filings and other matters referred to in the next sentence, any provision
of any Order or Law applicable to such Stockholder, the Subject Shares or any
properties or assets of such Stockholder; except in the case of clauses (i) and
(iii) for conflicts, violations, defaults, rights, losses or Liens that would
not, individually or in the aggregate, reasonably be expected to restrict,
prevent or delay in any material respect the performance by such Stockholder of
its obligations under this Agreement. No Consent or exemption of, or
registration, declaration or filing with, any Governmental Entity or any other
Person is required to be obtained or made by or with respect to such
Stockholder in connection with the execution, delivery and performance of this
Agreement or the consummation of the transactions contemplated hereby, other
than the applicable requirements, if any, of the Exchange Act (including such
reports and schedules under Sections 13(d), 13(e) and 16 of the Exchange Act as
may be required in connection with this Agreement and the transactions
contemplated hereby) and any other Consent, exemption, registration,
declaration or filing the failure of which to be obtained or made would not,
individually or in the aggregate, reasonably be expected to restrict, prevent
or delay in any material respect the performance by such Stockholder of its
obligations under this Agreement.

                    (b)
The Owned Shares. Except as expressly stated otherwise on Schedule A
hereto, such Stockholder is the record owner and Beneficial Owner of, and has
good and valid title to, the Owned Shares, free and clear of any Liens (except
for restrictions under the Target Charter and Target By-Laws or federal or
state securities laws). Such Stockholder does not Beneficially Own, or own of
record, any equity securities of Target other than the Subject Shares
(including the options set forth opposite such Stockholder’s name on Schedule
A hereto, as applicable) and, except for any Affiliate of such Stockholder
party hereto, no Affiliate of such Stockholder Beneficially Owns, or owns of
record, any equity securities of Target. Except as expressly stated otherwise
on Schedule A hereto, such Stockholder has the sole right to vote the
Subject Shares, and none of the Subject Shares is subject to any voting trust
or other Contract, arrangement or restriction with respect to the voting of the
Subject Shares, except as contemplated by this Agreement or the Merger
Agreement. Such Stockholder has not appointed or granted any proxy or similar
agreement inconsistent with this Agreement, which appointment or grant is still
effective, with respect to the Subject Shares. Notwithstanding any other
provision of this Agreement, Stockholder will not be required to vote in favor
of the Merger (nor will the irrevocable proxy apply) if the Target and Parent
amend the Merger Agreement and either (i) such amendment is not approved by the
Board of Directors of the Target or a special committee thereof, or (ii) such
amendment results in the Stockholder receiving different treatment or
consideration for his, her, or its Subject Shares than is received on a per
share basis by the other stockholders of the Target who have executed an
agreement with Parent similar to this Agreement.

                    As
used in this Agreement, “Beneficial Owner” means, with respect to any
security, any Person who, directly or indirectly, through any Contract,
understanding, relationship or otherwise, has or shares (i) voting power, which
includes the power to vote, or to direct the voting of, such security; and/or
(ii) investment power, which includes the power to dispose, or to direct the
disposition, of such security; and shall otherwise be interpreted in accordance
with the term “beneficial ownership” as defined in Rule 13d-3 under the
Exchange Act. For purposes of this Agreement, without duplicative counting of
the same securities by the same holder, securities Beneficially Owned by a
Person include securities Beneficially Owned by all other persons with whom
such Person would constitute a “group” within the meaning of Section 13(d) of
the Exchange Act with respect to securities of the same issuer. The terms
“Beneficially Own”, “Beneficially Owned” and “Beneficial Ownership” shall have
correlative meanings to “Beneficial Owner”.

                    (c)
Merger Agreement. Such Stockholder understands and acknowledges that
Parent is entering into the Merger Agreement in reliance upon such
Stockholder’s execution and delivery of this Agreement.

2

                    Section
2. Representations and Warranties of Parent. Parent hereby represents
and warrants to the Stockholders as follows: Parent has all requisite corporate
power and authority to execute and deliver this Agreement and to consummate the
transactions contemplated hereby. The execution and delivery by Parent of this
Agreement and consummation of the transactions contemplated hereby have been
duly authorized by all necessary action on the part of Parent. Parent has duly
and validly executed and delivered this Agreement, and (assuming its due
authorization, execution and delivery by the other parties hereto) this
Agreement constitutes the legal, valid and binding obligation of Parent,
enforceable against Parent in accordance with its terms (except as may be
limited by bankruptcy, insolvency, fraudulent transfer, moratorium,
reorganization or similar Laws of general applicability relating to or
affecting the rights of creditors generally and subject to general principles
of equity). 

                    Section
3. Covenants of Each Stockholder. Each Stockholder covenants and agrees
as follows:

                    (a)
(i) At every meeting of the stockholders of Target called to seek the Target
Stockholder Approval, at every adjournment or postponement thereof, and in each
other circumstance upon which a vote, consent or other approval (including by
written consent) with respect to the Merger Agreement or any of the transactions
contemplated thereby (including the Target Merger and the Parent Merger), and
any actions that would reasonably be considered to be in furtherance thereof,
is sought, such Stockholder shall, (A) if a meeting is held, appear at such
meeting or otherwise cause the Subject Shares to be counted as present at such
meeting for purposes of establishing a quorum and (B) vote (or cause to be
voted), including by executing a written consent solicitation if requested by
Parent, the Subject Shares in favor of the Merger Agreement and the other
transactions contemplated thereby, and take any other actions reasonably
requested by Parent in furtherance thereof (including, without limiting any of
the foregoing obligations, in favor of any proposal to adjourn or postpone any
meeting of Target’s stockholders at which any of the foregoing matters are
submitted for consideration and vote of Target’s stockholders to a later date
if there are not sufficient votes for approval of such matters on the date on
which the meeting is held to vote upon any of the foregoing matters). Such
Stockholder represents that any proxies heretofore given in respect of the
Subject Shares that may still be in effect are not irrevocable, and such
proxies are hereby revoked.

                              (ii)
Such Stockholder hereby irrevocably grants to, and appoints, Parent and any
individual designated in writing by Parent, and each of them individually, as
such Stockholder’s proxy and attorney-in-fact (with full power of substitution
and resubstitution), for and in the name, place and stead of such Stockholder,
to vote the Subject Shares, or grant a consent or approval in respect of the
Subject Shares, in a manner consistent with this Section 3. Such
Stockholder hereby affirms that the irrevocable proxy set forth in this Section
3(a)(ii) is given in connection with the execution of the Merger Agreement,
and that such irrevocable proxy is given to secure the performance of the
duties of such Stockholder under this Agreement. Such Stockholder hereby further
affirms that the irrevocable proxy is coupled with an interest and may under no
circumstances be revoked. Such Stockholder hereby ratifies and confirms all
that such irrevocable proxy may lawfully do or cause to be done by virtue
hereof. Such irrevocable proxy is executed and intended to be irrevocable in
accordance with the provisions of Section 212(e) of the Delaware General
Corporation Law. The irrevocable proxy granted hereunder shall automatically
terminate upon the termination of this Agreement. Upon delivery of written
request to do so by Parent, such Stockholder shall as promptly as practicable
execute and deliver to Parent a separate written instrument or proxy that
embodies the terms of the irrevocable proxy set forth in this Section 3(a)(ii); provided that such written instrument or proxy shall (i) be in a form
reasonably acceptable to such Stockholder, and (ii) terminate upon the
termination of this Agreement. Parent agrees that to the extent it exercises
its rights under this Section 3(a)(ii), Parent shall comply with the
appearance and voting requirements imposed on such Stockholder by Section
3(a)(i) with respect to such Stockholder’s Subject Shares.  

3

                    (b)
At any meeting of the stockholders of Target or at any adjournment or
postponement thereof or in any other circumstances upon which such
Stockholder’s vote, consent or other approval is sought, such Stockholder shall
vote (or cause to be voted) the Subject Shares against (and shall not provide
consents in favor of) (i) any consolidation, combination, sale of substantial
assets, merger, reorganization, recapitalization, dissolution, liquidation or
winding up of or by Target (other than the Merger Agreement and the
transactions contemplated thereby), (ii) any Alternative Transaction or Target
Alternative Proposal (including any Superior Proposal), and (iii) any amendment
of the Target Charter or the Target By-Laws or other proposal or transaction
involving Target or any of its Subsidiaries, which amendment or other proposal
or transaction would reasonably be expected to in any manner impede, frustrate,
prevent, delay or nullify any provision of the Merger Agreement or any of the
transactions contemplated hereby or thereby, or change in any manner the voting
rights of any class of capital stock of Target. Such Stockholder shall not
commit or agree to take any action inconsistent with the foregoing requirements
in this Section 3(b).

                    (c)
Except as set forth in this Agreement, such Stockholder shall not, without the
prior written consent of Parent (which consent may be withheld in Parent’s sole
discretion) (i) sell, transfer, pledge, hypothecate, assign or otherwise
dispose of (including by gift), hedge or utilize a derivative to transfer the
economic interest in (collectively, “Transfer”), or enter into any
Contract, option or other arrangement (including any profit sharing
arrangement) with respect to the Transfer of, or propose to Transfer, any
Subject Shares to any Person, (ii) grant any proxies, options or right of first
offer or right of first refusal with respect to the Subject Shares, (iii) enter
into, or propose to enter into, any voting arrangement, whether by proxy,
voting agreement, voting trust or otherwise, with respect to any Subject
Shares, (iv) take any action that would make any representation or warranty of
such Stockholder herein untrue or incorrect or have the effect of preventing or
disabling such Stockholder from performing its obligations hereunder or (v)
commit or agree to take any of the foregoing actions in clauses (i), (ii),
(iii) or (iv). Notwithstanding anything to the contrary in the preceding
sentence, nothing in this Section 3(c) shall prohibit (x) any Transfer in the
case of such Stockholder’s death, by will or by the laws of interstate
succession, or (y) any Transfer by a Stockholder to a trust for the benefit of
any immediate family member of such Stockholder in connection with estate
planning purposes so long as all of the beneficial interests in such trust are
held by such Stockholder or one or more immediate family members of such
Stockholder; in each case, so long as the other party to such Transfer or
arrangement executes this Agreement (or a joinder thereto in a form reasonably
satisfactory to Parent) and agrees to be bound by its terms; provided, however,
that notwithstanding such Transfer or arrangement, such Stockholder shall
continue to be liable for any breach by such transferee of its agreements and
covenants under this Agreement.

                    (d)
Such Stockholder shall not, and shall use its commercially reasonable best
efforts to cause any manager, officer, director, employee, agent,
representative, consultant, financial advisor, attorney, accountant, other
agent or controlled affiliate of such Stockholder not to, directly or
indirectly, (i) solicit, initiate, or take any action that it knows or
reasonably should know would facilitate or encourage the submission of, any
Acquisition Proposal, (ii) enter into or participate in any discussions or
negotiation with, furnish any information relating to the Company or any of its
Subsidiaries or afford access to the business, properties, assets, books or
records of the Company or any of its Subsidiaries to, otherwise cooperate in
any way with, or knowingly assist, participate in, facilitate or encourage any
effort by any Third Party that is seeking to make, or has made, an Acquisition
Proposal, or (iii) enter into any agreement in principle, letter of intent,
term sheet, acquisition agreement, option agreement, joint venture agreement,
partnership agreement or other similar instrument constituting or relating to
the Subject Shares. Without limiting the foregoing, it is agreed that any
violation of the restrictions set forth in the preceding sentence by any
manager, officer, director, employee, agent, representative, consultant,
financial advisor, attorney, accountant, other agent, or controlled affiliate
of such Stockholder shall be deemed to be a breach of this Section 3(d) by such
Stockholder. Each Stockholder shall, and shall use its commercially reasonable
best efforts to cause its managers, officers, directors, employees, agents,
representatives, consultants, financial advisors, attorneys, accountants, other
agents, and controlled 

4

affiliates, as applicable, to, cease immediately and cause to be
terminated any and all existing discussions, conversations, negotiations and
other communications with any Person (other than any party to the Merger
Agreement) conducted heretofore with respect to, or that would reasonably be
expected to lead to, an Alternative Transaction or an Alternative Proposal.

                    (e)
Such Stockholder shall not issue any press release or make any other public
statement with respect to this Agreement, the Merger Agreement or any of the transactions
contemplated hereby or thereby, without the prior written consent of Parent
(which consent may be withheld in Parent’s sole discretion), except to the
extent required by applicable Law.

                    (f)
Such Stockholder hereby waives, and agrees not to exercise or assert, any
appraisal or similar rights (including under the Delaware General Corporation
Law) in connection with the Merger Agreement and the transactions contemplated
thereby.

                    (g)
Notwithstanding anything to the contrary in this Agreement and in this Section 3 in particular, such Stockholder is only executing this Agreement in his
capacity as the Beneficial Owner, or owner of record, of the Subject Shares.

                    Section
4. Termination. This Agreement shall terminate upon the earlier of (a)
the Effective Time, and (b) the termination of the Merger Agreement in
accordance with its terms; except that (Section
3(e), Section 6(b), Sections 6(d) through 6(n) and
this Section 4 shall survive any termination of this Agreement; and (y) no party hereto shall be
relieved or released from any liabilities or damages arising out of its willful
breach of any provision of this Agreement.

                    Section
5. Additional Matters. Each Stockholder and Parent shall, from time to
time, execute and deliver, or cause to be executed and delivered, such
additional or further consents, documents and other instruments as the other
party may reasonably request for the purpose of effectively carrying out the
transactions contemplated by this Agreement.

                    Section
6. General Provisions.

                    (a)
Parent acknowledges that each Stockholder has entered into this Agreement
solely in its capacity as the record and/or beneficial owner of the Subject
Shares (and not in any other capacity, including any capacity as a director or
officer of Target). To the extent that any Stockholder or any of its
Affiliates, managers, officers, directors, employees, agents, representatives,
consultants, financial advisors, attorneys, accountants or other agents is a
director or officer of Target nothing herein shall limit or affect any actions
taken by any such officer or director in their capacities as such, or require
such Stockholder or any of its Affiliates, managers, officers, directors,
employees, agents, representatives, consultants, financial advisors, attorneys,
accountants or other agents to take any action, in each case, in his capacity
as a director or officer of Target, including to disclose information acquired
solely in his capacity as a director or officer of Target, and any actions
taken (whatsoever), or failure to take any actions (whatsoever), by him in such
capacity as a director or officer of Target, shall not be deemed to constitute
a breach of this Agreement. Without limiting the foregoing, and for the
avoidance of doubt, nothing in this Section 6(a) shall affect any of the rights
or remedies of Parent under the Merger Agreement or relieve Target from any
breach or violation of the Merger Agreement caused by any action or omission of
any Stockholder or any of its Affiliates, managers, officers, directors,
employees, agents, representatives, consultants, financial advisors, attorneys,
accountants or other agents (in its capacity as a director or officer of
Target, or otherwise).

                    (b)
Each Stockholder agrees that it shall not assert or bring any claims against
any other Stockholder, under any circumstance, for any matter whatsoever
arising out of this Agreement. 

5

                    (c)
Nothing contained in this Agreement shall be deemed to vest in Parent or Merger
Sub any direct or indirect ownership or incidence of ownership of or with
respect to any Subject Shares, other than the right of Parent to vote the
Subject Shares upon the terms and subject to the conditions of this Agreement.
Except as provided in this Agreement, all rights, ownership and economic
benefits of and relating to such Stockholder’s Shares shall remain vested in
and belong to such Stockholder, and Parent or Merger Sub shall have no
authority to manage, direct, superintend, restrict, regulate, govern, or
administer any of the policies or operations of Target or exercise any power or
authority to direct such Stockholder in the voting of any of the Subject Shares,
except as otherwise specifically provided herein, or in the performance of such
Stockholders’ duties or responsibilities as stockholders of Target. Nothing in
this Agreement shall be interpreted as (i) obligating a Stockholder to exercise
any warrants, options, conversion of convertible securities or otherwise to
acquire any equity securities of Target or (ii) creating or forming a “group”
with any other Person, including Parent or Merger Sub or any other Stockholder,
for purposes of Rule 13d-5(b)(1) under the Exchange Act or any other similar
provision of applicable Law.

                    (d)
Amendments. Any provision of this Agreement may be amended or waived if,
but only if, such amendment or waiver is in writing and is signed, in the case
of an amendment, by each party to this Agreement or in the case of a waiver, by
the party against whom the waiver is to be effective.

                    (e)
Expenses. All costs and expenses incurred in connection with this
Agreement shall be paid by the party incurring such cost or expense.

                    (f)
Notice. All notices and other communications hereunder shall be in
writing and shall be deemed given in accordance with Section 12.1 of the
Merger Agreement to Parent at the address set forth in Section 12.1 of
the Merger Agreement and to any Stockholder at such Stockholder’s address set
forth opposite its name on Schedule A hereto (or at such other address
for a party as shall be specified by like notice).

                    (g)
Interpretation. When a reference is
made in this Agreement to Sections or Schedules,
such reference shall be to a Section of or Schedule to this Agreement unless
otherwise indicated. The headings
contained in this Agreement are for reference purposes only and shall not
affect in any way the meaning or
interpretation of this Agreement. Whenever the words “include,” “includes’ or
“including” are used in this Agreement, they shall be deemed to be
followed by the words “without limitation.” Words defined in the singular have
the parallel meaning in the plural and vice
versa. Words of one gender shall be construed to apply to each gender and the
neutral gender. The term “party” refers to a party to this Agreement and
the term “parties” refers to the parties to this Agreement. This Agreement shall not be interpreted or construed to
require any person to take any action, or fail to take any action, if to do so would violate any applicable law. The parties
hereto acknowledge that each party hereto has reviewed, and has had an opportunity to have its counsel review, this
Agreement and that any rule of construction to the effect that any ambiguities
are to be resolved against the
drafting party, or any similar rule
operating against the drafter of an agreement, shall not be applicable to the
construction or interpretation of this Agreement.

                    (h)
Severability. The provisions of this Agreement shall be deemed severable
and the invalidity or unenforceability of any provision shall not affect the
validity or enforceability of the other provisions hereof. If any provision of
this Agreement, or the application thereof to any Person or any circumstance,
is invalid or unenforceable, (a) a suitable and equitable provision shall
be substituted therefor in order to carry out, so far as may be valid and
enforceable, the intent and purpose of such invalid or unenforceable provision
and (b) the remainder of this Agreement and the application of such
provision to other Persons or circumstances shall not be affected by such
invalidity or unenforceability, nor shall such invalidity or unenforceability
affect the validity or enforceability of such provision, or the application
thereof, in any other jurisdiction.

6

                    (i)
Counterparts. This Agreement may be
executed and delivered (including by facsimile transmission) in one or more
counterparts, all of which shall be considered one and the
same agreement and shall become effective when one or more counterparts have
been signed by each of the parties and delivered to the other parties, it being understood that each
party need not sign the same counterpart.

                    (j)
Entire Agreement; No Third-Party Beneficiaries. This Agreement constitutes the
entire agreement and supersedes all prior agreements and understandings, both written and oral, between
the parties with respect to the subject matter of this Agreement.

                    (k)
Governing Law; Jurisdiction. This Agreement shall be governed and construed in
accordance with the internal laws of
the State of Delaware applicable to contracts made and wholly performed within
such state, without regard to any applicable
conflicts of law principles. The parties hereto agree that any suit, action or
proceeding brought by either party to enforce
any provision of, or based on any matter arising out of or in connection with,
this Agreement or the transactions contemplated
hereby shall be brought in any federal or state court located in the Borough of
Manhattan, State of New York. Each of the parties hereto submits to the jurisdiction of any such court in
any suit, action or proceeding seeking to enforce any provision of, or based on
any matter arising out of, or in
connection with, this Agreement or the transactions contemplated hereby and
hereby irrevocably waives the benefit
of jurisdiction derived from present or future domicile or otherwise in such
action or proceeding. Each party hereto irrevocably waives, to the fullest
extent permitted by law, any objection that it may now or hereafter have to the
laying of the venue of any such suit,
action or proceeding in any such court or that any such suit, action or
proceeding brought in any such court
has been brought in an inconvenient forum.

                    (l)
WAIVER OF JURY TRIAL. EACH OF THE PARTIES HERETO HEREBY WAIVES TO THE
FULLEST EXTENT PERMITTED BY APPLICABLE LAW ANY RIGHT IT MAY HAVE TO A TRIAL BY
JURY WITH RESPECT TO ANY ACTION DIRECTLY OR INDIRECTLY ARISING OUT OF, UNDER OR
IN CONNECTION WITH THIS AGREEMENT. EACH OF THE PARTIES HERETO (A) CERTIFIES
THAT NO REPRESENTATIVE OF ANY OTHER PARTY HAS REPRESENTED, EXPRESSLY OR
OTHERWISE, THAT SUCH OTHER PARTY WOULD NOT, IN THE EVENT OF ANY SUCH ACTION,
SEEK TO ENFORCE THAT FOREGOING WAIVER AND (B) ACKNOWLEDGES THAT IT AND THE
OTHER PARTIES HERETO HAVE BEEN INDUCED TO ENTER INTO THIS AGREEMENT BY, AMONG
OTHER THINGS, THE MUTUAL WAIVERS AND CERTIFICATIONS IN THIS SECTION 6(l).  

                    (m)
Assignment; Third Party Beneficiaries. Neither this Agreement nor any of the rights,
interests or obligations under this
Agreement shall be assigned, in whole or in part, by any of the parties
(whether by operation of law or otherwise) without the prior written consent of
the other parties. Subject to the preceding sentence, this Agreement shall be
binding upon, inure to the benefit of,
and be enforceable by, each of the parties and their respective successors and
assigns. This Agreement (including the
documents and instruments referred to in this Agreement) is not intended to and
does not confer upon any person other than the parties hereto any rights or
remedies under this Agreement.

                    (n)
Enforcement. The parties agree that irreparable injury would occur in
the event that any of the provisions of this Agreement were not performed in
accordance with their specific terms or were otherwise breached and that
damages, even if available, will not be an adequate remedy. Accordingly, each
party hereby consents (in addition to any other remedy that may be available to
the non-breaching party whether in Law or equity) to: (1) any decree or order
of specific performance to enforce the observance and performance of such
covenant or obligation; or (2) any injunction restraining such breach or
threatened breach, in each case, without requiring proof of actual damages and
without any requirement to obtain, furnish or post any bond or similar
instrument. The parties further 

7

agree that no other party nor any other Person shall be required to
obtain, furnish or post any bond or similar instrument in connection with or as
a condition to such first party obtaining any remedy referred to in this Section
6(n), and each party irrevocably waives any right such party may have to
require the obtaining, furnishing or posting of any such bond or similar
instrument. Notwithstanding anything to the contrary herein, to the extent the
terms of this Section 6(n) conflict with the rights and remedies of
Parent under the Merger Agreement with respect to any claim arising out of or
related to the Merger Agreement, the Merger Agreement shall control.

                    IN
WITNESS WHEREOF,
each party hereto has duly executed
this Agreement as of the date first above written.

	
 

	
 

	
 

	
 

	
RODMAN &
RENSHAW CAPITAL GROUP, INC.

	
 

	
 

	
 

	
 

	
By:

	
 

	
 

	
 

	

	
 

	
Name: Edward Rubin

	
 

	
Title: President and Chief Executive Officer

	
 

	
 

	
 

	
 

	
THE STOCKHOLDERS:

	
 

	
 

	
 

	
 

	

	
 

	
KEITH R. KNOX

	
 

	
 

	
 

	
 

	

	
 

	
ANTHONY M. SANFILIPPO

	
 

	
 

	
 

	
 

	

	
 

	
PETER ZUGSCHWERT

	
 

	
 

	
 

	
 

	

	
 

	
JOHN C. SHAW, JR.

	
 

	
 

	
 

	
 

	

	
 

	
JOHN W. MASCONE

	
 

	
 

	
 

	
 

	

	
 

	
KENNETH D. PASTERNAK

	
 

	
 

	
 

	
 

	
SEAPORT HUDSON LLC

	
 

	
 

	
 

	
 

	
By:

	
 

	
 

	

	
 

	
Name:

	
 

	
Title:

	
 

	
 

	
 

	
 

	

	
 

	
AJAY SAREEN

	
 

	
 

	
 

	
 

	

	
 

	
FRANK DRAZKA

8exv10w1

Exhibit 10.1

 

$100,000,000

THIRD AMENDED AND RESTATED CREDIT AGREEMENT

among

DELTA PETROLEUM CORPORATION

as Borrower,

THE LENDERS PARTY HERETO from time to time

as Lenders,

and

MACQUARIE BANK LIMITED,

as Administrative Agent and Issuing Lender

December 29, 2010

 

 

 

TABLE OF CONTENTS

	 	 	 	 	 
	 	 	Page	 
	ARTICLE I DEFINITIONS AND ACCOUNTING TERMS
	 	 	1	 
	 
	 	 	 	 
	Section 1.1. Certain Defined Terms
	 	 	1	 
	Section 1.2. Computation of Time Periods
	 	 	2	 
	Section 1.3. Accounting Terms; Changes in GAAP
	 	 	2	 
	Section 1.4. Types of Advances
	 	 	2	 
	Section 1.5. Miscellaneous
	 	 	2	 
	 
	 	 	 	 
	ARTICLE II CREDIT FACILITIES
	 	 	2	 
	 
	 	 	 	 
	Section 2.1. Maximum Commitment
	 	 	3	 
	Section 2.2. Availability and Purpose of Revolving Loan Advances
	 	 	3	 
	Section 2.3. Availability and Purposes of Term Loan Advances
	 	 	7	 
	Section 2.4. Development Plan
	 	 	7	 
	Section 2.5. Method of Borrowing
	 	 	8	 
	Section 2.6. Reduction of the Commitments
	 	 	10	 
	Section 2.7. Prepayment of Advances
	 	 	11	 
	Section 2.8. Repayment of the Term Loan; Net Operating Cash Flow
	 	 	13	 
	Section 2.9. Repayment of Revolving Loan
	 	 	13	 
	Section 2.10. Letters of Credit
	 	 	14	 
	Section 2.11. Time and Place of Payments
	 	 	18	 
	Section 2.12. Borrower Sub-Account; Disbursements
	 	 	18	 
	Section 2.13. Fees
	 	 	20	 
	Section 2.14. Interest
	 	 	21	 
	Section 2.15. Payments and Computations
	 	 	22	 
	Section 2.16. Sharing of Payments, Etc.
	 	 	23	 
	Section 2.17. Breakage Costs
	 	 	23	 
	Section 2.18. Increased Costs
	 	 	24	 
	Section 2.19.Taxes
	 	 	25	 
	Section 2.20. Replacement of Lender
	 	 	28	 
	 
	 	 	 	 
	ARTICLE III CONDITIONS
	 	 	29	 
	 
	 	 	 	 
	Section 3.1. Conditions Precedent to Initial Borrowings
	 	 	29	 
	Section 3.2. Conditions Precedent to All Borrowings
	 	 	33	 
	 
	 	 	 	 
	ARTICLE IV REPRESENTATIONS AND WARRANTIES
	 	 	34	 
	 
	 	 	 	 
	Section 4.1. Existence
	 	 	34	 
	Section 4.2. Power
	 	 	34	 
	Section 4.3. Authorization and Approvals
	 	 	34	 
	Section 4.4. Enforceable Obligations
	 	 	34	 
	Section 4.5. Financial Statements
	 	 	35	 
	Section 4.6. True and Complete Disclosure
	 	 	35	 
	Section 4.7. Litigation; Compliance with Laws
	 	 	35	 

i

 

	 	 	 	 	 
	 	 	Page	 
	Section 4.8. Use of Proceeds
	 	 	36	 
	Section 4.9. Investment Company Act
	 	 	36	 
	Section 4.10. Taxes
	 	 	36	 
	Section 4.11. Pension Plans
	 	 	36	 
	Section 4.12. Condition of Property; Casualties
	 	 	37	 
	Section 4.13. No Burdensome Restrictions; No Defaults
	 	 	37	 
	Section 4.14. Environmental Condition
	 	 	38	 
	Section 4.15. Permits, Licenses, Etc.
	 	 	38	 
	Section 4.16. Gas Contracts
	 	 	38	 
	Section 4.17. Liens; Titles, Leases, Etc.
	 	 	39	 
	Section 4.18. Solvency and Insurance
	 	 	39	 
	Section 4.19. Hedging Agreements
	 	 	39	 
	Section 4.20. Material Agreements
	 	 	39	 
	Section 4.21. Other Notes
	 	 	40	 
	Section 4.22. JPMorgan Credit Facility
	 	 	40	 
	Section 4.23. Liquidity Position
	 	 	40	 
	 
	 	 	 	 
	ARTICLE V AFFIRMATIVE COVENANTS
	 	 	40	 
	 
	 	 	 	 
	Section 5.1. Compliance with Laws, Etc.
	 	 	40	 
	Section 5.2. Maintenance of Insurance
	 	 	40	 
	Section 5.3. Preservation of Corporate Existence, Etc.
	 	 	41	 
	Section 5.4. Payment of Taxes, Etc.
	 	 	41	 
	Section 5.5. Visitation Rights
	 	 	41	 
	Section 5.6. Reporting Requirements
	 	 	42	 
	Section 5.7. Maintenance of Property
	 	 	46	 
	Section 5.8. Agreement to Pledge
	 	 	46	 
	Section 5.9. Use of Proceeds
	 	 	46	 
	Section 5.10. Title Evidence and Opinions
	 	 	46	 
	Section 5.11. Further Assurances; Cure of Title Defects
	 	 	46	 
	Section 5.12. Hedging Arrangements
	 	 	47	 
	Section 5.13. Leases; Development and Maintenance
	 	 	47	 
	Section 5.14. Pledge of Equity in Delta Oilfield Tank Company, LLC
	 	 	48	 
	 
	 	 	 	 
	ARTICLE VI NEGATIVE COVENANTS
	 	 	48	 
	 
	 	 	 	 
	Section 6.1. Liens, Etc.
	 	 	48	 
	Section 6.2. Debts, Guaranties, and Other Obligations
	 	 	49	 
	Section 6.3. Agreements Restricting Liens and Distributions
	 	 	50	 
	Section 6.4. Merger or Consolidation; Asset Sales
	 	 	50	 
	Section 6.5. Restricted Payments
	 	 	52	 
	Section 6.6. Amendment of Debt Instruments
	 	 	52	 
	Section 6.7. Investments
	 	 	52	 
	Section 6.8. Affiliate Transactions
	 	 	53	 
	Section 6.9. Compliance with ERISA
	 	 	53	 
	Section 6.10. Sale-and-Leaseback
	 	 	54	 
	Section 6.11. Change of Business; Accounting Change
	 	 	54	 
	Section 6.12.
Organizational Documents, Name Change
	 	 	54	 

ii

 

	 	 	 	 	 
	 	 	Page	 
	Section 6.13. Use of Proceeds; Letters of Credit
	 	 	54	 
	Section 6.14. Gas Imbalances, Take-or-Pay or Other Prepayments
	 	 	54	 
	Section 6.15. Hedging Requirements
	 	 	55	 
	Section 6.16. Additional Subsidiaries
	 	 	55	 
	Section 6.17. Account Payables
	 	 	55	 
	Section 6.18. Current Ratio
	 	 	55	 
	Section 6.19. Minimum Quarterly Net Operating Cash Flow
	 	 	56	 
	Section 6.20. Maximum Quarterly G&A Expenses
	 	 	56	 
	Section 6.21. Prepayments of Debt
	 	 	56	 
	Section 6.22. Equity Issuance
	 	 	56	 
	Section 6.23. Deposit Accounts
	 	 	56	 
	Section 6.24. Support of Subsidiaries
	 	 	57	 
	 
	 	 	 	 
	ARTICLE VII EVENTS OF DEFAULT; REMEDIES
	 	 	57	 
	 
	 	 	 	 
	Section 7.1. Events of Default
	 	 	57	 
	Section 7.2. Optional Acceleration of Maturity
	 	 	59	 
	Section 7.3. Automatic Acceleration of Maturity
	 	 	60	 
	Section 7.4. Right of Set off
	 	 	60	 
	Section 7.5. Non-exclusivity of Remedies
	 	 	61	 
	Section 7.6. Application of Proceeds
	 	 	61	 
	 
	 	 	 	 
	ARTICLE VIII ADMINISTRATIVE AGENT AND THE ISSUING LENDER
	 	 	61	 
	 
	 	 	 	 
	Section 8.1. Authorization and Action
	 	 	61	 
	Section 8.2.
Administrative Agent’s Reliance, Etc.
	 	 	62	 
	Section 8.3. Administrative Agent and Its Affiliates
	 	 	62	 
	Section 8.4. Lender Credit Decision
	 	 	63	 
	Section 8.5. Indemnification
	 	 	63	 
	Section 8.6. Successor Administrative Agent and Issuing Lender
	 	 	64	 
	Section 8.7.
Collateral Matters
	 	 	65	 
	 
	 	 	 	 
	ARTICLE IX MISCELLANEOUS
	 	 	66	 
	 
	 	 	 	 
	Section 9.1. Amendments, Etc.
	 	 	66	 
	Section 9.2. Notices, Etc.
	 	 	67	 
	Section 9.3. No Waiver; Remedies
	 	 	67	 
	Section 9.4. Costs and Expenses
	 	 	67	 
	Section 9.5. Binding Effect
	 	 	68	 
	Section 9.6. Lender Assignments and Participations
	 	 	68	 
	Section 9.7. Indemnification; Waiver
	 	 	70	 
	Section 9.8. Execution in Counterparts
	 	 	71	 
	Section 9.9. Survival of Representations, Etc.
	 	 	71	 
	Section 9.10. Severability
	 	 	72	 
	Section 9.11. Business Loans
	 	 	72	 
	Section 9.12. Governing Law; Submission to Jurisdiction
	 	 	72	 
	Section 9.13. USA PATRIOT Act
	 	 	72	 
	Section 9.14. WAIVER OF JURY TRIAL
	 	 	73	 

iii

 

	 	 	 	 	 
	 	 	Page	 
	Section 9.15. NO ORAL AGREEMENTS
	 	 	73	 

	 	 	 	 	 

	APPENDICES:
	 	 	 	 
	 
	 	 	 	 
	Appendix I

	 	-
	 	Definitions
	 
	 	 	 	 
	EXHIBITS:
	 	 	 	 
	 
	 	 	 	 
	Exhibit A

	 	-
	 	Form of Assignment and Acceptance
	Exhibit B

	 	-
	 	Form of Compliance Certificate
	Exhibit C

	 	-
	 	Form of Guaranty
	Exhibit D

	 	-
	 	Form of Mortgage
	Exhibit E

	 	-
	 	Form of Note
	Exhibit F

	 	-
	 	Form of Notice of Borrowing
	Exhibit G

	 	-
	 	Form of Notice of Conversion or Continuation
	Exhibit H

	 	-
	 	Form of Pledge Agreement
	Exhibit I

	 	-
	 	Form of Security Agreement
	Exhibit J

	 	-
	 	Form of Transfer Letters
	Exhibit K

	 	-
	 	Form of Borrower’s Counsel Opinion
	Exhibit L

	 	-
	 	Form of Property Operating Statement
	Exhibit M

	 	 	 	Notice of Assignment of Proceeds

	 	 	 	 	 

	SCHEDULES:
	 	 	 	 
	 
	 	 	 	 
	Schedule I

	 	-
	 	Pricing Grid
	Schedule II

	 	-
	 	Notice Information and Commitments
	Schedule III

	 	-
	 	Operators
	Schedule 2.4

	 	-
	 	Development Plan
	Schedule 3.1(k)

	 	-
	 	Hedging Requirements on Effective Date
	Schedule 3.1(q)(ii)

	 	-
	 	Post Closing Hedging Requirements
	Schedule 4.1

	 	-
	 	Subsidiaries of Borrower
	Schedule 4.5

	 	-
	 	Existing Debt
	Schedule 4.7

	 	-
	 	Litigation
	Schedule 4.13(a)

	 	-
	 	Burdensome Restrictions
	Schedule 4.17

	 	-
	 	Liens, Title, Leases, Etc.
	Schedule 4.19

	 	-
	 	Hedging Contracts
	Schedule 4.20

	 	-
	 	Material Agreements
	Schedule 4.23

	 	-
	 	Liquidity Position
	Schedule 5.6(n)

	 	-
	 	Disputes
	Schedule 6.23

	 	-
	 	Deposit Accounts
	 
	 	 	 	 

iv

 

THIRD AMENDED AND RESTATED CREDIT AGREEMENT

     This Third Amended and Restated Credit Agreement dated as of December 29, 2010, is among Delta
Petroleum Corporation, a Delaware corporation (“Borrower”), the lenders party hereto from
time to time (the “Lenders”), and Macquarie Bank Limited, as administrative agent for such
Lenders (in such capacity, the “Administrative Agent”) and as issuing lender for such
Lenders (in such capacity, the “Issuing Lender”).

Background

     A. On November 3, 2008, Borrower entered into the JPMorgan Credit Facility (as defined below).

     B. Immediately prior to the execution of this Agreement, JPMorgan Chase Bank, N.A. assigned all of
its rights and obligations under the JPMorgan Credit Facility and the other Loan Papers (as defined
in the JPMorgan Credit Facility) to Administrative Agent for the benefit of Lenders pursuant to an
Assignment of Liens and Security Interests dated December 29, 2010.

     C. Immediately prior to the execution of this Agreement, each lender under the JPMorgan Credit
Facility assigned all of its rights and obligations under the JPMorgan Credit Facility and the
other transferred Loan Papers (as defined in the JPMorgan Credit Facility) to Lenders pursuant to
an Assignment and Acceptance dated December 29, 2010.

     D. Borrower, Administrative Agent and each Lender agree to amend and restate the terms of the
JPMorgan Credit Facility as set forth in this Agreement.

     E. Borrower, Administrative Agent and each of the Lenders agree that this Agreement sets forth the
terms and conditions pursuant to which Lenders will make available to Borrower a senior secured
loan for the purposes set forth in this Agreement.

