Document:

EX-4.11

 

Exhibit 4.11

Addendum

to the

Integration Agreement

between

Norsk Hydro ASA (“Hydro”)

and

Statoil ASA (“Statoil”)

This addendum to the Integration Agreement (the “Integration Agreement”) concerning the merger of
Hydro’s petroleum activities with Statoil (the “Merger”) is entered into between Hydro and Statoil.

	1.	 	INFORMATION AND VERIFICATION

Hydro and Statoil has, in accordance with clause 3 of the Integration Agreement, conducted a due
diligence review to verify the Information Assumption.

The due diligence review is governed by a separate agreement dated 25 January 2007.

The due diligence review was completed on 27 January in Stavanger.

	2.	 	CHANGE OF FINANCIAL CONDITIONS FOR THE MERGER

Clause 2.4, third paragraph, sub-clause (i) of the Integration Agreement shall be amended as
follows:

	(i)	 	Hydro’s Petroleum Activities shall be allocated a Net Interest-bearing Debt (as defined in
Annex 2) of NOK 1 000 000 000 (one billion) as per 1 January 2007.

Clause
2.4, third paragraph, sub-clauses (ii) - (v), shall remain unchanged.

	3.	 	OTHER CONDITIONS FOR THE MERGER

The Parties confirm by the entering into of this addendum to the Integration Agreement that the due
diligence review which were to be completed in accordance with clause 3 of the Integration
Agreement, has been concluded.

Except for what follows from the above clauses, all other conditions in the Integration Agreement
regarding the Merger shall remain unchanged.

	 	 	 
	Oslo, 30 January 2006 [sic]
	 	 
	 
	 	 
	/s/ Helge Lund

	 	/s/ Eivind Reiten
	 
	 	 
	For Statoil ASA

	 	For Norsk Hydro ASA
	 
	 	 
	Helge Lund

	 	Eivind Reiten
	 
	 	 
	CEO

	 	CEOexv10w1

 

Exhibit 10.1

EXECUTION COPY

CREDIT AGREEMENT

Dated as of April 18, 2007

Among

CALLON PETROLEUM COMPANY

as Borrower,

MERRILL LYNCH,

PIERCE, FENNER & SMITH INCORPORATED,

as Lead Arranger

MERRILL LYNCH CAPITAL CORPORATION,

as Administrative Agent and Revolving Loan Lender

MERRILL LYNCH BANK USA,

as Deposit Bank

and

THE LENDERS SIGNATORY HERETO

$200,000,000 Senior Secured Credit Facility

 

 

TABLE OF CONTENTS

	 	 	 	 	 
	 	 	 	Page	 
	 
	ARTICLE I DEFINITIONS AND ACCOUNTING MATTERS
	 	 	1	 
	Section 1.01 Terms Defined Above
	 	 	1	 
	Section 1.02 Certain Defined Terms
	 	 	2	 
	Section 1.03 Accounting Terms and Determinations
	 	 	18	 
	ARTICLE II COMMITMENTS
	 	 	18	 
	Section 2.01 Loans
	 	 	18	 
	Section 2.02 Continuations and Conversions
	 	 	20	 
	Section 2.03 Changes of Commitments
	 	 	21	 
	Section 2.04 Fees
	 	 	22	 
	Section 2.05 Several Obligations
	 	 	23	 
	Section 2.06 Notes
	 	 	23	 
	Section 2.07 Prepayments
	 	 	23	 
	Section 2.08 Borrowing Base
	 	 	24	 
	Section 2.09 Lending Offices
	 	 	25	 
	ARTICLE III PAYMENTS OF PRINCIPAL AND INTEREST
	 	 	26	 
	Section 3.01 Repayment of Principal
	 	 	26	 
	Section 3.02 Payment of Interest
	 	 	26	 
	Section 3.03 Payment Waterfall
	 	 	27	 
	ARTICLE IV PAYMENTS; PRO RATA TREATMENT; COMPUTATIONS; ETC.
	 	 	28	 
	Section 4.01 Payments
	 	 	28	 
	Section 4.02 Pro Rata Treatment
	 	 	28	 
	Section 4.03 Computations
	 	 	29	 
	Section 4.04 Non-receipt of Funds by the Administrative Agent
	 	 	29	 
	Section 4.05 Set-off, Sharing of Payments, Etc.
	 	 	29	 
	Section 4.06 Taxes
	 	 	30	 
	Section 4.07 Disposition of Proceeds
	 	 	33	 
	ARTICLE V CAPITAL ADEQUACY AND YIELD PROTECTION
	 	 	34	 
	Section 5.01 Additional Costs
	 	 	34	 
	Section 5.02 Limitation on LIBOR Loans
	 	 	35	 
	Section 5.03 Illegality
	 	 	36	 

 

 

TABLE OF CONTENTS

(continued)

	 	 	 	 	 
	 	 	 	Page	 
	 
	Section 5.04 Base Rate Loans Pursuant to Sections 5.01, 5.02 and 5.03
	 	 	36	 
	Section 5.05 Compensation
	 	 	36	 
	Section 5.06 Time Limit; Etc.
	 	 	37	 
	Section 5.07 Replacement Lenders
	 	 	37	 
	ARTICLE VI CONDITIONS PRECEDENT
	 	 	38	 
	Section 6.01 Conditions Precedent to Effectiveness of this Agreement
	 	 	38	 
	Section 6.02 Initial and Subsequent Loans
	 	 	41	 
	Section 6.03 Conditions Precedent for the Benefit of Lenders
	 	 	41	 
	Section 6.04 No Waiver
	 	 	41	 
	ARTICLE VII REPRESENTATIONS AND WARRANTIES
	 	 	42	 
	Section 7.01 Corporate Existence
	 	 	42	 
	Section 7.02 Financial Condition
	 	 	42	 
	Section 7.03 Litigation
	 	 	42	 
	Section 7.04 No Breach
	 	 	42	 
	Section 7.05 Authority
	 	 	43	 
	Section 7.06 Approvals
	 	 	43	 
	Section 7.07 Use of Loans
	 	 	43	 
	Section 7.08 ERISA
	 	 	43	 
	Section 7.09 Taxes
	 	 	44	 
	Section 7.10 Titles, Etc.
	 	 	44	 
	Section 7.11 No Material Misstatements
	 	 	45	 
	Section 7.12 Investment Company Act
	 	 	45	 
	Section 7.13 Subsidiaries
	 	 	45	 
	Section 7.14 Location of Business, Offices and Inventory
	 	 	45	 
	Section 7.15 Defaults
	 	 	45	 
	Section 7.16 Environmental Matters
	 	 	46	 
	Section 7.17 Compliance with the Law
	 	 	47	 
	Section 7.18 Insurance
	 	 	47	 
	Section 7.19 Hedging Agreements
	 	 	48	 
	Section 7.20 Restriction on Liens
	 	 	48	 

-ii-

 

TABLE OF CONTENTS

(continued)

	 	 	 	 	 
	 	 	 	Page	 
	 
	Section 7.21 Material Agreements
	 	 	48	 
	Section 7.22 Labor Matters
	 	 	48	 
	Section 7.23 Foreign Assets Control Regulations, etc.
	 	 	49	 
	ARTICLE VIII AFFIRMATIVE COVENANTS
	 	 	49	 
	Section 8.01 Reporting Requirements
	 	 	49	 
	Section 8.02 Litigation
	 	 	52	 
	Section 8.03 Maintenance, Etc.
	 	 	52	 
	Section 8.04 Environmental Matters
	 	 	53	 
	Section 8.05 Further Assurances
	 	 	54	 
	Section 8.06 Performance of Obligations
	 	 	54	 
	Section 8.07 Engineering Reports
	 	 	54	 
	Section 8.08 Collateral
	 	 	55	 
	Section 8.09 ERISA Information and Compliance
	 	 	56	 
	Section 8.10 Inspection; Books and Records
	 	 	56	 
	Section 8.11 Interest Rate Management
	 	 	56	 
	Section 8.12 Additional Guarantors
	 	 	56	 
	Section 8.13 Entrada Field
	 	 	57	 
	ARTICLE IX NEGATIVE COVENANTS
	 	 	57	 
	Section 9.01 Debt
	 	 	57	 
	Section 9.02 Liens
	 	 	58	 
	Section 9.03 Investments, Loans and Advances
	 	 	59	 
	Section 9.04 Dividends, Distributions and Redemptions
	 	 	60	 
	Section 9.05 Sales and Leasebacks
	 	 	60	 
	Section 9.06 Nature of Business
	 	 	60	 
	Section 9.07 Mergers, Etc.
	 	 	60	 
	Section 9.08 Proceeds of Notes
	 	 	60	 
	Section 9.09 ERISA Compliance
	 	 	61	 
	Section 9.10 Interest Coverage Ratio
	 	 	62	 
	Section 9.11 Leverage Ratio
	 	 	62	 
	Section 9.12 PV10 Ratio
	 	 	62	 

-iii-

 

TABLE OF CONTENTS

(continued)

	 	 	 	 	 
	 	 	 	Page	 
	 
	Section 9.13 Sale of Oil and Gas Properties
	 	 	62	 
	Section 9.14 Environmental Matters
	 	 	62	 
	Section 9.15 Transactions with Affiliates
	 	 	63	 
	Section 9.16 Subsidiaries
	 	 	63	 
	Section 9.17 Negative Pledge Agreements
	 	 	63	 
	Section 9.18 Subordinated Debt; Senior Notes
	 	 	63	 
	Section 9.19 Hanover Agreements
	 	 	63	 
	Section 9.20 Permitted Medusa Transactions
	 	 	64	 
	Section 9.21 Change of Fiscal Year
	 	 	64	 
	Section 9.22 Speculative Trading and Hedging
	 	 	64	 
	ARTICLE X EVENTS OF DEFAULT; REMEDIES
	 	 	64	 
	Section 10.01 Events of Default
	 	 	64	 
	Section 10.02 Remedies
	 	 	66	 
	ARTICLE XI THE ADMINISTRATIVE AGENT
	 	 	66	 
	Section 11.01 Appointment, Powers and Immunities
	 	 	66	 
	Section 11.02 Reliance by Administrative Agent
	 	 	67	 
	Section 11.03 Defaults
	 	 	67	 
	Section 11.04 Rights as a Lender
	 	 	67	 
	Section 11.05 Indemnification
	 	 	68	 
	Section 11.06 Non-Reliance on Administrative Agent and other Lenders
	 	 	68	 
	Section 11.07 Action by Administrative Agent
	 	 	69	 
	Section 11.08 Resignation or Removal of Administrative Agent
	 	 	69	 
	Section 11.09 Resignation or Removal of Revolving Loan Lender and Deposit Bank
	 	 	70	 
	ARTICLE XII MISCELLANEOUS
	 	 	70	 
	Section 12.01 Waiver
	 	 	70	 
	Section 12.02 Notices
	 	 	70	 
	Section 12.03 Payment of Expenses, Indemnities, etc.
	 	 	71	 
	Section 12.04 Amendments, Etc.
	 	 	73	 
	Section 12.05 Successors and Assigns
	 	 	74	 

-iv-

 

TABLE OF CONTENTS

(continued)

	 	 	 	 	 
	 	 	 	Page	 
	 
	Section 12.06 Assignments and Participations
	 	 	74	 
	Section 12.07 Invalidity
	 	 	75	 
	Section 12.08 Counterparts
	 	 	75	 
	Section 12.09 References; Use of Word “Including”
	 	 	75	 
	Section 12.10 Survival
	 	 	75	 
	Section 12.11 Captions
	 	 	76	 
	Section 12.12 No Oral Agreements
	 	 	76	 
	Section 12.13 Governing Law; Submission to Jurisdiction
	 	 	76	 
	Section 12.14 Interest
	 	 	77	 
	Section 12.15 Confidentiality
	 	 	78	 
	Section 12.16 Exculpation Provisions
	 	 	79	 
	Section 12.17 Hedging Agreement Substitution of Collateral
	 	 	79	 
	Section 12.18 Obligations as Senior Indebtedness; Specified Senior Indebtedness
	 	 	79	 
	Section 12.19 USA PATRIOT Act Notice
	 	 	80	 

-v-

 

ANNEXES, EXHIBITS AND SCHEDULES

	 	 	 
	Annex I

	 	- List of Percentage Shares and Maximum Credit Amounts
	 
	 	 
	Exhibit A

	 	- Form of Note
	Exhibit B

	 	- Form of Borrowing, Continuation and Conversion Request
	Exhibit C

	 	- Form of Compliance Certificate
	Exhibit D

	 	- List of Security Instruments
	Exhibit E

	 	- Form of Assignment Agreement
	 
	 	 
	Schedule 7.02

	 	- Liabilities
	Schedule 7.03

	 	- Litigation
	Schedule 7.09

	 	- Taxes
	Schedule 7.10

	 	- Titles, etc.
	Schedule 7.13

	 	- Subsidiaries and Partnerships
	Schedule 7.16

	 	- Environmental Matters
	Schedule 7.18

	 	- Insurance
	Schedule 7.19

	 	- Hedging Agreements
	Schedule 7.21

	 	- Material Agreements
	Schedule 9.01

	 	- Debt
	Schedule 9.02

	 	- Liens
	Schedule 9.03

	 	- Investments, Loans and Advances
	Schedule 12.02

	 	- Notice Information

-vi-

 

     This Credit Agreement dated as of April 18, 2007 is among Callon Petroleum Company, a Delaware
corporation (the “Borrower”); each of the lenders that is a signatory hereto or which
becomes a signatory hereto as provided in Section 12.06 (individually, together with its
successors and assigns, a “Lender” and, collectively, the “Lenders”); Merrill
Lynch, Pierce, Fenner & Smith Incorporated, as Lead Arranger; Merrill Lynch Capital Corporation (in
its individual capacity, “Merrill”), as administrative agent for the Lenders (in such
capacity, together with its successors in such capacity, the “Administrative Agent”) and as
Revolving Loan Lender; and Merrill Lynch Bank USA, as Deposit Bank.

