Document:

exv10w2

 

      

LOAN AGREEMENT

by and between

CITY OF SPRINGDALE, ARKANSAS,

the City

and

ADVANCED ENVIRONMENTAL RECYCLING TECHNOLOGIES, INC.,

the Company

Related to:

$10,610,000

City of Springdale, Arkansas

Industrial Development Refunding Revenue Bonds

(Advanced Environmental Recycling Technologies, Inc. Project)

Series 2008

Dated as of February 1, 2008

      

 

 

TABLE OF CONTENTS

	 	 	 	 	 	 	 
	 	 	 	 	Page
	ARTICLE I
	 
	 	 	 	 	 	 
	DEFINITIONS

	 	 	 	 	2	 
	 
	 	 	 	 	 	 
	ARTICLE II
	 
	 	 	 	 	 	 
	REPRESENTATIONS, WARRANTIES AND COVENANTS

	 
	 	 	 	 	 	 
	Section 2.01.

	 	Representations, Warranties and Covenants by the City
	 	 	2	 
	Section 2.02.

	 	Representations, Warranties and Covenants by the Company
	 	 	3	 
	Section 2.03.

	 	Environmental Representations and Covenants
	 	 	4	 
	 
	 	 	 	 	 	 
	ARTICLE III

	 
	 	 	 	 	 	 
	SECURITY PROVISIONS: TERM OF THE LOAN AGREEMENT

	 
	 	 	 	 	 	 
	Section 3.01.

	 	Security Provisions
	 	 	5	 
	Section 3.02.

	 	Term
	 	 	6	 
	Section 3.03.

	 	Patent Security
	 	 	6	 
	Section 3.04.

	 	Deposit of Pledged Revenues: Deposit Account Control Agreement
	 	 	7	 
	Section 3.05.

	 	Assignment of Weyerhaeuser Agreement
	 	 	7	 
	 
	 	 	 	 	 	 
	ARTICLE IV
	 
	 	 	 	 	 	 
	FINANCING THE COST OF THE FACILITIES: ISSUANCE OF THE SERIES 2008 BONDS

	 
	 	 	 	 	 	 
	Section 4.01.

	 	[Intentionally Omitted]
	 	 	8	 
	Section 4.02.

	 	Agreement to Issue the Bonds; Application of Bond Proceeds
	 	 	8	 
	Section 4.03.

	 	[Intentionally Omitted]
	 	 	8	 
	Section 4.04.

	 	[Intentionally Omitted]
	 	 	8	 
	Section 4.05.

	 	Investment of Moneys
	 	 	8	 
	Section 4.06.

	 	Arbitrage and Tax Matters
	 	 	8	 
	 
	 	 	 	 	 	 
	ARTICLE V

	 
	 	 	 	 	 	 
	OBLIGATIONS; PROVISIONS FOR PAYMENT

	 
	 	 	 	 	 	 
	Section 5.01.

	 	Loan Payments and Other Amounts Payable
	 	 	8	 
	Section 5.02.

	 	Payees of Payments
	 	 	10	 
	Section 5.03.

	 	Obligations of Company Hereunder Unconditional
	 	 	10	 

 

 

	 	 	 	 	 	 	 
	 	 	 	 	Page
	ARTICLE VI

	 
	 	 	 	 	 	 
	MAINTENANCE AND INSURANCE

	 
	 	 	 	 	 	 
	Section 6.01.

	 	Maintenance and Modifications
	 	 	11	 
	Section 6.02.

	 	Insurance
	 	 	12	 
	 
	 	 	 	 	 	 
	ARTICLE VII

	 
	 	 	 	 	 	 
	CASUALTY LOSS AND CONDEMNATION

	 
	 	 	 	 	 	 
	Section 7.01.

	 	Insurance and Condemnation Proceeds
	 	 	15	 
	 
	 	 	 	 	 	 
	ARTICLE VIII

	 
	 	 	 	 	 	 
	SPECIAL COVENANTS

	 
	 	 	 	 	 	 
	Section 8.01.

	 	No Warranty of Condition or Suitability by the City
	 	 	15	 
	Section 8.02.

	 	Further Assurances
	 	 	15	 
	Section 8.03.

	 	Annual Audit
	 	 	16	 
	Section 8.04.

	 	Financial Statements
	 	 	16	 
	Section 8.05.

	 	Release and Indemnification Covenants
	 	 	16	 
	Section 8.06.

	 	Company Representative
	 	 	17	 
	Section 8.07.

	 	Leases and Operating Contracts
	 	 	17	 
	Section 8.08.

	 	No Default Certificate
	 	 	18	 
	Section 8.09.

	 	[Intentionally Omitted]
	 	 	18	 
	Section 8.10.

	 	Limitations on Creation of Liens
	 	 	18	 
	Section 8.11.

	 	Limitations on Indebtedness
	 	 	19	 
	Section 8.12.

	 	Subordinated Debt
	 	 	19	 
	Section 8.13.

	 	Parity Indebtedness
	 	 	22	 
	Section 8.14.

	 	Transfer of Assets
	 	 	22	 
	Section 8.15.

	 	Consolidation, Merger, Sale or Conveyance
	 	 	23	 
	Section 8.16.

	 	Financial Covenants
	 	 	24	 
	Section 8.17.

	 	Reporting Extensions
	 	 	25	 
	 
	 	 	 	 	 	 
	ARTICLE IX

	 
	 	 	 	 	 	 
	ASSIGNMENT AND PLEDGING OF LOAN AGREEMENT; REDEMPTION OF BONDS

	 
	 	 	 	 	 	 
	Section 9.01.

	 	Assignment by Company
	 	 	25	 
	Section 9.02.

	 	Assignment and Pledge by the City
	 	 	25	 
	Section 9.03.

	 	Redemption of Bonds
	 	 	25	 
	 
	 	 	 	 	 	 
	ARTICLE X

	 
	 	 	 	 	 	 
	EVENTS OF DEFAULT AND REMEDIES

	 
	 	 	 	 	 	 
	Section 10.01.

	 	Events of Default Defined
	 	 	26	 

ii

 

	 	 	 	 	 	 	 
	 	 	 	 	Page
	Section 10.02.

	 	Remedies on Default
	 	 	27	 
	Section 10.03.

	 	No Remedy Exclusive
	 	 	29	 
	Section 10.04.

	 	Agreement to Pay Attorneys’ Fees and Expenses
	 	 	29	 
	Section 10.05.

	 	Waiver
	 	 	30	 
	Section 10.06.

	 	Appointment of Receiver
	 	 	30	 
	Section 10.07.

	 	Remedies Subject to Provisions of Law
	 	 	30	 
	Section 10.08.

	 	Waiver of Appraisement, Valuation, Stay, and Execution Laws
	 	 	31	 
	Section 10.09.

	 	Purchase of Property by Bondholder or Holder of Parity Indebtedness
	 	 	31	 
	 
	 	 	 	 	 	 
	ARTICLE XI

	 
	 	 	 	 	 	 
	PREPAYMENT OF THE LOAN

	 
	 	 	 	 	 	 
	Section 11.01.

	 	General Option to Prepay the Loan
	 	 	32	 
	Section 11.02.

	 	Prepayment Credits
	 	 	32	 
	Section 11.03.

	 	Notice of Prepayment
	 	 	32	 
	Section 11.04.

	 	Use of Prepayment Moneys
	 	 	32	 
	 
	 	 	 	 	 	 
	ARTICLE XII

	 
	 	 	 	 	 	 
	MISCELLANEOUS

	 
	 	 	 	 	 	 
	Section 12.01.

	 	Notices
	 	 	33	 
	Section 12.02.

	 	Binding Effect
	 	 	33	 
	Section 12.03.

	 	Severability
	 	 	33	 
	Section 12.04.

	 	Amounts Remaining in Funds
	 	 	33	 
	Section 12.05.

	 	Amendments, Changes and Modifications
	 	 	33	 
	Section 12.06.

	 	Execution in Counterparts
	 	 	34	 
	Section 12.07.

	 	Governing Law
	 	 	34	 
	Section 12.08.

	 	Cancellation at Expiration of Term of Agreement
	 	 	34	 
	Section 12.09.

	 	Recording
	 	 	34	 
	Section 12.10.

	 	No Pecuniary Liability of the City
	 	 	34	 
	Section 12.11.

	 	Partial Release
	 	 	34	 
	Section 12.12.

	 	General Release
	 	 	35	 
	Section 12.13.

	 	Captions
	 	 	35	 
	Section 12.14.

	 	Payments Due on Non-Business Day
	 	 	35	 
	Section 12.15.

	 	Provision of General Application
	 	 	35	 
	 
	 	 	 	 	 	 
	EXHIBIT A

	 	COSTS OF THE PROJECT	 	 	 	 
	EXHIBIT B

	 	PERMITTED EXCEPTIONS	 	 	 	 

iii

 

LOAN AGREEMENT

     THIS LOAN AGREEMENT (this “Loan Agreement”), dated as of February 1, 2008, by and between CITY
OF SPRINGDALE, ARKANSAS (the “City”), a body corporate and politic, and ADVANCED ENVIRONMENTAL
RECYCLING TECHNOLOGIES, INC. (the “Company”), a corporation duly organized and existing under the
laws of the State of Delaware.

W I T N E S S E T H :

     WHEREAS, the Company had previously requested that the City finance and refinance the cost of
certain solid waste disposal facilities located within the City, in accordance with that certain
Mortgage and Loan Agreement, dated as of October 1, 1999 (as amended, the “Original Loan
Agreement”) between the City and the Company; and

     WHEREAS, Title 14, Chapter 267 of the Arkansas Code of 1987, Annotated, and Title 14,
Chapter 164, Subchapter 2 of the Arkansas Code of 1987, Annotated (the “Act”), authorizes the City
to finance such costs; and

     WHEREAS, in order to finance and refinance such costs, the City issued its City of Springdale,
Arkansas Industrial Development Revenue Bonds (Advanced Environmental Recycling Technologies, Inc.
Project) Series 1999 (the “Series 1999 Bonds”) pursuant to and secured by an Indenture of Trust,
dated as of October 1, 1999 (the “Original Indenture”), between the City and First National Bank of
Springdale, as trustee (as trustee under the Original Indenture, the “Original Trustee”); and

     WHEREAS, the rights of the City in the Original Loan Agreement were assigned by the City to
the Original Trustee pursuant to an Assignment of Mortgage, dated as of October 1, 1999; and

     WHEREAS, in order to provide funds to refund, redeem and discharge the Series 1999 Bonds, the
City issued its City of Springdale, Arkansas Industrial Development Refunding Revenue Bonds
(Advanced Environmental Recycling Technologies, Inc. Project) Series 2003 (the “Series 2003
Bonds”); and

     WHEREAS, in order to provide funds to refund, redeem and discharge the Series 2003 Bonds with
the consent of the holders thereof, the City shall issue its City of Springdale, Arkansas
Industrial Development Refunding Revenue Bonds (Advanced Environmental Recycling Technologies, Inc.
Project) Series 2008 (the “Bonds” or the “Series 2008 Bonds”) pursuant to and secured by an
Indenture of Trust, dated as of the date hereof (the “Indenture”), between the City and Bank of
Oklahoma, N.A., as trustee (the “Trustee”); and

     WHEREAS, the City proposes to loan to the Company and the Company desires to borrow from the
City the proceeds of the Bonds upon the terms and conditions hereinafter in this Loan Agreement set
forth.

4

 

     NOW, THEREFORE, for and in consideration of the premises and the mutual covenants hereinafter
contained, the parties hereto formally covenant, agree and bind themselves as follows:

ARTICLE I

DEFINITIONS

     All terms not defined herein shall have the meanings assigned to such terms in Article I of
the Indenture.

ARTICLE II

REPRESENTATIONS, WARRANTIES AND COVENANTS

     Section 2.01. Representations, Warranties and Covenants by the City. The City represents,
covenants and warrants for the benefit of the Company, the Trustee and the Bondholders that:

     (a) the City is an independent public body politic and corporate constituting a
political subdivision, is duly organized and existing under the laws of the State of
Arkansas, is authorized pursuant to the Act to enter into the transactions contemplated by
this Loan Agreement and the Indenture and to carry out its obligations hereunder and
thereunder, and has duly authorized the execution and delivery of this Loan Agreement and
the Indenture;

     (b) consistent with the understanding between the City and the Company, the City will
loan the Company the proceeds of the Bonds to provide for the refinancing of the Project;

     (c) the City hereby finds that the refinancing of the Project is in the public
interest;

     (d) to refinance the Project, the City will issue the Bonds in the aggregate principal
amount of $10,610,000. The Bonds shall mature, bear interest, be subject to redemption
prior to maturity, be secured and have such other terms and conditions as are set forth in
the Indenture;

     (e) neither the execution and delivery of this Loan Agreement or the Indenture, the
consummation of the transactions contemplated hereby or thereby nor the fulfillment of or
compliance with the terms and conditions of this Loan Agreement or the Indenture conflicts
with or results in a breach of any of the terms, conditions or provisions of any restriction
or any agreement or instrument to which the City is now a party or by which it is bound or
constitutes a default under any of the foregoing or results
in the creation or imposition of any prohibited lien, charge or encumbrance of any
nature whatsoever upon any of the property or assets of the City under the terms of any
instrument or agreement;

5

 

     (f) the City hereby acknowledges the Company’s estimate of the total Cost of the
Project set forth in Exhibit A hereto;

     (g) the Bonds are to be issued under and secured by the Indenture pursuant to which
certain of the City’s interest in this Loan Agreement will be pledged and assigned to the
Trustee as security for payment of the principal of, premium, if any, and interest on the
Bonds; and

     (h) the issuance of the Bonds was approved by the governmental unit on behalf of which
the Bonds were issued by the applicable elected representatives thereof after a public
hearing following reasonable public notice.

     Section 2.02. Representations, Warranties and Covenants by the Company. The Company
represents, warrants and covenants for the benefit of the City, the Trustee and the Bondholders,
that:

     (a) the Company is a corporation duly organized and in good standing under the laws of
the State of Delaware, is authorized by the laws of each state where its facilities are
located to own, provide and operate the applicable facilities, has power to enter into and
to perform and observe the covenants and agreements on its part contained in this Loan
Agreement and the Tax Certificates and by proper action has duly authorized the execution
and delivery of this Loan Agreement, the Watts Mortgage, the Springdale Mortgage, the Lowell
Mortgage, the Junction Deed of Trust, the Weyerhaeuser Assignment Agreement, the Patent and
Trademark Security Agreement and the Tax Certificate;

     (b) neither the execution and delivery of this Loan Agreement and the Tax Certificate,
the consummation of the transactions contemplated hereby or thereby nor the fulfillment of
or compliance with the terms and conditions of this Loan Agreement and the Tax Certificate
violates any law or conflicts with or results in a breach of any of the terms, conditions or
provisions of any restriction or any agreement or instrument to which the Company is now a
party or by which it is bound or constitutes a default under any of the foregoing or results
in the creation or imposition of any lien, charge or encumbrance of any nature whatsoever
upon any of the property or assets of the Company under the terms of any instrument or
agreement except for the Indenture and other Permitted Liens;

     (c) the total cost of refunding the Prior Bonds is hereby determined to be not less
than $10,610,000, and the refinancing of such cost by the City will assist the Company in
providing recycling and manufacturing facilities;

     (d) the Company intends to operate or to cause its facilities to be operated and to use
the improvements thereon in connection therewith to the expiration of the term of this Loan
Agreement pursuant to the Act;

     (e) as of the date of this Loan Agreement, there is no litigation or legal or
governmental action, proceeding, inquiry or investigation pending or threatened by
governmental authority or to which the Company is a party or of which any property of

6

 

the
Company is subject, which would, if determined adversely to the Company, materially
adversely affect the transactions contemplated hereby;

     (f) the Company has or shall have good and marketable title to the Springdale Property,
the Lowell Property and the Junction Property, and a valid leasehold interest in the Watts
Property, free from all encumbrances except Permitted Liens and such title shall remain in
the Company so long as the Bonds remain Outstanding, except as otherwise provided herein;

     (g) the Company has obtained, or will obtain on or before the date required therefor,
all licenses, authorizations, permits and approvals from applicable local, state and federal
governmental agencies necessary to operate its Facilities as plastic waste reclamation and
recycling facilities contemplated by this Loan Agreement. The Company knows of no reasons
that such licenses, authorizations, permits and approvals will not be issued or issued in a
timely manner;

     (h) the Company is in possession of Phase One Environmental Assessments which were
performed on the Springdale Property, the Lowell Property, the Junction Property and the
Watts Property, and such assessments have not revealed any contamination of the Springdale
Property, the Lowell Property, the Junction Property or the Watts Property or any violation
of any rules or regulations of the Environmental Protection Agency or any other
environmental protection rule or regulation of any federal, state or local agency;

     (i) no improvements located or to be located in the building set-back shown on the
ALTA/ATSM Land Title Surveys prepared with respect to the Springdale Property, the Lowell
Property, the Junction Property or the Watts Property are used or shall be used in the
business operations of the Company.

     Section 2.03. Environmental Representations and Covenants. Except as may be described in (i)
the Phase I Environmental Site Assessment dated September 2003, prepared by ENVIRON International
Corporation with respect to the Site, or (ii) the Phase I Environmental Site Assessment dated
September 2003, prepared by ENVIRON International Corporation with respect to the Junction Property
        , or (iii) the limited environmental review dated September 12, 2003, prepared by ENVIRON
International Corporation with respect to the Lowell Property, or (iv) the Phase I Environmental
Site Assessment Report, dated October 1, 2002, prepared by B&F Engineering, Inc., with respect to
the Lowell Property or (iv) the Phase I Environmental Site Assessment dated October 25, 2007,
prepared by Terracon Consultants, Inc. with respect to the Watts Property, neither the Company nor,
to the Company’s knowledge, any other Person has ever caused or permitted any Hazardous Material to
be placed, held, located or disposed of on, under or at the Springdale Property, the Lowell
Property, the Junction Property or the Watts Property or any part thereof except in compliance with
Environmental Laws. The Company hereby warrants and represents that, to the best of its knowledge,
it has complied and, in the future, will comply in all material respects with all applicable
Environmental Laws. None of the
Springdale Property, the Lowell Property, the Junction Property or the Watts Property has
previously contained, and none of such properties now contain, any underground storage tanks (other
than in compliance with all applicable Environmental Laws) and none has ever been used

7

 

by the
Company or by any other Person as a temporary or permanent storage or disposal site for any
Hazardous Material. The Company has delivered to the Trustee all environmental reports, studies,
audits and other data and information in the possession or control of the Company relating to the
Springdale Property, the Lowell Property, the Junction Property or the Watts Property.

     If the City or the Trustee reasonably suspects that any violation of the Environmental Laws is
occurring involving the Springdale Property, the Lowell Property, the Junction Property or the
Watts Property, or if an Event of Default shall have occurred and be continuing which, with the
passage of time or the giving of notice, or both, would constitute an Event of Default, the City
and the Trustee shall have the right, but no obligation, to conduct any tests or inspections of the
Springdale Property, the Lowell Property, the Junction Property and the Watts Property at the
Company’s expense (including, without limitation, soil and other tests, borings, sampling and
monitoring) in order to determine compliance with Environmental Laws or the presence thereon or
therein of Hazardous Material and to have access to the Springdale Property, the Lowell Property,
the Junction Property and the Watts Property for such purposes.

ARTICLE III

SECURITY PROVISIONS: TERM OF THE LOAN AGREEMENT

     Section 3.01. Security Provisions. In order to secure the payment of the Bonds and Parity
Indebtedness, on a pro rata basis, and payment of all sums advanced under this Loan Agreement,
including advances which may be made in the future and to secure the performance by the Company of
all the covenants expressed or implied by this Loan Agreement (a) the Company does hereby grant,
bargain, sell, convey and mortgage unto the City (for the benefit of the Bondholders and holders of
Parity Indebtedness, pro rata) its interest in the real property described in the Watts Mortgage,
the Springdale Mortgage, the Lowell Mortgage and the Junction Deed of Trust and any fixtures or
appurtenances now or hereafter erected thereon; together with all rents and leases, profits,
royalties, minerals, geothermal resources, oil and gas rights and profits, easements and access
rights, now owned or hereafter acquired by the Company, used, belonging to, or in any way connected
with the Watts Property, the Springdale Property, the Lowell Property or the Junction Property, all
of which are declared to be a part of said Watts Property, Springdale Property, Lowell Property or
Junction Property, as applicable, and all the rights, privileges, benefits, hereditaments and
appurtenances in any way belonging, incidental or appertaining to said Watts Property, Springdale
Property, Lowell Property or Junction Property (other than equipment hereafter acquired), subject
to Permitted Liens as described in Section 8.10 hereof; and (b) the Company hereby pledges to and
grants to the City a present security interest, within the meaning of the Arkansas Uniform
Commercial Code and to the extent permitted by law; in (i) the Pledged Revenues; (ii) all of its
right, title and interest, if any, in the Funds (other than the Rebate Fund); (iii) any trust
accounts referred to in this Loan Agreement or in the Indenture; (iv) all tangible personal
property, furniture, machinery and equipment of the Company, now owned by the Company and located
on the Springdale Property, the Lowell Property, the Junction Property or the Watts Property (the
“Equipment”); and
(v) inventory of the Company located on the Springdale Property, the Lowell Property, the
Junction Property or the Watts Property, in each case subject to Permitted Liens and subject to
liens and security interests of record as of the date of execution hereof, excluding from such

8

 

pledge and security interest all patents, trademarks, copyrights, licenses and similar proprietary
rights of the Company now owned or hereafter acquired, to the extent the same constitute
“collateral” within the meaning of Section 3.03 hereof.

     This pledge shall be valid and binding from and after the date of the first delivery of any of
the Bonds. To the extent any assets pledged pursuant to this Loan Agreement consist of rights of
action or personal property, this Loan Agreement constitutes a security agreement. The Company
shall file financing statements from time to time relating to this Loan Agreement in such manner
and at such places as may be required by law fully to protect the security of the Bondholders and
the right, title and interest of the Trustee in and to the Trust Estate or any part thereof.

     Notwithstanding the foregoing, the Company shall be entitled to pledge any accounts
receivable, raw materials and inventory, on a basis senior to the pledge herein provided, to secure
the payment of Indebtedness in the form of a revolving credit or similar agreement in a maximum
principal amount up to $25,000,000.

     In addition, the Company shall be entitled to pledge purchase order receipts from Approved
Purchasers and to pledge inventory with respect thereto on a basis senior to the pledge herein
provided, to secure the payment of Indebtedness in a maximum principal amount equal to 95% of the
principal amount of such purchase orders. The terms of such Indebtedness shall require that the
principal balance of such indebtedness be reduced to $0 for a period of not less than three
consecutive business days annually.

     The Trustee, as assignee of the City pursuant to the Indenture, will execute such
subordination or similar agreements as reasonably requested by the Company with respect to any such
accounts receivable, purchase order receipts and inventory pledge. In the event the Company is
unable, following a reasonable good faith effort, as certified to the Trustee, to obtain a
commitment from a lending institution to provide either such credit arrangements, the Company may
submit revised proposed lending terms to the holders of the Bonds requesting a consent to such
terms, which consent shall not be unreasonably withheld.

     Section 3.02. Term. This Loan Agreement shall remain in full force and effect from the date
of delivery hereof until such time as all of the Bonds and Parity Indebtedness shall have been
fully paid or provision is made for such payment pursuant to the Indenture and all reasonable and
necessary fees and expenses of the Trustee accrued and to accrue through final payment of the Bonds
and Parity Indebtedness, all fees and expenses of the City accrued and to accrue through final
payment of the Bonds and Parity Indebtedness and all other liabilities of the Company accrued and
to accrue through final payment of the Bonds and Parity Indebtedness under this Loan Agreement and
the Indenture have been paid or provision is made for such payments pursuant to the Indenture.

     Section 3.03. Patent Security. Simultaneously with the execution hereof, the Company shall
execute and deliver a Patent and Trademark Security Agreement to the Trustee (for the
benefit of the holders of the Bonds and holders of Parity Indebtedness), the provisions of
which shall control all security and other interests of the Trustee in “collateral,” as therein
defined, to

9

 

the extent the same shall be inconsistent with the terms hereof or of the Springdale
Mortgage, Lowell Mortgage, Junction Deed of Trust or Watts Mortgage.

     Section 3.04. Deposit of Pledged Revenues: Deposit Account Control Agreement. The Company
covenants and agrees that it shall deposit or cause to be deposited no later than the Business Day
following receipt of such Pledged Revenues all Pledged Revenues in the Deposit Account pursuant to
the terms of the Deposit Account Control Agreement. The Company covenants and agrees to maintain
or cause to be maintained the Deposit Account while the Bonds are Outstanding. The Company
covenants and agrees to execute any substitute or replacement control agreements with respect to
the Pledged Revenues. The Company hereby consents to the filing of UCC financing statements and
shall execute and cause to be sent to the Depository Bank a notice of the security interest granted
hereunder and shall execute and deliver such other documents (including, but not limited to,
continuation statements and control agreements) as may be necessary or reasonably requested by the
Trustee or the Issuer in order to perfect and maintain as perfected such security interest or give
public notice thereof. Amounts on deposit in the Deposit Account shall be applied pursuant to the
Deposit Account Control Agreement and when transferred to the Trustee shall be applied by the
Trustee in accordance with the Indenture. Amounts in the Deposit Account may be used and withdrawn
by the Company and the Trustee as provided in the Deposit Account Control Agreement, the Indenture
and herein; provided, however, that in the event of a conflict among such documents, the Indenture
shall be deemed the controlling instrument. The Deposit Account Control Agreement shall provide
that immediately following receipt of a written notice that an Event of Default under the Indenture
has occurred, the Trustee shall direct the Depository Bank to withhold disbursements of Pledged
Revenues to the Company or its designees and to transfer the Deposit Account and the collateral
held therein to the name and credit of the Trustee upon demand thereof; provided, the Trustee shall
continue to be bound by the Indenture and the Deposit Account Control Agreement. Following an
Event of Default under the Indenture, all Pledged Revenues shall be disbursed by the Depository
Bank to the Trustee for application as may be directed by the Trustee. The Trustee also shall be
entitled to and shall take all steps, actions and proceedings following an Event of Default under
the Indenture reasonably necessary in its judgment to enforce all of the rights of the City which
have been assigned to the Trustee and all of the obligations of the Company under this Loan
Agreement. The Company shall execute and deliver all instruments as may be required to implement
this Section. The Company further agrees that a failure to comply with the terms of this Section
shall cause irreparable harm to the Registered Owners from time to time of the Bonds, and shall
entitle the Trustee, as assignee of the City, with or without notice to the Company, to take
immediate action to compel the specific performance of the obligations of the Company as provided
in this Section.

     Section 3.05. Assignment of Weyerhaeuser Agreement. While the Bonds are Outstanding, the
Company shall maintain the Weyerhaeuser Assignment Agreement for the benefit of the Trustee.

10

 

ARTICLE IV

FINANCING THE COST OF THE FACILITIES:

ISSUANCE OF THE SERIES 2008 BONDS

     Section 4.01. [Intentionally Omitted].

     Section 4.02. Agreement to Issue the Bonds; Application of Bond Proceeds. In order to provide
funds to make the Loan for payment of the Project, the City will sell and cause to be delivered to
the initial purchaser thereof the Bonds. Proceeds of the Bonds shall be deposited in accordance
with the Indenture, and invested as provided in Section 6.01 of the Indenture.

     Section 4.03. [Intentionally Omitted].

     Section 4.04. [Intentionally Omitted].

     Section 4.05. Investment of Moneys. Any moneys held as a part of the Funds shall be invested,
reinvested and transferred to other Funds by the Trustee as provided in Article VI of the
Indenture.

     Section 4.06. Arbitrage and Tax Matters. The Company hereby covenants and represents for the
benefit of each owner of the Bonds and the City that it will not make or permit any use of the
proceeds of the Bonds or the moneys in the Funds or take any other action which will cause the
Bonds to be “arbitrage bonds” within the meaning of Section 148 of the Code. The Company covenants
that it will comply with the applicable requirements of Section 148 of the Code so long as any
Bonds are Outstanding. The Company shall deliver to the City certificates in such reasonable form
as the City shall specify upon which the City may rely in furnishing the certificates required by
Section 6.02 of the Indenture. The Company covenants and agrees to comply with the provisions of
the Tax Certificates.

ARTICLE V

OBLIGATIONS; PROVISIONS FOR PAYMENT

     Section 5.01. Loan Payments and Other Amounts Payable.

     (a) As repayment of the Loan, the Company shall deposit with the Trustee, on the date
of issuance of the Bonds, and thereafter not later than the fifteenth day of each month, the
Monthly Payment with respect to the following calendar month, in accordance with the
Indenture, which amounts shall be applied to the payment of the Bonds at the times and in
the manner provided in the Indenture. The Company shall be entitled to credit with respect
to such Monthly Payments for any transfers to the Bond Principal Fund and Bond Interest Fund
pursuant to Section 3.07(b) of the Indenture.

     (b) Upon any acceleration of amounts due under the Loan Agreement, the Company shall
immediately pay as repayment of the Loan, for deposit in the Bond Principal Fund, the Bond
Interest Fund and the Reserve Fund, an amount which, together

11

 

with other moneys available under the Loan Agreement, is sufficient to pay the entire
principal of and interest on the Bonds.

     (c) On or before any redemption date (other than a sinking fund redemption date) for
which a notice of redemption has been given pursuant to the Indenture, the Company shall pay
as repayment of the Loan, for deposit in the Bond Principal Fund, an amount which, together
with other moneys available therefor in the Bond Principal Fund (and, if all Bonds are
called for redemption, the Reserve Fund), is sufficient to pay the principal of and premium,
if any, on the Bonds called for optional or mandatory redemption and for deposit into the
Bond Interest Fund an amount of money which, together with other moneys available therefor
in the Bond Interest Fund, is sufficient to pay the interest accrued to the redemption date
on the Bonds called for optional or mandatory redemption. If on any principal or interest
payment date on the Bonds or the date any other amounts are payable on the Bonds the amount
held by the Trustee in the Bond Principal Fund and the Bond Interest Fund is insufficient to
make the required payments of principal of, premium, if any, and interest on the Bonds, the
Company shall forthwith pay such deficiency as repayment of the Loan for deposit in the Bond
Principal Fund or the Bond Interest Fund, as the case may be.

     (d) At the option of the Company Representative, so long as no Event of Default has
occurred or is occurring, to be exercised by delivery of a written certificate to the
Trustee and the City not less than 45 days next preceding the applicable sinking fund
redemption date, it may (i) deliver to the Trustee for cancellation Bonds in an aggregate
principal amount desired by the Company Representative or (ii) specify a principal amount of
such Bonds which prior to said date have been redeemed (otherwise than through the operation
of the applicable sinking fund) and canceled by the Trustee and not theretofore applied as a
credit against the respective sinking fund redemption obligation. Each such Bond so
delivered or previously redeemed shall be credited by the Trustee at 100% of the principal
amount thereof against the obligation of the Company on such respective sinking fund
redemption date for Bonds and any excess over such amounts shall be credited against future
sinking fund redemption obligations for such Bonds as directed by the Company
Representative. In the event the Company Representative shall avail itself of the
provisions of clause (i) of the first sentence of this paragraph, the certificate required
by the first sentence of this paragraph shall be accompanied by the Bonds to be canceled.

     (e) The Company shall deposit the following amounts to the Reserve Fund:

          (i) on the date of issuance of the Bonds, $1,061,000 from proceeds of the
reserve fund established with respect to the Prior Bonds;

          (ii) in the event any moneys in the Reserve Fund are transferred to the Bond
Principal Fund or the Bond Interest Fund pursuant to the Indenture, or to the Rebate
Fund pursuant to the Indenture, or in the event the valuation of the amounts in the
Reserve Fund required by the Indenture reveals there is an amount less than the
Reserve Requirement on deposit in the Reserve Fund, the Company shall deposit, on
the first day of each month following such transfer or valuation,

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substantially equal monthly payments into the Reserve Fund to cause the total
amount in the Reserve Fund to equal the Reserve Requirement not later than the next
succeeding Interest Payment Date.

     (f) The Company agrees to pay to the Trustee and the City, respectively, as an
Operating Expense, the reasonable and necessary fees and expenses of the Trustee and the
City, respectively, including the reasonable fees and other costs incurred for the services
of any paying agent or engineers, architects, attorneys, management consultants, accountants
and other consultants employed by the Trustee or the City to make examinations and reports,
provide services and render opinions required under the Loan Agreement or the Indenture,
plus the Company agrees to pay to the appropriate party the fees and expenses of any Rebate
Analyst, as and when the same become due, upon submission of a statement therefor.

     (g) The Company agrees to pay to the Trustee as an Operating Expense all amounts to be
deposited to the Rebate Fund, as and when the same become due as determined pursuant to the
Indenture, to the extent there are no other amounts available to make such deposits, and to
cause the Trustee to apply such funds in compliance with the terms of the Indenture.

     (h) The Company agrees to pay as an Operating Expense all costs and expenses which may
be incurred in connection with any removal or substitution of the Trustee and the
appointment of any successor trustee.

     Section 5.02. Payees of Payments. The payments provided for in Sections 5.01(a), (b) and (c)
hereof shall be paid in funds immediately available in the City in which the designated office of
the Trustee is located directly to the Trustee for the account of the City and shall be deposited
as therein provided. The payments provided for in Section 5.01(e) hereof shall be paid in funds
immediately available in the City in which the designated office of the Trustee is located directly
to the Trustee for the benefit of the Bondholders and shall be deposited in the Reserve Fund. The
payments to be made under Sections 5.01(d), (g) and (h) hereof shall be paid directly to the payee
for its own use.

     Section 5.03. Obligations of Company Hereunder Unconditional. The obligations of the Company
to make the payments required in Section 5.01 hereof and to perform and observe the other
agreements on its part contained herein shall be absolute and unconditional. The Company (a) will
not suspend or discontinue, or permit the suspension or discontinuance of, any payments provided
for in Section 5.01 hereof; (b) will perform and observe all of its other agreements contained in
this Loan Agreement; and (c) except as provided in Article XI hereof, will not terminate this Loan
Agreement for any cause including, without limiting the generality of the foregoing, any acts or
circumstances that may constitute failure of consideration, eviction or constructive eviction,
destruction of or damage to its solid waste recovery facilities, commercial frustration of purpose,
or change in the tax or other laws or administrative rulings of or administrative actions by the
United States of America or the State of Arkansas or any political subdivision of either, any
failure of the City to perform and observe any agreement, whether express or implied, or any duty,
liability, or obligation arising out of or connected with this Loan Agreement, whether express or
implied, or any failure of the Trustee to perform and

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observe any agreement, whether express or implied, or any duty, liability or obligation
arising out of or connected with the Indenture, whether express or implied. Nothing contained in
this Section shall be construed to release the City from the performance of any agreements on its
part herein contained, and if the City shall fail to perform any such agreement, the Company may
institute such action against the City as the Company may deem necessary to compel performance,
provided that no such action shall violate the agreements on the part of the Company contained
herein. The Company may, however, at its own cost and expense and in its own name or in the name
of the City, prosecute or defend any action or proceeding or take any other action involving third
persons which the Company deems reasonably necessary in order to secure or protect its right of
possession, occupancy and use of its solid waste recovery facilities, and in such event the City
hereby agrees to cooperate fully with the Company (without expense to the City).

ARTICLE VI

MAINTENANCE AND INSURANCE

     Section 6.01. Maintenance and Modifications . The Company agrees that during the term of this
Loan Agreement its Property, Plant and Equipment shall be operated and maintained in substantial
compliance with all laws, building codes, ordinances and regulations and zoning laws as shall be
applicable to the Property, Plant and Equipment. The Company agrees that during the term of this
Loan Agreement it will at its own expense (a) keep the Property, Plant and Equipment in as
reasonably safe condition as its operations permit; and (b) keep the Property, Plant and Equipment
in good repair and in good operating condition, making from time to time all necessary repairs
thereto (including external and structural repairs) and renewals and replacements thereof. The
Company may also at its own expense, make from time to time any additions, modifications or
improvements to the Property, Plant and Equipment it may deem desirable for its purposes that do
not adversely affect the structural integrity of any building or substantially reduce its value or
impair the character of its use permitted pursuant to the Act, provided that all such additions,
modifications, renovations, repairs and improvements made by the Company shall become a part of the
Property, Plant and Equipment; provided, however, that nothing in this subsection shall prevent the
Company from ceasing to operate any immaterial portion of the Property, Plant and Equipment. The
Company hereby covenants and agrees that it shall not construct any improvements or install any
equipment on any portion of the Springdale Property, Lowell Property, Junction Property or Watts
Property located within a federally designated flood hazard zone unless and until such property
shall be insured against loss or damage by flood in accordance with Section 6.02(a) hereof.

     Section 6.02. Insurance.

     (a) Throughout the term of this Loan Agreement, the Company will keep the Springdale
Property, the Lowell Property, the Junction Property and the Watts Property (or cause the
Springdale Property, the Lowell Property, the Junction Property and the Watts Property to be
kept) continuously insured against such risks as are customarily insured against with
respect to property similar to the Springdale Property, the Lowell Property, the Junction
Property and the Watts Property by businesses of like size and

14

 

type, paying as the same becomes due all premiums in respect thereto, including but not
necessarily limited to:

          (i) insurance to the full insurable value of the Property, Plant and Equipment
of the Company as determined by the Company sufficient to prevent the Company from
being a co-issuer (and in no event less than the principal amount of the Bonds
Outstanding from time to time), against loss or damage by fire, lightning and flood
(if the Springdale Property, the Lowell Property, the Junction Property or the Watts
Property is located within a federally designated flood hazard zone) and such other
risks and matters, including without limitation, rental loss, public liability and
boiler insurance, with uniform standard extended coverage endorsement limited only
as may be provided in the standard form of extended coverage endorsement at that
time customarily used in the state where such property is located, provided that the
insurance required by this subsection may contain a deductible provision and be in
amounts which in the opinion of an Insurance Consultant is normal and reasonable;

          (ii) general public liability insurance against claims for bodily injury, death
or property damage occurring on, in or about the Springdale Property, the Lowell
Property, the Junction Property and the Watts Property and the adjoining streets,
sidewalks and passageways, such insurance to afford protection of the type and in an
amount which in the opinion of an Insurance Consultant is normal and reasonable with
respect to bodily injury and property damage;

          (iii) rental or business interruption insurance against abatement of rent
resulting from fire or other casualty in an amount not less than $1,000,000, with
the proceeds from such rental or business interruption insurance being payable to
the Company and the Trustee, as their respective interest may appear;

          (iv) Worker’s Compensation Insurance as required by law; and

          (v) key-man insurance with respect to Joe Brooks, the Co-Chairman of the Board
of Directors of the Company, in the amount of $4 million and Douglas Brooks, as the
Vice President, in the amount of $2.5 million.

     (b) Anything herein to the contrary, notwithstanding, a Significant Bondholder may, by
notice thereof in writing to the Company and the Trustee, require additional insurance to be
carried by the Company with respect to the Springdale Property, the Lowell Property, the
Junction Property and the Watts Property beyond that expressly identified herein, with
respect to such risks and in such coverage amounts and other terms as in each case are
reasonable and customary with respect to property similar to the Springdale Property, the
Lowell Property, the Junction Property or the Watts Property, and the Company will obtain
such insurance and furnish to the Trustee and Significant Bondholder evidence thereof
satisfactory to the Trustee and Significant Bondholder. All policies of insurance shall be
issued by an insurer authorized to do business in the state where the respective property is
located having a rating of at least A:6 in Best’s Key Rating Guide. Not later than 30 days
prior to the expiration date of

15

 

each of the insurance policies, the Company will deliver to the Trustee satisfactory
evidence of the renewal of each of the policies. If at any time the Trustee is not in
receipt of written evidence that all insurance required hereunder is in full force and
effect, the Trustee will have the right without notice to the Company to take such action as
the Trustee deems necessary to protect its interest in the Springdale Property, the Lowell
Property, the Junction Property and the Watts Property, including without limitation the
obtaining of such insurance coverage as the Trustee in its sole discretion deems
appropriate, and all expenses incurred by the Trustee in connection with such action or in
obtaining such insurance and keeping it in effect will be paid by the Company to the Trustee
upon demand; provided, however, that if that the Trustee takes any such action, the Trustee
shall give the Company notice of such action within five Business Days thereof.