     F. In connection with Lenders making available to Borrower the financial accommodations described
in this Agreement, Borrower will grant to Administrative Agent, for the ratable benefit of each of
Lenders, a first-priority Lien in all of the real and personal property of Borrower subject only to
the Permitted Liens (defined below).

Agreements

     For good and valuable consideration, the receipt and sufficiency of which are acknowledged by each
of the parties, Borrower, Lenders, Administrative Agent and Issuing Lender hereby agree as follows:

ARTICLE I

DEFINITIONS AND ACCOUNTING TERMS

     Section 1.1. Certain Defined Terms.
As used in this Agreement, the terms defined above
shall have the meanings set forth therein and the following terms shall have the meanings set forth
on Appendix I (unless otherwise indicated, such meanings to be equally applicable to both
the singular and plural forms of the terms defined).

 

 

     Section 1.2. Computation of Time Periods.
In this Agreement, with respect to the
computation of periods of time from a specified date to a later specified date, the word “from”
means “from and including” and the words “to” and “until” each means “to but excluding”.

     Section 1.3. Accounting Terms; Changes in GAAP.
Except as otherwise expressly provided
herein, all accounting terms used herein shall be interpreted, and all financial statements and
certificates and reports as to financial matters required to be delivered to the Lenders hereunder
shall (unless otherwise disclosed to the Lenders in writing at the time of delivery thereof) be
prepared, in accordance with GAAP applied on a basis consistent with those used in the preparation
of the latest financial statements furnished to the Lenders hereunder (which prior to the delivery
of the first financial statements under Section 5.6, shall mean the Financial Statements
and the Interim Financial Statements). All calculations made for the purposes of determining
compliance with this Agreement shall (except as otherwise expressly provided herein) be made by
application of GAAP applied on a basis consistent with those used in the preparation of the annual
or quarterly financial statements furnished to the Lenders pursuant to Section 5.6 most
recently delivered prior to or concurrently with such calculations (or, prior to the delivery of
the first financial statements under Section 5.6, used in the preparation of the Financial
Statements and the Interim Financial Statements). If at any time any change in GAAP would affect
the computation of any financial ratio or requirement set forth herein, and either Borrower or the
Required Lenders shall so request, Administrative Agent, the Lenders and Borrower shall negotiate
in good faith to amend such ratio or requirement to preserve the original intent thereof in light
of such change in GAAP (subject to the approval of the Required Lenders); provided that, until so
amended, (a) such ratio or requirement shall continue to be computed in accordance with GAAP prior
to such change therein, and (b) Borrower shall provide to Administrative Agent and the Lenders
financial statements and other documents required under this Agreement or as reasonably requested
hereunder setting forth a reconciliation between calculations of such ratio or requirement made
before and after giving effect to such change in GAAP.

     Section 1.4. Types of Advances.
Advances are distinguished by “Type.” The “Type” of an
Advance refers to the determination whether such Advance is a Eurodollar Rate Advance or Reference
Rate Advance.

     Section 1.5. Miscellaneous.
Article, Section, Schedule, and Exhibit references are to
Articles and Sections of and Schedules and Exhibits to this Agreement, unless otherwise specified.
All references to instruments, documents, contracts, and agreements are references to such
instruments, documents, contracts, and agreements as the same may be amended, supplemented, and
otherwise modified from time to time, unless otherwise specified. The words “hereof”, “herein”,
and “hereunder” and words of similar import when used in this Agreement shall refer to this
Agreement as a whole and not to any particular provision of this Agreement. The term “including”
means “including, without limitation,”. Paragraph headings have been inserted in this Agreement as
a matter of convenience for reference only and it is agreed that such paragraph headings are not a
part of this Agreement and shall not be used in the interpretation of any provision of this
Agreement.

2

 

ARTICLE II

CREDIT FACILITIES

     Section 2.1. Maximum Commitment.

     (a) Maximum Commitment. Each Lender severally agrees, subject to the terms and
conditions of this Agreement, prior to the applicable Commitment Termination Date to make available
to Borrower (i) a senior secured revolving loan pursuant to the terms and conditions of
Section 2.2 (the “Revolving Loan”) and (ii) a senior secured term loan pursuant to
the terms and conditions of Section 2.3 (the “Term Loan”) not to exceed in
aggregate such Lender’s Commitment for the purposes set forth herein and not to exceed the Maximum
Commitment. Borrower acknowledges that Lenders do not intend to advance Borrower any amount which
would at any point in time exceed the Maximum Commitment; provided, however, if the
obligations of Borrower under the Revolving Loan and the Term Loan exceed the Maximum Commitment,
all obligations will nevertheless constitute Obligations under this Agreement and be entitled to
the benefit of all of Administrative Agent’s Liens on the Collateral. All monetary Obligations
(other than Obligations that may continue past the Maturity Date under the terms of a Hedge
Contract with a Hedge Counterparty) will be fully due and payable on the Maturity Date.

     (b) Advances. Each Borrowing shall, in the case of Borrowings consisting of Reference
Rate Advances, be in an aggregate amount not less than $250,000 and in integral multiples of
$100,000 in excess thereof, and in the case of Borrowings consisting of Eurodollar Rate Advances,
be in an aggregate amount not less than $500,000 and in integral multiples of $100,000 in excess
thereof, and in each case shall consist of Advances of the same Type made on the same day by the
Lenders ratably according to their respective Commitments. Within the limits of each Lender’s
Commitment, and subject to the terms of this Agreement, Borrower may from time to time borrow,
prepay, and reborrow Advances under the Revolving Loan. Amounts repaid in respect of the Term Loan
may not be reborrowed.

     (c) Notes. The indebtedness of Borrower to each Lender resulting from the Advances
owing to such Lender shall be evidenced by a Note of Borrower payable to the order of such Lender.

     Section 2.2. Availability and Purpose of Revolving Loan Advances.

     (a) Revolving Loan. The initial Borrowing Base available under the Revolving Loan in
effect as of Effective Date has been set by Administrative Agent and the Lenders and acknowledged
by Borrower as $30,000,000. Such initial Borrowing Base shall remain in effect until the next
redetermination made pursuant to this Section 2.2. The Borrowing Base shall be determined
in accordance with the standards set forth in Section 2.2(d) and is subject to periodic
redetermination pursuant to Section 2.2(b), Section 2.2(c) and Section
2.2(e). Advances under the Borrowing Base shall be used in accordance with Section
5.9. Up to $5,000,000 of the Borrowing Base may be used for the issuance of Letters of Credit
pursuant to Section 2.10.

     (b) Calculation of Borrowing Base.

          (i) Borrower shall deliver to Administrative Agent and each of the Lenders on or before each
April 1, beginning April 1, 2011, an Independent Engineering Report dated effective as of the
immediately preceding January 1, and such other information as may be

3

 

reasonably requested by any
Lender, including but not limited to the Oil and Gas Properties included or to be included in the
Borrowing Base. After Administrative Agent and the Lenders’ receipt of such Independent
Engineering Report and other information, (A) Administrative Agent shall deliver to each Lender
Administrative Agent’s recommendation for the redetermined Borrowing Base, (B) Administrative Agent
and the Lenders shall redetermine the Borrowing Base in accordance with Section 2.2(d), and
(C) Administrative Agent shall promptly notify Borrower in writing of the amount of the Borrowing
Base as so redetermined.

          (ii) Borrower shall deliver to Administrative Agent and each Lender, on or before each October
1, beginning October 1, 2011, an Internal Engineering Report dated effective as of the immediately
preceding July 1st and such other information as may be reasonably requested by Administrative
Agent or any Lender including but not limited to the Oil and Gas Properties included or to be
included in the Borrowing Base. After Administrative Agent and the Lenders’ receipt of such
Internal Engineering Report and other information, (A) Administrative Agent shall deliver to each
Lender Administrative Agent’s recommendation for the redetermined Borrowing Base, (B)
Administrative Agent and the Lenders shall redetermine the Borrowing Base in accordance with
Section 2.2(d), and (C) Administrative Agent shall promptly notify Borrower in writing of
the amount of the Borrowing Base as so redetermined.

          (iii) In the event that Borrower does not furnish to Administrative Agent and the Lenders the
Independent Engineering Report, Internal Engineering Report or other information specified in
clauses (i) and (ii) above by the date specified therein, Administrative Agent and the Lenders may
nonetheless redetermine the Borrowing Base and redesignate the Borrowing Base from time-to-time
thereafter in their sole discretion until Administrative Agent and the Lenders receive the relevant
Independent Engineering Report, Internal Engineering Report, or other information, as applicable,
whereupon Administrative Agent and the Lenders shall redetermine the Borrowing Base as otherwise
specified in this Section 2.2.

          (iv) Each delivery of an Engineering Report by Borrower to Administrative Agent and the
Lenders shall constitute a representation and warranty by Borrower to Administrative Agent and the
Lenders that:

          (A) Borrower owns the Oil and Gas Properties specified therein with at least 90% (by
value) of the Proved Reserves covered therein subject to an Acceptable Security Interest
and free and clear of any Liens (except Permitted Liens),

          (B) on and as of the date of such Engineering Report each Oil and Gas Property
described as “proved developed” therein was developed for oil or gas, and the wells
pertaining to such Oil and Gas Properties that are described therein as producing Wells,
were each capable of producing oil and/or gas in paying quantities, except for Wells that
were utilized as water or gas injection wells, carbon dioxide wells or as water disposal
wells (each as noted in such Engineering Report),

          (C) the descriptions of quantum and nature of the record title interests of Borrower,
as applicable, set forth in such Engineering Report include the entire record title
interests of Borrower in such Oil and Gas Properties, are complete and accurate in all
respects, and take into account all Permitted Liens,

4

 

          (D) there are no “back-in” or “reversionary” interests held by third parties which
could reduce the interests of Borrower in such Oil and Gas Properties except as set forth
in such Engineering Report,

          (E) no operating or other agreement to which Borrower is a party or by which Borrower
is bound affecting any part of such Oil and Gas Properties requires Borrower to bear any of
the costs relating to such Oil and Gas Properties greater than the record title interest of
Borrower in such portion of the such Oil and Gas Properties as set forth in such
Engineering Report, except in the event Borrower is obligated under an operating agreement
to assume a portion of a defaulting party’s share of costs, and

          (F) Borrower’s ownership of the Hydrocarbons and the undivided interests in the Oil
and Gas Properties as specified in such Engineering Report (i) will, after giving full
effect to all Permitted Liens, afford Borrower not less than those net interests (expressed
as a fraction, percentage or decimal) in the production from or which is allocated to such
Hydrocarbons specified as Net Revenue Interest in such Engineering Report and (ii) will
cause Borrower to bear not more than that portion (expressed as a fraction, percentage or
decimal), specified as Working Interest in such Engineering Report, of the costs of
drilling, developing and operating the wells identified in such Engineering Report or
identified in the exhibits to the Mortgages encumbering such Oil and Gas Properties (except
for any increases in Working Interest with a corresponding increase in the Net Revenue
Interest in such Oil and Gas Property).

     (c) Interim Redetermination. In addition to the Borrowing Base redeterminations
provided for in Section 2.2(b), (i) based on such information as Administrative Agent and
the Lenders deem relevant (but in accordance with Section 2.2(d)), Administrative Agent
may, and shall at the request of the Required Lenders, require one additional redetermination of
the Borrowing Base during any six-month period between scheduled redeterminations; (ii) based on
such information as Administrative Agent and the Lenders deem relevant (but in accordance with
Section 2.2(d)), Borrower may require one additional redetermination of the Borrowing Base
during any six-month period between scheduled redeterminations; and (iii) Administrative Agent and
the Lenders may make additional redeterminations of the Borrowing Base in connection with any
Disposition of Oil and Gas Properties constituting Proved Reserves of Borrower having a fair market
value which, when taken together with (A) the fair market value of all other Dispositions of Oil
and Gas Properties constituting Proved Reserves of Borrower and (B) the Net Hedge Value for such BB
Hedges that have been subject to novations, assignments, unwinding, amendments, or terminations, in
each case, occurring since the date of the most recent scheduled Borrowing Base redetermination,
equals or exceeds 5% of the Borrowing Base then in effect. For the avoidance of doubt, such
additional redeterminations of the Borrowing Base shall not constitute nor be construed as a
consent to any transaction or proposed transaction that would not be permitted under the terms of
this Agreement. In connection with any redetermination of the Borrowing Base under this
Section 2.2(c), Borrower shall provide Administrative Agent and the Lenders with such
information regarding Borrower’s business (including, without limitation, its Oil and Gas
Properties, the Proved Reserves, and production relating thereto) as Administrative Agent or any
Lender may reasonably request. Administrative Agent shall promptly notify Borrower in writing of
each redetermination of the Borrowing Base pursuant to this Section 2.2(c) and the amount
of the Borrowing Base as so redetermined.

5

 

     (d) Standards for Redetermination. Each redetermination of the Borrowing Base by
Administrative Agent and the Lenders pursuant to this Section 2.2 shall be made (i) in the
sole discretion of Administrative Agent and the Lenders (but in accordance with the other
provisions of this Section 2.2(d)), (ii) in accordance with Administrative Agent’s and the
Lenders’ customary internal standards and practices for valuing and redetermining the value of Oil
and Gas Properties in connection with reserve based oil and gas loan transactions, (iii) in
conjunction with the most recent Independent Engineering Report or Internal Engineering Report, as
applicable, or other information received by Administrative Agent and the Lenders including but not
limited to the Proved Reserves of Borrower, and (iv) based upon the estimated value of the Proved
Reserves owned by Borrower as determined by Administrative Agent and the Lenders. In valuing and
redetermining the Borrowing Base, Administrative Agent and the Lenders may also consider the
business, financial condition, and Debt obligations of Borrower and the Guarantors and such other
factors as Administrative Agent and the Lenders customarily deem appropriate, including without
limitation, commodity price assumptions, projections of production, operating expenses, general and
administrative expenses, capital costs, working capital requirements, liquidity evaluations,
dividend payments, environmental costs, and legal costs. In that regard, Borrower acknowledges
that the determination of the Borrowing Base contains an equity cushion (market value in excess of
loan value), which is essential for the adequate protection of Administrative Agent and the
Lenders. No Proved Reserves shall be included or considered for inclusion in the Borrowing Base
unless Administrative Agent shall have received, at Borrower’s expense, (A) evidence of title
reasonably satisfactory in form and substance to Administrative Agent covering at least 90% (by
value) of the Proved Reserves and the Oil and Gas Properties relating thereto and (B) Mortgages and
such other Security Instruments requested by Administrative Agent to the extent necessary to cause
Administrative Agent to have an Acceptable Security Interest in at least 90% (by value) of the
Proved Reserves and the Oil and Gas Properties relating thereto. At all times after Administrative
Agent has given Borrower notification of a redetermination of the Borrowing Base under this
Section 2.2, the Borrowing Base shall be equal to the redetermined amount or such lesser
amount designated by Borrower and disclosed in writing to Administrative Agent and the Lenders
until the Borrowing Base is subsequently redetermined in accordance with this Section 2.2;
provided that Borrower shall not request that the Borrowing Base be reduced to a level that would
result in a Borrowing Base deficiency. Notwithstanding anything herein to the contrary, (x) other
than for the mandatory reduction provided in Section 2.2(e) to the extent the redetermined
Borrowing Base is less than or equal to the Borrowing Base in effect prior to such redetermination,
such redetermined Borrowing Base must be Approved by Administrative Agent and the Required Lenders,
and (y) to the extent the redetermined Borrowing Base is greater than the Borrowing Base in effect
prior to such redetermination, such redetermined Borrowing Base must be Approved by Administrative
Agent and all of the Lenders.

     (e) Mandatory Reductions in the Borrowing Base. In addition to the Borrowing Base
redeterminations provided for otherwise in this Section 2.2, if Borrower or any Guarantor
novates, assigns, unwinds, terminates, or amends any BB Hedge, then the Borrowing Base shall
automatically reduce by an amount equal to the negative Net Hedge Value, if any, resulting from
such event. Such mandatory reduction of the Borrowing Base shall be effective as of the date
Administrative Agent notifies Borrower of the negative Net Hedge Value resulting from such event.

6

 

     Section 2.3. Availability and Purposes of Term Loan Advances.
Beginning on the Closing
Date, and subject to the Approval by Administrative Agent and Required Lenders of the initial
Development Plan, and any subsequent modifications of the Development Plan pursuant to Section
2.4(a), and continuing through the applicable Commitment Termination Date, up to $20,000,000 is
available under the Term Loan and shall be used by Borrower in accordance with Section 5.9
and as follows:

     (a) to pay costs incurred by Borrower in connection with the drilling and completion of Wells
and other development activities included on the Development Plan, in each instance, pursuant to an
AFE Approved by Administrative Agent; and

     (b) for any other purpose Approved by Administrative Agent.

     Section 2.4. Development Plan.

     (a) The initial Development Plan is attached as Schedule 2.4. Administrative Agent
Approves the initial Development Plan. Borrower may propose modifications to the Development Plan
from time to time, and those modifications will become effective when Approved by Administrative
Agent and the Required Lenders. Approval of any Development Plan is within the sole and absolute
discretion of Administrative Agent and the Required Lenders and Administrative Agent and the
Required Lenders may make their Approval subject to such conditions as Administrative Agent and the
Required Lenders deem appropriate.

     (b) In support of each Development Plan, Borrower will prepare and submit to Administrative
Agent for Approval an AFE (including all Supporting Documentation) at least fifteen days before
Borrower incurs any costs that it intends to fund out of an Advance under the Term Loan. To the
extent an AFE conforms to a Development Plan previously Approved by Administrative Agent and
Required Lenders, however, Administrative Agent’s Approval of that AFE will not be unreasonably
withheld or delayed.

     (c) Notwithstanding the foregoing Approval of a Development Plan:

          (i) Borrower must nevertheless satisfy the conditions described in this Article II and
Article III below prior to the making of each Advance; and

          (ii) Administrative Agent will have no obligation to make an Advance to fund projects included
on the Development Plan:

          (A) unless the requested Advance relates to an AFE Approved by Administrative Agent;

          (B) if the requested Advance (together with all amounts previously Advanced in respect
of the applicable AFE) exceeds the cost set forth in the Development Plan for that project
by more than 10%; or

          (C) if the requested Advance exceeds the remaining funds available and not yet
Advanced under the Term Loan.

7

 

     Section 2.5. Method of Borrowing.

     (a) Notice. Each Borrowing shall be made pursuant to a Notice of Borrowing (or by
telephone notice promptly confirmed in writing by a Notice of Borrowing), given not later than
11:00 a.m. (Houston, Texas time) (i) on the third Business Day before the date of the proposed
Borrowing, in the case of a Borrowing comprised of Eurodollar Rate Advances or (ii) one Business
Day prior to the proposed Borrowing, in the case of a Borrowing comprised of Reference Rate
Advances, by Borrower to Administrative Agent, which shall in turn give to each Lender prompt
notice of such proposed Borrowing by facsimile. Each Notice of a Borrowing shall be given by
facsimile, confirmed immediately in writing, specifying the information required therein. In the
case of a proposed Borrowing comprised of Eurodollar Rate Advances, Administrative Agent shall
promptly notify each Lender of the applicable interest rate under Section 2.14(b). Each
Lender shall, before 1:00 pm (Houston, Texas time) on the date of such Borrowing, make available
for the account of its Lending Office to Administrative Agent at its address referred to in
Section 9.2, or such other location as Administrative Agent may specify by notice to the
Lenders, in same day funds, in the case of a Borrowing, such Lender’s Pro Rata Share of such
Borrowing. After Administrative Agent’s receipt of such funds and upon fulfillment of the
applicable conditions set forth in Article III, Administrative Agent shall make such funds
available to Borrower at its account with Administrative Agent.

     (b) Conversions and Continuations. Borrower may elect to Convert or continue any
Borrowing under this Section 2.5 by delivering an irrevocable Notice of Conversion or
Continuation to Administrative Agent at Administrative Agent’s office no later than 11:00 a.m.
(Houston, Texas time) (i) on the date which is at least three Business Days in advance of the
proposed Conversion or continuation date in the case of a Conversion to or a continuation of a
Borrowing comprised of Eurodollar Rate Advances and (ii) one Business Day prior to the proposed
Conversion in the case of a Conversion to a Borrowing comprised of Reference Rate Advances. Each
such Notice of Conversion or Continuation shall be in writing or by facsimile confirmed immediately
in writing specifying the information required therein. Promptly after receipt of a Notice of
Conversion or Continuation under this Section 2.5, Administrative Agent shall provide each
Lender with a copy thereof and, in the case of a Conversion to or a continuation of a Borrowing
comprised of Eurodollar Rate Advances, notify each Lender of the applicable interest rate under
Section 2.14(b).

     (c) Certain Limitations. Notwithstanding anything to the contrary contained in
paragraphs (a) and (b) above:

          (i) at no time shall there be more than six Interest Periods applicable to outstanding
Eurodollar Rate Advances and Borrower may not select Eurodollar Rate Advances for any Borrowing at
any time that a Default has occurred and is continuing;

          (ii) if any Lender shall, at least one Business Day before the date of any requested
Borrowing, Conversion, or continuation, notify Administrative Agent that the introduction of or any
change in or in the interpretation of any law or regulation makes it unlawful, or that any central
bank or other Governmental Authority asserts that it is unlawful, for such Lender or its Lending
Office to perform its obligations under this Agreement to make Eurodollar Rate Advances or to fund
or maintain Eurodollar Rate Advances, the right of

8

 

Borrower to select Eurodollar Rate Advances from
such Lender shall be suspended until such Lender shall notify Administrative Agent that the
circumstances causing such suspension no longer exist, and the Advance made by such Lender in
respect of such Borrowing, Conversion, or continuation shall be a Reference Rate Advance;

          (iii) if Administrative Agent is unable to determine the Eurodollar Rate for Eurodollar Rate
Advances comprising any requested Borrowing, the right of Borrower to select Eurodollar Rate
Advances for such Borrowing or for any subsequent Borrowing shall be suspended until Administrative
Agent shall notify Borrower and the Lenders that the circumstances causing such suspension no
longer exist, and each Advance comprising such Borrowing shall be a Reference Rate Advance;

          (iv) if the Required Lenders shall, at least one Business Day before the date of any requested
Borrowing, notify Administrative Agent that the Eurodollar Rate for Eurodollar Rate Advances
comprising such Borrowing will not adequately reflect the cost to such Lenders of making or funding
their respective Eurodollar Rate Advances, as the case may be, for such Borrowing, the right of
Borrower to select Eurodollar Rate Advances for such Borrowing or for any subsequent Borrowing
shall be suspended until Administrative Agent shall notify Borrower and the Lenders that the
circumstances causing such suspension no longer exist, and each Advance comprising such Borrowing
shall be a Reference Rate Advance; and

          (v) if Borrower shall fail to select the duration or continuation of any Interest Period for
any Eurodollar Rate Advances in accordance with the provisions contained in the definition of
“Interest Period” in Appendix I, Administrative Agent shall forthwith so notify Borrower and the
Lenders and such Advances shall be made available to Borrower on the date of such Borrowing as
Reference Rate Advances or, if an existing Advance, Convert into Reference Rate Advances.

     (d) Notices Irrevocable. Each Notice of Borrowing and Notice of Conversion or
Continuation shall be irrevocable and binding on Borrower. In the case of any Borrowing for which
the related Notice of Borrowing specifies is to be comprised of Eurodollar Rate Advances, Borrower
shall indemnify each Lender against any loss, out-of-pocket cost, or expense incurred by such
Lender as a result of any failure by Borrower to fulfill on or before the date specified in such
Notice of Borrowing for such Borrowing the applicable conditions set forth in Article III
including, without limitation, any loss (including any loss of anticipated profits), cost, or
expense incurred by reason of the liquidation or reemployment of deposits or other funds acquired
by such Lender to fund the Advance to be made by such Lender as part of such Borrowing when such
Advance, as a result of such failure, is not made on such date.

     (e) Administrative Agent Reliance. Unless Administrative Agent shall have received
notice from a Lender before the date of any Borrowing that such Lender shall not make available to
Administrative Agent such Lender’s Pro Rata Share of a Borrowing, Administrative Agent may assume
that such Lender has made its Pro Rata Share of such Borrowing available to Administrative Agent on
the date of such Borrowing in accordance with Section 2.5(a) and Administrative Agent may,
in reliance upon such assumption, make available to Borrower on such date a corresponding amount.
If and to the extent that such Lender shall not have so made its Pro Rata Share of such Borrowing
available to Administrative Agent, such Lender and

9

 

Borrower severally agree to immediately repay to
Administrative Agent on demand such corresponding amount, together with interest on such amount,
for each day from the date such amount is made available to Borrower until the date such amount is
repaid to Administrative Agent, at (i) in the case of Borrower, the interest rate applicable on
such day to Advances comprising such Borrowing and (ii) in the case of such Lender, the Federal
Funds Rate for such day. If such Lender shall repay to Administrative Agent such corresponding
amount and interest as provided above, such corresponding amount so repaid shall constitute such
Lender’s Advance as part of such Borrowing for purposes of this Agreement even though not made on
the same day as the other Advances comprising such Borrowing.

     (f) Lender Obligations Several. The failure of any Lender to make the Advance to be
made by it as part of any Borrowing shall not relieve any other Lender of its obligation, if any,
to make its Advance on the date of such Borrowing. No Lender shall be responsible for the failure
of any other Lender to make the Advance to be made by such other Lender on the date of any
Borrowing.

     Section 2.6. Reduction of the Commitments.

     (a) Borrower shall have the right, upon at least three Business Days’ irrevocable notice to
Administrative Agent, to terminate in whole or reduce ratably in part the unused portion of the
Commitments; provided that each partial reduction shall be in the aggregate amount of at least
$500,000 or in integral multiples of $100,000 in excess thereof.

     (b) Other
than as provided in Section 2.6(c), any reduction and termination of the
Commitments pursuant to this Section 2.6 shall be applied ratably to each Lender’s
Commitment and shall be permanent, with no obligation of the Lenders to reinstate such Commitments.

     (c) In the event of a Defaulting Lender, Borrower, at Borrower’s election may elect to
terminate such Defaulting Lender’s Commitment hereunder; provided that (i) such termination must be
of the Defaulting Lender’s entire Commitment, (ii) Borrower shall pay all amounts owed by Borrower
to such Defaulting Lender under this Agreement and under the other Loan Documents (including
principal of and interest on the Advances owed to such Defaulting Lender, accrued commitment fees,
and letter of credit fees but specifically excluding any amounts owing under Section 2.17
as result of such payment of Advances) and shall deposit with Administrative Agent into the Cash
Collateral Account cash collateral in the amount equal to such Defaulting Lender’s ratable share of
the Letter of Credit Exposure, and (iii) unless otherwise consented to by Administrative Agent, a
Defaulting Lender’s Commitment may be terminated by Borrower under this Section 2.6(c) if
and only if at such time, Borrower has elected, or is then electing, to terminate the Commitments
of all then existing Defaulting Lenders. Upon written notice to the Defaulting Lender and
Administrative Agent of Borrower’s election to terminate a Defaulting Lender’s Commitment pursuant
to this Section 2.6(c) and the payment and deposit of amounts required to be made by
Borrower under clause (c), (A) such Defaulting Lender shall cease to be a “Lender”
hereunder for all purposes except that such Lender’s rights under Sections 2.18,
2.19 and 9.7 shall continue with respect to events and occurrences occurring before
or concurrently with its ceasing to be a “Lender” hereunder, (B) such Defaulting Lender’s
Commitment shall be deemed terminated, and (C) such Defaulting Lender shall be relieved of its
obligations hereunder other than its obligations under Section 8.5 with respect to events
and occurrences occurring

10

 

before or concurrently with its ceasing to be a “Lender”
hereunder; provided that, any such termination will not be deemed to be a waiver or release of any
claim by Borrower, Administrative Agent or any Lender may have against such Defaulting Lender.

     Section 2.7. Prepayment of Advances.

     (a) Optional. Borrower may prepay the Advances, after giving by 11:00 a.m. (Houston,
Texas time) (i) in the case of Eurodollar Rate Advances, at least three Business Days’ or (ii) in
the case of Reference Rate Advances, same Business Day’s, irrevocable prior written notice to
Administrative Agent stating the proposed date and aggregate principal amount of such prepayment.
If any such notice is given, Borrower shall prepay the Advances in whole or ratably in part in an
aggregate principal amount equal to the amount specified in such notice, together with accrued
interest to the date of such prepayment on the principal amount prepaid and amounts, if any,
required to be paid pursuant to Section 2.17 as a result of such prepayment being made on
such date; provided, however, that each partial prepayment with respect to: (A)
any amounts prepaid in respect of Eurodollar Rate Advances shall be applied to Eurodollar Rate
Advances comprising part of the same Borrowing; (B) any prepayments made in respect of Reference
Rate Advances shall be made in a minimum amounts of $250,000 and in integral multiples of $100,000
in excess thereof, and (C) any prepayments made in respect of any Borrowing comprised of Eurodollar
Rate Advances shall be made in an aggregate principal amount of at least $500,000 and in integral
multiples of $100,000 in excess thereof, and in an aggregate principal amount such that after
giving effect thereto such Borrowing shall have a remaining principal amount outstanding with
respect to such Borrowing of at least $500,000. Full prepayments of any Borrowing are permitted
without restriction of amounts.

     (b) Borrowing Base Deficiency.

          (i) Other than as provided in Section 2.7(b)(ii) below, if the aggregate outstanding
amount of the Revolving Loan Advances plus the Letter of Credit Exposure ever exceeds the lesser of
(y) the Borrowing Base and (z) the aggregate Commitments, Borrower shall, after receipt of written
notice from Administrative Agent regarding such deficiency, take any of the following actions (and
the failure of Borrower to take such actions to remedy such Borrowing Base deficiency shall
constitute an Event of Default):

          (A) prepay Revolving Loan Advances or, if the Revolving Loan Advances have been repaid
in full, make deposits into the Cash Collateral Account to provide cash collateral for the
Letter of Credit Exposure, such that the Borrowing Base deficiency is cured within 30 days
after the date such deficiency notice is received by Borrower from Administrative Agent;

          (B) pledge as Collateral for the Obligations additional Oil and Gas Properties
acceptable to Administrative Agent and the Required Lenders such that the Borrowing Base
deficiency is cured within 30 days after the date such deficiency notice is received by
Borrower from Administrative Agent;

          (C) (1) deliver, within 10 days after the date such deficiency notice is received by
Borrower from Administrative Agent, written notice to Administrative Agent

11

 

indicating
Borrower’s election to repay the Revolving Loan Advances and make deposits into the Cash
Collateral Account to provide cash collateral for the Letters of Credit, each in five
monthly installments equal to one-fifth of such Borrowing Base deficiency with the first
such installment due 30 days after the date such deficiency notice is received by Borrower
from Administrative Agent and each following installment due 30 days after the preceding
installment and (2) make such payments and deposits within such time periods; or

          (D) eliminate the Borrowing Base deficiency through a combination of the actions
described in Sections 2.7(b)(i)(A), (B), and (C) above.

          (ii) Upon each reduction of the Borrowing Base, if any, resulting from a Borrowing Base
redetermination made under Section 2.2(e) if the aggregate outstanding amount of the
Revolving Loan Advances plus the Letter of Credit Exposure exceeds the lesser of (y) the Borrowing
Base and (z) the aggregate Commitments, then Borrower shall immediately prepay the Revolving Loan
Advances or, if the Revolving Loan Advances have been repaid in full, make deposits into the Cash
Collateral Account to provide cash collateral for the Letter of Credit Exposure, in an amount equal
to (A) such portion of the Borrowing Base deficiency resulting from such reduction plus (B) if a
Borrowing Base deficiency exists prior to such reduction, then an amount equal to the lesser of (i)
the net cash proceeds of the transaction that triggered such Borrowing Base reduction and (ii) such
portion of the Borrowing Base deficiency in existence immediately prior to such reduction.

          (iii) Each prepayment pursuant to this Section 2.7(b) shall be accompanied by accrued
interest on the amount prepaid to the date of such prepayment and amounts, if any, required to be
paid pursuant to Section 2.17 as a result of such prepayment being made on such date. Each
prepayment under this Section 2.7(b) shall be applied to the Revolving Loan Advances as
determined by Administrative Agent and agreed to by the Lenders in their sole discretion.

     (c) Reduction of Commitments. On the date of each reduction of the aggregate
Commitments pursuant to Section 2.6, Borrower agrees to make a prepayment in respect of the
outstanding amount of the Revolving Loan Advances to the extent, if any, that the aggregate unpaid
principal amount of all Revolving Loan Advances plus the Letter of Credit Exposure exceeds the
lesser of (i) the aggregate Commitments, as so reduced and (ii) the Borrowing Base. Each
prepayment pursuant to this Section 2.7(c) shall be accompanied by accrued interest on the
amount prepaid to the date of such prepayment and amounts, if any, required to be paid pursuant to
Section 2.17 as a result of such prepayment being made on such date. Each prepayment under
this Section 2.7(c) shall be applied to the Revolving Loan Advances as determined by
Administrative Agent and agreed to by the Lenders in their sole discretion.

     (d) Illegality. If any Lender shall notify Administrative Agent and Borrower that the
introduction of or any change in or in the interpretation of any applicable Legal Requirement makes
it unlawful, or that any central bank or other Governmental Authority asserts that it is unlawful
for such Lender or its Lending Office to perform its obligations under this Agreement to maintain
any Eurodollar Rate Advances of such Lender then outstanding hereunder, (i) Borrower shall, no
later than 11:00 a.m. (Houston, Texas time) (A) if not prohibited by law, on

12

 

the last day of the
Interest Period for each outstanding Eurodollar Rate Advance made by such Lender or (B) if required
by such notice, on the second Business Day following its receipt of such notice, automatically
convert to Reference Rate Advances all of the Eurodollar Rate Advances made by such Lender then
outstanding, together with accrued interest on the principal amount converted to the date of such
conversion and amounts, if any, required to be paid pursuant to Section 2.17 as a result of
such conversion being made on such date, (ii) such Lender shall simultaneously make a Reference
Rate Advance to Borrower on such date in an amount equal to the aggregate principal amount of the
Eurodollar Rate Advances prepaid to such Lender, and (iii) the right of Borrower to select
Eurodollar Rate Advances from such Lender for any subsequent Borrowing shall be suspended until
such Lender gives notice referred to above shall notify Administrative Agent that the circumstances
causing such suspension no longer exist.

     (e) Optional Prepayment; Ratable Prepayment. Borrower may prepay the Revolving Loan
and the Term Loan in whole or in part at any time without penalty or premium, except for breakage
costs as set forth in Section 2.17 resulting from such prepayment. Except as provided in
the preceding sentence, each payment of any Advance pursuant to this Section 2.7 shall be
made in a manner such that all Advances comprising part of the same Borrowing are paid in whole or
ratably in part.

     Section 2.8. Repayment of the Term Loan; Net Operating Cash Flow.

     (a) Repayment of Term Loan Generally. On each Payment Date beginning January 25,
2011, to the extent any Advances under the Term Loan remain outstanding, Borrower will pay to
Administrative Agent 100% of Net Operating Cash Flow to be applied as set forth in Section
2.8(c). On the Maturity Date, Borrower will pay to Administrative Agent all of the monetary
Obligations outstanding on that date (other than Obligations that may continue past the Maturity
Date under the terms of any Hedge Contracts) and perform or otherwise satisfy all other Obligations
then outstanding.

     (b) Calculation of Net Operating Cash Flow. Administrative Agent will calculate Net
Operating Cash Flow based on the Property Operating Statements prepared and delivered by Borrower.
The first Property Operating Statement is due on the twenty-fifth (25th) day of the
month following the month in which the first Advance under the Term Loan is made.

     (c) Application of Funds.

          (i) Payments due under Section 2.8(a) will be applied first to unpaid fees and Related
Costs payable under the Loan Documents, second to accrued interest on the Loans, and third to
principal on the Term Loan.

          (ii) Any prepayments made pursuant to the terms of this Agreement, will be applied first to
unpaid fees and Related Costs payable under the Loan Documents, second to accrued interest on the
Term Loan, third to principal on the Term Loan, and fourth to any principal on the Revolving Loan,
and fifth to accrued interest on the Revolving Loan.

     Section 2.9. Repayment of Revolving Loan.
Borrower shall repay to Administrative Agent for
the ratable benefit of Lenders the outstanding principal amount of each Revolving

13

 

Loan Advance,
together with any accrued interest thereon, on the Maturity Date or such earlier date pursuant to
Section 7.2 or Section 7.3.

     Section 2.10. Letters of Credit.