INTRODUCTION

     A. The Borrower has advised Merrill that its wholly-owned subsidiary Callon Petroleum
Operating Company, a Delaware corporation (“CPOC”), under the Purchase and Sale Agreement
dated as of March 8, 2007, (the “Acquisition Agreement”) with BP Exploration & Production
Inc., a Delaware corporation (“BP”), will acquire (the “Acquisition”) all of BP’s
interests in the Oil and Gas Properties (as defined below) on, under or related to Garden Banks
Blocks 738, 782, 785, 826, and 827 located in the federal offshore waters of the Gulf of Mexico
subject to certain depth limits (the “Entrada Field”). The Acquisition and the execution
and delivery of this Agreement, the other Credit Documents and the other transactions contemplated
hereby and thereby are referred to as the “Transactions.”

     B. The Borrower has requested that the Lenders provide certain loans to and extensions of
credit on behalf of the Borrower to finance the Acquisition and pay related fees and expenses,
subject to the terms and conditions set forth in this Agreement on the date of consummation of the
Acquisition (the “Closing Date”) and thereafter to finance the development of Oil and Gas
Properties in the Entrada Field owned by Borrower and its Subsidiaries and for other general
corporate purposes.

     C. The lenders under the Amended and Restated Credit Agreement dated as of August 30, 2006 (as
modified or amended, the “UBOC Credit Agreement”) among the Borrower, Union Bank of
California, N.A. as lead arranger and administrative agent, and the lenders signatory thereto, have
consented to the Borrower’s entering into this Agreement subject to an amendment of the UBOC Credit
Agreement to be effective upon the Closing Date.

     D. In consideration of the mutual covenants and agreements herein contained and of the loans,
extensions of credit and commitments hereinafter referred to, the parties hereto agree as follows:

ARTICLE I

Definitions and Accounting Matters

     Section 1.01 Terms Defined Above. As used in this Agreement, the terms
“Acquisition,” “Acquisition Agreement,” “Administrative Agent,”
“Borrower,” “BP,” “Closing Date,” “CPOC,” “Entrada Field,”
“Lender,” “Lenders,” “Merrill,” “Transactions,” and “UBOC
Credit Agreement” shall have the meanings indicated above.

 

 

     Section 1.02 Certain Defined Terms. As used herein, the following terms shall have
the following meanings (all terms defined in this Article I or in other provisions of this
Agreement in the singular to have equivalent meanings when used in the plural and vice versa):

     “Account” means an account maintained with the Administrative Agent for the benefit of
the Lenders but under the sole dominion and control of the Administrative Agent.

     “Additional Costs” has the meaning assigned such term in Section 5.01(a).

     “Affected Loans” has the meaning assigned such term in Section 5.04.

     “Affiliate” of any Person means (a) any Person directly or indirectly controlled by,
controlling or under common control with such first Person, (b) any director or officer of such
first Person or of any Person referred to in clause (a) above, and (c) if any Person in clause (a)
above is an individual, any member of the immediate family (including parents, spouse and children)
of such individual and any trust whose principal beneficiary is such individual or one or more
members of such immediate family and any Person who is controlled by any such member or trust. For
purposes of this definition, any Person which owns directly or indirectly 20% or more of the
securities having ordinary voting power for the election of directors or other governing body of a
corporation or 10% or more of the partnership or other ownership interests of any other Person
(other than as a limited partner of such other Person) will be deemed to “control”
(including, with its correlative meanings, “controlled by” and “under common control
with”) such corporation or other Person.

     “Agreement” means this Credit Agreement, as the same may from time to time be amended
or supplemented.

     “Aggregate Commitments” at any time shall equal the amount calculated in accordance
with Section 2.03(a).

     “Aggregate Maximum Credit Amount” at any time shall equal the sum of the Maximum
Credit Amounts of the Lenders, as the same may be reduced pursuant to Section 2.03(b) and
(c). The Aggregate Maximum Credit Amount on the Closing Date shall be $200,000,000.

     “Applicable Lending Office” means, for each Lender and the Revolving Loan Lender and
for each Type of Loan, the lending office of such Lender and the Revolving Loan Lender (or an
Affiliate of such Lender or the Revolving Loan Lender) designated for such Type of Loan on the
attached Schedule 12.02 or such other offices of such Lender or the Revolving Loan Lender
(or of an Affiliate of such Lender or the Revolving Loan Lender) as such Lender or the Revolving
Loan Lender may from time to time specify to the Administrative Agent and the Borrower as the
office by which its Loans of such Type are to be made and maintained.

     “Applicable Margin” means (a) with respect to LIBOR Loans, 7.00% per
annum and (b) with respect to Base Rate Loans, 6.00% per annum.

     “Applicable Premium” means, as determined by the Administrative Agent, with respect to
the voluntary reduction of the Aggregate Maximum Credit Amount before April 18, 2008, the greater
of (a) 3.0% of the amount of such voluntary reduction and (b) the excess of (i) the present

-2-

 

value at such time of (A) 103% of the amount of such voluntary reduction (which, for purposes
of calculating the present value thereof shall be deemed to be paid on April 17, 2008) plus (B) all
required interest payments due on the amount of such voluntary reduction through April 17, 2008
assuming that the rate of interest is the rate of interest in effect on the date the notice of
reduction is given, computed using a discount rate equal to the Treasury Rate plus 50 basis points,
over (ii) the amount of such voluntary reduction.

     “Assignment” has the meaning assigned such term in Section 12.06(b).

     “Base Rate” means, with respect to any Base Rate Loan, for any day, the higher of (a)
the Federal Funds Rate for any such day plus 1/2 of 1% or (b) the Prime Rate for such day. Each
change in any interest rate provided for herein based upon the Base Rate resulting from a change in
the Base Rate shall take effect at the time of such change in the Base Rate.

     “Base Rate Loans” means Loans that bear interest at rates based upon the Base Rate.

     “Beneficiaries” means the Administrative Agent, the Deposit Bank, the Lenders and each
Affiliate of a Lender that is a party to a Hedging Agreement related to interest payable on the
loans or commodity prices for production of Hydrocarbons from the Collateral with the Borrower or
any Guarantor.

     “Borrowing Base” means at any time an amount equal to the amount determined in
accordance with Section 2.08.

     “Borrowing Base Deficiency” shall occur and be continuing at any time that, and relate
to the amount by which, the aggregate outstanding principal amount of the Loans exceeds the
Borrowing Base.

     “Business Day” means (a) any day other than a day on which commercial banks are
authorized or required to close in New York, New York and, where such term is used in the
definition of “Quarterly Date” or (b) if such day relates to (i) a borrowing or continuation of, a
payment or prepayment of principal of or interest on, or a conversion of or into, or the Interest
Period for, a LIBOR Loan, (ii) a notice by the Borrower with respect to any such borrowing or
continuation, payment, prepayment, conversion or Interest Period, or (iii) a Deposit Period, any
day which is also a day on which dealings in Dollar deposits are carried out in the London
interbank market.

     “Change of Control” means the occurrence of any of the following events: (a) any
Person or two or more Persons, other than the Borrower or any Affiliate of the Borrower, acting as
a group shall acquire beneficial ownership (within the meaning of Rule 13d-3 of the Securities and
Exchange Commission under the Exchange Act, and including holding proxies to vote for the election
of directors other than proxies held by the Borrower’s management or their designees to be voted in
favor of persons nominated by the Borrower’s Board of Directors) of 40% or more of the outstanding
voting securities of the Borrower, measured by voting power (including both ordinary shares and any
preferred stock or other equity securities entitling the holders thereof to vote with the holders
of common stock in elections for directors of the Borrower), (b) the Borrower shall fail
beneficially to own, directly or indirectly, 100% of the outstanding shares of voting capital stock
of any of the Guarantors on a fully-diluted basis, or (c) 50% or more of the

-3-

 

directors of the Borrower shall consist of Persons not nominated by the Borrower’s Board of
Directors (not including as Board nominees any directors which the Board is obligated to nominate
pursuant to shareholders agreements, voting trust arrangements or similar arrangements).

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

     “Collateral” means the Entrada Assets and any additional Oil and Gas Properties in
which Liens are granted pursuant to Section 2.07(b)(iii)(C) as more particularly described
in the Security Instruments.

     “Commitment” means, as to each Lender, its obligation (a) to make its Deposit pursuant
to Section 2.01(b) and (b) to purchase participations in Loans pursuant to Section
2.01(b) in an aggregate principal amount at any one time outstanding not to exceed the lesser
of (i) the Maximum Credit Amount for such Lender and (ii) such Lender’s Percentage Share of the
amount equal to the then effective Borrowing Base.

     “Consolidated Interest Expense” means, for any period, the interest expense (less any
imputed interest expense attributable to the obligation of CPOC to pay additional consideration
upon the occurrence of certain future events pursuant to Section 2.3 of the Acquisition Agreement)
net of interest income of the Borrower and its Consolidated Subsidiaries calculated in accordance
with GAAP for such period.

     “Consolidated Net Debt” means, as of any date of determination, for the Borrower and
its Consolidated Subsidiaries in accordance with GAAP, (a) all outstanding Funded Debt of the
Borrower and its Subsidiaries on such date minus (b) without duplication, the lesser of (i)
$20,000,000 and (ii)(A) cash and short-term investments, (B) restricted cash, in an amount not to
exceed the aggregate amount of Debt of the Borrower or any of its Subsidiaries, the terms of which
Debt cause such cash to appear as restricted cash on the consolidated balance sheet of the Borrower
and its Subsidiaries, and (C) broker, counterparty, and customer margin/collateral assets and
deposits advanced to or held on behalf of such broker, counterparty or customer, as each of the
foregoing appears on the consolidated balance sheet of the Borrower and its Subsidiaries.

     “Consolidated Net Income” means with respect to the Borrower and its Consolidated
Subsidiaries, for any period, the aggregate of the net income (or loss) of the Borrower and its
Consolidated Subsidiaries after allowances for taxes for such period, determined on a consolidated
basis in accordance with GAAP; provided that there shall be excluded from such net income
(to the extent otherwise included therein) the following: (a) the net income of any Person in which
the Borrower or any Consolidated Subsidiary has an interest (which interest does not cause the net
income of such other Person to be consolidated with the net income of the Borrower and its
Consolidated Subsidiaries in accordance with GAAP), except to the extent of the amount of dividends
or distributions actually paid in such period by such other Person to the Borrower or to a
Consolidated Subsidiary, as the case may be; (b) the net income (but not loss) of any Consolidated
Subsidiary to the extent that the declaration or payment of dividends or similar distributions or
transfers or loans by that Consolidated Subsidiary is not at the time

-4-

 

permitted by operation of the terms of its charter or any agreement, instrument or
Governmental Requirement applicable to such Consolidated Subsidiary, or is otherwise restricted or
prohibited in each case determined in accordance with GAAP; (c) the net income (or loss) of any
Person acquired in a pooling of interests transaction for any period prior to the date of such
transaction; (d) any extraordinary gains or losses, including gains or losses attributable to
Property sales not in the ordinary course of business; and (e) the cumulative effect of a change in
accounting principles and any gains or losses attributable to writeups or write downs of assets.

     “Consolidated Subsidiaries” means each Subsidiary of a Person (whether now existing or
hereafter created or acquired) the financial statements of which shall be (or should have been)
consolidated with the financial statements of such Person in accordance with GAAP. Unless
otherwise indicated, each reference to the term “Consolidated Subsidiary” means a Subsidiary
consolidated with the Borrower.

     “Credit Documents” mean this Agreement, the Notes, the Fee Letter, and the Security
Instruments.

     “Credit Party” means the Borrower and the Guarantors, collectively, “Credit
Parties.”

     “Debt” means, for any Person the sum of the following (without duplication): (a) all
obligations of such Person for borrowed money or evidenced by bonds, debentures, notes or other
similar instruments (including principal, interest, fees and charges); (b) all obligations of such
Person (whether contingent or otherwise) in respect of bankers’ acceptances, letters of credit,
surety or other bonds and similar instruments; (c) all obligations of such Person to pay the
deferred purchase price of Property or services (other than for borrowed money); (d) all
obligations under leases which shall have been, or should have been, in accordance with GAAP,
recorded as capital leases in respect of which such Person is liable (whether contingent or
otherwise); (e) all obligations of such Person under leases treated as operating leases under GAAP
and as a loan or financing for U.S. income tax purposes; (f) all Debt (as described in the other
clauses of this definition) and other obligations of others secured by a Lien on any asset of such
Person, whether or not such Debt is assumed by such Person; (g) all Debt (as described in the other
clauses of this definition) and other obligations of others guaranteed by such Person or in which
such Person otherwise assures a creditor against loss of the debtor or obligations of others; (h)
all obligations or undertakings of such Person to maintain or cause to be maintained the financial
position or covenants of others or to purchase the Debt or Property of others; (i) obligations to
deliver goods or services including Hydrocarbons in consideration of advance payments, except as
disclosed by Section 8.07(c); (j) obligations to pay for goods or services whether or not
such goods or services are actually received or utilized by such Person; (k) any capital stock of
such Person in which such Person has a mandatory obligation to redeem such stock, but excluding, in
the case of the Borrower, mandatory obligations to redeem such stock after the Maturity Date; (l)
any Debt of a Special Entity for which such Person is liable either by agreement or because of a
Governmental Requirement; (m) the undischarged balance of any production payment created by such
Person or for the creation of which such Person directly or indirectly received payment; and (n)
all obligations of such Person under Hedging Agreements.

     “Default” means an Event of Default or an event which with notice or lapse of time or
both would become an Event of Default.

-5-

 

     “Deficiency Payment” means, in respect of any Borrowing Base Deficiency, any payments
made by the Borrower during a Deficiency Period for such Borrowing Base Deficiency equal to either
(a) in the case of each such payment the amount of the Borrowing Base Deficiency on the first day
of such Deficiency Period divided by six or (b) such other amount as the Required Lenders may
approve, which when aggregated with the other such payments for such Deficiency Period, are
sufficient to reduce the Borrowing Base Deficiency to zero on or before the final day of such
Deficiency Period.

     “Deficiency Period” means any period of time commencing on the date that the
Administrative Agent notifies the Borrower of the existence of a Borrowing Base Deficiency and
ending on the date which is six months thereafter.