     (c) All of the insurance policies required pursuant to this Section 6.02 will
(i) contain a standard noncontributory form of mortgage clause (in favor of the Trustee and
entitling the Trustee to collect any and all proceeds payable under such insurance), as well
as a standard waiver of subrogation endorsement, and in the case of such liability policy,
name the Trustee as an additional insured, all to be in form and substance satisfactory to
the Trustee; (ii) provide, to the extent obtainable, that such policies may not be canceled
or amended to diminish the coverage thereunder without at least 30 days prior written notice
to the Trustee; and (iii) provide that no act, omission or negligence of the Company, or its
agents, servants or employees, or of any tenant under any lease, which might otherwise
result in a forfeiture of such insurance or any part thereof, shall in any way affect the
validity or enforceability of such insurance insofar as the Trustee is concerned. The
Company will not carry separate insurance, concurrent in kind or form or contributing in the
event of loss, with any insurance required under this Section 6.02.

     The Company shall retain an Insurance Consultant to review the insurance requirements of the
Company at the date of issuance of the Bonds and from time to time thereafter (but not less
frequently than every two years) and to cause a certificate to be delivered to the Trustee and to
the Bondholders as to whether the insurance being maintained is in compliance with the requirements
of this Section. If the Insurance Consultant makes recommendations for the increase of any
coverage, the Company shall increase or cause to be increased such coverage in accordance with such
recommendations, to the extent that the Governing Body of the Company determines in good faith that
such recommendations are in the best interests of the Company. If the Insurance Consultant makes
recommendations for the decrease or elimination of any coverage, the Company may decrease or
eliminate such coverage in accordance with such recommendations, to the extent that the Governing
Body of the Company determines in good faith that such recommendations are in the best interest of
the Company.

     Notwithstanding anything in this Section to the contrary, the Company shall have the right,
without giving rise to an Event of Default solely on such account, (a) to maintain insurance
coverage below that most recently recommended by the Insurance Consultant, if the Company furnishes
to the Trustee a report of the Insurance Consultant to the effect that the insurance so provided
affords either the greatest amount of coverage available for the risk being insured against at
rates which in the judgment of the Insurance Consultant are reasonable in connection with
reasonable and appropriate risk management, or the greatest amount of coverage necessary

16

 

by reason of state or federal laws now or hereafter in existence; or (b) to adopt alternative risk
management programs which the Insurance Consultant determines to be reasonable, including, without
limitation, to self-insure in whole or in part individually or in connection with other
institutions, to participate in programs of captive insurance companies, to participate with other
solid waste disposal and manufacturing companies in mutual or other cooperative insurance or other
risk management programs, to participate in state or federal insurance programs, or to establish or
participate in other alternative risk management programs; all as may be approved by the Insurance
Consultant as reasonable and appropriate risk management by the Company. If the Company shall be
self-insured for any coverage, the report of the Insurance Consultant mentioned above shall state
whether the anticipated funding of any self-insurance fund is actuarially sound, and if not, the
required funding to produce such result and such coverage shall be reviewed by the Insurance
Consultant not less frequently than annually. Notwithstanding the other provisions of this
Section, the Company shall not self-insure (other than with respect to reasonable deductibles
certified as such in an Officer’s Certificate of the Company Representative) or otherwise
participate in programs described in clause (b) above with respect to any insurance against loss or
damage to the Property, Plant and Equipment by fire, lightning, vandalism, malicious mischief or
other casualty or with respect to boiler insurance and provided further that, the Company shall not
self-insure if such self-insurance has a material adverse effect on reimbursement from any third
party payor unless its Governing Body shall have determined in good faith, evidenced by a
resolution of the Governing Body, that such self-insurance is in the best interests of the Company
and the Company has given prior notice of such self-insurance to the Trustee and the Bondholders.

     The Company Representative shall deliver to the Trustee (a) upon execution and delivery of
this Loan Agreement, the originals or certified copies thereof of all insurance policies (or
certificates thereof) which the Company is required to maintain pursuant to this Section, together
with a Certificate of the Company Representative that payment of all premiums then due thereon has
been made; (b) at least 30 days prior to the expiration of any such policies evidence as to the
renewal thereof, if then required by this Section or the terms of such policies, and an Officer’s
Certificate of the Company Representative that payment of all premiums then due with respect
thereto has been made; and (c) promptly upon request by the Trustee, but in any case within 90 days
after the end of each calendar year, a certificate of the Company Representative setting forth the
particulars as to all insurance policies maintained by the Company pursuant to this Section and
certifying that such insurance policies are in full force and effect, that such policies comply
with the provisions of this Section and that all premiums then due thereon have been paid.

ARTICLE VII

CASUALTY LOSS AND CONDEMNATION

     Section 7.01. Insurance and Condemnation Proceeds. In the event that damage or destruction to the Springdale
Property, the Lowell Property, the Junction Property or the Watts Property or any portion thereof
occurs such that claims for loss do not exceed $100,000 or in the
event title to or the temporary use of the Springdale Property, the Lowell Property, the Junction
Property or the Watts Property, or any portion thereof, will be taken under the exercise of the
power of eminent domain and the Net Proceeds from any condemnation award are less than

17

 

$100,000, the Net Proceeds of insurance resulting from such claims or from any such
condemnation award will be paid to the Company and will be used for such purposes as the Company,
in its discretion, may deem appropriate. In the event that any damage or destruction is such that
claims for loss are between $100,000 and $1,000,000, both inclusive, or the Net Proceeds from any
condemnation award are between $100,000 and $1,000,000, both inclusive, the Net Proceeds of
insurance resulting from such claims or from any such condemnation award will be paid to the
Company and used by the Company with the consent of a Significant Bondholder either to redeem Bonds
or to repair, rebuild, restore or replace the property. In the event that any damage or
destruction is such that claims for loss exceed $1,000,000, or the Net Proceeds from any
condemnation award exceed $1,000,000, the Net Proceeds of insurance resulting from such claims or
from any such condemnation award will be held by the Trustee, and the Company will elect to have
the Net Proceeds received applied to either the redemption of the Bonds or to repair, rebuild,
restore or replace the property. If the Company elects the latter option, then the Net Proceeds
will be paid by the Trustee from a separate account, from time to time, upon evidence of the
expenditures therefor, upon receipt of a certificate of an Independent Architect. The Company may
elect to redeem less than all of the Bonds only if (a) the property damaged, destroyed or condemned
is not essential to the Company’s use or occupancy of the Springdale Property, the Lowell Property,
the Junction Property or the Watts Property; (b) the Springdale Property, the Lowell Property, the
Junction Property or the Watts Property has been restored to a condition substantially equivalent
to their condition prior to such damage, destruction or condemnation; or (c) suitable replacement
property has been acquired for the Company’s operations.

ARTICLE VIII

SPECIAL COVENANTS

     Section 8.01. No Warranty of Condition or Suitability by the City. The City makes no
warranty, either express or implied, as to the condition of the Facilities, or that they will be
suitable for the purposes or needs of the Company.

     Section 8.02. Further Assurances. The City and the Company agree that they will, from time to
time, execute, acknowledge and deliver, or cause to be executed, acknowledge and delivered, such
supplements hereto and such further instruments as may reasonably be required for carrying out the
intention of or facilitating the performance of this Loan Agreement.

     Section 8.03. Annual Audit. The Company will have the books and records of the Company
audited annually, and shall furnish within 120 days after the end of each Fiscal Year to the City,
the Notice Beneficial Owners, the Underwriter and the Trustee a copy of the audit report certified
by independent public accountants.

     Section 8.04. Financial Statements. The Company agrees that it will maintain proper books of
records and accounts of its Property, Plant and Equipment with full, true and correct entries of
all of its dealings in accordance with generally accepted accounting principles, and that it will
furnish to the Trustee, the Underwriter and Notice Beneficial Owners quarterly financial statements
within 45 days after the close of each such quarter, including a statement of income in comparative
form, to the extent practicable, with the financial figures from the corresponding

18

 

period in the preceding Fiscal Year and a balance sheet as of the end of each such period and
of the preceding Fiscal Year.

     Section 8.05. Release and Indemnification Covenants. The Company agrees to protect and defend
the City, former, present and future council members, officers, employees and other agents of the
City and each person, if any, who has the power, directly or indirectly, to direct or cause the
direction of the management or policies, now or hereafter, of the City and to protect and defend
the Trustee, its officers, employees and agents (collectively, the “Indemnified Parties” and
individually, the “Indemnified Party”) and further agrees to indemnify and hold harmless the
Indemnified Parties from and against any and all liabilities, losses, damages, costs, expenses
(including reasonable attorneys’ fees and court costs, including those for post-judgment and
appellate proceedings), judgments, claims, demands, suits, actions or other proceedings of
whatsoever kind or nature (including, without limitation, those in any manner directly or
indirectly arising or resulting from, out of or in connection with any injury to, or death of any
person or and damage to property but excluding those arising or resulting from any intentional
misrepresentation or any willful and wanton misconduct of the Indemnified Party or Indemnified
Parties) in any manner directly or indirectly (in any case, whether or not by the Company, or its
successors and assigns, or directly or indirectly through the agents, contractors, employees,
licensees or otherwise of the Company, or its successors and assigns) by any person or entity
whatsoever except the City or the Trustee, arising or purportedly arising from this Loan Agreement,
the Indenture, the Bonds, Parity Indebtedness, the initial and any subsequent offers and sales of
the Bonds, the Tax Certificate or the transactions contemplated hereby and thereby, the Project and
the ownership or the operation by the Company of the Property, Plant and Equipment the breach or
violation of its or any material inaccuracy or material omission in any agreement, covenant,
representation or warranty of the Company set forth herein or in any document delivered pursuant
hereto, the presence of any Hazardous Material or underground storage tanks on or under the
Property, Plant and Equipment or any escape, seepage, leakage, spillage, discharge, emission or
release of any Hazardous Material from the Property, Plant and Equipment, any Liens against the
Property permitted under or imposed by any Environmental Laws, or any violation or actual or
asserted liability or obligations of the Company under any Environmental Laws, regardless of
whether or not caused by, or within the control of, the Company, any actual or asserted liability
or obligations of the aforesaid Persons under any Environmental Law relating to the Property, Plant
and Equipment, regardless of whether or not caused by, or within the control of, the Company or any
action or failure to act by an Indemnified Party or Indemnified Parties with respect to any of the
foregoing.

     The Company releases the City and all former, present and future council members, servants,
officers, employees and other agents of the City, and the Trustee from, agrees that the City and
the Trustee and all former, present and future directors, members, servants, officers, employees
and other agents of the City and the Trustee shall not be liable for, and agrees to hold the City
and all former, present and future directors, members, servants, officers, employees and other
agents of the City and the Trustee harmless against, any expense or damages incurred because of any
lawsuit commenced as a result of action taken by the City, and the Trustee or their former, present
and future directors, members, servants, officers, employees or other agents (except for any
intentional misrepresentation or willful and wanton misconduct of the aforesaid) with respect to
this Loan Agreement, the Indenture, the Bonds, Parity Indebtedness, the Tax Certificate, the
Project or the Property, Plant and Equipment and the City and the Trustee shall

19

 

promptly give written notice to the Company with respect thereto. All covenants,
stipulations, promises, agreements and obligations of the City contained herein shall be deemed to
be the covenants, stipulations, promises, agreements and obligations of the City and not of any
former, present or future director, member, servant, officer, employee or other agent of the City
in his or her individual capacity, and no recourse shall be had for the payment of the principal
of, premium, if any, or interest on the Bonds or Parity Indebtedness or for any claim based thereon
or hereunder against any former, present or future director, member, servant, officer, employee or
other agent of the City or any natural person executing the Bonds.

     The indemnification arising under this Section shall continue in full force and effect
notwithstanding the full payment of all obligations under this Loan Agreement or the termination of
this Loan Agreement for any reason.

     Section 8.06. Company Representative. Whenever, under the provisions of this Loan Agreement,
the Tax Certificates or the Indenture, the approval or direction of the Company is required, or the
City or the Trustee is required to take some action at the request of the Company, such approval or
such request shall be made by the Company Representative unless otherwise specified in this Loan
Agreement, the Tax Certificate or the Indenture. The City or the Trustee shall be authorized to
act on any such approval or request and the Company shall have no complaint against the City or the
Trustee as a result of any such action taken in accordance with such approval or request. The
execution of any document or certificate required under the provisions of this Loan Agreement, the
Tax Certificates or the Indenture by the Company Representative shall be on behalf of the Company
and shall not result in any personal liability of such Company Representative.

     Section 8.07. Leases and Operating Contracts. The Company may lease (as lessor) any part of
the Property from which it derives revenues or contract for the performance by others of operations
or services on or in connection with the Property from which it derives revenues, or any part
thereof, for any lawful purpose, provided that (a) the Trustee shall receive written notice of such
lease or contract if such lease or contract has a value in excess of $250,000 or a duration longer
than six months; (b) each such lease or contract shall not be inconsistent with the provisions of
the Indenture or this Loan Agreement; (c) the Company shall remain fully obligated and responsible
under this Loan Agreement to the same extent as if such lease or contract had not been executed;
and (d) no such lease or operating contract shall adversely affect the validity of the Bonds or
Parity Indebtedness or the exclusion of interest on the Bonds from gross income for federal and
state income tax purposes. The Trustee shall request the Company to deliver an opinion of Bond
Counsel addressed to the Trustee relating to the matters set forth in (e) if the Company enters
into a lease or operating contract covered by this Section 8.07.

     Section 8.08. No Default Certificate. Within 150 days after the end of each Fiscal Year, the
Company shall furnish to the Trustee a certificate of the Company Representative stating that no
Event of Default under Section 10.01 hereof has occurred and is continuing and that he has no
knowledge of an event which, with the passage of time or the giving of notice, or both, would
constitute an Event of Default under Section 10.01 hereof, respectively, or describing any such
Event of Default or event known to the Company.

     Section 8.09. [Intentionally Omitted].

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     Section 8.10. Limitations on Creation of Liens.

     (a) The Company agrees that it will not create or suffer to be created or permit the
existence of any Lien on any tangible or intangible assets of the Company mortgaged or
pledged pursuant hereto or pursuant to the Watts Mortgage, the Lowell Mortgage, the Junction
Deed of Trust or the Springdale Mortgage, other than Permitted Liens, as described in
Section 8.10(b) hereof.

     (b) Permitted Liens shall consist of the following:

     (i) Liens arising by reason of good faith deposits with the Company in
connection with leases of real estate, bids or contracts (other than contracts for
the payment of money), deposits by the Company to secure public or statutory
obligations, or to secure or in lieu of surety, stay or appeal bonds, and deposits
as security for the payment of taxes or assessments or other similar charges;

     (ii) any Lien arising by reason of deposits with, or the giving of any form of
security to, any governmental agency or any body created or approved by law or
governmental regulation for any purpose at any time as required by law or
governmental regulation as a condition to the transaction of any business or the
exercise of any privilege or license, or to enable the Company to maintain
self-insurance or to participate in any funds established to cover any insurance
losses or in connection with workers’ compensation, unemployment insurance, pension
or profit sharing plans or other social security, or to share in the privileges or
benefits required for companies participating in such arrangements;

     (iii) any judgment lien against the Company so long as such judgment is being
contested in good faith and execution thereon is stayed and it will not materially
interfere with or materially impair the operations conducted on the Property, Plant
and Equipment;

     (iv) (A) rights reserved to or vested in any municipality or public authority
by the terms of any right, power, franchise, grant, license, permit or provision of
law, affecting its Property, Plant and Equipment; (B) any liens on the Property,
Plant and Equipment for taxes, assessments, levies, fees, water and sewer rents, and
other governmental and similar charges and any liens of mechanics, materialmen,
laborers, suppliers or vendors for work or services performed or materials furnished
in connection with the Property, Plant and Equipment which are not due and payable
or which are not delinquent or which, or the amount or validity of which, are being
contested and execution thereon is stayed or, with respect to liens of mechanics,
materialmen, laborers, suppliers or vendors, have been due for less than 90 days;
(C) easements, rights-of-way servitude, restrictions, oil, gas or other mineral
reservations and other minor defects, encumbrances and irregularities in the title
to the Property which in the opinion of the Company Representative do not materially
impair the use of the Property, Plant and Equipment for its intended purpose or
materially and adversely affect the value thereof provided that the Company
Representative shall

21

 

have given the Trustee written notice thereof at least 120 days before the
imposition of such Lien; (D) statutory landlord’s liens; and (E) all exceptions
shown on the policies of title insurance delivered pursuant to the Indenture;

     (v) any Lien securing Additional Indebtedness permitted hereby;

     (vi) any Lien permitted pursuant to Section 3.01 hereof;
(vii) any Lien created by the Indenture or this Loan Agreement;
(viii) any Lien described in Exhibit B hereto; and

     (ix) any Lien in favor of a creditor or a trustee on the proceeds of
Indebtedness and any earnings thereon prior to the application of such proceeds and
such earnings, and any Liens on trust funds established and held by a trustee or
creditor with respect to Indebtedness properly incurred.

     (c) Until such time as the lien filed by Advanced Control Solutions, Inc. (“ACS”) on
the Lowell Property, as evidenced by document number 2006-1433 of the records of Benton
County, Arkansas (the “ACS Lien”), has been released, the Company shall maintain in favor or
ACS a direct pay letter of credit issued by a reputable bank, trust company or other
financial institution in an amount of at least $800,000 to secure its obligations with
respect to the ACS Lien.

     Section 8.11. Limitations on Indebtedness. The Company may incur Additional Indebtedness, if
the Income Available for Debt Service for the two immediately preceding Fiscal Years based on
Audited Financial Statements is not less than 250% of the Long-Term Debt Service Requirements in
such period, taking into account the Loan and Indebtedness then Outstanding and the Additional
Indebtedness proposed to be incurred. Notwithstanding the foregoing, Commitment Indebtedness and
Nonrecourse Indebtedness may be incurred by the Company at any time, without limit. In addition,
the Company may incur Additional Indebtedness secured by accounts receivable and inventory, and
Additional Indebtedness with respect to Approved Purchaser purchase orders, as provided in
Section 3.01 of this Loan Agreement.

     Section 8.12. Subordinated Debt. Subordinated Debt shall include only Indebtedness of the
Company incurred pursuant to loan agreements, credit agreements or similar arrangements
(“Subordinate Loan Documents”) which contain provisions substantially to the following effect:

     (a) Subordinated Debt shall, to the extent and in the manner hereinafter set forth, be
fully subordinated to the Superior Indebtedness as herein defined. For all purposes of this
Section the term “Superior Indebtedness” shall mean all obligations of the Company arising
under this Loan Agreement, the Springdale Mortgage, the Lowell Mortgage, the Junction Deed
of Trust or the Watts Mortgage (the “Loan Documents”), as each may be supplemented and
modified to the date hereof, or as the same may hereafter from time to time be further
supplemented and modified and any other obligations secured by or evidencing, directly or
indirectly, obligations evidenced by such Loan Documents, including post-petition interest.

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     (b) No action or proceedings, judicial or otherwise (including without limitation the
commencement of or joinder in any bankruptcy or liquidation), shall be instituted or pursued
by the holder of any Subordinated Debt (together, the “Subordinate Creditors”), nor shall
such Subordinate Creditors take steps to enforce other judgments or encumbrances on assets
of the Company pledged to the payment of the obligations of the Company arising under any
Subordinate Loan Document (an “Enforcement Action”), other than an action to compel specific
performance, and other than an action with respect to collateral pledged to the payment of
such Subordinated Debt and not pledged to the payment of the Superior Indebtedness, unless
all Bondholders shall have consented thereto, or the Bondholders shall have been paid in
full or provision therefor shall have been made in accordance with the terms of the
Indenture.

     (c) No payment on account of principal, premium, if any, sinking funds or interest on
Subordinated Debt shall be made, nor shall any property or assets pledged to the payment of
the obligations of the Company arising under any Subordinate Loan Document, other than
collateral pledged to the payment thereof and not pledged to the payment of the Superior
Indebtedness, be applied to the payment or prepayment of Subordinated Debt, unless payment
of all amounts then due and payable for principal, premium, if any, sinking funds and
interest on Superior Indebtedness has been made or duly provided for in accordance with the
terms of the Loan Documents. No payment of principal of and interest on and other amounts
due under any Subordinate Loan Document may be made prior to full payment of Superior
Indebtedness, (other than payment derived with respect to collateral pledged to the payment
of Subordinated Debt and not pledged to the payment of the Superior Indebtedness) if, at the
time of such payment or application or immediately after giving effect thereto, (i)  there
shall exist any default in the payment of principal, premium, if any, sinking funds or
interest with respect to the Bonds or any Superior Indebtedness; or (ii) there shall have
occurred an Event of Default (other than a default in the payment of principal, premium, if
any, sinking funds or interest) with respect to the Bonds or any Superior Indebtedness
permitting the Trustee to accelerate the maturity thereof, and written notice of such
occurrence shall have been given to the Subordinate Creditors and such event of default
shall not have been cured or waived or shall not have ceased to exist.

     (d) Upon (i) any acceleration of maturity of the principal amount due on any
Subordinated Debt; or (ii) any payment or distribution of any kind or character, whether in
cash, property or securities, upon any dissolution or winding-up or total or partial
liquidation, reorganization or arrangement of the Company, whether voluntary or involuntary
or in bankruptcy, insolvency, receivership or other proceedings, all principal, premium, if
any, and interest due or to become due upon the Bonds and all Superior Indebtedness shall
first be paid in full, or payment thereof provided for in accordance with the terms of the
Indenture, before any payment is made on account of the principal, premium, if any, or
interest on the Subordinated Debt (other than payment derived with respect to collateral
pledged to the payment of Subordinated Debt and not pledged to the payment of the Superior
Indebtedness), and upon any such dissolution or winding-up or liquidation, reorganization or
arrangement, any payment or distribution of any kind or character, whether in cash, property
or securities, to which the holders of the Subordinated Debt would be entitled, except for
the provisions hereof, shall be paid by

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the Company, or by a receiver, trustee in bankruptcy, liquidating trustee, agent or
other person making such payment or distribution, to the Trustee to the extent necessary to
pay all Superior Indebtedness in full, before any payment or distribution is made to the
holders of the Subordinate Debt.

     (e) In the event that, in violation of any of the foregoing provisions, any payment or
distribution of any kind or character, whether in cash, property or securities, shall be
received by any Subordinate Creditor before all Bonds and Superior Indebtedness is paid in
full or provision for such payment in accordance with the terms of the Indenture, such
payment or distribution shall be held in trust for the benefit of, and shall be paid over or
delivered to the Trustee for application to the payment of all Bonds remaining unpaid to the
extent necessary to pay all such Bonds in full in accordance with its terms.

     (f) Neither the Trustee nor any present or future holder of any Bonds shall be
prejudiced in any right to enforce subordination of the indebtedness evidenced by the
Subordinate Loan Documents by any act or failure to act on the part of the Company or anyone
in custody of its assets or property.

     (g) The foregoing subordination provisions shall be for the benefit of the holders of
Bonds and may be enforced by the Trustee against the holders of Subordinate Indebtedness or
any trustee therefor.

     The foregoing provisions are solely for the purpose of defining the relative rights of the
holders of Superior Indebtedness on the one hand and the holders of the Subordinated Debt on the
other hand, and nothing therein shall impair, as between the Company and the holders of the
Subordinate Indebtedness, the obligation of the Company, which is unconditional and absolute, to
pay to the holders thereof the principal thereof, premium, if any, and interest thereon in
accordance with its terms, nor shall anything herein prevent the holders of the Subordinated Debt
or any trustee on their behalf from exercising all remedies otherwise permitted by applicable law
or thereunder upon default thereunder, subject to the rights set forth above of the holders of
Superior Indebtedness to receive cash, property or securities otherwise payable or deliverable to
the holders of the Subordinate Indebtedness. Upon any payment or distribution of assets of the
Company of the character referred to in the fifth paragraph of the foregoing provisions, the
holders of Subordinate Indebtedness shall be entitled to rely upon any order or decree of a court
of competent jurisdiction in which such dissolution, winding-up, liquidation, reorganization or
arrangement proceedings are pending, and upon a certificate of the receiver, trustee in bankruptcy,
liquidating trustee, agent or other person making any such payment or distribution, delivered to
the holders of Subordinate Indebtedness for the purpose of ascertaining the Persons entitled to
participate in such distribution, the holders of Subordinate Indebtedness and other indebtedness of
Company, the amount thereof or payable thereon, the amount or amounts paid or distributed thereon
and all other facts pertinent thereto or to the foregoing provisions. No holders of Subordinate
Indebtedness shall be charged with knowledge of the existence of any facts which would prohibit the
making of any payment of moneys to or by such holders of Subordinate Indebtedness, unless and until
the holders of Subordinate Indebtedness, as the case may be, have actual notice or shall have
received notice thereof from the Company, the Trustee

24

 

or one or more holders of Superior Indebtedness. The Company hereby covenants and agrees in
each case to provide such notice.

     Section 8.13. Parity Indebtedness. The Company covenants not to incur or assume any Parity
Indebtedness or Subordinated Indebtedness unless the Company has received consent of the holders of
100% of the principal amount of the Bonds Outstanding; provided, however, that the Indebtedness
incurred by the Company in connection with the $13,515,000 original principal amount of Adair
County Industrial Authority Solid Waste Recovery Facilities Revenue Bonds (Advanced Environmental
Recycling Technologies Project) Series 2007 shall be deemed Parity Indebtedness approved by the
holders of the Bonds. Upon issuance of Parity Indebtedness, such debt will be entitled to share on
a parity in all property and rights securing the Bonds, except the moneys in the Funds, which shall
secure only the Bonds.

     Unless otherwise consented to by the holders of 100% of the principal amount of the Bonds
Outstanding, all instruments creating or securing Parity Indebtedness shall (a) provide that the
Trustee shall have the sole power to select remedies to be used to enforce rights against common
security for the Bonds and Parity Indebtedness, subject to the right of the owners of a majority in
aggregate principal amount of the sum of the Bonds and Parity Indebtedness then Outstanding to
direct remedies in the manner provided in the Indenture; (b) provide that the holders of Parity
Indebtedness or the trustee therefor shall undertake such actions as may be requested by the
Trustee that are reasonably necessary to effectuate the purposes of clause (a); and (c) contain
cross default provisions with the Loan Agreement, the Indenture and all other instruments creating
Parity Indebtedness.

     All collateral given or to be given to secure Parity Indebtedness (other than credit
enhancement devices such as letters of credit, insurance or surety bonds and other than reserve
funds) shall also secure the obligations of the Company under the Loan Agreement on a parity basis;
and the instruments under which any Parity Indebtedness is incurred shall contain provisions that
all Parity Indebtedness and the obligations of the Company under the Loan Agreement shall be
secured equally and ratably by all such security provided for any such Parity Indebtedness. The
Property, the Pledged Revenues and any other collateral at any time given to secure the obligations
of the Company under the Loan Agreement (other than the Funds) shall likewise secure Parity
Indebtedness, and such shall be set forth and so provided in any instrument securing Parity
Indebtedness. No release by or permission from the City and the Trustee under the Loan Agreement
shall be necessary (other than the Company’s payment of any Trustee fees or any fees or expenses of
the Trustee) to allow such collateral to be pledged pursuant to any instrument relating to Parity
Indebtedness, so long as the conditions of the Loan Agreement are complied with.

     Section 8.14. Transfer of Assets. The Company agrees that it will not Transfer assets without
the consent of 100% of the owners of the Bonds, except for Transfers of assets:

     (a) to any Person if prior to the sale, lease or other disposition there is delivered
to the Trustee an Officer’s Certificate of the Company Representative stating that such
assets have or will within the next 24 months become inadequate, obsolete, worn out,
unsuitable, unprofitable, undesirable or unnecessary and the sale, lease,

25

 

removal or other disposition thereof will not impair the structural soundness,
efficiency, or economic value of the remaining assets of the Company;

     (b) to any Person provided there shall be delivered to the Trustee prior to such
Transfer a report of a Consultant to the effect that the assets being transferred are not an
integral part of the Property, Plant and Equipment; and either:

     (i) an Officer’s Certificate (accompanied by the Audited Financial Statements)
certifying the Long-Term Debt Service Coverage Ratio, adjusted to exclude the
revenues and expenses derived from the assets proposed to be disposed of, for the
most recent Fiscal Year for which the Audited Financial Statements are available and
such Long-Term Debt Service Coverage Ratio is not less than 2.00 and not less than
65% of what it would have been were such Transfer not to take place; or

     (ii) the report of a Consultant to the effect that the forecasted Long-Term
Debt Service Coverage Ratio, taking such Transfer into account, for each of the two
Fiscal Years succeeding the date on which such Transfer is expected to occur, and
the Long-Term Debt Service Coverage Ratio for each such period is not less than 2.00
and not less than 65% of what it would have been were such Transfer not to take
place, accompanied by a statement of the relevant assumptions upon which such
forecasts are based;

     (c) with respect to any Transfer of non-inventory assets, to any Person in the ordinary
course of business and on terms not less favorable to the Company than arm’s length, but not
to exceed $1,000,000 in aggregate proceeds in any Fiscal Year unless otherwise consented to
by a majority of the Bondholders;

     (d) with respect to any Transfer of inventory, to any Person in the ordinary course of
business;

     (e) to any Person if the aggregate Net Book Value of the assets transferred pursuant to
this clause in any five consecutive Fiscal Years, does not exceed 5% of the Net Book Value
of all assets of the Company as shown in the Audited Financial Statements for the most
recent Fiscal Year; or

     (f) to any Person, if the Company shall determine to sell all or substantially all of
its assets, and (i) the Company exercises its option to prepay the Loan; or (ii) the holders
of 100% of the Bonds shall consent to such transfer, all as provided in Section 8.15 hereof.

     Section 8.15. Consolidation, Merger, Sale or Conveyance. The Company covenants that it will
not merge or consolidate with, or sell or convey all or substantially all of its assets to, any
Person, unless (a) such merger, consolidation or sale shall be consented to by the holders of 100%
of the Bonds; or (b) the Company shall elect to prepay the Loan and redeem the Bonds in accordance
with Section 5.01(b) of the Indenture. In case of any such consolidation, merger, sale or
conveyance and upon any such assumption by the successor corporation, such successor

26

 

corporation shall succeed to its predecessor, with the same effect as if it had been named
herein as such predecessor.

     Section 8.16. Financial Covenants.

     (a) The Company shall calculate quarterly the Long-Term Debt Service Coverage Ratio for
the prior four fiscal quarters, and shall provide a copy of such calculation for such period
to the Trustee and Notice Beneficial Owners at the time of delivery of the quarterly
financial statements delivered in accordance with Section 8.04 hereof. If the Debt Service
Coverage Ratio computation delivered at the time of delivery of any such statement indicates
that the Long-Term Debt Service Coverage Ratio of the Company for such previous period shall
be less than 1.50 to 1.00 (and, beginning with the report with respect to the fiscal quarter
ending March 31, 2009, shall be less than 2.00 to 1.00), the Company covenants to retain a
Consultant at the expense of the Company, within 30 days, to make recommendations to
increase such Long-Term Debt Service Coverage Ratio in the then-current Fiscal Year to such
level or, if in the opinion of the Consultant the attainment of such level is impracticable,
to the highest level attainable in such Fiscal Year. Any Consultant so retained shall be
required to submit such recommendations to the Trustee and the Notice Beneficial Owners
within 90 days after being so retained. The Company agrees that it will, to the extent
permitted by law, follow the recommendations of the Consultant. The Company shall not be
obligated to retain such a Consultant more often than once during any 24-month period.

     (b) The Company covenants and agrees that it shall maintain a Current Ratio, calculated
as of the last day of each calendar quarter, of not less than 1.00 to 1.00. The Company
shall provide a copy of such calculation to the Trustee and Notice Beneficial Owners at the
time of delivery of the quarterly financial statements delivered in accordance with
Section 8.04 hereof.

     (c) The Company covenants and agrees that it shall maintain a Debt to Equity Ratio,
calculated as of the last day of each Fiscal Year, of not more than 3.00 to 1.00. The
Company shall provide a copy of such calculation to the Trustee and Notice Beneficial Owners
at the time of delivery of the annual audit delivered in accordance with Section 8.03
hereof.

     (d) The Company covenants and agrees that not more than 20% of its accounts payable
(for the deferred purchase price of property or services) from time to time incurred in the
ordinary course of operations and activities shall be in excess of 75 days past the invoice
or billing date, or, if greater than 75 days, are being contested in good faith by the
Company.

     (e) The Company covenants and agrees that not more than 20% of its accounts receivable
(for the deferred purchase price of property or services) from time to time shall be in
excess of 90 days past the invoice or billing date, excluding from such calculation
(i) amounts being contested in good faith by the obligated party, and (ii) amounts which the
Company has determined, in good faith, are not likely to be

27

 

collected and are to be treated as losses in accordance with generally accepted
accounting principles.

     Section 8.17. Reporting Extensions. Notwithstanding the foregoing, in the event the Company
receives an extension of time with respect to any annual or quarterly reports filed with the
Securities and Exchange Commission pursuant to Section 13 and Section 15(d) of the Securities
Exchange Act of 1934, as amended, the Company shall be entitled to the same extension for annual
and quarterly reports required to be filed under this Loan Agreement.

ARTICLE IX

ASSIGNMENT AND PLEDGING OF LOAN AGREEMENT; REDEMPTION OF

BONDS

     Section 9.01. Assignment by Company. This Loan Agreement may be assigned by the Company with
the prior written consent of the Bondholders subject to each of the following conditions:

     (a) no assignment shall relieve the Company from primary liability for any of its
obligations hereunder, and in the event of any such assignment, the Company shall continue
to remain primarily liable for payment of the Loan Payments, payments on Parity Indebtedness
and other payments required to be made under Section 5.01 hereof and for performance and
observance of the other covenants and agreements on its part herein provided;

     (b) no assignment shall impair the exclusion of interest on the Bonds from gross income
for federal income tax purposes;

     (c) the assignee shall assume in writing the obligations of the Company hereunder to
the extent of the interest assigned; and

     (d) the Company shall, within 30 days after the delivery thereof, furnish or cause to
be furnished to the City and the Trustee a true and complete copy of each such assumption of
obligations and assignment.

     Section 9.02. Assignment and Pledge by the City. The City shall assign certain of its
interests in and pledge certain of the moneys receivable under this Loan Agreement to the Trustee
pursuant to the Indenture as security for payment of the principal of, premium, if any, and
interest on the Bonds and Parity Indebtedness. The Company hereby consents to such assignment and
pledge.

     Section 9.03. Redemption of Bonds. Upon the agreement of the Company to deposit moneys in the
Bond Principal Fund and the Bond Interest Fund in an amount sufficient to redeem Bonds subject to
redemption, the City, at the request of the Company Representative, shall forthwith take all
reasonable steps consistent with the Indenture and this Loan Agreement necessary under the
applicable redemption provisions of the Indenture to effect redemption of all or part of the then
Outstanding Bonds on the redemption date.

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ARTICLE X

EVENTS OF DEFAULT AND REMEDIES

     Section 10.01. Events of Default Defined. The following shall be “events of default” under
this Loan Agreement and the term “event of default” shall mean any one or more of the following
events:

     (a) failure to pay the Loan Payments required to be paid under Section 5.01(a) hereof
for a period of 15 days after the time such Loan Payments were required to be paid
thereunder;

     (b) failure by the Company to observe and perform any covenant, condition or agreement
on its part to be observed or performed, other than as referred to in Section 10.01(a)
hereof, for a period of 30 days after written notice, specifying such failure and requesting
that it be remedied, shall have been given to the Company by the City or the Trustee,
provided, with respect to any such failure covered by this clause (b) no event of default
shall be deemed to have occurred so long as a course of action adequate to remedy such
failure shall have been commenced within such 30-day period and shall thereafter be
diligently prosecuted to completion and the failure shall be remedied thereby; provided,
however, that failure to correct such default within 90 days after receipt of such notice
shall constitute an Event of Default;

     (c) any representation or warranty made by the Company hereunder or otherwise in
connection with the sale and delivery of the Bonds shall prove to have been incorrect in any
material respect on or as of the date of issuance of the Bonds or the date of making such
representation or warranty and cannot be cured within 30 days after written notice by the
City or the Trustee, specifying such incorrect representation or warranty and requesting
that it be cured, provided no event of default shall be deemed to have occurred under this
subsection (c) so long as a course of action adequate to cure shall have been commenced
within such 30-day period and shall thereafter be diligently prosecuted to completion and
remedied thereby; provided, however, that failure to correct such default within 90 days
after receipt of such notice shall constitute an Event of Default;

     (d) an event of default shall have occurred under the Indenture, the Tax Certificates,
the 2003 Promissory Note or with respect to any Parity Indebtedness;

     (e) if the Company shall file a petition in bankruptcy or for reorganization or for an
arrangement pursuant to any present or future federal bankruptcy act or under any similar
federal or state law, or shall be adjudicated a bankrupt or insolvent, or shall make an
assignment for the benefit of its creditors or shall admit in writing its inability to pay
its debts generally as they become due, or if a petition or answer proposing the
adjudication of the Company as a bankrupt or its reorganization under any present or future
federal bankruptcy act or any similar federal or state law shall be filed in any court and
such petition or answer shall not be discharged or denied within 90 days after the filing
thereof, or if a receiver, trustee or liquidator of the Company or of all or

29

 

substantially all of the assets of the Company, or the Property, Plant and Equipment
shall be appointed in any proceeding brought against the Company and shall not be discharged
within 90 day’s after such appointment or if the Company shall consent to or acquiesce in
such appointment if the estate or interest of the Company in the Property, Plant and
Equipment or any part thereof shall be levied upon or attached in any proceeding and such
process shall not be vacated, discharged or released within 60 days after such levy or
attachment, or if the Property, Plant and Equipment shall have been abandoned by the Company
for a period of 30 consecutive days, or if the Company shall be dissolved or liquidated
(other than as a result of a merger or consolidation of the Company into or with another
entity under the conditions permitting such actions contained in this Loan Agreement); and

     (f) a final judgment is entered against the Company which, together with all
unsatisfied final judgments against the Company, exceeds the sum of $1,000,000 and which is
not covered by insurance or adequate Company reserves and such judgment shall remain
unsatisfied or unstayed for a period of 90 days after the entry thereof.

     The foregoing provisions of Section 10.01(b) hereof are subject to the following limitations:
If by reason of force majeure the Company is unable in whole or in part to carry out its agreements
herein contained, other than the obligations on the part of the Company contained in Article V and
in Sections 4.07 and 8.05 hereof, the Company shall not be deemed in default during the continuance
of such inability so long as (a) the Company provides the Bondholders written notice that an Event
of Default has occurred by reason of force majeure within 10 Business Days of the receipt of the
notice of an Event of Default from the Trustee, and (b) a majority of Bondholders consents to
implementation of Company’s plan to cure such Event of Default. The Company agrees to promptly
submit its plans for curing the Event of Default to the Bondholders; provided that the settlement
of strikes, lockouts and other industrial disturbances shall be entirely within the discretion of
the Company, and the Company shall not be required to make settlement of strikes, lockouts or other
industrial disturbances by acceding to the demands of the opposing party or parties when such
course is in the reasonable judgment of the Company unfavorable to the Company. The term “force
majeure” as used herein shall mean the following: acts of God; strikes, lockouts or other
industrial disturbances; acts of public enemies, insurrections; riots; epidemics; landslides;
lightning; earthquake; fire; hurricane; tornadoes; storms; floods; washouts; droughts; arrests;
restraint of government and people; civil disturbances; war, explosions; or partial or entire
failure of utilities.