     (a) Commitment. From time to time from the date of this Agreement until 30 days prior
to the Maturity Date, at the request of Borrower, the Issuing Lender shall, on the terms and
conditions hereinafter set forth, issue, increase, or extend the Expiration Date of, Letters of
Credit for the account of Borrower on any Business Day. No Letter of Credit will be issued,
increased, or extended:

          (i) if such issuance, increase, or extension would cause the Letter of Credit Exposure to
exceed the lesser of (A) $5,000,000 and (B) an amount equal to the lesser of (1) the aggregate
Commitments at such time and (2) the Borrowing Base in effect at such time minus, in each case
under this Section 2.10(a)(i)(B), the sum of the aggregate outstanding principal amount of
all Advances at such time;

          (ii) if such Letter of Credit has an Expiration Date later than the earlier of (A) one year
after the date of issuance thereof (or, in the case of any extension thereof, one year after the
date of such extension), and (B) ten days prior to the Maturity Date;

          (iii) unless such Letter of Credit Documents are in form and substance acceptable to the
Issuing Lender in its sole discretion;

          (iv) unless such Letter of Credit is a standby letter of credit not supporting the repayment
of indebtedness for borrowed money of any Person;

          (v) unless Borrower has delivered to the Issuing Lender a completed and executed Letter of
Credit Application; provided that, if the terms of any such Letter of Credit Application conflicts
with the terms of this Agreement, the terms of this Agreement shall control;

          (vi) unless such Letter of Credit is governed by (A) the Uniform Customs and Practice for
Documentary Credits (2007 Revision), International Chamber of Commerce Publication No. 600, or (B)
the International Standby Practices (ISP98), International Chamber of Commerce Publication No. 590,
in either case, including any subsequent revisions thereof approved by a Congress of the
International Chamber of Commerce and adhered to by the Issuing Lender;

          (vii) if any order, judgment or decree of any Governmental Authority or arbitrator shall by
its terms purport to enjoin or restrain the Issuing Lender from issuing such Letter of Credit, or
any Legal Requirement applicable to the Issuing Lender or any request or directive (whether or not
having the force of law) from any Governmental Authority with jurisdiction over the Issuing Lender
shall prohibit, or request that the Issuing Lender refrain from, the issuance of letters of credit
generally or such Letter of Credit in particular or shall impose upon the Issuing Lender with
respect to such Letter of Credit any restriction, reserve or capital requirement (for which the
Issuing Lender is not otherwise compensated hereunder) not in effect on the date hereof, or shall
impose upon the Issuing Lender any unreimbursed loss, cost

14

 

or expense which was not applicable on
the date hereof and which the Issuing Lender in good faith deems material to it;

          (viii) if the issuance of such Letter of Credit would violate one or more policies of the
Issuing Lender applicable to letters of credit generally;

          (ix) except as otherwise agreed by the Issuing Lender, if Letter of Credit is to be
denominated in a currency other than Dollars; or

          (x) a default of any Lender’s obligations to fund under Section 2.10(d) exists or any
Lender is at such time a Defaulting Lender hereunder, unless the Issuing Lender has entered into
satisfactory arrangements with Borrower or such Lender to eliminate the Issuing Lender’s risk with
respect to such Lender.

     (b) Participations. Upon the date of the issuance or increase of a Letter of Credit,
the Issuing Lender shall be deemed to have sold to each other Lender having a Commitment and each
other Lender having a Commitment shall have been deemed to have purchased from the Issuing Lender a
participation in the related Letter of Credit Obligations equal to such Lender’s Pro Rata Share at
such date and such sale and purchase shall otherwise be in accordance with the terms of this
Agreement. The Issuing Lender shall promptly notify each such participant Lender having a
Commitment by telephone or facsimile of each Letter of Credit issued, increased, or extended or
converted and the actual dollar amount of such Lender’s participation in such Letter of Credit.

     (c) Issuing. Each Letter of Credit shall be issued, increased, or extended pursuant
to a Letter of Credit Application (or by telephone notice promptly confirmed in writing by a Letter
of Credit Application), given not later than 11:00 a.m. (Houston, Texas time) on the fifteenth
Business Day before the date of the proposed issuance, increase, or extension of the Letter of
Credit (or such later date as may be accepted by the Issuing Lender in its sole discretion), and
the Issuing Lender shall give to each other Lender prompt notice thereof by facsimile or telephone.
Each Letter of Credit Application shall be delivered by facsimile or by mail specifying the
information required therein; provided that if such Letter of Credit Application is delivered by
facsimile, Borrower shall follow such facsimile with an original by mail. After the Issuing
Lender’s receipt of such Letter of Credit Application (by facsimile or by mail) and upon
fulfillment of the applicable conditions set forth in Article III, the Issuing Lender shall
issue, increase, or extend, or cause the issuance, increase or extension of, such Letter of Credit
for the account of Borrower. Each Letter of Credit Application shall be irrevocable and binding on
Borrower.

     (d) Reimbursement. Borrower hereby agrees to either (i) pay on demand to the Issuing
Lender an amount equal to any amount paid by the Issuing Lender under any Letter of Credit or (ii)
request a Borrowing of References Rate Advances in an amount equal to such amount paid by the
Issuing Lender to be made on date the payment is due under such Letter of Credit. In the event the
Issuing Lender makes a payment pursuant to a request for draw presented under a Letter of Credit
and such payment is not reimbursed by Borrower upon demand under either option provided in the
preceding sentence for any reason (including but not limited to the failure to meet the conditions
in Section 3.2), then the Issuing Lender shall give

15

 

Administrative Agent notice of
Borrower’s failure to make such reimbursement and Administrative Agent shall promptly notify each
Lender having a Commitment of the amount necessary to reimburse the Issuing Lender. Upon such
notice from Administrative Agent, each Lender shall promptly reimburse the Issuing Lender for such
Lender’s Pro Rata Share of such amount, and such reimbursement shall be deemed for all purposes of
this Agreement to be an Advance to Borrower transferred at Borrower’s request to the Issuing Lender
regardless of any other provision of this Agreement (including the occurrence and continuance of a
Default or an Event of Default). If such reimbursement is not made by any Lender to the Issuing
Lender on the same day on which Administrative Agent notifies such Lender to make reimbursement to
the Issuing Lender hereunder, such Lender shall pay interest on its Pro Rata Share thereof to the
Issuing Lender at a rate per annum equal to the Federal Funds Rate. Borrower hereby
unconditionally and irrevocably authorizes, empowers, and directs Administrative Agent and Lenders
to record and otherwise treat such reimbursements to the Issuing Lender as Reference Rate Advances
under a Borrowing requested by Borrower to reimburse the Issuing Lender which have been transferred
to the Issuing Lender at Borrower’s request.

     (e) Obligations Unconditional. The obligations of Borrower under this Agreement in
respect of each Letter of Credit shall be unconditional and irrevocable, and shall be paid strictly
in accordance with the terms of this Agreement under all circumstances, including, without
limitation, the following circumstances:

          (i) any lack of validity or enforceability of any Letter of Credit Documents;

          (ii) any amendment or waiver of, or any consent to or departure from, any Letter of Credit
Documents;

          (iii) the existence of any claim, set off, defense, or other right which Borrower may have at
any time against any beneficiary or transferee of such Letter of Credit (or any Persons for whom
any such beneficiary or any such transferee may be acting), the Issuing Lender, or any other person
or entity, whether in connection with this Agreement, the transactions contemplated in this
Agreement or in any Letter of Credit Documents, or any unrelated transaction;

          (iv) any statement or any other document presented under such Letter of Credit proving to be
forged, fraudulent, invalid, or insufficient in any respect or any statement therein being untrue
or inaccurate in any respect;

          (v) payment by the Issuing Lender under such Letter of Credit against presentation of a draft
or certificate which does not comply with the terms of such Letter of Credit; or

          (vi) any other circumstance or happening whatsoever, whether or not similar to any of the
foregoing.

provided, however, that nothing contained in this paragraph (e) shall be deemed to
constitute a waiver of any remedies of Borrower in connection with the Letters of Credit or
Borrower’s rights under Section 2.10(f).

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     (f) Liability of Issuing Lender. Borrower assumes all risks of the acts or omissions
of any beneficiary or transferee of any Letter of Credit with respect to its use of such Letter of
Credit. Neither the Issuing Lender nor any of its officers or directors shall be liable or
responsible for:

          (i) the use which may be made of any Letter of Credit or any acts or omissions of any
beneficiary or transferee in connection therewith;

          (ii) the validity, sufficiency, or genuineness of documents, or of any endorsement thereon,
even if such documents should prove to be in any or all respects invalid, insufficient, fraudulent,
or forged;

          (iii) payment by the Issuing Lender against presentation of documents which do not comply with
the terms of a Letter of Credit, including failure of any documents to bear any reference or
adequate reference to the relevant Letter of Credit; or

          (iv) any other circumstances whatsoever in making or failing to make payment under any Letter
of Credit (INCLUDING THE ISSUING LENDER’S OWN NEGLIGENCE),

except that Borrower shall have a claim against the Issuing Lender, and the Issuing Lender shall be
liable to Borrower, to the extent of any direct, as opposed to consequential, damages suffered by
Borrower which a court determines in a final, non-appealable judgment were caused by the Issuing
Lender’s willful misconduct or gross negligence in determining whether documents presented under a
Letter of Credit comply with the terms of such Letter of Credit. In furtherance and not in
limitation of the foregoing, the Issuing Lender may accept documents that appear on their face to
be in order, without responsibility for further investigation, regardless of any notice or
information to the contrary.

     (g) Cash Collateral Account.

          (i) If Borrower is required to deposit funds in the Cash Collateral Account pursuant to
Section 2.6(c), 2.7(b), 7.2(b) or 7.3(b), then Borrower and the
Issuing Lender shall establish the Cash Collateral Account and Borrower shall execute any documents
and agreements, including the Issuing Lender’s standard form assignment of deposit accounts, that
the Issuing Lender requests in connection therewith to establish the Cash Collateral Account and
grant the Issuing Lender a first priority security interest in such account and the funds therein.
Borrower hereby pledges to the Issuing Lender and grants the Issuing Lender a security interest in
the Cash Collateral Account, whenever established, all funds held in the Cash Collateral Account
from time to time, and all proceeds thereof as security for the payment of the Obligations.

          (ii) So long as no Default exists, the Issuing Lender may apply the funds held in the Cash
Collateral Account only to the reimbursement of any Letter of Credit Obligations, and the Issuing
Lender shall release to Borrower at Borrower’s written request any funds held in the Cash
Collateral Account in an amount up to but not exceeding the excess, if any (immediately prior to
the release of any such funds), of the total amount of funds held in the Cash Collateral Account
over the Letter of Credit Exposure. During the existence of any

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Default, the Issuing Lender may
apply any funds held in the Cash Collateral Account to the Obligations in the order set forth in
Section 7.6.

          (iii) The Issuing Lender shall exercise reasonable care in the custody and preservation of any
funds held in the Cash Collateral Account and shall be deemed to have exercised such care if such
funds are accorded treatment substantially equivalent to that which the Issuing Lender accords its
own Property, it being understood that the Issuing Lender shall not have any responsibility for
taking any necessary steps to preserve rights against any parties with respect to any such funds.

     (h) Defaulting Lender. If, at any time, a Defaulting Lender exists hereunder, then,
at the request of the Issuing Lender, Borrower shall deposit funds with Administrative Agent into
the Cash Collateral Account in an amount equal to such Defaulting Lender’s Pro Rata Share of the
Letter of Credit Exposure.

     Section 2.11. Time and Place of Payments.
All payments to be made by Borrower to
Administrative Agent under this Agreement will be made to the following account (the “Project
Account”) by wire transfer in immediately available funds not later than 11:00 a.m., Houston,
Texas, time on the date due:

	 	 	 	Account: Bank of New York

                New York, NY 10004

                ABA # 021000018

	 	 	 	Favour: Macquarie Bank Limited – OBU Sydney

              Sydney

              A/C No.: 8900055375

              Chips UID: 236386

              Reference: Delta Petroleum Corporation

or to any other account that Administrative Agent may designate in writing to Borrower from time to
time.

     Section 2.12. Borrower Sub-Account; Disbursements.

     (a) Borrower Sub-Account. Following the date on which the first Advance under the
Term Loan is made and continuing until all Advances under the Term Loan have been paid in full in
cash, Borrower will direct and cause Operator, all purchasers of Hydrocarbons and all other
customers and obligors of Borrower (including all payors of Royalty Interests, net profit
interests, and production payment interests) to deposit directly into the Project Account all
payments of any nature due and owing to Borrower. If Borrower nonetheless receives any such funds,
it will promptly (but, in any event, by the end of the following third (3rd) Business
Day) deposit all such funds in the Project Account. This Section 2.12 will not prohibit
Operator from making payments directly to Royalty Interest owners and other third party payees who
are not Affiliates of Borrower. Administrative Agent will establish a sub account (the
“Borrower Sub-Account”) on its internal books and records and credit to the Borrower
Sub-Account all funds collected in the Project Account and attributable to Borrower’s Net Revenue
Interest in the Oil

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and Gas Properties at the time the amount to be credited has been identified to
Administrative Agent’s reasonable satisfaction. Borrower hereby irrevocably authorizes
Administrative Agent to debit the Borrower Sub-Account for (i) the payment of all Obligations when
due, and (ii) for any and all outstanding accrued interest existing on the date of said debit,
provided, however, any interest paid under this Section 2.12(a)(ii) in any
month will also be deducted under Section 2.8 for purposes of calculating Net Operating
Cash Flow for said month. Administrative Agent may, if an Event of Default exists, apply all funds
credited to the Borrower Sub-Account against any Obligations then outstanding.

     (b) Disbursement of Operating Expenses. Following its delivery of each monthly
Property Operating Statement to Administrative Agent, Borrower may, not more than four times each
month and on at least three Business Days written notice, request a release of funds credited to
the Borrower Sub-Account since the preceding Payment Date to pay:

          (i) the items described in clauses (a)–(f) of the definition of Net Operating Cash Flow and
payable in the Reported Month covered by the POS; and

          (ii) any other payments or distributions Approved by Administrative Agent;

but only if no Event of Default exists or would result from the release of the requested funds.
Borrower’s request will include supporting documentation reasonably satisfactory to Administrative
Agent, including Borrower’s monthly joint interest billing invoices and revenue distribution
statements. Unless Administrative Agent notifies Borrower in writing within that three Business
Day period that it objects or requires additional information with respect to the requested
disbursement (in which case, Administrative Agent will describe the objection or requested
information in reasonable detail), then Administrative Agent will process the disbursement request
and release the requested funds from the Borrower Sub-Account. Borrower will use funds returned to
it under this Section 2.12(b) exclusively to pay the amounts included in its disbursement
request and will, at the request of Administrative Agent, promptly document to the satisfaction of
Administrative Agent that those amounts have been paid. A Responsible Officer shall make any
request under this Section.

     (c) Amounts Owed to Third Parties; Taxes. Amounts deposited into the Project Account
and owing to (i) Working Interest and Royalty Interest owners that are not Affiliates of Borrower,
or (ii) Governmental Authorities for taxes or payments measured by production will be released by
Administrative Agent to Borrower upon receipt of a certificate from Borrower detailing the amounts
and the party to be paid. If an Event of Default exists, however, Administrative Agent will, at
its option and upon notice to Borrower, have the right (but not the obligation) to make payments
directly to the Persons identified on Borrower’s certificate. A Responsible Officer shall deliver
the certificate contemplated by this Section 2.12(c) on behalf of Borrower.

     (d) Administrative Agent’s Right to Audit. Administrative Agent will have the right
to undertake audit procedures during normal business hours and upon prior notice to periodically
confirm that the payments described in Sections 2.12(b) and 2.12(c) have been made
by Borrower.

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     (e) Debt Service Reserve Account. At least once per month and at least 3 Business
Days prior to the Payment Date, Borrower may request that Administrative Agent reserve funds from
the Borrower Sub-Account related to anticipated disbursement for items covered by Section
2.12(b) above, and place such funds into a separate account. Administrative Agent will
establish a sub-account on its internal books and records for such purpose (the “Debt Service
Reserve Account”). Borrower may, not more than twice each month and on at least three Business
Days written notice, request a release of funds remaining in the Debt Service Reserve Account to
pay (A) regularly scheduled interest payments under the Convertible Notes and the Senior Unsecured
Notes in accordance with Section 6.5; and (B) any other payments or distributions Approved
by Administrative Agent, in each case only if no Event of Default exists or would result from the
release of the requested funds. Borrower’s request will include supporting documentation
reasonably satisfactory to Administrative Agent. Unless Administrative Agent notifies Borrower in
writing within that three Business Day period that it objects or requires additional information
with respect to any requested disbursement under subparagraph (B) above (in which case,
Administrative Agent will describe the objection or requested information in reasonable detail),
then Administrative Agent will process each disbursement request and release the requested funds
from the Debt Service Reserve Account. Borrower will use funds returned to it under this
Section 2.12(e) exclusively to pay the amounts included in its disbursement request and
will, at the request of Administrative Agent, promptly document to the satisfaction of
Administrative Agent that those amounts have been paid. A Responsible Officer shall make any
request under this Section.

     Section 2.13. Fees.

     (a) Commitment Fees. Borrower agrees to pay to Administrative Agent, for the account
of each Lender, a commitment fee at a per annum rate equal to the Commitment Fee Rate on the daily
Unused Commitment Amount of such Lender, from the Effective Date until the Commitment Termination
Date; provided that, no Commitment Fee shall accrue on the Commitment of a Defaulting Lender during
the period such Lender remains a Defaulting Lender. The commitment fees shall be due and payable
quarterly in arrears on the last day of each March, June, September, and December commencing on
December 31, 2010 and continuing thereafter through and including the Commitment Termination Date.

     (b) Letter of Credit Fees.

          (i) Borrower agrees to pay to Administrative Agent for the pro rata benefit of Lenders a per
annum letter of credit fee for each Letter of Credit issued hereunder in an amount equal to the
Applicable Margin then in effect for Eurodollar Rate Advances times the daily maximum amount
available to be drawn under such Letter of Credit, payable quarterly in arrears on the last day of
each March, June, September, and December commencing on March 31, 2011 and continuing thereafter
through and including the Commitment Termination Date.

          (ii) Borrower also agrees to pay to the Issuing Lender such other usual and customary fees
associated with any transfers, amendments, drawings, negotiations or reissuances of any Letters of
Credit.

20

 

     (c) Upfront Fees. Borrower agrees to pay to Administrative Agent for the account of
each Lender a fee for commitments to fund under the Term Loan equal to 2% of the amount of any
incremental increase in the amount Lenders commit to fund at any time under the Term Loan above the
committed amount of the Term Loan previously in effect pursuant to a commitment to fund under
Section 2.3.

     Section 2.14. Interest.
Borrower shall pay interest on the unpaid principal amount of each
Advance made by each Lender from the date of such Advance until such principal amount shall be paid
in full, at the following rates per annum:

     (a) Reference Rate Advances. If such Advance is a Reference Rate Advance, a rate per
annum equal at all times to the Adjusted Reference Rate in effect from time to time plus the
Applicable Margin in effect from time to time, payable quarterly in arrears on the last day of each
fiscal quarter commencing on March 31, 2011, and on the date such Reference Rate Advance shall be
paid in full.

     (b) Eurodollar Rate Advances. If such Advance is a Eurodollar Rate Advance, a rate
per annum equal at all times during the Interest Period for such Advance to the Eurodollar Rate for
such Interest Period plus the Applicable Margin in effect from time to time, payable on the last
day of such Interest Period.

     (c) Usury Recapture.

          (i) If, with respect to any Lender, the effective rate of interest contracted for under the
Loan Documents, including the stated rates of interest and fees contracted for hereunder and any
other amounts contracted for under the Loan Documents which are deemed to be interest, at any time
exceeds the Maximum Rate, then the outstanding principal amount of the loans made by such Lender
hereunder shall bear interest at a rate which would make the effective rate of interest for such
Lender under the Loan Documents equal the Maximum Rate until the difference between the amounts
which would have been due at the stated rates and the amounts which were due at the Maximum Rate
(the “Lost Interest”) has been recaptured by such Lender.

          (ii) If, when the loans made hereunder are repaid in full, the Lost Interest has not been
fully recaptured by such Lender pursuant to the preceding paragraph, then, to the extent permitted
by law, for the loans made hereunder by such Lender the interest rates charged under Section
2.14 hereunder shall be retroactively increased such that the effective rate of interest under
the Loan Documents was at the Maximum Rate since the effectiveness of this Agreement to the extent
necessary to recapture the Lost Interest not recaptured pursuant to the preceding sentence and, to
the extent allowed by law, Borrower shall pay to such Lender the amount of the Lost Interest
remaining to be recaptured by such Lender.

          (iii) Notwithstanding the foregoing or any other term in this Agreement and the Loan Documents
to the contrary, it is the intention of each Lender and Borrower to conform strictly to any
applicable usury laws. Accordingly, if any Lender contracts for, charges, or receives any
consideration which constitutes interest in excess of the Maximum Rate, then any such excess shall
be canceled automatically and, if previously paid, shall at such Lender’s option

21

 

be applied to the
outstanding principal amount of the loans made hereunder by such Lender or be refunded to Borrower.

     Section 2.15. Payments and Computations.

     (a) Payment Procedures. Borrower shall make each payment under this Agreement and
under the Notes not later than 11:00 a.m. (Houston, Texas time) on the day when due in Dollars to
Administrative Agent as set forth in Section 2.11 in same day funds without deduction,
setoff, or counterclaim of any kind, except as may be applicable to any Defaulting Lender.
Administrative Agent shall promptly thereafter cause to be distributed like funds relating to the
payment of principal, interest or fees ratably (other than amounts payable solely to Administrative
Agent, the Issuing Lender, or a specific Lender pursuant to Sections 2.14(c), 2.17,
2.18, 2.19, 8.5, 9.7, but after taking into account payments
effected pursuant to Section 9.4) in accordance with each Lender’s Pro Rata Share to
Lenders for the account of their respective Lending Offices, and like funds relating to the payment
of any other amount payable to any Lender or the Issuing Lender to such Lender for the account of
its Lending Office, in each case to be applied in accordance with the terms of this Agreement.

     (b) Computations. All computations of interest based on the Reference Rate and of
fees shall be made by Administrative Agent on the basis of a year of 365 or 366 days, as the case
may be, and all computations of interest based on the Eurodollar Rate and the Federal Funds Rate
shall be made by Administrative Agent, on the basis of a year of 360 days, in each case for the
actual number of days (including the first day, but excluding the last day) occurring in the period
for which such interest or fees are payable. Each determination by Administrative Agent of an
interest rate or fee shall be conclusive and binding for all purposes, absent manifest error.

     (c) Non Business Day Payments. Whenever any payment shall be stated to be due on a
day other than a Business Day, such payment shall be made on the next succeeding Business Day, and
such extension of time shall in such case be included in the computation of payment of interest or
fees, as the case may be; provided, however, that if such extension would cause
payment of interest on or principal of Eurodollar Rate Advances to be made in the next following
calendar month, such payment shall be made on the immediately preceding Business Day and such
shortening of time shall in such case be included in the computation of payment of interest or
fees, as the case may be.

     (d) Administrative Agent Reliance. Unless Administrative Agent shall have received
written notice from Borrower prior to the date on which any payment is due to Lenders that Borrower
shall not make such payment in full, Administrative Agent may assume that Borrower has made such
payment in full to Administrative Agent on such date and Administrative Agent may, in reliance upon
such assumption, cause to be distributed to each Lender on such date an amount equal to the amount
then due such Lender. If and to the extent Borrower shall not have so made such payment in full to
Administrative Agent, each Lender shall repay to Administrative Agent forthwith on demand such
amount distributed to such Lender, together with interest, for each day from the date such amount
is distributed to such Lender until the date such Lender repays such amount to Administrative
Agent, at the Federal Funds Rate for such day.

22

 

     Section 2.16. Sharing of Payments, Etc.
If any Lender shall obtain any payment (whether
voluntary, involuntary, through the exercise of any right of set off, or otherwise) on account of
the Advances or Letter of Credit Obligations made by it in excess of its Pro Rata Share of payments
on account of the Advances or Letter of Credit Obligations obtained by all Lenders (other than as a
result of a termination of a Defaulting Lender’s Commitment under Section 2.6(c)), such
Lender shall notify Administrative Agent and forthwith purchase from the other Lenders such
participations in the Advances made by them or Letter of Credit Obligations held by them as shall
be necessary to cause such purchasing Lender to share the excess payment ratably with each of them;
provided, however, that if all or any portion of such excess payment is thereafter recovered from
such purchasing Lender, such purchase from each Lender shall be rescinded and such Lender shall
repay to the purchasing Lender the purchase price to the extent of such Lender’s ratable share
(according to the proportion of (a) the amount of the participation sold by such Lender to the
purchasing Lender as a result of such excess payment to (b) the total amount of such excess
payment) of such recovery, together with an amount equal to such Lender’s ratable share (according
to the proportion of (i) the amount of such Lender’s required repayment to the purchasing Lender to
(ii) the total amount of all such required repayments to the purchasing Lender) of any interest or
other amount paid or payable by the purchasing Lender in respect of the total amount so recovered.
Borrower agrees that any Lender so purchasing a participation from another Lender pursuant to this
Section 2.16 may, to the fullest extent permitted by law, exercise all its rights of
payment (including the right of set off) with respect to such participation as fully as if such
Lender were the direct creditor of Borrower in the amount of such participation. The provisions of
this Section 2.16 shall not be construed to apply to any payment made by Borrower pursuant
to and in accordance with the express terms of this Agreement or any payment obtained by a Lender
as consideration for the assignment of or sale of a participation in any of its Advances or
participations in Letter of Credit Exposure to any assignee or participant, other than to Borrower
or any Guarantor or Affiliate thereof (as to which the provisions of this Section 2.16
shall apply). If a Lender fails to make an Advance with respect to a Borrowing as and when
required hereunder and Borrower subsequently makes a repayment of any Advances, such repayment
shall be split among the non-defaulting Lenders ratably in accordance with their respective
Commitment percentages until each Lender (including the Defaulting Lender) has its percentage of
all of the outstanding Advances and the balance of such repayment shall be applied among Lenders in
accordance with their Pro Rata Share.

     Section 2.17. Breakage Costs.
If (a) any payment of principal of any Eurodollar Rate
Advance is made other than on the last day of the Interest Period for such Advance, whether as a
result of any payment pursuant to Section 2.7, the acceleration of the maturity of the
Notes pursuant to Article VII, or otherwise, or (b) Borrower fails to make a principal or
interest payment with respect to any Eurodollar Rate Advance on the date such payment is due and
payable, Borrower shall, within 10 days of any written demand sent by any Lender to Borrower
through Administrative Agent, pay to Administrative Agent for the account of such Lender any
amounts required to compensate such Lender for any additional losses, out of pocket costs or
expenses which it may reasonably incur as a result of such payment or nonpayment, including,
without limitation, any loss (including loss of anticipated profits), cost or expense incurred by
reason of the liquidation or reemployment of deposits or other funds acquired by any Lender to fund
or maintain such Advance.

23

 

     Section 2.18. Increased Costs.

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

          (i) impose, modify or deem applicable any reserve, special deposit, compulsory loan, insurance
charge or similar requirement against assets of, deposits with or for the account of, or credit
extended or participated in by, any Lender (except any reserve requirement reflected in the
Eurodollar Rate) or the Issuing Lender;

          (ii) subject any Lender or the Issuing Lender to any tax of any kind whatsoever with respect
to this Agreement, any Letter of Credit, any participation in a Letter of Credit or any Eurodollar
Rate Advance made by it, or change the basis of taxation of payments to such Lender or the Issuing
Lender in respect thereof (except for Indemnified Taxes or Other Taxes covered by Section
2.19 and the imposition of, or any change in the rate of, any Excluded Tax payable by such
Lender or the Issuing Lender); or

          (iii) impose on any Lender or the Issuing Lender or the London interbank market any other
condition, cost or expense affecting this Agreement or Eurodollar Rate Advances made by such Lender
or any Letter of Credit or participation therein;

and the result of any of the foregoing shall be to increase the cost to such Lender or Issuing
Lender of making or maintaining any Eurodollar Rate Advance (or of maintaining its obligation to
make any such Eurodollar Rate Advance), or to increase the cost to such Lender or the Issuing
Lender of participating in, issuing or maintaining any Letter of Credit (or of maintaining its
obligation to participate in or to issue any Letter of Credit), or to reduce the amount of any sum
received or receivable by such Lender or the Issuing Lender hereunder (whether of principal,
interest or any other amount) then, upon request of such Lender or the Issuing Lender, Borrower
will pay to such Lender or the Issuing Lender, as the case may be, such additional amount or
amounts as will compensate such Lender or the Issuing Lender, as the case may be, for such
additional costs incurred or reduction suffered.

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

24

 

     (c) Letters of Credit. If any Change in Law shall either impose, modify, or deem
applicable any reserve, special deposit, or similar requirement against letters of credit issued
by, or assets held by, or deposits in or for the account of, the Issuing Lender or impose on the
Issuing Lender any other condition regarding the provisions of this Agreement relating to the
Letters of Credit or any Letter of Credit Obligations, and the result of any event referred to in
the preceding clause (i) or (ii) shall be to increase the cost to the Issuing Lender of issuing or
maintaining any Letter of Credit (which increase in cost shall be determined by the Issuing
Lender’s reasonable allocation of the aggregate of such cost increases resulting from such event),
then, upon demand by the Issuing Lender, Borrower shall pay to the Issuing Lender, from time to
time as specified by the Issuing Lender, additional amounts which shall be sufficient to compensate
the Issuing Lender for such increased cost.

     (d) Delay in Requests. Failure or delay on the part of any Lender or the Issuing
Lender to demand compensation pursuant to this Section shall not constitute a waiver of such Lender
or the Issuing Lender’s right to demand such compensation, provided that Borrower shall not be
required to compensate a Lender or the Issuing Lender pursuant to this Section for any increased
costs incurred or reductions suffered more than 180 days prior to the date that such Lender or the
Issuing Lender, as the case may be, notifies Borrower of the Change in Law giving rise to such
increased costs or reductions and of such Lender’s or the Issuing Lender’s intention to claim
compensation therefor (except 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).

     (e) Mitigation. If any Lender requests compensation under Section 2.18, or
requires Borrower to pay any additional amount to any Lender or any Governmental Authority for the
account of any Lender pursuant to Section 2.19, then such Lender shall use reasonable
efforts to designate a different lending office for funding or booking its Advances hereunder or to
assign its rights and obligations hereunder to another of its offices, branches or affiliates, if,
in the judgment of such Lender, such designation or assignment (i) would eliminate or reduce
amounts payable pursuant to Section 2.18 or Section 2.19, as the case may be, in
the future and (ii) would not subject such Lender to any unreimbursed cost or expense and would not
otherwise be disadvantageous to such Lender. Borrower hereby agrees to pay all costs and expenses
incurred by any Lender in connection with any such designation or assignment.

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

     Section 2.19. Taxes.

     (a) Taxes Not Deducted from Payments to Lenders. All payments made by Borrower under
this Agreement will be made free and clear of and without deduction for Indemnified Taxes. If
Borrower is required by law to deduct any Indemnified Taxes from any sum payable to any Lender, (i)
the sum payable will be increased by an amount so that, after making all required

25

 

deductions
(including deductions applicable to additional sums payable under this Section 2.19(a))
each Lender will receive an amount equal to the sum it would have received had no deductions been
made, (ii) Borrower will deduct from the sum payable to each Lender an amount sufficient to pay the
Taxes and pay the balance to such Lender, and (iii) Borrower will promptly pay the full amount
deducted to the relevant Governmental Authority in accordance with applicable law.

     (b) Other Taxes. In addition, and to the fullest extent permitted by Law, Borrower
agrees to pay any Other Taxes.

     (c) INDEMNIFICATION. WITHOUT DUPLICATION OF ITS OBLIGATION TO PAY INCREASED AMOUNTS
PURSUANT TO SECTION 2.19(a) AND (b), AND SUBJECT TO SECTION 2.19(i), TO TO
THE FULLEST EXTENT PERMITTED BY APPLICABLE LAW, EXCEPT AS PROVIDED IN SECTION 2.19(e)
BELOW, AND UNLESS THERE EXISTS A MATERIAL BREACH OF LENDERS’ REPRESENTATIONS IN THIS AGREEMENT,
BORROWER WILL FOREVER INDEMNIFY ADMINISTRATIVE AGENT, ISSUING LENDER AND LENDERS FROM AND AGAINST
(I) ALL TAXES AND OTHER TAXES IMPOSED BY ANY TAXING AUTHORITY ON AMOUNTS PAYABLE UNDER THIS
SECTION 2.19 AND PAID BY ADMINISTRATIVE AGENT, ISSUING LENDER OR ANY LENDER ON BEHALF OF
BORROWER AND (II) ALL LIABILITIES (INCLUDING PENALTIES, INTEREST AND REASONABLE ATTORNEYS FEES,
EXPENSES AND DISBURSEMENTS) ARISING FROM OR RELATED TO THOSE TAXES AND OTHER TAXES WITHOUT REGARD
TO WHETHER THOSE TAXES OR OTHER TAXES WERE CORRECTLY OR LEGALLY IMPOSED. BORROWER WILL MAKE ANY
PAYMENTS REQUIRED UNDER THIS SECTION 2.19(c) WITHIN 30 DAYS AFTER THE ADMINISTRATIVE AGENT
OR ANY LENDER DELIVERS A WRITTEN NOTICE TO BORROWER THAT (X) IDENTIFIES THE RELEVANT GOVERNMENTAL
AUTHORITY AND THE AMOUNT OF THE TAX OR OTHER TAX IMPOSED, (Y) STATES WITH REASONABLE SPECIFICITY
THE BASIS FOR THAT TAX OR OTHER TAX, AND (Z) CERTIFIES THAT ADMINISTRATIVE AGENT OR SUCH LENDER HAS
PAID THE TAX OR OTHER TAX IMPOSED. THE INDEMNIFICATION OBLIGATIONS OF BORROWER UNDER THIS
SECTION 2.19(C) WILL SURVIVE THE REPAYMENT OF THE OBLIGATIONS AND THE TERMINATION OF THIS
AGREEMENT.

     (d) Certification of Tax Status By Any Lender. Each Lender will promptly (i) execute
and deliver to Borrower a duly completed copy of United States Internal Revenue Service Form W
8BEN, W-81MY or W-8ECI (as applicable), certifying in either case that such Lender is entitled to
receive payments under this Agreement without deduction or withholding of any United States federal
income taxes, and (ii) deliver to Borrower a United States Internal Revenue Service Form W-8 or W-9
(as applicable) and certify that such Lender is entitled to an exemption from United States backup
withholding tax. Each Lender further agrees to deliver to Borrower (x) renewals or additional
copies of such forms (or any successor forms) on or before the date that such forms expire or
become obsolete, and (y) after the occurrence of any event requiring a change in the most recent
forms delivered by it, additional forms or amendments to those forms as may be reasonably requested
by Borrower. All forms or amendments described in the preceding sentence will include a
certification by each Lender that it is entitled to receive payments under this Agreement without
deduction or withholding of any United States federal

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income taxes, unless an event (including a
change in applicable law) has occurred prior to the date on which any such delivery would otherwise
be required which renders all such forms inapplicable or which would prevent such Lender from duly
completing and delivering any such form or amendment with respect to it and such Lender advises
Borrower in writing that such Lender is not capable of receiving payments without any deduction or
withholding of United States federal income tax.

     (e) Certain Events Not Entitled to Indemnification. For any period during which any
Lender has failed to provide Borrower with an appropriate form pursuant to Section 2.19(d)
above (and unless the failure is due to a change in applicable law or a change in the
interpretation or administration of any applicable law by any Governmental Authority, occurring
after the date on which a form was required to be provided), such Lender will not be entitled to
indemnification under this Section 2.19 with respect to Taxes imposed by the United States.
If, however, a Lender becomes subject to Taxes because of its failure to deliver a form required
under Section 2.19(d) above, Borrower shall take such steps as such Lender may reasonably
request to assist such Lender in recovering those Taxes.

     (f) Documentation of Exemptions. If any Lender is entitled to an exemption from or
reduction of withholding tax with respect to payments under any Loan Document pursuant to
applicable law of any relevant jurisdiction, such Lender will deliver to Borrower, at the time or
times prescribed by applicable aw, properly completed and executed documentation required by law so
as to permit those payments to be made without withholding or at a reduced rate of withholding.

     (g) Indemnification By Lender for Certain Tax Claims. If the United States Internal
Revenue Service or any other Governmental Authority asserts a claim against Borrower alleging that
it did not properly withhold tax from amounts paid to or for the account of any Lender (for any
reason, including because the relevant form was not delivered or was not properly completed or
because such Lender failed to notify Borrower of a change in circumstances that rendered its
exemption from withholding ineffective), then such Lender will indemnify Borrower from and against
all amounts paid, directly or indirectly, by Borrower as tax or withholding for any tax (and
including reasonable attorneys fees, expenses and disbursements together with penalties and
interest imposed by Governmental Authority on amounts payable to Borrower under this subsection).
The indemnification obligations of any Lender under this Section 2.19(g) will survive the
repayment of the Obligations and the termination of this Agreement.

     (h) Designation of Substitute Lending Office. Each Lender will, at Borrower’s request
following the occurrence of any event giving rise to the operation of this Section 2.19,
use commercially reasonable efforts (subject to overall policy considerations of such Lender) to
designate a substitute lending office, but provided that such designation is made on such terms
that such Lender and its lending office suffer no economic, legal or regulatory disadvantage, with
the object of avoiding the consequence of the event giving rise to the operation of this
Section 2.19. Nothing in this Section 2.19(h) will affect or postpone any of the
obligations of Borrower or the rights of any Lender provided in this section.

     (i) Effect of Tax Refund. Each Lender will use its commercially reasonable efforts to
obtain in a timely fashion any refund, deduction or credit of any Taxes or Other Taxes paid or

27

 

reimbursed by Borrower pursuant to this Section 2.19. If any Lender receives a benefit in
the nature of a refund, deduction or credit (including a refund in the form of a deduction from or
credit against taxes that are otherwise payable by a Lender) of any Taxes or Other Taxes with
respect to which Borrower have made a payment under this Section 2.19, such Lender will
notify and reimburse Borrower (promptly after such Lender reasonably determines that such refund,
deduction or credit has become final) to the extent of the benefit of such refund, deduction or
credit, including any interest paid by the relevant Governmental Authority. Nothing in this
Section 2.19 will, however, require any Lender to make available its tax returns (or any
other information relating to its taxes which it deems to be confidential) or to attempt to obtain
any refund, deduction or credit (including any interest paid by the relevant Governmental Authority
and received by any Lender), if any Lender determines that doing so could be inconsistent with any
reporting position otherwise taken by such Lender on its tax returns.