     “Deposit” means, as to each Lender, the cash deposit made by such Lender pursuant to
Section 2.02(a), as such deposit may be (a) reduced from time to time pursuant to the terms
of this Agreement and (b) reduced or increased from time to time pursuant to assignments by or to
such Lender pursuant to Section 10.06. Unless otherwise agreed by the Administrative Agent
and the Borrower, the initial amount of each Lender’s Deposit shall be equal to the amount of its
Maximum Credit Amount on the Closing Date or on the date that such Person becomes a Lender pursuant
to Section 10.06.

     “Deposit Account” means the account of, and established by, the Administrative Agent
under its sole and exclusive control and maintained at the office of the Deposit Bank, and
designated as the “Callon Petroleum Deposit Account” that shall be used solely for the purposes set
forth in Section 2.02.

     “Deposit Account Cost Amount” means the cost as a percentage rate per annum determined
by the Administrative Agent in consultation with the Borrower of investing the Deposit Account
balance, which cost shall not exceed 0.15% per annum.

     “Deposit Bank” means Merrill Lynch Bank USA and any successor deposit bank appointed
pursuant to Section 11.09.

     “Deposit Period” means (a) in the case of the first Deposit Period, the period
commencing on the Closing Date and ending April 30, 2007 and (b) in the case of each subsequent
Deposit Period, a period corresponding to a one-month Interest Period commencing on the day
following the end of the immediately preceding Deposit Period.

     “Deposit Rate” means, at any time, the sum of (a) LIBOR Rate that would be in effect
at such time for a Loan made on the first day of the Deposit Period then in effect and having an
Interest Period equal to the Deposit Period then in effect minus (b) Deposit Account Cost
Amount.

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

     “EBITDA” means, for any period, the sum of (a) Consolidated Net Income for such period
plus (b) the following expenses or charges to the extent deducted from Consolidated Net
Income in such period: interest, taxes, depreciation, depletion and amortization and any other non
cash charges or expenses.

-6-

 

     “Engineering Reports” has the meaning assigned such term in Section 2.08.

     “Entrada Assets” has the meaning assigned to such term in Section 8.08(a).

     “Environmental Laws” means any and all Governmental Requirements pertaining to health
or the environment in effect in any and all jurisdictions in which the Borrower or any Subsidiary
is conducting or at any time has conducted business, or where any Property of the Borrower or any
Subsidiary is located, including without limitation, the Oil Pollution Act of 1990 (“OPA”),
the Clean Air Act, as amended, the Comprehensive Environmental, Response, Compensation, and
Liability Act of 1980 (“CERCLA”), as amended, the Federal Water Pollution Control Act, as
amended, the Occupational Safety and Health Act of 1970, as amended, the Resource Conservation and
Recovery Act of 1976 (“RCRA”), as amended, the Safe Drinking Water Act, as amended, the
Toxic Substances Control Act, as amended, the Superfund Amendments and Reauthorization Act of 1986,
as amended, the Hazardous Materials Transportation Act, as amended, and other environmental
conservation or protection laws. The term “oil” has the meaning specified in OPA, the terms
“hazardous substance” and “release” (or “threatened release”) have the meanings specified in
CERCLA, and the terms “solid waste” and “disposal” (or “disposed”) have the meanings specified in
RCRA; provided, however, that (a) in the event either OPA, CERCLA or RCRA is
amended so as to broaden the meaning of any term defined thereby, such broader meaning shall apply
subsequent to the effective date of such amendment and (b) to the extent the laws of the state in
which any Property of the Borrower or any Subsidiary is located establish a meaning for “oil,”
“hazardous substance,” “release,” “solid waste” or “disposal” which is broader than that specified
in either OPA, CERCLA or RCRA, such broader meaning shall apply.

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

     “ERISA Affiliate” means each trade or business (whether or not incorporated) which
together with the Borrower or any Subsidiary would be deemed to be a “single employer” within the
meaning of section 4001(b)(1) of ERISA or subsections (b), (c), (m), or (o) of section 414 of the
Code.

     “ERISA Event” means (a) a “Reportable Event” described in Section 4043 of ERISA and
the regulations issued thereunder, (b) the withdrawal of the Borrower, any Subsidiary or any ERISA
Affiliate from a Plan during a plan year in which it was a “substantial employer” as defined in
Section 4001(a)(2) of ERISA, (c) the filing of a notice of intent to terminate a Plan or the
treatment of a Plan amendment as a termination under Section 4041 of ERISA, (d) the institution of
proceedings to terminate a Plan by the PBGC, or (e) any other event or condition which might
constitute grounds under Section 4042 of ERISA for the termination of, or the appointment of a
trustee to administer, any Plan.

     “Event of Default” has the meaning assigned such term in Section 10.01.

     “Excepted Liens” means: (a) Liens for taxes, assessments or other governmental charges
or levies not yet due or which are being contested in good faith by appropriate action and for
which adequate reserves have been maintained; (b) Liens in connection with workmen’s

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compensation, unemployment insurance or other social security, old age pension or public
liability obligations not yet due or which are being contested in good faith by appropriate action
and for which adequate reserves have been maintained in accordance with GAAP; (c) operators’,
vendors’, carriers’, warehousemen’s, repairmen’s, mechanics’, workmen’s, materialmen’s,
construction or other like Liens arising by operation of law in the ordinary course of business or
incident to the exploration, development, operation and maintenance of Oil and Gas Properties or
landlord’s liens, each of which is in respect of obligations that have not been outstanding more
than 90 days or which are being contested in good faith by appropriate proceedings and for which
adequate reserves have been maintained in accordance with GAAP; (d) any Liens reserved in leases or
farmout agreements for rent or royalties and for compliance with the terms of the farmout
agreements or leases in the case of leasehold estates, to the extent that any such Lien referred to
in this clause does not materially impair the use of the Property covered by such Lien for the
purposes for which such Property is held by the Borrower or any Subsidiary or materially impair the
value of such Property subject thereto; (e) encumbrances (other than to secure the payment of
borrowed money or the deferred purchase price of Property or services), easements, restrictions,
servitudes, permits, conditions, covenants, exceptions or reservations in any rights of way or
other Property of the Borrower or any Subsidiary for the purpose of roads, pipelines, transmission
lines, transportation lines, distribution lines for the removal of gas, oil, coal or other minerals
or timber, and other like purposes, or for the joint or common use of real estate, rights of way,
facilities and equipment, and defects, irregularities, zoning restrictions and deficiencies in
title of any rights of way or other Property which in the aggregate do not materially impair the
use of such rights of way or other Property for the purposes of which such rights of way and other
Property are held by the Borrower or any Subsidiary or materially impair the value of such Property
subject thereto; (f) deposits of cash or securities to secure the performance of bids, trade
contracts, leases, statutory obligations and other obligations of a like nature incurred in the
ordinary course of business; and (g) Liens permitted by the Security Instruments.

     “Excess Entrada Cash Flow” means, for any consecutive two-fiscal quarter period for
the Borrower and its Subsidiaries on a consolidated basis as certified to the Administrative Agent
and the Lenders by a Responsible Officer of the Borrower, (a) revenues from the Entrada Field for
such period minus (b) the sum of (i) operating expenses (including allocable general and
administrative expenses) attributable to the Entrada Field for such period, (ii) the amount of
capital expenditures made by the Borrower and its Subsidiaries for the development of the Entrada
Field during such period provided that the amount of capital expenditures for the development of
the Entrada Field under this clause (ii) for all periods for which Excess Entrada Cash Flow is
calculated may not exceed $35,000,000, (iii) Aggregate Maximum Credit Amount reductions made during
such period, all as determined in accordance with GAAP, (iv) interest expense and commitment fees
on the Loans, and (v) income taxes attributable to the revenues from the Entrada Field less the
operating expenses (including allocable general and administrative expenses) attributable to the
Entrada Field calculated at the Borrower’s effective marginal tax rate.

     “Federal Funds Rate” means, for any day, the rate per annum (rounded upwards, if
necessary, to the nearest 1/100 of 1%) equal to the weighted average of the rates on overnight
federal funds transactions with a member of the Federal Reserve System arranged by federal funds
brokers on such day, as published by the Federal Reserve Bank of New York on the

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Business Day next succeeding such day, provided that (a) if the date for which such rate is to
be determined is not a Business Day, the Federal Funds Rate for such day shall be such rate on such
transactions on the next preceding Business Day as so published on the next succeeding Business Day
and (b) if such rate is not so published for any day, the Federal Funds Rate for such day shall be
the average rate charged to the Administrative Agent on such day on such transactions as determined
by the Administrative Agent.

     “Fee Letter” means the letter agreement from Merrill to the Borrower dated as of March
7, 2007 concerning certain fees in connection with this Agreement and any agreements or instruments
executed in connection therewith, as the same may be amended or replaced from time to time.

     “Financial Statements” means the financial statement or statements of the Borrower and
its Consolidated Subsidiaries described or referred to in Section 7.02.

     “Funded Debt” means, for any Person the sum (without duplication) of all Debt of the
type described in clauses (a), (d), (e), (f), (g), (h), and (i) of the definition of Debt.

     “GAAP” means generally accepted accounting principles in the United States of America
in effect from time to time.

     “Governmental Authority” shall include the country, the state, county, city and
political subdivisions in which any Person or such Person’s Property is located or which exercises
valid jurisdiction over any such Person or such Person’s Property, and any court, agency,
department, commission, board, bureau or instrumentality of any of them including monetary
authorities which exercises valid jurisdiction over any such Person or such Person’s Property.
Unless otherwise specified, all references to Governmental Authority herein means a Governmental
Authority having jurisdiction over, where applicable, the Borrower, its Subsidiaries or any of
their Property or the Administrative Agent, any Lender, any Affiliate of Lender or any Applicable
Lending Office.

     “Governmental Requirement” means any law, statute, code, ordinance, order,
determination, rule, regulation, judgment, decree, injunction, franchise, permit, certificate,
license, authorization or other directive or requirement (whether or not having the force of law),
including, without limitation, Environmental Laws, energy regulations and occupational, safety and
health standards or controls, of any Governmental Authority.

     “Guarantors” means CPOC, Callon Offshore Production, Inc., a Mississippi corporation,
Mississippi Marketing, Inc., a Mississippi corporation, and any of the Borrower’s Subsidiaries
required to become a Guarantor under Section 8.12.

     “Guaranty Agreement” means an agreement executed by each Guarantor in form and
substance satisfactory to the Administrative Agent guarantying, unconditionally, on a joint and
several basis, payment of the Obligations, as the same may be amended, modified or supplemented
from time to time.

-9-

 

     “Hanover Processing Agreement” means the Processing Agreement dated as of December 14,
2001 by and between CPOC and Hanover Compression Limited Partnership and an accurate copy of which
has been previously provided to the Lenders.

     “Hanover Sales Documents” means the Bill of Sale dated as of December 14, 2001 and the
Engineering, Procurement, Construction and Installation (EPCI) Contract dated as of December 14,
2001 each by and between CPOC and Hanover Compression Limited Partnership and accurate copies of
which have been previously provided to the Lenders.

     “Hedging Agreements” means any commodity, interest rate or currency swap, cap, floor,
collar, forward agreement (for a term in excess of thirty days) or other exchange or protection
agreements or any option with respect to any such transaction.

     “Highest Lawful Rate” means, with respect to each Lender, the maximum nonusurious
interest rate, if any, that at any time or from time to time may be contracted for, taken,
reserved, charged or received on the Notes or on other Obligations under laws applicable to such
Lender which are presently in effect or, to the extent allowed by law, under such applicable laws
which may hereafter be in effect and which allow a higher maximum nonusurious interest rate than
applicable laws now allow.

     “Hydrocarbon Interests” means all rights, titles, interests and estates now or
hereafter acquired in and to oil and gas leases, oil, gas and mineral leases, or other liquid or
gaseous hydrocarbon leases, mineral fee interests, overriding royalty and royalty interests, net
profit interests and production payment interests, including any reserved or residual interests of
whatever nature.

     “Hydrocarbons” means oil, gas, casinghead gas, drip gasoline, natural gasoline,
condensate, distillate, liquid hydrocarbons, gaseous hydrocarbons and all products refined or
separated therefrom.

     “Indemnified Parties” has the meaning assigned such term in Section
12.03(a)(ii).

     “Indemnity Matters” means any and all actions, suits, proceedings (including any
investigations, litigation or inquiries), claims, demands and causes of action made or threatened
against a Person and, in connection therewith, all losses, liabilities, damages (including, without
limitation, consequential damages) or reasonable costs and expenses of any kind or nature
whatsoever incurred by such Person whether caused by the sole or concurrent negligence of such
Person seeking indemnification.

     “Initial Reserve Report” means the report of the Borrower, dated effective as of
February 22, 2007, with respect to the Oil and Gas Properties of the Borrower as of December 31,
2006, a copy of which has been delivered to the Administrative Agent and the Lenders.

     “Interest Period” means, with respect to any LIBOR Loan, the period commencing on the
date such LIBOR Loan is made and ending on the numerically corresponding day in the first, second,
third or sixth calendar month thereafter, as the Borrower may select as provided in Section
2.02 (or such other period as may be requested by the Borrower and agreed to by the

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Required Lenders), except that each Interest Period which commences on the last Business Day
of a calendar month (or on any day for which there is no numerically corresponding day in the
appropriate subsequent calendar month) shall end on the last Business Day of the appropriate
subsequent calendar month.

     Notwithstanding the foregoing: (a) no Interest Period may end after the Maturity Date; (b)
each Interest Period which would otherwise end on a day which is not a Business Day shall end on
the next succeeding Business Day (or, if such next succeeding Business Day falls in the next
succeeding calendar month, on the next preceding Business Day); (c) except as set forth in clause
(d), no Interest Period shall have a duration of less than one month and, if the Interest Period
for any LIBOR Loans would otherwise be for a shorter period, such Loans shall not be available
hereunder; and (d) unless consented to by the Administrative Agent in its sole discretion, no LIBOR
Loans may be elected on the Closing Date or prior to the date 30 days thereafter (unless the
completion of the primary syndication of the Loans as determined by the Lead Arranger shall have
occurred), except that from and after the fifth Business Day after the Closing Date LIBOR periods
of 14 days may be elected until the 30th day after the Closing Date.