     Section 10.02. Remedies on Default. Whenever any event of default referred to in
Section 10.01 hereof shall have occurred and is continuing, the City, or the Trustee, where so
provided herein, may take any one or more of the following remedial steps:

     (a) the Trustee (acting as assignee of the City), as and to the extent provided in the
Indenture, or the City (in the event of a failure of the Trustee to act under this
subsection), may, and, at the direction of holders of 25% of the aggregate principal amount
of the Bonds Outstanding and Parity Indebtedness, the Trustee shall, declare the Loan
Payments payable hereunder for the remainder of the term of this Loan Agreement to be
immediately due and payable, whereupon the same shall become due and payable;

30

 

     (b) the Trustee may, subject to indemnification as provided in the Indenture, and, at
the direction of holders of 25% of the aggregate principal amount of the Bonds Outstanding
and Parity Indebtedness, shall, take any action permitted under the Indenture with respect
to an Event of Default thereunder;

     (c) the Trustee (acting as assignee of the City) may foreclose on all or any portion of
the Property or any interest of the Company therein as and to the extent permitted of a
mortgagee by applicable laws and exercise all of the rights and remedies of a secured party
under the Uniform Commercial Code of the applicable jurisdiction with respect thereto and to
the tangible personal property, furniture, machinery and equipment of the Company described
in Section 3.01;

     (d) the Trustee may foreclose on all or any portion of the Springdale Property, the
Lowell Property, the Junction Property and the Watts Property and any interest of the
Company therein as and to the extent permitted of a mortgagee by the laws of the State of
Arkansas, the State of Texas and the State of Oklahoma, as applicable, and exercise all of
the rights and remedies of a secured party under the Uniform Commercial Code of the State of
Arkansas, the State of Texas and the State of Oklahoma, as applicable, with respect thereto;

     (e) the Trustee may take exercise any rights permitted pursuant to the Patent and
Trademark Security Agreement and the Weyerhaeuser Assignment Agreement;

     (f) the Trustee (acting as assignee of the City) may realize upon the security interest
in the Pledged Revenues and exercise all of the rights and remedies of a secured party under
the Uniform Commercial Code of the applicable jurisdiction with respect thereto; or

     (g) the Trustee (acting as assignee of the City), as and to the extent provided in the
Indenture, or the City (in the event of a failure of the Trustee to act under this
subsection) may take whatever action at law or in equity as may appear necessary or
desirable to collect the amounts then due and thereafter to become due, or to enforce
performance or observance of any obligations, agreements or covenants of the Company under
this Loan Agreement.

     At any time after such a declaration of acceleration has been made, but before the
entry of a judgment or decree to enforce remedies under the Indenture or this Loan
Agreement, such declaration and its consequences shall be rescinded and annulled (unless the
Trustee is otherwise directed by the holders of a majority of the principal amount of the
Bonds Outstanding (excluding Bonds of any series which are subordinate to any other Series
of Bonds)) if:

     (i) there has been paid to or deposited with the Trustee, or provision
satisfactory to the Trustee has been made for the payment of a sum sufficient to
pay:

     (A) all sums reasonably paid or advanced by the Trustee (including
reasonable counsel fees and disbursements) under the Indenture

31

 

or this Loan Agreement and the reasonable compensation, expenses,
disbursements and advances of the Trustee (including reasonable counsel fees
and disbursements);

     (B) all overdue installments of interest on the Bonds payable by the
Company with interest on such overdue interest at the rate of 1% per annum
above the interest borne by the Bonds during the 365 days prior to the date
of such payment;

     (C) the principal of any Bonds which have become due otherwise than by
such declaration of acceleration and accrued but unpaid interest thereon to
the date of payment of such Bonds payable by the Company at the rate or
rates borne by such Bonds;

     (D) the amounts required to be on deposit in the Reserve Fund in
accordance with the Indenture; and

     (E) all sums, including the reasonable fees and expenses of counsel,
reasonably paid or advanced by any Bondholder because of the Company’s
default.

     (ii) All Events of Default of the Company, other than the nonpayment of the
principal of the Bonds, which have become due solely by such declaration of
acceleration, have been cured or waived as provided in the Indenture and this Loan
Agreement.

     In the event that the Company fails to make any payment required hereby, the payment so in
default shall continue as an obligation of the Company until the amount in default shall have been
fully paid. Any proceeds received by the City or the Trustee from the exercise of any of the above
remedies, after reimbursement of any costs incurred by the City or the Trustee in connection
therewith, shall be applied by the Trustee in accordance with the provisions of the Indenture.

     Section 10.03. No Remedy Exclusive. No remedy herein conferred upon or reserved to the City
or the Trustee is intended to be exclusive of any other available remedy or remedies, but each and
every such remedy shall be cumulative and shall be in addition to every other remedy given under
this Loan Agreement or now or hereafter existing at law or in equity or by statute. No delay or
omission to exercise any right or power accruing upon any default shall impair any such right or
power or shall be construed to be a waiver thereof, but any such right or power may be exercised
from time to time and as often as may be deemed expedient. In order to entitle the City to
exercise any remedy reserved to it in this Article, it shall not be necessary to give any notice,
other than notice required herein or by applicable law. Such rights and remedies given the City
hereunder shall also extend to the Trustee and the owners of the Bonds, subject to the Indenture.

     Section 10.04. Agreement to Pay Attorneys’ Fees and Expenses. In the event the Company should
default under any of the provisions of this Loan Agreement, the Indenture or the Tax Certificates,
and the City, any Significant Bondholder or the Trustee should employ

32

 

attorneys or incur other expenses for the collection of Loan Payments or the enforcement of
performance or observance of any obligation or agreement on the part of the Company herein or in
the Tax Certificates or the Indenture, the Company agrees that it will within 30 days of a request
therefor pay to the City, any Significant Bondholder or the Trustee, as the case may be, the
reasonable fees of such attorneys and such other reasonable expenses incurred by the City, any
Significant Bondholder or the Trustee. This Section shall continue in full force and effect,
notwithstanding the full payment of all obligations under this Loan Agreement or the termination of
this Loan Agreement for any reason.

     Section 10.05. Waiver. In the event any agreement contained in this Loan Agreement should be
breached by any party and thereafter waived by any other party, such waiver shall be limited to the
particular breach waived and shall not be deemed to waive any other breach hereunder. In view of
the assignment of the City’s rights in and under this Loan Agreement to the Trustee under the
Indenture, the City shall have no power to waive any Event of Default hereunder without the written
consent of the Trustee. Notwithstanding the foregoing, a waiver of an Event of Default under the
Indenture or a rescission of a declaration of acceleration of the Bonds and a rescission and
annulment of its consequences shall constitute a waiver of the corresponding event of default under
this Loan Agreement and a rescission and annulment of its consequences; provided that no such
waiver or rescission shall extend to or affect any subsequent or other default hereunder or impair
any right consequent thereon.

     Section 10.06. Appointment of Receiver. Upon the occurrence of any Event of Default, unless
the same shall have been waived as herein provided, the Trustee, acting as assignee of the City,
shall be entitled as a matter of right if it shall so elect, without notice or demand (such notice
being expressly waived hereby), ex parte, (a) forthwith and without declaring the Bonds or Parity
Indebtedness to be due and payable; (b) after declaring the same to be due and payable; or (c) upon
the commencement of an action to enforce the specific performance hereof or in aid thereof or upon
the commencement of any other judicial proceeding to enforce any right of the Trustee, the
Bondholders or the holders of Parity Indebtedness, to the appointment of a receiver or receivers of
any or all of the Springdale Property, the Lowell Property, the Junction Property and the Watts
Property with such powers as the court making such appointment shall confer. The Company hereby
consents and agrees, and will if requested by the Trustee consent and agree at the time of
application by the Trustee for appointment of a receiver of the Springdale Property, the Lowell
Property, the Junction Property and the Watts Property, to the appointment of such receiver of the
Springdale Property, the Lowell Property, the Junction Property and the Watts Property and that
such receiver may be given, the right, power and authority, to the extent the same may lawfully be
given to take possession of and operate and deal with the Springdale Property, the Lowell Property,
the Junction Property and the Watts Property and the revenues, profits and proceeds therefrom, with
like effect as the Company could do so, and to borrow money and issue evidences of indebtedness as
such receiver.

     Section 10.07. Remedies Subject to Provisions of Law. All rights, remedies and powers
provided by this Article may be exercised only to the extent that the exercise thereof does not
violate any applicable provision of law, and all the provisions of this Article are intended to be
subject to all applicable mandatory provisions of law which may be controlling and to be

33

 

limited to the extent necessary so that they will not render this instrument or the provisions
hereof invalid or unenforceable under the provisions of any applicable law.

     Section 10.08. Waiver of Appraisement, Valuation, Stay, and Execution Laws. The Company
agrees, to the extent permitted by law, that in the case of the occurrence of an Event of Default,
neither the Company nor anyone claiming through or under it shall or will set up, claim or seek to
take advantage of any appraisement, valuation, stay or extension laws now or hereafter in force in
order to prevent or hinder the enforcement or foreclosure of the lien of this Loan Agreement, or
the absolute sale of the Springdale Property, the Lowell Property, the Junction Property and the
Watts Property, or any interest of the Company therein, or the final and absolute putting into
possession thereof, immediately after such sale, of the purchasers thereof, and the Company for
itself and all who may at any time claim through or under it, hereby waives, to the full extent
that it may lawfully do so, the benefit of all such laws, and any and all right to have the estates
comprising the security intended to be hereby created marshaled upon any foreclosure of the Lien
hereof and agrees that the Trustee or any court having jurisdiction to foreclose such Lien may sell
the Springdale Property, the Lowell Property, the Junction Property and the Watts Property, or any
interest of the Company therein as an entirety.

     Section 10.09. Purchase of Property by Bondholder or Holder of Parity Indebtedness. Upon the
occurrence of an Event of Default, the Lien and/or security interest on the Springdale Property,
the Lowell Property, the Junction Property and the Watts Property created and vested by this Loan
Agreement may be foreclosed. If sold at public sale, any Bondholder, and holder of Parity
Indebtedness or the Trustee may bid for and purchase the Springdale Property, the Lowell Property,
the Junction Property or the Watts Property or any interest of the Company therein and upon
compliance with the terms of sale, may hold, retain and possess and dispose of such Springdale
Property, Lowell Property, Junction Property or Watts Property or interest therein in his own
absolute right without further accountability; and any purchaser at any such sale may, if permitted
by law, after allowing for the proportion of the total purchase price required to be paid in cash
for the costs and expenses of the sale, compensation and other charges, in paying purchase money,
surrender Bonds or Parity Indebtedness then Outstanding, as the case may be, in lieu of cash. Said
Bonds or Parity Indebtedness, in case the amount so payable thereon shall be less than the amount
due thereon, shall be returned to the holders thereof after being properly stamped to show partial
payment. If the Trustee shall acquire title to the Springdale Property, the Lowell Property, the
Junction Property and the Watts Property or any interest of the Company therein as a result of any
such foreclosure sale or any proceedings or transaction in lieu of foreclosure, the Trustee may
thereafter take any lawful action with respect to the Springdale Property, the Lowell Property, the
Junction Property and the Watts Property or interest therein which it shall deem to be in the best
interest of the holders of the Bonds or Parity Indebtedness, including but not limited to: (a) the
enforcement of all rights and remedies set forth in the Indenture and the taking of all other
courses of action permitted herein; and (b) the sale of the Springdale Property, the Lowell
Property, the Junction Property and the Watts Property or any interest therein, or any portion
thereof.

34

 

ARTICLE XI

PREPAYMENT OF THE LOAN

     Section 11.01. General Option to Prepay the Loan. Subject to Section 11.03 hereof, the
Company shall have and is hereby granted the option exercisable at any time to prepay all or any
portion of the Loan by depositing with the Trustee an amount of money or Government Obligations
described in Section 1(a) of the definition of such term as set forth in Article I of the Indenture
to the extent permitted by Section 7.01 of the Indenture, the principal and interest on which, when
due, will be equal (giving effect to the credit, if any, provided by Section 11.02 hereof) to an
amount sufficient to pay the principal of (in integral multiples of $100,000 and in multiples of
$5,000 in excess thereof), premium, if any, and interest on any portion of the Bonds then
Outstanding under the Indenture. The exercise of the option granted by this Section shall not be
cause for redemption of Bonds unless such redemption is permitted or required at that time under
the provisions of Article V of the Indenture, and the Company Representative specifies the date for
such redemption. In the event the Company prepays all of the Loan pursuant to this Section (and
the Bonds are defeased in accordance with the Indenture) and pays all reasonable and necessary fees
and expenses of the Trustee accrued and to accrue through final payment or redemption of the Bonds
as a result of such prepayment and all of its liabilities accrued and to accrue hereunder to the
City through final payment or redemption of the Bonds as a result of such prepayment, this Loan
Agreement shall terminate except for Sections 5.01 (f), 4.06 and 8.05 hereof. The City and the
Trustee may certify to the Company prior to payment all expenses, fees and liabilities due for
payment hereunder. Payment of moneys or securities to the Trustee under this Section 11.01 shall
be accompanied by an Opinion of Bond Counsel to the effect that the application of such payment
will not adversely affect the tax-exempt status of the Bonds Outstanding.

     Section 11.02. Prepayment Credits. In the event of prepayment by the Company of the Loan in
whole the amounts then contained in the Funds related to the Bonds shall be credited first to the
Rebate Fund so that it shall be fully funded for any required payment to the federal government
therefrom, and then against the Company’s prepayment obligation.

     Section 11.03. Notice of Prepayment. In order to exercise the option granted by this Article,
the Company shall give written notice to the City and the Trustee which shall specify therein the
date of making the prepayment, which date shall be not less than 60 days nor more than 90 days from
the date the notice is mailed. In the case of any prepayment pursuant to this Article, the Company
Representative shall make arrangements with the Trustee for giving the required notice of
redemption of any Bonds to be redeemed.

     Section 11.04. Use of Prepayment Moneys. By virtue of the assignment of the rights of the
City under this Loan Agreement to the Trustee, the Company agrees to and shall pay any amount
required to be paid by it under this Article directly to the Trustee (other than amounts to be paid
to the City for its own account or as otherwise provided in Section 5.03 hereof). The Trustee
shall use the moneys so paid to it by the Company to pay the principal of and interest on the Bonds
on regularly scheduled payment or redemption dates.

35

 

ARTICLE XII

MISCELLANEOUS

     Section 12.01. Notices. All notices, certificates or other communications hereunder shall be
sufficiently given and shall be deemed given when mailed by certified mail, return-receipt
requested, postage prepaid, or dispatched by telegram or telecopy (if confirmed promptly
telephonically and in writing by the sender of such facsimile and if receipt of such facsimile is
confirmed in writing by the intended recipient), addressed as follows:

	 	 	 	 	 
	 

	 	to the City:
	 	City of Springdale, Arkansas
	 

	 	 	 	201 Spring Street
	 

	 	 	 	Springdale, AR 72764
	 

	 	 	 	Attention: Mayor
	 
	 	 	 	 
	 

	 	to the Trustee:
	 	Bank of Oklahoma, N.A.
	 

	 	 	 	9520 North May Avenue, 2nd Floor
	 

	 	 	 	Oklahoma City, OK 73120
	 

	 	 	 	Telephone: (214) 346-3953
	 

	 	 	 	Facsimile: (214) 987-8890
	 
	 	 	 	 
	 

	 	to the Company:
	 	Advanced Environmental Recycling Technologies, Inc.
	 

	 	 	 	801 North Jefferson
	 

	 	 	 	Springdale, AR 72764
	 

	 	 	 	Telephone: (479) 750-1299
	 

	 	 	 	Facsimile: (479) 750-1322

     The City, the Company, and the Trustee may, by notice hereunder, designate any further or
different addresses to which subsequent notices, certificates or other communications shall be
sent.

     Section 12.02. Binding Effect. This Loan Agreement shall inure to the benefit of and shall be
binding upon the City and the Company and their respective successors and assigns, subject,
however, to the limitations contained in Sections 8.14, 9.01, 9.02 and 12.10 hereof.

     Section 12.03. Severability. In the event any provision of this Loan Agreement shall be held
invalid or unenforceable by any court of competent jurisdiction, such holding shall not invalidate
or render unenforceable any other provision hereof.

     Section 12.04. Amounts Remaining in Funds. It is agreed by the parties hereto that any
amounts remaining in the Funds upon expiration of the term of this Loan Agreement shall be paid by
the Trustee as directed in writing by the Company Representative as provided in the Indenture.

     Section 12.05. Amendments, Changes and Modifications. Except as otherwise provided in this
Loan Agreement or in the Indenture, this Loan Agreement may not be amended, changed, modified,
altered or terminated.

36

 

     Section 12.06. Execution in Counterparts. This Loan Agreement may be executed in several
counterparts, each of which shall be an original and all of which shall constitute but one and the
same instrument.

     Section 12.07. Governing Law. This Loan Agreement shall be governed and construed in
accordance with the laws of the State of Arkansas.

     Section 12.08. Cancellation at Expiration of Term of Agreement. Upon the expiration of the
term of this Loan Agreement, the City shall deliver to the Company any documents and take or cause
the Trustee to take such actions as may be necessary to evidence the termination of this Loan
Agreement and the discharge of the Lien hereof.

     Section 12.09. Recording. In accordance with the Indenture, the Company shall cause the
security interest in the Pledged Revenues, Funds, the Equipment and trust accounts referred to in
Section 3.01 hereof granted to the City, the assignment of such security interest to the Trustee
and the security interest in this Loan Agreement granted to the Trustee to be perfected to the
extent permitted by law, including the filing of all financing statements. The parties further
agree that all necessary continuation statements shall be filed by the Company within the time
prescribed by applicable law and all other appropriate actions will be taken in order to continue
such security interests.

     Section 12.10. No Pecuniary Liability of the City. No provision, covenant or agreement
contained in this Loan Agreement, or any obligations herein imposed upon the City, or the breach
thereof, shall constitute an indebtedness or liability of the City within the meaning of any
Arkansas constitutional provision or statutory limitation or shall constitute or give rise to a
pecuniary liability of the City or any member, officer or agent of the City or a charge against the
City’s general credit. In making the Loan, the City has not obligated itself except with respect
to the Trust Estate.

     Section 12.11. Partial Release. So long as no Event of Default shall have occurred and be
continuing under this Loan Agreement, whenever under the terms of this Loan Agreement any portion
of the Springdale Property, Lowell Property, Junction Property, Watts Property or Equipment is
permitted to be sold, transferred, disposed of or released from the provisions of this Loan
Agreement, including releases in the event of condemnation of the Springdale Property, Lowell
Property, Junction Property, Watts Property or Equipment in accordance with Article VII hereof, or
Transfers permitted under Section 8.14 hereof, the Trustee shall take all actions reasonably
necessary to release that portion of the Springdale Property, Lowell Property, Junction Property,
Watts Property or Equipment so sold, leased or disposed of from the Lien of this Loan Agreement.
Any such release shall be requested of the City in writing by the Company Representative and shall
be accompanied by a description of the Springdale Property, Lowell Property, Junction Property,
Watts Property or Equipment to be released, an amendment or supplement to the exhibits of this Loan
Agreement to the extent necessary to provide for such release, a plat or improvement location
survey of the remaining Springdale Property, Lowell Property, Junction Property and Watts Property
after the release by a registered civil engineer or surveyor licensed in the state in which the
applicable Springdale Property, Lowell Property, Junction Property, Watts Property or Equipment is
located in accordance with the standard detail

37

 

requirements for land title surveys adopted by ALTA, and an Opinion of Counsel to the effect
that such release is permitted by the provisions of this Loan Agreement.

     Section 12.12. General Release. Upon payment of all sums secured by this Loan Agreement and
upon full performance hereof by the Company, the Trustee, as assignee of the City, shall promptly,
after written notice from the Company Representative, execute and deliver to the Company a release
of the Lien of this Loan Agreement in form reasonably acceptable to the Trustee. The Company
shall, however, pay all costs and expenses in connection with the preparation, review, recordation
and execution of said release.

     Section 12.13. Captions. The captions and headings in this Loan Agreement are for convenience
only and in no way define, limit or describe the scope or intent of any provisions or sections of
this Loan Agreement.

     Section 12.14. Payments Due on Non-Business Day. If the date for making any payment or the
last date for performance of any act or the exercise of any right, as provided in this Loan
Agreement shall not be a Business Day, such payment may be made or act performed or right exercised
on the next succeeding business day with the same force and effect as if done on the nominal date
provided in this Loan Agreement, except as otherwise expressly provided herein.

     Section 12.15. Provision of General Application. Any consent or approval of the City required
pursuant to this Loan Agreement shall be in writing and shall not be unreasonably withheld.

[Remainder of page intentionally left blank]

38

 

     IN WITNESS WHEREOF, the City and the Company have caused this Loan Agreement to be executed in
their respective corporate names and attested by their duly authorized officers, all as of the date
first above written.

	 	 	 	 	 	 	 	 	 
	 	 	 	 	CITY OF SPRINGDALE, ARKANSAS	 	 
	 
	 	 	 	 	 	 	 	 
	 

	 	 	 	By	 	 	 	 
	 

	 	 	 	 	 	 

Jerre M. Van Hoose, Mayor
	 	 
	 
	 	 	 	 	 	 	 	 
	Attest:	 	 	 	 	 	 
	 
	 	 	 	 	 	 	 	 
	By
	 	 	 	 	 	 	 	 
	 

	 	 

Denise Pearce, City Clerk
	 	 	 	 	 	 
	 
	 	 	 	 	 	 	 	 
	 	 	 	 	ADVANCED ENVIRONMENTAL	 	 
	 	 	 	 	RECYCLING TECHNOLOGIES, INC.	 	 
	 
	 	 	 	 	 	 	 	 
	 

	 	 	 	By	 	 	 	 
	 

	 	 	 	 	 	 

Joe Brooks, Chief Executive Officer
	 	 

[Signature Page to Loan Agreement]

39

 

EXHIBIT A

COSTS OF THE PROJECT

 

 

EXHIBIT B

PERMITTED EXCEPTIONS

B-1exv10w24

 

Exhibit 10.24

 

$75,000,000

CREDIT AGREEMENT

among

DHS HOLDING COMPANY,

DHS DRILLING COMPANY,

as Borrower,

The Several Lenders

from Time to Time Parties Hereto,

LEHMAN BROTHERS INC.,

as Sole Arranger,

and

LEHMAN COMMERCIAL PAPER INC.,

as Syndication Agent and Administrative Agent

Dated
as of December 20, 2007

 

 

 

TABLE OF CONTENTS

	 	 	 	 	 
	 	 	Page
	ARTICLE I DEFINITIONS
	 	 	1	 
	1.1 Defined Terms
	 	 	1	 
	1.2 Other Definitional Provisions
	 	 	18	 
	1.3 Computation of Time Periods
	 	 	19	 
	 
	 	 	 	 
	ARTICLE II AMOUNT AND TERMS OF COMMITMENTS
	 	 	19	 
	2.1 Loan Commitments
	 	 	19	 
	2.2 Procedures for Borrowing
	 	 	19	 
	2.3 Maturity Date
	 	 	19	 
	2.4 Repayment of Loans; Evidence of Debt
	 	 	19	 
	2.5 Fees
	 	 	20	 
	2.6 Optional Prepayments
	 	 	20	 
	2.7 Mandatory Prepayments
	 	 	21	 
	2.8 Interest Rates, Payment Dates and Computation of Interest and Fees
	 	 	22	 
	2.9 Application of Payments
	 	 	22	 
	2.10 Requirements of Law
	 	 	24	 
	2.11 Taxes
	 	 	25	 
	2.12 Indemnity
	 	 	27	 
	2.13 Change of Lending Office
	 	 	27	 
	 
	 	 	 	 
	ARTICLE III REPRESENTATIONS AND WARRANTIES
	 	 	27	 
	3.1 Financial Condition
	 	 	27	 
	3.2 No Change
	 	 	28	 
	3.3 Corporate Existence; Compliance with Law
	 	 	28	 
	3.4 Entity Power; Authorization; Enforceable Obligations
	 	 	29	 
	3.5 No Legal Bar
	 	 	29	 
	3.6 No Indebtedness; No Material Litigation
	 	 	29	 
	3.7 No Default
	 	 	29	 
	3.8 Ownership of Property; Liens
	 	 	29	 
	3.9 Insurance
	 	 	30	 
	3.10 Intellectual Property
	 	 	30	 
	3.11 Taxes
	 	 	30	 
	3.12 Federal Regulations
	 	 	30	 
	3.13 Labor Matters
	 	 	31	 
	3.14 ERISA
	 	 	31	 
	3.15 Regulations
	 	 	31	 
	3.16 Capital Stock; Subsidiaries
	 	 	31	 
	3.17 Use of Proceeds
	 	 	32	 
	3.18 Customers and Suppliers
	 	 	32	 
	3.19 Environmental Matters
	 	 	32	 
	3.20 Accuracy of Information, Etc
	 	 	33	 
	3.21 Security Documents
	 	 	33	 
	3.22 Solvency
	 	 	34	 
	3.23 Drilling Rig Assets
	 	 	34	 
	3.24 Contingent Obligations
	 	 	34	 
	3.25 Bank Accounts
	 	 	35	 

i

 

	 	 	 	 	 
	 	 	Page
	3.26 Access Agreements
	 	 	35	 
	3.27 Customers and Suppliers
	 	 	35	 
	 
	 	 	 	 
	ARTICLE IV CONDITIONS PRECEDENT
	 	 	35	 
	4.1 Conditions to Initial Loan
	 	 	35	 
	4.2 Conditions Deemed Fulfilled
	 	 	38	 
	 
	 	 	 	 
	ARTICLE V AFFIRMATIVE COVENANTS
	 	 	39	 
	5.1 Financial Statements
	 	 	39	 
	5.2 Collateral Reporting
	 	 	40	 
	5.3 Certificates; Other Information
	 	 	40	 
	5.4 Payment of Obligations
	 	 	42	 
	5.5 Conduct of Business and Maintenance of Existence, etc
	 	 	42	 
	5.6 Operation and Maintenance of Property; Insurance
	 	 	42	 
	5.7 Inspection of Property; Books and Records; Discussions
	 	 	43	 
	5.8 Notices
	 	 	43	 
	5.9 Environmental Laws
	 	 	44	 
	5.10 Additional Collateral, etc
	 	 	45	 
	5.11 Use of Proceeds
	 	 	46	 
	5.12 ERISA Documents
	 	 	46	 
	5.13 Further Assurances
	 	 	47	 
	5.14 Patriot Act Compliance
	 	 	47	 
	5.15 Post-Closing Delivery
	 	 	47	 
	 
	 	 	 	 
	ARTICLE VI NEGATIVE COVENANTS
	 	 	47	 
	6.1 Financial Condition Covenants
	 	 	47	 
	6.2 Indebtedness
	 	 	48	 
	6.3 Liens
	 	 	48	 
	6.4 Fundamental Changes
	 	 	49	 
	6.5 Disposition of Property
	 	 	50	 
	6.6 Restricted Payments
	 	 	50	 
	6.7 Capital Expenditures
	 	 	51	 
	6.8 Investments
	 	 	51	 
	6.9 Transactions with Affiliates
	 	 	51	 
	6.10 Sales and Leasebacks
	 	 	52	 
	6.11 Changes in Fiscal Periods
	 	 	52	 
	6.12 Negative Pledge Clauses
	 	 	52	 
	6.13 Restrictions on Subsidiary Distributions
	 	 	52	 
	6.14 Lines of Business
	 	 	52	 
	6.15 Amendments of Certain Documents
	 	 	52	 
	6.16 Activities of Holdings
	 	 	52	 
	6.17 New Subsidiaries
	 	 	53	 
	6.18 Use of Proceeds
	 	 	53	 
	6.19 New Bank Accounts
	 	 	53	 
	6.20 Storage of Drilling Rig Assets
	 	 	53	 
	6.21 Hedging Agreements
	 	 	53	 
	 
	 	 	 	 
	ARTICLE VII EVENTS OF DEFAULT
	 	 	53	 
	7.1 Events of Default
	 	 	53	 
	7.2 Remedies
	 	 	55	 

ii

 

	 	 	 	 	 
	 	 	Page
	ARTICLE VIII THE AGENTS
	 	 	55	 
	8.1 Appointment
	 	 	55	 
	8.2 Delegation of Duties
	 	 	56	 
	8.3 Exculpatory Provisions
	 	 	56	 
	8.4 Reliance by Agents
	 	 	56	 
	8.5 Notice of Default
	 	 	56	 
	8.6 Non Reliance on the Agents and Other Lenders
	 	 	57	 
	8.7 Indemnification
	 	 	57	 
	8.8 Agents in their Individual Capacities
	 	 	57	 
	8.9 Successor Administrative Agent
	 	 	58	 
	8.10 Authorization to Release Liens and Guarantees
	 	 	58	 
	8.11 Arranger; Syndication Agent
	 	 	58	 
	8.12 Withholding Tax
	 	 	58	 
	 
	 	 	 	 
	ARTICLE IX MISCELLANEOUS
	 	 	59	 
	9.1 Amendments and Waivers
	 	 	59	 
	9.2 Notices
	 	 	60	 
	9.3 No Waiver; Cumulative Remedies
	 	 	61	 
	9.4 Survival of Representations and Warranties
	 	 	61	 
	9.5 Payment of Expenses
	 	 	61	 
	9.6 Successors and Assigns; Participations and Assignments
	 	 	62	 
	9.7 Adjustments; Set off
	 	 	64	 
	9.8 Counterparts
	 	 	65	 
	9.9 Severability
	 	 	65	 
	9.10 Integration; Construction
	 	 	65	 
	9.11 GOVERNING LAW
	 	 	65	 
	9.12 Submission To Jurisdiction; Waivers
	 	 	66	 
	9.13 Acknowledgments
	 	 	66	 
	9.14 Confidentiality
	 	 	66	 
	9.15 Release of Collateral and Guarantee Obligations
	 	 	67	 
	9.16 Accounting Changes
	 	 	67	 
	9.17 WAIVERS OF JURY TRIAL
	 	 	68	 
	9.18 Customer Identification – USA PATRIOT Act Notice
	 	 	68	 

iii

 

	 	 	 
	SCHEDULES:
	 	 
	 
	 	 
	1.1

	 	Commitments
	1.2

	 	Real Property
	3.1(b)

	 	Dispositions
	3.4

	 	Consents, Authorizations, Filings and Notices
	3.16

	 	Capital Stock Ownership
	3.21(a)-1

	 	Security Agreement UCC Filing Jurisdictions
	3.21(a)-2

	 	UCC Financing Statements to Remain on File
	3.21(a)-3

	 	UCC Financing Statements to be Terminated
	3.23

	 	Drilling Rig Assets
	3.25

	 	Bank Accounts
	 
	 	 
	EXHIBITS:
	 	 
	 
	 	 
	A

	 	Form of Access Agreement
	B

	 	Form of Borrowing Notice
	C

	 	Form of Compliance Certificate
	D

	 	Form of Deposit Account Control Agreement
	E

	 	Form of Guarantee and Security Agreement
	F

	 	Form of Solvency Certificate
	G

	 	Form of Note
	H

	 	Form of Exemption Certificate
	I

	 	Form of Closing Certificate
	J

	 	Form of Assignment and Acceptance

iv

 

     This
CREDIT AGREEMENT, dated as of December 20, 2007 , is by and among DHS HOLDING COMPANY, a
Delaware corporation (“Holdings”), DHS DRILLING COMPANY, a Colorado corporation (“Borrower”), the
several banks and other financial institutions or entities from time to time parties to this
Agreement (the “Lenders”), LEHMAN BROTHERS INC., as sole arranger and sole bookrunner (in such
capacity, the “Arranger”), and LEHMAN COMMERCIAL PAPER INC., as syndication agent and as
administrative agent (in such capacity, the “Administrative Agent”).

W I T N E S S E T H:

     WHEREAS, Borrower has requested that the Lenders make term loans to Borrower in the aggregate
principal amount of up to $75,000,000;

     WHEREAS, Holdings and Borrower are party to that certain Credit Agreement dated as of May 4,
2006 (as amended to the date hereof, the “Existing Credit Agreement”) with JPMorgan Chase Bank,
N.A., as administrative agent and the other lenders party thereto are parties to that certain; and

     WHEREAS, Holdings and Borrower desire to refinance Indebtedness outstanding under the Existing
Credit Agreement; and the Lenders are willing to make term loans to Borrower on the terms and
conditions of this Agreement;

     NOW, THEREFORE, in consideration of the premises and the agreements hereinafter set forth, the
parties hereto hereby agree as follows:

ARTICLE I

DEFINITIONS

     1.1 Defined Terms. As used in this Agreement, the terms listed in this Section 1.1 shall have the
respective meanings set forth in this Section 1.1.

     Access Agreement: each access agreement to be executed and delivered by each Person on whose
premises any Loan Party maintains a material portion of any Collateral, including any Drilling Rig
Assets and any books and records of the Loan Parties, such Loan Party and the Administrative Agent,
substantially in the form of Exhibit A.

     Accounting Change: as defined in Section 9.16.

     Administrative Agent: as defined in the preamble hereto.

     Affiliate: as to any Person, any other Person that, directly or indirectly, is in control of,
is controlled by, or is under common control with, such Person. For purposes of this definition,
“control” of a Person means the power, directly or indirectly, either to (a) vote 10% or more of
the securities having ordinary voting power for the election of directors (or persons performing
similar functions) of such Person or (b) direct or cause the direction of the management and
policies of such Person, whether by contract or otherwise. Notwithstanding the foregoing, no Lender
shall be deemed to be an Affiliate of the Loan Parties.

     Agents: the collective reference to the Arranger, the Syndication Agent and the
Administrative Agent.

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     Aggregate Exposure: with respect to any Lender at any time, an amount equal to (a) until the
funding of the Loans on the Closing Date, such Lender’s Commitment at such time; (b) thereafter,
the aggregate then unpaid principal amount of such Lender’s Loans.

     Aggregate Exposure Percentage: with respect to any Lender at any time, the ratio (expressed
as a percentage) of such Lender’s Aggregate Exposure at such time to the sum of the Aggregate
Exposures of all Lenders at such time.

     Agreement: this Credit Agreement, as amended, restated, replaced, supplemented or otherwise
modified from time to time.

     Applicable Premium: as defined in Section 2.6(a).

     Approved Appraiser: Superior Asset Management or such other independent appraiser reasonably
acceptable to the Administrative Agent having issued an appraisal report after March 1, 2006.

     Arranger: as defined in the preamble hereto.

     Asset Sale: any Disposition of Property or series of related Dispositions of Property
(excluding any such Disposition permitted by Sections 6.5(b) and (e)) which yields aggregate gross
proceeds to any Loan Party or any of its Subsidiaries (valued at the initial principal amount
thereof in the case of non-cash proceeds consisting of notes or other debt securities and valued at
fair market value in the case of other non-cash proceeds) in excess of $500,000.

     Assignee: as defined in Section 9.6(c).

     Assignment and Acceptance: as defined in Section 9.6(c).

     Assignor: as defined in Section 9.6(c).

     Benefit Plan: at a particular time, any employee benefit plan that is covered by ERISA and in
respect of which any Loan Party or a Commonly Controlled Entity is (or, if such Benefit Plan were
terminated at such time, would under Section 4069 of ERISA be deemed to be) an “employer” as
defined in Section 3(5) of ERISA.

     Benefitted Lender: as defined in Section 9.7(a).

     Board: the Board of Governors of the Federal Reserve System of the United States (or any
successor).

     Borrower: as defined in the preamble hereto.

     Borrower’s knowledge: the best knowledge (after due and diligent investigation) of Borrower
or Holdings, as applicable.

     Borrowing Date: any Business Day specified by Borrower as a date on which Borrower requests
the relevant Lenders to make Loans hereunder.

     Borrowing Notice: with respect to any request for borrowing of Loans hereunder, a notice from
Borrower, substantially in the form of, and containing the information prescribed by, Exhibit
B, delivered to the Administrative Agent.

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     Business Day: a day other than a Saturday, Sunday or other day on which commercial banks in
New York City, New York, or Houston, Texas are authorized or required by law to close.

     Capital Expenditures: for any period, with respect to any Person, the aggregate of all
expenditures by such Person and its Subsidiaries for the direct or indirect acquisition or leasing
(pursuant to a Capital Lease) fixed or capital assets or additions to equipment (including
replacements, capitalized repairs and improvements) during such period which are required to be
capitalized under GAAP on a balance sheet of such Person; provided that Capital Expenditures shall
exclude expenditures made with any portion of any Reinvestment Deferred Amount relating to any
Reinvestment Event in compliance with Sections 2.7(b) and Section 6.7(b).

     Capital Lease: any lease (or other arrangement conveying the right to use) of a Person with
respect to any Property or a combination thereof, the obligations under which are required to be
classified and accounted for as a capital lease on a balance sheet of such Person under GAAP.

     Capital Lease Obligations: with respect to any Person, the obligations of such Person to pay
rent or other amounts under any Capital Lease and, for the purposes of this Agreement, the amount
of such obligations at any time shall be the capitalized amount thereof at such time determined in
accordance with GAAP.

     Capital Stock: any and all shares, interests, participations or other equivalents (however
designated) of capital stock of a corporation, any and all equivalent membership, partnership or
other ownership interests in a Person (other than a corporation) and any and all warrants, rights
or options to purchase any of the foregoing.

     Cash Equivalents: (a) marketable direct obligations issued by, or unconditionally guaranteed
by, the United States government or issued by any agency thereof and backed by the full faith and
credit of the United States, in each case maturing within one year from the date of acquisition;
(b) certificates of deposit, time deposits, Eurodollar time deposits or overnight bank deposits
having maturities of six months or less from the date of acquisition issued by any Lender or by any
commercial bank organized under the laws of the United States of America or any state thereof
having combined capital and surplus of not less than $500,000,000; (c) commercial paper of an
issuer rated at least A-2 by S&P or P-2 by Moody’s, or carrying an equivalent rating by a
“nationally recognized statistical rating organization” (within the meaning of proposed Rule 3b-10
promulgated by the SEC under the Exchange Act), if both of the two named rating agencies cease
publishing ratings of commercial paper issuers generally, and maturing within six months from the
date of acquisition; (d) repurchase obligations of any Lender or of any commercial bank satisfying
the requirements of clause (b) of this definition, having a term of not more than 30 days with
respect to securities issued or fully guaranteed or insured by the United States government; (e)
securities with maturities of one year or less from the date of acquisition issued or fully
guaranteed by any state, commonwealth or territory of the United States, by any political
subdivision or taxing authority of any such state, commonwealth or territory, the securities of
which state, commonwealth, territory, political subdivision or taxing authority (as the case may
be) are rated at least A by S&P or A by Moody’s; (f) securities with maturities of six months or
less from the date of acquisition backed by standby letters of credit issued by any Lender or any
commercial bank satisfying the requirements of clause (b) of this definition; and (g) shares of
money market mutual or similar funds which invest exclusively in assets satisfying the requirements
of clauses (a) through (f) of this definition.

     Change of Control: the occurrence of any of the following events: (a) Delta Petroleum
Corporation and the Management Investors shall cease to have the power to vote or direct the voting
of securities having a majority of the ordinary voting power for the election of directors of
Holdings (determined on a fully diluted basis); (b) Delta Petroleum Corporation and the Management
Investors

3

 

shall cease to own of record and beneficially a majority of the outstanding common stock of
Holdings; (c) any “person” or “group” (as such terms are used in Sections 13(d) and 14(d) of the
Exchange Act), excluding Delta Petroleum Corporation and Chesapeake Energy Corporation, shall
become, or obtain rights (whether by means or warrants, options or otherwise) to become, the
“beneficial owner” (as defined in Rules 13(d)-3 and 13(d)-5 under the Exchange Act), directly or
indirectly, of more than 20% on a fully diluted basis, of the outstanding Capital Stock of Holdings
entitled to vote for the members of the board of directors of Holdings; (d) ) any “person” or
“group” (as such terms are used in Sections 13(d) and 14(d) of the Exchange Act) shall become, or
obtain rights (whether by means or warrants, options or otherwise) to become, the “beneficial
owner” (as defined in Rules 13(d)-3 and 13(d)-5 under the Exchange Act), directly or indirectly, of
more than 50% on a fully diluted basis, of the outstanding Capital Stock of Delta Petroleum
Corporation; (e) the board of directors of Borrower or Delta Petroleum Corporation shall cease to
consist of a majority of Continuing Directors; or (f) Holdings shall cease to own and control, of
record and beneficially, directly, 100% of each class of outstanding Capital Stock of Borrower or
Borrower shall cease to own and control, of record and beneficially, directly or indirectly, 100%
of each class of outstanding Capital Stock of each Subsidiary Guarantor or other Subsidiary of
Borrower, in each case free and clear of all Liens (except Liens created by the Guarantee and
Security Agreement).