     Section 2.20. Replacement of Lender.
If any Lender requests compensation under Section
2.18(a) or Section 2.18(b), (a) any Lender suspends its obligation to continue, or
Convert Advances into, Eurodollar Rate Advances pursuant to Section 2.5(c)(ii) or
Section 2.16, any Lender becomes a Defaulting Lender, or (b) any Lender is a
Non-Consenting Lender (any such Lender, a “Subject Lender”), then (i) in the case of a
Defaulting Lender, Administrative Agent may, upon notice to the Subject Lender and Borrower,
require such Subject Lender to assign and delegate, without recourse (in accordance with and
subject to the restrictions contained in, and consents required by, Section 9.6), all of
its interests, rights and obligations under this Agreement and the related Loan Documents to an
Eligible Assignee that shall assume such obligations (which Eligible Assignee may be another
Lender, if a Lender accepts such assignment) and (ii) in the case of any Subject Lender, including
a Defaulting Lender, Borrower may, upon notice to the Subject Lender and Administrative Agent and
at Borrower’s sole cost and expense, require such Subject Lender to assign, without recourse (in
accordance with and subject to the restrictions contained in, and consents required by, Section
9.6), all of its interests, rights and obligations under this Agreement and the related Loan
Documents to an assignee that shall assume such obligations (which assignee may be another Lender,
if a Lender accepts such assignment), provided that:

          (A) as to assignments required by Borrower, Borrower shall have paid to Administrative
Agent the assignment fee specified in Section 9.6;

          (B) such Subject Lender shall have received payment of an amount equal to the
outstanding principal of its Advances and participations in outstanding Letter of Credit
Obligations, accrued interest thereon, accrued fees and all other amounts payable to it
hereunder and under the other Loan Documents (including any amounts under Section
2.17) from the assignee (to the extent of such outstanding principal and accrued
interest and fees) or Borrower (in the case of all other amounts);

          (C) in the case of any such assignment resulting from a claim for compensation under
Section 2.18, such assignment will result in a reduction in such compensation or
payments thereafter;

          (D) such assignment does not conflict with applicable Legal Requirements; and

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          (E) with respect to a Non-Consenting Lender, the proposed agreement, amendment,
waiver, consent or release with respect to this Agreement or any other Loan Document
(including any increases to the Borrowing Base) has been Approved by the Required Lenders
and such agreement, amendment, waiver, consent or release can be effected as a result of
the assignment contemplated by this Section.

A Lender shall not be required to make any such assignment or delegation if, prior thereto, as a
result of a waiver by such Lender or otherwise, the circumstances entitling Borrower to require
such assignment and delegation cease to apply. Solely for purposes of effecting the assignment
required for a Defaulting Lender under this Section 2.20 and to the extent permitted under
applicable Legal Requirements, each Lender hereby designates and appoints Administrative Agent as
true and lawful agent and attorney-in-fact, with full power and authority, for and on behalf of and
in the name of such Lender to execute, acknowledge and deliver the Assignment and Acceptance
required hereunder if such Lender was a Defaulting Lender and such Lender shall be bound thereby as
fully and effectively as if such Lender had personally executed, acknowledged and delivered the
same. In lieu of Borrower or Administrative Agent replacing a Defaulting Lender as provided in
this Section 2.20, Borrower may terminate such Defaulting Lender’s Commitment as provided
in Section 2.6.

ARTICLE III

CONDITIONS

     Section 3.1. Conditions Precedent to Initial Borrowings.
The obligations of each Lender to
make the initial Advance shall be subject to the conditions precedent that:

     (a) Documentation. Administrative Agent shall have received the following duly
executed by all the parties thereto, in form and substance satisfactory to Administrative Agent,
the Issuing Lender and Lenders, and, where applicable, in sufficient copies for each Lender:

          (i) this Agreement, a Note payable to the order of each Lender in the amount of its
Commitment, the Guaranties, the Pledge Agreement, the Security Agreements, and Mortgages
encumbering at least 90% (by value) of Borrower’s Proved Reserves and associated Oil and Gas
Properties in connection therewith, and each of the other Loan Documents, and all attached exhibits
and schedules;

          (ii) a favorable opinion of Borrower’s and the Guarantors’ counsel dated as of the date of
this Agreement and substantially in the form of the attached Exhibit K covering the matters
discussed in such Exhibit and such other matters as Administrative Agent may reasonably request;

          (iii) copies, certified as of the date of this Agreement by a Responsible Officer of Borrower
of (A) the resolutions of the Board of Directors of Borrower approving the Loan Documents to which
Borrower is a party, (B) the certificate of incorporation of Borrower, (C) the bylaws of Borrower
and (D) all other documents evidencing other necessary corporate action and governmental approvals,
if any, with respect to this Agreement, the Note, and the other Loan Documents;

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          (iv) certificates of a Responsible Officer of Borrower certifying the names and true
signatures of the officers of Borrower authorized to sign this Agreement, the Notes, Notices of
Borrowing, Notices of Conversion or Continuation, and the other Loan Documents to which Borrower is
a party;

          (v) copies, certified as of the date of this Agreement by a Responsible Officer or the
secretary or an assistant secretary of each Guarantor of (A) the resolutions of the Board of
Directors (or other applicable governing body) of such Guarantor approving the Loan Documents to
which it is a party, (B) the articles or certificate (as applicable) of incorporation (or
organization) and bylaws of such Guarantor, and (C) all other documents evidencing other necessary
corporate action and governmental approvals, if any, with respect to the Guaranty, the Security
Instruments, and the other Loan Documents to which such Guarantor is a party;

          (vi) a certificate of the secretary or an assistant secretary of each Guarantor certifying the
names and true signatures of officers of such Guarantor authorized to sign the Guaranty, Security
Instruments and the other Loan Documents to which such Guarantor is a party;

          (vii) appropriate UCC-1 and UCC-3, as applicable, Financing Statements covering the Collateral
for filing with the appropriate authorities and any other documents, agreements or instruments
necessary to create an Acceptable Security Interest in such Collateral;

          (viii) insurance certificates naming Administrative Agent as additional insured, or loss
payee, as applicable, and evidencing insurance which meets the requirements of this Agreement and
the Security Instruments, and which is otherwise satisfactory to Administrative Agent;

          (ix) the initial Independent Engineer’s Report dated effective as of a date acceptable to
Administrative Agent;

          (x) certificates of good standing for Borrower and the Guarantors in each state in which each
such Person is organized or qualified to do business, which certificate shall be acceptable to
Administrative Agent;

          (xi) a certificate dated as of the date of this Agreement from the Responsible Officer of
Borrower stating that (A) all representations and warranties of Borrower set forth in this
Agreement are true and correct in all material respects as of such date (except in the case of
representations and warranties that are made solely as of an earlier date or time, which
representations and warranties shall be true and correct in all material respects as of such
earlier date or time); (B) no Default has occurred and is continuing; and (C) the conditions in
this Section 3.1 have been met;

          (xii) a list of current purchasers of Hydrocarbons produced from the Oil and Gas Properties
and contact information and addresses for each purchaser;

          (xiii) such other documents, governmental certificates, agreements and lien searches as
Administrative Agent may reasonably request; and

30

 

          (xiv) consent, in form and substance satisfactory to Administrative Agent, from Blackstone
Minerals Company L.P. (or its appropriate Affiliate) to the Mortgage (for Oil & Gas Properties
located in the State of Texas), enforcement of same and all rights and remedies granted thereunder.

     (b) Payment of Fees. On the date of this Agreement, Borrower shall have paid the fees
required by Section 2.13 and all costs and expenses that have been invoiced and are payable
pursuant to Section 9.4.

     (c) Delivery of Financial Statements. Administrative Agent and Lenders shall have
received true and correct copies of the Financial Statements, the Interim Financial Statements
and such other financial information as Administrative Agent may reasonably request.

     (d) Security Instruments. Administrative Agent shall have received all appropriate
evidence required by Administrative Agent and Lenders in their sole discretion necessary to
determine that Administrative Agent (for its benefit and the benefit of the Secured Parties) shall
have an Acceptable Security Interest in the Collateral and that all actions or filings necessary to
protect, preserve and validly perfect such Liens have been made, taken or obtained, as the case may
be, and are in full force and effect.

     (e) Title. Administrative Agent shall be satisfied in its sole discretion with the
title to the Oil and Gas Properties included in the Borrowing Base and that such Oil and Gas
Properties constitute at least 90% of the present value of the Proved Reserves of Borrower as
determined by Administrative Agent in its sole discretion.

     (f) No Default. No Default shall have occurred and be continuing.

     (g) Representations and Warranties. The representations and warranties contained in
Article IV and in each other Loan Document shall be true and correct in all material
respects.

     (h) Material Adverse Change. No event or circumstance that could cause a Material
Adverse Change shall have occurred since December 31, 2009.

     (i) No Proceeding or Litigation; No Injunctive Relief. No action, suit, investigation
or other proceeding (including, without limitation, the enactment or promulgation of a statute or
rule) by or before any arbitrator or any Governmental Authority shall be threatened or pending and
no preliminary or permanent injunction or order by a state or federal court shall have been entered
(i) in connection with this Agreement or any transaction contemplated hereby or (ii) which, in any
case, in the judgment of Administrative Agent, could reasonably be expected to result in a Material
Adverse Change (other than the developments under the litigation proceedings set forth on
Schedule 4.7 which have been disclosed to Administrative Agent prior to the Effective
Date).

     (j) Consents, Licenses, Approvals, etc. Administrative Agent shall have received true
copies (certified to be such by Borrower or other appropriate party) of all consents, licenses and
approvals required in accordance with applicable law, or in accordance with any document,
agreement, instrument or arrangement to which Borrower and the Guarantors is a party, in connection
with the execution, delivery, performance, validity and enforceability of this

31

 

Agreement, and the
other Loan Documents. In addition, Borrower and the Guarantors shall have all such material
consents, licenses and approvals required in connection with the continued operation of Borrower
and the Guarantors, and such approvals shall be in full force and effect, and all applicable
waiting periods shall have expired without any action being taken or threatened by any competent
authority which would restrain, prevent or otherwise impose material and adverse conditions on this
Agreement and the actions contemplated hereby.

     (k) Hedging Arrangements. In addition to the Hydrocarbon Hedge Agreements detailed on
Schedule 4.19, Borrower shall have entered into Hydrocarbon Hedge Agreements in the form of
Hedge Contracts satisfactory to Administrative Agent which shall result in such term, notional
amounts or volumes hedged in compliance with Schedule 3.1(k).

     (l) Repayment of Other Debt. Prior to, or concurrently with, the making of the
initial Advances hereunder, all outstanding obligations owing under the JPMorgan Credit Facility
shall have been paid in full and Administrative Agent shall have received a “pay-off” letter (or
such other evidence) in form and substance satisfactory to Administrative Agent with respect to all
such Debt; and Administrative Agent shall have received from any Person holding any Lien securing
any such Debt, such UCC (or equivalent) assignment or termination statements, mortgage assignments
or releases, assignments or releases of assignments of leases and rents, and other instruments, in
each case in proper form for recording or filing, as Administrative Agent shall have requested to
evidence the assignment or, where applicable, the release and termination, of the Liens securing
such Debt.

     (m) USA PATRIOT Act. Borrower has delivered to each Lender that is subject to the
PATRIOT Act such information requested by such Lender in order to comply with the PATRIOT Act.

     (n) Deposit Accounts. As of the Effective Date of this Agreement, arrangements
satisfactory to Administrative Agent shall have been made for Borrower and the Guarantors to
maintain their Deposit Accounts with an Acceptable Bank pursuant to Section 6.23.

     (o) Minimum Production Report. Administrative Agent shall have received reports or
other evidence satisfactory to it confirming that the minimum volume production for the month
ending November 30, 2010, for all Oil and Gas Properties of Borrower, was at or above 990 MMcfe.

     (p) Bureau of Ocean Energy, Management, Regulation and Enforcement. (A) All Bureau of
Ocean Energy, Management, Regulation and Enforcement (“BOEM”) bonds for environmental
liabilities shall have been funded to Administrative Agent’s satisfaction, and (B) Borrower shall
have provided all documentation and taken all steps necessary and sufficient such that
Administrative Agent or a designee of Administrative Agent will be included as a signatory on the
signatory qualification card on file with the BOEM and any corresponding instrument with any
applicable state regulatory body; provided, however, when Administrative Agent or its designee
becomes such signatory, Administrative Agent or its designee shall only be able to sign BOEM or
applicable state regulatory authority documents on behalf of Borrower if an Event of Default has
occurred and is continuing.

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     (q) Post-Closing Conditions. Within thirty (30) days of the Effective Date, Borrower
shall deliver to Administrative Agent :

          (i) an environmental review by an environmental consultant satisfactory to Administrative
Agent covering the Oil and Gas Properties included in the Borrowing Base pursuant to Section
2.2(b); such review to be in form and content satisfactory to Administrative Agent. Borrower
shall fully cooperate with Administrative Agent and the environmental consultant in the preparation
and delivery of such environmental review; and

          (ii) Borrower shall have entered into Hydrocarbon Hedge Agreements in the form of Hedge
Contracts satisfactory to Administrative Agent which shall result in such term, notional amounts or
volumes hedged in compliance with Schedule 3.1(q)(ii).

     Section 3.2. Conditions Precedent to All Borrowings.
The obligation of each Lender to make
an Advance on the occasion of each Borrowing and of the Issuing Lender to issue, increase, or
extend any Letter of Credit shall be subject to the further conditions precedent that on the date
of such Borrowing or the date of the issuance, increase, or extension of such Letter of Credit:

     (a) the following statements shall be true (and each of the giving of the applicable Notice of
Borrowing, Notice of Conversion or Continuation, or Letter of Credit Application and the acceptance
by Borrower of the proceeds of such Borrowing or the issuance, increase, or extension of such
Letter of Credit shall constitute a representation and warranty by Borrower that on the date of
such Borrowing or on the date of such issuance, increase, or extension of such Letter of Credit, as
applicable, such statements are true):

          (i) the representations and warranties contained in Article IV and the representations
and warranties contained in the Security Instruments, the Guaranties, and each of the other Loan
Documents are true and correct in all material respects (except that such materiality qualifier
shall not be applicable to any representations and warranties that already are qualified or
modified by materiality in the text thereof) on and as of the date of such Borrowing or the date of
the issuance, increase, or extension of such Letter of Credit, before and after giving effect to
such Borrowing or to the issuance, increase, or extension of such Letter of Credit and to the
application of the proceeds from such Borrowing, as though made on and as of such date except to
the extent that any such representation or warranty expressly relates solely to an earlier date, in
which case it shall have been true and correct in all material respects (except that such
materiality qualifier shall not be applicable to any representations and warranties that already
are qualified or modified by materiality in the text thereof) as of such earlier date; and

          (ii) no Default has occurred and is continuing or would result from such Borrowing or from the
application of the proceeds therefrom, or would result from the issuance, increase, or extension of
such Letter of Credit; and

     (b) Administrative Agent shall have received such other approvals, opinions, or documents
reasonably deemed necessary or desirable by any Lender as a result of circumstances occurring after
the date of this Agreement, as Administrative Agent may reasonably request.

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ARTICLE IV

REPRESENTATIONS AND WARRANTIES

     Borrower represents and warrants as follows:

     Section 4.1. Existence.
Borrower is a corporation duly organized, validly existing and in
good standing under the laws of Delaware. Borrower is in good standing and qualified to do
business in each other jurisdiction where its ownership or lease of Property or conduct of its
business requires such qualification, except where the failure to be in good standing could not
reasonably be expected to result in a Material Adverse Change. Each Guarantor is duly organized,
validly existing, and in good standing under the laws of its jurisdiction of formation and, except
where the failure to be in good standing could reasonably be expected to result in a Material
Adverse Change, is in good standing and qualified to do business in each jurisdiction where its
ownership or lease of Property or conduct of its business requires such qualification. As of the
date hereof, Borrower has no Subsidiaries other than those identified in Schedule 4.1.

     Section 4.2. Power.
The execution, delivery, and performance by Borrower of this
Agreement, the Notes, and the other Loan Documents to which it is a party and by the Guarantors of
the Guaranties and the other Loan Documents to which they are a party and the consummation of the
transactions contemplated hereby and thereby (a) are within Borrower’s and such Guarantors’
governing powers, (b) have been duly authorized by all necessary governing action, (c) do not
contravene (i) Borrower’s or any Guarantor’s certificate or articles of incorporation, bylaws,
limited liability company agreement, or other similar governance documents or (ii) any law or any
contractual restriction binding on or affecting Borrower or any Guarantor, and (d) will not result
in or require the creation or imposition of any Lien prohibited by this Agreement.

     Section 4.3. Authorization and Approvals.
No consent, order, authorization, or approval or
other action by, and no notice to or filing with, any Governmental Authority or any other Person is
required for the due execution, delivery, and performance by Borrower of this Agreement, the Notes,
or the other Loan Documents to which Borrower is a party or by each Guarantor of its Guaranty or
the other Loan Documents to which it is a party or the consummation of the transactions
contemplated thereby, except for (a) the filing of UCC-1 financing statements and Mortgages in the
state and county filing offices and (b) those consents and approvals that have been obtained or
made on or prior to the date hereof and that are in full force and effect.

     Section 4.4. Enforceable Obligations.
This Agreement, the Notes, and the other Loan
Documents to which Borrower is a party have been duly executed and delivered by Borrower and the
Guaranties and the other Loan Documents to which each Guarantor is a party have been duly executed
and delivered by the Guarantors. Each Loan Document is the legal, valid, and binding obligation of
Borrower and each Guarantor which is a party to it enforceable against Borrower and each such
Guarantor in accordance with its terms, except as such enforceability may be limited by any
applicable bankruptcy, insolvency, reorganization, moratorium, fraudulent conveyance or transfer,
or similar law affecting creditors’ rights generally and by general principles of equity.

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     Section 4.5. Financial Statements.

     (a) Borrower has delivered to Administrative Agent and Lender copies of the Financial
Statements and the Interim Financial Statements, and the Financial Statements and the Interim
Financial Statements present fairly in all material respects the financial position of Borrower and
its consolidated Subsidiaries for their respective period in accordance with GAAP, subject to
year-end adjustments and the absence of footnotes in the case of the Interim Financial Statements.
As of the date of the Financial Statements, there were no material contingent obligations,
liabilities for taxes, unusual forward or long term commitments, or unrealized or anticipated
losses of Borrower or any Guarantor, except as disclosed therein and adequate reserves for such
items have been made in accordance with GAAP.

     (b) Since December 31, 2009, no event or circumstance that could reasonably be expected to
cause a Material Adverse Change has occurred.

     (c) As of the date hereof and after giving effect to the payment in full of the obligations
outstanding under the JPMorgan Credit Facility, Borrower and the Guarantors have no Debt other than
the Debt listed on Schedule 4.5.

     Section 4.6. True and Complete Disclosure.
All factual information (excluding estimates,
projections and proforma financial information) heretofore or contemporaneously furnished by or on
behalf of Borrower or any of the Guarantors in writing to any Lender or Administrative Agent for
purposes of or in connection with this Agreement, any other Loan Document or any transaction
contemplated hereby or thereby is, and all other such factual information hereafter furnished by or
on behalf of Borrower and the Guarantors in writing to Administrative Agent or any of the Lenders
was or shall be, true and accurate in all material respects on the date as of which such
information was or is dated or certified and did not or does not contain any untrue statement of a
material fact or omit to state any material fact necessary to make the statements contained therein
not misleading at such time. All projections, estimates, and pro forma financial information
furnished by Borrower were prepared on the basis of assumptions, data, information, tests, or
conditions believed to be reasonable at the time such projections, estimates, and pro forma
financial information were furnished.

     Section 4.7. Litigation; Compliance with Laws.

     (a) There is no pending or, to the knowledge of Borrower, threatened action or proceeding
affecting Borrower or any of the Guarantors before any court, Governmental Authority or arbitrator
which could reasonably be expected to cause a Material Adverse Change other than as set forth in
Schedule 4.7 or which purports to affect the legality, validity, binding effect or
enforceability of this Agreement, any Note, or any other Loan Document. As of the Effective Date,
there is no pending or, to the knowledge of Borrower, threatened action or proceeding instituted
against Borrower or any of the Guarantors which seeks to adjudicate Borrower or any of the
Guarantors as bankrupt or insolvent, or seeking liquidation, winding up, reorganization,
arrangement, adjustment, protection, relief, or composition of it or its debts under any law
relating to bankruptcy, insolvency or reorganization or relief of debtors, or seeking the entry of
an order for relief or the appointment of a receiver, trustee or other similar official for it or
for any substantial part of its Property.

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     (b) Borrower and the Guarantors have complied in all material respects with all material
statutes, rules, regulations, orders and restrictions of any Governmental Authority having
jurisdiction over the conduct of their respective businesses or the ownership of their respective
Property.

     Section 4.8. Use of Proceeds.
The proceeds of the Advances will be used by Borrower for
the purposes described in Section 5.9. Neither Borrower nor any Guarantor is engaged in
the business of extending credit for the purpose of purchasing or carrying margin stock (within the
meaning of Regulation U). No proceeds of any Advance will be used to purchase or carry any margin
stock in violation of Regulation T, U or X.

     Section 4.9. Investment Company Act.
Neither Borrower nor any of the Guarantors is an
“investment company” or a company “controlled” by an “investment company” within the meaning of the
Investment Company Act of 1940, as amended.

     Section 4.10. Taxes.

     (a) Reports and Payments. All Returns (as defined below in clause (c) of this
Section) required to be filed by or on behalf of Borrower, the Guarantors, or any member of the
Controlled Group (hereafter collectively called the “Tax Group”) have been duly filed on a
timely basis or appropriate extensions have been obtained and such Returns are and will be true,
complete and correct, except where the failure to so file would not be reasonably expected to cause
a Material Adverse Change; and all Taxes shown to be payable on the Returns or on subsequent
assessments with respect thereto will have been paid in full on a timely basis, and no other Taxes
will be payable by the Tax Group with respect to items or periods covered by such Returns, except
in each case to the extent of (i) reserves reflected in the Financial Statements and the Interim
Financial Statements, or (ii) Taxes that are being contested in good faith. The reserves for
accrued Taxes reflected in the financial statements delivered to Lenders under this Agreement are
adequate in the aggregate for the payment of all unpaid Taxes, whether or not disputed, for the
period ended as of the date thereof and for any period prior thereto, and for which the Tax Group
may be liable in its own right, as withholding agent or as a transferee of the assets of, or
successor to, any Person.

     (b) Taxes Definition. “Taxes” in this Section 4.10 shall mean all
taxes, charges, fees, levies, or other assessments imposed by any federal, state, local, or foreign
taxing authority, including without limitation, income, gross receipts, excise, real or personal
property, sales, occupation, use, service, leasing, environmental, value added, transfer, payroll,
and franchise taxes (and including any interest, penalties, or additions to tax attributable to or
imposed on with respect to any such assessment).

     (c) Returns Definition. “Returns” in this Section 4.10 shall mean any
federal, state, local, or foreign report, declaration of estimated Tax, information statement or
return relating to, or required to be filed in connection with, any Taxes, including any
information return or report with respect to backup withholding or other payments of third parties.

     Section 4.11. Pension Plans.
All Plans are in compliance in all material respects with all
applicable provisions of ERISA. No Termination Event has occurred with respect to any Plan,

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and each Plan has complied with and been administered in all material respects in accordance with
applicable provisions of ERISA and the Code. No “accumulated funding deficiency” (as defined in
Section 302 of ERISA) has occurred and there has been no excise tax imposed under Section 4971 of
the Code. No Reportable Event under Section 4043 of ERISA and the regulations issued thereunder
has occurred with respect to any Multiemployer Plan, and each Multiemployer Plan has complied with
and been administered in all material respects with applicable provisions of ERISA and the Code.
The present value of all benefits vested under each Plan (based on the assumptions used to fund
such Plan) did not, as of the last annual valuation date applicable thereto, exceed the value of
the assets of such Plan allocable to such vested benefits. Neither Borrower nor any member of the
Controlled Group has had a complete or partial withdrawal from any Multiemployer Plan for which
there is any withdrawal liability. As of the most recent valuation date applicable thereto,
neither Borrower nor any member of the Controlled Group would become subject to any liability under
ERISA if Borrower or any member of the Controlled Group has received notice that any Multiemployer
Plan is insolvent or in reorganization. Based upon GAAP existing as of the date of this Agreement
and current factual circumstances, Borrower has no reason to believe that the annual cost during
the term of this Agreement to Borrower or any member of the Controlled Group for post-retirement
benefits to be provided to the current and former employees of Borrower or any member of the
Controlled Group under Plans that are welfare benefit plans (as defined in Section 3(1) of ERISA)
could, in the aggregate, reasonably be expected to cause a Material Adverse Change.

     Section 4.12. Condition of Property; Casualties.
Each of Borrower and the Guarantors has
good and defensible title to, or valid leasehold interest in, all of its Oil and Gas Properties as
is customary in the oil and gas industry in all material respects, free and clear of all Liens
except for Permitted Liens. Each of Borrower and the Guarantors has good title to, or valid
leasehold interest in, all of its other material Properties, free and clear of all Liens except for
Permitted Liens. The material Properties used or to be used in the continuing operations of
Borrower and each of the Guarantors are in good repair, working order and condition, normal wear
and tear excepted. Since December 31, 2009, neither the business nor the material Properties of
Borrower and each of the Guarantors, taken as a whole, has been materially and adversely affected
as a result of any fire, explosion, earthquake, flood, drought, windstorm, accident, strike or
other labor disturbance, embargo, requisition or taking of Property or cancellation of contracts,
Permits, or concessions by a Governmental Authority, riot, activities of armed forces, or acts of
God or of any public enemy.

     Section 4.13. No Burdensome Restrictions; No Defaults.

     (a) Other than those identified on Schedule 4.13(a), neither Borrower nor any
Guarantor is a party to any indenture, loan, or credit agreement or any lease or other agreement or
instrument or subject to any charter or corporate restriction or provision of applicable law or
governmental regulation that could reasonably be expected to cause a Material Adverse Change.
Neither Borrower nor any of the Guarantors is in default in any material respect under or with
respect to any contract, agreement, lease, or other instrument to which Borrower or any Guarantor
is a party. Neither Borrower nor any of the Guarantors has received any notice of default under
any material contract, agreement, lease, or other instrument to which Borrower or such Guarantor is
a party a copy of which has not been delivered to Administrative Agent.

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     (b) No Default has occurred and is continuing.

     Section 4.14. Environmental Condition.

     (a) Permits, Etc. Borrower and the Guarantors (i) have obtained all Environmental
Permits necessary for the ownership and operation of their respective Properties and the conduct of
their respective businesses; (ii) have at all times been and are in material compliance with all
terms and conditions of such Permits and with all other material requirements of applicable
Environmental Laws; (iii) have not received notice of any material violation or alleged violation
of any Environmental Law or Permit; and (iv) are not subject to any actual, pending or to
Borrower’s knowledge, threatened Environmental Claim, that could reasonably be expected to cause a
Material Adverse Change.

     (b) Certain Liabilities. To Borrower’s knowledge, none of the present or previously
owned or operated Property of Borrower or any Guarantor or of any of their former wholly-owned
Subsidiaries, wherever located, (i) has been placed on or proposed to be placed on the National
Priorities List, or its state or local analogs, or have been otherwise investigated, designated,
listed, or identified as a potential site for removal, remediation, cleanup, closure, restoration,
reclamation, or other response activity under any Environmental Laws; (ii) is subject to a Lien,
arising under or in connection with any Environmental Laws, that attaches to any revenues or to any
Property owned, leased or operated by Borrower or any of the Guarantors, wherever located, which
could reasonably be expected to cause a Material Adverse Change; or (iii) has been the site of any
Release of Hazardous Substances or Hazardous Wastes from present or past operations which has
caused at the site or at any third party site any condition that has resulted in or could
reasonably be expected to result in the need for Response that would cause a Material Adverse
Change.

     (c) Certain Actions. Without limiting the foregoing, (i) all necessary notices have
been properly filed, and no further action is required under current Environmental Law as to each
Response or other restoration or remedial project undertaken by Borrower or the Guarantors on any
of their presently or formerly owned, leased or operated Property and (ii) there are no facts,
circumstances, conditions or occurrences with respect to any Property owned, leased or operated by
Borrower or any of the Guarantors that could reasonably be expected to form the basis of an
Environmental Claim under Environmental Laws that could reasonably be expected to result in a
Material Adverse Change.

     Section 4.15. Permits, Licenses, Etc.
Borrower and the Guarantors possess all
authorizations, Permits, licenses, patents, patent rights or licenses, trademarks, trademark
rights, trade names rights and copyrights which are material to the conduct of their business.
Borrower and the Guarantors manage and operate their business in all material respects in
accordance with all applicable Legal Requirements and prudent industry practices.

     Section 4.16. Gas Contracts.
Neither Borrower nor any of the Guarantors, as of the date
hereof, (a) is obligated in any material respect by virtue of any prepayment made under any
contract containing a “take-or-pay” or “prepayment” provision or under any similar agreement to
deliver Hydrocarbons produced from or allocated to any of Borrower’s Oil and Gas Properties at some
future date without receiving full payment therefor at the time of delivery or (b) except as

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has been disclosed to Administrative Agent, has produced gas, in any material amount, subject to
balancing rights of third parties or subject to balancing duties under Legal Requirements.

     Section 4.17. Liens; Titles, Leases, Etc.
None of the Property of Borrower or any of the
Guarantors is subject to any Lien other than Permitted Liens. On the date of this Agreement, all
governmental actions and all other filings, recordings, registrations, third party consents and
other actions which are necessary to create and perfect the Liens provided for in the Security
Instruments will have been made, obtained and taken in all relevant jurisdictions. Other than as
set forth on Schedule 4.17 and to the extent such could not reasonably be expected to cause
a Material Adverse Change, (i) all leases and agreements for the conduct of business of Borrower
and the Guarantors are valid and subsisting, in full force and effect and there exists no default
or event of default or circumstance which with the giving of notice or lapse of time or both would
give rise to a default by Borrower or any Guarantor, or to Borrower’s knowledge, by any of the
other parties thereto, under any such leases or agreements. Neither Borrower nor any Guarantor is
a party to any agreement or arrangement (other than this Agreement and the Security Instruments),
or subject to any order, judgment, writ or decree, that either restricts or purports to restrict
its ability to grant Liens to secure the Obligations against their respective Properties.

     Section 4.18. Solvency and Insurance.
Before and after giving effect to the making of the
initial Advances (or deemed issuance thereof under Section 2.1(c)), the Borrower is Solvent
and the Borrower and Guarantors are Solvent on a consolidated basis. Furthermore, each of Borrower
and the Guarantors carry insurance required under Section 5.2.

     Section 4.19. Hedging Agreements.
Schedule 4.19 sets forth, as of the date hereof,
a true and complete list of all Interest Hedge Agreements, Hydrocarbon Hedge Agreements, and Hedge
Contracts of Borrower, the material terms thereof (including the type, term, effective date,
termination date and notional amounts or volumes), all credit support agreements relating thereto
(including any margin required or supplied), and the counterparty to each such agreement.

     Section 4.20. Material Agreements.
Schedule 4.20 sets forth a complete and correct
list of all material agreements, leases, indentures, purchase agreements, obligations in respect of
letters of credit, guarantees, joint venture agreements, and other instruments in effect or to be
in effect as of the date hereof (other than the agreements set forth in Schedule 4.19)
providing for, evidencing, securing or otherwise relating to any Debt of Borrower or any the
Guarantors, and all obligations of Borrower or any of the Guarantors to issuers of surety or appeal
bonds issued for account of Borrower or any such Guarantor, and such list correctly sets forth the
names of the debtor or lessee and creditor or lessor with respect to the Debt or lease obligations
outstanding or to be outstanding and the Property subject to any Lien securing such Debt or lease
obligation. Also set forth on Schedule 4.20 is a complete and correct list, as of the date
of this Agreement, of all material agreements (other than Hedge Contracts) of Borrower and the
Guarantors relating to the purchase, transportation by pipeline, gas processing, marketing, sale
and supply of natural gas and other Hydrocarbons and which either (a) has a term longer than 6
months or (b) provides for liabilities of Borrower and the Guarantors in excess of $500,000 over
any 12 month period. To the extent requested, Borrower has heretofore delivered to Administrative
Agent and Lenders a complete and correct copy of all such material credit agreements, indentures,
purchase agreements, contracts, letters of credit, guarantees, joint venture agreements, or other
instruments, including any modifications or supplements thereto, as in effect on the date hereof.

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     Section 4.21. Other Notes.
Borrower and its Affiliates and Subsidiaries are in compliance
with the terms and conditions of, and are not in default under, the Convertible Notes Documents and
the Senior Unsecured Notes Documents.

     Section 4.22. JPMorgan Credit Facility.
Except as provided in the JPMorgan Loan Documents,
Borrower has not altered or modified, or approved any alteration or modifications of the JPMorgan
Notes or other JPMorgan Loan Documents. To Borrower’s knowledge, none of the JPMorgan Notes nor any
of the JPMorgan Loan Documents are subject to any dispute, right of rescission, setoff,
counterclaim or defense of any kind held by any party to the JPMorgan Notes or the JPMorgan Loan
Documents. Neither Borrower nor any other obligor under the JPMorgan Credit Facility has been
released in whole or in part by any other party to the JPMorgan Credit Facility that is not
otherwise reflected in the JPMorgan Loan Documents.

     Section 4.23. Liquidity Position.
As of the Effective Date and after giving effect to all
Advances made on the Effective Date under the Revolving Loan, Schedule 4.23 sets forth a
true and correct statement of Borrower’s liquidity position and credit availability.

ARTICLE V

AFFIRMATIVE COVENANTS

     So long as any Note or any amount under any Loan Document shall remain unpaid, any Letter of Credit
shall remain outstanding, or any Lender shall have any Commitment hereunder, Borrower agrees,
unless the Required Lenders shall otherwise consent in writing, to comply with the following
covenants.

     Section 5.1. Compliance with Laws, Etc.
Borrower shall comply, and cause each of the
Guarantors to comply, in all material respects with all applicable Legal Requirements. Without
limiting the generality and coverage of the foregoing, Borrower shall comply, and shall cause each
of the Guarantors to comply, in all material respects, with all Environmental Laws and all laws,
regulations, or directives with respect to equal employment opportunity and employee safety in all
jurisdictions in which Borrower, or any of the Guarantors do business except to the extent the
failure to do so could not reasonably be expected to cause a Material Adverse Change. Without
limitation of the foregoing, Borrower shall, and shall cause each of the Guarantors to, (a)
maintain and possess all authorizations, Permits, licenses, trademarks, trade names, rights and
copyrights which are necessary to the conduct of its business and (b) obtain, as soon as
practicable, all consents or approvals required from any states of the United States (or other
Governmental Authorities) necessary to grant Administrative Agent an Acceptable Security Interest
in at least 90% by value (or if an Event of Default exists and is continuing, at least 100% by
value at the request of Administrative Agent) of the Proved Reserves attributable to Borrower’s
and the Guarantors’ Oil and Gas Properties.

     Section 5.2. Maintenance of Insurance.

     (a) Borrower shall, and shall cause each of the Guarantors to, procure and maintain or shall
cause to be procured and maintained continuously in effect policies of insurance in form and
amounts and issued by companies, associations or organizations reasonably satisfactory to

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Administrative Agent covering such casualties, risks, perils, liabilities and other hazards
reasonably required by Administrative Agent.

     (b) All certified copies of policies or certificates thereof, and endorsements and
renewals thereof shall be delivered to and retained by Administrative Agent upon its request. All
policies of insurance shall either have attached thereto a “Lender’s loss payable
endorsement” for the benefit of Administrative Agent, as loss payee in form reasonably
satisfactory to Administrative Agent or shall name Administrative Agent as an additional insured,
as applicable. All policies or certificates of insurance shall set forth the coverage, the limits
of liability, the name of the carrier, the policy number, and the period of coverage. In addition,
all policies of insurance required under the terms hereof shall contain an endorsement or agreement
by the insurer that any loss shall be payable in accordance with the terms of such policy
notwithstanding any act of negligence of Borrower, or a Guarantor or any party holding under
Borrower or a Guarantor which might otherwise result in a forfeiture of the insurance and the
further agreement of the insurer waiving all rights of setoff, counterclaim or deductions against
Borrower and the Guarantors. All such policies shall contain a provision that notwithstanding any
contrary agreements between Borrower, the Guarantors, and the applicable insurance company, such
policies will not be canceled, allowed to lapse without renewal, surrendered or amended (which
provision shall include any reduction in the scope or limits of coverage) without at least 30 days’
prior written notice to Administrative Agent. In the event that, notwithstanding the “Lender’s
loss payable endorsement” requirement of this Section 5.2, the proceeds of any
insurance policy described above are paid to Borrower or a Guarantor, to the extent not used, to
repair or replace such assets, Borrower shall deliver such proceeds to Administrative Agent
immediately upon receipt.

     Section 5.3. Preservation of Corporate Existence, Etc. Borrower shall preserve and maintain, and,
except as otherwise permitted herein, cause each the Guarantors to preserve and maintain, its
corporate existence, rights, franchises, and privileges in the jurisdiction of its formation and
qualify and remain qualified, and cause each such Guarantor to qualify and remain qualified, as a
foreign corporation in each jurisdiction in which qualification is necessary or desirable in view
of its business and operations or the ownership of its Properties, and, in each case, where failure
to qualify or preserve and maintain its rights and franchises could reasonably be expected to cause
a Material Adverse Change.

     Section 5.4. Payment of Taxes, Etc. Borrower shall pay and discharge, and cause each of the Guarantors
to pay and discharge, before the same shall become delinquent, (a) all taxes, assessments, and
governmental charges or levies imposed upon it or upon its income or profits or Property that are
material in amount, prior to the date on which penalties attach thereto and (b) all lawful claims
that are material in amount which, if unpaid, might by law become a Lien (other than Permitted
Liens) upon its Property; provided, however, that neither Borrower nor any such Guarantor shall be
required to pay or discharge any such tax, assessment, charge, levy, or claim which is being
contested in good faith and by appropriate proceedings, and with respect to which reserves in
conformity with GAAP have been provided.

     Section 5.5. Visitation Rights. At any reasonable time and from time to time, upon reasonable notice,
Borrower shall, and shall cause the Guarantors to, permit (a) Administrative Agent or any of its
agents or representatives thereof, to examine and make copies of and

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abstracts from the records and books of account of, and visit and inspect at their reasonable discretion the Properties of,
Borrower and any such Guarantor, and (b) Administrative Agent and any Lender or any of their
respective agents or representatives thereof to discuss the affairs, finances and accounts of
Borrower and any such Guarantor with any of their respective officers or directors.