     “Joint Operating Agreement” means the Operating Agreement dated as of December 6, 1999
between BP (as successor in interest to Vastar Resources, Inc.) and CPOC.

     “LIBOR” means the rate of interest determined on the basis of the rate for deposits in
Dollars for a period equal to the applicable Interest Period commencing on the first day of such
Interest Period appearing on Dow Jones Market Service Page 3750 as of 11:00 a.m. (London time) two
Business Days prior to the first day of the applicable Interest Period. In the event that such
rate does not appear on Dow Jones Market Service Page 3750, “LIBOR” shall be determined by the
Administrative Agent to be the rate per annum at which deposits in Dollars are offered by leading
reference banks in the London interbank market to Merrill at approximately 11:00 a.m. (London time)
two Business Days prior to the first day of the applicable Interest Period for a period equal to
such Interest Period and in an amount substantially equal to the amount of the applicable Loan.

     “LIBOR Loans” means Loans the interest rates on which are determined on the basis of
rates referred to in the definition of “LIBOR Rate”.

     “LIBOR Rate” means, with respect to any LIBOR Loan, a rate per annum (rounded upwards,
if necessary, to the nearest 1/100 of 1%) determined by the Administrative Agent to be equal to the
quotient of (a) LIBOR for such Loan for the Interest Period for such Loan divided by (b) 1 minus
the Reserve Requirement for such Loan for such Interest Period.

     “Lien” means any interest in Property securing an obligation owed to, or a claim by, a
Person other than the owner of the Property, whether such interest is based on the common law,
statute or contract, and whether such obligation or claim is fixed or contingent, and including but
not limited to (a) the lien or security interest arising from a mortgage, encumbrance, pledge,
security agreement, conditional sale or trust receipt or a lease, consignment or bailment for
security purposes or (b) production payments and the like payable out of Oil and Gas Properties.
The term “Lien” shall include reservations, exceptions, encroachments, easements, rights of
way, covenants, conditions, restrictions, leases and other title exceptions and encumbrances
affecting

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Property. For the purposes of this Agreement, the Borrower or any Subsidiary shall be deemed
to be the owner of any Property which it has acquired or holds subject to a conditional sale
agreement, or leases under a financing lease or other arrangement pursuant to which title to the
Property has been retained by or vested in some other Person in a transaction intended to create a
financing.

     “Loans” means the loans as provided for by Section 2.01(a)(i).

     “Material Adverse Effect” means any material adverse effect upon, or material adverse
change in, (a) the business, assets, operations, properties, or financial condition of the Borrower
and its Subsidiaries taken as a whole, (b) the ability of the Borrower and its Subsidiaries taken
as a whole to duly and punctually pay and perform their obligations under this Agreement and any of
the other Credit Documents, (c) the validity, binding effect or enforceability of this Agreement or
any of the other Credit Documents, or (d) the ability of the Administrative Agent or any of the
Lenders, to the extent permitted, to enforce its legal remedies pursuant to this Agreement and the
other Credit Documents or otherwise available at law or in equity.

     “Maturity Date” means the earlier of (a) September 8, 2010 if the Senior Notes have
not been refinanced on or before such date with unsecured debt (including convertible debt) with a
maturity after June 30, 2014, common equity, or preferred equity (including convertible preferred)
that is not redeemable before July 1, 2014 and (b) March 31, 2014.

     “Maximum Credit Amount” means, as to each Lender, the amount set forth opposite such
Lender’s name on Annex I under the caption “Maximum Credit Amounts” (as the same may be
reduced pursuant to Section 2.03(b) and (c) pro rata to each Lender based on its Percentage
Share), as modified from time to time to reflect any assignments permitted by Section
12.06(b).

     “Multiemployer Plan” means a Plan defined as such in Section 3(37) or 4001(a)(3) of
ERISA.

     “Notes” means the Notes provided for by Section 2.06, together with any and
all renewals, extensions for any period, increases, rearrangements, substitutions, amendments,
and/or modifications thereof.

     “Obligations” means all indebtedness, obligations and liabilities of the Borrower to
any of the Lenders, any of the Lenders’ Affiliates, or the Administrative Agent, individually or
collectively, existing on the date of this Agreement or arising thereafter, direct or indirect,
joint or several, absolute or contingent, matured or unmatured, liquidated or unliquidated, secured
or unsecured, arising or incurred under any Hedging Agreement related to interest payable on the
Loans or commodity prices for production of Hydrocarbons from the Collateral, under this Agreement
or the other Credit Documents or in respect of any of the Loans made or any of the Notes, or other
instruments at any time evidencing any thereof, including any prepayment premiums, the Applicable
Premium, and interest accruing subsequent to the filing of a petition or other action concerning
bankruptcy or other similar proceedings, and all renewals, extensions, rearrangements, amendments,
refinancings, replacements and/or increases of the foregoing. The term “Obligations” shall
include, where the context refers to “Obligations” of any or all of the Guarantors, all obligations
of any or all of the Guarantors, pursuant to any and all guarantees,

-12-

 

guaranty agreements, and all other instruments, executed by any and all of the Guarantors, now
or in the future, guaranteeing all or any portion of the “Obligations” of the Borrower.

     “Oil and Gas Properties” means Hydrocarbon Interests; the Properties now or hereafter
pooled or unitized with Hydrocarbon Interests; all presently existing or future unitization,
pooling agreements and declarations of pooled units and the units created thereby (including
without limitation all units created under orders, regulations and rules of any Governmental
Authority) which may affect all or any portion of the Hydrocarbon Interests; all operating
agreements, contracts and other agreements which relate to any of the Hydrocarbon Interests or the
production, sale, purchase, exchange or processing of Hydrocarbons from or attributable to such
Hydrocarbon Interests; all Hydrocarbons in and under and which may be produced and saved or
attributable to the Hydrocarbon Interests, including all oil in tanks, the lands covered thereby
and all rents, issues, profits, proceeds, products, revenues and other incomes from or attributable
to the Hydrocarbon Interests; all tenements, hereditaments, appurtenances and Properties in any
manner appertaining, belonging, affixed or incidental to the Hydrocarbon Interests; and all
Properties, rights, titles, interests and estates described or referred to above, including any and
all Property, real or personal, now owned or hereinafter acquired and situated upon, used, held for
use or useful in connection with the operating, working or development of any of such Hydrocarbon
Interests or Property (excluding drilling rigs, automotive equipment or other personal property
which may be on such premises for the purpose of drilling a well or for other similar temporary
uses) and including any and all oil wells, gas wells, injection wells or other wells, buildings,
structures, fuel separators, liquid extraction plants, plant compressors, pumps, pumping units,
field gathering systems, tanks and tank batteries, fixtures, valves, fittings, machinery and parts,
engines, boilers, meters, apparatus, equipment, appliances, tools, implements, cables, wires,
towers, casing, tubing and rods, surface leases, rights-of-way, easements and servitudes together
with all additions, substitutions, replacements, accessions and attachments to any and all of the
foregoing.

     “Other Taxes” has the meaning assigned such term in Section 4.06(b).

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

     “Percentage Share” means the percentage of the Aggregate Maximum Credit Amount to be
provided by a Lender under this Agreement as indicated on Annex I hereto, as modified from
time to time to reflect any assignments permitted by Section 12.06(b).

     “Permitted Medusa Transaction” means each of the following transactions now or
hereafter undertaken by the Borrower or any Subsidiary with respect to the development of Oil and
Gas Properties related to Mississippi Canyon Blocks 582, 538, 493, 624, 539, and 581 located in the
federal offshore waters of the Gulf of Mexico (the “Medusa Field”) in conjunction with the
other working interest owners in the Medusa Field:

     (a) the construction of the gas export line and related facilities designed to
transport natural gas production from the Medusa Field to downstream markets (the
“Medusa Gas System”); the conveyance of all or a portion thereof to a third party
(the “Medusa Gas System Owner”) upon completion thereof in consideration of the
Medusa

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Field working interest owners being reimbursed for all or a portion of their actual
costs incurred for construction of that portion of the Medusa Gas System so conveyed; and
the agreement of the Medusa Field working interest owners to transport all or a portion of
their future gas production from the Medusa Field for a gathering fee (which gathering fee
may vary based on actual throughput) paid to the Medusa Gas System Owner, pursuant to, among
other things, the documents and agreements listed as items 4 through 17 on Schedule
7.21, as the same may be from time to time modified or amended;

     (b) the construction of the oil export line and related facilities designed to
transport oil production from the Medusa Field to downstream markets (the “Medusa Oil
System”); the conveyance of all or a portion thereof to a third party (the “Medusa
Oil System Owner”) upon completion thereof in consideration of the Medusa Field working
interest owners being reimbursed for all or a portion of their actual costs incurred for
construction of that portion of the Medusa Oil System so conveyed; and the agreement of the
Medusa Field working interest owners to transport all or a portion of their future oil
production from the Medusa Field for a transportation fee (which transportation fee may vary
based on actual throughput) paid to the Medusa Oil System Owner, pursuant to, among other
things, the documents and agreements listed as items 4 through 17 on Schedule 7.21,
as the same may be from time to time modified or amended; and

     (c) the construction of a spar facility (the “Medusa SPAR”) to produce and
process the Medusa field hydrocarbons; the conveyance of all or a portion thereof to an
Affiliate or a third party (the “Medusa SPAR Owner”) upon completion thereof in
consideration of the Medusa Field working interest owners being reimbursed for all or a
portion of their actual costs incurred for construction of that portion of the Medusa SPAR
so conveyed; and the agreement of the Medusa Field working interest owners to produce and
process all or a portion of their future production from the Medusa Field through the Medusa
SPAR for a tariff (which tariff may vary based on actual throughput) paid to the Medusa SPAR
Owner, pursuant to, among other things, the documents and agreements listed as items 6
through 17 on Schedule 7.21, as the same may be from time to time modified or
amended.

     “Person” means any individual, corporation, company, voluntary association,
partnership, joint venture, trust, unincorporated organization or government or any agency,
instrumentality or political subdivision thereof, or any other form of entity.

     “Plan” means any employee pension benefit plan, as defined in Section 3(2) of ERISA,
which (a) is currently or hereafter sponsored, maintained or contributed to by the Borrower, any
Subsidiary or an ERISA Affiliate or (b) was at any time during the preceding six calendar years
sponsored, maintained or contributed to, by the Borrower, any Subsidiary or an ERISA Affiliate.

     “Post Default Rate” means, in respect of any principal of any Loan and any interest
thereon, or any other amount payable by the Borrower under this Agreement or any other Credit
Document, a rate per annum during the period commencing on the date of occurrence of an Event of
Default until such amount is paid in full or all Events of Default are cured or waived equal to 2%
per annum above the Base Rate as in effect from time to time plus the Applicable Margin (if any),
but in no event to exceed the Highest Lawful Rate; provided however, that for a

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LIBOR Loan, and any past due interest thereon, the “Post Default Rate” for such
principal shall be, for the period commencing on the date of occurrence of an Event of Default and
ending on the earlier to occur of the last day of the Interest Period therefor or the date all
Events of Default are cured or waived, 2% per annum above the interest rate for such Loan as
provided in Section 3.02(a)(ii), but in no event to exceed the Highest Lawful Rate.

     “Prime Rate” means the rate of interest from time to time announced publicly by the
Administrative Agent at the Principal Office as its prime commercial lending rate. Such rate is
set by the Administrative Agent as a general reference rate of interest, taking into account such
factors as the Administrative Agent may deem appropriate, it being understood that many of the
Administrative Agent’s commercial or other loans are priced in relation to such rate, that it is
not necessarily the lowest or best rate actually charged to any customer and that the
Administrative Agent may make various commercial or other loans at rates of interest having no
relationship to such rate.

     “Principal Office” means the principal office of the Administrative Agent, presently
located at 4 World Financial Center, 250 Vesey Street, New York, New York 10080.

     “Property” means any interest in any kind of property or asset, whether real, personal
or mixed, or tangible or intangible.

     “PV10” means the present value of future cash flows utilizing the average of the
three-year strip price for crude oil (WTI Cushing) and natural gas (Henry Hub), quoted on the New
York Mercantile Exchange (or its successor) utilizing a 10% discount rate and adjusted to give
effect to the commodity hedging agreements of the Borrower and its Subsidiaries then in effect.

     “Quarterly Dates” means the last day of each March, June, September, and December, in
each year, the first of which shall be June 30, 2007.

     “Redetermination Date” means the date that the redetermined Borrowing Base becomes
effective subject to the notice requirements specified in Section 2.02(c) both for
scheduled redeterminations and unscheduled redeterminations.

     “Regulation D” means Regulation D of the Board of Governors of the Federal Reserve
System (or any successor), as the same may be amended or supplemented from time to time.

     “Regulatory Change” means, with respect to any Lender, any change after the Closing
Date in any Governmental Requirement (including Regulation D) or the adoption or making after such
date of any interpretations, directives or requests applying to a class of lenders (including such
Lender or its Applicable Lending Office) of or under any Governmental Requirement (whether or not
having the force of law) by any Governmental Authority charged with the interpretation or
administration thereof.

     “Required Lenders” means, at any time while no Loans are outstanding, Lenders having
at least a majority of the Aggregate Commitments and, at any time while Loans are outstanding,
Lenders holding or holding participation interests in at least a majority of the outstanding
aggregate principal amount of the Loans (without regard to any sale by a Lender of a
subparticipation in any Loan under Section 12.06(c)).

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     “Required Payment” has the meaning assigned such term in Section 4.04.

     “Reserve Report” means a report, in form and substance satisfactory to the
Administrative Agent, setting forth, as of each January 1 or July 1 (or such other date in the
event of an unscheduled redetermination): (a) the oil and gas reserves attributable to the
Borrower’s proved Oil and Properties together with a projection of the rate of production and
future net income, taxes, operating expenses and capital expenditures with respect thereto as of
such date, based upon the pricing assumptions consistent with SEC reporting requirements at the
time and (b) such other information as the Administrative Agent may reasonably request.