     Closing Date: the date on which the conditions precedent set forth in Section 4.1 shall have
been satisfied, which date shall be not later than December 31, 2007.

     Code: the Internal Revenue Code of 1986, as amended from time to time, the regulations
thereunder and publicly available interpretations thereof.

     Collateral: all Property of the Loan Parties, now owned or hereafter acquired, upon which a
Lien is purported to be created by any Security Document.

     Collateral Value Deficiency: at any point in time, the amount, if any, by which the aggregate
Obligations exceed the aggregate Rig Asset Value.

     Commitment: as to any Lender, the obligation of such Lender, if any, to make a Loan to
Borrower hereunder in a principal amount not to exceed the amount set forth under the heading
“Commitment” opposite such Lender’s name on Schedule 1 hereto, or, as the case may be, in
the Assignment and Acceptance pursuant to which such Lender became a party hereto, as the same may
be reduced pursuant to Section 2.1. The original aggregate amount of the Commitments is
$75,000,000.

     Commitment Letter: that certain Letter Agreement, dated as of December 14, 2007, among
Borrower, Lehman Brothers Inc. and Lehman Commercial Paper Inc.

     Commonly Controlled Entity: an entity, whether or not incorporated, that is under common
control with Borrower within the meaning of Section 4001 of ERISA or is part of a group that
includes Borrower and that is treated as a single employer under Section 414 of the Code.

     Compliance Certificate: a certificate duly executed by a Responsible Officer, substantially in
the form of Exhibit C.

     Consolidated Current Assets: at any date, the total consolidated current assets of Borrower
and its Subsidiaries at such date, adjusted for non-cash assets, determined in conformity with GAAP.

     Consolidated Current Liabilities: at any date, all liabilities of Borrower and its
Subsidiaries at such date which should, in conformity with GAAP, be classified as current
liabilities adjusted for non-

4

 

cash liabilities, on a consolidated balance sheet of Borrower and its Subsidiaries prepared in conformity
with GAAP.

     Consolidated EBITDA: of any Person for any period, Consolidated Net Income of such Person and
its Subsidiaries for such period plus, without duplication and to the extent reflected as a charge
in the statement of such Consolidated Net Income for such period, the sum of (a) income tax
expense, (b) Consolidated Interest Expense of such Person and its Subsidiaries, amortization or
write-off of debt discount and debt issuance costs and commissions, discounts and other fees and
charges associated with Indebtedness, (c) depreciation and amortization expense, (d) amortization
of intangibles (including, but not limited to, goodwill) and organization costs, (e) any
extraordinary, unusual or non-recurring expenses or losses (including, whether or not otherwise
includable as a separate item in the statement of such Consolidated Net Income for such period,
losses on sales of assets outside of the ordinary course of business) provided that the amounts
referred to in this clause (e) shall not, in the aggregate, exceed for any fiscal year of Borrower
$5,000,000 and (f) any other non-cash charges, including (in case of clauses (e) and (f), charges
representing (i) accruals of or reserves for cash expenditures in a future period and (ii)
amortization of prepaid items paid in cash in a prior period; minus, to the extent included in the
statement of such Consolidated Net Income for such period, the sum of (A) interest income (except
to the extent deducted in determining Consolidated Interest Expense), (B) any extraordinary,
unusual or non-recurring income or gains (including, whether or not otherwise includable as a
separate item in the statement of such Consolidated Net Income for such period, gains on the sales
of assets outside of the ordinary course of business), (C) income tax credits (to the extent not
netted from income tax expense) and (D) any other non-cash income, all as determined on a
consolidated basis and (E) whether or not included in the statement of such Consolidated Net Income
for such period, all cash expenditures in such period for previously accrued or reserved for
charges or prepaid items to be amortized in future periods; provided that for purposes of
calculating Consolidated EBITDA of Borrower for any period, (i) the Consolidated EBITDA of any
Person or business acquired by Borrower or its Subsidiaries during such period shall be included on
a pro forma basis for such period (assuming the consummation of such acquisition and the incurrence
or assumption of any Indebtedness in connection therewith occurred on the first day of such period)
if the consolidated balance sheet of such acquired Person and its consolidated Subsidiaries as at
the end of the period preceding the acquisition of such Person and the related consolidated
statements of income and stockholders’ equity and of cash flows for the period in respect of which
Consolidated EBITDA is to be calculated (1) have been previously provided to the Administrative
Agent and the Lenders and (2) either (x) have been reported on without a qualification arising out
of the scope of the audit by independent certified public accountants of nationally recognized
standing or (y) have been found acceptable by the Administrative Agent and (ii) the Consolidated
EBITDA of any Person or business Disposed of by Borrower or its Subsidiaries during such period
shall be excluded for such period (assuming the consummation of such Disposition and the repayment
of any Indebtedness in connection therewith occurred on the first day of such period).

     Consolidated Interest Coverage Ratio: for any period, the ratio of (a) Consolidated EBITDA of
Borrower and its Subsidiaries for such period to (b) Consolidated Interest Expense of Borrower and
its Subsidiaries for such period.

     Consolidated Interest Expense: of any Person for any period, total cash interest expense
(including that attributable to Capital Lease Obligations) of such Person and its Subsidiaries for
such period with respect to all outstanding Indebtedness of such Person and its Subsidiaries
(including all commissions, discounts and other fees and charges owed by such Person with respect
to letters of credit and bankers’ acceptance financing); provided that for purposes of calculating
Consolidated Interest of Borrower for any period, (i) the Consolidated Interest of any Person or
business acquired by Borrower or its Subsidiaries during such period shall be included on a pro
forma basis for such period (assuming the
consummation of such acquisition and the incurrence or assumption of any Indebtedness in
connection

5

 

therewith occurred on the first day of such period) if the consolidated balance sheet of
such acquired Person and its consolidated Subsidiaries as at the end of the period preceding the
acquisition of such Person and the related consolidated statements of income and stockholders’
equity and of cash flows for the period in respect of which Consolidated Interest is to be
calculated (x) have been previously provided to the Administrative Agent and the Lenders and (y)
either (1) have been reported on without a qualification arising out of the scope of the audit by
independent certified public accountants of nationally recognized standing or (2) have been found
acceptable by the Administrative Agent and (ii) the Consolidated Interest of any Person or business
Disposed of by Borrower or its Subsidiaries during such period shall be excluded for such period
(assuming the consummation of such Disposition and the repayment of any Indebtedness in connection
therewith occurred on the first day of such period).

     Consolidated Leverage Ratio: as at the last day of any period of four consecutive fiscal
quarters of Borrower, the ratio of (a) Consolidated Total Debt on such day to (b) Consolidated
EBITDA of Borrower for such period.

     Consolidated Net Income: of any Person for any period, the consolidated net income (or loss)
of such Person and its Subsidiaries for such period, determined on a consolidated basis in
accordance with GAAP; provided that in calculating Consolidated Net Income of Borrower and its
consolidated Subsidiaries for any period, there shall be excluded (a) the income (or deficit) of
any Person accrued prior to the date it becomes a Subsidiary of Borrower or is merged into or
consolidated with Borrower or any of its Subsidiaries, (b) the income (or deficit) of any Person
(other than a Subsidiary of Borrower) in which Borrower or any of its Subsidiaries has an ownership
interest, except to the extent that any such income is actually received by Borrower or such
Subsidiary in the form of dividends or similar distributions, (c) the undistributed earnings of any
Subsidiary of Borrower to the extent that the declaration or payment of dividends or similar
distributions by such Subsidiary is not at the time permitted by the terms of any Contractual
Obligation (other than under any Loan Document) or Requirement of Law applicable to such
Subsidiary, and (d) any one-time increase or decrease to such consolidated net income (or loss)
which is required to be recorded because of the adoption of new accounting policies, practices or
standards required by GAAP.

     Consolidated Total Debt: at any date, the aggregate principal amount of all Indebtedness of
Borrower and its Subsidiaries at such date, determined on a consolidated basis in accordance with
GAAP, less the aggregate amount of all Cash and Cash Equivalents in excess of $1,000,000.

     Consolidated Working Capital: at any date, the difference of (a) Consolidated Current Assets
of Borrower on such date less (b) Consolidated Current Liabilities of Borrower on such date.

     Constituent Documents: with respect to any Person, (a) the articles or certificate of
incorporation, certificate of formation or partnership, articles of organization, limited liability
company agreement or agreement of limited partnership (or the equivalent organizational documents)
of such Person, (b) the by-laws (or the equivalent governing documents) of such Person and (c) any
document setting forth the manner of election and duties of the directors or managing members of
such Person (if any) and the designation, amount or relative rights, limitations and preferences of
any class or series of such Person’s Capital Stock.

     Contingent Obligation: of a Person, any agreement, undertaking or arrangement by which such
Person assumes, guarantees, endorses, contingently agrees to purchase or provide funds for the
payment of, or otherwise becomes or is contingently liable upon, the obligation or liability of any
other Person, or agrees to maintain the net worth or working capital or other financial condition
of any other Person, or otherwise assures any creditor of such other Person against loss, including
any comfort letter, operating

6

 

agreement, take or pay contract or the obligations of any such Person as general partner of a
partnership with respect to the liabilities of the partnership.

     Continuing Directors: the directors of Borrower or Delta Petroleum Corporation, as
applicable, on the Closing Date, and each other director if, in each case, such other director’s
nomination for election to the board of directors of Borrower or Delta Petroleum Corporation, as
applicable, is recommended by at least 66-2/3% of the then Continuing Directors or, in the case of
Borrower, such other director receives the vote of the Permitted Investors in his or her election
by the shareholders of Borrower or Delta Petroleum Corporation, as applicable.

     Contractual Obligation: with respect to any Person, any term, condition or provision of any
security issued by such Person or of any agreement, instrument or other undertaking to which such
Person is a party or by which it or any of its Property is bound.

     Control Investment Affiliate: with respect to any Person, any other Person that (a) directly
or indirectly, is in control of, is controlled by, or is under common control with, such Person and
(b) is organized by such Person primarily for the purpose of making equity or debt investments in
one or more companies. For purposes of this definition, “control” of a Person means the power,
directly or indirectly, to direct or cause the direction of the management and policies of such
Person, whether by contract or otherwise.

     Loan Parties: Borrower and each Guarantor.

     Current Ratio: as of any date of determination, the ratio of (a) Consolidated Current Assets
at such date to (b) Consolidated Current Liabilities at such date.

     Daywork Drilling Contracts: collectively, those certain operating contracts for utilization
of the Rigs entered into by Borrower which have a primary term of greater than six months, together
with any amendments thereto, shall be in form and substance acceptable to the Lenders.

     Default: any of the events specified in Article VII, whether or not any requirement for the
giving of notice, the lapse of time, or both, has been satisfied.

     Default Rate: as defined in Section 2.8(b).

     Defensible Title: good and indefeasible title, free and clear of all Liens other than
Permitted Liens.

     Deposit Account Control Agreement: a Deposit Account Control Agreement to be executed and
delivered among any Loan Party, the Administrative Agent and each bank at which such Loan Party
maintains any bank account, in each case, substantially in the form of Exhibit D or such
other form as may be acceptable to the Administrative Agent in its sole discretion, as the same may
be amended, restated, replaced, supplemented or otherwise modified from time to time.

     Derivatives Counterparty: as defined in Section 6.6.

     Disposition: with respect to any Property, any sale, lease, Sale and Leaseback Transaction,
assignment, conveyance, transfer or other disposition (including by way of a merger or
consolidation) of such Property or any interest therein (excluding the creation of any Permitted
Lien on such Property but including the sale or factoring at maturity or collection of any accounts
or permitting or suffering any other Person to acquire any interest (other than a Permitted Lien)
in such Property) or the entering into

7

 

any agreement to do any of the foregoing; and the terms “Dispose” and “Disposed of” shall have
correlative meanings.

     Disqualified Stock: as to any Person, any Capital Stock of such Person that by its terms (or
by the terms of any security into which it is convertible or for which it is exchangeable) or
otherwise (including upon the occurrence of an event) requires the payment of dividends (other than
dividends payable solely in Capital Stock which does not otherwise constitute Disqualified Stock)
or matures or is required to be redeemed (pursuant to any sinking fund obligation or otherwise) or
is convertible into or exchangeable for Indebtedness or is redeemable at the option of the holder
thereof, in whole or in part, at any time on or prior to the date six months after the Maturity
Date.

     Dollars and $: lawful currency of the United States of America.

     Drilling Rig Assets: as defined in Section 3.23.

     Environmental Laws: any and all applicable laws, rules, orders, regulations, statutes,
ordinances, codes, decrees or other legally enforceable requirements (including common law) of any
Governmental Authority regulating, relating to or imposing liability or standards of conduct
concerning pollution, protection of the environment, natural resources or of human health, or
employee health and safety, as has been, is now, or may at any time hereafter be, in effect,
including the Comprehensive Environmental Response, Compensation and Liability Act, 42 U.S.C. §
9601 et seq., the Hazardous Materials Transportation Act, 49 U.S.C. § 5101 et seq., the Resource
Conservation and Recovery Act, 42 U.S.C. § 6901 et seq., the Clean Water Act, 33 U.S.C. § 1251 et
seq., the Clean Air Act, 42 U.S.C. § 7401 et seq., the Toxic Substances Control Act, 15 U.S.C. §
2601 et seq., the Federal Insecticide, Fungicide, and Rodenticide Act, 7 U.S.C. § 136 et seq., the
Oil Pollution Act of 1990, 33 U.S.C. § 2701 et seq., the Occupational Safety and Health Act, 29
U.S.C. § 651 et seq., and the regulations promulgated pursuant thereto, and all analogous state or
local statutes and regulations.

     Environmental Permits: any and all permits, licenses, approvals, registrations,
notifications, exemptions and other authorizations required or obtained under any Environmental
Law.

     ERISA: the Employee Retirement Income Security Act of 1974, as amended from time to time and
the rules and regulations promulgated thereunder.

     Event of Default: any of the events specified in Article VII; provided that any requirement
for the giving of notice, the lapse of time, or both, has been satisfied.

     Excess Cash Flow: with respect to Borrower for any period, the Consolidated EBITDA of
Borrower for such period plus (a) the excess, if any, of the Consolidated Working Capital at the
beginning of such period over the Consolidated Working Capital at the end of such period minus (b)
the sum of (without duplication) (i) scheduled and mandatory cash principal payments on the Loans
during such period and optional cash principal payments on the Loans during such period, (ii)
scheduled cash principal payments made by Borrower or any of its Subsidiaries during such period on
other Indebtedness to the extent such other Indebtedness and payments are permitted by this
Agreement, (iii) scheduled payments made by Borrower or any of its Subsidiaries on Capital Lease
Obligations to the extent such Capital Lease Obligations and payments are permitted by this
Agreement, (iv) Capital Expenditures made by Borrower or any of its Subsidiaries during such period
to the extent permitted by this Agreement, (v) the excess, if any, of the Consolidated Working
Capital at the end of such period over the Consolidated Working Capital at the beginning of such
period, (vi) expenditures made with any portion of the Reinvestment Deferred Amount and (vii)
Consolidated Interest Expense for such period.

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     Exchange Act: the Securities Exchange Act of 1934, as amended.

     Existing Credit Agreement: as defined in the recitals hereto.

     Existing Credit Documents: the Existing Credit Agreement, together with all other agreements,
instruments, financing statements or other documents executed or delivered thereunder.

     Existing Indebtedness: all Indebtedness outstanding under the Existing Credit Documents.

     Federal Funds Effective Rate: for any day, 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 on the next succeeding Business Day by the Federal Reserve Bank of New York,
or, if such rate is not so published for any day which is a Business Day, the average of the
quotations for the day of such transactions received by the Administrative Agent from three federal
funds brokers of recognized standing selected by the Administrative Agent.

     Fee Letter: that certain Letter Agreement, dated as of December 14, 2007, among Borrower,
Lehman Brothers Inc. and Lehman Commercial Paper Inc.

     Funding Office: the office specified from time to time by the Administrative Agent as its
funding office by notice to Borrower and the Lenders.

     GAAP: generally accepted accounting principles in the United States of America as in effect
from time to time, applied in a manner consistent with that used in preparation of the Pro Forma
Balance Sheet.

     Governmental Authority: any nation or government, any state or other political subdivision
thereof and any entity exercising executive, legislative, judicial, taxing, regulatory or
administrative functions of or pertaining to government, any province, commonwealth, territory,
possession, county, parish, town, township, village or municipality, whether now existing or
hereafter constituted or existing.

     Granting Lender: as defined in Section 9.6(g).

     Guarantee and Security Agreement: the Guarantee and Security Agreement to be executed and
delivered by Holdings, Borrower and each Subsidiary of Borrower and the Administrative Agent,
substantially in the form of Exhibit E, as the same may be amended, restated, replaced,
supplemented or otherwise modified from time to time.

     Guarantee Obligation: as to any Person (the “guaranteeing person”), any obligation of (a) the
guaranteeing person or (b) another Person (including any bank under any letter of credit), if to
induce the creation of such obligation of such other Person, the guaranteeing person has issued a
reimbursement, counterindemnity or similar obligation, in either case guaranteeing or in effect
guaranteeing any Indebtedness, leases, dividends or other obligations (the “primary obligations”)
of any other third Person (the “primary obligor”) in any manner, whether directly or indirectly,
including any obligation of the guaranteeing person, whether or not contingent, (w) to purchase any
such primary obligation or any Property constituting direct or indirect security therefor, (x) to
advance or supply funds (i) for the purchase or payment of any such primary obligation or (ii) to
maintain working capital or equity capital of the primary obligor or otherwise to maintain the net
worth or solvency of the primary obligor, (y) to purchase Property, securities or services, in each
case, primarily for the purpose of assuring the owner of any such primary obligation of the ability
of the primary obligor to make payment of such primary obligation or (z) otherwise to assure or
hold harmless the owner of any such primary obligation against

9

 

loss in respect thereof; provided that the term Guarantee Obligation shall not include
endorsements of instruments for deposit or collection in the ordinary course of business. The
amount of any Guarantee Obligation of any guaranteeing person shall be deemed to be the lower of
(I) an amount equal to the stated or determinable amount of the primary obligation in respect of
which such Guarantee Obligation is made and (II) the maximum amount for which such guaranteeing
person may be liable pursuant to the terms of the instrument embodying such Guarantee Obligation,
unless such primary obligation and the maximum amount for which such guaranteeing person may be
liable are not stated or determinable, in which case the amount of such Guarantee Obligation shall
be such guaranteeing person’s maximum reasonably anticipated liability in respect thereof as
determined by Borrower in good faith.

     Guarantor: each Person who is a party as a “Guarantor” and “Grantor” to a Guarantee and
Security Agreement.

     Hedging Agreement: with respect to any Person, any agreement or arrangement, or any
combination thereof, consisting of interest rate or currency swaps, caps or collar agreements,
foreign exchange agreements, commodity contracts or similar arrangements entered into by such
Person providing for protection against fluctuations in interest rates, currency exchange rates or
the exchange of nominal interest obligations, either generally or under specific contingencies.

     Indebtedness: of any Person at any date, without duplication (a) all indebtedness of such
Person for borrowed money, (b) all obligations of such Person for the deferred purchase price of
Property or services, (c) all obligations of such Person evidenced by notes, bonds, debentures or
other similar instruments, (d) all indebtedness created or arising under any conditional sale or
other title retention agreement with respect to Property acquired by such Person (even though the
rights and remedies of the seller or lender under such agreement in the event of default are
limited to repossession or sale of such Property), (e) all Capital Lease Obligations of such
Person, (f) all obligations of such Person, contingent or otherwise, as an account party or
applicant under acceptance, letter of credit or similar facilities, (g) all obligations of such
Person, contingent or otherwise, to purchase, redeem, retire or otherwise acquire for value any
Capital Stock of such Person, (h) all Guarantee Obligations of such Person in respect of
obligations of the kind referred to in clauses (a) through (g) above; and (i) all obligations of
the kind referred to in clauses (a) through (h) above secured by (or for which the holder of such
obligation has an existing right, contingent or otherwise, to be secured by) any Lien on Property
(including accounts and contract rights) owned by such Person, whether or not such Person has
assumed or become liable for the payment of such obligation. The Indebtedness of a Person shall
include the Indebtedness of any other Person (including any partnership in which such Person is a
general partner) to the extent such Person is liable therefor as a result of such Person’s
ownership interest in or other relationship with such entity, except to the extent the terms of
such Indebtedness expressly provide that such Person is not liable therefor.

     Indemnified Liabilities: as defined in Section 9.5.

     Indemnitee: as defined in Section 9.5.

     Independent Accountant: KPMG LLP or such other independent certified public accountants
reasonably acceptable to the Administrative Agent.

     Insolvency: with respect to any Multiemployer Plan, the condition that such Benefit Plan is
insolvent within the meaning of Section 4245 of ERISA.

     Insolvent: pertaining to a condition of Insolvency.

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     Intellectual Property: the collective reference to all rights, priorities and privileges
relating to intellectual property, whether arising under United States, state, multinational or
foreign laws or otherwise, including, copyrights, copyright licenses, patents, patent licenses,
trademarks, trademark licenses, service-marks, technology, know-how and processes, licenses or
rights to use databases, geological data, geophysical data, engineering data, seismic data, maps,
interpretations and other technical information, recipes, formulas, trade secrets and all rights to
sue at law or in equity for any infringement or other impairment thereof, including the right to
receive all proceeds and damages therefrom.

     Interest Margin: 5.50%.

     Interest Payment Date: (a) the first Business Day immediately following the end of each
calendar quarter, commencing with March 31, 2008 and the Maturity Date and (b) the date of any
repayment or prepayment made with respect to any Loan.

     Interest Rate: subject to Section 2.10, for each LIBOR Period, a rate per annum equal to the
LIBOR Rate plus the Interest Margin.

     Investment: for any Person (a) the acquisition (whether for cash, Property of such Person,
services or securities or otherwise) of Capital Stock, bonds, notes, debentures, debt securities,
partnership or other ownership interests or other securities of, or any Property constituting an
ongoing business of, or the making of any capital contribution to, any other Person or any
agreement to make any such acquisition or capital contribution, (b) the making of any deposit with,
or advance, loan or other extension of credit to, any other Person (including the purchase of
Property from another Person subject to an understanding or agreement, contingent or otherwise, to
resell such Property to such Person, but excluding any such advance, loan or extension of credit
having a term not exceeding 90 days representing the purchase price of inventory or supplies sold
in the ordinary course of business), (c) the entering into of any Guarantee of, or other contingent
obligation with respect to, Indebtedness or other liability of any other Person, and (d) any other
investment that would be classified as such on a balance sheet of such Person in accordance with
GAAP.

     Lehman Entity: any of Lehman Commercial Paper Inc. or any of its Affiliates.

     Lenders: as defined in the preamble hereto.

     LIBOR Business Day: a Business Day on which banks in the city of London, England are generally
open for dealings in Dollar deposits in the London interbank market.

     LIBOR Period: each period commencing on a LIBOR Business Day and ending on the first LIBOR
Business Day of the month beginning three months thereafter; provided that the first LIBOR Period
shall begin on the Closing Date and end on April 1, 2008, and each successive LIBOR Period shall
begin on the last LIBOR Business Day of the immediately preceding LIBOR Period.

     LIBOR Rate: for each LIBOR Period, a rate of interest determined by the Administrative Agent
equal to:

     (a) the offered rate for deposits in United States Dollars for the applicable LIBOR Period
that appears on Telerate Page 3750 (or any successor thereto) as of 11:00 a.m. (London time) on the
second full LIBOR Business Day preceding the first day of each LIBOR Period (unless such date is
not a Business Day, in which event the next succeeding Business Day will be used); divided by

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     (b) a number equal to 1.0 minus the aggregate (but without duplication) of the rates
(expressed as a decimal fraction) of reserve requirements in effect on the day that is two LIBOR
Business Days prior to the beginning of such LIBOR Period (including basic, supplemental, marginal
and emergency reserves under any regulations of the Board or other Governmental Authority having
jurisdiction with respect thereto, as now and from time to time in effect) for Eurocurrency funding
(currently referred to as “Eurocurrency Liabilities” in Regulation D of the Board) that are
required to be maintained by a member bank of the Federal Reserve System.

     If such interest rates shall cease to be available from Telerate News Service, the LIBOR Rate
shall be determined from such comparable publicly available financial reporting service for
displaying Eurodollar rates as shall be selected by the Administrative Agent.

     Lien: any mortgage, pledge, hypothecation, assignment, deposit arrangement, encumbrance, lien
(statutory or other), charge or other security interest or any preference, priority or other
security agreement or preferential arrangement of any kind or nature whatsoever intended to assure
payment or performance of any Indebtedness or other obligation (including any conditional sale or
other title retention agreement, the interest of a lessor under a Capital Lease, any financing
lease having substantially the same economic effect as any of the foregoing and the filing of any
financing statement under the UCC or comparable law of any jurisdiction naming the owner of the
asset to which such Lien relates as debtor).

     Loans: as defined in Section 2.1.

     Loan Documents: this Agreement, the Commitment Letter, the Fee Letter, the Security
Documents, the Notes and each certificate, agreement, waiver, consent or document executed by a
Loan Party and delivered to the Administrative Agent or any Lender in connection with or pursuant
to any of the foregoing.

     Loan Parties: Holdings, Borrower and each Subsidiary of Borrower.

     Management Investors: collectively, Bill Sauer, Jr. and Gregg Tubbs.

     Material Adverse Effect: a material adverse effect on any of (a) the business, assets,
property, condition (financial or otherwise) or prospects of the Loan Parties taken as a whole, (b)
the value of the Collateral (except when such value is affected by then-current market conditions),
(c) the legality, validity or enforceability of this Agreement or any of the other Loan Documents
or the rights or remedies of the Agents or the Lenders hereunder or thereunder, (d) the perfection
or priority of the Liens granted pursuant to the Security Documents or (e) the ability of Borrower
to repay the Obligations or of the Loan Parties to perform their obligations under the Loan
Documents.

     Material Environmental Amount: an amount or amounts payable or reasonably likely to become
payable by any Loan Party or any of its Subsidiaries, in the aggregate in excess of $100,000, for
costs to comply with or any liability under any Environmental Law, failure to obtain or comply with
any Environmental Permit, costs of any investigation, and any remediation, of any Material of
Environmental Concern, and any other cost or liability, including compensatory damages (including
damages to natural resources), punitive damages, fines, and penalties pursuant to any Environmental
Law.

     Materials of Environmental Concern: any gasoline or petroleum (including crude oil or any
fraction thereof) or petroleum products, polychlorinated biphenyls, natural gas or natural gas
products, mercury, hydrogen sulfide, drilling fluids, produced water, asbestos, pollutants,
contaminants, radioactivity, and any other substances or forces of any kind, whether or not any
such substance or force

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is defined as hazardous or toxic under any Environmental Law, that is regulated pursuant to or
could give rise to liability under any Environmental Law.

     Maturity Date: as defined in Section 2.3.

     Moody’s: Moody’s Investors Service, Inc.

     Mortgaged Properties: the Real Property listed on Schedule 1.2, together with any
additional Real Properties which Borrower or any Subsidiary may hereafter acquire, in each case as
to which the Administrative Agent for the benefit of the Secured Parties shall be granted a Lien
pursuant to one or more Mortgages.

     Mortgages: each of the mortgages and deeds of trust, if any, made by any Loan Party in favor
of, or for the benefit of, the Administrative Agent for the benefit of the Secured Parties, in each
case, in form and substance acceptable to the Administrative Agent, as the same may be amended,
restated, replaced, supplemented or otherwise modified from time to time.

     Multiemployer Plan: a Benefit Plan that is a multiemployer plan as defined in Section
4001(a)(3) of ERISA.

     Net Cash Proceeds: (a) in connection with any Asset Sale or any Recovery Event, the proceeds
thereof in the form of cash and Cash Equivalents (including any such proceeds received by way of
deferred payment of principal pursuant to a note or installment receivable or purchase price
adjustment receivable or otherwise, but only as and when received) of such Asset Sale or Recovery
Event, net of (i) amounts required to be applied to the repayment of Indebtedness secured by a Lien
expressly permitted hereunder on any asset that is the subject of such Asset Sale or Recovery Event
(other than any Lien pursuant to a Security Document), (ii) in the case of an Asset Sale,
attorneys’ fees, accountants’ fees, investment bank fees and other reasonable and customary fees
and expenses actually incurred in connection therewith and (iii) taxes paid or reasonably estimated
to be payable as a result thereof (after taking into account any available tax credits or
deductions and any tax sharing arrangements); provided that the evidence of each of (i), (ii) and
(iii) is provided to the Administrative Agent in form and substance reasonably satisfactory to it,
and (b) in connection with any issuance or sale of Capital Stock or debt securities or instruments
or the incurrence of Indebtedness for borrowed money, the cash proceeds received from such
issuance, sale or incurrence, net of attorneys’ fees, investment banking fees, accountants’ fees,
underwriting discounts and commissions and other reasonable and customary fees and expenses
actually incurred in connection therewith; provided, that in the case of this clause (b), evidence
of such costs is provided to the Administrative Agent in form and substance reasonably satisfactory
to it.

     Non-Excluded Taxes: as defined in Section 2.11(a).

     Non-U.S. Lender: as defined in Section 2.11(d).

     Notes: as defined in Section 2.4(e).

     Obligations: the unpaid principal of and interest on (including, interest accruing after the
maturity of the Loans and interest accruing after the filing of any petition in bankruptcy, or the
commencement of any insolvency, reorganization or like proceeding, relating to any Loan Party,
whether or not a claim for post-filing or post-petition interest is allowed in such proceeding) the
Loans and all other obligations and liabilities of any Loan Party to the Administrative Agent or to
any Lender, whether direct or indirect, absolute or contingent, due or to become due, or now
existing or hereafter incurred, which may arise under, out of, or in connection with, this
Agreement, any other Loan Document or any

13

 

other document made, delivered or given in connection herewith or therewith, whether on
account of principal, interest, fees, reimbursement obligations, indemnities, costs, expenses
(including, all fees, charges and disbursements of counsel to the Administrative Agent or to any
Lender that are required to be paid by any Loan Party pursuant hereto) or otherwise.

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

     Participant: as defined in Section 9.6(b).

     Patriot Act: as defined in Section 9.18.

     Payment Office: the office specified from time to time by the Administrative Agent as its
payment office by notice to Borrower and the Lenders.

     PBGC: the Pension Benefit Guaranty Corporation established pursuant to Subtitle A of Title IV
of ERISA (or any successor).

     Permits: the collective reference to (i) Environmental Permits, and (ii) any and all other
franchises, licenses, leases, permits, approvals, consents, notifications, certifications,
registrations, authorizations, exemptions, variances, qualifications, easements and rights of way
of any Governmental Authority or third party.

     Permitted Capital Expenditures: as defined in Section 6.7.

     Permitted Capex Amount: as defined in Section 6.7.

     Permitted Equity Financing: any sale or issuance of the Capital Stock of Holdings for cash not
resulting in a Change of Control and any cash contribution to the capital of Holdings by a
Permitted Investor, in each case, (i) the sole purposes of which is to fund Capital Expenditures by
Borrower or any Subsidiary Guarantor within the fiscal quarter in which such sale, issuance or
contribution is made and (ii) the net proceeds of which Holdings contributes in full to Borrower
concurrently with the consummation of such sale, issuance of contribution.

     Permitted Indebtedness: as defined in Section 6.2.

     Permitted Investors: the collective reference to Delta Petroleum Corporation, Chesapeake
Energy Corporation and the Management Investors.

     Permitted Liens: the collective reference to (i) in the case of Collateral other than Pledged
Stock, Liens permitted by Section 6.3 and (ii) in the case of Collateral consisting of Pledged
Stock, non-consensual Liens permitted by Section 6.3 to the extent arising by operation of law.

     Person: an individual, partnership, corporation, limited liability company, business trust,
joint stock company, trust, unincorporated association, joint venture, Governmental Authority or
other entity of whatever nature.

     Pledged Stock: as defined in the Guarantee and Security Agreement.

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     Prepayment Date: (a) with respect to any mandatory prepayment pursuant to Section 2.7, the
date of such mandatory prepayment and (b) with respect to any optional prepayment pursuant to
Section 2.6, the date of such optional prepayment.

     Pro Forma Balance Sheet: as defined in Section 3.1(a).

     Projections: as defined in Section 5.3(c).

     Property: any right or interest in or to property of any kind whatsoever, whether real,
personal or mixed and whether tangible or intangible.

     Purchase Price Refund: any amount received by any Loan Party after the Closing Date as a
result of a purchase price adjustment or similar event in connection with any acquisition of
Property by such Loan Party.

     Qualified Investment: expenditures incurred (i) to acquire or repair similar assets owned (or
to be owned) by Borrower or any Wholly Owned Subsidiary Guarantor of the same type as those subject
to such Reinvestment Event or equipment (or to be owned) by and useful in the business of Borrower
or any Wholly Owned Subsidiary Guarantor or (ii) to reimburse Borrower or such Wholly Owned
Subsidiary Guarantor for amounts paid from the operating cash flow of such Person in advance of the
receipt of Net Cash Proceeds with respect to any Recovery Event in order to repair or replace the
assets of Borrower or any Wholly Owned Subsidiary Guarantor that have been damaged, destroyed or
lost as a result of any casualty event or condemnation; provided that Borrower or such Wholly Owned
Subsidiary Guarantor shall not be reimbursed in an amount exceeding the Net Cash Proceeds actually
received in connection with such Recovery Event.

     Real Property: the surface, subsurface and mineral rights, buildings and interests and any
appurtenances thereto owned, leased or otherwise held by any Loan Party or its Subsidiaries.

     Recovery Event: any settlement of or payment in respect of any property or casualty insurance
claim or any condemnation proceeding (or proceeding in lieu thereof) relating to any asset of any
Loan Party.

     Register: as defined in Section 9.6(d).

     Regulation U: Regulation U of the Board as in effect from time to time.

     Reinvestment Deferred Amount: with respect to any Reinvestment Event, the aggregate Net Cash
Proceeds received by any Loan Party in connection therewith that are duly specified in a
Reinvestment Notice as not being required to be initially applied to prepay the Loans pursuant to
Section 2.7(b) as a result of the delivery of a Reinvestment Notice.

     Reinvestment Event: any Asset Sale, Purchase Price Refund or Recovery Event in respect of
which Borrower has delivered a Reinvestment Notice.

     Reinvestment Notice: a written notice executed by a Responsible Officer stating that no
Default or Event of Default has occurred and is continuing and stating that Borrower (directly or
indirectly through a Wholly Owned Subsidiary Guarantor) intends and expects to use all or a
specified portion of the Net Cash Proceeds of a Reinvestment Event specified in such notice to make
a Qualified Investment.

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     Reinvestment Prepayment Amount: with respect to any Reinvestment Event, the Reinvestment
Deferred Amount relating thereto less the portion, if any, thereof expended prior to the relevant
Reinvestment Prepayment Date to make a Qualified Investment.

     Reinvestment Prepayment Date: with respect to any Reinvestment Event, the earlier of (a) the
date occurring six months after such Reinvestment Event and (b) the date on which Borrower shall
have determined not to, or shall have otherwise ceased to, make a Qualified Investment with all or
any portion of the relevant Reinvestment Deferred Amount.

     Related Fund: with respect to any Lender, any fund that (a) invests in commercial loans and
(b) is managed or advised by the same investment advisor as such Lender, by such Lender or an
Affiliate of such Lender.

     Reorganization: with respect to any Multiemployer Plan, the condition that such Benefit Plan
is in reorganization within the meaning of Section 4241 of ERISA.

     Reportable Event: any of the events set forth in Section 4043(c) of ERISA, other than those
events as to which the thirty day notice period is waived under
subsections .27, .28, .29, .30, .31, .32, .34 or .35 of PBGC Reg. § 4043.

     Required Lenders: at any time, Lenders having Aggregate Exposure Percentages of more than 66
2/3%.

     Requirement of Law: as to any Person, the Constituent Documents of such Person, and any law,
treaty, rule or regulation or determination of an arbitrator or a court or other Governmental
Authority, in each case applicable to or binding upon such Person or any of its Property or to
which such Person or any of its Property is subject.

     Responsible Officer: as to any Loan Party, the chief executive officer, president or chief
financial officer of such Loan Party, but in any event, with respect to financial matters, the
chief financial officer of such Loan Party. Unless otherwise qualified, all references to a
“Responsible Officer” shall refer to a Responsible Officer of Borrower.

     Restricted Payments: as defined in Section 6.6.

     Rig: any of the land-based drilling and workover rigs owned by any Loan Party.

     Rig Appraisal: a written appraisal in form, content and detail reasonably satisfactory to the
Administrative Agent prepared by an Approved Appraiser.

     Rig Accessories: all pumps, drilling equipment, machinery, equipment and parts.

     Rig Asset Value: the “as is, where is” six month, orderly liquidation value of the Drilling
Rig Assets.

     S&P: Standard & Poor’s Ratings Services, a division of McGraw-Hill Companies, Inc.

     Sale and Leaseback Transaction: any sale or other transfer of Property by any Person with the
intent of such Person or an Affiliate thereof to lease such Property as lessee.

16

 

     SEC: the Securities and Exchange Commission (or successor thereto or an analogous
Governmental Authority).

     Secured Parties: collectively, the Administrative Agent and any Lender.

     Security Documents: the collective reference to the Guarantee and Security Agreement, the
Mortgages, each Deposit Account Control Agreement, each Access Agreement and all other security
documents hereafter delivered to the Administrative Agent granting a Lien on any Property of any
Person to secure any of the Obligations.

     Single Employer Plan: any Benefit Plan that is covered by Title IV of ERISA, but which is not
a Multiemployer Plan.

     Solvency Certificate: a solvency certificate and analysis by the chief financial officer of
Borrower substantially in the form of Exhibit F.

     Solvent: with respect to any Person, as of any date of determination, (a) the amount of the
“present fair saleable value” of the assets of such Person will, as of such date, exceed the amount
of all “liabilities of such Person, contingent or otherwise”, as of such date, as such quoted terms
are determined in accordance with applicable federal and state laws governing determinations of the
insolvency of debtors, (b) the present fair saleable value of the assets of such Person will, as of
such date, be greater than the amount that will be required to pay the liability of such Person on
its debts as such debts become absolute and matured, (c) such Person will not have, as of such
date, an unreasonably small amount of capital with which to conduct its business, (d) such Person
will be able to pay its debts as they mature and (e) such Person is not insolvent within the
meaning of any applicable Requirement of Law. For purposes of this definition, (i) “debt” means
liability on a “claim”, and (ii) “claim” means any (x) right to payment, whether or not such a
right is reduced to judgment, liquidated, unliquidated, fixed, contingent, matured, unmatured,
disputed, undisputed, legal, equitable, secured or unsecured or (y) right to an equitable remedy
for breach of performance if such breach gives rise to a right to payment, whether or not such
right to an equitable remedy is reduced to judgment, fixed, contingent, matured or unmatured,
disputed, undisputed, secured or unsecured.

     SPC: as defined in Section 9.6(g).

     Specified Vehicles: is defined in the Guarantee and Security Agreement.

     Subsidiary: as to any Person, a corporation, partnership, limited liability company or other
entity of which shares of Capital Stock having ordinary voting power (other than stock or such
other ownership interests having such power only by reason of the happening of a contingency) to
elect a majority of the board of directors or other managers of such corporation, partnership,
limited liability company or other entity are at the time owned, or the management of which is
otherwise controlled, in each case, directly or indirectly through one or more intermediaries, or
both, by such Person. Unless otherwise qualified, all references to a “Subsidiary” or to
“Subsidiaries” in this Agreement shall refer to a Subsidiary or Subsidiaries of Borrower.

     Subsidiary Guarantor: each Subsidiary of Borrower that is a Guarantor.