     Section 5.6. Reporting Requirements. Borrower shall furnish to Administrative Agent and each Lender:

     (a) Annual Financials. As soon as available and in any event not later than 120
days after the end of each fiscal year of Borrower and its consolidated Subsidiaries, commencing
with the fiscal year ending December 31, 2010, (i) a copy of the annual audit report for such year
for Borrower and its consolidated Subsidiaries, including therein Borrower’s and its consolidated
Subsidiaries’ balance sheets as of the end of such fiscal year and Borrower’s and its consolidated
Subsidiaries’ statements of income, cash flows, and retained earnings, in each case certified by an
independent certified public accountants of national standing reasonably acceptable to
Administrative Agent and including any management letters delivered by such accountants to Borrower
or any Guarantor in connection with such audit, (ii) any management letters delivered by such
accountants to Borrower, (iii) a consolidating balance sheet and statement of operations of
Borrower together with the Guarantors, and (iv) a Compliance Certificate executed by a Responsible
Officer of Borrower.

     (b) Quarterly Financials. As soon as available and in any event not later than 45
days after the end of each of the first three fiscal quarters of each fiscal year of Borrower and
its consolidated Subsidiaries, (i) commencing with the fiscal quarter ending March 31, 2011, the
unaudited balance sheet and the statements of income, cash flows, and retained earnings of each
such Person for the period commencing at the end of the previous year and ending with the end of
such fiscal quarter, all in reasonable detail and duly certified with respect to such consolidated
statements (subject to year end audit adjustments) by a Responsible Officer of Borrower as having
been prepared in accordance with GAAP, (ii) a consolidating balance sheet and statement of
operations of Borrower together with Guarantors, and (iii) a Compliance Certificate executed by the
Responsible Officer of Borrower.

     (c) Oil and Gas Reserve Reports.

          (i) As soon as available but in any event on or before April 1 of each year thereafter, an
Independent Engineering Report dated effective as of the immediately preceding January 1st;

          (ii) As soon as available but in any event on or before October 1 of each year an Internal
Engineering Report dated effective as of the immediately preceding July 1st;

          (iii) Such other information as may be reasonably requested by Administrative Agent or any
Lender with respect to the Oil and Gas Properties included or to be included in the Borrowing Base;

          (iv) With the delivery of each Engineering Report, a certificate from a Responsible
Officer of Borrower certifying that, to his knowledge and in all material respects:

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(A) the
information contained in the Engineering Report and any other information delivered in
connection therewith is true and correct, (B) except as set forth on an exhibit to the
certificate, on a net basis there are no gas imbalances, take or pay or other prepayments with
respect to its Oil and Gas Properties evaluated in such Engineering Report which would require
Borrower to deliver Hydrocarbons produced from such Oil and Gas Properties at some future time
without then or thereafter receiving full payment therefor, (C) none of its Oil and Gas Properties
have been sold since the date of the last Borrowing Base determination except as set forth on an
exhibit to the certificate, which certificate shall list all of its Oil and Gas Properties sold and
in such detail as reasonably required by the Required Lenders, (D) attached to the certificate is a
list of its Oil and Gas Properties added to and deleted from the immediately prior Engineering
Report and a list showing any change in working interest or net revenue interest in its Oil and Gas
Properties occurring and the reason for such change, (E) attached to the certificate is a list of
all Persons disbursing proceeds to Borrower from its Oil and Gas Properties, and (F) except as set
forth on a schedule attached to the certificate, at least 90% (by value) of the Proved Reserves
(and associated Oil and Gas Properties) evaluated by such Engineering Report are pledged as
Collateral for the Obligations.

     (d) Property Operating Statement. Beginning on the twenty-fifth (25th)
day of the month immediately following the first Advance under the Term Loan and continuing
thereafter, within twenty-five (25) days after the end of each calendar month ( such month being
the “Reported Month”), a POS including:

          (i) attachments prepared by Borrower detailing (A) Sales Volumes associated with cash
payments received during the Reported Month, (B) all cash payments received during the Reported
Month in respect of the Properties, and (C) Borrower’s aged accounts payable at the end of the
Reported Month, and accompanied by a certification of a Responsible Officer, dated as of the date
on which Administrative Agent receives the POS, and certifying that, to the knowledge of the
Responsible Officer, no Default exists under any of the Loan Documents; and

          (ii) a list of invoices paid or to be paid by Borrower to any Person (other than
Administrative Agent) from the revenues described in the preceding Section 5.6(d)(i)(B) and
such other information that Administrative Agent requests from time to time.

     (e) Production and Hedging Reports. As soon as available and in any event within
45 days after the end of each quarter, commencing with the quarter ending December 31, 2010, a
report certified by a Responsible Officer of Borrower in form and substance satisfactory to
Administrative Agent prepared by Borrower (i) covering each of the Oil and Gas Properties of
Borrower and detailing on a quarterly basis (A) the production, revenue, and price information and
associated operating expenses for each such quarter, (B) any changes to any producing reservoir,
production equipment, or producing well during each such quarter, which changes could reasonably be
expected to cause a Material Adverse Change, and (C) any sales of Borrower’s Oil and Gas Properties
during each such quarter, (ii) setting forth a true and complete list of all Hedge Contracts of
Borrower and detailing the material terms thereof (including the type, term, effective date,
termination date and notional amounts or volumes), the net mark to market value thereof, all credit
support agreements relating thereto (including any margin required or supplied), and the
counterparty to each such agreement; provided that, such required

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listing shall, in no event, be
construed as permitting such credit supports which are not permitted under the terms of this
Agreement; and (iii) certifying Borrower’s compliance with Section 5.12;

     (f) Updated Development Plan. Contemporaneous with the delivery of each Reserve
Report bearing an effective date as of January 1st of any year, Borrower will prepare and deliver
to Administrative Agent a revised, proposed Development Plan covering at least the next twelve (12)
months and setting forth all capital expenditure development projects proposed for that period, the
anticipated timing of those projects, the net cost of each of those projects to Borrower and any
other information that Administrative Agent may request. Each proposed modification to the
Development Plan will be subject to the Approval of Administrative Agent, and Borrower acknowledges
that Administrative Agent is not required to Approve any proposed modification to the Development
Plan. Until Administrative Agent has Approved a revised Development Plan, the most recent Approved
Development Plan (and all AFEs Approved in connection with that most recently Approved Development
Plan) will remain in effect.

     (g) Defaults. As soon as possible and in any event within three Business Days
after (i) the occurrence of any Default or (ii) the occurrence of a default under any instrument or
document evidencing Debt of Borrower or any Guarantor, which obligation underlying such Debt does
not exceed a total potential obligation to Borrower or such Guarantor of $500,000 in the aggregate,
in each case known to any Responsible Officer of Borrower or any of the Guarantors which is
continuing on the date of such statement, a statement of a Responsible Officer of Borrower setting
forth the details of such Default or default, as applicable, and the actions which Borrower or such
Guarantor has taken and proposes to take with respect thereto;

     (h) Termination Events. As soon as possible and in any event (i) within 30 days
after Borrower or any member of the Controlled Group knows or has reason to know that any
Termination Event described in clause (a) of the definition of Termination Event with respect to
any Plan has occurred, and (ii) within 10 days after Borrower or any of its Affiliates knows or has
reason to know that any other Termination Event with respect to any Plan has occurred, a statement
of a Responsible Officer of Borrower describing such Termination Event and the action, if any,
which Borrower or such Affiliate proposes to take with respect thereto;

     (i) Termination of Plans. Promptly and in any event within two Business Days
after receipt thereof by Borrower or any member of the Controlled Group from the PBGC, copies of
each notice received by Borrower or any such member of the Controlled Group of the PBGC’s intention
to terminate any Plan or to have a trustee appointed to administer any Plan;

     (j) Other ERISA Notices. Promptly and in any event within five Business Days
after receipt thereof by Borrower or any member of the Controlled Group from a Multiemployer Plan
sponsor, a copy of each notice received by Borrower or any member of the Controlled Group
concerning the imposition or amount of withdrawal liability pursuant to Section 4202 of ERISA;

     (k) Environmental Notices. Promptly upon the receipt thereof by Borrower or any
of the Guarantors, a copy of any form of request, notice, summons or citation received from the
Environmental Protection Agency, or any other Governmental Authority, concerning (i) violations or
alleged violations of Environmental Laws, which seeks to impose liability therefor and could cause
a Material Adverse Change, (ii) any action or omission on the part of Borrower

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or any Guarantor or
any of their former wholly-owned Subsidiaries in connection with Hazardous Waste or Hazardous
Substances which could reasonably result in the imposition of liability therefor that could cause a
Material Adverse Change, including without limitation any
information request related to, or notice of, potential responsibility under CERCLA, or (iii)
concerning the filing of a Lien upon, against or in connection with Borrower or any Guarantor or
their former wholly-owned Subsidiaries, or any of their leased or owned Property, wherever located;

     (l) Other Governmental Notices. Promptly and in any event within five Business
Days after receipt thereof by Borrower or any Guarantor, a copy of any notice, summons, citation,
or proceeding seeking to modify in any material respect, revoke, or suspend any material contract,
license, permit or agreement with any Governmental Authority;

     (m) Material Changes. Prompt written notice of any condition or event of which
Borrower has knowledge, which condition or event (i) has resulted or could reasonably be expected
to result in a Material Adverse Change or (ii) has resulted in a breach of or noncompliance with
any material term, condition, or covenant of any material contract to which Borrower or any of the
Guarantors is a party or by which they or their Properties is bound;

     (n) Disputes, Etc. Prompt written notice of (i) any claims, legal or arbitration
proceedings, proceedings before any Governmental Authority, or disputes pending, or to the
knowledge of Borrower threatened, or affecting Borrower, or any of its Subsidiaries which, if
adversely determined, could reasonably be expected to cause a Material Adverse Change, or any
material labor controversy of which Borrower or any of the Guarantors has knowledge resulting in or
reasonably considered to be likely to result in a strike against Borrower or any of the Guarantors
and (ii) with the exception of any claim listed on Schedule 5.6(n), any claim, judgment,
Lien or other encumbrance (other than a Permitted Lien) affecting any Property of Borrower or any
Guarantor if the value of the claim, judgment, Lien, or other encumbrance affecting such Property
shall exceed $500,000;

     (o) Other Accounting Reports. Promptly upon receipt thereof, a copy of each other
report or letter submitted to Borrower or any Guarantor by independent accountants in connection
with any annual, interim or special audit made by them of the books of Borrower and the Guarantors,
and a copy of any response by Borrower or any Guarantor, or the Board of Directors (or other
applicable governing body) of Borrower or any Guarantor, to such letter or report;

     (p) Notices Under Other Loan Agreements. Promptly after the furnishing thereof,
copies of any statement, report or notice furnished to any Person pursuant to the terms of any
indenture, loan or credit or other similar agreement, other than this Agreement and not otherwise
required to be furnished to Lenders pursuant to any other provision of this Section 5.6;

     (q) USA PATRIOT Act. Promptly, following a request by any Lender, all
documentation and other information that such Lender reasonably requests in order to comply with
its ongoing obligations under applicable “know your customer” and anti-money laundering rules and
regulations, including the PATRIOT Act; and

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     (r) Other Information. Such other information respecting the business or
Properties, or the condition or operations, financial or otherwise, of Borrower or any of the
Guarantors, as Administrative Agent may from time to time reasonably request.

     Section 5.7. Maintenance of Property. Borrower shall, and shall cause each of the Guarantors to,
maintain their owned or leased Property in good condition and repair, normal wear and tear excepted
and maintain their operated Property, as a reasonably prudent operator would, in good condition and
repair, normal wear and tear excepted; provided that no item of equipment needs to be repaired,
renewed, replaced, or improved, if Borrower shall in good faith determine that such action is not
necessary or desirable for the continued efficient and profitable operation of the business of
Borrower; and, further Borrower shall abstain, and cause each of the Guarantors to abstain from,
knowingly or willfully permitting the Release of any Hazardous Material in, on or about the owned,
leased or operated Property except in compliance with Applicable Environmental Law, the Release of
which could reasonably be expected to result in Response activities and that could reasonably be
expected to cause a Material Adverse Change.

     Section 5.8. Agreement to Pledge. Borrower shall, and shall cause each Guarantor to, grant to
Administrative Agent an Acceptable Security Interest in any Property of Borrower or any Guarantor
now owned or hereafter acquired promptly after receipt of a written request from Administrative
Agent.

     Section 5.9. Use of Proceeds. Borrower shall use the proceeds of the Advances (a) to repay the JPMorgan
Credit Facility, (b) to explore, develop, operate and acquire Oil and Gas Properties, (c) to pay
any and all fees due and payable pursuant to or in accordance with this Agreement, and (d) for
general corporate purposes, including working capital needs. Borrower shall use the Letters of
Credit for general corporate purposes.

     Section 5.10. Title Evidence and Opinions. Borrower shall from time to time upon the reasonable request
of Administrative Agent, take such actions and execute and deliver such documents and instruments
as Administrative Agent shall require to ensure that Administrative Agent shall, at all times, have
received satisfactory title evidence, which title evidence shall be in form and substance
acceptable to Administrative Agent in its sole discretion and shall include information regarding
the before payout and after payout ownership interests held by Borrower and the Guarantors, for all
wells located on the Oil and Gas Properties, covering at least 90% of the present value of the
Proved Reserves of Borrower as determined by Administrative Agent.

     Section 5.11. Further Assurances; Cure of Title Defects. Borrower shall, and shall cause each Guarantor
to, cure promptly any defects in the creation and issuance of the Notes and the execution and
delivery of the Security Instruments and this Agreement. Borrower hereby authorizes Administrative
Agent to file any financing statements without the signature of Borrower to the extent permitted by
applicable law in order to perfect or maintain the perfection of any security interest granted
under any of the Loan Documents. Borrower at its expense will, and will cause each Guarantor to,
promptly execute and deliver to Administrative Agent upon request all such other documents,
agreements and instruments to comply with or accomplish the covenants and agreements of Borrower or
any Guarantor, as the case may be, in the Security Instruments and this Agreement, or to further
evidence and more fully describe the collateral intended as security for the Notes, or to correct
any omissions in the Security Instruments, or to

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state more fully the security obligations set out
herein or in any of the Security Instruments, or to perfect, protect or preserve any Liens created
pursuant to any of the Security Instruments, or to make any recordings, to file any notices or
obtain any consents, all as may be necessary or appropriate in connection therewith or to enable
Administrative Agent to exercise and enforce its
rights and remedies with respect to any Collateral. Within 30 days after (a) a request by
Administrative Agent or Lenders to cure any title defects or exceptions which are not Permitted
Liens raised by such information or (b) a notice by Administrative Agent that Borrower has failed
to comply with Section 5.10, Borrower shall (i) cure such title defects or exceptions which
are not Permitted Liens or substitute acceptable Oil and Gas Properties with no title defects or
exceptions except for Permitted Liens covering Collateral of an equivalent value and (ii) deliver
to Administrative Agent satisfactory title evidence (including supplemental or new title opinions
meeting the foregoing requirements) in form and substance acceptable to Administrative Agent in its
reasonable business judgment as to Borrower’s and the Guarantors’ ownership of such Oil and Gas
Properties and Administrative Agent’s Liens and security interests therein as are required to
maintain compliance with Section 5.10.

     Section 5.12. Hedging Arrangements. Borrower shall maintain each Hydrocarbon Hedge Agreement described
in Schedule 4.19 and required by Sections 3.1(k) and 3.1(q)(ii), and each
other BB Hedge until the stated maturity of such Hydrocarbon Hedge Agreement; provided that for any
Hedge Contracts not described in Schedule 4.19 and not required by Sections 3.1(k)
and 3.1(q)(ii), Borrower may modify, amend, assign, unwind, novate or terminate any
such Hedge Contract so long as (a) Borrower has provided at least five Business Days prior written
notice thereof (or such shorter notice as may be accepted by Administrative Agent) to
Administrative Agent in order for Administrative Agent to determine the Net Hedge Value, if any,
resulting from such modification, amendment, novation, or termination, (b) the net cash proceeds,
if any, received by Borrower in connection therewith are applied to the extent necessary to cure
any Borrowing Base deficiency, if any, resulting as a result of Section 2.7(e), (c) the sum
of (i) the aggregate Net Hedge Value of all such transactions occurring between consecutive
scheduled redeterminations of the Borrowing (the “6-Month Period”) plus (ii) the aggregate fair
market value of Oil and Gas Properties subject to Dispositions consummated in such applicable
6-Month Period, shall not exceed 5% of the then effective Borrowing Base, and (d) no more than one
such series of hedge transactions may be consummated during any applicable 6-Month Period.

     Section 5.13. Leases; Development and Maintenance. Borrower shall (a) pay and discharge promptly, or
cause to be paid and discharged promptly, all rentals, delay rentals, royalties, overriding
royalties, payments out of production and other indebtedness or obligations accruing under, and
perform or cause to be performed each and every act, matter or thing required by each and all of,
the oil and gas leases and all other agreements and contracts constituting or affecting the Oil and
Gas Properties of Borrower (except where the amount thereof is being contested in good faith by
appropriate proceedings and except where the non-payment or non-performance of which could not
reasonably be expected to result in a diminution in the aggregate value of Borrower’s Oil and Gas
Properties by more than 1%), (b) in all material respects, do all other things necessary to keep
unimpaired its rights thereunder and prevent any forfeiture thereof or default thereunder, and
operate or cause to be operated such Properties as a prudent operator would in accordance with
industry standard practices and in compliance with all applicable proration and conservation Legal
Requirements and any other Legal Requirements

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of every Governmental Authority, whether state,
federal, municipal or other jurisdiction, from time to time constituted to regulate the development
and operations of oil and gas properties and the production and sale of oil, gas and other
Hydrocarbons therefrom, and (c) maintain (or cause to be maintained) the Leases, wells, units and
acreage to which the Oil and Gas Properties of Borrower pertain in a prudent manner consistent with
industry standard practices.

     Section 5.14. Pledge of Equity in Delta Oilfield Tank Company, LLC. In the event that Borrower and
Pro-Tech Enterprises LLC do not consummate the transaction contemplated by that certain non-binding
letter of intent between Borrower and Pro-Tech Enterprises LLC dated July 2, 2010, by January 30,
2011, then Borrower shall grant to Administrative Agent, for the ratable benefit of Lenders, a
first priority security interest in all of the issued and outstanding Equity Interest of Borrower
in Delta Oilfield Tank Company, LLC. In such event, Borrower and Delta Oilfield Tank Company, LLC
shall execute and deliver to Administrative Agent a Pledge Agreement on or before February 4, 2011.

ARTICLE VI

NEGATIVE COVENANTS

     So long as any Note or any amount under any Loan Document shall remain unpaid, any Letter of
Credit shall remain outstanding, or any Lender shall have any Commitment, Borrower agrees, unless
the Required Lenders otherwise consent in writing, to comply with the following covenants.

     Section 6.1. Liens, Etc. Borrower shall not create, assume, incur, or suffer to exist, or permit any of
the Guarantors to create, assume, incur, or suffer to exist, any Lien on or in respect of any of
its Property whether now owned or hereafter acquired, or assign any right to receive income, except
that Borrower and the Guarantors may create, incur, assume, or suffer to exist:

     (a) Liens granted pursuant to the Security Instruments and securing the Obligations;

     (b) purchase money Liens or purchase money security interests upon or in any equipment
acquired or held by Borrower or any of the Guarantors in the ordinary course of business prior to
or at the time of Borrower’s or such Guarantor’s acquisition of such equipment; provided that, the
Debt secured by such Liens (i) was incurred solely for the purpose of financing the acquisition of
such equipment, and does not exceed the aggregate purchase price of such equipment, (ii) is secured
only by such equipment and not by any other assets of Borrower and the Guarantors, and (iii) is not
increased in amount;

     (c) Liens for taxes, assessments, or other governmental charges or levies not yet due or
not yet delinquent or, if delinquent, that (provided foreclosure, sale, or other similar
proceedings shall not have been initiated) are being contested in good faith by appropriate
proceedings, and such reserve as may be required by GAAP shall have been made therefor;

     (d) Liens in favor of vendors, carriers, warehousemen, repairmen, mechanics, workmen,
materialmen, construction, or similar Liens arising by operation of law in the ordinary course of
business in respect of obligations that are not yet due or that are being contested in good faith
by appropriate proceedings, provided such reserve as may be required by GAAP shall have been made
therefor;

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     (e) royalties, overriding royalties, net profits interests, production payments,
reversionary interests, calls on production, preferential purchase rights and other burdens on or
deductions from the proceeds of production, that do not secure Debt for borrowed money and that are
taken into account in computing the Net Revenue Interests and Working Interests of
Borrower set forth in any Reserve Report warranted in the Security Instruments or in this
Agreement;

     (f) Liens arising in the ordinary course of business out of pledges or deposits under
workers’ compensation laws, unemployment insurance, old age pensions or other social security or
retirement benefits, or similar legislation or to secure public or statutory obligations of
Borrower;

     (g) Liens arising under operating agreements, unitization and pooling agreements and
orders, farmout agreements, gas balancing agreements, and other agreements, in each case that are
customary in the oil, gas and mineral production business and that are entered into by Borrower, or
any Guarantor, in the ordinary course of business provided that (i) such Liens are taken into
account in computing the Net Revenue Interests and Working Interests of Borrower set forth in any
Reserve Report warranted in the Security Instruments or this Agreement, (ii) such Liens do not
secure borrowed money, (iii) such Liens secure amounts that are not yet due, or not yet delinquent,
or if delinquent, are being contested in good faith by appropriate proceedings, if such reserve as
may be required by GAAP shall have been made therefor and (iv) such Liens are limited to the
Properties that are the subject of such agreements;

     (h) easements, rights-of-way, restrictions, and other similar encumbrances, and minor
defects in the chain of title that are customarily accepted in the oil and gas financing industry,
none of which interfere with the ordinary conduct of the business of Borrower or any Guarantor or
materially detract from the value or use of the Property to which they apply, and

     (i) until the Acquisition Letters of Credit are cancelled, terminated and/or released, the
Lien encumbering the Collateral (as defined in the Cash Collateral Agreement) granted by Borrower
to JPMorgan Chase Bank, N.A., as collateral agent under the Cash Collateral Agreement pursuant to
the terms of the Cash Collateral Agreement; and

     (j) Liens on cash collateral securing Debt permitted under Section 6.2(b);
provided that such cash collateral does not exceed $1,500,000 in the aggregate at any time.

     Section 6.2. Debts, Guaranties, and Other Obligations. Borrower shall not, and shall not permit any of
the Guarantors to, create, assume, suffer to exist, or in any manner become or be liable in respect
of, any Debt except:

     (a) Debt of Borrower and the Guarantors under the Loan Documents;

     (b) Debt set forth on Schedule 4.5;

     (c) Debt secured by the Liens permitted under Section 6.1(b) and any renewal,
refinancing or extension of such Debt; provided that (i) no Lien existing at the time of such
renewal, refinancing or extension shall be extended to cover any property not already subject to
such Lien, (ii) the principal amount of any Debt renewed, refinanced or
extended shall not

49

 

exceed
the amount of such Debt outstanding immediately prior to such renewal, refinancing or extension;
and (iii) in any event, the aggregate amount of such Debt at any time shall not exceed $500,000;

     (d) Debt under Hydrocarbon Hedge Agreements which are not prohibited by the terms of
Section 6.15; provided that (i) such Debt shall not be secured, other than such Debt owing
to Hedge Counterparties which are secured under the Loan Documents, (ii) such Debt shall not
obligate Borrower or any of the Guarantors to any margin call requirements including any
requirement to post cash collateral, property collateral or a letter of credit, and (iii) such Debt
shall not include any deferred premium payments associated with such Hedge Contracts;

     (e) Debt consisting of sureties or bonds provided to any Governmental Authority or other
Person and assuring payment of contingent liabilities of Borrower in connection with the operation
of the Oil and Gas Properties, including with respect to plugging, facility removal and abandonment
of its Oil and Gas Properties;

     (f) Debt of Borrower or any Guarantor owing to Borrower or to any other Guarantor;
provided that such Debt is subordinated to the Obligations on terms acceptable to Administrative
Agent in its sole discretion;

     (g) Debt evidenced by letters of credit, surety bonds and other credit assurances and
similar obligations of a like nature; provided that the then maximum obligations owing with respect
to such Debt shall not exceed $1,500,000 in the aggregate at any time and such obligations were
cash-collateralized by Borrower or the applicable Guarantor at the time the obligations were
created ; and

     (h) Other unsecured Debt in an aggregate amount outstanding at any time not to exceed
$500,000.

     Section 6.3. Agreements Restricting Liens and Distributions. Borrower shall not, nor shall it permit
any of the Guarantors to, create, incur, assume or permit to exist any contract, agreement or
understanding (other than this Agreement or Security Instruments) which in any way prohibits or
restricts the granting, conveying, creation or imposition of any Lien on any of its Property,
whether now owned or hereafter acquired, to secure the Obligations or restricts any Guarantor from
paying dividends to Borrower, or which requires the consent of or notice to other Persons in
connection therewith; provided, that the foregoing shall not apply to customary restrictions
imposed on the granting, conveying, creation or imposition of any Lien on any Property of Borrower
or the Guarantors imposed by any contract, agreement or understanding related to the Liens
permitted under Section 6.1(b) so long as such restriction only applies to the Property
permitted under such clause to be encumbered by such Liens.

     Section 6.4. Merger or Consolidation; Asset Sales. Borrower shall not, nor shall it permit any of the
Guarantors to:

     (a) merge or consolidate with or into any other Person; provided that Borrower or any
Guarantor may merge or may be consolidated into Borrower or any Guarantor if Borrower or such
Guarantor is the surviving entity and Borrower may merge or consolidated with any other

50

 

Person so
long as Borrower or such Guarantor is the surviving Person, and, in the case of a Guarantor, a
wholly owned Subsidiary of Borrower; or

     (b) make any Disposition of any of its Property (including, without limitation, any
working interest, overriding royalty interest, production payments, net profits interest, royalty
interest, or mineral fee interest) other than:

          (i) the sale of Hydrocarbons or liquidation of Liquid Investments in the ordinary course
of business;

          (ii) the Disposition of equipment that is (A) obsolete, worn out, depleted or uneconomic
and disposed of in the ordinary course of business, (B) no longer necessary for the business of
such Person or (C) contemporaneously replaced by equipment of at least comparable value and use;

          (iii) the Disposition of Property between or among a Guarantor and Borrower or between or
among Guarantors;

          (iv) the Disposition of Property which is not Oil and Gas Properties attributable to
Proved Reserves and which is not Collateral or which is not otherwise required pursuant to the
terms of this Agreement to be Collateral; provided, however, Borrower and the Guarantors may
dispose of Property described in this Section 6.4(b)(iv) to non-Affiliates in an arm’s
length transaction so long as the maximum aggregate fair market value of all such Property disposed
of does not exceed $500,000 in any given calendar year.

          (v) the Disposition of Oil and Gas Properties which are attributable to Proved Reserves;
provided that, (A) 100% of the consideration received in respect of such Disposition shall be cash
or cash equivalents, (B) the consideration received in respect of such Disposition shall be equal
to or greater than the fair market value of the such Oil and Gas Properties, interest therein
subject of such Disposition (as reasonably determined by the board of directors or the equivalent
governing body of Borrower and, if requested by Administrative Agent, Borrower shall deliver a
certificate of a Responsible Officer of Borrower certifying to that effect), and (C) the aggregate
fair market value of Oil and Gas Properties attributable to Proved Reserves and subject to such
Disposition consummated in the applicable 6-Month Period plus the Net Hedge Value of BB Hedges
which have been novated, assigned, unwound, terminated, or amended during such 6-Month Period,
shall not exceed 5% of the then effective Borrowing Base;

          (vi) farmouts of undeveloped acreage and assignments in connection with such farmouts,
each with the prior Approval of Administrative Agent;

          (vii) the Disposition of the Equity Interests of Subsidiaries that are not Guarantors with
the prior Approval of Administrative Agent; and

          (viii) the settlement of joint interest billing accounts in the ordinary course of
business or discounts granted to settle collection of accounts receivable or the sale of defaulted
accounts receivable arising in the ordinary course of business in connection with the compromise or
collection thereof and not in connection with any financing transaction.

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     Section 6.5. Restricted Payments. Borrower shall not, nor shall it permit any of the Guarantors to,
make any Restricted Payments except that if (a) no Default has occurred both before and after
giving effect to the making of such Restricted Payment, the Guarantors may make Restricted
Payments to Borrower, (b) if no Default has occurred both before and after giving effect to the
making of such Restricted Payment, any Guarantor may make Restricted Payments to any other
Guarantor, and (c) Borrower may make regularly scheduled interest payments in accordance with the
terms and conditions of the Convertible Notes and the Senior Unsecured Notes.

     Section 6.6. Amendment of Debt Instruments. Borrower shall not, nor shall it permit any of its
Subsidiaries to, amend, modify, extent or restate the Convertible Notes Documents and Senior
Unsecured Notes Documents without the Approval of the Administrative Agent and Required Lenders.

     Section 6.7. Investments. Borrower shall not, nor shall it permit any of the Guarantors to, make or
permit to exist any loans, advances, or capital contributions to, or make any investment in
(including, without limitation, the making of any Acquisition), or purchase or commit to purchase
any stock or other securities or evidences of Debt of or interests in any Person or any Oil and Gas
Properties or activities related to Oil and Gas Properties, except:

     (a) Liquid Investments;

     (b) trade and customer accounts receivable which are for goods furnished or services
rendered in the ordinary course of business and are payable in accordance with customary trade
terms;

     (c) creation of any additional Subsidiaries in compliance with Section 6.16;

     (d) investments received in connection with the bankruptcy or reorganization of, or
settlement of delinquent accounts and disputes with, customers and suppliers, in each case in the
ordinary course of business; provided that, the aggregate amount of such investment shall not
exceed $100,000 (other than by appreciation);

     (e) investments consisting of any deferred portion of the sales price received by Borrower
or any Guarantor in connection with any sale of assets permitted hereunder;

     (f) investments in direct ownership interests in additional Oil and Gas Properties and gas
gathering systems related thereto or related to farm-out, farm-in, joint operating, joint venture
or area of mutual interest agreements, gathering systems, pipelines or other similar arrangements
which are usual and customary in the oil and gas exploration and production business located within
the geographic boundaries of the United States of America; provided that if requested by
Administrative Agent, such assets are pledged as Collateral pursuant to Section 5.8;

     (g) Debt permitted under Section 6.2(h);

     (h) Hedge Contracts to the extent permitted under Section 6.15; and

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     (i) other loans, advances and investments not to exceed $500,000 in the aggregate.

     Section 6.8. Affiliate Transactions. Borrower shall not, nor shall it permit any of the Guarantors to,
directly or indirectly, enter into or permit to exist any transaction or series of transactions
(including, but not limited to, the purchase, sale, lease or exchange of Property, the making of
any investment, the giving of any guaranty, the assumption of any obligation or the rendering of
any service) with any of their Affiliates unless such transaction or series of transactions is on
terms no less favorable to Borrower or the Guarantors, as applicable, than those that could be
obtained in a comparable arm’s length transaction with a Person that is not such an Affiliate.

     Section 6.9. Compliance with ERISA. Borrower shall not, nor shall it permit any of the Guarantors to,
directly or indirectly, (a) engage in, or permit any Guarantor to engage in, any transaction in
connection with which Borrower or any Controlled Group member could be subjected to either a civil
penalty assessed pursuant to Section 502(c), (i) or (l) of ERISA or a tax imposed by Chapter 43 of
Subtitle D of the Code; (b) terminate, or permit any Guarantor to terminate, any Plan in a manner,
or take any other action with respect to any Plan, which could result in any liability to Borrower
or any Controlled Group member to the PBGC; (c) fail to make, or permit any Guarantor to fail to
make, full payment when due of all amounts which, under the provisions of any Plan, agreement
relating thereto or applicable law, Borrower or any Controlled Group member is required to pay as
contributions thereto; (d) permit to exist, or allow any Guarantor to permit to exist, any
accumulated funding deficiency within the meaning of Section 302 of ERISA or Section 412 of the
Code, whether or not waived, with respect to any Plan; (e) permit, or allow any Guarantor to
permit, the actuarial present value of the benefit liabilities (as “actuarial present value of the
benefit liabilities” shall have the meaning specified in Section 4041 of ERISA) under any Plan
maintained by Borrower or any Controlled Group member which is regulated under Title IV of ERISA to
exceed the current value of the assets (computed on a plan termination basis in accordance with
Title IV of ERISA) of such Plan allocable to such benefit liabilities; (f) assume an obligation to
contribute to, or permit any Guarantor to assume an obligation to contribute to, any Multiemployer
Plan; (g) acquire, or permit any Guarantor to acquire, an 90% or greater interest in any Person if
such Person sponsors, maintains or contributes to, or at any time in the six-year period preceding
such acquisition has sponsored, maintained, or contributed to, (1) any Multiemployer Plan, or (2)
any other Plan that is subject to Title IV of ERISA, and in either case, the actuarial present
value of the benefit liabilities under such Plan exceeds the current value of the assets (computed
on a plan termination basis in accordance with Title IV of ERISA) of such Plan allocable to such
benefit liabilities, and the withdrawal liability, if assessed, could reasonably be expected to
result in a Material Adverse Change; (h) incur, or permit any Guarantor to incur, a liability to or
on account of a Plan under Sections 515, 4062, 4063, 4064, 4201 or 4204 of ERISA; (i) assume an
obligation to contribute to, or permit any Guarantor to assume an obligation to contribute to, any
employee welfare benefit plan, as defined in Section 3(1) of ERISA, including, without limitation,
any such plan maintained to provide benefits to former employees of such entities, that may not be
terminated by such entities in their sole discretion without any material liability; (j) amend or
permit any Guarantor to amend, a Plan resulting in an increase in current liability such that
Borrower or any Controlled Group member is required to provide security to such Plan under Section
401(a)(29) of the Code; or (k) permit to exist any occurrence of any Reportable Event (as defined
in Title IV of ERISA), or any other event or condition, which presents a

53

 

material (in the opinion
of the Required Lenders) risk of such a termination by the PBGC of any Plan that could reasonably
be expected to result in a Material Adverse Change.

     Section 6.10. Sale-and-Leaseback. Borrower shall not, nor shall it permit any of the Guarantors to, sell
or transfer to a Person any Property, whether now owned or hereafter acquired, if at the time or
thereafter Borrower or a Guarantor shall lease as lessee such Property or any part thereof or other
Property which Borrower or a Guarantor intends to use for substantially the same purpose as the
Property sold or transferred.

     Section 6.11. Change of Business; Accounting Change. Borrower shall not, nor shall it permit any of the
Guarantors to, make any material change in the character of its business as an independent oil and
gas exploration and production company, nor will Borrower or any Guarantor operate any business in
any jurisdiction other than the United States. Borrower shall not, nor shall it permit any of the
Guarantors to, make a change in the method of accounting employed in the preparation of the
financial statements referred to in Section 4.4 or change the fiscal year end of Borrower
unless required to conform to GAAP or Approved in writing by Administrative Agent.

     Section 6.12. Organizational Documents, Name Change. Borrower shall not, nor shall it permit any of the
Guarantors to, amend, supplement, modify or restate their articles or certificate of incorporation,
bylaws, limited liability company agreements, or other equivalent organizational documents where
such amendment, supplement, modification or restatement could have an adverse effect on Lenders as
determined by Administrative Agent in its sole reasonable discretion, or amend its name or change
its jurisdiction of incorporation, organization or formation without prior written notice to, and
prior consent of, Administrative Agent.

     Section 6.13. Use of Proceeds; Letters of Credit. Borrower will not permit the proceeds of any Advance
or Letters of Credit to be used for any purpose other than those permitted by Section 5.9.
Borrower will not engage in the business of extending credit for the purpose of purchasing or
carrying margin stock (within the meaning of Regulation U). Neither Borrower nor any Person acting
on behalf of Borrower has taken or shall take, nor permit any of the Guarantors to take any action
which might cause any of the Loan Documents to violate Regulation T, U or X or any other regulation
of the Board of Governors of the Federal Reserve System or to violate Section 7 of the Securities
Exchange Act of 1934 or any rule or regulation thereunder, in each case as now in effect or as the
same may hereinafter be in effect, including without limitation, the use of the proceeds of any
Advance or Letters of Credit to purchase or carry any margin stock in violation of Regulation T, U
or X.

     Section 6.14. Gas Imbalances, Take-or-Pay or Other Prepayments. Borrower shall not, nor shall it permit
any of the Guarantors to, allow gas imbalances, take-or-pay or other prepayments with respect to
the Oil and Gas Properties of Borrower or any Guarantor which would require Borrower or any
Guarantor to deliver their respective Hydrocarbons produced on a monthly basis from such Oil and
Gas Properties at some future time without then or thereafter receiving full payment therefor other
than that which do not result in Borrower or any Guarantor having net aggregate liability in excess
of $100,000.

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     Section 6.15. Hedging Requirements. Other than the Hedge Contracts required to be entered into and
maintained pursuant to Sections 3.1(k), 3.1(q)(ii) and 5.12 and as set
forth on Schedule 4.19, Borrower shall not, nor shall it permit any of the Guarantors to,

     (a) purchase, assume, or hold a speculative position in any commodities market or futures
market or enter into any Hydrocarbon Hedge Agreement, Interest Hedge Agreement or similar hedge
arrangement for speculative purposes, or

     (b) be party to or otherwise enter into any Hedge Contract which (i) is entered into for
reasons other than as a part of its normal business operations as a risk management strategy and/or
hedge against changes resulting from market conditions related to Borrower’s operations, (ii)
covers notional volumes in excess of 80% of the anticipated production of gas volumes during the
period such hedge arrangement is in effect or covers notional volumes in excess of 80% of the
anticipated production of oil volumes during the period such hedge arrangement is in effect, in
either case, attributable to “proved, developed and producing” Proved Reserves of Borrower as
reflected in the most recently delivered Engineering Report under Section 2.2(b) or covers
notional volumes in excess of 80% of the anticipated production of natural gas liquids volumes
during the period such hedge arrangement is in effect, in each case, attributable to “proved,
developed and producing” Proved Reserves of Borrower as reflected in the most recently delivered
Engineering Report under Section 2.2(b) or (c); provided, however,
that (A) with regard to a “costless collar” that involves the purchase of a put and the sale of a
call for the same volumes and dates and commodities, only the volumes associated with the put or
the call (but not both) will be included in calculating the 80% threshold, and (B) the volume
limitations shall not apply to put option contracts that are not related to corresponding calls,
collars or swaps, or (iii) is longer than five years in duration from the date such Hedge Contract
is entered into.