     “Reserve Requirement” means, for any Interest Period for any LIBOR Loan, the average
maximum rate at which reserves (including any marginal, supplemental or emergency reserves) are
required to be maintained during such Interest Period under Regulation D by member banks of the
Federal Reserve System in New York City with deposits exceeding one billion Dollars against
“Eurocurrency liabilities” (as such term is used in Regulation D). Without limiting the effect of
the foregoing, the Reserve Requirement shall reflect any other reserves required to be maintained
by such member banks by reason of any Regulatory Change against (a) any category of liabilities
which includes deposits by reference to which LIBOR is to be determined as provided in the
definition of “LIBOR” or (b) any category of extensions of credit or other assets which include a
LIBOR Loan.

     “Responsible Officer” means, as to any Person, the Chief Executive Officer, the
President or any Vice President of such Person and, with respect to financial matters, the term
“Responsible Officer” shall include the Chief Financial Officer or the Treasurer of such Person.
Unless otherwise specified, all references to a Responsible Officer herein means a Responsible
Officer of the Borrower.

     “Revolving Loan Lender” means Merrill and any successor Revolving Loan Lender pursuant
to Section 11.09.

     “Scheduled Redetermination Date” has the meaning assigned such term in Section
2.08(d).

     “SEC” means the Securities and Exchange Commission or any successor Governmental
Authority.

     “Security Instruments” means the agreements or instruments described or referred to in
Exhibit D, and any and all other agreements or instruments heretofore, now or hereafter
executed and delivered by the Borrower or any other Person (other than participation or similar
agreements between any Lender and any other lender or creditor with respect to any Obligations
pursuant to this Agreement) in connection with, or as security for the payment or performance of,
the Notes and this Agreement, as such agreements may be amended, supplemented or restated from time
to time.

     “Senior Notes” means the 9.75% Senior Notes due December 8, 2010, issued by the
Borrower under the Indenture dated March 15, 2004 between the Borrower and American Stock Transfer
& Trust Company as trustee, as modified, renewed, or supplemented from time to time.

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     “Special Entity” means any joint venture, limited liability company or partnership,
general or limited partnership or any other type of partnership or company other than a corporation
in which a Person or one or more of its other Subsidiaries is a member, owner, partner or joint
venturer and owns, directly or indirectly, at least a majority of the equity of such entity or
controls such entity, but excluding any tax partnerships that are not classified as partnerships
under state law. For purposes of this definition, any Person which owns directly or indirectly an
equity investment in another Person which allows the first Person to manage or elect managers who
manage the normal activities of such second Person will be deemed to “control” such second Person
(e.g. a sole general partner controls a limited partnership).

     “Subordinated Debt” means any Debt of the Borrower expressly subordinated to the
Obligations, on terms specifically including, without limitation, that payments on such Debt shall
be prohibited if a Default exists or would result from such payment, and other terms and conditions
and pursuant to documentation, all in form and substance satisfactory to the Required Lenders.

     “Subsidiary” means (a) any corporation of which at least a majority of the outstanding
shares of stock having by the terms thereof ordinary voting power to elect a majority of the board
of directors of such corporation (irrespective of whether or not at the time stock of any other
class or classes of such corporation shall have or might have voting power by reason of the
happening of any contingency) is at the time directly or indirectly owned or controlled by another
Person or one or more of such Person’s Subsidiaries or by such Person and one or more of its
Subsidiaries and (b) any Special Entity of which at least a majority of the equity interests are
owned, directly or indirectly or controlled by such Person. Unless otherwise indicated herein,
each reference to the term “Subsidiary” means a Subsidiary of the Borrower.

     “Taxes” has the meaning assigned such term in Section 4.06(a).

     “Transfer” has the meaning assigned such term in Section 9.13.

     “Treasury Rate” means, as determined or obtained by the Administrative Agent, the
yield to maturity at the time of computation of United States Treasury securities with a constant
maturity (as compiled and published in the most recent Federal Reserve Statistical Release H.15
(519) which has become publicly available at least two business days prior to the reduction date
(or, if such Statistical Release is no longer published, any publicly available source or similar
market data)) most nearly equal to the period from the reduction date to April 17, 2008; provided,
however, that if the period from the reduction date to April 17, 2008, is not equal to the constant
maturity of a United States Treasury security for which a weekly average yield is given, the
Treasury Rate shall be obtained by linear interpolation (calculated to the nearest one-twelfth of a
year) from the weekly average yields of United States Treasury securities for which such yields are
given, except that if the period from the reduction date to April 17, 2008 is less than one year,
the weekly average yield on actually traded United States Treasury securities adjusted to a
constant maturity of one year shall be used.

     “Type” means, with respect to any Loan, a Base Rate Loan or a LIBOR Loan.

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     Section 1.03 Accounting Terms and Determinations. Unless otherwise specified herein,
all accounting terms used herein shall be interpreted, all determinations with respect to
accounting matters hereunder shall be made, and all financial statements and certificates and
reports as to financial matters required to be furnished to the Administrative Agent or the Lenders
hereunder shall be prepared, in accordance with GAAP, applied on a basis consistent with the
audited financial statements of the Borrower referred to in Section 7.02 (except for
changes concurred with by the Borrower’s independent public accountants).

ARTICLE II

Commitments

     Section 2.01 Loans.

     (a) Loans.

     (i) The Revolving Loan Lender agrees, on the terms and conditions set forth in this
Agreement, to make Loans to the Borrower during the period from the Closing Date to the
Maturity Date in an amount not to exceed the Aggregate Commitments. Each Loan shall be in
an aggregate amount not less than $1,000,000 and in integral multiples of $1,000,000 in
excess thereof. The Borrower may from time to time borrow, prepay pursuant to Section
2.07 and reborrow under this Section 2.01(a).

     (ii) Each Loan shall be made pursuant to a written notice to the Administrative Agent
(which shall promptly notify the Lenders) in the form of Exhibit B (or telephonic
notice promptly confirmed by such a written notice), which in each case shall be
irrevocable, from the Borrower to be received by the Administrative Agent not later than
11:00 a.m. (New York time) on the requested borrowing date, in each case to the
Administrative Agent’s Applicable Lending Office. The Administrative Agent shall give to
the Revolving Loan Lender and each Lender prompt notice on the day of receipt of a timely
notice of borrowing. Upon fulfillment of the applicable conditions set forth in Article
VI, the Revolving Loan Lender shall, to the extent it receives funds from the Deposit
Account, make the funds for the borrowing available to the Administrative Agent pursuant to
Section 2.01(a)(iv), and the Administrative Agent will promptly make such funds from
the borrowing available to the Borrower not later than 2:00 p.m. (New York time) at such
account as the Borrower shall specify in writing to the Administrative Agent. Without in
any way limiting the Borrower’s obligation to confirm in writing any telephonic notice, the
Administrative Agent may act without liability upon the basis of telephonic notice believed
by the Administrative Agent in good faith to be from the Borrower prior to receipt of
written confirmation. In each such case, the Borrower hereby waives the right to dispute
the Administrative Agent’s record of the terms of such telephonic notice except in the case
of gross negligence or willful misconduct by the Administrative Agent.

     (iii) Upon the date of any Loan, the Revolving Loan Lender shall be deemed to have sold
to each other Lender and each other Lender shall have been deemed to have purchased from the
Revolving Loan Lender a participation in the Obligations related to

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such Loan equal to such Lender’s Percentage Share at such date. Each Lender
acknowledges and agrees that its obligation to acquire participations pursuant to this
paragraph in respect of Loans is absolute and unconditional and shall not be affected by any
circumstance whatsoever, including the occurrence and continuance of a Default or an Event
of Default, and that each such payment shall be made without any offset, abatement,
withholding or reduction whatsoever.

     (iv) Each Lender hereby irrevocably authorizes the Administrative Agent to withdraw a
portion of its Deposit in an amount equal to such Lender’s Percentage Share of each Loan and
pay the same over to the Revolving Loan Lender. The Deposit Bank hereby agrees to effect
the withdrawal referred to in the immediately preceding sentence and all other withdrawals
and payments requested by the Administrative Agent pursuant to, and in accordance with, the
terms of this Agreement. Promptly following receipt by the Administrative Agent of any
principal payment from the Borrower of any Loans, the Administrative Agent shall pay such
payment to the Deposit Bank for deposit in the Deposit Account. The Borrower shall pay
interest on the unpaid amount of such Loan as provided in Section 3.02.

     (b) Deposit Account. On the Closing Date, subject to the satisfaction of the
conditions precedent set forth in Article VI and unless otherwise agreed by the relevant
Lenders and the Borrower, each Lender shall deposit with the Deposit Bank such Lender’s Deposit in
the amount of its Maximum Credit Amount. The Deposits shall be held by the Deposit Bank in (or
credited to) the Deposit Account, and no Person other than the Deposit Bank or the Administrative
Agent shall have a right of withdrawal from the Deposit Account or any other right or power with
respect to the Deposits. Notwithstanding anything herein to the contrary, the obligation of each
Lender in respect of its participation in Loans shall be satisfied in full upon the funding of its
Deposit. Each of the Deposit Bank, the Administrative Agent, and each Lender hereby acknowledges
and agrees (i) that each Lender is funding its Deposit to the Deposit Bank for application in the
manner contemplated by Section 2.01(a), (ii) the Deposit Bank may invest the Deposits in
such investments as may be determined from time to time by the Deposit Bank so as to earn a return
equal to at least the Deposit Rate described in the following clause (iii) or as provided in
Section 2.01(d), and (iii) the Deposit Bank hereby agrees to pay to the Administrative
Agent, which agrees to distribute to each Lender promptly after receipt, a return on its Deposit
(except as otherwise provided in Sections 2.01(d) and (e)) equal at any time to the
Deposit Rate at such time, payable quarterly in arrears on or before the later of (A) the last
Business Day of each March, June, September and December and (B) the same Business Day that the
Lenders receive payment of the commitment fees pursuant to Section 2.04(a), commencing with
the first such date to occur after the Closing Date, and on the Maturity Date.

     (c) Right to Deposit Account. No Credit Party shall have any right, title or interest
in or to the Deposit Account or the Deposits and no Credit Party shall have any obligations with
respect thereto (except to repay outstanding Loans), it being acknowledged and agreed by the
parties hereto that the funding of the Deposits by the Lenders, and the application of the Deposits
in the manner contemplated by Section 2.01(a) constitute agreements among the Deposit Bank,
the Administrative Agent, and each Lender with respect to the participation in the Loans and do not
constitute any loan or extension of credit to the Borrower.

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     (d) LIBOR Availability. If the Deposit Bank is not offering Dollar deposits (in the
applicable amounts) in the London interbank market, or the Deposit Bank reasonably determines that
adequate and fair means do not otherwise exist for ascertaining the Deposit Rate, then the Deposits
(or such parts, as applicable) shall be invested so as to earn a return equal to the greater of the
Federal Funds Rate and a rate reasonably determined by the Deposit Bank in accordance with banking
industry rules on interbank compensation and the Deposit Bank hereby agrees to pay such greater
amount to each Lender on its Deposit.

     (e) Early Payments. If any Loan is repaid by the Borrower on a day other than on the
last day of a Deposit Period, the Administrative Agent shall, upon receipt thereof, pay over such
amounts to the Deposit Bank which will invest such amounts in overnight or short-term cash
equivalent investments until the end of the Deposit Period at the time in effect and the Borrower
shall pay to the Deposit Bank, upon the Deposit Bank’s request therefor, the amount, if any, by
which the interest which would have accrued on a like amount of Deposits through the end of the
then-current Deposit Period shall exceed the interest earned through the investment of the amount
so reimbursed for the period from the date of such reimbursement through the end of the applicable
Deposit Period, as determined by the Deposit Bank (such determination shall, absent manifest error,
be presumed correct and binding on all parties hereto). In the event that the Borrower shall fail
to pay any amount due under this Section 2.01(e), the interest payable by the Deposit Bank
to the Lenders on their Deposits under Section 2.01(b) shall be correspondingly reduced and
the Lenders shall without further act succeed, ratably in accordance with their Percentage Share,
to the rights of the Deposit Bank with respect to such amount due from the Borrower. All
repayments or prepayments of Loans received by the Administrative Agent prior to the termination of
the Commitments, shall be paid over to the Deposit Bank, for the ratable benefit of the Lenders,
and the Deposit Bank will deposit same in the Deposit Account.

     (f) Limitation on Types of Loans. Subject to the other terms and provisions of this
Agreement, at the option of the Borrower, the Loans may be Base Rate Loans or LIBOR Loans; provided
that, without the prior written consent of the Required Lenders, no more than three LIBOR Loans may
be outstanding at any time.

     Section 2.02 Continuations and Conversions.

     (a) Notices. Each Loan shall initially be deemed to be a LIBOR Loan with an Interest
Period ending on the last day of the Deposit Period then in effect. Thereafter, all continuations
and conversions shall require advance written notice to the Administrative Agent (which shall
promptly notify the Lenders) in the form of Exhibit B (or telephonic notice promptly
confirmed by such a written notice), which in each case shall be irrevocable, from the Borrower to
be received by the Administrative Agent not later than 1:00 p.m. (New York time) (i) on the date of
each Base Rate Loan conversion and (ii) three Business Days prior to the date of each LIBOR Loan
continuation or conversion. Without in any way limiting the Borrower’s obligation to confirm in
writing any telephonic notice, the Administrative Agent may act without liability upon the basis of
telephonic notice believed by the Administrative Agent in good faith to be from the Borrower prior
to receipt of written confirmation. In each such case, the Borrower hereby waives the right to
dispute the Administrative Agent’s record of the terms of such telephonic notice except in the case
of gross negligence or willful misconduct by the Administrative Agent.

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     (b) Continuation Options. Subject to the provisions made in this Section
2.02(b), the Borrower may elect to continue all or any part of any LIBOR Loan beyond the
expiration of the then current Interest Period relating thereto by giving advance notice as
provided in Section 2.02(a) to the Administrative Agent (which shall promptly notify the
Lenders) of such election, specifying the amount of such Loan to be continued and the Interest
Period therefor. In the absence of such a timely and proper election, the Borrower shall be deemed
to have elected to convert such LIBOR Loan to a Base Rate Loan pursuant to Section 2.02(c).
All or any part of any LIBOR Loan may be continued as provided herein, provided that (i) any
continuation of any such Loan shall be (as to each Loan as continued for an applicable Interest
Period) in amounts of at least $1,000,000 or any whole multiple of $1,000,000 in excess thereof and
(ii) no Default has occurred and be continuing. If a Default has occurred and be continuing, each
LIBOR Loan shall be converted to a Base Rate Loan on the last day of the Interest Period applicable
thereto.