     Tax Affiliate: with respect to any Person, (a) any Subsidiary of such Person, and (b) any
Affiliate of such Person with which such Person files or is eligible to file consolidated, combined
or unitary tax returns.

17

 

     Tax Return: as defined in Section 3.11.

     Transferee: as defined in Section 9.14.

     UCC: the Uniform Commercial Code, as in effect from time to time in the State of New York or
other applicable jurisdiction.

     Wholly Owned Subsidiary: as to any Person, any other Person all of the Capital Stock of which
(other than directors’ qualifying shares required by law) is owned by such Person directly and/or
through other Wholly Owned Subsidiaries.

     Wholly Owned Subsidiary Guarantor: any Subsidiary Guarantor that is a Wholly Owned Subsidiary
of Borrower.

     1.2 Other Definitional Provisions.

     (a) Unless otherwise specified therein, all terms defined in this Agreement shall have the
defined meanings when used in the other Loan Documents or any certificate or other document made or
delivered pursuant hereto or thereto.

     (b) As used herein and in the other Loan Documents, and any certificate or other document made
or delivered pursuant hereto or thereto, accounting terms relating to Borrower and its Subsidiaries
not defined in Section 1.1 and accounting terms partly defined in Section 1.1, to the extent not
defined, shall have the respective meanings given to them under GAAP; provided that for purposes of
Section 6.1, any non-cash items arising under FAS 133, 142, 143 or 144 shall be excluded from the
relevant calculation.

     (c) 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, and Section, Schedule and Exhibit references are to this Agreement unless otherwise
specified.

     (d) The meanings given to terms defined herein shall be equally applicable to both the
singular and plural forms of such terms.

     (e) All calculations of financial ratios set forth in Section 6.1 shall be calculated to the
same number of decimal places as the relevant ratios are expressed in and shall be rounded upward
if the number in the decimal place immediately following the last calculated decimal place is five
or greater. For example, if the relevant ratio is to be calculated to the hundredth decimal place
and the calculation of the ratio is 5.126, the ratio will be rounded up to 5.13.

     (f) Each agreement defined in this Agreement shall include all appendices, exhibits and
schedules thereto, and references thereto shall be to such agreement as amended, restated,
replaced, supplemented or otherwise modified; provided that if the prior written consent of the
Required Lenders is required hereunder for an amendment, restatement, replacement, supplement or
other modification to any such agreement and such consent is obtained, references in this Agreement
to such agreement shall be to such agreement as so amended, restated, replaced, supplemented or
modified.

     (g) References in this Agreement to any statute shall be to such statute as amended or
modified and in effect at the time any such reference is operative.

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     (h) The term “including” when used in any Loan Document means “including without limitation”
except when used in the computation of time periods.

     (i) The term “or” has, except where otherwise indicated, the inclusive meaning represented by
the phrase “and/or”.

     (j) The terms “Lender” and “Administrative Agent” include their respective successors.

     (k) The words “asset” and “property” shall be construed to have the same meaning and effect
and to refer to any and all tangible and intangible assets and properties, including cash, Capital
Stock, securities (as such term is defined in the Securities Act), revenues, accounts, leasehold
interests and contract rights.

     (l) Each reference to “Loan Party” in Article III shall include any Subsidiary of Borrower
that is or, pursuant to Section 5.10 or Section 6.17, is required to be a Guarantor.

     1.3 Computation of Time Periods. In this Agreement, in 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 mean “to but excluding” and the word “through” means “to and including.”

ARTICLE II

AMOUNT AND TERMS OF COMMITMENTS

     2.1 Loan Commitments. Subject to the terms and conditions hereof, each of the Lenders severally agrees
to make loans (each, a “Loan”) to Borrower on the Closing Date in an aggregate principal amount not
to exceed such Lender’s Commitment. Once borrowed or repaid, the Loans may not be reborrowed and
any Commitment, once terminated or reduced, may not be reinstated. The Commitment shall
automatically and without notice be reduced to zero immediately after the funding of the Loans on
the Closing Date.

     2.2 Procedures for Borrowing.

     (a) Borrower shall deliver to the Administrative Agent a Borrowing Notice (which Borrowing
Notice must be received by the Administrative Agent prior to 10:00 A.M., New York City time, one
Business Day prior to the anticipated borrowing date) requesting that the Lenders make the Loans on
the Borrowing Date and specifying the amount to be borrowed. Upon receipt of such Borrowing Notice
the Administrative Agent shall promptly notify each Lender thereof. Not later than 12:00 Noon, New
York City time, on the Borrowing Date for the Loans specified hereunder, each Lender shall make
available to the Administrative Agent at the Funding Office an amount in immediately available
funds equal to the Loan to be made by such Lender. The Administrative Agent shall make available
to Borrower the aggregate of the amounts made available to the Administrative Agent by the Lenders,
in like funds as received by the Administrative Agent.

     (b) The Borrower shall not deliver a Borrowing Notice, and no Lender shall be under any
obligation to make available any funds, for Loans in an aggregate amount for all Lenders less than
$75,000,000.

     2.3
Maturity Date. The Loans of each Lender shall mature on December 31, 2010 (the “Maturity Date”).

     2.4 Repayment of Loans; Evidence of Debt.

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     (a) Borrower hereby unconditionally promises to pay to the Administrative Agent for the
account of the appropriate Lender the entire principal amount of each Loan of such Lender on the
Maturity Date or on such earlier date on which the Loans become due and payable pursuant to
Sections 2.6 or 2.7 or Article VII. Borrower hereby further agrees to pay interest on the unpaid
principal amount of the Loans from time to time outstanding from the date hereof until payment in
full thereof at the rates per annum, and on the dates, set forth in Section 2.8.

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

     (c) The Administrative Agent, on behalf of Borrower, shall maintain the Register pursuant to
Section 9.6(d), and a subaccount therein for each Lender, in which shall be recorded (i) the amount
of each Loan made hereunder and any Note evidencing such Loan, (ii) the amount of any principal or
interest due and payable or to become due and payable from Borrower to each Lender hereunder and
(iii) both the amount of any sum received by the Administrative Agent hereunder from Borrower and
each Lender’s share thereof.

     (d) The entries made in the Register and the accounts of each Lender maintained pursuant to
this Section 2.4 shall, to the extent permitted by applicable law, be prima facie evidence of the
existence and amounts of the obligations of Borrower therein recorded; provided, however, that the
failure of any Lender or the Administrative Agent to maintain the Register or any such account, or
any error therein, shall not in any manner affect the obligation of Borrower to repay (with
applicable interest) the Loans made to Borrower by such Lender in accordance with the terms of this
Agreement.

     (e) Borrower agrees that, upon the request to the Administrative Agent by any Lender, Borrower
will promptly execute and deliver to such Lender a promissory note of Borrower evidencing any Loans
of such Lender, substantially in the form of Exhibit G (a “Note”), with appropriate
insertions as to date and principal amount; provided that delivery of Notes shall not be a
condition precedent to the occurrence of the Closing Date or the making of the Loans on any
Borrowing Date.

     2.5 Fees.

     (a) On the Closing Date, Borrower shall pay the Administrative Agent for the account of each
Lender a fee equal to 1.0% of the aggregate principal amount of the Loan made by such Lender.

     (b) On the first anniversary of the Closing Date, Borrower shall pay the Administrative Agent
for the account of the Lenders as of such first anniversary a fee equal to 0.50% of the aggregate
principal amount of the Loans made by the Lenders on the Closing Date, which fee shall be fully
earned on the Closing Date.

     (c) Borrower shall pay to the Administrative Agent for its own account an annual nonrefundable
administration fee equal to $50,000, such fee to be paid in advance on the Closing Date and
thereafter on each anniversary of the Closing Date (other than the Maturity Date) or, if any such
date is not a Business Day, on the first Business Day thereafter.

     (d) Borrower agrees to pay to the Administrative Agent the fees in the amounts and on the
dates from time to time agreed to in writing by Borrower and the Administrative Agent.

     2.6 Optional Prepayments.

20

 

     (a) Subject to the concurrent payment of the Applicable Premium, Borrower may, upon at least
three Business Days’ prior notice to the Administrative Agent stating the Prepayment Date and
aggregate principal amount of the prepayment, prepay on any date the outstanding principal amount
of the Loans, in whole or in part, at Borrower’s option at 100% of the principal amount thereof,
together with accrued interest through the Prepayment Date on the principal amount prepaid, in
accordance with the provisions of this Agreement.

     (b) For purposes hereof, the “Applicable Premium” shall be a cash amount equal to the
percentages of principal amount of the Loans being prepaid set forth below:

	 	 	 	 	 
	If prepaid on or prior to December 31, 2008 
	 	 	1.0	%
	If prepaid at any time after December 31, 2008 
	 	 	0.0	%

     (c) Each partial prepayment shall be in an aggregate amount not less than $1,000,000 or
integral multiples of $100,000 in excess thereof, and any such prepayment must be accompanied by
payment of Agent’s and each Lender’s reasonable out-of-pocket expenses and payment of any LIBOR
funding breakage costs in accordance with Section 2.12. Upon the giving of such notice of
prepayment, the principal amount of the Loans specified to be prepaid and at the applicable price
specified therefor, together with the accrued interest through the Prepayment Date and, if
applicable, the Applicable Premium, shall become due and payable on the Prepayment Date.

     (d) Upon the giving of any such notice of prepayment, the principal amount of the Loans
specified to be prepaid, together with the accrued interest thereon through the Prepayment Date
shall become due and payable on the Prepayment Date.

     (e) Any optional prepayment under this Section 2.6 shall be applied to the Loans as set forth
in Section 2.9 below.

     2.7 Mandatory Prepayments.

     (a) Unless the Required Lenders shall otherwise agree, if any Capital Stock shall be issued
(excluding any Permitted Equity Financing), or any Indebtedness (excluding any Permitted
Indebtedness) incurred, by any Loan Party or any Person shall make any contribution to the capital
of any Loan Party (excluding any Permitted Equity Financing, contributions by Holdings to the
capital of Borrower, or by Borrower to the capital of any Wholly Owned Subsidiary Guarantor), then
on the date of such issuance, incurrence or capital contribution, Borrower shall prepay the
principal amount of the Loans in an amount equal to the amount of the Net Cash Proceeds of such
issuance, incurrence or capital contribution. The provisions of this Section 2.7(a) do not
constitute a consent to the issuance of any Capital Stock by any Person whose Capital Stock is
pledged pursuant to any Security Document, or a consent to the incurrence of any Indebtedness or
the making of any capital contribution by any Loan Party.

     (b) Unless the Required Lenders shall otherwise agree, if on any date any Loan Party shall
receive a Purchase Price Refund or Net Cash Proceeds from any Asset Sale or Recovery Event then, on
the date of receipt by such Person of such Net Cash Proceeds or such Purchase Price Refund,
Borrower shall prepay the principal amount of the Loans in an amount equal to the amount of such
Net Cash Proceeds or such Purchase Price Refund; provided, however, that in the case of any Net
Cash Proceeds constituting the Reinvestment Deferred Amount with respect to a Reinvestment Event,
Borrower shall prepay the Loans in an amount equal to the Reinvestment Prepayment Amount applicable
to such Reinvestment Event, if any, on the Reinvestment Prepayment Date with respect to such
Reinvestment Event; provided further that the aggregate Net Cash Proceeds of Reinvestment Events
that may be

21

 

specified as Reinvestment Deferred Amounts in one or more Reinvestment Notices shall not
exceed $250,000 in the case of any Reinvestment Event and $500,000 in the aggregate in the case of
all Reinvestment Events. The provisions of this Section do not constitute a consent to the
consummation of any Disposition not permitted by Section 6.5.

     (c) If on any date, a Collateral Value Deficiency exists, Borrower shall immediately (and in
any event no later than the date five Business Days after such date), and without the necessity of
demand by the Administrative Agent, prepay the principal amount of the Loans by an amount equal to
the amount of such Reserve Value Deficiency.

     (d) Not later than 75 days after the last day of each fiscal year beginning with fiscal year
2008, Borrower shall prepay the principal amount of the Loans in an amount equal to 75% of Excess
Cash Flow for such fiscal year;

     (e) Upon the occurrence of a Change of Control, the Required Lenders, at their sole
discretion, may require Borrower to immediately prepay the outstanding principal amount of the
Loans (after considering any prepayments by Borrower pursuant to Section 2.6), together with all
other amounts owing under this Agreement or any Loan Document including any fees and expenses
earned or then due and payable under any Loan Document.

     (f) Each prepayment of the Loans pursuant to this Section 2.7 shall be applied in accordance
with Section 2.9 below and shall be accompanied by payment of accrued interest to the Prepayment
Date on the principal amount prepaid. Each prepayment of the Loans pursuant to Section 2.7(a), (b),
(c) or (e) shall include a concurrent payment of the Applicable Premium.

     2.8 Interest Rates, Payment Dates and Computation of Interest and Fees.

     (a) Each Loan shall bear interest for each day on which it is outstanding at the Interest
Rate.

     (b) (i) If all or a portion of the principal amount of any Loan shall not be paid when due
(whether at the stated maturity, by acceleration or otherwise) or there shall occur and be
continuing any other Event of Default, all outstanding Loans (whether or not overdue) (to the
extent legally permitted) shall bear interest at a rate per annum that is equal to the Interest
Rate plus 2.0% the (“Default Rate”), from the date of such nonpayment of principal or occurrence of
such Event of Default, respectively, until such amount of principal is paid in full (after as well
as before judgment) or until such Event of Default is no longer continuing, respectively, and (ii)
if all or a portion of any interest payable on any Loan or any fee or other amount payable
hereunder shall not be paid when due (whether at the stated maturity, by acceleration or
otherwise), such overdue amount shall bear interest at a rate per annum equal to the Default Rate,
in each case, with respect to clauses (i) and (ii) above, from the date of such non payment until
such amount is paid in full (after as well as before judgment).

     (c) Subject to Section 2.7(f) and Section 2.9(h), interest shall be payable in arrears on each
Interest Payment Date, provided that interest accruing pursuant to Section 2.8(b) shall be payable
from time to time on demand.

     (d) Interest, fees and commissions payable pursuant hereto shall be calculated on the basis of
a year of 360 days.

     2.9 Application of Payments.

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     (a) The borrowing by Borrower from the Lenders hereunder, any reduction of the Commitments of
the Lenders and, subject to Section 2.9(c), each payment by Borrower on account of any commitment
fee, shall be made pro rata according to the Aggregate Exposure Percentages of the relevant
Lenders. Each payment (including any prepayment) in respect of principal or interest in respect of
any Loans and each payment in respect of fees or expenses payable hereunder shall be applied to the
amounts of such obligations owing to the Lenders pro rata according to the respective amounts then
due and owing to the Lenders. Amounts prepaid on account of the Loans may not be reborrowed.

     (b) So long as no Event of Default shall have occurred and be continuing all payments and any
other amounts received by the Administrative Agent from or for the benefit of Borrower shall be
applied: (i) first, to pay all Obligations then due and payable and (ii) second, as Borrower so
designates.

     (c) After the occurrence and during the continuance of any Event of Default, Borrower hereby
irrevocably waives the right to direct the application of any and all payments in respect of the
Obligations and any proceeds of Collateral, and agrees that the Administrative Agent may, and shall
upon either (A) the written direction of the Required Lenders or (B) the acceleration of the
Obligations pursuant to Section 7.1, apply all payments in respect of any Obligations and all
proceeds of Collateral in the following order:

     (i) first, to the payment or reimbursement of the Administrative Agent for all costs,
expenses, disbursements and losses incurred by the Administrative Agent and which any Loan
Party is required to pay or reimburse pursuant to the Loan Documents;

     (ii) second, to the payment or reimbursement of the Lenders for all costs, expenses,
disbursements and losses incurred by such Persons and which any Loan Party is required to
pay or reimburse pursuant to the Loan Documents;

     (iii) third, to the payment of interest on the Loans which is then due;

     (iv) fourth, to the payment of principal of the Loans which is then due;

     (v) fifth, to the payment or prepayment to the Lenders of all other Obligations; and

     (vi) sixth, to whomsoever shall be legally entitled thereto.

     (d) If any Lender owes payments to the Administrative Agent hereunder, any amounts otherwise
distributable under this Section 2.9 to such Lender shall be deemed to belong to the Administrative
Agent to the extent of such unpaid payments, and the Administrative Agent shall apply such amounts
to make such unpaid payments rather than distribute such amounts to such Lender. All distributions
of amounts described in paragraphs second and fifth above shall be made by the Administrative Agent
to each Lender on a pro rata basis determined by the amount such Obligations owed to such Lender
represents of the aggregate amount of all such Obligations.

     (e) All payments (including prepayments) to be made by Borrower hereunder, whether on account
of principal, interest, premium, fees or otherwise, shall be made without setoff or counterclaim
and shall be made prior to 12:00 Noon, New York City time, on the due date thereof to the
Administrative Agent, for the account of the relevant Lenders, at the Payment Office, in Dollars
and in immediately available funds. Any payment made by Borrower after 12:00 Noon, New York City
time, on any Business Day shall be deemed to have been made on the next following Business Day.
The Administrative Agent shall distribute such payments to the Lenders promptly upon receipt in
like funds as received. If any payment hereunder becomes due and payable on a day other than a
Business Day, such

23

 

payment shall be extended to the next succeeding Business Day. In the case of any extension
of any payment of principal pursuant to the preceding sentence, interest thereon shall be payable
at the then-applicable rate during such extension.

     (f) Unless the Administrative Agent shall have been notified in writing by any Lender prior to
the borrowing that such Lender will not make the amount that would constitute its share of such
borrowing available to the Administrative Agent, the Administrative Agent may assume that such
Lender is making such amount available to the Administrative Agent, and the Administrative Agent
may, in reliance upon such assumption, make available to Borrower a corresponding amount. If such
amount is not made available to the Administrative Agent by the required time on any Borrowing
Date, such Lender shall pay to the Administrative Agent, on demand, such amount with interest
thereon at a rate equal to the average Federal Funds Effective Rate for the period until such
Lender makes such amount immediately available to the Administrative Agent. A certificate of the
Administrative Agent submitted to any Lender with respect to any amounts owing under this Section
2.9(f) shall be conclusive in the absence of manifest error. If such Lender’s share of such
borrowing is not made available to the Administrative Agent by such Lender within three Business
Days after such Borrowing Date, the Administrative Agent shall also be entitled to recover such
amount with interest thereon at the Interest Rate, on demand, from Borrower.

     (g) Unless the Administrative Agent shall have been notified in writing by Borrower prior to
the date of any payment due to be made by Borrower hereunder that Borrower will not make such
payment to the Administrative Agent, the Administrative Agent may assume that Borrower is making
such payment, and the Administrative Agent may, but shall not be required to, in reliance upon such
assumption, make available to the Lenders their respective pro rata shares of a corresponding
amount. If such payment is not made to the Administrative Agent by Borrower within three Business
Days after such due date, the Administrative Agent shall be entitled to recover, on demand, from
each Lender to which any amount which was made available pursuant to the preceding sentence, such
amount with interest thereon at the rate per annum equal to the daily average Federal Funds
Effective Rate. Nothing herein shall be deemed to limit the rights of the Administrative Agent or
any Lender against Borrower.

     (h) Each payment of the Loans shall be accompanied by accrued interest to the date of such
payment on the amount paid.

     2.10 Requirements of Law.

     (a) If the adoption of or any change in any Requirement of Law or in the interpretation or
application thereof or compliance by any Lender with any request or directive (whether or not
having the force of law) from any central bank or other Governmental Authority made subsequent to
the date hereof:

     (i) shall subject any Lender to any tax of any kind whatsoever with respect to this
Agreement, any Application or any LIBOR Loan made by it, or change the basis of taxation of
payments to such Lender in respect thereof (except for Non-Excluded Taxes covered by
Section 2.11 and changes in the rate of tax on the overall net income of such Lender);

     (ii) shall impose, modify or hold applicable any reserve, special deposit, compulsory
loan or similar requirement against assets held by, deposits or other liabilities in or for
the account of, advances, loans or other extensions of credit by, or any other acquisition
of funds by, any office of such Lender that is not otherwise included in the determination
of the LIBOR Rate hereunder; or

     (iii) shall impose on such Lender any other condition;

24

 

and the result of any of the foregoing is to increase the cost to such Lender, by an amount which
such Lender deems to be material, of making, continuing or maintaining Loans bearing interest by
reference to the LIBOR Rate, or to reduce any amount receivable hereunder in respect thereof, then,
in any such case, Borrower shall promptly pay such Lender, upon its demand, any additional amounts
necessary to compensate such Lender on an after-tax basis for such increased cost or reduced amount
receivable. If any Lender becomes entitled to claim any additional amounts pursuant to this
Section 2.10, it shall promptly notify Borrower (with a copy to the Administrative Agent) of the
event by reason of which it has become so entitled.

     (b) If any Lender shall have determined that the adoption of or any change in any Requirement
of Law regarding capital adequacy, reserve requirements or similar requirements generally
acceptable to lending institutions or in the interpretation or application thereof or compliance by
such Lender or any corporation controlling such Lender with any request or directive regarding
capital adequacy, reserve requirements or similar requirements (whether or not having the force of
law) from any Governmental Authority made subsequent to the Closing Date shall have the effect of
reducing the rate of return on such Lender’s or such corporation’s capital as a consequence of its
obligations hereunder to a level below that which such Lender or such corporation could have
achieved but for such adoption, change or compliance (taking into consideration such Lender’s or
such corporation’s policies with respect to capital adequacy) by an amount deemed by such Lender to
be material, then from time to time, after submission by such Lender to Borrower (with a copy to
the Administrative Agent) of a written request therefor, Borrower shall promptly pay to such Lender
such additional amount or amounts as will compensate such Lender or such corporation for such
reduction on an after-tax basis.

     (c) A certificate as to any additional amounts payable pursuant to this Section submitted by
any Lender to Borrower (with a copy to the Administrative Agent) shall be conclusive in the absence
of manifest error. The obligations of Borrower pursuant to this Section shall survive the
termination of this Agreement and the payment of the Loans and all other amounts payable hereunder.

     (d) Notwithstanding anything to the contrary contained herein, if the introduction of or any
change in any law or regulation (or any change in the interpretation thereof) after the Closing
Date shall make it unlawful, or any central bank or other Governmental Authority shall assert after
the Closing Date that it is unlawful, for any Lender to agree to make or to make or to continue to
fund or maintain any Loan bearing interest by reference to the LIBOR Rate, then, unless that Lender
is able to make or to continue to fund or to maintain such Loan at another branch or office of that
Lender without, in that Lender’s opinion, adversely affecting it or its Loans or the income
obtained therefrom, on notice thereof and demand therefor by such Lender to Borrower through the
Administrative Agent, (i) the obligation of such Lender to agree to make or to make or to continue
to fund or maintain Loans bearing interest by reference to the LIBOR Rate shall terminate, and (ii)
all of such Lender’s Loans shall automatically convert at the end of the then-current LIBOR Period
with respect thereto or sooner, if required by such law, regulation or interpretation, into Loans
bearing interest with respect to such Lender from and after the date of such conversion at a rate
per annum equal to the sum of (x) the Federal Funds Effective Rate in effect from time to time plus
0.50% and (y) the Interest Margin.

     2.11 Taxes.

     (a) All payments made by any Loan Party under this Agreement or any other Loan Documents shall
be made free and clear of, and without deduction or withholding for or on account of,
any present or future income, stamp or other taxes, levies, imposts, duties, charges, fees,
deductions or withholdings, now or hereafter imposed, levied, collected, withheld or assessed by
any Governmental Authority, excluding net income taxes and franchise taxes (imposed in lieu of net
income taxes) imposed on any Agent or any Lender as a result of a present or former connection
between such Agent or such

25

 

Lender and the jurisdiction of the Governmental Authority imposing such
tax or any political subdivision or taxing authority thereof or therein (other than any such
connection arising solely from such Agent’s or such Lender’s having executed, delivered or
performed its obligations or received a payment under, or enforced, this Agreement or any other
Loan Document). If any such non-excluded taxes, levies, imposts, duties, charges, fees, deductions
or withholdings (“Non-Excluded Taxes”) or any Other Taxes are required to be withheld from any
amounts payable to any Agent or any Lender hereunder, the amounts so payable to such Agent or such
Lender shall be increased to the extent necessary to yield to such Agent or such Lender (after
payment of all Non-Excluded Taxes and Other Taxes) interest or any such other amounts payable
hereunder at the rates or in the amounts specified in this Agreement; provided, however, that
Borrower or any Guarantor shall not be required to increase any such amounts payable to any Agent
or any Lender with respect to any Non-Excluded Taxes (i) that are attributable to such Agent’s or
such Lender’s failure to comply with the requirements of Sections 2.11(d) or (e) or (ii) that are
United States withholding taxes imposed on amounts payable to such Agent or such Lender at the time
such Agent or such Lender becomes a party to this Agreement, except to the extent that such Agent’s
or such Lender’s assignor (if any) was entitled, at the time of assignment, to receive additional
amounts from Borrower with respect to such Non-Excluded Taxes pursuant to this Section 2.11(a).
Borrower or the applicable Guarantor shall make any required withholding and pay the full amount
withheld to the relevant tax authority or other Governmental Authority in accordance with
applicable Requirements of Law.

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

     (c) Whenever any Non-Excluded Taxes or Other Taxes are payable by Borrower, as promptly as
possible thereafter Borrower shall send to the Administrative Agent for the account of the relevant
Agent or Lender, as the case may be, a certified copy of an original official receipt received by
Borrower showing payment thereof. If Borrower fails to pay any Non-Excluded Taxes or Other Taxes
when due to the appropriate taxing authority or fails to remit to the Administrative Agent the
required receipts or other required documentary evidence, Borrower shall indemnify the Agents and
the Lenders for any incremental taxes, interest or penalties that may become payable by any Agent
or any Lender as a result of any such failure. The agreements in this Section 2.11 shall survive
the termination of this Agreement and the payment of the Loans and all other amounts payable
hereunder.

     (d) Each Lender (or Transferee) that is not a citizen or resident of the United States of
America, a corporation, partnership or other entity created or organized in or under the laws of
the United States of America (or any jurisdiction thereof), or any estate or trust that is subject
to federal income taxation regardless of the source of its income (a “Non U.S. Lender”) shall
deliver to Borrower and the Administrative Agent (or, in the case of a Participant, to the Lender
from which the related participation shall have been purchased) two copies of either U.S. Internal
Revenue Service Form W-8BEN or Form W-8ECI, or, in the case of a Non U.S. Lender claiming exemption
from U.S. federal withholding tax under Section 871(h) or 881(c) of the Code with respect to
payments of “portfolio interest” a statement substantially in the form of Exhibit H to the
effect that such Lender is eligible for a complete exemption from withholding of U.S. taxes under
Section 871(h) or 881(c) of the Code and a Form W-8BEN, or any subsequent versions thereof or
successors thereto properly completed and duly executed by such Non U.S. Lender claiming complete
exemption from, or a reduced rate of, U.S. federal withholding tax on all payments by Borrower
under this Agreement and the other Loan Documents. Such forms shall be delivered by each Non U.S.
Lender on or before the date it becomes a party to this Agreement (or, in the case of any
Participant, on or before the date such Participant purchases the related participation). In
addition, each Non U.S. Lender shall deliver such forms promptly upon the obsolescence or
invalidity of any form previously delivered by such Non U.S. Lender. Each Non-U.S. Lender shall
promptly notify Borrower at any time it determines that it is no longer in a position to provide
any previously delivered certificate to Borrower (or any other form of certification adopted by the
U.S. taxing authorities for such

26

 

purpose). Notwithstanding any other provision of this Section
2.11(d), a Non U.S. Lender shall not be required to deliver any form pursuant to this Section
2.11(d) that such Non U.S. Lender is not legally able to deliver.

     (e) A Lender that is entitled to an exemption from or reduction of non-U.S. withholding tax
under the law of the jurisdiction in which Borrower is located, or any treaty to which such
jurisdiction is a party, with respect to payments under this Agreement shall deliver to Borrower
(with a copy to the Administrative Agent), at the time or times prescribed by applicable law or
reasonably requested by Borrower, such properly completed and executed documentation prescribed by
applicable law as will permit such payments to be made without withholding or at a reduced rate,
provided that such Lender is legally entitled to complete, execute and deliver such documentation
and in such Lender’s reasonable judgment such completion, execution or submission would not
materially prejudice the legal position of such Lender.

     2.12 Indemnity. Borrower agrees promptly to indemnify each Lender for, and to hold each Lender harmless
from, any loss or expense that such Lender may sustain or incur as a consequence of (a) the failure
to make any prepayment of a Loan after Borrower has given a notice thereof in accordance with the
provisions of this Agreement; (b) the repayment of any Loans that are repaid in whole or in part
prior to the last day of a LIBOR Period (whether such repayment is made pursuant to any provision
of this Agreement or any other Loan Document or occurs as a result of acceleration, mandatory
prepayment, by operation of law or otherwise); or (c) a default in payment when due of the
principal amount of or interest on any Loan; or (d) a default in making any borrowing of Loans
after Borrower has given notice requesting the same in accordance herewith. Such indemnification
shall include any loss (excluding loss of margin) or expense arising from the reemployment of funds
obtained by it or from fees payable to terminate deposits from which such funds were obtained. For
the purpose of calculating amounts payable to a Lender under this Section 2.12, each Lender shall
be deemed to have actually funded its relevant Loan through the purchase of a deposit bearing
interest at the LIBOR Rate in an amount equal to the amount of that Loan and having a maturity
comparable to the LIBOR Period; provided that each Lender may fund each of its Loans in any manner
it deems appropriate, and the foregoing assumption shall be utilized only for the calculation of
amounts payable under this Section 2.12. A certificate as to any amounts payable pursuant to this
Section submitted to Borrower by any Lender shall be conclusive in the absence of manifest error.
This covenant shall survive the termination of this Agreement and the repayment of the Loans and
all other amounts payable hereunder.

     2.13 Change of Lending Office. Each Lender agrees that, upon the occurrence of any event giving rise to
the operation of Section 2.10 or 2.11(a) with respect to such Lender, it will, if requested by
Borrower, use reasonable efforts (subject to overall policy considerations of such Lender) to
designate another lending office for any Loans affected by such event with the object of avoiding
the consequences of such event; provided that such designation is made on terms that, in the sole
judgment of such Lender, cause such Lender and its lending office(s) to suffer no economic, legal
or regulatory disadvantage, and provided, further, that nothing in this Section 2.13 shall affect
or postpone any of the obligations of Borrower or the rights of any Lender pursuant to Section 2.10
or 2.11(a).

ARTICLE III

REPRESENTATIONS AND WARRANTIES

     To induce the Agents and the Lenders to enter into this Agreement and to make the Loans, each
of Holdings and Borrower hereby represents and warrants, jointly and severally, to each Agent and
each Lender that on the date hereof and on the Closing Date:

     3.1 Financial Condition.

27

 

     (a) The unaudited pro forma consolidated balance sheet of Holdings and its consolidated
Subsidiaries as at September 30, 2007 (including the notes thereto) (the “Pro Forma Balance
Sheet”), copies of which have heretofore been furnished to the Administrative Agent, has been
prepared giving effect (as if such events had occurred on such date) to (i) the Loans to be made on
the Closing Date and the use of proceeds thereof and (ii) the payment of fees and expenses in
connection with the foregoing. The Pro Forma Balance Sheet has been prepared based on the best
information available to Holdings as of the date of delivery thereof, and presents fairly on a pro
forma basis the estimated financial position of Holdings and its consolidated Subsidiaries as at
September 30, 2007, assuming that the events specified in the preceding sentence had actually
occurred at such date.

     (b) The audited consolidated balance sheets of Holdings as at December 31, 2005 and December
31, 2006, and the related consolidated statements of income and of cash flows for the fiscal years
ended on such dates, reported on by and accompanied by an unqualified report from the Independent
Accountant, present fairly the consolidated financial condition of Holdings as at such date, and
the consolidated results of its operations and its consolidated cash flows for the respective
fiscal years then ended. The unaudited consolidated balance sheet of Holdings as at September 30,
2007, and the related unaudited consolidated statements of income and cash flows for the nine-month
period ended on such date, present fairly the consolidated financial condition of Holdings as at
such date, and the consolidated results of its operations and its consolidated cash flows for the
nine-month period then ended (subject to normal year end audit adjustments). All such financial
statements, including the related schedules and notes thereto, have been prepared in accordance
with GAAP applied consistently throughout the periods involved (except as approved by the
aforementioned firm of accountants and disclosed therein). No Loan Party has any material
Guarantee Obligations, contingent liabilities and liabilities for taxes, or any long term leases or
unusual forward or long term commitments, including, any interest rate or foreign currency swap or
exchange transaction or other obligation in respect of derivatives, that are not reflected in the
most recent financial statements referred to in this paragraph. During the period from October 1,
2007 to and including the date hereof there has been no Disposition by any Loan Party of any
material part of its business or Property except as described on Schedule 3.1(b).

     3.2 No Change. Except as set forth on Schedule 3.2, since December 31, 2006, there has been no
development or event that has had or could reasonably be expected to have a Material Adverse
Effect.

     3.3 Corporate Existence; Compliance with Law.

     (a) Each of the Loan Parties (i) is duly incorporated, organized or formed, as applicable,
validly existing and (if relevant) in good standing under the laws of the jurisdiction of its
incorporation,
organization or formation, as the case may be, (ii) has the corporate, company or partnership
power and authority, as applicable, and the legal right, to own and operate its Property, to lease
the Property it operates as lessee and to conduct the business in which it is currently engaged,
(iii) is duly qualified as a foreign corporation, company or partnership, as applicable, and (if
relevant) in good standing under the laws of each jurisdiction where its ownership, lease or
operation of Property or the conduct of its business requires such qualification except to the
extent that the failure to comply therewith could not, in the aggregate, reasonably be expected to
have a Material Adverse Effect, (iv) is in compliance with its Constituent Documents and (v) is in
compliance with all Requirements of Law (other than its Constituent Documents) except to the extent
that the failure to comply therewith could not, individually or in the aggregate, reasonably be
expected to have a Material Adverse Effect.

     (b) Each Loan Party has all Permits necessary for the ownership and, if any Loan Party is the
operator, operation of its Properties and the conduct of its businesses except for those Permits
the failure

28

 

of which to have could not reasonably be expected to have a Material Adverse Effect,
and is in compliance in all material respects with the terms and conditions of all such Permits.

     3.4 Entity Power; Authorization; Enforceable Obligations. Each Loan Party has the power and authority
(corporate or otherwise), and the legal right, to make, deliver and perform the Loan Documents to
which it is a party and, in the case of Borrower, to borrow hereunder. Each Loan Party has taken
all necessary corporate or other action to authorize the execution, delivery and performance of the
Loan Documents to which it is a party and, in the case of Borrower, to authorize the borrowings on
the terms and conditions of this Agreement. No consent or authorization of, filing with, notice to
or other act by or in respect of, any Governmental Authority or any other Person is required in
connection with the borrowings hereunder or the execution, delivery, performance, validity or
enforceability of this Agreement or any of the other Loan Documents except (i) consents,
authorizations, filings and notices described in Schedule 3.4, which consents,
authorizations, filings and notices have been obtained or made and are in full force and effect and
(ii) the filings referred to in Section 3.21. Each Loan Document has been duly executed and
delivered on behalf of each Loan Party that is a party thereto. This Agreement constitutes, and
each other Loan Document upon execution will constitute, a legal, valid and binding obligation of
each Loan Party that is a party thereto, enforceable against each such Loan Party in accordance
with its terms, except as enforceability may be limited by applicable bankruptcy, insolvency,
reorganization, moratorium or similar laws affecting the enforcement of creditors’ rights generally
and by general equitable principles (whether enforcement is sought by proceedings in equity or at
law).

     3.5 No Legal Bar. The execution, delivery and performance of this Agreement and the other Loan
Documents, the borrowings hereunder and the use of the proceeds thereof will not violate any
Requirement of Law or any Contractual Obligation of any Loan Party and will not result in, or
require, the creation or imposition of any Lien on any of their respective properties or revenues
pursuant to any Requirement of Law or any such Contractual Obligation (other than the Liens created
by the Security Documents). No Requirement of Law or Contractual Obligation applicable to any Loan
Party could reasonably be expected to have a Material Adverse Effect. No performance of a
Contractual Obligation by any Loan Party, either unconditionally or upon the happening of an event,
would result in the creation of a Lien (other than a Permitted Lien) on the Property of any Loan
Party.

     3.6 No Indebtedness; No Material Litigation.

     (a) After giving effect to the making of the Loans and application of the proceeds thereof on
the Closing Date, no Loan Party shall have outstanding any Indebtedness other than the Loans.

     (b) No litigation, investigation or proceeding of or before any arbitrator or Governmental
Authority is pending or, to Borrower’s knowledge, threatened by or against any Loan Party or
against any of their respective properties or revenues (a) with respect to any of the Loan
Documents or any of the transactions contemplated hereby or thereby, or (b) that could reasonably
be expected to have a Material Adverse Effect.

     3.7 No Default. No Loan Party is in default under or with respect to any of its Contractual
Obligations in any respect that could reasonably be expected to have a Material Adverse Effect. No
Default or Event of Default has occurred and is continuing.

     3.8 Ownership of Property; Liens.

     (a) No Loan Party holds any Real Property in fee simple. Schedule 1.2 describes all
Real Property in which any Loan Party holds a leasehold interest. The Loan Parties have valid
leasehold interests in all such Real Property and Defensible Title to, or a valid leasehold
interest in, all other

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Property material to its business, and none of such Property is subject to
any Lien other than Permitted Liens.

     (b) The Rigs are (i) mobile equipment which are not designed to be permanently used in any one
location; (ii) not property subject to Revised Colorado Statue §§ 42-6-120 or 42-6-121 or any
comparable statute, law, regulation or rule of any state in which any of the Rigs is located and
not certificated as motor vehicles under the laws of any jurisdiction; and (iii) not fixtures under
the laws of any jurisdiction in which any of the Rigs is located.

     3.9 Insurance. All policies of insurance of any kind or nature of any Loan Party, including policies
of fire, theft, product liability, public liability, property damage, other casualty, employee
fidelity, workers’ compensation and employee health and welfare insurance, are in full force and
effect and are of a nature and provide such coverage as is customarily carried by businesses of the
size and character such Loan Party. No Loan Party has been refused insurance for any material
coverage for which it had applied or had any policy of insurance terminated (other than at its
request).

     3.10 Intellectual Property. Each Loan Party owns, or is licensed to use, all Intellectual Property
necessary for the conduct of its business as currently conducted. No material claim has been
asserted and is pending by any Person challenging or questioning the use by any Loan Party of any
Intellectual Property or the validity or effectiveness of any Intellectual Property, nor, to
Borrower’s knowledge, is there any valid basis for any such claim. The use of Intellectual
Property by any Loan Party does not infringe on the rights of any Person in any material respect.

     3.11 Taxes. Each Loan Party has filed or caused to be filed all federal, state and other material tax
returns, reports and statements (collectively, “Tax Returns”) that are required to be filed by such
Loan Party or any of its Tax Affiliates with the appropriate Governmental Authorities in all
jurisdictions in which such Tax Returns are required to be filed; all such Tax Returns are true and
correct in all material respects and correctly reflect the facts regarding the income, business,
assets, operations, activities, status or other matters of such Loan Party and any other
information required to be shown thereon; each Loan Party has paid, prior to the date on which any
fine, penalty, interest, late charge or loss may be added thereto for non-payment thereof, all
taxes shown to be due and payable on said returns or on any assessments made against it or any of
its Property and all other taxes, fees or other charges imposed on it or any of its Property by or
otherwise due and payable to any Governmental Authority (other than any the amount or validity of
which are currently being contested in good faith by appropriate proceedings and with respect to
which reserves in conformity with GAAP have been provided on the books of such Loan Party); and no
tax Lien has been filed against the Property of any Loan Party, and, to Borrower’s knowledge, no
claim is being asserted, with respect to any such tax, fee or other charge. No Tax Return is under
audit or examination by any Governmental Authority and no notice of such an audit or examination or
any assertion of any claim for taxes has been given or made by any Governmental Authority. Proper
and accurate amounts have been withheld by each Loan Party and each of its Tax Affiliates from
their respective employees for all periods in full and complete compliance with the tax, social
security and unemployment withholding provisions of applicable Requirements of Law and such
withholdings have been timely paid to the respective Governmental Authorities. No Loan Party (i)
intends to treat the Loans or any other transaction contemplated hereby as being a “reportable
transaction” (within the meaning of Treasury Regulation 1.6011-4) or (ii) is aware of any facts or
events that would result in such treatment.