     Section 6.16. Additional Subsidiaries. Borrower shall not, nor shall it permit any of the Guarantors to,
create or acquire any additional Subsidiaries without (a) such new Subsidiary executing and
delivering to Administrative Agent, at its request, a Guaranty, a Pledge Agreement, a Security
Agreement and a Mortgage, and such other Security Instruments as Administrative Agent or the
Required Lenders may reasonably request, and (b) the delivery by Borrower of any certificates,
opinions of counsel, title opinions or other documents as Administrative Agent may reasonably
request; provided that, in any event, no Subsidiary may be created or acquired if a Default has
occurred and is continuing before, or a Default would arise after, giving effect to such creation
or acquisition of the new Subsidiary.

     Section 6.17. Account Payables. Borrower shall not, nor shall it permit any of the Guarantors to, allow
any of its trade payables or other accounts payable to be outstanding for more than 90 days
following receipt of the invoice covering such payable (except in cases where any such trade
payable is being disputed in good faith and adequate reserves under GAAP have been established).

     Section 6.18. Current Ratio. As of each fiscal quarter end beginning with the fiscal quarter ending
December 31, 2010, Borrower and Guarantors shall not permit the ratio of (a) their combined current
assets to (b) their combined current liabilities, to be less 1.00 to 1.00. For purposes of this
calculation (i) “current assets” shall include, as of the date of calculation, (A) the

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Borrowing
Base then in effect less the sum of (x) the aggregate outstanding principal amount of all Advances
under the Revolving Loan plus (y) the Letter of Credit Exposure at such time, and (B) amounts
available for funding pursuant to Section 2.3(a), but shall exclude any current non-cash
assets described in or calculated pursuant to the requirements of FASB 133 and 143 (or any
successor GAAP which serves to amend, supplement or replace FASB Statements 133 and 143), each as
amended, and (ii) “current liabilities” shall exclude, as of the date of calculation, the current
portion of long-term Debt existing under this Agreement, the Senior Unsecured Notes and the
Convertible Notes, and any current non-cash liabilities described in or calculated
pursuant to the requirements of FASB 133 and 143 (or any successor GAAP which serves to amend,
supplement or replace FASB Statements 133 and 143), each as amended.

     Section 6.19. Minimum Quarterly Net Operating Cash Flow. As of each fiscal quarter end beginning with
the fiscal quarter ending December 31, 2010, Borrower and Guarantors shall maintain a combined
Quarterly Net Operating Cash Flow of at least $8,600,000 per fiscal quarter.

     Section 6.20. Maximum Quarterly G&A Expenses. As of each fiscal quarter end beginning with the fiscal
quarter ending December 31, 2010, Borrower and Guarantors shall not permit their combined G&A
Expenses (excluding (a) any loan or attorneys’ fees required for or payable in connection with the
closing of this Agreement and all Loan Documents, and (b)any advisory fees paid or accrued to
Macquarie Capital (USA) Inc, on or after closing) to exceed $5,000,000 per fiscal quarter.

     Section 6.21. Prepayments of Debt. Borrower shall not, nor shall it permit any of the Guarantors to,
prepay, redeem, purchase, defease or otherwise satisfy prior to the scheduled maturity thereof in
any manner, or make any payment in violation of any subordination terms of, any Debt, except (a)
the prepayment of the Advances in accordance with the terms of this Agreement, (b) regularly
scheduled or required repayments or redemptions of Debt permitted under Section 6.2, and
(c) so long as no Event of Default exists or would result therefrom, other prepayments of Debt
permitted under Section 6.2.

     Section 6.22. Equity Issuance. Borrower shall not, nor shall it permit any of the Guarantors to, issue
any preferred, convertible equity securities or other Equity Interests other than common Equity
Interests of Borrower.

     Section 6.23. Deposit Accounts. Borrower shall not, nor shall it permit any of the Guarantors to, open
or maintain any Deposit Accounts except for:

     (a) Deposit Accounts set forth on Schedule 6.23,

     (b) Deposit Accounts which are subject to account control agreements reasonably acceptable
in form and substance to Administrative Agent, and

     (c) such other Deposit Accounts as shall be necessary for payroll, petty cash, local trade
payables, and other occasional needs of Borrower; the aggregate balance of all such Deposit
Accounts permitted under this Section 6.23(c) may not, at any time, exceed $100,000;
provided, however, if such the aggregate amount in such accounts exceeds $100,000, Borrower shall
not be in default of this Section 6.23 as long as Borrower transfers within five (5)
Business

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Days any amounts in excess of $100,000 to an account subject to account control agreements
reasonably acceptable in form and substance to Administrative Agent.

     Section 6.24. Support of Subsidiaries. Borrower shall not provide any direct or indirect financial
support to any of its Subsidiaries which are not Guarantors; provided, however,
this Section 6.24 shall not prohibit the sales of goods and services from such Subsidiaries
to Borrower in the ordinary course of business, consistent with past practice and on an arm’s
length basis.

ARTICLE VII

EVENTS OF DEFAULT; REMEDIES

     Section 7.1. Events of Default. The occurrence of any of the following events shall constitute an
“Event of Default” under any Loan Document:

     (a) Payment. Borrower shall fail to pay, within 3 Business Days, when due any (i)
principal payable hereunder or under the Notes or (ii) other amounts (including interest, fees,
reimbursements, and indemnifications) payable hereunder, under the Notes, or under any other Loan
Document;

     (b) Representation and Warranties. Any representation or warranty made or deemed
to be made by Borrower or any Guarantor (or any of their respective officers) in this Agreement or
in any other Loan Document, or by Borrower or any Guarantor (or any of their respective officers)
in connection with this Agreement or any other Loan Document, shall prove to have been incorrect in
any material respect (except that such materiality qualifier shall not be applicable to any
representations and warranties that already are qualified or modified by materiality in the text
thereof) when made or deemed to be made;

     (c) Covenant Breaches. Borrower or any Guarantor shall fail to perform or observe
any term or covenant set forth in this Agreement (except for payment default described in
Section 7.1(a) above) or in any other Loan Document;

     (d) Cross Defaults. (i) Borrower or any Guarantor shall fail to pay any principal
of or premium or interest on its Debt that is outstanding in a principal amount of at least
$500,000 individually or when aggregated with all such Debt of Borrower or any Guarantor so in
default (but excluding Debt evidenced by the Notes) when the same becomes due and payable (whether
by scheduled maturity, required prepayment, acceleration, demand or otherwise), and such failure
shall continue after the applicable grace period, if any, specified in the agreement or instrument
relating to such Debt; (ii) any other event shall occur or condition shall exist under any
agreement or instrument relating to Debt (including, without limitation, any event of default,
termination event or additional termination event under any Hedge Contract) that is outstanding in
a principal amount (or termination payment amount or similar amount) of at least $500,000
individually or when aggregated with all such Debt of Borrower or any Guarantor so in default, and
shall continue after the applicable grace period, if any, specified in such agreement or
instrument, if the effect of such event or condition is to accelerate, or to permit the
acceleration of, the maturity of such Debt; or (iii) any such Debt in a principal amount of at
least $500,000 individually or when aggregated with all such Debt of Borrower or any Guarantor
shall be

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declared to be due and payable, or required to be prepaid (other than by a regularly
scheduled required prepayment), prior to the stated maturity thereof; provided that, for purposes
of this Section 7.1(d), the “principal amount” of the obligations in respect of any Hedging
Contracts at any time shall be the maximum aggregate amount (giving effect to any netting
agreements) that would be required to be paid if such Hedging Contracts were terminated at such
time;

     (e) Insolvency. Borrower or any Guarantor shall generally not pay its debts as
such debts become due, or shall admit in writing its inability to pay its debts generally, or shall
make a general assignment for the benefit of creditors; or any proceeding shall be instituted by or
against
Borrower or any Guarantor seeking to adjudicate it as bankrupt or insolvent, or seeking
liquidation, winding up, reorganization, arrangement, adjustment, protection, relief, or
composition of it or its debts under any law relating to bankruptcy, insolvency or reorganization
or relief of debtors, or seeking the entry of an order for relief or the appointment of a receiver,
trustee or other similar official for it or for any substantial part of its Property and, in the
case of any such proceeding instituted against Borrower or any such Guarantor either such
proceeding shall remain undismissed for a period of 60 days or any of the actions sought in such
proceeding shall occur; or Borrower or any Guarantor shall take any corporate action to authorize
any of the actions set forth above in this paragraph (e);

     (f) Judgments. Any judgment or order for the payment of money in excess of
$500,000 shall be rendered against Borrower or any Guarantor and either (i) enforcement proceedings
shall have been commenced by any creditor upon such judgment or order or (ii) there shall be any
period of 30 consecutive days during which a stay of enforcement of such judgment or order, by
reason of a pending appeal or otherwise, shall not be in effect;

     (g) Termination Events. Any Termination Event with respect to a Plan shall have
occurred, and, 30 days after notice thereof shall have been given to Borrower by Administrative
Agent, (i) such Termination Event shall not have been corrected and (ii) the then present value of
such Plan’s vested benefits exceeds the then current value of assets accumulated in such Plan by
more than the amount of $500,000 (or in the case of a Termination Event involving the withdrawal of
a “substantial employer” (as defined in Section 4001(a)(2) of ERISA), the withdrawing employer’s
proportionate share of such excess shall exceed such amount);

     (h) Plan Withdrawals. Borrower or any member of the Controlled Group as employer
under a Multiemployer Plan shall have made a complete or partial withdrawal from such Multiemployer
Plan and the plan sponsor of such Multiemployer Plan shall have notified such withdrawing employer
that such employer has incurred a withdrawal liability in an annual amount exceeding $500,000.

     (i) Change in Control. Borrower shall have discontinued its usual business or a
Change in Control shall have occurred;

     (j) Key Personnel. (i) Any two of the following events occur: (A) Carl Lakey
ceases to be employed by Borrower on a full time basis as President and CEO of Borrower; (B) Kevin
Nanke ceases to be employed by Borrower on a full time basis as Treasurer and CFO of Borrower, and
(C) Daniel Taylor ceases to serve as Chairman of the Board of Directors of Borrower, and (ii) a
replacement for such person reasonably acceptable to Administrative Agent

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 is not employed by such
Borrower (or, if already employed by such Borrower, reassigned) within ninety (90) days.

     (k) Loan Documents. Any material provision of any Loan Document shall for any
reason cease to be valid and binding on Borrower or a Guarantor or any such Person shall so state
in writing;

     (l) Security Instruments. (i) Administrative Agent shall fail to have an
Acceptable Security Interest in any portion of the Collateral in excess of $500,000.00 in the
aggregate at any
one time, or (ii) any Security Instrument shall at any time and for any reason cease to create
the Lien on the Property purported to be subject to such agreement in accordance with the terms of
such agreement, or cease to be in full force and effect, or shall be contested by Borrower or any
Guarantor;

     (m) Potential Failure of Title. The title of Borrower or any Guarantor to any of
the Oil and Gas Properties subject to the Mortgages, or any material part thereof, shall become the
subject matter of litigation before any Governmental Authority or arbitrator which could reasonably
be expected to result in a Material Adverse Change with respect to Borrower’s or such Guarantor’s
title to such Oil and Gas Properties;

     (n) Material Adverse Change. An event resulting in a Material Adverse Change
shall have occurred; or

     (o) Casualty. Loss, theft, substantial damage or destruction of a material
portion of the Collateral the subject of any Security Instrument and not fully covered by insurance
(except for deductibles and allowing for the depreciated value of such Collateral) shall have
occurred;

provided that the events described in Section 7.1(b), (d), (j), (m), and (o) above will constitute an Event of Default
only if the event described is not remedied by Borrower within 30 days after the earlier of (i) any officer of Borrower (or, in the case of any
Subsidiary, any officer of that Subsidiary) becoming aware of the occurrence of the event and (ii) Borrower’s receipt of a notice from Administrative
Agent on behalf of Lenders of the occurrence of the event.

     Section 7.2. Optional Acceleration of Maturity. If any Event of Default (other than an Event of Default
pursuant to Section 7.1(e)) shall have occurred and be continuing, then, and in any such
event,

     (a) Administrative Agent (i) shall at the request, or may with the consent, of the
Required Lenders, by notice to Borrower, declare the obligation of each Lender and the Issuing
Lender to make extensions of credit hereunder, including making Advances and issuing, increasing or
extending Letters of Credit, to be terminated, whereupon the same shall forthwith terminate, and
(ii) shall at the request, or may with the consent, of the Required Lenders, by notice to Borrower,
declare all principal, interest, fees, reimbursements, indemnifications, and all other amounts
payable under this Agreement, the Notes, and the other Loan Documents to be forthwith due and
payable, whereupon all such amounts shall become and be forthwith due and payable in full, without
notice of intent to demand, demand, presentment for payment, notice
of nonpayment, protest, notice
of protest, grace, notice of dishonor, notice of intent to accelerate,

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 notice of acceleration, and
all other notices, all of which are hereby expressly waived by Borrower;

     (b) Borrower shall, on demand of Administrative Agent at the request or with the consent
of the Required Lenders, deposit with Administrative Agent into the Cash Collateral Account an
amount of cash equal to the Letter of Credit Exposure as security for the Obligations; and

     (c) Administrative Agent shall at the request of, or may with the consent of, the Required
Lenders proceed to enforce its rights and remedies under the Security Instruments, the
Guaranties, and any other Loan Documents for the ratable benefit of the Secured Parties by
appropriate proceedings.

     Section 7.3. Automatic Acceleration of Maturity. If any Event of Default pursuant to Section
7.1(e) shall occur,

     (a) (i) the obligation of each Lender and the Issuing Lender to make extensions of credit
hereunder, including making Advances and issuing, increasing or extending Letters of Credit, shall
terminate, and (ii) all principal, interest, fees, reimbursements, indemnifications, and all other
amounts payable under this Agreement, the Notes, and the other Loan Documents shall become and be
forthwith due and payable in full, without notice of intent to demand, demand, presentment for
payment, notice of nonpayment, protest, notice of protest, grace, notice of dishonor, notice of
intent to accelerate, notice of acceleration, and all other notices, all of which are hereby
expressly waived by Borrower;

     (b) Borrower shall deposit with Administrative Agent into the Cash Collateral Account an
amount of cash equal to the outstanding Letter of Credit Exposure as security for the Obligations;
and

     (c) Administrative Agent shall at the request of, or may with the consent of, the Required
Lenders proceed to enforce its rights and remedies under the Security Instruments, the Guaranties,
and any other Loan Document for the ratable benefit of the Secured Parties by appropriate
proceedings.

     Section 7.4. Right of Set off. Upon the occurrence and during the continuance of any Event of Default,
Administrative Agent, the Issuing Lender and each Lender is hereby authorized at any time and from
time to time, to the fullest extent permitted by law, to set off and apply any and all deposits
(general or special, time or demand, provisional or final) at any time held and other indebtedness
at any time owing by Administrative Agent, the Issuing Lender or such Lender to or for the credit
or the account of Borrower against any and all of the obligations of Borrower now or hereafter
existing under this Agreement, the Notes held by Administrative Agent, the Issuing Lender or such
Lender, and the other Loan Documents, irrespective of whether or not Administrative Agent, the
Issuing Lender or such Lender shall have made any demand under this Agreement, such Notes, or such
other Loan Documents, and although such obligations may be unmatured. Administrative Agent, the
Issuing Lender and each Lender agrees to promptly notify Borrower after any such set off and
application made by Administrative Agent, the Issuing Lender or such Lender, provided that the
failure to give such

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notice shall not affect the validity of such set off and application. The
rights of Administrative Agent, the Issuing Lender and each Lender under this Section 7.4
are in addition to any other rights and remedies (including, without limitation, other rights of
set off) that Administrative Agent, the Issuing Lender or such Lender may have.

     Section 7.5. Non-exclusivity of Remedies. No remedy conferred upon Administrative Agent, the Issuing
Lender and Lenders is intended to be exclusive of any other remedy, and each remedy shall be
cumulative of all other remedies existing by contract, at law, in equity, by statute or otherwise.

     Section 7.6. Application of Proceeds. From and during the continuance of any Event of Default, any
monies or Property actually received by Administrative Agent pursuant to this Agreement or any
other Loan Document, the exercise of any rights or remedies under any Security Instrument or any
other agreement with Borrower or any Guarantor which secures any of the Obligations, shall be
applied in the following order:

     (a) First, to the payment of all amounts, including costs and expenses incurred in
connection with the collection of such proceeds and the payment of any part of the Obligations, due
to Administrative Agent under any of the expense reimbursement or indemnity provisions of this
Agreement or any other Loan Document, any Security Instrument or other collateral documents, and
any applicable law;

     (b) Second, ratably, according to the then unpaid amounts thereof, without preference or
priority of any kind among them, to the payment of the Obligations then due and payable, including
Obligations with respect to Letters of Credit and any obligations of Borrower or the Guarantors
owing to any Hedge Counterparty under any Hedge Contract; and

     (c) Third, the remainder, if any, to Borrower, the Guarantors, their respective successors
or assigns, or such other Person as may be lawfully entitled to receive the same or as a court of
competent jurisdiction may direct.

ARTICLE VIII

ADMINISTRATIVE AGENT AND THE ISSUING LENDER

     Section 8.1. Authorization and Action. Each Lender, and each other Secured Party that is not party
hereto by accepting the benefits of the Liens securing Obligations owing to such Secured Party,
hereby appoints and authorizes Administrative Agent to take such action as agent on its behalf and
to exercise such powers under this Agreement as are delegated to Administrative Agent by the terms
hereof and of the other Loan Documents, together with such powers as are reasonably incidental
thereto. As to any matters not expressly provided for by this Agreement or any other Loan Document
(including, without limitation, enforcement or collection of the Notes), Administrative Agent shall
not be required to exercise any discretion or take any action, but shall be required to act or to
refrain from acting (and shall be fully protected in so acting or refraining from acting) upon the
instructions of the Required Lenders, and such instructions shall be binding upon all Lenders and
all holders of Notes; provided, however, that Administrative Agent shall not be required to take
any action which exposes Administrative

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Agent to personal liability or which is contrary to this
Agreement, any other Loan Document, or applicable law.

     Section 8.2. Administrative Agent’s Reliance, Etc. Neither Administrative Agent nor any of its
directors, officers, agents, or employees shall be liable for any action taken or omitted to be
taken (INCLUDING ADMINISTRATIVE AGENT’S OWN NEGLIGENCE) by it or them under or in connection with
this Agreement or the other Loan Documents, except for its or their own gross negligence or willful
misconduct. Without limitation of the generality of the foregoing, Administrative Agent:

     (a) may treat the payee of any Note as the holder thereof until Administrative Agent
receives written notice of the assignment or transfer thereof signed by such payee and in form
satisfactory to Administrative Agent;

     (b) may consult with legal counsel (including counsel for Borrower), independent public
accountants, and other experts selected by it and shall not be liable for any action taken or
omitted to be taken in good faith by it in accordance with the advice of such counsel, accountants,
or experts;

     (c) makes no warranty or representation to any Lender and shall not be responsible to any
Lender for any statements, warranties, or representations made in or in connection with this
Agreement or the other Loan Documents;

     (d) shall not have any duty to ascertain or to inquire as to the performance or observance
of any of the terms, covenants or conditions of this Agreement or any other Loan Document on the
part of Borrower or the Guarantors or to inspect the Property (including the books and records) of
Borrower or the Guarantors;

     (e) shall not be responsible to any Lender for the due execution, legality, validity,
enforceability, genuineness, sufficiency, or value of this Agreement or any other Loan Document;
and

     (f) shall incur no liability under or in respect of this Agreement or any other Loan
Document by acting upon any notice, consent, certificate, or other instrument or writing (which may
be by facsimile) believed by it to be genuine and signed or sent by the proper party or parties.

     Section 8.3. Administrative Agent and Its Affiliates. With respect to its Commitment, the Advances made
by it and the Notes issued to it, Administrative Agent shall have the same rights and powers under
this Agreement as any other Lender and may exercise the same as though it were not Administrative
Agent. The term “Lender” or “Lenders” shall, unless otherwise expressly indicated,
include Administrative Agent in its individual capacity. Administrative Agent and its Affiliates
may accept deposits from, lend money to, act as trustee under indentures of, and generally engage
in any kind of business with, Borrower or any of its Subsidiaries, and any Person who may do
business with or own securities of Borrower or any such Subsidiary, all as if Administrative Agent
were not an agent hereunder and without any duty to account therefor to Lenders.

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     Section 8.4. Lender Credit Decision. Each Lender acknowledges that it has, independently and without
reliance upon Administrative Agent or any other Lender and based on the Financial Statements and
the Interim Financial Statements and such other documents and information as it has deemed
appropriate, made its own credit analysis and decision to enter into this Agreement. Each Lender
also acknowledges that it shall, independently and without reliance upon Administrative Agent or
any other Lender and based on such documents and information as it shall deem appropriate at the
time, continue to make its own credit decisions in taking or not taking action under this
Agreement.

     Section 8.5. Indemnification. LENDERS SEVERALLY AGREE TO INDEMNIFY ADMINISTRATIVE AGENT AND THE ISSUING
LENDER AND EACH AFFILIATE THEREOF AND THEIR RESPECTIVE DIRECTORS, OFFICERS, EMPLOYEES, AND AGENTS
(TO THE EXTENT NOT REIMBURSED BY BORROWER), ACCORDING TO THEIR RESPECTIVE PRO RATA SHARES FROM AND
AGAINST ANY AND ALL LIABILITIES, OBLIGATIONS, LOSSES, DAMAGES, PENALTIES, ACTIONS, JUDGMENTS,
SUITS, COSTS, EXPENSES, OR DISBURSEMENTS OF ANY KIND OR NATURE WHATSOEVER WHICH MAY BE IMPOSED ON,
INCURRED BY, OR ASSERTED AGAINST ADMINISTRATIVE AGENT AND THE ISSUING LENDER IN ANY WAY RELATING TO
OR ARISING OUT OF THIS AGREEMENT OR ANY ACTION TAKEN OR OMITTED BY ADMINISTRATIVE AGENT OR THE
ISSUING LENDER UNDER THIS AGREEMENT OR ANY OTHER LOAN DOCUMENT (INCLUDING ADMINISTRATIVE AGENT’S
AND THE ISSUING LENDER’S OWN NEGLIGENCE), AND INCLUDING, WITHOUT LIMITATION, ENVIRONMENTAL CLAIMS
AND ANY LIABILITIES ARISING UNDER ENVIRONMENTAL LAW, PROVIDED THAT NO LENDER SHALL BE LIABLE FOR
ANY PORTION OF SUCH LIABILITIES, OBLIGATIONS, LOSSES, DAMAGES, PENALTIES, ACTIONS, JUDGMENTS,
SUITS, COSTS, EXPENSES, OR DISBURSEMENTS RESULTING FROM ADMINISTRATIVE AGENT’S OR THE ISSUING
LENDER’S GROSS NEGLIGENCE OR WILLFUL MISCONDUCT AS DETERMINED BY A COURT OF COMPETENT JURISDICTION
BY FINAL AND NONAPPEALABLE JUDGMENT. WITHOUT LIMITATION OF THE FOREGOING, EACH LENDER AGREES TO
REIMBURSE ADMINISTRATIVE AGENT AND THE ISSUING LENDER PROMPTLY UPON DEMAND FOR ITS RATABLE SHARE OF
ANY OUT OF POCKET EXPENSES (INCLUDING COUNSEL FEES) INCURRED BY ADMINISTRATIVE AGENT IN CONNECTION
WITH THE PREPARATION, EXECUTION, DELIVERY, ADMINISTRATION, MODIFICATION, AMENDMENT, OR ENFORCEMENT
(WHETHER THROUGH NEGOTIATIONS, LEGAL PROCEEDINGS, OR OTHERWISE) OF, OR LEGAL ADVICE IN RESPECT OF
RIGHTS OR RESPONSIBILITIES UNDER, THIS AGREEMENT OR ANY OTHER LOAN DOCUMENT, TO THE EXTENT THAT
ADMINISTRATIVE AGENT OR THE ISSUING LENDER IS NOT REIMBURSED FOR SUCH BY BORROWER. To the extent
that the indemnity obligations provided in this Section 8.5 are for the benefit of
Administrative Agent as the named secured party under the Liens granted under the Security
Instruments, each Lender hereby agrees that if such Lender ceases to be a Lender hereunder but
Obligations owing to such Lender or an Affiliate of such Lender continue to be secured by such
Liens, then such Lender shall continue to be bound by the provisions of this Section 8.5
until such time as such Obligations have been satisfied or terminated in full and subject to the
terms of the last sentence of Section 9.9. In such event, in determining the pro rata
shares under this Section 8.5, Lenders shall include the aggregate

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amount (giving effect to
any netting agreements) that would be owing to such Hedge Counterparty if such Hedge Contracts were
terminated at the time of determination.

     Section 8.6. Successor Administrative Agent and Issuing Lender. Administrative Agent or the Issuing
Lender may resign at any time by giving written notice thereof to Lenders and Borrower and may be
removed at any time with or without cause by the Required Lenders upon receipt of written notice
from the Required Lenders to such effect. Upon receipt of notice of any such resignation or
removal, the Required Lenders shall have the right to appoint a successor Administrative Agent or
Issuing Lender with, if no Event of Default has occurred and is
continuing, the consent of Borrower, which consent shall not be unreasonably withheld. If no
successor Administrative Agent or Issuing Lender shall have been so appointed by the Required
Lenders with the consent of Borrower, and shall have accepted such appointment, within 30 days
after the retiring Administrative Agent’s or Issuing Lender’s giving of notice of resignation or
the Required Lenders’ removal of the retiring Administrative Agent or Issuing Lender, then the
retiring Administrative Agent or Issuing Lender may, on behalf of Lenders and Borrower, appoint a
successor Administrative Agent or Issuing Lender, which shall be, in the case of a successor agent,
a commercial bank organized under the laws of the United States of America or of any State thereof
and having a combined capital and surplus of at least $500,000,000.00 and, in the case of the
Issuing Lender, a Lender; provided that, if Administrative Agent or Issuing Lender shall notify
Borrower and Lenders that no qualifying Person has accepted such appointment, then such resignation
shall nonetheless become effective in accordance with such notice and (a) the retiring
Administrative Agent or Issuing Lender shall be discharged from its duties and obligations
hereunder and under the other Loan Documents (except that (i) in the case of any collateral
security held by Administrative Agent on behalf of Lenders or the Issuing Lender under any of the
Loan Documents, the retiring Administrative Agent shall continue to hold such collateral security
until such time as a successor Administrative Agent is appointed and (ii) the retiring Issuing
Lender shall remain the Issuing Lender with respect to any Letters of Credit outstanding on the
effective date of its resignation or removal and the provisions affecting the Issuing Lender with
respect to such Letters of Credit shall inure to the benefit of the retiring Issuing Lender until
the termination of all such Letters of Credit) and (b) all payments, communications and
determinations provided to be made by, to or through the retiring Administrative Agent shall
instead be made by or to each Lender and the Issuing Lender directly, until such time as the
Required Lenders appoint a successor Administrative Agent or Issuing Lender, as applicable, as
provided for above in this paragraph. Upon the acceptance of any appointment as Administrative
Agent or Issuing Lender by a successor Administrative Agent or Issuing Lender, such successor
Administrative Agent or Issuing Lender shall thereupon succeed to and become vested with all the
rights, powers, privileges, and duties of the retiring Administrative Agent or Issuing Lender, and
the retiring Administrative Agent or Issuing Lender shall be discharged from its duties and
obligations under this Agreement and the other Loan Documents, except that the retiring Issuing
Lender shall remain the Issuing Lender with respect to any Letters of Credit outstanding on the
effective date of its resignation or removal and the provisions affecting the Issuing Lender with
respect to such Letters of Credit shall inure to the benefit of the retiring Issuing Lender until
the termination of all such Letters of Credit. After any retiring Administrative Agent’s or
Issuing Lender’s resignation or removal hereunder as Administrative Agent or Issuing Lender, the
provisions of this Article VIII shall inure to its benefit as to any actions taken or
omitted to be taken by it while it was Administrative Agent or Issuing Lender under this Agreement
and the other Loan Documents.

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     Section 8.7. Collateral Matters.

     (a) Administrative Agent is authorized on behalf of the Secured Parties, without the
necessity of any notice to or further consent from the Secured Parties, from time to time, to take
any actions with respect to any Collateral or Security Instruments which may be necessary to
perfect and maintain Acceptable Security Interests in and Liens upon the Collateral granted
pursuant to the Security Instruments. Administrative Agent is further authorized on behalf of the
Secured Parties, without the necessity of any notice to or further consent from the Secured
Parties, from time to time, to take any action (other than enforcement actions requiring the
consent of, or request by, the Required Lenders as set forth in Section 7.2 or Section
7.3) in exigent circumstances as may be reasonably necessary to preserve any rights or
privileges of the Secured Parties under the Loan Documents or applicable law. By accepting the
benefit of the Liens granted pursuant to the Security Instruments, each Secured Party not party
hereto hereby agrees to the terms of this paragraph (a).

     (b) Each Secured Party irrevocably authorizes Administrative Agent to release any Lien
granted to or held by Administrative Agent upon any Collateral: (i) upon termination of the
Commitments, termination or expiration of all Letters of Credit (other than Letters of Credit as to
which other arrangements satisfactory to Administrative Agent and the Issuing Lender have been
made), termination of all Hedge Contracts with Hedge Counterparties that are secured by the Liens
on the Collateral (other than Hedge Contracts with any Hedge Counterparty with respect to which
other arrangements satisfactory to the Hedge Counterparty and Borrower have been made; provided
that, unless a Hedge Counterparty (other than the Person that may be serving as Administrative
Agent) notifies Administrative Agent in writing at least 2 Business Days prior to the expected
termination of the Commitments that such arrangements have not been made, then solely for purposes
of this paragraph (b), it shall be deemed that such satisfactory arrangements have been
made; provided further that, the immediately preceding proviso shall not apply unless
Administrative Agent or Borrower shall have given such Hedge Counterparty written notice of such
expected termination of Commitments at least 10 Business Days prior to the expected date of
termination), and payment in full of all Obligations (other than Obligations arising under Hedge
Contracts with any Hedge Counterparty with respect to which other arrangements satisfactory to the
Hedge Counterparty and Borrower have been made; provided that, unless a Hedge Counterparty (other
than the Person that may be serving as Administrative Agent) notifies Administrative Agent in
writing at least 2 Business Days prior to the expected termination of the Commitments that such
arrangements have not been made, then solely for purposes of this clause (b), it shall be deemed
that such satisfactory arrangements have been made; provided further that, the immediately
preceding proviso shall not apply unless Administrative Agent or Borrower shall have given such
Hedge Counterparty written notice of such expected termination of Commitments at least 10 Business
Days prior to the expected date of termination); (ii) constituting Property sold or to be sold or
otherwise disposed of as part of or in connection with any Disposition permitted under this
Agreement or the other Loan Documents; (iii) constituting Property in which Borrower or any
Guarantor owned no interest at the time the Lien was granted or at any time thereafter; (iv)
constituting Property leased to Borrower or any Guarantor under a lease which has expired or has
been terminated in a transaction permitted under this Agreement or is about to expire and which has
not been, and is not intended by Borrower or such Guarantor to be, renewed or extended; or (v) if
Approved, authorized or ratified in writing by the applicable Required Lenders or all Lenders, as
the case may be, as required by Section 9.1. Upon the

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request of Administrative Agent at
any time, the Secured Parties will confirm in writing Administrative Agent’s authority to release
particular types or items of Collateral pursuant to this Section 8.7. By accepting the
benefit of the Liens granted pursuant to the Security Instruments, each Secured Party not party
hereto hereby agrees to the terms of this paragraph (b).

     (c) Notwithstanding anything contained in any of the Loan Documents to the contrary,
Borrower, Administrative Agent, and each Secured Party hereby agree that no Secured Party shall
have any right individually to realize upon any of the Collateral or to enforce the
Guaranties, it being understood and agreed that all powers, rights and remedies hereunder and
under the Security Instruments may be exercised solely by Administrative Agent on behalf of the
Secured Parties in accordance with the terms hereof. By accepting the benefit of the Liens granted
pursuant to the Security Instruments, to the extent a Secured Party is not a party hereto, it
agrees to the terms of this paragraph (c).

ARTICLE IX

MISCELLANEOUS

     Section 9.1. Amendments, Etc. No amendment or waiver of any provision of this Agreement, the Notes, or
any other Loan Document, nor consent to any departure by Borrower or any Subsidiary therefrom,
shall in any event be effective unless the same shall be in writing and signed by the Required
Lenders and Borrower, and then such waiver or consent shall be effective only in the specific
instance and for the specific purpose for which given; provided, however, that no amendment,
waiver, or consent shall, unless in writing and signed by all Lenders, do any of the following:

     (a) waive any of the conditions specified in Section 3.1,

     (b) increase the Borrowing Base or the Commitments of Lenders,

     (c) reduce the principal of, or interest on, the Notes or any fees or other amounts
payable hereunder or under any other Loan Document,

     (d) postpone any date fixed for any payment of principal of, or interest on, the Notes or
any fees or other amounts payable hereunder or extend the Maturity Date or the Commitment
Termination Date,

     (e) change the percentage of Lenders which shall be required for Lenders or any of them to
take any action hereunder or under any other Loan Document,

     (f) amend Section 2.16, Section 7.6 or this Section 9.1,

     (g) amend the definition of “Required Lenders,”

     (h) release any Guarantor from its obligations under any Guaranty other than as a result
of a transaction permitted hereby,

     (i) except as permitted by Section 6.4(a), permit Borrower or any Guarantor to
enter into any merger or consolidation with or into any other Person,

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     (j) release any Collateral securing the Obligations, except for releases of Collateral
sold as permitted by this Agreement and except for releases of Collateral as permitted under
Section 6.8, or

     (k) amend the definition of “Secured Parties” or the definition of
“Obligations” in this Agreement or any such corresponding terms in any other Loan Document;
and provided, further, that no amendment, waiver or consent shall, unless in writing and signed by
Administrative
Agent or the Issuing Lender in addition Lenders required above to take such action, affect the
rights or duties of Administrative Agent or the Issuing Lender, as the case may be, under this
Agreement or any other Loan Document and if a Lender ceases to be a Lender hereunder for any reason
and, in connection therewith, such Lender (or its Affiliate) as a Hedge Counterparty terminates or
novates any Hedge Contract secured by the Loan Documents within 10 Business Days after the date on
which such Lender ceases to be a Lender hereunder, then for so long as the Obligations, if any,
owing to such Hedge Counterparty in respect of such terminated or novated Hedge Contracts remain
outstanding, no amendment, waiver, or consent shall, unless in writing and signed by such Hedge
Counterparty (in addition to such other consents that may be required under this Section
9.1), do any of the following in any manner that would be adverse to such Hedge Counterparty
from a secured party or creditor perspective: (i) amend this Section 9.1(k), (ii) amend the
definition of “Secured Party” or the definition of “Obligations” in this Agreement
or any such corresponding terms in any other Loan Document, or (iii) amend Section 7.6.
Other than as provided in this clause (k), no Lender or any Affiliate of a Lender shall have any
voting rights under any Loan Document as a result of the existence of obligations owed to it under
Hedge Contracts.

     Section 9.2. Notices, Etc. All notices and other communications shall be in writing and, except as
otherwise provided in this Agreement, delivered by messenger, United States certified mail, return
receipt requested, facsimile or other electronic transmission, or a nationally recognized overnight
courier, at the address for the appropriate party specified in Schedule II or at such other
address as shall be designated by such party in a written notice to the other parties. All such
notices and communications shall, when so mailed, facsimile or electronically delivered, or hand
delivered or delivered by a nationally recognized overnight courier, be effective when received if
mailed, when facsimile is completed and when confirmed by the sender’s facsimile machine
confirmation, or when delivered by such messenger or courier, respectively, except that notices and
communications to Administrative Agent pursuant to Article II or Article VIII shall
not be effective until received by Administrative Agent.

     Section 9.3. No Waiver; Remedies. No failure on the part of any Lender, Administrative Agent, or the
Issuing Lender to exercise, and no delay in exercising, any right hereunder or under any Note shall
operate as a waiver thereof; nor shall any single or partial exercise of any such right preclude
any other or further exercise thereof or the exercise of any other right. The remedies herein
provided are cumulative and not exclusive of any remedies provided by law.

Section 9.4. Costs and Expenses. Borrower shall pay (a) all reasonable out of pocket expenses incurred
by Administrative Agent and its Affiliates (including the reasonable fees, charges and
disbursements of counsel for Administrative Agent), in connection with the syndication of the
credit facilities provided for herein, the preparation, negotiation, execution,

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delivery and
administration of this Agreement and the other Loan Documents or any amendments, modifications or
waivers of the provisions hereof or thereof (whether or not the transactions contemplated hereby or
thereby shall be consummated), (b) all reasonable out of pocket expenses incurred by the Issuing
Lender in connection with the issuance, amendment, renewal or extension of any Letter of Credit or
any demand for payment thereunder and (c) all out of pocket expenses incurred by Administrative
Agent, any Lender or the Issuing Lender (including the fees, charges and disbursements of any
counsel for Administrative Agent, any Lender or the Issuing Lender) in connection with the
enforcement or protection of its rights (i) in connection
with this Agreement and the other Loan Documents, including its rights under this Section, or (ii)
in connection with the Loans made or Letters of Credit issued hereunder, including all such out of
pocket expenses incurred during any workout, restructuring or negotiations in respect of such Loans
or Letters of Credit.