     (c) Conversion Options. The Borrower may elect to convert all or any part of any
LIBOR Loan on the last day of the then current Interest Period relating thereto to a Base Rate Loan
by giving advance notice to the Administrative Agent (which shall promptly notify the Lenders) of
such election. Subject to the provisions made in this Section 2.02(c), the Borrower may
elect to convert all or any part of any Base Rate Loan at any time and from time to time to a LIBOR
Loan by giving advance notice as provided in Section 2.02(a) to the Administrative Agent
(which shall promptly notify the Lenders) of such election. All or any part of any outstanding
Loan may be converted as provided herein, provided that (i) any conversion of any Base Rate Loan
into a LIBOR Loan shall be (as to each such Loan into which there is a conversion for an applicable
Interest Period) in amounts of at least $1,000,000 or any whole multiple of $1,000,000 in excess
thereof and (ii) no Default has occurred and be continuing. If a Default has occurred and be
continuing, no Base Rate Loan may be converted into a LIBOR Loan.

     Section 2.03 Changes of Commitments.

     (a) The Aggregate Commitments shall at all times be equal to the lesser of (i) the Aggregate
Maximum Credit Amount after adjustments resulting from reductions pursuant to Section 2.03(b)
and (c) and (ii) the Borrowing Base as determined from time to time.

     (b) The Borrower has the right to terminate or to reduce the Aggregate Maximum Credit Amount
at any time, or from time to time, upon not less than three Business Days’ prior notice to the
Administrative Agent (which shall promptly notify the Lenders) of each such termination or
reduction, which notice shall specify the effective date thereof and the amount of any such
reduction (which shall not be less than $1,000,000 or any whole multiple of $1,000,000 in excess
thereof) and shall be irrevocable and effective only upon receipt by the Administrative Agent.

     (c) The Aggregate Maximum Credit Amount shall be reduced by the amount of each mandatory
reduction required to be made pursuant to Section 2.07(b).

     (d) At the time of any reduction or termination of the Maximum Credit Amount of any Lender
pursuant to this Section 2.03 or Section 2.07(b) or on the Maturity Date, the
Administrative Agent shall request the Deposit Bank to withdraw from the Deposit Account and

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to pay the same over to it, and shall return to such Lender, the Lender’s Deposit in an
aggregate amount equal to such reduction (or the amount of the Maximum Credit Amount being
terminated) and the Deposit Bank agrees that it shall, unless prohibited by any Governmental
Authority, make such withdrawal. Any reduction or termination of the Aggregate Maximum Credit
Amount pursuant to this Section 2.03 or Section 2.07(b) shall be permanent, with no
obligation of the Lenders to reinstate any reduction or termination of the Aggregate Maximum Credit
Amount, and the commitment fees provided for in Section 2.04(a) shall thereafter be
computed on the basis of the Aggregate Maximum Credit Amount as so reduced. The Administrative
Agent shall give each Lender prompt notice of any reduction or termination of the Aggregate Maximum
Credit Amount.

     (e) (i) On the date of any voluntary reduction of or reduction due to the acceleration of the
Obligations of the Aggregate Maximum Credit Amount made before April 18, 2008 the Borrower shall
pay to the Administrative Agent for the ratable benefit of the Lenders the Applicable Premium and
(ii) on the date of any mandatory reduction of the Aggregate Maximum Credit Amount made before
April 18, 2008, the Borrower shall pay to the Administrative Agent for the benefit of each Lender a
prepayment premium equal 3% of the amount of the reduction of such Lender’s Maximum Credit Amount.

     (f) On the date of any voluntary or mandatory reduction of or reduction due to the
acceleration of the Obligations of the Aggregate Maximum Credit Amount made on or after April 18,
2008, the Borrower shall pay the Administrative Agent for the benefit of each Lender a prepayment
premium equal to the percentage set forth below of the amount of the reduction of such Lender’s
Maximum Credit Amount during any 12-month period beginning with the dates set forth below:

	 	 	 	 	 
	 	 	Premium (percentage of
	 	 	Maximum Credit Amount
	         Date	 	reduced)
	April 18, 2008
	 	 	3	%
	April 18, 2009
	 	 	2	%
	April 18, 2010
	 	 	1	%

     (g) Each reduction in the Aggregate Maximum Credit Amount shall apply pro rata to each Lender
based on its Percentage Share, and the Aggregate Maximum Credit Amount once terminated or reduced
may not be reinstated.

     Section 2.04 Fees.

     (a) Commitment Fee. The Borrower shall pay to the Administrative Agent for the
account of each Lender a commitment fee on the daily unused amount of the Aggregate Maximum Credit
Amount at a rate per annum equal to the Deposit Account Cost Amount plus

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the Applicable Margin for LIBOR Loans. When an Event of Default exists, the commitment fee
shall increase by 2% per annum. All commitment fees will be payable in arrears on the last day of
each one-month LIBOR interest period applicable to the Deposit Account.

     (b) Fee Letter. The Borrower shall pay to the Administrative Agent such other fees as
are set forth in the Fee Letter on the dates and in the amounts specified therein.

     Section 2.05 Several Obligations. The failure of any Lender to make its Deposit shall
not relieve any other Lender of its obligation to make its Deposit, but no Lender shall be
responsible for the failure of any other Lender to make its Deposit to be made by such other
Lender.

     Section 2.06 Notes. The Loans made by the Revolving Loan Lender may, at the request
of the Revolving Loan Lender, be evidenced by a promissory note or notes of the Borrower in
substantially the form of Exhibit A, dated (a) the Closing Date or (b) the effective date
of the replacement of the Revolving Loan Lender under Section 12.06(b), payable to the
order of the Revolving Loan Lender in a principal amount equal to the Aggregate Maximum Credit
Amount as originally in effect. The date, amount, Type, interest rate and Interest Period of each
Loan made by the Revolving Loan Lender, and all payments made on account of the principal thereof,
shall be recorded by the Administrative Agent on its books. Failure to make any such recording
shall not affect any Lender’s or the Revolving Loan Lender’s or the Borrower’s rights or
obligations in respect of such Loans.

     Section 2.07 Prepayments.

     (a) Voluntary Prepayments. The Borrower may prepay the Base Rate Loans upon not less
than one Business Day’s prior notice to the Administrative Agent (which shall promptly notify the
Lenders), which notice shall specify the prepayment date (which shall be a Business Day) and the
amount of the prepayment (which shall be at least $1,000,000 or the remaining aggregate principal
balance outstanding of the Loans) and shall be irrevocable and effective only upon receipt by the
Administrative Agent, provided that interest on the principal prepaid, accrued to the prepayment
date and any prepayment premium, shall be paid on the prepayment date. The Borrower may prepay
LIBOR Loans on the same conditions as for Base Rate Loans (except that prior notice to the
Administrative Agent shall be not less than three Business Days for LIBOR Loans) and in addition
such prepayments of LIBOR Loans shall be subject to the terms of Section 5.05 and shall be
in an amount equal to all of the LIBOR Loans for the Interest Period prepaid provided that interest
on the principal prepaid accrued to the prepayment date and any prepayment premium, shall be paid
on the prepayment date.

     (b) Mandatory Prepayments and Commitment Reductions.

          (i) If, after giving effect to any termination or reduction of the Aggregate Maximum
Credit Amount pursuant to Section 2.03(b) or 2.07(b)(ii), the outstanding
aggregate principal amount of the Loans exceeds the Aggregate Maximum Credit Amount, the
Borrower shall prepay the Loans on the date of such termination or reduction in an aggregate
principal amount equal to the excess, together with interest on the principal amount paid
accrued to the date of such prepayment.

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          (ii) The Aggregate Maximum Credit Amount shall automatically reduce in an amount equal
to (A) 50% of the net cash proceeds (including condemnation and insurance proceeds) from
dispositions of the Collateral or any interest in the Collateral (including farm ins) on the
fifth Business Day after the receipt of such proceeds, (B) an additional 50% of the net cash
proceeds (including condemnation and insurance proceeds) from Dispositions of the Collateral
or any interest in the Collateral (including farm ins) if such proceeds are not reinvested
in capital expenditures or other costs and expenses incurred for the development of the
Collateral during the 360-day period after the receipt of such proceeds on such
360th day, and (C) on the first day of each September 1 and March 1 beginning
September 1, 2009 in an amount equal to 50% of Excess Entrada Cash Flow for the two fiscal
quarter period ending immediately before the immediately preceding fiscal quarter.

          (iii) Upon any redetermination of the amount of the Borrowing Base in accordance with
Section 2.08, if the redetermined Borrowing Base results in a Borrowing Base
Deficiency, then the Borrower shall within 30 days of receipt of written notice thereof
either: (A) prepay the Loans in an aggregate principal amount equal to the Borrowing Base
Deficiency, together with interest on the principal amount paid accrued to the date of such
prepayment; or (B) the Borrower shall notify the Administrative Agent (which will promptly
notify the Lenders) in writing of the Borrower’s election to initiate a Deficiency Period
during which it will eliminate such Borrowing Base Deficiency by making six consecutive
monthly Deficiency Payments, the first of such payments being due and payable with the
delivery to the Administrative Agent of such notice and each of the remaining payments due
and payable on the same day of each month thereafter during the Deficiency Period; or (C)
mortgage to the Lenders in a manner reasonably satisfactory to the Required Lenders
additional Oil and Gas Properties sufficient to fully offset the amount of such Borrowing
Base Deficiency and obtain an amendment to the Intercreditor Agreement properly reflecting
the additional Collateral reasonably satisfactory to the Administrative Agent; provided
however, in the event of an acceleration of the maturity of the Notes pursuant to
Section 10.02, such acceleration shall also accelerate the maturity of all
outstanding and unpaid Deficiency Payments. All payments under this subsection (iii),
whether a single payment under clause (A) or monthly Deficiency Payments under clause (B),
shall be applied in the order of priority specified in Section 3.03.

     (c) Generally. Prepayments permitted or required under this Section 2.07
shall be without premium or penalty, except as required under Section 5.05 for prepayment
of LIBOR Loans and as set forth in Sections 2.03(e) and (f). Any prepayments on the Loans
may be reborrowed subject to the then effective Aggregate Commitments.

     Section 2.08 Borrowing Base.

     (a) The Borrowing Base shall be determined in accordance with Section 2.08(b) by the
Administrative Agent and is subject to redetermination in accordance with Section 2.08(d).
Upon any redetermination of the Borrowing Base, such redetermination shall remain in effect until
the next successive Redetermination Date. So long as any of the Commitments are in effect or Loans
are outstanding hereunder, this facility shall be governed by the then effective

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Borrowing Base. During the period from and after the Closing Date until the first
redetermination pursuant to Section 2.08(d), the amount of the Borrowing Base shall be
$400,000,000.

     (b) Upon receipt of the reports required by Section 8.07 and such other reports, data
and supplemental information as may from time to time be reasonably requested by the Administrative
Agent (the “Engineering Reports”), the Administrative Agent will redetermine the Borrowing
Base from time to time as set forth in Section 2.08(d) below. Such redetermination will be
equal to (i) the PV10 from proved reserves on the Borrower’s and its Subsidiaries’ Oil and Gas
Properties constituting Collateral after giving effect to the Transactions as set forth in the
Borrower’s most recent Reserve Report divided by (ii) two (the “Borrowing Base”).

     (c) The Administrative Agent may exclude any Oil and Gas Property or portion of production
therefrom or any income from any other Property from the Borrowing Base, at any time, because title
information is not reasonably satisfactory, such Property is not Collateral or such Property is not
assignable.

     (d) So long as any of the Commitments are in effect and until payment in full of all Loans
hereunder, on or around the first Business Day of each April and October, commencing October 1,
2008 (each being a “Scheduled Redetermination Date”), the Administrative Agent shall
redetermine the amount of the Borrowing Base in accordance with Section 2.08(b). In
addition, (i) the Borrower may initiate a redetermination of the Borrowing Base at any time after
October 1, 2008 as it so elects by specifying in writing to the Administrative Agent the date by
which the Borrower will furnish to the Administrative Agent a Reserve Report in accordance with
Section 8.07(b) and the date by which such redetermination is requested to occur;
provided, however, that the Borrower may initiate only one such unscheduled
redetermination between Scheduled Redetermination Dates during the first 12 months after October 1,
2008, and thereafter may initiate only one such unscheduled redetermination per year, and (ii) the
Administrative Agent may initiate a redetermination of the Borrowing Base upon a sale or transfer
of any interest in the Entrada Field and at any time after October 1, 2008 as it so elects by
specifying in writing to the Borrower the date by which the Borrower is to furnish a Reserve Report
in accordance with Section 8.07(b) and the date on which such redetermination is to occur;
provided, however, that the Administrative Agent may, except in the case of a sale
or transfer of any interest in the Entrada Field, initiate only one such unscheduled
redetermination between Scheduled Redetermination Dates during the first 12 months after October 1,
2008, and thereafter may initiate only one such unscheduled redetermination per year.

     (e) The Administrative Agent shall promptly notify in writing the Borrower and the Lenders of
the new Borrowing Base. Any redetermination of the Borrowing Base shall not be in effect until
written notice is received by the Borrower.

     Section 2.09 Lending Offices. The Loans of each Type made by the Revolving Loan
Lender shall be made and maintained at the Revolving Loan Lenders’ Applicable Lending Office for
Loans of such Type.

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ARTICLE III

Payments of Principal and Interest

     Section 3.01 Repayment of Principal.

     (a) Loans. On the Maturity Date the Borrower shall repay the outstanding aggregate
principal of the Loans and the Notes evidencing the Loans.

     (b) Generally. The Borrower will pay to the Administrative Agent, for the account of
the Revolving Loan Lender, the principal payments required by this Section 3.01.

     Section 3.02 Payment of Interest.