     3.12 Federal Regulations. No part of the proceeds of any Loans will be used for “buying” or “carrying”
any “margin stock” within the respective meanings of each of the quoted terms under Regulation U as
now and from time to time hereafter in effect or for any purpose that violates the provisions of
the Regulations of the Board.

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     3.13 Labor Matters. There are no strikes, stoppages or slowdowns or other labor disputes against any
Loan Party pending or, to Borrower’s knowledge, threatened that (individually or in the aggregate)
could reasonably be expected to have a Material Adverse Effect. Hours worked by and payment made
to employees of any Loan Party have not been in violation of the Fair Labor Standards Act of 1938,
as amended, or any other applicable Requirement of Law dealing with such matters that (individually
or in the aggregate) could reasonably be expected to have a Material Adverse Effect. All payments
due from any Loan Party on account of employee health and welfare insurance that (individually or
in the aggregate) could reasonably be expected to have a Material Adverse Effect if not paid have
been paid or accrued as a liability on the books of such Loan Party.

     3.14 ERISA. Neither a Reportable Event nor an “accumulated funding deficiency” (within the meaning of
Section 412 of the Code or Section 302 of ERISA) has occurred during the five year period prior to
the date on which this representation is made or deemed made with respect to any Benefit Plan, and
each Benefit Plan has complied in all material respects with the applicable provisions of ERISA and
the Code. No termination of a Single Employer Plan has occurred, and no Lien in favor of the PBGC
or a Benefit Plan has arisen, during such five-year period. The present value of all accrued
benefits under each Single Employer Plan (based on those assumptions used to fund such Benefit
Plans) did not, as of the last annual valuation date prior to the date on which this representation
is made or deemed made, exceed the value of
the assets of such Plan allocable to such accrued benefits by a material amount. Neither any Loan
Party nor any Commonly Controlled Entity has had a complete or partial withdrawal from any
Multiemployer Plan that has resulted or could reasonably be expected to result in a material
liability under ERISA, and neither any Loan Party nor any Commonly Controlled Entity would become
subject to any material liability under ERISA if such Loan Party or any such Commonly Controlled
Entity were to withdraw completely from all Multiemployer Plans as of the valuation date most
closely preceding the date on which this representation is made or deemed made. No such
Multiemployer Plan is in Reorganization or Insolvent.

     3.15 Regulations.

     (a) No Loan Party is an “investment company”, or a company “controlled” by an “investment
company”, within the meaning of the Investment Company Act of 1940, as amended.

     (b) No Loan Party is subject to regulation under any Requirement of Law (other than Regulation
X of the Board) which limits its ability to incur Indebtedness.

     (c) No Loan Party is a “holding company” or a “subsidiary company” of a “holding company”, or
an “affiliate” of a “holding company” or of a “subsidiary company” of a “holding company”, within
the meaning of the Public Utility Holding Company Act of 1935, as amended.

     (d) No Mortgage encumbers improved Real Property that is located in an area that has been
identified by the Secretary of Housing and Urban Development as an area having special flood
hazards and in which flood insurance has been made available under the National Flood Insurance Act
of 1968.

     3.16 Capital Stock; Subsidiaries.

     (a) All of the outstanding Capital Stock of each Loan Party has been duly authorized and
validly issued and is fully paid and non-assessable and, in the case of each Loan Party other than
Holdings, has been duly pledged as Collateral under the Guarantee and Security Agreement and is
free and clear of all Liens (except Liens pursuant to the Security Documents).

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     (b) The Subsidiaries listed on Schedule 3.16 constitute all the Subsidiaries of each
Loan Party as of the Closing Date. Schedule 3.16 sets forth as of the Closing Date the exact legal name (as reflected on the certificate of
incorporation (or formation) and jurisdiction of incorporation (or formation) of each Subsidiary of
any Loan Party and, as to each such Subsidiary, the percentage and number of each class of Capital
Stock owned by each Loan Party.

     (c) There are no outstanding subscriptions, options, warrants, calls, rights or other
agreements or commitments (other than stock options with respect to Capital Stock of Holdings
granted to employees or directors and directors’ qualifying shares) of any nature relating to any
Capital Stock of any Loan Party, except as disclosed on Schedule 3.16.

     (d) Holdings owns directly all of the outstanding Capital Stock of Borrower. No Loan Party
owns or holds, directly or indirectly, any Capital Stock of any Person other than any Subsidiary.
Borrower owns, directly or indirectly through other Subsidiaries, all of the outstanding Capital
Stock of its Subsidiaries. Each Loan Party is a party to the Guarantee and Security Agreement.

     (e) There are no agreements or understandings (other than the Loan Documents): (i) to which
any Loan Party is a party with respect to the voting, sale or transfer of any shares of Capital
Stock of Holdings or any Loan Party or restricting the transfer or hypothecation of any such shares
or (ii) with respect to the voting, sale or transfer of any shares of Capital Stock of any Loan
Party (other than Holdings) or restricting the transfer or hypothecation of any such shares.

     3.17 Use of Proceeds. The proceeds of the Loans shall be used to repay the Existing Indebtedness and to
pay related fees and expenses and for general corporate purposes.

     3.18 Customers and Suppliers. There exists no actual or threatened termination, cancellation or
limitation of, or modification to or change in (a) any Daywork Drilling Contract, or (b)  the
business relationship between (i) either Loan Party, on the one hand, and any customer or any group
thereof, on the other hand, whose agreements with either Loan Party is individually or in the
aggregate material to the business or operations of Borrower, or (ii) either Loan Party, on the one
hand, and any material supplier thereof, on the other hand; and there exists no present state of
facts or circumstances that could give rise to or result in any such termination, cancellation,
limitation, modification or change. No Person providing any materials or services to either Loan
Party has filed, or threatened to file, a mechanics’, materialmen’s, repairmen’s or other like Lien
on any Drilling Rig Assets.

     3.19 Environmental Matters. Other than exceptions to any of the following that could not, individually
or in the aggregate, reasonably be expected to result in the payment of a Material Environmental
Amount:

     (a) Each Loan Party: (i) is, and within the period of all applicable statutes of limitation
has been, in compliance with all applicable Environmental Laws; (ii) holds all Environmental
Permits (each of which is in full force and effect) required for any of their current or intended
operations or for any property owned, leased, or otherwise operated by any of them; (iii) is, and
within the period of all applicable statutes of limitation has been, in compliance with all of
their Environmental Permits; and (iv) reasonably believes that: each of their Environmental
Permits will be timely renewed and complied with, without material expense; any additional
Environmental Permits that may be required of any of them will be timely obtained and complied
with, without material expense; and compliance with any Environmental Law that is or is expected to
become applicable to any of them will be timely attained and maintained, without material expense.

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     (b) Materials of Environmental Concern are not present at, on, under, in, or about any Real
Property now or formerly owned, leased or operated by any Loan Party, or at any other location
(including, any location to which Materials of Environmental Concern have been sent for re-use or
recycling or for treatment, storage, or disposal) which could reasonably be expected to (i) give
rise to liability of any Loan Party under any applicable Environmental Law or otherwise result in
costs to any Loan Party, or (ii) interfere with the continued operations of any Loan Party, or
(iii) impair the fair saleable value of any Property owned or leased by any Loan Party

     (c) There is no judicial, administrative, or arbitral proceeding (including any notice of
violation or alleged violation) under or relating to any Environmental Law or Environmental Permit
to which any Loan Party is, or to Borrower’s knowledge, or any of its Subsidiaries will be, named
as a party that is pending or, to Borrower’s knowledge, threatened.

     (d) No Loan Party has received any written request for information, or been notified that it
is a potentially responsible party under or relating to the federal Comprehensive Environmental
Response, Compensation, and Liability Act or any similar Environmental Law, or with respect to any
Materials of Environmental Concern.

     (e) No Loan Party has entered into or agreed to any consent decree, order, or settlement or
other agreement, or is subject to any judgment, decree, or order or other agreement, in any
judicial, administrative, arbitral, or other forum for dispute resolution, relating to compliance
with or liability under any Environmental Law.

     (f) No Loan Party has assumed or retained, by contract or operation of law, any liabilities of
any kind, fixed or contingent, known or unknown, under any Environmental Law or with respect to any
Material of Environmental Concern.

     (g) Borrower has made available to the Administrative Agent and the Lenders copies of all
significant reports, correspondence and other documents in its possession, custody or control
regarding compliance by any Loan Party with or potential liability of any Loan party under
Environmental Laws or Environmental Permits.

     3.20 Accuracy of Information, Etc. No statement or information contained in this Agreement, any other
Loan Document or any other document, certificate or statement furnished to the Agents or the
Lenders or any of them, by or on behalf of any Loan Party for use in connection with the
transactions contemplated by this Agreement or the other Loan Documents, contained as of the date
such statement, information, document or certificate was so furnished, any untrue statement of a
material fact or omitted to state a material fact necessary in order to make the statements
contained herein or therein not misleading. The projections and pro forma financial information
contained in the materials referenced above are based upon good faith estimates and assumptions
believed by management of Holdings and Borrower to be reasonable at the time made, it being
recognized by the Lenders that such financial information as it relates to future events is not to
be viewed as fact and that actual results during the period or periods covered by such financial
information may differ from the projected results set forth therein by a material amount. There is
no fact known to any Loan Party that could reasonably be expected to have a Material Adverse Effect
that has not been expressly disclosed herein, in the other Loan Documents or in any other
documents, certificates and statements furnished to the Agents and the Lenders for use in
connection with the transactions contemplated hereby and by the other Loan Documents.

     3.21 Security Documents.

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     (a) The Guarantee and Security Agreement is effective to create in favor of the Administrative
Agent, for the benefit of the Secured Parties, a legal, valid, binding and enforceable security
interest in the Collateral described therein and proceeds and products thereof. In the case of the
Pledged Stock described in the Guarantee and Security Agreement, when any stock certificates
representing such Pledged Stock are delivered to the Administrative Agent, and, in the case of
Pledged Stock that is a “security” (as defined in the UCC) but is not evidenced by a certificate,
when an Instructions Agreement, substantially in the form of Annex A to the Guarantee and Security
Agreement, has been delivered to the Administrative Agent, and in the case of any other Collateral
described in the Guarantee and Security Agreement, when financing statements in appropriate form
are filed in the offices specified on Schedule 3.21(a)-1 (which financing statements may be
filed by the Administrative Agent) at any time and such other filings as are specified on Schedule
3 to the Guarantee and Security Agreement have been completed (all of which filings may be filed by
the Administrative Agent) at any time, the Guarantee and Security Agreement shall constitute a
fully perfected Lien on, and security interest in, all right, title and interest of the Loan
Parties in such Collateral and the proceeds and products thereof, as security for the Obligations
(as defined in the Guarantee and Security Agreement), in each case prior and superior in right to
any other Person (except (in the case of Collateral other than securities pledged by any Loan
Party) Permitted Liens). Schedule 3.21(a)-2 lists each UCC Financing Statement that (i)
names any Loan Party as debtor and (ii) will remain on file after the Closing Date. Schedule
3.21(a)-3 lists each UCC Financing Statement that (i) names any Loan Party as debtor and (ii)
will be terminated on or prior to the Closing Date; and on or prior to the Closing Date, Borrower
will have delivered to the Administrative Agent, or caused to be filed, duly completed UCC
termination statements, signed by the relevant secured party, in respect of each such UCC Financing
Statement.

     (b) The Mortgaged Properties constitute all of the Real Property owned by the Loan Parties.
Each of the Mortgages is effective to create in favor of the Administrative Agent, for the benefit
of the Secured Parties, a legal, valid, binding and enforceable Lien on the Mortgaged Properties
described therein and proceeds and products thereof; and when the Mortgages are filed in the
offices specified on Schedule 3.21(b) (in the case of Mortgages to be executed and
delivered on the Closing Date) or in the recording office designated by Borrower (in the case of
any Mortgage to be executed and delivered pursuant to Section 5.10(a)), each Mortgage shall
constitute a fully perfected Lien on, and security interest in, all right, title and interest of
the Loan Parties in the Mortgaged Properties described therein and the proceeds and products
thereof, as security for the Obligations (as defined in the relevant Mortgage), in each case prior
and superior in right to any other Person (other than Persons holding Liens or other encumbrances
or rights permitted by the relevant Mortgage).

     3.22 Solvency. Each Loan Party is, and after giving effect to the incurrence of all
Indebtedness and obligations being incurred in connection herewith will be and will
continue to be, Solvent.

     3.23 Drilling Rig Assets. Set forth on Schedule 3.23 is a complete and accurate list
and description of (a) each Rig (including, on a Rig by Rig basis, (i) identification of the rig
number of each Rig and the owner thereof and (ii) identification of the location of each Rig (by
county, state and country)), (b) each Rig Accessory and (c) each contract right of any Loan Party
relating to the use, operation, refurbishment, upgrade or purchase of any Rig or Rig Accessories
(collectively, the “Drilling Rig Assets”), and such Drilling Rig Assets constitute all of the
land-based drilling rigs, Rig Accessories and related contracts rights owned or held by any Loan
Party on the Closing Date.

     3.24 Contingent Obligations. There will be no material Contingent Obligations of any Loan Party
existing at the Closing Date.

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     3.25 Bank Accounts. Schedule 3.25 lists all accounts maintained by or for the benefit of
any Loan Party with any bank or financial institution.

     3.26 Access Agreements. No books or records of any Loan Party are located or maintained on any
premises owned by a third party or leased by a third party to any Loan Party other than such
premises as to which the Administrative Agent has received an Access Agreement from such Loan
Party.

     3.27 Customers and Suppliers. There exists no actual or threatened termination, cancellation or
limitation of, or modification to or change in the business relationship between (i) any Loan
Party, on the one hand, and any customer or any group thereof, on the other hand, whose agreements
with such Loan Party is individually or in the aggregate material to the business or operations of
the Loan Parties, or (ii) any Loan Party, on the one hand, and any material supplier thereof, on
the other hand; and there exists no present state of facts or circumstances that could reasonably
be expected to give rise to or result in any such termination, cancellation, limitation,
modification or change.

ARTICLE IV

CONDITIONS PRECEDENT

     4.1 Conditions to Initial Loan. The agreement of each Lender to make the Loan requested to be made
by it hereunder is subject to the satisfaction, prior to or concurrently with the making of such
Loan on the Closing Date, of the following conditions precedent:

     (a) Loan Documents. The Administrative Agent shall have received the following
documents, in each case executed and delivered by a duly authorized officer of each of the parties
thereto: (i) this Agreement, (ii) the Guarantee and Security Agreement for each Loan Party and
(iii) a financing statement on Form UCC-1 for each Loan Party.

     (b) Constituent Documents. All documents establishing or implementing the ownership,
capital and corporate, organizational, tax and legal structure of each Loan Party shall be
reasonably satisfactory to the Administrative Agent.

     (c) Pro Forma Balance Sheet; Financial Statements. The Lenders shall have received
(i) the Pro Forma Balance Sheet, (ii) audited consolidated financial statements for the 2005 and
2006 fiscal years and (iii) unaudited interim consolidated financial statements of Borrower since
September 30, 2007 for each fiscal month and quarterly period ended subsequent to the date of the
latest applicable financial statements delivered pursuant to clause (ii) of this paragraph as to
which such financial statements are available; and such financial statements shall not, in the
reasonable judgment of the Administrative Agent or the Lenders, reflect any Material Adverse Effect
since December 31, 2006.

     (d) Approvals. Permits and third party approvals necessary or, in the sole discretion
of the Administrative Agent, advisable to be obtained by a Loan Party in connection with this
Agreement, the Security Documents and the continuing operations of Holdings, Borrower and its
Subsidiaries and the transactions contemplated hereby shall have been obtained and 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 adverse
conditions on the financing contemplated hereby.

     (e) Related Agreements. The Administrative Agent shall have received (in a form
reasonably satisfactory to the Administrative Agent), true and correct copies, certified to be
true, correct and complete as of the Closing Date by a Responsible Officer of Borrower, of fully
executed versions of such other documents or instruments as may be reasonably requested by the
Administrative Agent,

35

 

including, a copy of any debt instrument, security agreement or other
material contract to which the Loan Parties may be a party.

     (f) Termination of Existing Credit Documents. The Administrative Agent shall have
received evidence satisfactory to the Administrative Agent that the Existing Credit Documents shall
be simultaneously terminated, all amounts thereunder shall be simultaneously paid in full and
arrangements satisfactory to the Administrative Agent shall have been made for the termination of
Liens and security interests granted in connection therewith.

     (g) Fees. The Lenders and the Agents shall have received all fees required to be
paid, and all expenses for which invoices have been presented (including reasonable fees,
disbursements and other charges of counsel to the Agents), on or before the Closing Date; provided
that the Administrative Agent shall have advised Borrower at such time that its attorney’s fees
have reached $75,000 together with a remaining estimate of the legal fees through the completion of
the transaction. All such amounts will be paid with proceeds of Loans made on the Closing Date and
will be reflected in the funding instructions given by Borrower to the Administrative Agent on or
before the Closing Date.

     (h) Solvency. The Lenders shall have received a reasonably satisfactory Solvency
Certificate which shall document the solvency of the Loan Parties considered as a whole after
giving effect to the transactions contemplated hereby.

     (i) Budget. The Lenders shall have received a budget for Borrower and its
Subsidiaries for the 2008 fiscal year which budget shall be reasonably acceptable to the
Administrative Agent and the Lenders.

     (j) Lien Searches. The Administrative Agent shall have received the results of a
recent lien, search in each of the jurisdictions or offices in which UCC financing statements or
other filings or
recordations should be made to evidence or perfect (with the priority required under the Loan
Documents) security interests in all assets of the Loan Parties (or would have been made at any
time during the five years immediately preceding the Closing Date to perfect Liens on any assets
owned on the Closing Date by any Loan Party), and such search shall reveal no Liens on any of the
assets of the Loan Party, except for Permitted Liens or Liens set forth on Schedule
3.21(a)-3 that were terminated, released or otherwise discharged on or prior to the Closing
Date pursuant to documentation satisfactory to the Administrative Agent.

     (k) Closing Certificate. The Administrative Agent shall have received a certificate
of each Loan Party, dated the Closing Date, substantially in the form of Exhibit I, with
appropriate insertions and attachments.

     (l) Other Certifications. The Administrative Agent shall have received the following:

     (i) a copy of the charter of each Loan Party and each amendment thereto, certified (as
of a date reasonably near the date of the initial extension of credit) as being a true and
correct copy thereof by the Secretary of State or other applicable Governmental Authority
of the jurisdiction in which each such Loan Party is organized;

     (ii) a copy of a certificate of the Secretary of State or other applicable
Governmental Authority of the jurisdiction in which each Loan Party is organized, dated
reasonably near the date of the initial extension of credit, listing the charter such Loan
Party and each amendment thereto on file in such office and certifying that (A) such
amendments are the only amendments to such Loan Party’s charter on file in such office, (B)
such Loan Party has

36

 

paid all franchise taxes to the date of such certificate and (C) such
Loan Party is duly organized and in good standing under the laws of such jurisdiction;

     (iii) an electronic confirmation from the Secretary of State or other applicable
Governmental Authority of each jurisdiction in which each such Loan Party is organized
certifying that such Loan Party is duly organized and in good standing under the laws of
such jurisdiction on the date of the initial extension of credit; prepared by, or on behalf
of, a filing service acceptable to the Administrative Agent; and

     (iv) a copy of a certificate of the Secretary of State or other applicable
Governmental Authority of the States of Colorado, and Nevada, as
applicable, dated
reasonably near the date of the initial extension of credit, stating that each Loan Party
is duly qualified and in good standing as a foreign corporation or entity in each such
jurisdiction and has filed all annual reports required to be filed to the date of such
certificate; and electronic confirmation, from the Secretary of State or other applicable
Governmental Authority of each such jurisdiction on the date of the initial extension of
credit as to the due qualification and continued good standing of each such Person as a
foreign corporation or entity in each such jurisdiction on or about such date, prepared by,
or on behalf of, a filing service acceptable to the Administrative Agent.

     (m) Legal Opinions. The Administrative Agent shall have received the following
executed legal opinions:

     (i) the legal opinion of Krys Boyle, PC, counsel to the Loan Parties, with respect to
such matters as may be reasonably requested by the Administrative Agent, and in form and
substance satisfactory to the Administrative Agent; and

     (ii) the legal opinion of special Wyoming counsel to the Loan Parties, with respect to
such matters as may be reasonably requested by the Administrative Agent, and in form and
substance satisfactory to the Administrative Agent.

     (n) Pledged Stock; Stock Powers; Acknowledgment and Consent; Pledged Notes. The
Administrative Agent shall have received (i) the certificates representing the shares of Capital
Stock pledged pursuant to the Guarantee and Security Agreement, together with an undated stock
power for each such certificate executed in blank by a duly authorized officer of the pledgor
thereof, (ii) in the case of Capital Stock that is a “security” (as defined in the UCC) but is not
evidenced by a certificate, an Instructions Agreement, substantially in the form of Annex I to the
Guarantee and Security Agreement, duly executed by any issuer of Capital Stock pledged pursuant to
the Guarantee and Security Agreement and (iii) each promissory note pledged pursuant to the
Guarantee and Security Agreement endorsed (without recourse) in blank (or accompanied by an
executed transfer form in blank satisfactory to the Administrative Agent) by the pledgor thereof.

     (o) Specified Vehicles. The Administrative Agent shall have received certificates of
title for each of the Specified Vehicles.

     (p) Lender Consents. Each of the Lenders shall have received all internal consents
and approvals necessary for the consummation of the transactions contemplated by this Agreement and
the Security Documents.

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     (q) No Material Adverse Effect. Except as set forth on Schedule 3.2, since
December 31, 2006, no development, event or circumstance that has had or could reasonably be
expected to have a Material Adverse Effect shall have occurred and be continuing.

     (r) Filings, Registrations and Recordings. Each document (including any Uniform
Commercial Code financing statement) required by the Security Documents or under law or reasonably
requested by the Administrative Agent to be filed, registered or recorded in order to create in
favor of the Administrative Agent, for the benefit of the Secured Parties, a perfected Lien on the
Collateral described therein, prior and superior in right to any other Person (other than with
respect to Permitted Liens), shall have been filed, registered or recorded or shall have been
delivered to the Administrative Agent in proper form for filing, registration or recordation.

     (s) Insurance. The Administrative Agent shall have received a summary of the
insurance carried in respect of each Loan Party and its Properties, including copies of all
relevant insurance policies (which insurance shall be for such amounts, against such risk, covering
such liabilities and with such deductibles or self-insured retentions as are acceptable to the
Administrative Agent) and certificates of insurance, satisfying the requirements of Section 5.3 of
the Guarantee and Security Agreement and otherwise reasonably satisfactory to the Administrative
Agent, naming the Administrative Agent, for the ratable benefit of the Secured Parties, as “lender
loss payee” under its property loss policies and as “additional insured” on its comprehensive and
general policies.

     (t) Due Diligence. The Administrative Agent shall have completed a satisfactory due
diligence review of the Loan Parties, including business prospects, title to properties, tax, legal
and accounting issues. The Lenders shall have completed a satisfactory due diligence review of
Borrower, including its business prospects, title to its properties and tax, legal and accounting
issues.

     (u) Material Agreements. The Administrative Agent shall have received a true, correct
and complete copy, certified as to such by a Responsible Officer of the applicable Loan Parties, of
each material agreement.

     (v) Representations and Warranties. Each of the representations and warranties made
by any Loan Party in or pursuant to any Loan Document or Acquisition Document shall be true and
correct on and as of the Closing Date or, with respect to any representations and warranties that
are by their express terms made as of a specified earlier date, on and as of such earlier date.

     (w) No Default. No Default or Event of Default shall have occurred and be continuing
on such date or after giving effect to the Loans requested to be made under this Agreement on the
Closing Date.

     (x) No Collateral Value Deficiency. No Collateral Value Deficiency shall exist as of
the Closing Date nor would any Collateral Value Deficiency exist after giving effect to the
extensions of credit requested to be made on such date.

     (y) Additional Documents. The Administrative Agent and the Lenders shall have
received such other documents, agreements, certificates and information as such Persons shall
reasonably request.

     4.2 Conditions Deemed Fulfilled. Except to the extent that Borrower has disclosed in the Borrowing
Notice that an applicable condition specified in Section 4.1 will not be satisfied as of the
requested time for the making of any Loan, Borrower shall be deemed to have made a representation
and warranty as of such time that the conditions specified in Section 4.1 have been satisfied. No
such disclosure by Borrower that a condition specified in Section 4.1 will not be satisfied as of
the requested

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time for the making of the requested Loans shall affect the right of each Lender not
to make the Loans requested to be made by it if such condition has not been satisfied at such time.

ARTICLE V

AFFIRMATIVE COVENANTS

     Each of Holdings and Borrower hereby jointly and severally agree that, so long as the
Commitments remain in effect, or any Loan or other amount is owing to any Lender or any Agent
hereunder, each of Holdings and Borrower shall, and shall cause each of its Subsidiaries to:

     5.1 Financial Statements. Furnish to each Agent and each Lender by physical means or, if requested
by the Administrative Agent, electronically via the Administrative Agent’s proprietary transmission
software and date collection method:

     (a) as soon as available, but in any event within 90 days after the end of each fiscal year of
Holdings, commencing with the 2007 fiscal year, a copy of the audited consolidated balance sheet of
Holdings and its consolidated Subsidiaries as at the end of such year and the related audited
consolidated statements of income and of cash flows for such year, setting forth in each case in
comparative form the figures as of the end of and for the previous year, reported on without a
“going concern” or like qualification or exception, or qualification arising out of the scope of
the audit, by the Independent Accountants;

     (b) as soon as available, but in any event not later than 45 days after the end of each
quarterly period of each fiscal year of Holdings, the unaudited consolidated balance sheet of
Holdings and its consolidated Subsidiaries as at the end of such quarter and the related unaudited
consolidated statements of income and of cash flows for such quarter and the portion of the fiscal
year through the end of such
quarter, setting forth in each case in comparative form the figures as of the end of and for
the corresponding period in the previous year, certified by a Responsible Officer as being fairly
stated in all material respects (subject to normal year-end audit adjustments); and

     (c) as soon as available, but in any event not later than 30 days after the end of each
calendar month commencing on January 30, 2008, the unaudited consolidated balance sheets of
Borrower and its Subsidiaries as at the end of such month and the related unaudited consolidated
statements of income and of cash flows for such month and the portion of the fiscal year through
the end of such month, setting forth in each case in comparative form the figures as of the end of
and for the corresponding period in the previous year, certified by a Responsible Officer as being
fairly stated in all material respects (subject to normal year-end audit adjustments);

     (d) as soon as available, but in any event not later than 30 days after the end of each
calendar month commencing on January 30, 2008, a schedule of the contract status of each Rig which
schedule shall include in sufficient detail the marketing prospects for each Rig; and

     (e) promptly upon Borrower’s having knowledge that a Collateral Value Deficiency exists, or is
likely to exist, written notice thereof (if not previously provided in a certificate delivered
pursuant to Section 5.3(a)), together with a written plan to cure such deficiency by the end of the
fiscal quarter in which such plan was delivered, which plan shall be satisfactory in form and
substance to the Administrative Agent;

all such financial statements to be complete and correct in all material respects and to be
prepared in reasonable detail and in accordance with GAAP applied consistently throughout the
periods reflected therein and with prior periods (except as approved by the Independent Accountants
or officer, as the case

39

 

may be, and disclosed therein, and quarterly financial statements shall be
subject to normal year-end audit adjustments and need not be accompanied by footnotes).

     5.2 Collateral Reporting. Furnish to the Administrative Agent:

     (a) (i) on or before each June 30 of each year, beginning June 30, 2008, a Rig Appraisal dated
as of each preceding May 1 (or dated later if available) and (ii) promptly upon written request by
the Administrative Agent, a Rig Appraisal; provided that unless a Default or an Event of Default
shall then exist, the Administrative Agent may request, at Borrower’s cost and expense, no more
than one such Rig Appraisals during any 12-month period, with any additional requests for updated
Rig Appraisal during any such period to be at the Administrative Agent’s cost and expense, and
after the occurrence and during the continuance of a Default or Event of Default, the
Administrative Agent may, from time to time, request a Rig Appraisal at the sole cost and expense
of Borrower, in each case dated as of the first day of the month during which Borrower receives
such request;

     (b) reports, certifications, engineering studies, environmental assessments or other written
material or data requested by, and in form, scope and substance reasonably satisfactory to, the
Administrative Agent or the Required Lenders, in the event that Administrative Agent or the
Required Lenders at any time have a reasonable basis to believe that there may be a material
violation of any Environmental Law or a condition at any Property owned, operated or leased by any
Loan Party that could reasonably give rise to a Material Adverse Effect, or if an Event of Default
has occurred and is continuing; provided that if any Loan Party fails to provide such reports,
certifications, engineering studies or other written material or data within 75 days after the
request of the Administrative Agent or the Required Lenders, the Administrative Agent shall have
the right, at such Loan Party’s sole cost and
expense, to conduct such environmental assessments or investigations as may reasonably be
required to enable the Administrative Agent and the Required Lenders to determine whether each of
the Loan Parties is in material compliance with Environmental Laws;

     (c) prior to any Asset Sale, a notice (i) describing such Asset Sale or the nature and
material terms and conditions of such transaction and (ii) stating the estimated Net Cash Proceeds
anticipated to be received by any Loan Party;

     (d) as soon as is practicable following the written request of the Administrative Agent and in
any event within 60 days after the end of each fiscal year, (i) a report in form and substance
satisfactory to the Administrative Agent and the Lenders outlining all material insurance coverage
maintained as of the date of such report by each Loan Party and the duration of such coverage and
(ii) an insurance broker’s statement that all premiums then due and payable with respect to such
coverage have been paid and confirming that the Administrative Agent has been named as loss payee
or additional insured, as applicable; and

     (e) upon reasonable request by the Administrative Agent, such other reports as to the
Collateral or the financial condition of the Loan Parties as may be so requested.

     5.3 Certificates; Other Information. Furnish to each Agent and each Lender or, in the case of
clause (h) to the relevant Lender or Agent or, in the case of clause (i), to the relevant Lender:

     (a) concurrently with the delivery of the financial statements referred to in Section 5.1(a),
a certificate of the independent certified public accountants reporting on such financial
statements stating that in making the examination necessary therefor no knowledge was obtained of
any Default or Event of Default, except as specified in such certificate (it being understood that
such certificate shall be limited to

40

 

the items that independent certified public accountants are
permitted to cover in such certificates pursuant to their professional standards and customs of the
profession);

     (b) concurrently with the delivery of any financial statements pursuant to Section 5.1, (i) a
certificate of a Responsible Officer stating that, to the best of such Responsible Officer’s
knowledge, each Loan Party during such period has observed or performed all of its covenants and
other agreements, and satisfied every condition, contained in this Agreement and the other Loan
Documents to which it is a party to be observed, performed or satisfied by such Loan Party, and
that such Responsible Officer has obtained no knowledge of (A) any Default or Event of Default or
(B) the existence of a Collateral Value Deficiency, in each case except as specified in such
certificate and (ii) in the case of quarterly or annual financial statements, a Compliance
Certificate containing all information and calculations necessary for determining compliance by the
Loan Parties with the provisions of this Agreement referred to therein as of the last day of the
fiscal quarter or fiscal year of Holdings, as the case may be, and authorization to file any UCC
financing statements or other filings specified in such Compliance Certificate as being required to
be delivered therewith;

     (c) as soon as available, and in any event no later than 45 days after the end of each fiscal
year of Borrower, a detailed consolidated budget for the following fiscal year (including a
projected consolidated balance sheet of Borrower and its Subsidiaries as of the end of the
following fiscal year, and the related consolidated statements of projected cash flow, projected
changes in financial position and projected income and a description of the underlying assumptions
applicable thereto), and, as soon as available, significant revisions, if any, of such budget and
projections with respect to such fiscal year (collectively, the “Projections”), which Projections
shall in each case be accompanied by a certificate of a
Responsible Officer stating that such Projections are based on reasonable estimates,
information and assumptions and that such Responsible Officer has no reason to believe that such
Projections are incorrect or misleading in any material respect;

     (d) as soon as possible and in any event within five days of obtaining knowledge thereof: (i)
notice of any development, event, or condition that, individually or in the aggregate with other
developments, events or conditions that, individually or in the aggregate, could reasonably be
expected to result in the payment by the Loan Parties in the aggregate, of a Material Environmental
Amount; and (ii) any notice that any Governmental Authority has taken action to or may deny any
application for an Environmental Permit or other Material Permit sought by, or revoke or refuse to
renew any such Permit held by any Loan Party or condition approval of any such Permit on terms and
conditions if the effect of any such action would have a material adverse effect on any Loan Party,
or to the operation of any of its businesses or any property owned, leased or otherwise operated by
such Person;

     (e) promptly after becoming aware of the same, written notice of (i) any material labor
dispute to which either Loan Party is or may become a party, including any strikes, lockouts or
other disputes relating to any of such Person’s plants and other facilities, and (ii) any Worker
Adjustment and Retraining Notification Act or related liability incurred with respect to the
closing of any plant or other facility of any of such Person that would reasonably be expected to
have a Material Adverse Effect;

     (f) within five Business Days after receipt thereof by any Loan Party, copies of each final
management letter, exception report or similar letter or report received by such Loan Party from
its Independent Accountant;

     (g) within 45 days after the end of each fiscal quarter of Borrower, a narrative discussion
and analysis of the financial condition and results of operations of Borrower and its Subsidiaries
for such fiscal quarter and for the period from the beginning of the then current fiscal year to
the end of such fiscal

41

 

quarter, as compared to the portion of the Projections covering such periods
and to the comparable periods of the previous year;

     (h) if requested by any Lender or Agent, a statement to the effect specified in Section 3.12
in conformity with the requirements of FR Form G-3 or FR Form U 1 referred to in Regulation U; and

     (i) promptly, such additional financial and other information as the Administrative Agent or
any Lender may from time to time reasonably request.

     5.4 Payment of Obligations. Pay, discharge or otherwise satisfy at or before maturity or before
they become delinquent, as the case may be, all its material obligations of whatever nature, except
where the amount or validity thereof is currently being contested in good faith by appropriate
proceedings and reserves in conformity with GAAP with respect thereto have been provided on the
books of the Loan Party obligated therefor.

     5.5 Conduct of Business and Maintenance of Existence, etc.

     (a) (i) Preserve, renew and keep in full force and effect its corporate or other existence and
(ii) take all reasonable action to maintain all rights, privileges, franchises, Permits and
licenses necessary or desirable in the normal conduct of its business, except, in each case, as
otherwise permitted by Section
6.4 and except, in the case of clause (ii) above, to the extent that failure to do so could
not reasonably be expected to have a Material Adverse Effect.

     (b) To the extent not in conflict with this Agreement or the other Loan Documents, comply with
all (i) Contractual Obligations and Constituent Documents and (ii) Permits and Requirements of Law,
and use its reasonable efforts to cause all employees, crew members, agents, contractors and
subcontractors of any Loan Party to comply with all Permits and Requirements of Law as may be
necessary or appropriate to enable such Loan Party so to comply, except, in the case of Contractual
Obligations, Permits and Requirements of Law, where the failure to comply could not reasonably be
expected to result in a Material Adverse Effect.

     5.6 Operation and Maintenance of Property; Insurance.

     (a) Keep, preserve and maintain all Property and systems, including all improvements, personal
property and equipment, useful and necessary in its business in good working order and condition in
accordance with the general practice of other businesses of similar character and size (ordinary
wear and tear excepted) and make all necessary repairs, renewals and replacements so that its
business may be property conducted at all times

     (b) Operate or cause to be operated the Drilling Rig Assets in a good and workman-like manner.

     (c) Maintain with financially sound and reputable insurance companies insurance on all its
Property meeting the requirements of the Guarantee and Security Agreement and in at least such
amounts and against at least such risks (but including in any event general liability) as are
usually insured against in the same general area by companies engaged in the same or a similar
business, with such deductibles as are reasonably acceptable to the Administrative Agent.

     (d) Name the Administrative Agent, for the ratable benefit of the Secured Parties, as “loss
payee” under its casualty loss policies and the Administrative Agent as “additional insured” on its
comprehensive and general liability policies and cause all such casualty loss policies to be
reasonably

42

 

satisfactory to the Administrative Agent in all respects and provide that they shall not
be canceled, amended or changed without at least 30 days’ (ten days for nonpayment) written notice
to the Administrative Agent, it being understood, however, that, so long as no Event of Default has
occurred and is continuing, Net Cash Proceeds of any insurance policies shall be applied in
accordance with Sections 2.7 and 2.9.

     (e) Renew all insurance policies referred to in this Section 5.6 on terms no less favorable to
the Administrative Agent for the ratable benefit of the Secured Parties during the term of this
Agreement and cause any substitute underwriter to be, in Borrower’s reasonable opinion, as
financially sound as Borrower’s existing underwriters.

     5.7 Inspection of Property; Books and Records; Discussions.

     (a) Keep proper books of records and account in which full, true and correct entries in
conformity with GAAP and all Requirements of Law shall be made of all dealings and transactions in
relation to its business and activities.

     (b) Permit the Administrative Agent and the Lenders, or any agents or representatives thereof,
from time to time during Borrower’s normal business hours, as often as may be reasonably requested
and upon two Business Days notice (except that, during the continuance of an Event of Default, no
such notice shall be required) to (i) go upon, examine, inspect and remain on the Properties of any
Loan Party, (ii) during any such visit, inspect and verify the amount, character and condition of
any of the Property of any Loan Party, (iii) during any such visit, examine and, at Borrower’s cost
and expense, make copies of and abstracts from the records and books of account of any Loan Party,
and (iv) discuss the affairs, finances and accounts of any Loan Party with any of their respective
officers, directors, employees or Independent Accountants, it being understood that, except as
otherwise stated in clause (iii) above, the Administrative Agent and each Lender will pay the costs
and expenses incurred by it in exercising its rights under this Section 5.7(b); provided that after
the occurrence of an Event of Default, Borrower shall reimburse the Administrative Agent and each
Lender promptly after a request therefor for the reasonable costs and expenses incurred by it in
connection with the exercise of its rights under this Section 5.7(b).

     (c) Authorize the Independent Accountants of Holdings or Borrower to disclose to the
Administrative Agent or any Lender any and all financial statements and other information of any
kind, as the Administrative Agent or any Lender reasonably requests from of Holdings or Borrower
and which the Independent Accountants may have with respect to the business, financial condition,
results of operations or other affairs of any Loan Party.

     5.8 Notices. Promptly, and in any event within three Business Days after Borrower’s knowledge
thereof, give notice to the Administrative Agent and each Lender of:

     (a) the occurrence of any Default or Event of Default;

     (b) any (i) default or event of default (or alleged default) under any Contractual Obligation
of any Loan Party or (ii) litigation, investigation or proceeding which may exist at any time
between any Loan Party and any Governmental Authority, that in case of clause (i) or (ii), if not
cured or if adversely determined, as the case may be, could reasonably be expected to have a
Material Adverse Effect;

     (c) any litigation or proceeding affecting any Loan Party in which the amount involved that is
not covered by insurance is $100,000 or more or in which injunctive or similar relief is sought;

43

 

     (d) the following events, as soon as possible and in any event within 30 days after Holdings
or Borrower knows or has reason to know thereof: (i) the occurrence of any Reportable Event with
respect to any Benefit Plan, a failure to make any required contribution to a Benefit Plan, the
creation of any Lien in favor of the PBGC or a Benefit Plan or any withdrawal from, or the
termination, Reorganization or Insolvency of, any Multiemployer Plan, (ii) the institution of
proceedings or the taking of any other action by the PBGC or any Loan Party or any Commonly
Controlled Entity or any Multiemployer Plan with respect to the withdrawal from, or the
termination, Reorganization or Insolvency of, any Benefit Plan or (iii) proceedings that have been
instituted pursuant to Section 515 of ERISA to collect a delinquent contribution to a Benefit Plan,
that Borrower or any Commonly Controlled Entity will or may incur any material liability (including
any indirect, contingent or secondary liability) to or on account of a termination or withdrawal
from a Benefit Plan under Title IV of ERISA or with respect to a Benefit Plan under Section
401(a)(29) or 4971, 4975, or 4980 of the Code or Section 409, 502(i) or 503(l) of ERISA or with
respect to a group health plan (as defined in Section 607(1) of ERISA or Section 4980B of the Code)
under Section 4890B of the Code, or that Borrower or a Commonly Controlled Entity will incur any
material liability pursuant to an employee welfare benefit plan that provides benefits to retired
employees or former employees (other than as required under Section 601 of ERISA) or any Benefit
Plan;

     (e) any development or event that has had or could reasonably be expected to have a Material
Adverse Effect; and

     (f) the audit or examination of any Tax Return by any Governmental Authority, the receipt by
any Loan Party of notice of any such audit or examination or the assertion of any claim for taxes
against any Loan Party by any Governmental Authority.