     Section 9.5. Binding Effect. This Agreement shall become effective when it shall have been executed by
Borrower and Administrative Agent, and when Administrative Agent shall have, as to each Lender,
either received a counterpart hereof executed by such Lender or been notified by such Lender that
such Lender has executed it and thereafter shall be binding upon and inure to the benefit of
Borrower, Administrative Agent, and each Lender and their respective successors and assigns, except
that neither Borrower nor any other Credit Party shall have the right to assign its rights or
delegate its duties under this Agreement or any interest in this Agreement without the prior
written consent of each Lender.

     Section 9.6. Lender Assignments and Participations.

     (a) Assignments. Any Lender may assign to one or more Eligible Assignees all or
any portion of its rights and obligations under this Agreement (including, without limitation, all
or a portion of its Commitments, the Advances owing to it, the Notes held by it, and the
participation interest in the Letter of Credit Obligations held by it); provided,
however, that (i) each such assignment shall be of a constant, and not a varying,
percentage of such Lender’s rights and obligations assigned under this Agreement and shall be an
equal percentage with respect to both its obligations owing in respect of the Commitments and the
related Advances and Letters of Credit, (ii) the amount of the Commitments and Advances of such
Lender being assigned pursuant to each such assignment (determined as of the date of the Assignment
and Acceptance with respect to such assignment) shall be, if to an entity other than a Lender, not
less than $5,000,000 and shall be an integral multiple of $1,000,000 in excess thereof, (iii) each
such assignment shall be to an Eligible Assignee, (iv) the parties to each such assignment shall
execute and deliver to Administrative Agent, for its acceptance and recording in the Register, an
Assignment and Acceptance, together with the Notes subject to such assignment, and (v) each
Eligible Assignee (other than the Eligible Assignee of Administrative Agent or an Affiliate of a
Lender) shall pay to Administrative Agent a $3,500 administrative fee. Upon such execution,
delivery, acceptance and recording, from and after the effective date specified in each Assignment
and Acceptance, which effective date shall be at least three Business Days after the execution
thereof, (A) the assignee thereunder shall be a party hereto for all purposes and, to the extent
that rights and obligations hereunder have been assigned to it pursuant to such Assignment and
Acceptance, have the rights and obligations of a Lender hereunder and (B) such Lender thereunder
shall, to the extent that rights and obligations hereunder have been assigned by it pursuant to
such Assignment and Acceptance, relinquish its rights and be released from its

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obligations under
this Agreement (and, in the case of an Assignment and Acceptance covering all or the remaining
portion of such Lender’s rights and obligations under this Agreement, such Lender shall cease to be
a party hereto).

     (b) Terms of Assignments. By executing and delivering an Assignment and
Acceptance, Lender thereunder and the assignee thereunder confirm to and agree with each other and
the other parties hereto as follows: (i) other than as provided in such Assignment and Acceptance,
such Lender makes no representation or warranty and assumes no responsibility
with respect to any statements, warranties or representations made in or in connection with
this Agreement or the execution, legality, validity, enforceability, genuineness, sufficiency of
value of this Agreement or any other instrument or document furnished pursuant hereto; (ii) such
Lender makes no representation or warranty and assumes no responsibility with respect to the
financial condition of Borrower or the Guarantors or the performance or observance by Borrower or
the Guarantors of any of their obligations under this Agreement or any other instrument or document
furnished pursuant hereto; (iii) such assignee confirms that it has received a copy of this
Agreement, together with copies of the Financial Statements and Interim Financial Statements
referred to in Section 4.5 and such other documents and information as it has deemed
appropriate to make its own credit analysis and decision to enter into such Assignment and
Acceptance; (iv) such assignee will, independently and without reliance upon Administrative Agent,
such Lender or any other Lender and based on such documents and information as it shall deem
appropriate at the time, continue to make its own credit decisions in taking or not taking action
under this Agreement; (v) such assignee appoints and authorizes Administrative Agent to take such
action as agent on its behalf and to exercise such powers under this Agreement as are delegated to
Administrative Agent by the terms hereof, together with such powers as are reasonably incidental
thereto; and (vi) such assignee agrees that it will perform in accordance with their terms all of
the obligations which by the terms of this Agreement are required to be performed by it as a
Lender.

     (c) The Register. Administrative Agent shall maintain at its address referred to
in Section 9.2 a copy of each Assignment and Acceptance delivered to and accepted by it and
a register for the recordation of the names and addresses of Lenders and the Commitments of, and
principal amount of the Advances owing to, each Lender from time to time (the “Register”).
The entries in the Register shall be conclusive and binding for all purposes, absent manifest
error, and Borrower, Administrative Agent, the Issuing Lender, and Lenders may treat each Person
whose name is recorded in the Register as a Lender hereunder for all purposes of this Agreement.
The Register shall be available for inspection by Borrower or any Lender at any reasonable time and
from time to time upon reasonable prior notice.

     (d) Procedures. Upon its receipt of an Assignment and Acceptance executed by a
Lender and an Eligible Assignee, together with the Notes subject to such assignment, Administrative
Agent shall, if such Assignment and Acceptance has been completed and is in substantially the form
of the attached Exhibit A, (i) accept such Assignment and Acceptance, (ii) record the
information contained therein in the Register, and (iii) give prompt notice thereof to Borrower.
Within five Business Days after its receipt of such notice, Borrower shall execute and deliver to
Administrative Agent in exchange for the surrendered Notes (A) if such Eligible Assignee has
acquired a Commitment, a new Note to the order of such Eligible Assignee in an amount equal to the
Commitment assumed by it pursuant to such Assignment and Acceptance

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and (B) if such Lender has
retained any Commitment hereunder, a new Note to the order of such Lender in an amount equal to the
Commitment retained by it hereunder. Such new Notes shall be dated the effective date of such
Assignment and Acceptance and shall otherwise be in substantially the form of the attached
Exhibit E.

     (e) Participations. Each Lender may sell participations to any Eligible Assignee
in or to all or a portion of its rights and obligations under this Agreement (including, without
limitation, all or a portion of its Commitments, the Advances owing to it, its participation
interest
in the Letter of Credit Obligations, and the Notes held by it); provided, however,
that (i) such Lender’s obligations under this Agreement (including, without limitation, its
Commitments to Borrower hereunder) shall remain unchanged, (ii) such Lender shall remain solely
responsible to the other parties hereto for the performance of such obligations, (iii) such Lender
shall remain the holder of any such Notes for all purposes of this Agreement, (iv) Borrower,
Administrative Agent, and the Issuing Lender and the other Lenders shall continue to deal solely
and directly with such Lender in connection with such Lender’s rights and obligations under this
Agreement, and (v) such Lender shall not require the participant’s consent to any matter under this
Agreement, except for change in the principal amount of the Notes, reductions in fees or interest,
releasing all or substantially all of any Collateral, permitting Borrower or any Guarantor to enter
into any merger or consolidation with or into any other, postponement of any date fixed for any
payment of principal of, or interest on, the Notes or any fees or other amounts payable hereunder,
or extensions of the Maturity Date or the Commitment Termination Date. Borrower hereby agrees that
participants shall have the same rights under Section 2.17, Section 2.18,
Section 2.19(c), and Section 9.7 as a Lender to the extent of their respective
participations.

     (f) Certain Pledges. Any Lender may at any time pledge or assign a security
interest in all or any portion of its rights under this Agreement to secure obligations of such
Lender, including any pledge or assignment to secure obligations to a Federal Reserve Bank;
provided that no such pledge or assignment shall release such Lender from any of its obligations
hereunder or substitute any such pledgee or assignee for such Lender as a party hereto.

     Section 9.7. Indemnification; Waiver.

     (a) INDEMNIFICATION. BORROWER SHALL, AND DOES HEREBY INDEMNIFY, ADMINISTRATIVE
AGENT (AND ANY SUB-AGENT THEREOF), EACH LENDER AND THE ISSUING LENDER, AND EACH OFFICER, DIRECTOR,
EMPLOYEE, AGENT, ATTORNEY-IN-FACT AND AFFILIATE OF ANY OF THE FOREGOING PERSONS (EACH SUCH PERSON
BEING CALLED AN “INDEMNITEE”) AGAINST, AND HOLD EACH INDEMNITEE HARMLESS FROM, ANY AND ALL
LOSSES, CLAIMS, DAMAGES, LIABILITIES AND RELATED EXPENSES (INCLUDING THE FEES, CHARGES AND
DISBURSEMENTS OF ANY COUNSEL FOR ANY INDEMNITEE), INCURRED BY ANY INDEMNITEE OR ASSERTED AGAINST
ANY INDEMNITEE BY ANY THIRD PARTY OR BY BORROWER OR ANY GUARANTOR ARISING OUT OF, IN CONNECTION
WITH, OR AS A RESULT OF THE EXECUTION OR DELIVERY OF THIS AGREEMENT, ANY OTHER LOAN DOCUMENT OR
ANY AGREEMENT OR INSTRUMENT CONTEMPLATED HEREBY OR THEREBY, THE PERFORMANCE BY THE PARTIES HERETO
OF THEIR RESPECTIVE OBLIGATIONS HEREUNDER OR THEREUNDER, THE CONSUMMATION OF THE TRANSACTIONS
CONTEMPLATED

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HEREBY OR THEREBY, OR, IN THE CASE OF ADMINISTRATIVE AGENT (AND ANY SUB-AGENT,
OFFICER, DIRECTOR, EMPLOYEE, AGENT, ATTORNEY-IN-FACT AND AFFILIATE THEREOF) THE ADMINISTRATION OF
THIS AGREEMENT AND THE OTHER LOAN DOCUMENTS, ANY ADVANCE OR LETTER OF CREDIT OR THE USE OR
PROPOSED USE OF THE PROCEEDS THEREFROM (INCLUDING ANY REFUSAL BY THE ISSUING LENDER TO HONOR A
DEMAND FOR PAYMENT UNDER A LETTER OF CREDIT IF THE DOCUMENTS PRESENTED IN CONNECTION WITH SUCH
DEMAND DO NOT STRICTLY COMPLY WITH THE TERMS OF SUCH LETTER OF
CREDIT), ANY ACTUAL OR ALLEGED PRESENCE OR RELEASE OF HAZARDOUS MATERIALS ON OR FROM ANY
PROPERTY OWNED OR OPERATED BY BORROWER OR ANY OF THE GUARANTORS, OR ANY ENVIRONMENTAL LIABILITY
RELATED IN ANY WAY TO BORROWER OR ANY OF THE GUARANTORS, OR ANY ACTUAL OR PROSPECTIVE CLAIM,
LITIGATION, INVESTIGATION OR PROCEEDING RELATING TO ANY OF THE FOREGOING, WHETHER BASED ON
CONTRACT, TORT OR ANY OTHER THEORY, WHETHER BROUGHT BY A THIRD PARTY OR BY BORROWER OR ANY
GUARANTOR, AND REGARDLESS OF WHETHER ANY INDEMNITEE IS A PARTY THERETO, IN ALL CASES, WHETHER OR
NOT CAUSED BY OR ARISING, IN WHOLE OR IN PART, OUT OF THE COMPARATIVE, CONTRIBUTORY OR SOLE
NEGLIGENCE OF THE INDEMNITEE; PROVIDED THAT SUCH INDEMNITY SHALL NOT, AS TO ANY INDEMNITEE, BE
AVAILABLE TO THE EXTENT THAT SUCH LOSSES, CLAIMS, DAMAGES, LIABILITIES OR RELATED EXPENSES 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.

     (b) Waiver of Damages. To the fullest extent permitted by applicable law,
Borrower shall not assert, and hereby waives, any claim against any Indemnitee, on any theory of
liability, for special, indirect, consequential or punitive damages (as opposed to direct or actual
damages) arising out of, in connection with, or as a result of, this Agreement, any other Loan
Document or any agreement or instrument contemplated hereby, the transactions contemplated hereby
or thereby, any Advance or Letter of Credit or the use of the proceeds thereof. No Indemnitee
referred to in Section 9.7(a) shall be liable for any damages arising from the use by
unintended recipients of any information or other materials distributed by it through
telecommunications, electronic or other information transmission systems in connection with this
Agreement or the other Loan Documents or the transactions contemplated hereby or thereby.

     Section 9.8. Execution in Counterparts. This Agreement may be executed in any number of counterparts
and by different parties hereto in separate counterparts, each of which when so executed shall be
deemed to be an original and all of which taken together shall constitute one and the same
agreement. Delivery of an executed counterpart signature page of this Agreement by facsimile is as
effective as executing and delivering this Agreement in the presence of the other parties to this
Agreement.

     Section 9.9. Survival of Representations, Etc. All representations and warranties contained in this
Agreement or made in writing by or on behalf of Borrower in connection herewith shall survive the
execution and delivery of this Agreement and the Loan Documents, the making of the Advances and any
investigation made by or on behalf of Lenders, none of

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which investigations shall diminish any
Lender’s right to rely on such representations and warranties. All obligations of Borrower
provided for in Sections 2.17, 2.18, 2.19, 9.4 and 9.7 and
all of the obligations of Lenders in Section 8.5 shall survive any termination of this
Agreement and repayment in full of the Obligations.

     Section 9.10. Severability. In case one or more provisions of this Agreement or the other Loan Documents
shall be invalid, illegal or unenforceable in any respect under any applicable law, the
validity, legality, and enforceability of the remaining provisions contained herein or therein
shall not be affected or impaired thereby.

     Section 9.11. Business Loans. Borrower warrants and represents that the Loans evidenced by the Notes are
and shall be for business, commercial, investment, or other similar purposes and not primarily for
personal, family, household, or agricultural use, as such terms are used in Chapter One
(“Chapter One”) of the Texas Credit Code. At all such times, if any, as Chapter One shall
establish a Maximum Rate, the Maximum Rate shall be the “indicated rate ceiling” (as such term is
defined in Chapter One) from time to time in effect.

     Section 9.12. Governing Law; Submission to Jurisdiction. This Agreement, the Notes and the other Loan
Documents shall be governed by, and construed and enforced in accordance with, the laws of the
State of Texas. Without limiting the intent of the parties set forth above, (a) Chapter 346 of the
Texas Finance Code, as amended (relating to revolving loans and revolving tri-party accounts
(formerly Tex. Rev. Civ. Stat. Ann. Art. 5069, Ch. 15)), shall not apply to this Agreement,
the Notes, or the transactions contemplated hereby and (b) to the extent that any Lender may be
subject to Texas law limiting the amount of interest payable for its account, such Lender shall
utilize the indicated (weekly) rate ceiling from time to time in effect. Each Letter of Credit
shall be governed by either the Uniform Customs and Practice for Documentary Credits (2007
Revision), International Chamber of Commerce Publication No. 600, or the International Standby
Practices (ISP98), International Chamber of Commerce Publication No. 590 (and any subsequent
revisions thereof approved by a Congress of the International Chamber of Commerce and adhered to by
the Issuing Lender). Borrower hereby irrevocably submits to the jurisdiction of any Texas state or
federal court sitting in Houston, Texas in any action or proceeding arising out of or relating to
this Agreement or the other Loan Documents, and Borrower hereby irrevocably agrees that all claims
in respect of such action or proceeding may be heard and determined in such court. Borrower hereby
unconditionally and irrevocably waives, to the fullest extent it may effectively do so, any right
it may have to the defense of an inconvenient forum to the maintenance of such action or
proceeding. Borrower hereby agrees that service of copies of the summons and complaint and any
other process which may be served in any such action or proceeding may be made by mailing or
delivering a copy of such process to such Borrower at its address set forth in this Agreement.
Borrower agrees that a final judgment in any such action or proceeding shall be conclusive and may
be enforced in other jurisdictions by suit on the judgment or in any other manner provided by law.
Nothing in this Section shall affect the rights of any Lender to serve legal process in any other
manner permitted by the law or affect the right of any Lender to bring any action or proceeding
against Borrower or its Property in the courts of any other jurisdiction.

     Section 9.13. USA PATRIOT Act. Each Lender that is subject to the USA PATRIOT Act and Administrative
Agent (for itself and not on behalf of any Lender) hereby notifies

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Borrower that pursuant to the
requirements of the USA PATRIOT Act it is required to obtain, verify and record information that
identifies Borrower, which information includes the name and address of Borrower and other
information that will allow such Lender or Administrative Agent, as applicable, to identify
Borrower in accordance with the USA PATRIOT Act.

     Section 9.14. WAIVER OF JURY TRIAL. BORROWER, LENDERS, THE ISSUING LENDER AND ADMINISTRATIVE AGENT
HEREBY ACKNOWLEDGE THAT THEY HAVE BEEN
REPRESENTED BY AND HAVE CONSULTED WITH COUNSEL OF THEIR CHOICE, AND HEREBY KNOWINGLY, VOLUNTARILY,
INTENTIONALLY, AND IRREVOCABLY WAIVE ANY AND ALL RIGHT TO TRIAL BY JURY IN RESPECT OF ANY LEGAL
PROCEEDING ARISING OUT OF OR RELATING TO THIS AGREEMENT, ANY OTHER LOAN DOCUMENT, OR ANY OF THE
TRANSACTIONS CONTEMPLATED HEREBY OR THEREBY.

     Section 9.15. NO ORAL AGREEMENTS. THIS WRITTEN AGREEMENT AND THE LOAN DOCUMENTS, AS DEFINED IN THIS
AGREEMENT, REPRESENT THE FINAL AGREEMENT AMONG THE PARTIES AND MAY NOT BE CONTRADICTED BY EVIDENCE
OF PRIOR, CONTEMPORANEOUS, OR SUBSEQUENT ORAL AGREEMENTS OF THE PARTIES.

THERE ARE NO UNWRITTEN ORAL AGREEMENTS AMONG THE PARTIES.

[Remainder of this page intentionally left blank. Signature page follows.]

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     EXECUTED as of the date first above written.

	 	 	 	 	 
	 	BORROWER:

DELTA PETROLEUM CORPORATION,

a Delaware corporation

 	 
	 	By:  	/s/ Kevin K. Nanke
 	 
	 	 	Name:  	Kevin K. Nanke                 	 
	 	 	Title:  	CFO 	 
	 

Signature Page to Credit Agreement

 

 

	 	 	 	 	 
	 	ADMINISTRATIVE AGENT:

MACQUARIE BANK LIMITED,

as Administrative Agent, Issuing Lender and a Lender

 	 
	 	By:  	/s/ Vanessa Lenthall
 	 
	 	 	Name:  	Vanessa Lenthall           	 
	 	 	Title:  	Division Director 	 
	 
	 	By:  	       /s/ Robert McRobbie
 	 
	 	 	Name:  	Robert McRobbie              	 
	 	 	Title:  	Division Director, Legal Risk Management 	 
	 

Signature Page to Credit Agreement

 

 

APPENDIX
I

DEFINITIONS

     “6-Month Period” has the meaning set forth in Section 5.12.

     “Acceptable Bank” means:

     (a) a financial institution that has a rating for its long-term unsecured and non
credit-enhanced debt obligations of A or higher by Standard & Poor’s Rating Services, A or higher
by Fitch Ratings Ltd., or A-2 or higher by Moody’s Investor Services Limited (an “A” Equivalent
Rating”); or

     (b) any other financial institution Approved by Administrative Agent.

     “Acceptable Security Interest” in any Property means a Lien which (a) exists in favor
of Administrative Agent for the benefit of the Secured Parties, (b) is superior to all Liens or
rights of any other Person in the Property encumbered thereby, other than Permitted Liens, (c)
secures the Obligations, and (d) is perfected and enforceable.

     “Acquisition” means the purchase by Borrower or any of the Guarantors of any business,
including the purchase of all or substantially all the associated assets or operations or of stock
(or other ownership interests) of a Person (other than of a wholly-owned Subsidiary of Borrower).

     “Acquisition Letters of Credit” means, collectively, one or more letters of credit in
the original stated aggregate amount of $300,000,000, issued for the account of Borrower, such
letters of credit to be (a) issued by JPMorgan Chase Bank, N.A. and (b) fully cash collateralized
pursuant to, and in accordance with, the Cash Collateral Agreement.

     “Adjusted Reference Rate” means, for any day, the fluctuating rate per annum of
interest equal to the greatest of (a) the Reference Rate in effect on such day, (b) the Federal
Funds Rate in effect on such day plus 0.5 of 1% and (c) the One-Month LIBOR plus 1.50%. Any change
in the Adjusted Reference Rate due to a change in the Reference Rate, Eurodollar Rate or the
Federal Funds Rate shall be effective on the effective date of such change in the Reference Rate,
Eurodollar Rate or the Federal Funds Rate.

     “Administrative Agent” means Macquarie Bank Limited, in its capacity as agent pursuant
to Article VIII, and any successor agent pursuant to Section 8.6.

     “Administrative Questionnaire” means an administrative questionnaire in a form
supplied by Administrative Agent or such other form provided by a Lender and acceptable to
Administrative Agent.

     “Advance” means an advance by a Lender to Borrower pursuant to Section 2.1(a)
as part of a Borrowing and refers to a Reference Rate Advance or a Eurodollar Rate Advance.

     “AFE” means an authorization for expenditure representing an estimate of work to be
performed for a specific drilling, completion or other operation; provided that AFEs will not

 

 

include COPAS overhead or other similar expenses related to Borrower’s own overhead expense.

     “Affiliate” means, as to any Person, any other Person that, directly or indirectly,
through one or more intermediaries, controls, is controlled by, or is under common control with,
such Person or any Subsidiary of such Person. The term “control” (including the terms “controlled
by” or “under common control with”) means the possession, directly or indirectly, of the power to
direct or cause the direction of the management and policies of a Person, whether through ownership
of a Control Percentage, by contract, or otherwise.

     “Agreement” means this Third Amended and Restated Credit Agreement, as the same may be
further amended, supplemented, restated, and otherwise modified from time to time.

     “Applicable Margin” means, with respect to any Advance, (a) during any time when an
Event of Default exists, 4% per annum plus the rate per annum set forth in the appropriate
intersection of the Pricing Grid for the relevant Loan and Type of such Advance, and (b) at any
other time, the rate per annum set forth in the appropriate intersection of the Pricing Grid for
the relevant Loan and Type of such Advance. The Applicable Margin for any Advance shall change
when and as any such Event of Default commences or terminates.

     “Approval” and “Consent” mean, with respect to any consent or approval sought
by Borrower and given by Administrative Agent, the writings executed by Administrative Agent that
(a) authorize Borrower to take the action for which the consent or approval is sought and (b) set
forth the conditions, if any, upon which the consent or approval is given by Administrative Agent.
“Approve” and “Approved” have the correlative meaning.

     “Assignment and Acceptance” means an assignment and acceptance entered into by a
Lender and an Eligible Assignee, and accepted by Administrative Agent, in substantially the form of
the attached Exhibit A.

     “BB Hedge” means any hedge position or Hedge Contract considered by Administrative
Agent in determining the then effective Borrowing Base.

     “Borrower Sub-Account” has the meaning set forth in Section 2.12(a).

     “Borrowing” means a borrowing consisting of Advances made on the same day by Lender
pursuant to Section 2.1.

     “Borrowing Base” means at any particular time, the Dollar amount determined in
accordance with Section 2.2 on account of Proved Reserves attributable to Oil and Gas
Properties of Borrower subject to an Acceptable Security Interest and described in the most recent
Independent Engineering Report or Internal Engineering Report, as applicable, delivered to
Administrative Agent and each Lender pursuant to Section 2.2.

     “Business Day” means (a) any day other than a day on which commercial banks are
authorized or required to close in New York, New York, and (b) if such day relates to the making of
any Advance by Administrative Agent, the making of any payment or prepayment by Borrower or the
continuation of any Interest Period, each in connection with a Eurodollar Rate

 

 

Advance, any day that is both (i) a “Business Day” under the preceding clause (a) and
(ii) a day on which dealings in Dollar deposits are carried out in the London interbank market.

     “Capital Leases” means, as applied to any Person, any lease of any Property by such
Person as lessee which would, in accordance with GAAP, be required to be classified and accounted
for as a capital lease on the balance sheet of such Person.

     “Cash Collateral Account” means a cash collateral account pledged by Borrower to the
Issuing Lender containing cash deposited pursuant to Section 2.7(b), Section
7.2(b), or Section 7.3(b) to be maintained with the Issuing Lender or a bank designated
by Administrative Agent in accordance with Section 2.10(g).

     “Cash Collateral Agreement” means that certain Second Amended and Restated Cash
Collateral Account Agreement, dated as of October 24, 2008, among Borrower, JPMorgan Chase Bank,
N.A., in its individual capacity as depositary bank, as the same may hereafter be modified, amended
or supplemented from time to time.

     “CERCLA” means the Comprehensive Environmental Response, Compensation, and Liability
Act of 1980, as amended, state and local analogs, and all rules and regulations and requirements
thereunder in each case as now or hereafter in effect.

     “Change in Control” means (a) that, for any reason (i) any Person or group (as defined
in Sections 13(d)(3) or 14(d)(2) of the Securities Exchange Act of 1934) other than Tracinda
Corporation, a Nevada corporation, and its Affiliates shall become the direct or indirect
beneficial owner (as defined in Sections 13(d)(3) or 14(d)(2) of the Securities Exchange Act of
1934) of greater than 30% of the total voting power of all classes of capital stock then
outstanding of Borrower entitled (without regard to the occurrence of any contingency) to vote in
elections of directors of Borrower, or (ii) Borrower ceases to own, either directly or indirectly,
100% of the Equity Interest in any wholly-owned Subsidiary other than as a result of a sale of
assets or merger permitted under Section 6.4, or (b) a “Change of Control” (or similar
defined term) as defined in any of the Senior Unsecured Notes Documents or the Convertible Notes
Documents.

     “Change in Law” means the occurrence, after the date of this Agreement, of any of the
following: (a) the adoption or taking effect of any new Legal Requirement, (b) any change in any
Legal Requirement or in the administration, interpretation or application thereof by any
Governmental Authority or (c) the making or issuance of any request, guideline or directive
(whether or not having the force of law) by any Governmental Authority.

     “Code” means the Internal Revenue Code of 1986, as amended, and any successor statute.

     “Collateral” means (a) all “Collateral”, “Pledged Collateral” and
“Mortgaged Properties” (as defined in each of the Mortgages, the Security Agreements, and
the Pledge Agreement, as applicable) or similar terms used in the Security Instruments, and (b) all
amounts contained in Borrower’s and the Guarantors’ bank accounts.

 

 

     “Commitment” means the amount set opposite such Lender’s name on Schedule II
hereof as its Commitment, or if such Lender has entered into any Assignment and Acceptance, as set
forth for such Lender as its Commitment in the Register maintained by Administrative Agent pursuant
to Section 9.6(c), as such amount may be reduced or terminated pursuant to Section
2.6 or Article VII or otherwise under this Agreement. The aggregate amount of the
Commitments on the date hereof is $100,000,000.00.

     “Commitment Fee Rate” means the per annum commitment fee rate set forth on the Pricing
Grid for a Revolving Loan and Term Loan, as applicable from time to time, and calculated in
accordance with Section 2.13(a).

     “Commitment Termination Date” means the earlier of (a) the Maturity Date and (b) the
earlier termination in whole of the Commitments pursuant to Section 2.6 or Article
VIII.

     “Compliance Certificate” means a compliance certificate in the form of the attached
Exhibit B signed by a Responsible Officer of Borrower.

     “Contingent Obligations” means the contingent obligations of Borrower or any Guarantor
under the sureties or bonds permitted under Section 6.2(e) which are not due and owing.

     “Control Percentage” means, with respect to any Person, the percentage of the
outstanding Equity Interest (including any options, warrants or similar rights to purchase such
Equity Interest) of such Person having ordinary voting power which gives the direct or indirect
holder of such Equity Interest the power to elect a majority of the board of directors (or other
applicable governing body) of such Person.

     “Controlled Group” means all members of a controlled group of corporations and all
businesses (whether or not incorporated) under common control which, together with Borrower, are
treated as a single employer under Section 414 of the Code.

     “Convert,” “Conversion,” and “Converted” each refers to a conversion
of Advances of one Type into Advances of another Type pursuant to Section 2.5(b).

     “Convertible Notes” means Borrower’s 3 3/4% Convertible Senior Notes due 2037 issued
pursuant to the Convertible Notes Indenture.

     “Convertible Notes Documents” means the Convertible Notes Indenture, the notes
evidencing the Convertible Notes and any other documents related thereto, including but not limited
to Subsidiary guaranties.

     “Convertible Notes Indenture” means that certain Indenture dated as of April 25, 2007
among Borrower, the Subsidiary guarantors parties thereto and U.S. Bank National Association, as
trustee, as the same may be amended, supplemented or otherwise modified from time to time.

     “Credit Extensions” means (a) an Advance made by any Lender, and (b) the issuance,
increase or extension of any Letter of Credit by the Issuing Lender.

     “Debt,” for any Person, means without duplication:

 

 

     (a) indebtedness of such Person for borrowed money;

     (b) obligations of such Person evidenced by bonds, debentures, notes or other similar
instruments;

     (c) obligations of such Person to pay the deferred purchase price of Property or
services (including, without limitation, obligations that are non-recourse to the credit of
such Person but are secured by the assets of such Person, but excluding trade accounts
payable);

     (d) obligations of such Person as lessee under Capital Leases and obligations of such
Person in respect of synthetic leases;

     (e) obligations of such Person under letters of credit and agreements relating to the
issuance of letters of credit or acceptance financing

     (f) obligations of such Person under any Hedge Contract;

     (g) obligations of such Person owing in respect of mandatorily redeemable preferred
stock or other mandatorily redeemable preferred Equity Interest of such Person;

     (h) any obligations of such Person owing in connection with any volumetric or
production prepayments;

     (i) obligations of such Person under direct or indirect guaranties in respect of, and
obligations (contingent or otherwise) of such Person to purchase or otherwise acquire, or
otherwise to assure a creditor against loss in respect of, indebtedness or obligations of
others of the kinds referred to in clauses (a) through (h) above;

     (j) indebtedness or obligations of others of the kinds referred to in clauses (a)
through (i) above secured by any Lien on or in respect of any Property of such Person; and

     (k) all liabilities of such Person in respect of unfunded vested benefits under any
Plan.

     “Debt Service Reserve Account” has the meaning assigned to such term in Section
2.12(e).

     “Default” means (a) an Event of Default or (b) any event or condition which with
notice or lapse of time or both would become an Event of Default.

     “Defaulting Lender” means any Lender that (a) has failed to fund its Pro Rata Share of
any Advance or participation in Letter of Credit Obligations required to be funded by it hereunder
within one Business Day of the date required to be funded by it hereunder unless such failure has
been cured within three Business Days (or such longer time period accepted by Borrower and
Administrative Agent), (b) has otherwise failed to pay over to Administrative Agent or any other
Lender any other amount required to be paid by it hereunder within one

 

 

Business Day of the date when due, unless the subject of a good faith dispute or unless such
failure has been cured within three Business Days (or such longer time period accepted by
Administrative Agent or such other Lender, as applicable), (c) has notified Administrative Agent,
or has stated publicly, that it will not comply with any such obligations hereunder, or (d) as to
which a Lender Insolvency Event has occurred and is continuing with respect to such Lender. Any
determination that a Lender is a Defaulting Lender will be made by Administrative Agent in its sole
discretion acting in good faith; provided, that a Lender shall not become a Defaulting Lender
solely as the result of the acquisition or maintenance of an ownership interest in such Lender or
its Parent Company by a Governmental Authority.

     “Delta Petroleum Equity Interest” means equivalents (however designated) of stock (or
any other ownership interests) of Delta Petroleum Corporation.

     “Deposit Account” shall have the meaning given to the term in the Uniform Commercial
Code (or any successor statute), as adopted and in force in the State of Texas or, when the laws of
any other state govern the method or manner of the perfection or enforcement of any Lien in any of
the Collateral, the Uniform Commercial Code (or any successor statute) of such other state.

     “Development Plan” means the comprehensive plan or plans in effect from time to time
with respect to the development of the Properties of Borrower and any other expenditures that have
been Approved by Administrative Agent. A Development Plan shall provide for, among other things,
the location, timing and estimated costs of Wells to be drilled or recompleted.

     “Disposition” means any sale, lease, transfer, assignment, farm-out, conveyance, or
other disposition of any Property (including any working interest, overriding royalty interest,
production payments, net profits interest, royalty interest, or mineral fee interest).

     “Dollars” and “$” means lawful money of the United States of America.

     “Effective Date” means December 29, 2010.

     “Eligible Assignee” means (a) any Lender (other than a Defaulting Lender), (b) any
Subsidiary or Affiliate of a Lender (other than a Defaulting Lender), and (c) any commercial bank
or other financial institution (i) Approved by Administrative Agent and the Issuing Lender in their
sole discretion, and (ii) unless an Event of Default has occurred and is continuing, reasonably
acceptable to Borrower.

     “Engineering Report” means either an Independent Engineering Report or an Internal
Engineering Report.

     “Environment” or “Environmental” shall have the meanings set forth in 42
U.S.C. 9601(8) (1988).

     “Environmental Claim” means any third party (including governmental agencies and
employees) action, lawsuit, claim, demand, regulatory action or proceeding, order, decree, consent
agreement or notice of potential or actual responsibility or violation (including claims or
proceedings under the Occupational Safety and Health Acts or similar laws or requirements

 

 

relating to health or safety of employees) which seeks to impose liability under any
Environmental Law.

     “Environmental Law” means, as to Borrower or the Guarantors, all Legal Requirements or
common law theories applicable to Borrower or the Guarantors arising from, relating to, or in
connection with the Environment, health, or safety, including without limitation CERCLA, relating
to (a) pollution, contamination, injury, destruction, loss, protection, cleanup, reclamation or
restoration of the air, surface water, groundwater, land surface or subsurface strata, or other
natural resources; (b) solid, gaseous or liquid waste generation, treatment, processing, recycling,
reclamation, cleanup, storage, disposal or transportation; (c) exposure to pollutants,
contaminants, hazardous, or toxic substances, materials or wastes; (d) the safety or health of
employees; or (e) the manufacture, processing, handling, transportation, distribution in commerce,
use, storage or disposal of hazardous or toxic substances, materials or wastes.

     “Environmental Permit” means any permit, license, order, approval, registration or
other authorization under Environmental Law.

     “Equity Interest” means with respect to any Person, any shares, interests,
participation, or other equivalents (however designated) of corporate stock, membership interests
or partnership interests (or any other ownership interests) of such Person.

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

     “Eurocurrency Liabilities” has the meaning assigned to that term in Regulation D of
the Federal Reserve Board (or any successor), as in effect from time to time.

     “Eurodollar Base Rate” means (a) in determining Eurodollar Rate for purposes of the
“One Month LIBOR”, the rate per annum for Dollar deposits quoted by Administrative Agent as
the inter-bank offered rate in effect from time to time for delivery of funds for one (1) month in
amounts approximately equal to the principal amount of the applicable Advances; provided that,
Administrative Agent may base its quotation of the inter-bank offered rate upon such offers or
other market indicators of the inter-bank market as Administrative Agent in its reasonable
discretion deems appropriate including the rate determined under the following clause (b), and (b)
in determining Eurodollar Rate for all other purposes, the rate per annum (rounded upward to the
nearest whole multiple of 1/100th of 1%) equal to the interest rate per annum set forth on the
Reuters Reference LIBOR1 page as the London Interbank Offered Rate, for deposits in Dollars at
11:00 a.m. (London, England time) two Business Days before the first day of the applicable
Interest Period and for a period equal to such Interest Period; provided that, if, on or before any
date on which Administrative Agent is to determine the Eurodollar Base Rate:

     (i) Administrative Agent determines that adequate and fair means do not or will not
exist for determining the Eurodollar Base Rate applicable to an Interest Period or, for any
reason, Administrative Agent will not be able to determine the Eurodollar Base Rate for the
applicable Interest Period; or

 

 

     (ii) Administrative Agent determines that the Eurodollar Base Rate determined in
accordance with this Agreement does not accurately reflect the cost of funding, making or
maintaining that Advance for the applicable Interest Period;

then Administrative Agent can give notice of that circumstance to Borrower (a “Market
Disruption Notice”), whereupon Lenders’ obligation to make the requested Advance on the basis
of the Eurodollar Base Rate will be suspended until such time as Administrative Agent notifies
Borrower that the circumstances described in the Market Disruption Notice no longer exist. If
Administrative Agent has issued a Market Disruption Notice, all Advances then outstanding will bear
interest at a rate to be determined by Administrative Agent (and specified in a notice to Borrower)
that compensates Lenders for the cost of funding (from any source that Administrative Agent may
reasonably select) plus the Applicable Margin.

     “Eurodollar Rate” means for purposes of determining the rate applicable for any
Interest Period with respect to any Eurodollar Rate Advance and for purposes of determining the
Adjusted Reference Rate, a rate per annum determined by Administrative Agent (which determination
shall be conclusive in the absence of manifest error) pursuant to the following formula:

	 	 	 	 	 	 	 
	Eurodollar Rate

	 	=	 	Eurodollar Base Rate
	 	
	 	 	 	 	 
	
	 	1.00 – Eurodollar Rate Reserve Percentage	 	 

     “Eurodollar Rate Advance” means an Advance which bears interest as provided in
Section 2.14(b).

     “Eurodollar Rate Reserve Percentage” of any Lender for the Interest Period for any
Eurodollar Rate Advance means the reserve percentage applicable during such Interest Period (or if
more than one such percentage shall be so applicable, the daily average of such percentages for
those days in such Interest Period during which any such percentage shall be so applicable) under
regulations issued from time to time by the Federal Reserve Board for determining the maximum
reserve requirement (including, without limitation, any emergency, supplemental, or other marginal
reserve requirement) for such Lender with respect to liabilities or assets consisting of or
including Eurocurrency Liabilities having a term equal to such Interest Period.

     “Event of Default” has the meaning specified in Section 7.1.