     (a) Interest Rates. The Borrower will pay to the Administrative Agent, for the
account of the Revolving Loan Lender, interest on the unpaid principal amount of each Loan for the
period commencing on the date such Loan is made to, but excluding, the date such Loan shall be paid
in full, at the following rates per annum:

          (i) if such a Loan is a Base Rate Loan, the Base Rate (as in effect from time to time)
plus the Applicable Margin, but in no event to exceed the Highest Lawful Rate and

          (ii) if such a Loan is a LIBOR Loan, for each Interest Period relating thereto, the
LIBOR Rate for such Loan (as in effect from time to time) plus the Applicable Margin, but in
no event to exceed the Highest Lawful Rate.

     (b) Post-Default Rate. Notwithstanding the foregoing, the Borrower will pay to the
Administrative Agent, for the account of the Revolving Loan Lender or any Lender, as applicable,
interest at the applicable Post-Default Rate on any principal of each Loan, and (to the fullest
extent permitted by law) on any other amount payable by the Borrower hereunder, under this
Agreement or any other Credit Document or under any Note, for the period commencing on the date of
an Event of Default until the same is paid in full or all Events of Default are cured or waived.

     (c) Due Dates. Accrued interest on Base Rate Loans shall be payable on each Quarterly
Date, and accrued interest on each LIBOR Loan shall be payable on the last day of the Interest
Period therefor and, if such Interest Period is longer than three months at three-month intervals
following the first day of such Interest Period, except that interest payable at the Post-Default
Rate shall be payable from time to time on demand and interest on any LIBOR Loan that is converted
into a Base Rate Loan (pursuant to Section 5.04) shall be payable on the date of conversion
(but only to the extent so converted). Any accrued and unpaid interest on the Loans on the
Maturity Date shall be paid on such date.

     (d) Determination of Rates. Promptly after the determination of any interest rate
provided for herein or any change therein, the Administrative Agent shall notify the Lenders to
which such interest is payable and the Borrower thereof. Each determination by the

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Administrative Agent of an interest rate or fee hereunder shall, except in cases of manifest
error, be final, conclusive and binding on the parties.

     Section 3.03 Payment Waterfall. Notwithstanding any other provision in this Agreement
or any other Credit Document to the contrary:

     (a) Whenever the Borrower (or any Guarantor) pays or is required to make payments on the
Obligations, or whenever any Lender receives (and such funds were not received from the
Administrative Agent in accordance with the priorities established by this Section 3.03) or
has the right to receive funds to be applied to the Obligations (whether in bankruptcy, pursuant to
Section 4.05, or otherwise), or whenever the Administrative Agent holds proceeds of
collection or other funds to be applied to the Obligations, in each case whether before or after
maturity (and notwithstanding any bankruptcy, insolvency, or any other proceeding), such payments
shall be made and such proceeds and other funds shall be applied in the following order of
priority:

          (i) first, to the pro rata payment of reimbursements of expenses and payment of
indemnities due and owing at the time in question to the Administrative Agent or the Lenders
under this Agreement and the other Credit Documents;

          (ii) second, to the pro rata payment of accrued, unpaid interest (including, without
limitation, interest which may accrue subsequent to the Borrower or any Guarantor becoming
subject to any state or federal debtor-relief statute), fees then due and owing to the
Lenders and the Revolving Loan Lender, and any payments then due and owing to the Lenders or
their Affiliates under interest Hedging Agreements relating to the Loans;

          (iii) third, to the pro rata payment of the of principal on the Loans until they are
paid in full and any payments then due and owing to the Lenders or their Affiliates under
commodity Hedging Agreements relating to the Collateral;

          (iv) fourth, to the pro rata payment of all other Obligations; and

          (v) last, any excess shall be paid to the Borrower or as otherwise required by any
Governmental Requirement.

     (b) Payments must be made in accordance with the foregoing order of priority whether or not
the Borrower provides sufficient funds to make all payments due on the Obligations at the time in
question, but compliance with such order of priority does not relieve the Borrower of its duty to
make all payments of the Obligations whenever they become due and any breach of such duty shall
constitute an Event of Default or Default as provided in Section 10.01.

     (c) Should any Lender or the Revolving Loan Lender receive any funds to be applied to the
Obligations from any source whatsoever (whether in bankruptcy, pursuant to Section 4.05, or
otherwise) and such funds have not been distributed to the Lenders or the Revolving Loan Lender in
accordance with the provisions of this Section 3.03, such funds shall immediately be paid
to the Administrative Agent who shall distribute such funds in accordance with the provisions of
this Section 3.03. The Lenders and the Revolving Loan Lender grant to the

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Administrative Agent the right to enforce, collect and receive any such payment or
distribution and to give releases or acquittances therefor, subject, however to the express
provisions contained in this Agreement permitting all or certain Lenders or the Revolving Loan
Lender to direct the Administrative Agent to act or refrain from acting; provided, however, that
nothing contained in this section shall prohibit any Lender from suing for collections of principal
its share of the Loans at maturity or for collection of interest payable to it provided that the
Administrative Agent has not already commenced such suits, and provided that the Lenders have the
right to bring such suits under the provisions of this Agreement including, without limitation, all
provisions under Section 10.02; provided that if any sums are collected by any of the
Lenders, they will be paid to the Administrative Agent for payment and distribution in accordance
with Section 3.03.

ARTICLE IV

Payments; Pro Rata Treatment; Computations; Etc.

     Section 4.01 Payments. Except to the extent otherwise provided herein, all payments
of principal, interest and other amounts to be made by the Borrower under this Agreement and the
Notes shall be made in Dollars, in immediately available funds, to the Administrative Agent at such
account as the Administrative Agent shall specify by notice to the Borrower from time to time, not
later than 2:00 p.m. New York time on the date on which such payments shall become due (each such
payment made after such time on such due date to be deemed to have been made on the next succeeding
Business Day). Such payments shall be made without (to the fullest extent permitted by applicable
law) defense, set-off or counterclaim. Each payment received by the Administrative Agent under
this Agreement for account of a Lender shall be paid promptly to such Lender in immediately
available funds. Except as otherwise provided in the definition of “Interest Period”, if the due
date of any payment under this Agreement would otherwise fall on a day which is not a Business Day
such date shall be extended to the next succeeding Business Day and interest shall be payable for
any principal so extended for the period of such extension. At the time of each payment to the
Administrative Agent of any principal of or interest on any borrowing, the Borrower shall notify
the Administrative Agent of the Loans to which such payment shall apply. In the absence of such
notice the Administrative Agent may specify the Loans to which such payment shall apply, but to the
extent possible such payment or prepayment will be applied first to the Loans comprised of Base
Rate Loans.

     Section 4.02 Pro Rata Treatment. Except to the extent otherwise provided herein each
Lender agrees that: (a) each borrowing from the Revolving Loan Lender under Section 2.01
and each continuation and conversion under Section 2.02 shall be made by the Revolving Loan
Lender, each payment of commitment fee under Section 2.04(a) shall be made for account of
the Lenders pro rata in accordance with their Percentage Share, and each termination or reduction
of the amount of the Aggregate Maximum Credit Amount under Section 2.03(b)and Section
2.07(b) shall be applied to the Maximum Credit Amount of each Lender, pro rata according to the
amounts of its respective Maximum Credit Amount; (b) each payment of principal of Loans by the
Borrower shall be made for account of the Lenders pro rata in accordance with the respective unpaid
principal amount of the participation in the Loans held by each Lender; and (c) each payment of
interest on Loans by the Borrower shall be made for account of the Lenders pro rata

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in accordance with the amounts of interest due and payable to the respective Lenders under the
participations in the Loans held by each Lender.

     Section 4.03 Computations. Interest on LIBOR Loans and fees shall be computed on the
basis of a year of 360 days and actual days elapsed (including the first day but excluding the last
day) occurring in the period for which such interest is payable, unless such calculation would
exceed the Highest Lawful Rate, in which case interest shall be calculated on the per annum basis
of a year of 365 or 366 days, as the case may be. Interest on Base Rate Loans shall be computed on
the basis of a year of 365 or 366 days, as the case may be, and actual days elapsed (including the
first day but excluding the last day) occurring in the period for which such interest is payable.

     Section 4.04 Non-receipt of Funds by the Administrative Agent. Unless the
Administrative Agent has been notified by a Lender or the Borrower prior to the date on which such
notifying party is scheduled to make payment to the Administrative Agent (in the case of a Lender)
of its Deposit or (in the case of the Borrower) a payment to the Administrative Agent for the
account of the Revolving Loan Lender or one or more of the Lenders hereunder (such payment being
herein called the “Required Payment”), which notice shall be effective upon receipt, that
it does not intend to make the Required Payment to the Administrative Agent, the Administrative
Agent may assume that the Required Payment has been made and may, in reliance upon such assumption
(but shall not be required to), make the amount thereof available to the intended recipient(s) on
such date and, if such Lender or the Borrower (as the case may be) has not in fact made the
Required Payment to the Administrative Agent, the recipient(s) of such payment shall, on demand,
repay to the Administrative Agent the amount so made available together with interest thereon in
respect of each day during the period commencing on the date such amount was so made available by
the Administrative Agent until, but excluding, the date the Administrative Agent recovers such
amount at a rate per annum which, for any Lender as recipient, will be equal to the Federal Funds
Rate, and for the Borrower as recipient, will be equal to the Base Rate plus the Applicable Margin.

     Section 4.05 Set-off, Sharing of Payments, Etc.

     (a) The Borrower agrees that, in addition to (and without limitation of) any right of set-off,
bankers’ lien or counterclaim a Lender may otherwise have, each Lender has the right and be
entitled (after consultation with the Administrative Agent), at its option, to offset balances held
by it or by any of its Affiliates for account of the Borrower or any Guarantor at any of its
offices, in Dollars or in any other currency, against any principal of or interest on any of such
Lender’s participation in the Loans, or any other amount payable to such Lender hereunder, which is
not paid when due after the passage of any applicable grace periods (regardless of whether such
balances are then due to the Borrower), in which case it shall promptly notify the Borrower and the
Administrative Agent thereof, provided that such Lender’s failure to give such notice shall not
affect the validity thereof.

     (b) If any Lender shall obtain payment of any principal of or interest on its participation in
any Loan through the exercise of any right of set-off, banker’s lien or counterclaim or similar
right or otherwise, and, as a result of such payment, such Lender shall have received a greater
portion of the principal or interest (or reimbursement) then due hereunder

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to such Lender than the portion received by any other Lenders, it shall promptly (i) notify
the Administrative Agent and each other Lender thereof and (ii) purchase from such other Lenders
subparticipations in (or, if and to the extent specified by such Lender, direct interests in) the
participations in the Loans held by such other Lenders (or in interest due thereon, as the case may
be) in such amounts, and make such other adjustments from time to time as shall be equitable, to
the end that all the Lenders shall share the benefit of such excess payment (net of any expenses
which may be incurred by such Lender in obtaining or preserving such excess payment) pro rata in
accordance with the unpaid principal and/or interest on the participations in the Loans held by
each of the Lenders. To such end all the Lenders shall make appropriate adjustments among
themselves (by the resale of subparticipations sold or otherwise) if such payment is rescinded or
must otherwise be restored. The Borrower agrees that (A) any Lender so purchasing a
subparticipation (or direct interest) in participations in the Loans made by other Lenders (or in
interest due thereon, as the case may be) and (B) any Lender in connection with its participations
in the Loans may exercise all rights of set-off, banker’s lien, counterclaim or similar rights with
respect to such subparticipation or participation as fully as if such Lender were a direct holder
of Loans in the amount of such subparticipation or participation. Nothing contained herein shall
require any Lender to exercise any such right or shall affect the right of any Lender to exercise,
and retain the benefits of exercising, any such right with respect to any other indebtedness or
obligation of the Borrower. If under any applicable bankruptcy, insolvency or other similar law,
any Lender receives a secured claim in lieu of a set off to which this Section 4.05
applies, such Lender shall, to the extent practicable, exercise its rights in respect of such
secured claim in a manner consistent with the rights of the Lenders entitled under this Section
4.05 to share the benefits of any recovery on such secured claim.

     Section 4.06 Taxes.

     (a) Payments Free and Clear. Any and all payments by the Borrower hereunder shall be
made, in accordance with Section 4.01, free and clear of and without deduction for any and
all present or future taxes, levies, imposts, deductions, charges or withholdings, and all
liabilities with respect thereto, excluding, in the case of each Lender, the Revolving Loan
Lender, the Deposit Bank, and the Administrative Agent, taxes imposed on its income, any
withholding taxes with respect to any Deposit or any interest or other earnings thereon, and
franchise or similar taxes imposed on it, by (i) any jurisdiction (or political subdivision
thereof) of which the Administrative Agent, the Revolving Loan Lender, the Deposit Bank, or such
Lender, as the case may be, is a citizen or resident or in which such Lender has an Applicable
Lending Office, (ii) the jurisdiction (or any political subdivision thereof) in which such Lender,
the Revolving Loan Lender, the Deposit Bank, or the Administrative Agent is organized, or (iii) any
jurisdiction (or political subdivision thereof) in which such Lender, the Revolving Loan Lender,
the Deposit Bank, or the Administrative Agent is presently doing business which taxes are imposed
solely as a result of doing business in such jurisdiction (all such non-excluded taxes, levies,
imposts, deductions, charges, withholdings and liabilities being hereinafter referred to as
“Taxes”). If the Borrower shall be required by law to deduct any Taxes from or in respect
of any sum payable hereunder to the Lenders, the Revolving Loan Lender, the Deposit Bank, or the
Administrative Agent (i) the sum payable shall be increased by the amount necessary so that after
making all required deductions (including deductions applicable to additional sums payable under
this Section 4.06) such Lender, the Revolving Loan Lender, the Deposit Bank, or the
Administrative Agent (as the case may be) shall receive an amount equal to the sum it would have
received had

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no such deductions been made, (ii) the Borrower shall make such deductions and (iii) the
Borrower shall pay the full amount deducted to the relevant taxing authority or other Governmental
Authority in accordance with applicable law.

     (b) Other Taxes. In addition, to the fullest extent permitted by applicable law, the
Borrower agrees to pay any present or future stamp or documentary taxes or any other excise or
property taxes, charges or similar levies that arise from any payment made hereunder or from the
execution, delivery or registration of, or otherwise with respect to, this Agreement or any
Security Instrument (hereinafter referred to as “Other Taxes”).