Each notice pursuant to this Section 5.8 shall be accompanied by a statement of a Responsible
Officer setting forth details of the occurrence referred to therein and stating what action any
Loan Party proposes to take with respect thereto.

     5.9 Environmental Laws.

     (a) Comply in all material respects with, and ensure compliance in all material respects at
any Property owned, leased or operated by any Loan Party by all tenants, subtenants, lessees,
sub-lessees, operators and contractors, if any, with, all applicable Environmental Laws and
Environmental Permits, and obtain and comply in all material respects with and maintain, and ensure
that all tenants, subtenants, lessees, sub-lessees, operators and contractors to obtain and comply
in all material respects with and maintain, any and all Environmental Permits required by
applicable Environmental Laws with respect to any Property owned, leased or operated by any Loan
Party.

     (b) Conduct and complete all investigations, studies, sampling and testing, and all reporting,
investigative, remedial, removal and other actions required under Environmental Laws as a result of
a release of or the discovery of Materials of Environmental Concern, and promptly comply in all
material respects with all lawful orders and directives of all Governmental Authorities regarding
Environmental Laws.

     (c) As soon as available, and in any case within five Business Days prior to the closing of
any acquisition of Property by a Loan Party for which Borrower reasonably believes that liability
of any Loan Party for environmental remediation potentially associated with the ownership or
operation of all such Property (exclusive of usual and customary platform maintenance,
refurbishment and abandonment obligations) is expected to exceed a Material Environmental Amount,
deliver to the Administrative Agent

44

 

an environmental report covering such Property to be acquired,
in form and substance reasonably satisfactory to the Administrative Agent and the Required Lenders.

     (d) Promptly, but in no event later than five days of the occurrence of a triggering event,
notify the Administrative Agent in writing of any threatened action, investigation or inquiry by
any Governmental Authority or any demand or threatened lawsuit by any landowner or other third
party against any Loan Party or its Properties of which Holdings or Borrower has knowledge in
connection with any Environmental Laws (excluding routine testing and corrective action) if
Holdings or Borrower reasonably anticipates that such action may result in liability (whether
individually or in the aggregate) in excess of $100,000.

     (e) Establish and implement such procedures as may be necessary to continuously determine and
assure that the obligations of each Loan Party under this Section 5.9 are timely and fully
satisfied.

     5.10 Additional Collateral, etc.

     (a) With respect to any Property (other than Real Property) acquired after the Closing Date by
any Loan Party as to which the Administrative Agent, for the benefit of the Secured Parties, does
not have a perfected Lien and security interest, promptly (i) execute and deliver to the
Administrative Agent such Security Documents or amendments to Security Documents as the
Administrative Agent deems necessary or advisable to grant to the Administrative Agent, for the
benefit of the Secured Parties, a security interest in such Property, (ii) take all actions
necessary or advisable to grant to the Administrative
Agent, for the benefit of the Secured Parties, a perfected first priority Lien and security
interest in such Property (subject only to Permitted Liens), including the execution and delivery
by all necessary third parties of any Deposit Account Control Agreements and Mortgages, the filing
of UCC financing statements in such jurisdictions as may be required by the Security Documents or
by law, the filing of any Mortgages in appropriate filing offices and the making of any other
filings required by law or as may be reasonably requested by the Administrative Agent and (iii)
deliver to the Administrative Agent such legal opinions relating to the matters described in
clauses (i) and (ii) immediately preceding as the Administrative Agent may reasonably request,
which opinions shall be in form and substance, and from counsel, reasonably satisfactory to the
Administrative Agent; provided that unless a Property is acquired for a purchase price or other
consideration in excess of $250,000, Borrower shall not be required to take the actions specified
in this Section 5.10(a) prior to the end of the fiscal quarter in which the acquisition occurs, or
if earlier, the date at which the cumulative amount of purchase price or other consideration for
all Property acquired in such quarter equals or exceeds $250,000, at which time all Property
theretofore acquired and not previously made subject to a Lien in favor of the Administrative Agent
shall be made so subject.

     (b) With respect to any fee interest in any Real Property acquired after the Closing Date by
any Loan Party (other than any such real property acquired for an aggregate consideration valued at
less than $100,000), promptly (i) execute and deliver a first priority Mortgage (subject only to
Permitted Liens) in favor of the Administrative Agent, for the benefit of the Secured Parties,
covering such real property and designating thereon the appropriate recording office, (ii) if
requested by the Administrative Agent, provide the Administrative Agent with (A) title and extended
coverage insurance covering such real property in an amount at least equal to the purchase price of
such real property (or such other amount as shall be reasonably specified by the Administrative
Agent) as well as a current ALTA or ALTAX survey thereof, together with a surveyor’s certificate,
(B) any consents or estoppels reasonably deemed necessary or advisable by the Administrative Agent
in connection with such Mortgage, each of the foregoing in form and substance reasonably
satisfactory to the Administrative Agent and (C) if requested by the Administrative Agent, deliver
to the Administrative Agent legal opinions relating to the matters

45

 

described above, which opinions
shall be in form and substance, and from counsel, reasonably satisfactory to the Administrative
Agent.

     (c) With respect to any new Subsidiary created or acquired by any Loan Party or otherwise
becoming a Subsidiary after the Closing Date, concurrently with such creation, acquisition or
becoming a Subsidiary, (i) execute and deliver to the Administrative Agent such Security Documents
or amendments to Security Documents as the Administrative Agent deems necessary or advisable to
grant to the Administrative Agent, for the benefit of the Secured Parties, a perfected first
priority Lien and security interest in the Capital Stock of such new Subsidiary that is owned by
any Loan Party, (ii) deliver to the Administrative Agent (A) the certificates (if any) representing
such Capital Stock, together with undated powers, in blank, executed and delivered by a duly
authorized officer of the Loan Party owning such Capital Stock and (B) in the case of a Subsidiary
whose Capital Stock is a security that is not evidenced by certificates, an Instructions Agreement,
substantially in the form of Annex A to the Guarantee and Security Agreement, duly executed by such
Subsidiary and each Loan Party owning such Capital Stock, (iii) cause such new Subsidiary (A) to
become a party to the Guarantee and Security Agreement and any other applicable Security Documents
(including Mortgages and Deposit Account Control Agreements) and (B) to take such other actions as
are necessary or advisable to grant to the Administrative Agent for the benefit of the Secured
Parties a perfected first priority Lien and security interest in the Collateral described in the
Guarantee and Security Agreement with respect to such new Subsidiary and, pursuant to Mortgages and
Deposit Account Control Agreements, all bank accounts owned by such Subsidiary, subject in each
case only to Permitted Liens, including the execution and delivery by all necessary third parties
of any Deposit Account Control Agreements and Mortgages, the filing of UCC financing statements in
such jurisdictions as may be required by the Guarantee and Security Agreement or by law,
the filing of any Mortgages in appropriate filing offices and the making of any other filings
required by law or as may be requested by the Administrative Agent, and (iv) if requested by the
Administrative Agent, deliver to the Administrative Agent legal opinions (including Title Opinions)
relating to the matters described above, which opinions shall be in form and substance, and from
counsel, reasonably satisfactory to the Administrative Agent.

     (d) Notwithstanding anything to the contrary in this Section 5.10, paragraphs (a), (b) and (c)
of this Section 5.10 shall not apply to any Property or new Subsidiary created or acquired after
the Closing Date, as applicable, as to which the Administrative Agent has determined in its sole
discretion that the collateral value thereof is insufficient to justify the difficulty, time or
expense of obtaining a perfected security interest therein.

     5.11 Use of Proceeds. Use the proceeds of the Loans only for the purposes specified in Section
3.17.

     5.12 ERISA Documents. Cause to be delivered to the Administrative Agent, promptly upon the
Administrative Agent’s request, any or all of the following: (i) a copy of each Benefit Plan (or,
where any such Benefit Plan is not in writing, a complete description thereof) and, if applicable,
related trust agreements or other funding instruments and all amendments thereto, and all written
interpretations thereof and written descriptions thereof that have been distributed to employees or
former employees of any Loan Party; (ii) the most recent determination letter issued by the
Internal Revenue Service with respect to each Benefit Plan; (iii) for the three most recent plan
years preceding the Administrative Agent’s request, Annual Reports on Form 5500 Series required to
be filed with any governmental agency for each Benefit Plan; (iv) a listing of all Multiemployer
Plans, with the aggregate amount of the most recent annual contributions required to be made by any
Loan Party or any Commonly Controlled Entity to each such Benefit Plan and copies of the collective
bargaining agreements requiring such contributions; (v) any information that has been provided to
any Loan Party or any Commonly Controlled Entity regarding withdrawal liability under any
Multiemployer Plan; (vi) the aggregate amount of payments

46

 

made under any employee welfare benefit
plan (as defined in Section 3(1) of ERISA) to any retired employees of any Loan party (or any
dependents thereof) during the most recently completed fiscal year; and (vii) documents reflecting
any agreements between the PBGC and any Loan Party or any Commonly Controlled Entity with respect
to any Benefit Plan.

     5.13 Further Assurances.

     (a) From time to time execute and deliver, or cause to be executed and delivered, such
additional instruments, certificates or documents, and take all such actions, as the Administrative
Agent may reasonably request for the purposes of implementing or effectuating the provisions of
this Agreement and the other Loan Documents, or of more fully perfecting or renewing the rights of
the Administrative Agent and the Lenders with respect to the Collateral (or with respect to any
additions thereto or replacements or proceeds or products thereof or with respect to any other
Property hereafter acquired by any Loan Party, which may be deemed to be part of the Collateral)
pursuant hereto or thereto.

     (b) Upon the exercise by the Administrative Agent or any Lender of any power, right, privilege
or remedy pursuant to this Agreement or the other Loan Documents which requires any consent,
approval, recording, qualification or authorization of any Governmental Authority, execute and
deliver, or
cause the execution and delivery of, all applications, certifications, instruments and other
documents and papers that the Administrative Agent or such Lender may be required to obtain from
Borrower or any of its Subsidiaries for such governmental consent, approval, recording,
qualification or authorization.

     (c) Preserve and protect the Lien status of each respective Mortgage and, if any Lien (other
than unrecorded Liens permitted under Section 6.3 that arise by operation of law) is asserted
against a Mortgaged Property, promptly and at its expense, give the Administrative Agent a detailed
written notice of such Lien and pay the underlying claim in full or take such other action so as to
cause it to be released or bonded over in a manner satisfactory to the Administrative Agent.

     5.14 Patriot Act Compliance. Provide such information and take such actions as are reasonably
required by the Agents or any Lender in order to assist the Agents and Lenders with compliance with
the Patriot Act.

     5.15 Post-Closing Delivery. As soon as available and in any event on or prior to January 30, 2008,
Borrower shall deliver, or cause to be delivered, to the Administrative Agent each of the
following:

     (a) an executed legal opinion from special Wyoming counsel to the Loan Parties, reasonably
acceptable to the Administrative, with respect to such matters, and in form and substance,
reasonably acceptable to the Administrative Agent; (b) each Access Agreement; and each Deposit
Account Control Agreement.

NEGATIVE COVENANTS

     Unless the Administrative Agent has provided Holdings and Borrower with prior written consent
for such actions, each of Holdings and Borrower hereby jointly and severally agree that, so long as
the Commitments remain in effect, any Loan or other amount is owing to any Lender or any Agent
hereunder, each of Holdings and Borrower shall not, and shall not permit any of its Subsidiaries
to, directly or indirectly:

     6.1 Financial Condition Covenants.

     (a) Minimum Consolidated EBITDA. Permit the Consolidated EBITDA for any period of
four consecutive fiscal quarters of Borrower ending with any fiscal quarter to be less than
$20,000,000.

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     (b) Consolidated Leverage Ratio. Permit the Consolidated Leverage Ratio as at the
last day of any period of four consecutive fiscal quarters of Borrower to exceed 3.5:1.0.

     (c) Consolidated Interest Coverage Ratio. Permit the Consolidated Interest Coverage
Ratio for any period of four consecutive fiscal quarters of Borrower to be less than 2.5:1.0.

     (d) Minimum Current Ratio. Permit the Current Ratio at the end of any fiscal quarter
to be less than 1.0 to 1.0.

     6.2 Indebtedness. Create, incur, assume, issue, guaranty or suffer to exist any Indebtedness,
except for the following (“Permitted Indebtedness”):

     (a) Indebtedness of any Loan Party pursuant to any Loan Document;

     (b) Indebtedness of Borrower to any Subsidiary Guarantor and of any Wholly Owned Subsidiary
Guarantor to Borrower or any other Subsidiary Guarantor;

     (c) Indebtedness of Borrower or any Subsidiary Guarantor (including Capital Lease Obligations)
secured by Liens permitted by Section 6.3(f) in an aggregate principal amount not to exceed
$500,000 at any one time outstanding;

     (d) Guarantee Obligations made in the ordinary course of business by Borrower or any of its
Subsidiaries of obligations of Borrower or any Subsidiary Guarantor;

     (e) unsecured current accounts payable incurred in the ordinary course of business which are
(i) outstanding for not more than 90 days past the original invoice or billing date thereof or (ii)
being contested in good faith by appropriate proceedings, if such reserve as may be required by
GAAP shall have been made therefor;

     (f) extensions of credit from suppliers or contractors who are not Affiliates of Borrower for
the performance of labor or services or the provision of supplies or materials under applicable
contracts or agreements in connection with Borrower’s or any Subsidiary’s oil and gas exploration
and development activities, which are not more than 60 days overdue or are being contested in good
faith by appropriate proceedings, if such reserves as may be required by GAAP shall have been made
therefor; and

     (g) Indebtedness subordinated in all respects to the Obligations and otherwise on terms and
provisions acceptable to the Administrative Agent.

     6.3 Liens. Create, incur, assume or suffer to exist any Lien upon any of its Property, whether now
owned or hereafter acquired, except for:

     (a) Liens for taxes not yet due or which are being contested in good faith by appropriate
proceedings, provided that adequate reserves with respect thereto are maintained on the books of
the applicable Loan Party in conformity with GAAP;

     (b) carriers’, warehousemen’s, mechanics’, materialmen’s, repairmen’s or other like Liens
arising in the ordinary course of business which are not overdue for a period of more than 30 days
or that are being contested in good faith by appropriate proceedings and for which adequate
reserves with respect thereto are maintained in the books of the applicable Loan Party in
conformity with GAAP; provided that at no time shall such sums
being contested exceed individually or in the
aggregate $250,000;

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     (c) pledges or deposits in connection with workers’ compensation, unemployment insurance and
other social security legislation;

     (d) deposits by or on behalf of Borrower or any of its Subsidiaries to secure the performance
of bids, trade contracts (other than for borrowed money), leases, statutory obligations, plugging
and
abandoning surety and appeal bonds, performance bonds and other obligations of a like nature
incurred in the ordinary course of business, so long as the aggregate amount of such deposits at
any one time does not exceed $250,000;

     (e) encumbrances consisting of easements, restrictions, servitudes, permits, conditions,
covenants, exceptions or reservations in any Property of Borrower or any of its Subsidiaries for
the purpose of roads, pipelines, transmission lines, transportation lines, distribution lines for
the removal of gas, oil, coal or other minerals and other like purposes, that, do not secure
Indebtedness or other monetary obligations and, in the aggregate, are not substantial in amount and
do not materially impairs the use of such property by any Loan Party in the operation of its
business and which do not in any case materially detract from the value of the Property subject
thereto are or would be violated in any material respect by existing or proposed operations of any
Loan Party;

     (f) Liens securing Indebtedness of Borrower or any of its Subsidiaries incurred pursuant to
Section 6.2(c) to finance the acquisition, construction or improvement of fixed or capital assets
(other than Drilling Rig Assets); provided that (i) such Liens and the Indebtedness secured thereby
shall be created substantially simultaneously with the acquisition, construction or improvement of
such fixed or capital assets, (ii) such Liens do not at any time encumber any Property other than
the Property financed by such Indebtedness, (iii) the amount of Indebtedness secured thereby is not
increased and (iv) the amount of Indebtedness initially secured thereby is not more than 100% of
the purchase price or cost of construction or improvement of such fixed or capital asset;

     (g) Liens created pursuant to the Security Documents;

     (h) any interest or title of a lessor under any lease entered into by Borrower or any of its
Subsidiaries in the ordinary course of its business and covering only the assets so leased;

     Liens not securing Indebtedness arising solely by virtue of any statutory or common law provision
relating to banker’s liens, rights of set-off or similar rights and remedies and burdening only
deposit accounts or other funds maintained with a creditor depository institution, provided that no
such deposit account is a dedicated cash collateral account or is subject to restrictions against
access by the depositor in excess of those set forth by regulations promulgated by the Board and no
such deposit account is intended by any Loan Party to provide collateral to the depository
institution.

     6.4 Fundamental Changes. Enter into any merger, consolidation, restructuring, recapitalization,
reorganization or amalgamation, or liquidate, wind up or dissolve itself (or suffer any liquidation
or dissolution), Dispose of all or substantially all of its Property or business or amend, modify
or otherwise change its name, jurisdiction of organization, organizational number, identification
number or FEIN, except that, if no Default shall have occurred and be continuing:

     (a) any Subsidiary of Borrower may be merged or consolidated with or into Borrower (provided
that Borrower shall be the continuing or surviving entity) or with or into any Wholly Owned
Subsidiary Guarantor (provided that (i) such Subsidiary Guarantor shall be the continuing or
surviving entity or (ii) simultaneously with such transaction, the continuing or surviving entity
shall become a Subsidiary Guarantor and Borrower shall comply with Section 5.10 in connection
therewith); and

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     (b) any Subsidiary of Borrower may Dispose of any or all of its assets (upon voluntary
liquidation or otherwise) to Borrower or any Wholly Owned Subsidiary Guarantor; and

     (c) the Capital Stock of any Subsidiary may be transferred to Borrower or any other
Wholly-Owned Subsidiary Guarantor.

     6.5 Disposition of Property. Dispose of any of its Property (including, receivables and leasehold
interests), whether now owned or hereafter acquired, or, in the case of any direct or indirect
Subsidiary of Holdings, issue or sell any shares of such Subsidiary’s Capital Stock (including
pursuant to any merger, consolidation, restructuring, recapitalization, reorganization or
amalgamation) to any Person, except:

     (a) the Disposition of obsolete or worn out property in the ordinary course of business;

     (b) Dispositions permitted by Section 6.4(b);

     (c) the sale or issuance of any Subsidiary’s Capital Stock to Borrower or any Wholly Owned
Subsidiary Guarantor;

     (d) subject to compliance with Section 2.7(a), the issuance of Capital Stock of Holdings for
cash;

     (e) Dispositions of claims against customers, other industry partners or any other Person in
connection with workouts or bankruptcy, insolvency or other similar proceedings with respect
thereto; and

     (f) any Recovery Event, provided that the requirements of Section 2.7(b) are complied with in
connection therewith.

     6.6 Restricted Payments. Declare or pay any dividend on, or make any payment on account of, or set
apart assets for a sinking or other analogous fund for, the purchase, redemption, defeasance,
retirement or other acquisition of, any Capital Stock of any Loan Party, whether now or hereafter
outstanding, or make any other distribution in respect thereof, either directly or indirectly,
whether in cash or property or in obligations of Loan Party, or enter into any derivatives or other
transaction with any financial institution, commodities or stock exchange or clearinghouse (a
"Derivatives Counterparty”) obligating any Loan Party to make payments to such Derivatives
Counterparty as a result of any change in market value of any such Capital Stock, or make or offer
to make any payment or prepayment of principal, premium (if any), interest, fees (including fees to
obtain any waiver or consent) or other charges on, or effect any repurchase, redemption, purchase,
retirement, defeasance, sinking fund or similar payment with respect to, any Indebtedness (other
than the Obligations) of any Loan Party (the payments or other transactions described in this
Section 6.6 collectively, “Restricted Payments”), except that:

     (a) any Subsidiary may make Restricted Payments to Borrower or any Subsidiary Guarantor;

     (b) Holdings may make Restricted Payments in the form of the common stock of Holdings;

     (c) Borrower or any Subsidiary Guarantor may make any required payment, prepayment, repurchase
redemption, purchase, retirement or other payment of other Permitted Indebtedness, in each case to
the extent required to be made by the terms thereof and permitted by such terms after giving effect
to any applicable subordination provisions; and

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     (d) Borrower or any Subsidiary Guarantor may prepay Capital Leases or purchase money financing
comprising Permitted Indebtedness upon the sale or exchange of the equipment subject thereto;

provided, however, that the Restricted Payments described in clauses (c) and (d) above shall not be
permitted if a Default or Event of Default shall have occurred and be continuing at the date of
declaration or payment thereof or would result therefrom.

     6.7 Capital Expenditures. Make or commit to make any Capital Expenditure, except (a) Capital
Expenditures of Borrower and its Subsidiaries in the ordinary course of business made with the
proceeds of any Permitted Equity Financing, (b) Capital Expenditures not exceeding the Permitted
Capex Amount in any fiscal year; provided that (i) up to $2,000,000 of any such amount referred to
above, if not so expended in the fiscal year for which it is permitted, may be carried over for
expenditure in the next succeeding fiscal year and (ii) Capital Expenditures made pursuant to this
clause (a) during any fiscal year shall be deemed made, first, in respect of amounts permitted for
such fiscal year as provided above and second, in respect of amounts carried over from the prior
fiscal year pursuant to subclause (i) above and (c) Capital Expenditures constituting Qualified
Investments made with the proceeds of any Reinvestment Deferred Amount (any such Capital
Expenditures permitted hereunder, a “Permitted Capital Expenditure”). For purposes hereof,
"Permitted Capex Amount” means an aggregate amount equal to the sum of (i) $7,000,000 and (ii) an
amount equal to 25% of the Consolidated EBITDA of Borrower for the prior quarter in excess of $6.25
million.

     6.8 Investments. Make any Investment in any other Person, except:

     (a) extensions of trade credit and advances to non-operators under operating agreements in the
ordinary course of business;

     (b) Investments in Cash Equivalents;

     (c) Investments arising in connection with the incurrence of Indebtedness permitted by Section
6.2(b) or Section 6.2(d);

     (d) Qualified Investments made by Borrower or any Wholly Owned Subsidiary Guarantor with any
Reinvestment Deferred Amount;

     (e) Investments (other than those relating to the incurrence of Indebtedness permitted by
Section 6.8(c)) by Holdings, Borrower or any of its Subsidiaries in Borrower or any Person that,
prior to such Investment, is a Wholly Owned Subsidiary Guarantor;

     (f) subject to the provisions of Section 6.7, Investments constituting Permitted Capital
Expenditures; and

     (g) Investments received by Borrower or any Subsidiary in connection with workouts with, or
bankruptcy, insolvency or other similar proceedings with respect to, customers, working interest
owners, other industry partners or any other Person.

     6.9 Transactions with Affiliates. Enter into any transaction, including, any purchase, sale, lease or exchange of Property, the
rendering of any service or the payment of any management, advisory or similar fees, with any
Affiliate (other than any Loan Party) unless such transaction is (a) otherwise permitted under this
Agreement, (b) in the ordinary course of business of the Loan Party party to such transaction and
(c) upon fair and reasonable terms no less favorable to such Loan Party than it would obtain in a
comparable arm’s length transaction with a Person that is not an Affiliate; provided that,
for

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the
avoidance of doubt, no transaction with any Affiliate effected pursuant to an agreement existing on
the date hereof shall be prohibited by this Section 6.9.

     6.10 Sales and Leasebacks. Enter into any Sale and Leaseback Transaction.

     6.11 Changes in Fiscal Periods. Permit the fiscal year of any Loan Party to end on a day other
than December 31 or change the method of determining its fiscal year for any Loan party.

     6.12 Negative Pledge Clauses. Enter into or suffer to exist or become effective any agreement that
prohibits or limits the ability of any Loan Party to create, incur, assume or suffer to exist any
Lien upon any of its Property or revenues, whether now owned or hereafter acquired, to secure the
Obligations or, in the case of any Guarantor, its obligations under the Guarantee and Security
Agreement, other than (a) this Agreement and the other Loan Documents and (b) in the case of
Borrower or any Subsidiary Guarantor any agreements governing any purchase money Liens or Capital
Lease Obligations otherwise permitted hereby (in which case, any prohibition or limitation shall
only be effective against the assets financed thereby).

     6.13 Restrictions on Subsidiary Distributions. Enter into or suffer to exist or become effective
any consensual encumbrance or restriction on the ability of any Subsidiary to (a) make Restricted
Payments in respect of any Capital Stock of such Subsidiary held by, or pay or subordinate any
Indebtedness owed to, any Loan Party, (b) make Investments in any Loan Party or (c) transfer any of
its assets to any Loan Party, except for such encumbrances or restrictions existing under or by
reason of (i) any restrictions existing under the Loan Documents and (ii) any restrictions with
respect to a Subsidiary imposed pursuant to an agreement that has been entered into in connection
with the Disposition of all or substantially all of the Capital Stock or assets of such Subsidiary.

     6.14 Lines of Business. Enter into any business, either directly or through any Subsidiary, except
for those businesses in which the Loan Parties are engaged on the date of this Agreement or that
are reasonably related thereto.

     6.15 Amendments of Certain Documents. Amend, modify or otherwise change, or permit any amendment,
modification or other change to (pursuant to a waiver or otherwise), any Constituent Documents
(including by the filing or modification of any certificate of designation, or any agreement or
arrangement (including any shareholders’ agreement) entered into, with respect to any of its
Capital Stock) or enter into any new agreement with respect to any of its Capital Stock, in each
case, except any such amendments, modifications or changes
or any such agreements or arrangements that do not adversely affect any right, privilege or
interest of the Administrative Agent or the Lenders under the Loan Documents or in the Collateral.

     6.16 Activities of Holdings. In the case of Holdings, notwithstanding anything to the contrary in
this Agreement or any other Loan Document, (a) conduct, transact or otherwise engage in, or commit
to conduct, transact or otherwise engage in, any business or operations other than those incidental
to its ownership of the Capital Stock of Borrower, (b) incur, create, assume or suffer to exist any
Indebtedness or other liabilities or financial obligations, except (i) nonconsensual obligations
imposed by operation of law, (ii) pursuant to the Loan Documents to which it is a party and (iii)
obligations with respect to its Capital Stock, or (c) own, lease, manage or otherwise operate any
properties or assets (including cash (other than cash received by Holdings in connection with
dividends made by Borrower in accordance with Section 6.6 pending application in the manner
contemplated by Section 6.6) and Cash Equivalents) other than the ownership of shares of Capital
Stock of Borrower.

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     6.17 New Subsidiaries. Acquire, form, incorporate or organize any Subsidiary or permit to exist
any Subsidiary (i) having any Capital Stock that is not wholly owned by Borrower directly or
through other Wholly-Owned Subsidiaries or (ii) that is not a Guarantor.

     6.18 Use of Proceeds. Use or permit the use of all or any portion of the proceeds of the Loans for
any purpose other than as permitted pursuant to Section 5.11.

     6.19 New Bank Accounts. Open or otherwise establish, or deposit or otherwise transfer funds into,
any bank account (other than the bank accounts listed on Schedule 3.25) in the name or
otherwise for the benefit of Borrower or any Subsidiary unless the Administrative Agent shall have
received a Deposit Account Control Agreement, in form and substance satisfactory to the
Administrative Agent in its sole discretion, executed and delivered by Borrower and the bank or
other financial institution at which such account is maintained.

     6.20 Storage of Drilling Rig Assets. Store or permit any Drilling Rig Assets to remain at any
location (other than any drill site) for more than 60 days other than on real property to which
Borrower has title in fee simple unless the Administrative Agent shall have received an Access
Agreement duly executed and delivered by the owner of such location.

     6.21 Hedging Agreements. Enter into, or suffer to exist, any Hedging Agreement unless
approved in advance in writing by the Administrative Agent.

ARTICLE VII

EVENTS OF DEFAULT

     7.1 Events of Default. If any of the following events shall occur and be continuing:

     (a) Borrower shall fail to pay when due and payable or when declared due and payable (in each
case whether at the stated maturity, by acceleration or otherwise), including, pursuant to Section
2.7, all or any portion of the Obligations (whether of principal, interest, fees and charges due to
the Lenders or other amounts constituting Obligations); or

     (b) Any representation or warranty made or deemed made by any Loan Party herein or in any
other Loan Document or that is contained in any certificate, document or financial or other
statement furnished by it at any time under or in connection with this Agreement or any such other
Loan Document shall prove to have been inaccurate in any material respect on or as of the date made
or deemed made or furnished; or

     (c) Any Loan Party shall default in the observance or performance of any agreement contained
in clause (i) or (ii) of Section 5.5(a) (with respect to Holdings or Borrower only), Section
5.6(e), Section 5.7, Section 5.8(a), Section 5.10,
Section 5.15 or Article VI, or in Section 5 of the Guarantee
and Security Agreement; or an “Event of Default” under and as defined in any Mortgage shall have
occurred and be continuing; provided that notwithstanding anything to the contrary in this
Agreement, Borrower shall be permitted to cure any breach of Section 6.1(c) (Consolidated Interest
Coverage Ratio), and the same shall not constitute an Event of Default hereunder, by making an
optional prepayment on or prior to the date of determination of the Consolidated Interest Coverage
Ratio sufficient in principal amount such that, upon exclusion from the calculation of such ratio
of the interest expense attributable to such prepayment amount, no such default would exist; or

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     (d) Any Loan Party shall default in the observance or performance of any other agreement
contained in this Agreement or any other Loan Document (other than as provided in paragraphs (a)
through (c) of this Section 7.1), and such default shall continue unremedied for a period of 30
days; or

     (e) Any Loan Party shall (i) default in making any payment of any principal or interest of any
Indebtedness (including, any Guarantee Obligation, but excluding the Loans and other Obligations)
on the scheduled or original due date with respect thereto; or (ii) default in the observance or
performance of any other agreement or condition relating to any such Indebtedness (including any
Guarantee Obligation but excluding the Obligations) or contained in any instrument or agreement
evidencing, securing or relating thereto, or any other event shall occur or condition exist, the
effect of which default or other event or condition is to cause, or to permit the holder or
beneficiary of such Indebtedness (or a trustee or agent on behalf of such holder or beneficiary) to
cause, with the giving of notice if required, such Indebtedness to become due prior to its stated
maturity or to become subject to a mandatory offer to purchase by the obligor thereunder or (in the
case of any such Indebtedness constituting a Guarantee Obligation) to become payable; provided that
a default, event or condition described in clause (i) or (ii) of this paragraph (e) shall not at
any time constitute an Event of Default unless, at such time, one or more defaults, events or
conditions of the type described in clauses (i) and (ii) of this paragraph (e) shall have occurred
and be continuing with respect to Indebtedness the outstanding principal amount of which exceeds in
the aggregate $100,000; or

     (f) (i) Any Loan Party shall commence any case, proceeding or other action (A) under any
existing or future law of any jurisdiction, domestic or foreign, relating to bankruptcy,
insolvency, reorganization or relief of debtors, seeking to have an order for relief entered with
respect to it, or seeking to adjudicate it a bankrupt or insolvent, or seeking reorganization,
arrangement, adjustment, winding up, liquidation, dissolution, composition or other relief with
respect to it or its debts, or (B) seeking appointment of a receiver, trustee, custodian,
conservator or other similar official for it or for all or any substantial part of its assets, or
such Loan Party shall make a general assignment for the benefit of its
creditors; or (ii) there shall be commenced against any Loan Party any case, proceeding or
other action of a nature referred to in clause (i) above that (A) results in the entry of an order
for relief or any such adjudication or appointment or (B) remains undismissed, undischarged or
unbonded for a period of 60 days; or (iii) there shall be commenced against any Loan Party any
case, proceeding or other action seeking issuance of a warrant of attachment, execution, distraint
or similar process against all or any substantial part of its assets that results in the entry of
an order for any such relief that shall not have been vacated, discharged, or stayed or bonded
pending appeal within 60 days from the entry thereof; or (iv) any Loan Party shall take any action
in furtherance of, or indicating its consent to, approval of, or acquiescence in, any of the acts
set forth in clause (i), (ii), or (iii) above; or (v) any Loan Party shall generally not, or shall
be unable to, or shall admit in writing its inability to, pay its debts as they become due; or

     (g) (i) Any Person shall engage in any “prohibited transaction” (as defined in Section 406 of
ERISA or Section 4975 of the Code) involving any Benefit Plan, (ii) any “accumulated funding
deficiency” (as defined in Section 302 of ERISA), whether or not waived, shall exist with respect
to any Benefit Plan, or any Lien in favor of the PBGC or a Benefit Plan shall arise on the assets
of any Loan Party any Commonly Controlled Entity, (iii) a Reportable Event shall occur with respect
to, or proceedings shall commence to have a trustee appointed, or a trustee shall be appointed, to
administer or to terminate, any Single Employer Plan, which Reportable Event or commencement of
proceedings or appointment of a trustee is, in the reasonable opinion of the Required Lenders,
likely to result in the termination of such Benefit Plan for purposes of Title IV of ERISA, (iv)
any Single Employer Plan shall terminate for purposes of Title IV of ERISA, (v) any Loan Party or
any Commonly Controlled Entity shall, or in the reasonable opinion of the Required Lenders shall be
likely to, incur any liability in connection with a withdrawal from, or the Insolvency or
Reorganization of, a Multiemployer Plan or (vi)

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any other event or condition shall occur or exist
with respect to a Benefit Plan; and in each case in clauses (i) through (vi) above, such event or
condition, together with all other such events or conditions, if any, could, in the sole judgment
of the Required Lenders, reasonably be expected to have a Material Adverse Effect; or

     (h) One or more judgments or decrees shall be entered against any Loan Party involving for the
Loan Parties taken as a whole a liability (not paid or fully covered by insurance as to which the
relevant insurance company has acknowledged coverage) of $100,000 or more, and all such judgments
or decrees shall not have been vacated, discharged, stayed or bonded pending appeal within 30 days
from the entry thereof; or

     (i) Any of the Security Documents shall cease, for any reason (other than by reason of the
express release thereof pursuant to Section 9.15), to be in full force and effect or any Loan Party
or any Affiliate of any Loan Party shall so assert, or any Lien created by any of the Security
Documents shall cease to be enforceable and of the same effect and priority purported to be created
thereby; or

     (j) The guarantee contained in Section 2 of the Guarantee and Security Agreement shall cease,
for any reason (other than by reason of the express release thereof pursuant to Section 9.15), to
be in full force and effect or any Loan Party or any Affiliate of any Loan Party shall so assert;
or

     (k) Any Change of Control shall occur; or

     (l) There shall occur any event or circumstance which has had, or would reasonably be expected
to have, a Material Adverse Effect; or

then, and in any such event, (A) if such event is an Event of Default specified in clause (i) or
(ii) of paragraph (f) above with respect to Borrower, automatically the Commitments shall
immediately
terminate and the Loans hereunder (with accrued interest thereon) and all other amounts owing under
this Agreement and the other Loan Documents shall immediately become due and payable, and (B) if
such event is any other Event of Default, either or both of the following actions may be taken:
(i) at any time prior to the Commitment Expiration Date, with the consent of the Required Lenders,
the Administrative Agent may, or upon the request of the Required Lenders, the Administrative Agent
shall, by notice to Borrower declare the Commitments to be terminated forthwith, whereupon the
Commitments shall immediately terminate; and (ii) with the consent of the Required Lenders, the
Administrative Agent may, or upon the request of the Required Lenders, the Administrative Agent
shall, by notice to Borrower, declare the Loans hereunder (with accrued interest thereon) and all
other amounts owing under this Agreement and the other Loan Documents to be due and payable
forthwith, whereupon the same shall immediately become due and payable.

     7.2 Remedies. Upon the occurrence and during the continuance of an Event of Default, the
Administrative Agent and the Lenders shall be entitled to exercise any and all remedies available
under the Security Documents or otherwise available under applicable law or otherwise.

ARTICLE VIII

THE AGENTS

     8.1 Appointment. Each Lender hereby irrevocably designates and appoints the Agents as the agents
of such Lender under this Agreement and the other Loan Documents, and each Lender irrevocably
authorizes each Agent, in such capacity, to take such action on its behalf under the provisions of
this Agreement and the other Loan Documents and to exercise such powers and perform such duties as
are expressly delegated to such Agent by the terms of this Agreement
and the other Loan Documents,

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together with
such other powers as are reasonably incidental thereto. Notwithstanding any provision to the
contrary elsewhere in this Agreement, no Agent shall have any duties or responsibilities, except
those expressly set forth herein, or any fiduciary relationship with any Lender, and no implied
covenants, functions, responsibilities, duties, obligations or liabilities shall be read into this
Agreement or any other Loan Document or otherwise exist against any Agent.

     8.2 Delegation of Duties. Each Agent may execute any of its duties under this Agreement and the other Loan Documents by or
through agents or attorneys in fact and shall be entitled to advice of counsel concerning all
matters pertaining to such duties. No Agent shall be responsible for the negligence or misconduct
of any agents or attorneys-in fact selected by it with reasonable care.

     8.3 Exculpatory Provisions. Neither any Agent nor any of its officers, directors, employees, agents, attorneys in fact or
affiliates shall be (i) liable for any action lawfully taken or omitted to be taken by it or such
Person under or in connection with this Agreement or any other Loan Document (except to the extent
that any of the foregoing are found by a final and nonappealable decision of a court of competent
jurisdiction to have resulted solely and proximately from its or such Person’s own gross negligence
or willful misconduct) or (ii) responsible in any manner to any of the Lenders for any recitals,
statements, representations or warranties made by any Loan Party or any officer thereof contained
in this Agreement or any other Loan Document or in any certificate, report, statement or other
document referred to or provided for in, or received by the Agents under or in connection with,
this Agreement or any other Loan Document or for the value, validity, effectiveness, genuineness,
enforceability or sufficiency of this Agreement or any other Loan Document or for any failure of
any Loan Party to perform its obligations hereunder or thereunder. The Agents shall not be under
any obligation to any Lender to ascertain or to inquire as to the observance or performance of any
of the agreements contained in, or conditions of, this Agreement or any other Loan Document, or to
inspect the properties, books or records of any Loan Party.

     8.4 Reliance by Agents. Each Agent shall be entitled to rely, and shall be fully protected in relying, upon any
instrument, writing, resolution, notice, consent, certificate, affidavit, letter, telecopy, telex
or teletype message, statement, order or other document or conversation believed by it to be
genuine and correct and to have been signed, sent or made by the proper Person or Persons and upon
advice and statements of legal counsel (including, counsel to the Loan Parties), independent
accountants and other experts selected by such Agent. The Agents may deem and treat the payee of
any Note as the owner thereof for all purposes unless such Note shall have been transferred in
accordance with Section 9.6 and all actions required by such Section in connection with such
transfer shall have been taken. Each Agent shall be fully justified in failing or refusing to take
any action under this Agreement or any other Loan Document unless it shall first receive such
advice or concurrence of the Required Lenders (or, if so specified by this Agreement, all Lenders
or any other instructing group of Lenders specified by this Agreement) as it deems appropriate or
it shall first be indemnified to its satisfaction by the Lenders against any and all liability and
expense that may be incurred by it by reason of taking or continuing to take any such action. Each
Agent shall in all cases be fully protected in acting, or in refraining from acting, under this
Agreement and the other Loan Documents in accordance with a request of the Required Lenders (or, if
so specified by this Agreement, all Lenders or any other instructing group of Lenders specified by
this Agreement), and such request and any action taken or failure to act pursuant thereto shall be
binding upon all the Lenders and all future holders of the Loans.