     “Excluded Taxes” means, with respect to Administrative Agent, any Lender, the Issuing
Lender or any other recipient of any payment to be made by or on account of any obligation of
Borrower hereunder, (a) taxes imposed on or measured by its overall net or gross income (however
denominated), and franchise taxes imposed on it (in lieu of net income taxes), by the jurisdiction
(or any political subdivision thereof) under the laws of which such recipient is organized or in
which its principal office is located or, in the case of any Lender, in which its applicable
Lending Office is located or any other jurisdiction where it is engaged or going business, (b) any
branch profits taxes imposed by the United States of America or any similar tax imposed by any
other jurisdiction in which Borrower is located or engaged or doing business, and (c) in the case
of a Foreign Lender (other than an assignee pursuant to a request by Borrower under Section
2.20), any withholding tax that is imposed on amounts payable to such Foreign

 

 

Lender at the time such Foreign Lender becomes a party hereto (or designates a new lending
office) or is attributable to such Foreign Lender’s failure or inability (other than as a result of
a Change in Law) to comply with Section 2.19(e) and Section 2.19(f), except to the
extent that such Foreign Lender (or its assignor, if any) was entitled, at the time of designation
of a new lending office (or assignment), to receive additional amounts from Borrower with respect
to such withholding tax pursuant to Section 2.19(a).

     “Expiration Date” means, with respect to any Letter of Credit, the date on which such
Letter of Credit will expire or terminate in accordance with its terms.

     “Federal Funds Rate” means, for any period, a fluctuating interest rate per annum
equal for each day during such period to the weighted average of the rates on overnight Federal
funds transactions with members of the Federal Reserve System arranged by Federal funds brokers, as
published for such day (or, if such day is not a Business Day, for the next preceding Business Day)
by the Federal Reserve Bank of New York, or, if such rate is not so published for any day which is
a Business Day, the average of the quotations for any such day on such transactions received by
Administrative Agent from three Federal funds brokers of recognized standing selected by it.

     “Federal Reserve Board” means the Board of Governors of the Federal Reserve System or
any of its successors.

     “Financial Statements” means the audited financial statements, including the audited
consolidated balance sheet, of Borrower and its consolidated Subsidiaries, in each case, as of
December 31, 2009, or December 31 of the relevant fiscal year then ended, as applicable, and the
related audited consolidated statements of income, cash flow, and retained earnings of Borrower and
its consolidated Subsidiaries, in each case, for the fiscal year ending December 31, 2009, or the
fiscal year then ended, as applicable, copies of which have been delivered to Administrative Agent
and Administrative Agent.

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

     “G&A Expenses” means the actual general and administrative expenses of Borrower,
including capitalized general and administrative expenses, calculated in accordance with GAAP,
(excluding all equity-based compensation pursuant to a plan Approved by Administrative Agent).

     “GAAP” means generally accepted accounting principles recognized as such by the
Financial Accounting Standards Board (or generally recognized successor) consistently applied and
maintained throughout the period indicated and consistent with applicable laws, except for changes
mandated by the Financial Accounting Standards Board or any similar accounting authority of
comparable standing, applied on a basis consistent with the requirements of Section 1.3.
If any change in any accounting principle or practice is required by the Financial Accounting
Standards Board (or generally recognized successor) in order for such principle or

 

 

practice to continue as a generally accepted principle or practice, all financial reports or
statements required hereunder or in connection herewith may be prepared in connection with such
change, but all calculations and determinations to be made hereunder may be made in accordance with
such change only if Borrowers and Administrative Agent agree to do so. Whenever any accounting
term is used herein which is not otherwise defined, it shall be interpreted in accordance with GAAP
or IFRS, as applicable.

     “Governmental Authority” means the government of the United States of America or any
other nation, or of any political subdivision thereof, whether state or local, and any agency,
authority, instrumentality, regulatory body, court, central bank or other entity exercising
executive, legislative, judicial, taxing, regulatory or administrative powers or functions of or
pertaining to government (including any supra-national bodies such as the European Union or the
European Central Bank).

     “Guarantor” means each Subsidiary of Borrower executing a Guaranty and any other
wholly owned Subsidiary of Borrower formed after the Effective Date of this Agreement.

     “Guaranty” means a Guaranty in substantially the form of the attached Exhibit
C and executed by a Guarantor, and “Guaranties” shall mean all such guaranties
collectively.

     “Hazardous Substance” means the substances identified as such pursuant to CERCLA and
those regulated under any other Environmental Law, including without limitation pollutants,
contaminants, petroleum, petroleum products, radionuclides, radioactive materials, and medical and
infectious waste.

     “Hazardous Waste” means the substances regulated as such pursuant to any Environmental
Law.

     “Hedge Contract” means (a) any and all rate swap transactions, basis swaps, credit
derivative transactions, forward rate transactions, puts, commodity swaps, commodity options,
forward commodity contracts, equity or equity index swaps or options, bond or bond price or bond
index swaps or options or forward bond or forward bond price or forward bond index transactions,
interest rate options, forward foreign exchange transactions, cap transactions, floor transactions,
collar transactions, currency swap transactions, cross-currency rate swap transactions, currency
options, spot contracts, or any other similar transactions or any combination of any of the
foregoing (including any options to enter into any of the foregoing), whether or not any such
transaction is governed by or subject to any master agreement, and (b) any and all transactions of
any kind, and the related confirmations, which are subject to the terms and conditions of, or
governed by, any form of master agreement published by the International Swaps and Derivatives
Association, Inc., any International Foreign Exchange Master Agreement, or any other master
agreement (any such master agreement, together with any related schedules, a “Master
Agreement”), including any such obligations or liabilities under any Master Agreement; provided
that, a “Hedge Contract” shall not include any “Master Agreement” or other
agreement that provides solely for the sale by Borrower or the Guarantors of physical Hydrocarbons
in exchange for cash in the ordinary course of its business.

 

 

     “Hedge Counterparty” means (a) any Person that is a Lender or Affiliate of a Lender on
date hereof and that is a counterparty to any Hedge Contract with Borrower or any Guarantor listed
on Schedule 4.19 and (b) any counterparty to any other Hedge Contract with Borrower or any
Guarantor; provided that such counterparty is a Lender or an Affiliate of a Lender at the time such
Hedge Contract is entered into. For the avoidance of doubt, “Hedge Counterparty” shall not
include any participant of a Lender pursuant to Section 9.6(e) other than to the extent
such participant is otherwise a Lender or an Affiliate of a Lender.

     “Hydrocarbon Hedge Agreement” means a Hedge Contract which is intended to reduce or
eliminate the risk of fluctuations in the price of Hydrocarbons.

     “Hydrocarbons” means oil, gas, coal seam gas, casinghead gas, drip gasoline, natural
gasoline, condensate, distillate, and all other liquid and gaseous hydrocarbons produced or to be
produced in conjunction therewith from a well bore and all products, by-products, and other
substances derived therefrom or the processing thereof, and all other minerals and substances
produced in conjunction with such substances, including, but not limited to, sulfur, geothermal
steam, water, carbon dioxide, helium, and any and all minerals, ores, or substances of value and
the products and proceeds therefrom.

     “Indemnified Taxes” means Taxes other than Excluded Taxes.

     “Independent Engineer” means Ralph E. Davis & Associates or any other engineering firm
reasonably acceptable to Administrative Agent.

     “Independent Engineering Report” means a report, in form and substance satisfactory to
Administrative Agent and each of Lenders, prepared by an Independent Engineer, addressed to
Administrative Agent and Lenders with respect to the Oil and Gas Properties owned by Borrower or
the Guarantors (or to be acquired by Borrower or any of the Guarantors, as applicable) which are or
are to be included in the Borrowing Base, which report shall (a) specify the location, quantity,
and type of the estimated Proved Reserves attributable to such Oil and Gas Properties, (b) contain
a projection of the rate of production of such Oil and Gas Properties, (c) contain an estimate of
the net operating revenues to be derived from the production and sale of Hydrocarbons from such
Proved Reserves based on product price and cost escalation assumptions specified by Administrative
Agent and Lenders, and (d) contain such other information as is customarily obtained from and
provided in such reports or is otherwise reasonably requested by Administrative Agent or any
Lender.

     “Interest Expense” means, for Borrower and its consolidated Subsidiaries for any
period, total interest, letter of credit fees, and other fees and expenses incurred in connection
with any Debt for such period, whether paid or accrued, including, without limitation, (i) all
commissions, discounts and other fees and charges owed with respect to letters of credit and
bankers’ acceptance financing, imputed interest under Capital Leases, and net costs under Interest
Hedge Agreements, all as determined in conformity with GAAP, and (ii) all interests, dividends,
distributions, or other payments made in respect of preferred Equity Interests.

 

 

     “Interest Hedge Agreement” means a Hedge Contract between Borrower and one or more
financial institutions providing for the exchange of nominal interest obligations between Borrower
and such financial institution or the cap of the interest rate on any Debt of Borrower.

     “Interest Period” means, for each Eurodollar Rate Advance comprising part of the same
Borrowing, the period commencing on the date of such Eurodollar Rate Advance or the date of the
Conversion of any Reference Rate Advance into a Eurodollar Rate Advance and ending on the last day
of the period selected by Borrower pursuant to the provisions below and Section 2.5 and,
thereafter, each subsequent period commencing on the last day of the immediately preceding Interest
Period and ending on the last day of the period selected by Borrower pursuant to the provisions
below and Section 2.5. The duration of each such Interest Period shall be one, two, or
three months, in each case as Borrower may, upon notice received by Administrative Agent not later
than 10:00 a.m. (Houston, Texas time) on the third Business Day prior to the first day of such
Interest Period, select; provided, however, that:

     (a) Borrower may not select any Interest Period which ends after the Maturity Date;

     (b) Interest Periods commencing on the same date for Advances comprising part of the
same Borrowing shall be of the same duration;

     (c) whenever the last day of any Interest Period would otherwise occur on a day other
than a Business Day, the last day of such Interest Period shall be extended to occur on the
next succeeding Business Day, provided that if such extension would cause the last day of
such Interest Period to occur in the next following calendar month, the last day of such
Interest Period shall occur on the next preceding Business Day; and

     (d) any Interest Period which begins on the last Business Day of a calendar month (or
on a day for which there is no numerically corresponding day in the calendar month at the
end of such Interest Period) shall end on the last Business Day of the calendar month in
which it would have ended if there were a numerically corresponding day in such calendar
month.

     “Interim Financial Statements” means the unaudited financial statements of Borrower
and it Subsidiaries, in each case, including the consolidated balance sheet, for the fiscal quarter
ended September 30, 2010 and including therein statements of income, cash flow, and retained
earnings of such Persons for the period commencing at the end of the previous year and ending with
the end of the fiscal quarter then ended, copies of which have been delivered to Administrative
Agent and Lenders.

     “Internal Engineering Report” means a report, in form and substance satisfactory to
Administrative Agent and each Lender, prepared by Borrower and certified by a Responsible Officer
of Borrower, addressed to Administrative Agent and Lenders with respect to the Oil and Gas
Properties owned by Borrower or any of the Guarantors (or to be acquired by Borrower or any of the
Guarantors, as applicable) which are or are to be included in the Borrowing Base, which report
shall (a) specify the location, quantity, and type of the estimated Proved Reserves attributable to
such Oil and Gas Properties, (b) contain a projection of the rate of production of

 

 

such Oil and Gas Properties, (c) contain an estimate of the net operating revenues to be
derived from the production and sale of Hydrocarbons from such Proved Reserves based on product
prices and cost escalation assumptions specified by Administrative Agent, and (d) contain such
other information as is customarily obtained from and provided in such reports or is otherwise
reasonably requested by Administrative Agent or any Lender.

     “Issuing Lender” means Macquarie Bank Limited, and any successor issuing bank pursuant
to Section 8.6.

     “JPMorgan Credit Facility” means that certain Second Amended and Restated Credit
Agreement dated as of November 3, 2008 among Delta Petroleum Corporation, as borrower, the lenders
party thereto from time to time, JPMorgan Chase Bank, N.A., as administrative agent, Bank of
Montreal, as syndication agent, and U.S. Bank National Association, as documentation agent, as the
same may be amended, supplemented or otherwise modified from time to time.

     “JPMorgan Loan Documents” means those certain documents listed on Schedule 1 to the
Assignment of Liens and Security Interests from JPMorgan Chase Bank, N.A. as assignor to Macquarie
Bank Limited as assignee and dated December 29, 2010.

     “JPMorgan Notes” means those certain notes listed on Schedule 2 to that certain
Omnibus Assignment and Acceptance, dated as of even date herewith, by and among Borrower, JPMorgan
Chase Bank, N.A., as administrative agent, and JPMorgan Chase Bank, N.A, Bank of Montreal, U.S.
Bank National Association, Deutsche Bank Trust Company Americas, KeyBank Financial Association,
Bank of Oklahoma, N.A., Natixis, Bank of Scotland plc, Barclays Bank plc, and Capital One, National
Association, as financial institutions.

     “Leases” means all oil and gas leases, oil, gas and mineral leases, oil, gas and
casinghead gas leases or any other instruments, agreements, or conveyances under and pursuant to
which the owner thereof has or obtains the right to enter upon lands and explore for, drill, and
develop such lands for the production of Hydrocarbons.

     “Legal Requirement” means, as to any Person, any law, statute, ordinance, decree,
requirement, order, judgment, rule, regulation (or official interpretation of any of the foregoing)
of, and the terms of any license or permit issued by, any Governmental Authority, including, but
not limited to, Regulations D, T, U, and X, which is applicable to such Person.

     “Lender Insolvency Event” means that (a) a Lender or its Parent Company is insolvent,
or is generally unable to pay its debts as they become due, or admits in writing its inability to
pay its debts as they become due, or makes a general assignment for the benefit of its creditors,
or (b) such Lender or its Parent Company is the subject of a bankruptcy, insolvency,
reorganization, liquidation or similar proceeding, or a receiver, trustee, conservator, intervenor
or sequestrator or the like has been appointed for such Lender or its Parent Company, or such
Lender or its Parent Company has taken any action in furtherance of or indicating its consent to or
acquiescence in any such proceeding or appointment.

     “Lenders” means a party hereto that (a) is a Lender listed on the signature pages of
this Agreement on the date hereof or (b) is an Eligible Assignee that became a Lender under this
Agreement pursuant to Section 2.20 or Section 9.6.

 

 

     “Lending Office” means, as to any Lender, the office or offices of such Lender
described as such in such Lender’s Administrative Questionnaire, or such other office or offices as
a Lender may from time to time notify Borrower and Administrative Agent.

     “Letter of Credit” means, individually, any standby letter of credit issued or deemed
issued by the Issuing Lender for the account of Borrower in connection with the Commitments and
that is subject to this Agreement, and “Letters of Credit” means all such letters of credit
collectively.

     “Letter of Credit Application” means the Issuing Lender’s standard form letter of
credit application for standby letters of credit that has been executed by Borrower and accepted by
the Issuing Lender in connection with the issuance of a Letter of Credit.

     “Letter of Credit Documents” means all Letters of Credit, Letter of Credit
Applications, and agreements, documents, and instruments entered into in connection with or
relating thereto.

     “Letter of Credit Exposure” means, at any time, the sum of (a) the aggregate undrawn
maximum amount of each Letter of Credit at such time plus (b) the aggregate unpaid amount of all
Reimbursement Obligations at such time.

     “Letter of Credit Obligations” means any obligations of Borrower under this Agreement
in connection with the Letters of Credit, including the Reimbursement Obligations.

     “Lien” means any mortgage, lien, pledge, assignment, charge, deed of trust, security
interest, hypothecation, preference, deposit arrangement or encumbrance (or other type of
arrangement having the practical effect of the foregoing) to secure or provide for the payment of
any obligation of any Person, whether arising by contract, operation of law, or otherwise
(including, without limitation, the interest of a vendor or lessor under any conditional sale
agreement, synthetic lease, Capital Lease, or other title retention agreement).

     “Liquid Investments” means:

     (a) direct obligations of, or obligations the principal of and interest on which are
unconditionally guaranteed by, the United States maturing within 180 days from the date of
any acquisition thereof;

     (b) negotiable or nonnegotiable certificates of deposit, time deposits, or other
similar banking arrangements maturing within 180 days from the date of acquisition thereof
(“bank debt securities”), issued by (A) any Lender (or any Affiliate of any Lender) or (B)
any other bank or trust company so long as such certificate of deposit is pledged to secure
Borrower’s or any Guarantor’s ordinary course of business bonding requirements, or any other
bank or trust company which has primary capital of not less than $500,000,000, if at the
time of deposit or purchase, such bank debt securities are rated not less than “AA” (or the
then equivalent) by the rating service of Standard & Poor’s Ratings Group or of Moody’s
Investors Service, Inc., and (ii) commercial paper issued by (A) any Lender (or any
Affiliate of any Lender) or (B) any other Person if at the time of purchase such commercial
paper is rated not less than “A 1” (or the then equivalent) by the rating service of
Standard & Poor’s Ratings Group or not less than “P

 

 

1” (or the then equivalent) by the rating service of Moody’s Investors Service, Inc.,
or upon the discontinuance of both of such services, such other nationally recognized rating
service or services, as the case may be, as shall be selected by Borrower with the consent
of the Required Lenders;

     (c) deposits in money market funds investing exclusively in investments described in
clauses (a) and (b) above;

     (d) repurchase agreements relating to investments described in clauses (a) and (b)
above with a market value at least equal to the consideration paid in connection therewith,
with any Person who regularly engages in the business of entering into repurchase agreements
and has a combined capital surplus and undivided profit of not less than $500,000,000, if at
the time of entering into such agreement the debt securities of such Person are rated not
less than “AA” (or the then equivalent) by the rating service of Standard & Poor’s Ratings
Group or of Moody’s Investors Service, Inc.; and

     (e) such other instruments (within the meaning of Article 9 of the Texas Business and
Commerce Code) as Borrower may request and Administrative Agent may approve in writing.

     “Loan” means, as applicable, a Revolving Loan or a Term Loan.

     “Loan Documents” means this Agreement, the Notes, the Letter of Credit Documents, the
Guaranties, the Security Instruments, any Hedge Contract with a Hedge Counterparty, and each other
agreement, instrument, or document executed by Borrower, any Guarantor, or any of Borrower’s or a
Guarantor’s Subsidiaries or any of their officers at any time in connection with this Agreement.

     “Market Disruption Notice” shall have the meaning assigned to such term within the
definition of “Eurodollar Base Rate”.

     “Material Adverse Change” means (a) a material adverse change in the business, assets
(including the Oil and Gas Properties of Borrower), financial condition, or operations of Borrower
and the Guarantors, taken as a whole, (b) a material adverse effect on Borrower’s and any of the
Guarantors’ ability, as a whole, to perform its obligations under this Agreement, any Note, any
Guaranty, or any other Loan Document, or (c) a material adverse change on the validity or
enforceability of this Agreement or any of the other Loan Documents.

     “Maturity Date” means January 31, 2012.

     “Maximum Commitment” means $100,000,000.

     “Maximum Rate” means the maximum nonusurious interest rate under applicable law
(determined under such laws after giving effect to any items which are required by such laws to be
construed as interest in making such determination, including without limitation if required by
such laws, certain fees and other costs).

 

 

     “Mortgage” means each of the mortgages or deeds of trust executed by any one or more
of Borrower, a Guarantor or any of their respective Subsidiaries in favor of Administrative Agent
for the ratable benefit of the Secured Parties in substantially the form of the attached Exhibit D
or such other form as may be requested by Administrative Agent, together with any assumptions or
assignments of the obligations thereunder by Borrower, any Guarantor or any of their respective
Subsidiaries, and “Mortgages” shall mean all of such Mortgages collectively.

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

     “Net Hedge Value” means, as to any novation, assignment, unwinding, termination, or
amendment of a BB Hedge, the net effect of such transaction (after giving effect to any new hedge
position or Hedge Contract entered into since the determination of the Borrowing Base then in
effect), if any, on the then effective Borrowing Base, as determined by Administrative Agent.

     “Net Operating Cash Flow” or “NOCF” means, on a cash accounting basis,
Borrower’s gross cash receipts from the sale of Hydrocarbons and all other cash receipts from
whatever source (including if applicable, cash payments received under any Hedging Agreement), less
the following expenses to be paid from this cash: (a) lease operating expenses (not including COPAS
overhead charges if Borrower or its Affiliate is the Operator); (b) production taxes; (c) payments
made or to be made with respect to Hedging Agreements (if applicable); (d) amounts paid by Borrower
to acquire and/or maintain any bonds or letters of credit identified on Schedule 4.20 and
securing plugging and abandonment obligations with respect to Borrower’s Oil and Gas Properties;
(e) if no Event of Default exists, G&A Expenses subject to the provisions of Section 6.20,
provided, however, for purposes of this definition, G&A Expenses shall not exclude
any fees paid to Lenders and advisory fees paid or accrued to Macquarie Capital (USA) Inc., and (f)
accrued interest expense for regularly scheduled interest payments under the Convertible Notes and
the Senior Unsecured Notes in accordance with Section 6.5. For the avoidance of doubt,
however, “Net Operating Cash Flow” does not include cash receipts or disbursements
attributable to Working Interests, Royalty Interests or net profits interests owned by any Person
that is not an Affiliate of Borrower.

     “Net Revenue Interest” means, with respect to any Oil and Gas Property, the decimal or
percentage share of Hydrocarbons produced and saved from or allocable to that Oil and Gas Property,
after deduction of Royalty Interests and other burdens on or paid out of such production.

     “Non-Consenting Lender” means any Lender that does not consent to a proposed
agreement, amendment, waiver, consent or release with respect to this Agreement or any other Loan
Document that requires the consent of each Lender, including any increases to the Borrowing Base.

     “Note” means a promissory note of Borrower payable to the order of any Lender, in
substantially the form of the attached Exhibit E, evidencing indebtedness of Borrower to such
Lender resulting from Advances owing to such Lender.

 

 

     “Notice of Borrowing” means a notice of borrowing in the form of the attached Exhibit
F signed by a Responsible Officer of Borrower.

     “Notice of Assignment of Proceeds” means a notice of assignment of proceeds
substantially in form of the attached Exhibit M.

     “Notice of Conversion or Continuation” means a notice of conversion or continuation in
the form of the attached Exhibit G signed by a Responsible Officer of Borrower.

     “Obligations” means (a) all principal, interest, fees, reimbursements,
indemnifications, and other amounts payable by Borrower, any Guarantor or any of their respective
Subsidiaries to Administrative Agent, the Issuing Lender or Lenders under the Loan Documents,
including without limitation, the Letter of Credit Obligations and the Related Costs, (b) all
obligations of Borrower, any Guarantor or any of their respective Subsidiaries owing to any Hedge
Counterparty under any Hedge Contract; provided that, (i) when any Hedge Counterparty assigns or
otherwise transfers any interest held by it under any Hedge Contract to any other Person pursuant
to the terms of such agreement, the obligations thereunder shall constitute Obligations only if
such assignee or transferee is also then a Lender or an Affiliate of a Lender and (ii) if a Hedge
Counterparty ceases to be a Lender hereunder or an Affiliate of a Lender hereunder, obligations
owing to such Hedge Counterparty shall be included as Obligations only to the extent such
obligations arise from transactions under such individual Hedge Contracts (and not the Master
Agreement between such parties) entered into at the time such Hedge Counterparty was a Lender
hereunder or an Affiliate of a Lender hereunder, without giving effect to any extension, increases,
or modifications thereof which are made after such Hedge Counterparty ceases to be a Lender
hereunder or an Affiliate of a Lender hereunder.

     “Oil and Gas Properties” means fee mineral interests, term mineral interests, Leases,
subleases, farm-outs, royalties, overriding royalties, net profit interests, carried interests,
production payments and similar mineral interests, and all unsevered and unextracted Hydrocarbons
in, under, or attributable to such oil and gas Properties and interests.

     “One Month LIBOR” means, for any day, the rate of interest equal to the Eurodollar
Rate then in effect for delivery of funds for a one (1) month period.

     “Operator” means, with respect to the Properties, Borrower and any other operators,
including contract operators, of the Properties Approved by Lender. The Operators of each of the
Properties as of the date of this Agreement are identified on Schedule III.

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

     “Parent Company” means, with respect to a Lender, the bank holding company (as defined
in Federal Reserve Board Regulation Y), if any, of such Lender, and/or any Person owning,
beneficially or of record, directly or indirectly, a majority of the shares of such Lender.

 

 

     “Payment Date” means the twenty-fifth (25th) day of each calendar month,
commencing on the twenty-fifth (25th) day of the calendar month following the month in
which the first Advance is made on the Term Loan.

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

     “Permit” means any approval, certificate of occupancy, consent, waiver, exemption,
variance, franchise, order, permit, authorization, right or license of or from any Governmental
Authority, including without limitation, an Environmental Permit.

     “Permitted Liens” means the Liens permitted under Section 6.1.

     “Permitted Subject Liens” means the Liens permitted under paragraphs (c) through (h)
of Section 6.1.

     “Person” means an individual, partnership, corporation (including a business trust),
joint stock company, limited liability corporation or company, limited liability partnership,
trust, unincorporated association, joint venture or other entity, or a government or any political
subdivision or agency thereof or any trustee, receiver, custodian or similar official.

     “Plan” means an employee benefit plan (other than a Multiemployer Plan) maintained for
employees of Borrower or any member of the Controlled Group and covered by Title IV of ERISA or
subject to the minimum funding standards under Section 412 of the Code.

     “Pledge Agreement” means a Pledge Agreement in substantially the form of the attached
Exhibit H, executed by Borrower or any of its Subsidiaries or any of the Guarantors.

     “Pricing Grid” means the pricing information set forth in Schedule I.

     “Project Account” has the meaning set forth in Section 2.11.

     “Property” of any Person means any property or assets (whether real, personal, or
mixed, tangible or intangible) of such Person.

     “Property Operating Statement” or “POS” means a monthly statement
substantially in the form of Exhibit L, and prepared by Borrower in accordance with
Section 5.6(d).

     “Pro Rata Share” means, with respect to any Lender, the ratio (expressed as a
percentage) of aggregate Commitments of such Lender to the aggregate Commitments of all Lenders (or
if such Commitments have been terminated, the ratio (expressed as a percentage) of outstanding
Advances owing to such Lender to the aggregate outstanding Advances owing to all such Lender.

     “Proved Reserves” has the meaning given to that term in the definitions promulgated by
the Society of Petroleum Evaluation Engineers and the World Petroleum Congress (the “SPE/WPC
Definitions”) in effect from time to time; “Proved Developed Producing Reserves” or
“PDP Reserves” means Proved Reserves which are categorized as both “Developed” and

 

 

“Producing” in the SPE/WPC Definitions; “Proved Developed Non Producing
Reserves” or “PDNP Reserves” means Proved Reserves which are categorized as both
“Developed” and “Non Producing” in the SPE/WPC Definitions; and “Proved
Undeveloped Reserves” or “PUD Reserves” means Proved Reserves which are categorized as
“Undeveloped” in the SPE/WPC Definitions.

     “Quarterly Net Operating Cash Flow” means Borrower’s oil and gas revenue (including if
applicable, realized gain under any Hydrocarbon Hedge Agreement), less : (a) lease operating
expenses (not including COPAS overhead charges if Borrower or its Affiliate is the Operator); (b)
production taxes; (c) transportation expenses; (d) realized loss under any Hydrocarbon Hedge
Agreement; and (e) amounts paid by Borrower to acquire and/or maintain any bonds or letters of
credit identified on Schedule 4.20 and securing plugging and abandonment obligations with
respect to Borrower’s Oil and Gas Properties. For the avoidance of doubt, however,
“Quarterly Net Operating Cash Flow” does not include cash receipts or disbursements
attributable to Working Interests, Royalty Interests or net profits interests owned by any Person
that is not an Affiliate of Borrower.

     “Reference Rate” with respect to any period, the greater of (i) the prime rate of
interest specified by the Wall Street Journal and (ii) the Federal Funds Rate plus 0.055 per annum,
in each case, from time to time as and when that rate changes. The Reference Rate is a reference
rate and does not necessarily represent the lowest or best rate actually available.

     “Reference Rate Advance” means an Advance which bears interest as provided in
Section 2.14(a).

     “Register” has the meaning set forth in Section 9.6(c).

     “Regulations D, T, U, and X” mean Regulations D, T, U, and X of the Federal Reserve
Board, as the same is from time to time in effect, and all official rulings and interpretations
thereunder or thereof.

     “Reimbursement Obligations” means all of the obligations of Borrower to reimburse the
Issuing Lender for amounts paid by the Issuing Lender under Letters of Credit as established by the
Letter of Credit Applications and Section 2.10(d).

     “Related Costs” means the reasonable and documented fees and out-of-pocket expenses of
counsel for Administrative Agent, Issuing Lender and Lenders, and consultants for Administrative
Agent, Issuing Lender and Lenders, and such other reasonable and documented out-of-pocket,
third-party expenses incurred by Administrative Agent, Issuing Lender and Lenders in connection
with the due diligence, negotiation and preparation of documents relating to the Loans and
execution, delivery and filing and/or recording of the Loan Documents together with any amendments,
supplements or modifications thereto or administration or enforcement thereof.

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

 

 

     “Release” shall have the meaning set forth in CERCLA or under any other Environmental
Law.

     “Reported Month” has the meaning assigned to that term in Section 5.6(d).

     “Required Lenders” means, (a) at any time when there are more than two Lenders,
Lenders holding at least 662⁄3% of the then aggregate unpaid principal amount of the Notes and
outstanding Letter of Credit Obligations held by Lenders at such time (with the aggregate amount of
each Lender’s risk participation and funded participation in Letter of Credit Obligations being
deemed to be “held” by such Lender for purposes of this definition); provided that, if no such
principal amount or Letter of Credit Obligation is then outstanding, “Required Lenders”
shall mean Lenders having at least 662⁄3% of the aggregate amount of the Commitments at such time and
(b) at any time when there are one or two Lenders, all Lenders; provided further that, if there are
two or more Lenders, the Commitment of, and the portion of the Advances and Letter of Credit
Exposure held or deemed held by, any Defaulting Lender shall be excluded for purposes of making a
determination of Required Lenders unless all Lenders are Defaulting Lenders.

     “Response” shall have the meaning set forth in CERCLA or under any other Environmental
Law.

     “Responsible Officer” means (a) with respect to any Person that is a corporation, such
Person’s Chief Executive Officer, President, Chief Financial Officer, or Vice President, (b) with
respect to any Person that is a limited liability company, a manager or the Responsible Officer of
such Person’s managing member or manager, and (c) with respect to any Person that is a general
partnership or a limited liability partnership, the Responsible Officer of such Person’s general
partner or partners.

     “Restricted Payment” means, with respect to any Person, (a) any direct or indirect
dividend or distribution (whether in cash, securities or other Property) or any direct or indirect
payment of any kind or character (whether in cash, securities or other Property) in consideration
for or otherwise in connection with any retirement, purchase, redemption or other acquisition of
any Equity Interest of such Person, or any options, warrants or rights to purchase or acquire any
such Equity Interest of such Person or (b) principal or interest payments (in cash, Property or
otherwise) on, or redemptions of, subordinated debt of such Person; and (c) other than as permitted
by Section 6.5, any direct or indirect payment under the Convertible Notes Documents and
the Senior Unsecured Notes Documents; provided that the term “Restricted Payment” shall not
include any dividend or distribution payable solely in Equity Interests of Borrower or warrants,
options or other rights to purchase such Equity Interests.

     “Revolving Loan” has the meaning assigned to such term in Section 2.1(a).

     “Revolving Loan Advance” means an Advance under the Revolving Loan.

     “Royalty Interest” means (a) an expense-free interest retained by a mineral lessor in
a Lease, (b) an overriding royalty reserved by or conveyed to a Person, or (c) any other
expense-free right to receive production or revenues from any Oil and Gas Property.

 

 

     “Sales Volumes” means, with respect to any or all of Borrower’s Oil and Gas
Properties, the product of Borrower’s Net Revenue Interest multiplied by the gross volume of
Hydrocarbons produced and saved from those Oil and Gas Properties.

     “SEC” means the United States Securities and Exchange Commission.

     “Secured Parties” means Administrative Agent, Issuing Lender, Lender, the Swap
Counterparties, and Bank Service Providers.

     “Security Agreements” means the Security Agreements, each in substantially the form of
the attached Exhibit I, executed by Borrower, any of its Subsidiaries, or any of the
Guarantors, and if applicable, Administrative Agent.

     “Security Instruments” means, collectively, (a) the Mortgages, (b) the Transfer
Letters, (c) the Pledge Agreements, (d) the Security Agreements, (e) each other agreement,
instrument or document executed at any time in connection with the Pledge Agreements, the Security
Agreements, or the Mortgages, (f) each agreement, instrument or document executed in connection
with the Cash Collateral Account; and (g) each other agreement, instrument or document executed at
any time in connection with securing the Obligations.

     “Senior Unsecured Notes” means Borrower’s 7% Senior Notes due 2015 issued pursuant to
the Senior Unsecured Notes Indenture.

     “Senior Unsecured Notes Documents” means the Senior Unsecured Notes Indenture, the
notes evidencing the Senior Unsecured Notes and any other documents related thereto, including but
not limited to Subsidiary guaranties.

     “Senior Unsecured Notes Indenture” means that certain Indenture dated as of March 15,
2005 among Borrower, the Subsidiary guarantors parties thereto and U.S. Bank National Association,
as trustee, as the same may be amended, supplemented or otherwise modified from time to time.

     “Solvent” means, with respect to any Person, as of the date of any determination, that
on such date (a) the fair value of the Property of such Person (both at fair valuation and at
present fair saleable value) is greater than the total liabilities, including contingent
liabilities, of such Person, (b) the present fair saleable value of the assets of such Person is
not less than the amount that will be required to pay the probable liability of such Person on its
debts as they become absolute and matured, (c) such Person is able to realize upon its assets and
pay its debts and other liabilities, contingent obligations, and other commitments as they mature
in the normal course of business, (d) such Person does not intend to, and does not believe that it
will, incur debts or liabilities beyond such Person’s ability to pay as such debts and liabilities
mature, and (e) such Person is not engaged in business or a transaction, and is not about to engage
in business or a transaction, for which such Person’s Property would constitute unreasonably small
capital after giving due consideration to current and anticipated future capital requirements and
current and anticipated future business conduct and the prevailing practice in the industry in
which such Person is engaged. In computing the amount of contingent liabilities at any time, such
liabilities shall be computed at the amount which, in light of the facts and circumstances existing
at such

 

 

time, represents the amount that can reasonably be expected to become an actual or matured
liability.

     “Subsidiary” means, with respect to any Person (the “parent”) at any date, any other
Person 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
GAAP as of such date, as well as any Person, a majority of whose outstanding Voting Securities
(other than directors’ qualifying shares) shall at any time be owned by such parent or one or more
Subsidiaries of such parent. Unless otherwise specified, all references herein to a
“Subsidiary” or to “Subsidiaries” shall refer to a Subsidiary or Subsidiaries of
Borrower.

     “Supporting Documentation” means a package containing data that is available to
Borrower sufficient to support the cost estimate and the justification for the proposed Development
Plan project, including but not limited to: (a) detailed work procedure, (b) before and after
wellbore schematic, (c) detailed cost estimate plus bids on major items and other backup as
appropriate, (d) reservoir structure and isopach maps, (e) log sections, core data, and directional
survey for any well being worked on plus key offset wells, (f) notes showing Borrower’s or
Independent Engineer’s reserves calculation, if available, and (g) economic forecast.

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

     “Termination Event” means (a) a Reportable Event described in Section 4043 of ERISA
and the regulations issued thereunder (other than a Reportable Event not subject to the provision
for 30 day notice to the PBGC under such regulations), (b) the withdrawal of Borrower or any of its
Affiliates from a Plan during a plan year in which it was a “substantial employer” as defined in
Section 4001(a)(2) of ERISA, (c) the filing of a notice of intent to terminate a Plan or the
treatment of a Plan amendment as a termination under Section 4041 of ERISA, (d) the institution of
proceedings to terminate a Plan by the PBGC, or (e) any other event or condition which constitutes
grounds under Section 4042 of ERISA for the termination of, or the appointment of a trustee to
administer, any Plan.

     “Term Loan” has the meaning assigned to that term in Section 2.1(a).

     “Transfer Letters” means, collectively, the letters in lieu of transfer orders in
substantially the form of the attached Exhibit J and executed by Borrower, any Guarantor or
any of their respective Subsidiaries executing a Mortgage.

     “Type” has the meaning set forth in Section 1.4.

     “Unused Commitment Amount” means, with respect to a Lender at any time, the lesser of
(a) such Lender’s Commitment at such time and (b) such Lender’s Pro Rata Share of the Borrowing
Base then in effect plus Lender’s Pro Rata Share of all amounts available under Section 2.3
at such time, minus, in the case of each (a) and (b) above, the sum of (i) the aggregate
outstanding principal amount of all Advances owed to such Lender at such time plus (ii) such
Lender’s Pro Rata Share of the aggregate Letter of Credit Exposure at such time.

 

 

     “USA PATRIOT Act” means the USA PATRIOT Act (Title III of Pub. L. 107-56 (signed into
law October 26, 2001)).

     “Voting Securities” means (a) with respect to any corporation (including any unlimited
liability company), capital stock of such corporation having general voting power under ordinary
circumstances to elect directors of such corporation (irrespective of whether at the time stock of
any other class or classes shall have or might have special voting power or rights by reason of the
happening of any contingency), (b) with respect to any partnership, any partnership interest or
other ownership interest having general voting power to elect the general partner or other
management of the partnership or other Person, and (c) with respect to any limited liability
company, membership certificates or interests having general voting power under ordinary
circumstances to elect managers of such limited liability company.

     “Well” means any existing or future oil or gas well, salt water disposal well,
injection well, water supply well or any other well located on or related to the Properties, and
any facility or equipment in addition to or replacement of any well.

     “Working Interest” means the property interest which entitles its owner to explore and
develop certain land for oil and gas production purposes, whether under an oil and gas lease or
unit, a compulsory pooling order or otherwise.

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