     8.5 Notice of Default. No Agent shall be deemed to have knowledge or notice of the occurrence of any Default or Event
of Default hereunder unless such Agent shall have received notice from a Lender or Borrower
referring to this Agreement, describing such Default or Event of Default and stating that such
notice is a “notice of default”. In the event that the Administrative Agent shall receive such a
notice, the Administrative Agent shall give notice thereof to the Lenders. The Administrative
Agent shall take such action with respect to such Default or Event of Default as shall be
reasonably

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directed by the Required Lenders (or, if so
specified by this Agreement, all Lenders or any other instructing group of Lenders specified by
this Agreement); provided that unless and until the Administrative Agent shall have received such
directions, the Administrative Agent may (but shall not be obligated to) take such action, or
refrain from taking such action, with respect to such Default or Event of Default as it shall deem
advisable in the best interests of the Lenders.

     8.6 Non Reliance on the Agents and Other Lenders. Each Lender expressly acknowledges that neither any of the Agents nor any of their respective
officers, directors, employees, agents, attorneys and other advisors, partners, attorneys in fact
or affiliates have made any representations or warranties to it and that no act by any Agent
hereafter taken, including any review of the affairs of a Loan Party or any affiliate of a Loan
Party, shall be deemed to constitute any representation or warranty by any Agent to any Lender.
Each Lender represents to the Agents that it has, independently and without reliance upon any Agent
or any other Lender, and based on such documents and information as it has deemed appropriate, made
its own appraisal of and investigation into the business, operations, property, financial and other
condition and creditworthiness of the Loan Parties and their affiliates and made its own decision
to make its Loans hereunder and enter into this Agreement. Each Lender also represents that it
will, independently and without reliance upon any 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
analysis, appraisals and decisions in taking or not taking action under this Agreement and the
other Loan Documents, and to make such investigation as it deems necessary to inform itself as to
the business, operations, property, financial and other condition and creditworthiness of the Loan
Parties and their affiliates. Except for notices, reports and other documents expressly required
to be furnished to the Lenders by the Administrative Agent hereunder, no Agent shall have any duty
or responsibility to provide any Lender with any credit or other information concerning the
business, operations, property, condition (financial or otherwise), prospects or creditworthiness
of any Loan Party or any affiliate of a Loan Party that may come into the possession of any Agent
or any of its officers, directors, employees, agents, attorneys and other advisors, partners,
attorneys in fact or affiliates.

     8.7 Indemnification. The Lenders agree to indemnify each Agent in its capacity as such (to the extent not reimbursed
by any Loan Party and without limiting the obligation of any Loan Party to do so), ratably
according to their respective Aggregate Exposure Percentages in effect on the date on which
indemnification is sought under this Section (or, if indemnification is sought after the date upon
which the Commitments shall have terminated and the Loans shall have been paid in full, ratably in
accordance with such Aggregate Exposure Percentages immediately prior to such date), for, and to
save each Agent harmless from and against, any and all liabilities, obligations, losses, damages,
penalties, actions, judgments, suits, costs, expenses or disbursements of any kind whatsoever that
may at any time (including, at any time following the payment of the Loans) be imposed on, incurred
by or asserted against such Agent in any way relating to or arising out of, the Commitments, this
Agreement, any of the other Loan Documents or any documents contemplated by or referred to herein
or therein or the transactions contemplated hereby or thereby or any action taken or omitted by
such Agent under or in connection with any of the foregoing; provided that no Lender shall be
liable for the payment of any portion of such liabilities, obligations, losses, damages, penalties,
actions, judgments, suits, costs, expenses or disbursements that are found by a final and
nonappealable decision of a court of competent jurisdiction to have resulted solely and proximately
from such Agent’s gross negligence or willful misconduct. The agreements in this Section shall
survive the payment of the Loans and all other amounts payable hereunder.

     8.8 Agents in their Individual Capacities. Each Agent and its affiliates may make loans to, accept deposits from and generally engage in
any kind of business with any Loan Party as though such Agent were not an Agent. With respect to
its Loans made or renewed by it, each Agent shall have the same rights and powers under this
Agreement and the other Loan Documents as any Lender and may

57

 

exercise the same as though it were
not an Agent, and the terms “Lender” and “Lenders” shall include each Agent in their individual
capacities.

     8.9 Successor Administrative Agent. The Administrative Agent may resign as Administrative Agent upon 10 days’ notice to the Lenders
and Borrower. If the Administrative Agent shall resign as Administrative Agent under this
Agreement and the other Loan Documents, then the Required Lenders shall appoint from among the
Lenders a successor agent for the Lenders, which successor agent shall (unless an Event of Default
shall have occurred and be continuing) be subject to approval by Borrower (which approval shall not
be unreasonably withheld, conditioned or delayed), whereupon such successor agent shall succeed to
the rights, powers and duties of the Administrative Agent, and the term “Administrative Agent”
shall mean such successor agent effective upon such appointment and approval, and the former
Administrative Agent’s rights, powers and duties as Administrative Agent shall be terminated,
without any other or further act or deed on the part of such former Administrative Agent or any of
the parties to this Agreement or any holders of the Loans. If no successor agent has accepted
appointment as Administrative Agent by the date that is 10 days following a retiring Administrative
Agent’s notice of resignation, the retiring Administrative Agent’s resignation shall nevertheless
thereupon become effective, and the Lenders shall assume and perform all of the duties of the
Administrative Agent hereunder until such time, if any, as the Required Lenders appoint a successor
agent as provided for above. After any retiring Administrative Agent’s resignation as
Administrative Agent, 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 under this Agreement
and the other Loan Documents.

     8.10 Authorization to Release Liens and Guarantees. The Administrative Agent is hereby irrevocably authorized by each of the Lenders to effect any
release of Liens or guarantee obligations contemplated by Section 9.15.

     8.11 Arranger; Syndication Agent. Each of the Syndication Agent and the Arranger, in its respective capacity as such, shall have
no duties or responsibilities, and shall incur no liability, under this Agreement and the other
Loan Documents.

     8.12 Withholding Tax.

     (a) To the extent required by any applicable law, the Administrative Agent may withhold from
any interest payment to any Lender an amount equivalent to any applicable withholding tax. If the
forms or other documentation required by Section 2.11(f) are not delivered to the Administrative
Agent, then the Administrative Agent may withhold from any interest payment to any Lender not
providing such forms or other documentation, a maximum amount of the applicable withholding tax.

     (b) If the Internal Revenue Service or any authority of the United States or other
jurisdiction asserts a claim that the Administrative Agent did not properly withhold tax from
amounts paid to or for the account of any Lender (because the appropriate form was not delivered,
was not properly executed, or because such Lender failed to notify the Administrative Agent of a
change in circumstances which rendered the exemption from, or reduction of, withholding tax
ineffective, or for any other reason), such
Lender shall indemnify the Administrative Agent fully for all amounts paid, directly or
indirectly, by the Administrative Agent as tax or otherwise, including penalties and interest,
together with all expenses incurred, including legal expenses, allocated staff costs and any out of
pocket expenses.

     (c) If any Lender sells, assigns, grants a participation in, or otherwise transfers its rights
under this Agreement, the purchaser, assignee, participant or transferee, as applicable, shall
comply and be bound by the terms of Sections 2.11(f) and 8.12; provided that with respect to any
Participant, as set

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forth in Section 9.6(b), such Participant shall only be required to comply with
the requirements of Sections 2.11(f) and 8.12 if such Participant seeks to obtain the benefits of
Section 2.11.

ARTICLE IX

MISCELLANEOUS

     9.1 Amendments and Waivers. Neither this Agreement nor any other Loan Document nor any terms hereof or thereof may be
amended, supplemented or modified except in accordance with the provisions of this Section 9.1.
The Required Lenders and each Loan Party that is party to the relevant Loan Document may, or (with
the written consent of the Required Lenders) the Administrative Agent and each Loan Party that is
party to the relevant Loan Document may, from time to time, (a) enter into written amendments,
supplements or modifications hereto and to the other Loan Documents (including amendments and
restatements hereof or thereof) for the purpose of adding any provisions to this Agreement or the
other Loan Documents or changing in any manner the rights of the Lenders or of the Loan Parties
hereunder or thereunder or (b) waive, on such terms and conditions as may be specified in the
instrument of waiver, any of the requirements of this Agreement or the other Loan Documents or any
Default or Event of Default and its consequences; provided, however, that no such waiver and no
such amendment, supplement or modification shall:

     (i) forgive the principal amount or extend the final scheduled date of maturity of any
Loan, reduce the stated rate of any interest or fee payable hereunder or extend the
scheduled date of any payment thereof, or increase the amount or extend the expiration date
of any Commitment of any Lender, in each case without the consent of each Lender directly
affected thereby;

     (ii) amend, modify or waive any provision of this Section or reduce any percentage
specified in the definition of Required Lenders, consent to the assignment or transfer by
Borrower of any of its rights and obligations under this Agreement and the other Loan
Documents, or (except as specified in Section 9.15) release all or substantially all of the
Collateral or release all or substantially all of the Subsidiary Guarantors from their
Guarantee Obligations under the Guarantee and Security Agreement, in each case without the
consent of all Lenders;

     (iii) amend, modify or waive any provision of Article VIII or any other provision
affecting the rights, duties and obligations of any Agent without the consent of the Agent
directly affected thereby;

     (iv) amend, modify or waive the pro rata provisions of Section 2.9 without the consent
of each Lender directly affected thereby; or

     (v) impose restrictions on assignments and participations that are more restrictive
than, or additional to, those set forth in Section 9.6.

Any such waiver and any such amendment, supplement or modification shall apply equally to each of
the Lenders and shall be binding upon the Loan Parties, the Lenders, the Agents and all future
holders of the Loans. In the case of any waiver, the Loan Parties, the Lenders, the Agents shall
be restored to their former position and rights hereunder and under the other Loan Documents, and
any Default or Event of Default waived shall be deemed to be cured and not continuing; but no such
waiver shall extend to any subsequent or other Default or Event of Default, or impair any right
consequent thereon. Any such waiver, amendment, supplement or modification shall be effected by a
written instrument signed by the parties required to sign pursuant to the foregoing provisions of
this Section 9.1; provided, however, that delivery of an executed signature page of any such
instrument by facsimile transmission shall be effective as delivery of a manually executed
counterpart thereof.

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     9.2 Notices. Notwithstanding anything to the contrary set forth in this Agreement, all notices, requests and
demands to or upon the respective parties hereto to be effective shall be in writing (including by
telecopy), and, unless otherwise expressly provided herein, shall be deemed to have been duly given
or made when delivered, or three Business Days after being deposited in the mail, postage prepaid,
or, in the case of telecopy notice, when received, addressed (a) in the case of Holdings, Borrower
or the Agents, as follows and (b) in the case of the Lenders, as set forth in an administrative
questionnaire delivered to the Administrative Agent or, in the case of a Lender which becomes a
party to this Agreement pursuant to an Assignment and Acceptance, in such Assignment and Acceptance
or (c) in the case of any party, to such other address as such party may hereafter notify to the
other parties hereto:

	 	 	 
	Holdings:
	 	DHS Drilling Company
	 
	 	P.O. Box 277
	 
	 	1813 Coleman Circle
	 
	 	Casper, Wyoming 8260
	 
	 	Attention: Bill Sauer, Jr.
	 
	 	Facsimile: (307) 473-5377
	 
	 	 
	Borrower
	 	DHS Drilling Company
	 
	 	P.O. Box 277
	 
	 	1813 Coleman Circle
	 
	 	Casper, Wyoming 8260
	 
	 	Attention: Bill Sauer, Jr.
	 
	 	Facsimile: (307) 473-5377
	 
	 	 
	with a copy to:
	 	DHS Drilling Company
	 
	 	370 17th Street, Suite 4300
	 
	 	Denver, CO  80202
	 
	 	Attention: Gregg Tubbs
	 
	 	Facsimile: (303) 575-0403
	 
	 	 
	with a copy to:
	 	Krys Boyle, P.C.
	 
	 	600 Seventeenth Street, Suite 2700
	 
	 	Denver, Colorado  80202
	 
	 	Attention: Peter T. Morre
	 
	 	Facsimile: (303) 893-2882
	 
	 	 
	Agent(s):
	 	Lehman Commercial Paper Inc.
	 
	 	745 Seventh Avenue, 16th Floor
	 
	 	New York, New York 10019
	 
	 	Attention:  Yvonne Lin-Lu
	 
	 	Facsimile:  (212) 299-0202
	 
	 	 
	with a copy to:
	 	Lehman Brothers Inc.
	 
	 	600 Travis Street, Suite 7200
	 
	 	Houston, Texas 77002
	 
	 	Attention:  Mathew Verghese
	 
	 	Facsimile:  (713) 236-3912

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	with a copy to:
	 	Akin Gump Strauss Hauer & Feld LLP
	 
	 	1111 Louisiana Street, Suite 4400
	 
	 	Houston, Texas 77002
	 
	 	Attention:  J. Michael Chambers
	 
	 	Facsimile:  (713) 236-0822

provided that any notice, request or demand to or upon any Agent or any Lender shall not be
effective until received.

The Administrative Agent or Borrower may, in its discretion, agree to accept notices and other
communications to it hereunder by electronic communications pursuant to procedures approved by it;
provided that approval of such procedures may be limited to particular notices or communications.

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

     9.4 Survival of Representations and Warranties. All representations and warranties made herein, in the other Loan Documents and in any document,
certificate or statement delivered pursuant hereto or in connection herewith shall survive the
execution and delivery of this Agreement and the making of the Loans and other extensions of credit
hereunder.

     9.5 Payment of Expenses. Borrower agrees (a) to pay or reimburse the Agents for all their reasonable out of pocket costs
and expenses incurred in connection with the syndication of the Loans and the development,
preparation and execution of, and any amendment, supplement or modification to, this Agreement and
the other Loan Documents and any other documents prepared in connection herewith or therewith, and
the consummation and administration of the transactions contemplated hereby and thereby, including,
the reasonable fees and disbursements and other charges of counsel and consultants to the
Administrative Agent and the charges of Intralinks, (b) to pay or reimburse each Lender and the
Agents for all their costs and expenses incurred in connection with the enforcement or preservation
of any rights under this Agreement, the other Loan Documents and any other documents prepared in
connection herewith or therewith, including, the fees and disbursements of counsel (including the
allocated fees and disbursements and other charges of in-house counsel) to each Lender and of
counsel to the Agents, (c) to pay, indemnify, or reimburse each Lender and the Agents for, and hold
each Lender and the Agents harmless from, any and all recording and filing fees and any and all
liabilities with respect to, or resulting from any delay in paying, stamp, excise and other taxes,
if any, which may be payable or determined to be payable in connection with the execution and
delivery of, or consummation or administration of any of
the transactions contemplated by, or any amendment, supplement or modification of, or any waiver or
consent under or in respect of, this Agreement, the other Loan Documents and any such other
documents, and (d) to pay, indemnify or reimburse each Lender, each Agent, their respective
affiliates, and their respective officers, directors, trustees, employees, affiliates,
shareholders, attorneys and other advisors, agents and controlling persons (each, an “Indemnitee”)
for, and hold each Indemnitee harmless from and against any and all other liabilities, obligations,
losses, damages, penalties, actions, judgments, suits, costs, expenses or disbursements of any kind
or nature whatsoever with respect to the execution, delivery, enforcement, performance and
administration of this Agreement, the other Loan Documents and any such other documents, including,
any of the foregoing relating to the use of proceeds of the Loans or the violation of,
noncompliance with or liability under, any Environmental Law applicable to the operations

61

 

of any
Loan Party or the use by unauthorized persons of information or other materials sent through
electronic, telecommunications or other information transmission systems that are intercepted by
such persons and the fees and disbursements and other charges of legal counsel in connection with
claims, actions or proceedings by any Indemnitee against Borrower hereunder (all the foregoing in
this clause (d), collectively, the “Indemnified Liabilities”); provided that Borrower shall have no
obligation hereunder to any Indemnitee with respect to Indemnified Liabilities to the extent such
Indemnified Liabilities are found by a final and nonappealable decision of a court of competent
jurisdiction to have resulted solely and proximately from the gross negligence or willful
misconduct of such Indemnitee. No Indemnitee shall be liable for any damages arising from the use
by unauthorized persons of information or other materials sent through electronic,
telecommunications or other information transmission systems that are intercepted by such persons
or for any special, indirect, consequential or punitive damages in connection with the Loans.
Without limiting the foregoing, and to the extent permitted by applicable law, each of Holdings and
Borrower agrees not to assert and to cause its Subsidiaries not to assert, and hereby waives and
agrees to cause its Subsidiaries so to waive, all rights for contribution or any other rights of
recovery with respect to all claims, demands, penalties, fines, liabilities, settlements, damages,
costs and expenses of whatever kind or nature, under or related to Environmental Laws, that any of
them might have by statute or otherwise against any Indemnitee. All amounts due under this Section
9.5 shall be payable not later than ten days after written demand therefor. Statements payable by
Borrower pursuant to this Section shall be submitted to Borrower at the address of Borrower set
forth in Section 9.2, or to such other Person or address as may be hereafter designated by Borrower
in a notice to the Administrative Agent. The agreements in this Section 9.5 shall survive
repayment of the Loans and all other amounts payable hereunder.

     9.6 Successors and Assigns; Participations and Assignments.

     (a) This Agreement shall be binding upon and inure to the benefit of Holdings, Borrower, the
Lenders, the Agents, all future holders of the Loans and their respective successors and assigns,
except that neither Holdings nor Borrower may assign or transfer any of its respective rights or
obligations under this Agreement without the prior written consent of the Agents and each Lender
(and any attempted assignment or transfer by the Borrower without such consent shall be null and
void).

     (b) Any Lender may, without the consent of Borrower or any other Person, in accordance with
applicable law, at any time sell to one or more banks, financial institutions or other entities
(each, a “Participant”) participating interests in any Loan owing to such Lender, any Commitment of
such Lender or any other interest of such Lender hereunder and under the other Loan Documents. In
the event of any such sale by a Lender of a participating interest to a Participant, such Lender’s
obligations under this Agreement to the other parties to this Agreement shall remain unchanged,
such Lender shall remain solely responsible for the performance thereof, such Lender shall remain
the holder of any such Loan for all purposes under this Agreement and the other Loan Documents, and
Borrower and the Agents shall
continue to deal solely and directly with such Lender in connection with such Lender’s rights
and obligations under this Agreement and the other Loan Documents. In no event shall any
Participant under any such participation have any right to approve any amendment or waiver of any
provision of any Loan Document, or any consent to any departure by any Loan Party therefrom, except
to the extent that such amendment, waiver or consent would require the consent of all Lenders
pursuant to Section 9.1. Borrower agrees that if amounts outstanding under this Agreement and the
Loans are due or unpaid, or shall have been declared or shall have become due and payable upon the
occurrence of an Event of Default, each Participant shall, to the maximum extent permitted by
applicable law, be deemed to have the right of setoff in respect of its participating interest in
amounts owing under this Agreement to the same extent as if the amount of its participating
interest were owing directly to it as a Lender under this Agreement, provided that, in purchasing
such participating interest, such Participant shall be deemed to have agreed to share with the
Lenders the proceeds thereof as provided in Section 9.7(a) as fully as if such

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Participant were a
Lender hereunder. Borrower also agrees that each Participant shall be entitled to the benefits of
Sections 2.10 and 2.11 with respect to its participation in the Commitments and the Loans
outstanding from time to time as if such Participant were a Lender; provided that, in the case of
Section 2.11, such Participant shall have complied with the requirements of Section 2.11 and
Section 8.12, and; provided, further, that no Participant shall be entitled to receive any greater
amount pursuant to any such Section than the transferor Lender would have been entitled to receive
in respect of the amount of the participation transferred by such transferor Lender to such
Participant had no such transfer occurred.

     (c) Any Lender (an “Assignor”) may, without the consent of any Loan Party, in accordance with
applicable law and upon written notice to the Administrative Agent, at any time and from time to
time assign to any Lender or any affiliate, Related Fund or Control Investment Affiliate thereof
or, with the consent of the Administrative Agent (which, in each case, shall not be unreasonably
withheld, conditioned or delayed) (provided that no such consent need be obtained by the
Administrative Agent or its affiliates), to an additional bank, financial institution or other
entity (an “Assignee”) all or any part of its rights and obligations under this Agreement pursuant
to an Assignment and Acceptance, substantially in the form of Exhibit J (an “Assignment and
Acceptance”), executed by such Assignee and such Assignor (and, where the consent of Borrower or
the Administrative Agent is required pursuant to the foregoing provisions, by Borrower and such
other Persons) and delivered to the Administrative Agent for its acceptance and recording in the
Register; provided that no such assignment to an Assignee (other than any Lender or any affiliate
thereof) shall be in an aggregate principal amount of less than $5,000,000 (other than, in each
case, in the case of an assignment of all of a Lender’s interests under this Agreement), unless
otherwise agreed by Borrower and the Administrative Agent. Upon such execution, delivery,
acceptance and recording, from and after the effective date determined pursuant to such Assignment
and Acceptance, (x) the Assignee thereunder shall be a party hereto and, to the extent provided in
such Assignment and Acceptance, have the rights and obligations of a Lender hereunder with
Commitments or Loans as set forth therein, and (y) the Assignor thereunder shall, to the extent
provided in such Assignment and Acceptance, be released from its obligations under this Agreement
(and, in the case of an Assignment and Acceptance covering all of an Assignor’s rights and
obligations under this Agreement, such Assignor shall cease to be a party hereto, except as to
Sections 2.10, 2.11, 8.12 and 9.5 in respect of the period prior to such effective date). For
purposes of the minimum assignment amounts set forth in this Section 9.6(c), multiple assignments
by two or more Related Funds shall be aggregated.

     (d) The Administrative Agent shall, on behalf of Borrower, maintain at its address referred to
in Section 9.2 a copy of each Assignment and Acceptance delivered to it and a register (the
“Register”) for the recordation of the names and addresses of the Lenders and the Commitment of,
and principal amount of the Loans owing to, each Lender from time to time. The entries in the
Register shall be conclusive, in the absence of manifest error, and Borrower, each Agent and the
Lenders shall treat each Person whose name is recorded in the Register as the owner of the Loans
and any Note evidencing such Loans recorded therein for all purposes of this Agreement. Any
assignment of any Loan, whether or not
evidenced by a Note, shall be effective only upon appropriate entries with respect thereto
being made in the Register (and each Note shall expressly so provide). Any assignment or transfer
of all or part of a Loan evidenced by a Note shall be registered on the Register only upon
surrender for registration of assignment or transfer of the Note evidencing such Loan, accompanied
by a duly executed Assignment and Acceptance; thereupon one or more new Notes in the same aggregate
principal amount shall be issued to the designated Assignee, and the old Notes shall be returned by
the Administrative Agent to Borrower marked “canceled”. The Register shall be available for
inspection by Borrower or any Lender (with respect to any entry relating to such Lender’s Loans) at
any reasonable time and from time to time upon reasonable prior notice.

     (e) Upon its receipt of an Assignment and Acceptance executed by an Assignor and an Assignee
(and, in any case where the consent of any other Person is required by Section 9.6(c), by each

63

 

such
other Person), the Administrative Agent shall (i) promptly accept such Assignment and Acceptance
and (ii) on the effective date determined pursuant thereto record the information contained therein
in the Register and give notice of such acceptance and recordation to Borrower. On or prior to
such effective date, Borrower, at its own expense, upon request, shall execute and deliver to the
Administrative Agent (in exchange for the applicable Note, if any, of the assigning Lender) new
Note or Notes to the order of such Assignee in an amount equal to the Commitment or Loan assumed or
acquired by it pursuant to such Assignment and Acceptance and, if the Assignor has retained a
Commitment or Loan, as the case may be, upon request, a new Note or Notes to the order of the
Assignor in an amount equal to the Commitment or Loans, as the case may be, retained by it
hereunder. Such new Note or Notes shall be dated the Closing Date and shall otherwise be in the
form of the Note or Notes replaced thereby.

     (f) For avoidance of doubt, the parties to this Agreement acknowledge that the provisions of
this Section concerning assignments of Loans and Notes relate only to absolute assignments and that
such provisions do not prohibit assignments creating security interests in Loans and Notes,
including, any pledge or assignment by a Lender of any Loan or Note to any Federal Reserve Bank in
accordance with applicable law.

     (g) Notwithstanding anything to the contrary contained herein, any Lender (a “Granting
Lender”) may grant to a special purpose funding vehicle (an “SPC”), identified as such in writing
from time to time by the Granting Lender to the Administrative Agent and Borrower, the option to
provide to Borrower all or any part of any Loan that such Granting Lender would otherwise be
obligated to make to Borrower pursuant to this Agreement; provided that (i) nothing herein shall
constitute a commitment by any SPC to make any Loan and (ii) if an SPC elects not to exercise such
option or otherwise fails to provide all or any part of such Loan, the Granting Lender shall be
obligated to make such Loan pursuant to the terms hereof. The making of a Loan by an SPC hereunder
shall utilize the Commitment of the Granting Lender to the same extent, and as if, such Loan were
made by such Granting Lender. Each party hereto hereby agrees that no SPC shall be liable for any
indemnity or similar payment obligation under this Agreement (all liability for which shall remain
with the Granting Lender). In furtherance of the foregoing, each party hereto hereby agrees (which
agreement shall survive the termination of this Agreement) that, prior to the date that is one year
and one day after the payment in full of all outstanding commercial paper or other indebtedness of
any SPC, it will not institute against, or join any other person in instituting against, such SPC
any bankruptcy, reorganization, arrangement, insolvency or liquidation proceedings under the laws
of the United States or any state thereof. In addition, notwithstanding anything to the contrary
in this Section 9.6(g), any SPC may (x) with notice to, but without the prior written consent of,
Borrower and the Administrative Agent and without paying any processing fee therefor, assign all or
a portion of its interests in any Loans to the Granting Lender, or with the prior written consent
of Borrower and the Administrative Agent (which consent shall not be unreasonably withheld,
conditioned or delayed) to any financial institutions providing liquidity or credit support to or
for the account of such SPC to support the funding or maintenance of Loans, and (y) disclose on a
confidential basis any non-public information relating to its Loans to any rating agency,
commercial paper dealer or provider of any surety, guarantee or credit or liquidity enhancement to
such SPC; provided that non-public information with respect to Borrower may be disclosed only with
Borrower’s consent which will not be unreasonably withheld, conditioned or delayed. This Section
9.6(g) may not be amended without the written consent of any SPC with Loans outstanding at the time
of such proposed amendment.

     9.7 Adjustments; Set off

     (a) If any Lender (a “Benefitted Lender”) shall at any time receive any payment of all or part
of the Obligations owing to it, or receive any collateral in respect thereof (whether voluntarily
or involuntarily, by set off, pursuant to events or proceedings of the nature referred to in clause
(f) of Article

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VII, or otherwise), in a greater proportion than any such payment to or collateral
received by any other Lender, if any, in respect of such other Lender’s Obligations, such
Benefitted Lender shall purchase for cash from the other Lenders a participating interest in such
portion of each such other Lender’s Obligations, or shall provide such other Lenders with the
benefits of any such collateral, as shall be necessary to cause such Benefitted Lender to share the
excess payment or benefits of such collateral ratably with each of the Lenders; provided, however,
that if all or any portion of such excess payment or benefits is thereafter recovered from such
Benefitted Lender, such purchase shall be rescinded, and the purchase price and benefits returned,
to the extent of such recovery, but without interest.

     (b) In addition to any rights and remedies of the Lenders provided by law, each Lender shall
have the right, without prior notice to Holdings or Borrower, any such notice being expressly
waived by Holdings and Borrower to the extent permitted by applicable law, upon any amount becoming
due and payable by Holdings or Borrower hereunder (whether at the stated maturity, by acceleration
or otherwise), to set off and appropriate and apply against such amount any and all deposits
(general or special, time or demand, provisional or final), in any currency, and any other credits,
indebtedness or claims, in any currency, in each case whether direct or indirect, absolute or
contingent, matured or unmatured, at any time held or owing by such Lender or any branch or agency
thereof to or for the credit or the account of Holdings or Borrower, as the case may be. Each
Lender agrees to notify promptly Borrower and the Administrative Agent after any such setoff and
application made by such Lender, provided that the failure to give such notice shall not affect the
validity of such setoff and application.

     9.8 Counterparts.
This Agreement may be executed by one or more of the parties to this Agreement on any number of
separate counterparts, and all of said counterparts taken together shall be deemed to constitute
one and the same instrument. Delivery of an executed signature page of this Agreement by facsimile
transmission shall be effective as delivery of a manually executed counterpart hereof. A set of the
copies of this Agreement signed by all the parties shall be lodged with Borrower and the
Administrative Agent.

     9.9 Severability.
Any provision of this Agreement that is prohibited or unenforceable in any jurisdiction shall,
as to such jurisdiction, be ineffective to the extent of such prohibition or unenforceability
without invalidating the remaining provisions hereof, and any such prohibition or unenforceability
in any jurisdiction shall not invalidate or render unenforceable such provision in any other
jurisdiction.

     9.10 Integration; Construction.

     (a) This Agreement and the other Loan Documents represent the entire agreement of Borrower,
Holdings, the Agents and the Lenders with respect to the subject matter hereof and thereof, and
there are no promises, undertakings, representations or warranties by any Agent or any Lender
relative to the subject matter hereof not expressly set forth or referred to herein or in the other
Loan Documents.

     (b) Each covenant contained herein shall be construed (absent express provision to the
contrary) as being independent of each other covenant contained herein, so that compliance with any
one covenant shall not (absent such an express contrary provision) be deemed to excuse compliance
with any other covenant. Where any provision herein refers to action to be taken by any Person, or
which such Person is prohibited from taking, such provision shall be applicable whether such action
is taken directly or indirectly by such Person.

     9.11 GOVERNING LAW. THIS AGREEMENT AND THE RIGHTS AND OBLIGATIONS OF THE PARTIES UNDER THIS AGREEMENT SHALL BE
GOVERNED BY, AND

65

 

CONSTRUED AND INTERPRETED IN ACCORDANCE WITH, THE LAW OF THE STATE OF NEW YORK.

     9.12 Submission To Jurisdiction; Waivers. Each of Holdings and Borrower hereby irrevocably and unconditionally:

     (a) submits for itself and its Property in any legal action or proceeding relating to this
Agreement and the other Loan Documents to which it is a party, or for recognition and enforcement
of any judgment in respect thereof, to the non exclusive general jurisdiction of the courts of the
State of New York located in the County of New York, the courts of the United States of America for
the Southern District of New York, and appellate courts from any thereof;

     (b) consents that any such action or proceeding may be brought in such courts and waives any
objection that it may now or hereafter have to the venue of any such action or proceeding in any
such court or that such action or proceeding was brought in an inconvenient court and agrees not to
plead or claim the same;

     (c) agrees that service of process in any such action or proceeding may be effected by mailing
a copy thereof by registered or certified mail (or any substantially similar form of mail), postage
prepaid, to Holdings or Borrower, as the case may be, at its address set forth in Section 9.2 or at
such other address of which the Administrative Agent shall have been notified pursuant thereto;

     (d) agrees that nothing herein shall affect the right to effect service of process in any
other manner permitted by law or shall limit the right to sue in any other jurisdiction; and

     (e) waives, to the maximum extent not prohibited by law, any right it may have to claim or
recover in any legal action or proceeding referred to in this Section any special, exemplary,
punitive or consequential damages.

     9.13 Acknowledgments. Each of Holdings and Borrower hereby acknowledges that:

     (a) it has been advised by counsel in the negotiation, execution and delivery of this
Agreement and the other Loan Documents;

     (b) neither any Agent nor any Lender has any fiduciary relationship with or duty to Holdings
or Borrower arising out of or in connection with this Agreement or any of the other Loan Documents,
and the relationship between the Agents and the Lenders, on one hand, and Holdings and Borrower, on
the other hand, in connection herewith or therewith is solely that of debtor and creditor; and

     (c) no joint venture is created hereby or by the other Loan Documents or otherwise exists by
virtue of the transactions contemplated hereby among the Arranger, the Agents and the Lenders or
among Holdings, Borrower and the Lenders.

     9.14 Confidentiality. Each of the Agents and the Lenders agrees to keep confidential all non-public information
provided to it by any Loan Party pursuant to this Agreement that is designated by such Loan Party
as confidential; provided that nothing herein shall prevent any Agent or any Lender from disclosing
any such information (a) to any Agent, any other Lender or any affiliate of any thereof, (b) to any
Participant or Assignee (each, a “Transferee”) or prospective Transferee that agrees to comply with
the provisions of this Section or substantially equivalent provisions, (c) to any of its employees,
directors, agents, attorneys, accountants and other professional advisors, (d) upon the request or
demand of any Governmental Authority having jurisdiction over it, (e) in response to any order of
any court or other

66

 

Governmental Authority or as may otherwise be required pursuant to any
Requirement of Law, (f) if requested or required to do so in connection with any litigation or
similar proceeding, (g) that has been publicly disclosed other than in breach of this Section, (h)
to the National Association of Insurance Commissioners or any similar organization or any
nationally recognized rating agency that requires access to information about a Lender’s investment
portfolio in connection with ratings issued with respect to such Lender or (i) in connection with
the exercise of any remedy hereunder or under any other Loan Document. Notwithstanding anything to
the contrary in the foregoing sentence or any other express or implied agreement, arrangement or
understanding, the parties hereto hereby agree that, from the commencement of discussions with
respect to the financing provided hereunder, any party hereto (and each of its employees,
representatives, or agents) is permitted to disclose to any and all persons, without limitation of
any kind, the tax structure and tax aspects of the transactions contemplated hereby, and all
materials of any kind (including opinions or other tax analyses) related to such tax structure and
tax aspects.

     9.15 Release of Collateral and Guarantee Obligations.

     (a) Notwithstanding anything to the contrary contained herein or in any other Loan Document,
upon request of Borrower in connection with any Disposition of Property permitted by the Loan
Documents (other than to a Loan Party), the Administrative Agent shall (without notice to, or vote
or consent of, any Lender) take such actions as shall be required to release its security interest
in any Collateral that is, or owned by any Person all the Capital Stock of which is, being Disposed
of in such Disposition, and to release any Guarantee Obligations under any Loan Document of any
Person being Disposed of in such Disposition, to the extent necessary to permit consummation of
such Disposition in accordance with the Loan Documents; provided that Borrower shall have delivered
to the Administrative Agent, at least ten Business Days prior to the date of the proposed release
(or such shorter period agreed to by the Administrative Agent), a written request for release
identifying the relevant Collateral being Disposed of in such Disposition and the terms of such
Disposition in reasonable detail, including the date thereof, the price thereof and any expenses in
connection therewith, together with a certification by
Borrower stating that such transaction is in compliance with this Agreement and the other Loan
Documents and that the proceeds of such Disposition will be applied in accordance with this
Agreement and the other Loan Documents.

     (b) Notwithstanding anything to the contrary contained herein or any other Loan Document, when
all Obligations have been paid in full, all Commitments have terminated or expired, upon request of
Borrower, the Administrative Agent shall (without notice to, or vote or consent of, any Lender)
take such actions as shall be required to release its security interest in all Collateral, and to
release all Guarantee Obligations provided for in any Loan Document. Any such release of Guarantee
Obligations shall be deemed subject to the provision that such Guarantee Obligations shall be
reinstated if after such release any portion of any payment in respect of the Obligations
guaranteed thereby shall be rescinded or must otherwise be restored or returned upon the
insolvency, bankruptcy, dissolution, liquidation or reorganization of Borrower or any Guarantor, or
upon or as a result of the appointment of a receiver, intervenor or conservator of, or trustee or
similar officer for, Borrower or any Guarantor or any substantial part of its Property, or
otherwise, all as though such payment had not been made.

     9.16 Accounting Changes. In the event that any “Accounting Change” (as defined below) shall occur and such change results
in a change in the method of calculation of financial covenants, standards or terms in this
Agreement, then Holdings, Borrower and the Administrative Agent agree to enter into negotiations in
order to amend such provisions of this Agreement so as to equitably reflect such Accounting Change
with the desired result that the criteria for evaluating the consolidated financial condition of
Holdings and Borrower shall be the same after such Accounting Change as if such Accounting Change
had not been made. Until such time as such an amendment shall have been executed

67

 

and delivered by
Holdings, Borrower, the Administrative Agent and the Required Lenders, all financial covenants,
standards and terms in this Agreement shall continue to be calculated or construed as if such
Accounting Change had not occurred. “Accounting Change” refers to any change in accounting
principles required by the promulgation of any rule, regulation, pronouncement or opinion by the
Financial Accounting Standards Board of the American Institute of Certified Public Accountants or,
if applicable, the SEC.

     9.17 WAIVERS OF JURY TRIAL. THE BORROWER, HOLDINGS, THE ARRANGER, THE AGENTS AND THE LENDERS HEREBY IRREVOCABLY AND
UNCONDITIONALLY WAIVE TRIAL BY JURY IN ANY LEGAL ACTION OR PROCEEDING RELATING TO THIS AGREEMENT OR
ANY OTHER LOAN DOCUMENT AND FOR ANY COUNTERCLAIM THEREIN (IN EACH CASE, WHETHER FOR CLAIMS SOUNDING
IN CONTRACT OR IN TORT OR OTHERWISE).

     9.18 Customer Identification – USA PATRIOT Act Notice. The Administrative Agent (for itself and not on behalf of any other party) and each Lender
hereby notifies the Loan Parties that, pursuant to the requirements of the USA PATRIOT Act, Title
III of Pub. L. 107-56, signed into law October 26, 2001 (the “Patriot Act”), it is required to
obtain, verify and record information that identifies the Loan Parties, which information includes
the name and address of the Loan Parties and other information that will allow the Administrative
Agent or such Lender, as applicable, to identify the Loan Parties in accordance with the Patriot
Act.

[Signature Page to Follow]

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

	 	 	 	 	 	 	 
	 	 	DHS HOLDINGS COMPANY	 	 
	 
	 	 	 	 	 	 
	 

	 	By:
	 	/s/ Gregg Tubbs	 	 
	 

	 	 	 	 

Name: Gregg Tubbs
	 	 
	 

	 	 	 	Title: Exec, V.P.	 	 
	 
	 	 	 	 	 	 
	 	 	DHS DRILLING COMPANY	 	 
	 
	 	 	 	 	 	 
	 

	 	By:
	 	/s/ Gregg Tubbs	 	 
	 

	 	 	 	 

Name: Gregg Tubbs
	 	 
	 

	 	 	 	Title: Exec V.P.	 	 
	 
	 	 	 	 	 	 
	 	 	LEHMAN BROTHERS INC., as Arranger	 	 
	 
	 	 	 	 	 	 
	 

	 	By:
	 	/s/ J. Robert Chambers
 

	 	 
	 

	 	 	 	J. Robert Chambers	 	 
	 

	 	 	 	Managing Director	 	 
	 
	 	 	 	 	 	 
	 	 	LEHMAN COMMERCIAL PAPER INC.,	 	 
	 	 	as Administrative Agent, Syndication Agent	 	 
	 	 	and as a Lender	 	 
	 
	 	 	 	 	 	 
	 

	 	By:
	 	/s/ J. Robert Chambers	 	 
	 

	 	 	 	 

J. Robert Chambers
	 	 
	 

	 	 	 	Authorized Signatory	 	 

[Signature Page to DHS Drilling Company Credit Agreement]

 

 

SCHEDULE 1.1

COMMITMENTS

	 	 	 
	Lender	 	Commitment
	 
	 	 
	Lehman Commercial Paper Inc.

	 	$75,000,000
	745 Seventh Avenue
	 	 
	New York, New York 10019
	 	 
	Attention:
	 	 
	Facsimile:

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