     (c) Indemnification. To the fullest extent permitted by applicable law,
the Borrower will indemnify the Lead Arranger, the Administrative Agent, the Revolving Loan Lender,
the Deposit Bank, and each Lender, for the full amount of Taxes and Other Taxes (including, but not
limited to, any Taxes or Other Taxes imposed by any Governmental Authority on amounts payable under
this section 4.06) paid by the Lead Arranger, the Revolving Loan Lender, the Deposit Bank,
the Administrative Agent, or such Lender (on their behalf or on behalf of any Lender), as the case
may be, and any liability (including penalties, interest and expenses) arising therefrom or with
respect thereto, whether or not such Taxes or Other Taxes were correctly or legally asserted unless
the payment of such Taxes was not correctly or legally asserted and such Lender’s payment of such
Taxes or Other Taxes was the result of its gross negligence or willful misconduct. Any payment
pursuant to such indemnification shall be made within 30 days after the date the Lead Arranger, the
Revolving Loan Lender, the Deposit Bank, the Administrative Agent, or any Lender, as the case may
be, makes written demand therefor. If the Lead Arranger, the Revolving Loan Lender, the Deposit
Bank, the Administrative Agent, or any Lender receives a refund or credit in respect of any Taxes
or Other Taxes for which the Lead Arranger, the Revolving Loan Lender, the Deposit Bank, the
Administrative Agent, or such Lender has received payment from the Borrower it shall promptly
notify the Borrower of such refund or credit and shall, if no default has occurred and is
continuing, within 30 days after receipt of a request by the Borrower (or promptly upon receipt, if
the Borrower has requested application for such refund or credit pursuant hereto), pay an amount
equal to such refund or credit to the Borrower without interest (but with any interest so refunded
or credited), provided that the Borrower, upon the request of the Lead Arranger, the Revolving Loan
Lender, the Deposit Bank, the Administrative Agent, or such Lender, agrees to return such refund or
credit (plus penalties, interest or other charges) to the Lead Arranger, the Revolving Loan Lender,
the Deposit Bank, the Administrative Agent, or such Lender in the event the Lead Arranger, the
Administrative Agent or such Lender is required to repay such refund or credit.

     (d) Lender Representations.

          (i) Each of each Lender and the Revolving Loan Lender represents that it is either (A)
not a “foreign person” as such term is defined in U.S. Treasury Regulations Section
1.1441-1(c)(2) or (B) it is entitled to complete exemption from

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United States withholding tax imposed on or with respect to any payments, including
fees, to be made to it pursuant to this Agreement (1) under an applicable provision of a tax
convention to which the United States of America is a party, (2) because it is acting
through a branch, agency or office in the United States of America and any payment to be
received by it hereunder is effectively connected with a trade or business in the United
States of America, or (3) because it is either (a) a partnership and no partner that is a
nonresident alien individual or foreign corporation is a “10-percent shareholder” with
respect to the Borrower within the meaning of section 871(h)(3) of the Code and the U.S.
Treasury Regulations promulgated thereunder or (b) a nonresident alien individual or foreign
corporation that is not a “10-percent shareholder” with respect to the Borrower within the
meaning of section 871(h)(3) of the Code and the U.S. Treasury Regulations promulgated
thereunder (a Lender described in 3(a) or 3(b), a “Portfolio Interest Lender”).
Each Lender that is, or the Revolving Loan Lender if it is, a “foreign person” as such term
is defined in U.S. Treasury Regulations Section 1.441-1(c)(2) agrees to provide to the
Borrower and the Administrative Agent on the Closing Date, or on the date of its delivery of
the Assignment pursuant to which it becomes a Lender, and at such other times as required by
United States law or as the Borrower or the Administrative Agent shall reasonably request,
two accurate and complete original signed copies of either (x) Internal Revenue Service Form
W-8ECI (or successor form) certifying that all payments to be made to it hereunder will be
effectively connected to a United States trade or business (the “Form W-8ECI
Certification”), (y) Internal Revenue Service Form W-8BEN (or successor form) certifying
that it is entitled to the benefit of a provision of a tax convention to which the United
States of America is a party which completely exempts from United States withholding tax all
payments to be made to it hereunder (the “Form W-8BEN Certification”), or (z) in the
case of a Portfolio Interest Lender either (i) Internal Revenue Service Form W-8IMY
certifying that it is a nonwithholding foreign partnership and representing that the income
is not effectively connected with a trade or business, that the form is being used to
transmit withholding certificates and/or documentary evidence, and that it has provided, or
will provide, a withholding statement, as required (the “Form W-8IMY Certification”)
or (ii) Internal Revenue Form W-8BEN establishing its exemption from withholding as a
Portfolio Interest Lender (the “Portfolio Interest W-8BEN”). In addition, each of
each Lender and the Revolving Loan Lender agrees that if it previously filed a Form W-8ECI
Certification, it will deliver to the Borrower and the Administrative Agent a new Form
W-8ECI Certification prior to the first payment date occurring in each of its subsequent
taxable years; and if it previously filed a Form W-8BEN Certification, it will deliver to
the Borrower and the Administrative Agent a new certification prior to the first payment
date falling in the third year following the previous filing of such certification. Each of
each Lender and the Revolving Loan Lender also agrees to deliver to the Borrower and the
Administrative Agent such other or supplemental forms as may at any time be required as a
result of changes in applicable law or regulation in order to confirm or maintain in effect
its entitlement to exemption from United States withholding tax on any payments hereunder,
provided that the circumstances of such Lender or the Revolving Loan Lender at the relevant
time and applicable laws permit it to do so. If a Lender or the Revolving Loan Lender
determines, as a result of any change in either (i) a Governmental Requirement or (ii) its
circumstances, that it is unable to submit any form or certificate that it is obligated

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to submit pursuant to this Section 4.06, or that it is required to withdraw or
cancel any such form or certificate previously submitted, it shall promptly notify the
Borrower and the Administrative Agent of such fact. If a Lender or the Revolving Loan
Lender is organized under the laws of a jurisdiction outside the United States of America,
unless the Borrower and the Administrative Agent have received a Form W-8IMY Certification,
Portfolio Interest W-8BEN, Form W-8BEN Certification or Form W-8ECI Certification
satisfactory to them indicating that all payments to be made to such Lender hereunder are
not subject to United States withholding tax, the Borrower shall withhold taxes from such
payments at the applicable statutory rate. Each Lender agrees to indemnify and hold
harmless the Borrower or Administrative Agent, as applicable, from any United States taxes,
penalties, interest and other expenses, costs and losses incurred or payable by (i) the
Administrative Agent as a result of such Lender’s or the Revolving Loan Lender’s failure to
submit any form or certificate that it is required to provide pursuant to this Section
4.06 or (ii) the Borrower or the Administrative Agent as a result of their reliance on
any such form or certificate which such Lender or the Revolving Loan Lender has provided to
them pursuant to this Section 4.06.

          (ii) For any period with respect to which a Lender or the Revolving Loan Lender has
failed to provide the Borrower with the form required pursuant to this Section 4.06,
if any, (other than if such failure is due to a change in a Governmental Requirement
occurring subsequent to the date on which a form originally was required to be provided),
such Lender or the Revolving Loan Lender shall not be entitled to indemnification under this
Section 4.06 with respect to taxes imposed by the United States which taxes would
not have been imposed but for such failure to provide such forms; provided,
however, that if a Lender or the Revolving Loan Lender, which is otherwise exempt
from or subject to a reduced rate of withholding tax, becomes subject to taxes because of
its failure to deliver a form required hereunder, the Borrower shall take such steps as such
Lender or the Revolving Loan Lender shall reasonably request to assist such Lender or the
Revolving Loan Lender to recover such taxes.

          (iii) Any Lender or the Revolving Loan Lender claiming any additional amounts payable
pursuant to this Section 4.06 shall use reasonable efforts (consistent with legal
and regulatory restrictions) to file any certificate or document requested by the Borrower
or the Administrative Agent or to change the jurisdiction of its Applicable Lending Office
or to contest any tax imposed if the making of such a filing or change or contesting such
tax would avoid the need for or reduce the amount of any such additional amounts that may
thereafter accrue and would not, in the sole determination of such Lender or the Revolving
Loan Lender, be otherwise disadvantageous to such Lender.

     Section 4.07 Disposition of Proceeds. Certain of the Security Instruments contain an
assignment by the Borrower and the Guarantors, as the case may be, unto and in favor of the
Administrative Agent for the benefit of the Lenders of all Hydrocarbon production and all proceeds
attributable thereto which may be produced from or allocated to the Oil and Gas Properties
constituting Collateral, and further provides in general for the application of such proceeds to
the satisfaction of the Obligations and any other obligations described therein and secured
thereby. Notwithstanding the assignment contained in such Security Instruments, until the
occurrence of an Event of Default, the Lenders agree that they will neither notify the

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purchaser or purchasers of such production nor take any other action to cause such proceeds to
be remitted to the Lenders, but the Lenders will instead permit such proceeds to be paid to the
Borrower and the Guarantors, as the case may be.

ARTICLE V

Capital Adequacy and Yield Protection

     Section 5.01 Additional Costs.

     (a) LIBOR Regulations, etc. The Borrower shall pay directly to each Lender and the
Revolving Loan Lender from time to time such amounts as such Lender may determine to be necessary
to compensate such Lender for any costs which it determines are attributable to its making or
maintaining its participation in any LIBOR Loans hereunder or its obligation to make or participate
in any LIBOR Loans hereunder, or any reduction in any amount receivable by such Lender hereunder in
respect of any such LIBOR Loans or such obligation (such increases in costs and reductions in
amounts receivable being herein called “Additional Costs”), resulting from any Regulatory
Change which: (i) changes the basis of taxation of any amounts payable to such Lender under this
Agreement or any Note in respect of any of such LIBOR Loans (other than taxes imposed on the income
or earnings on the Deposit of such Lender or on the overall net income of such Lender or of its
Applicable Lending Office for any of such LIBOR Loans by the jurisdiction in which such Lender has
its principal office or Applicable Lending Office); (ii) imposes or modifies any reserve, special
deposit, minimum capital, capital ratio or similar requirements relating to any extensions of
credit or other assets of, or any deposits with or other liabilities of such Lender, or the
Commitment or the participations in the Loans of such Lender or the Loans of the Revolving Loan
Lender or the London interbank market (other than the Deposits); or (iii) imposes any other
condition affecting this Agreement or any Note (or any of such extensions of credit or liabilities)
or such Lender’s Commitment or participation in the Loans or the Revolving Loan Lender’s Loans
(other than the Deposits). Each Lender and the Revolving Loan Lender will notify the
Administrative Agent and the Borrower of any event occurring after the Closing Date which will
entitle such Lender or the Revolving Loan Lender to compensation pursuant to this Section
5.01(a) as promptly as practicable after it obtains knowledge thereof and determines to request
such compensation, and will designate a different Applicable Lending Office for the participations
in the Loans of such Lender or the Loans of the Revolving Loan Lender affected by such event if
such designation will avoid the need for, or reduce the amount of, such compensation and will not,
in the sole opinion of such Lender or the Revolving Loan Lender, be disadvantageous to such Lender
or the Revolving Loan Lender provided that such Lender shall have no obligation to so designate an
Applicable Lending Office located in the United States. If any Lender or the Revolving Loan Lender
requests compensation from the Borrower under this Section 5.01(a), the Borrower may, by
notice to such Lender or the Revolving Loan Lender, suspend the obligation of such Lender to
participate in or the Revolving Loan Lender to make additional Loans of the Type with respect to
which such compensation is requested until the Regulatory Change giving rise to such request ceases
to be in effect (in which case the provisions of Section 5.04 shall be applicable).

     (b) Regulatory Change. Without limiting the effect of the provisions of Section
5.01(a), in the event that at any time (by reason of any Regulatory Change or any other

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circumstances arising after the Closing Date affecting (i) any Lender or the Revolving Loan
Lender, (ii) the London interbank market, or (iii) such Lender’s or the Revolving Loan Lender’s
position in such market), the LIBOR Rate, as determined in good faith by such Lender or the
Revolving Loan Lender, will not adequately and fairly reflect the cost to such Lender of funding
its participation in, or the Revolving Loan Lender’s making, LIBOR Loans, then, if such Lender or
the Revolving Loan Lender so elects, by notice to the Borrower and the Administrative Agent, the
obligation of such Lender to participate in, or the Revolving Loan Lender to make, additional LIBOR
Loans shall be suspended until such Regulatory Change or other circumstances ceases to be in effect
(in which case the provisions of Section 5.04 shall be applicable).

     (c) Capital Adequacy. Without limiting the effect of the foregoing provisions of this
Section 5.01 (but without duplication), the Borrower shall pay directly to any Lender from
time to time on request such amounts as such Lender may reasonably determine to be necessary to
compensate such Lender or its parent or holding company for any costs which it determines are
attributable to the maintenance by such Lender or its parent or holding company (or any Applicable
Lending Office), pursuant to any Governmental Requirement following any Regulatory Change, of
capital in respect of its Commitment or its participation in the Loans, such compensation to
include, without limitation, an amount equal to any reduction of the rate of return on assets or
equity of such Lender or its parent or holding company (or any Applicable Lending Office) to a
level below that which such Lender or its parent or holding company (or any Applicable Lending
Office) could have achieved but for such Governmental Requirement. Such Lender will notify the
Borrower that it is entitled to compensation pursuant to this Section 5.01(c) as promptly
as practicable after it determines to request such compensation.

     (d) Compensation Procedure. Any Lender or the Revolving Loan Lender’s notifying the
Borrower of the incurrence of Additional Costs under this Section 5.01 shall in such notice
to the Borrower and the Administrative Agent set forth in reasonable detail the basis and amount of
its request for compensation. Determinations and allocations by each Lender or the Revolving Loan
Lender’s for purposes of this Section 5.01 of the effect of any Regulatory Change pursuant
to Section 5.01(a) or (b), or of the effect of capital maintained pursuant to Section
5.01(c), on its costs or rate of return of maintaining its participation in the Loans or its
obligation to participate in or make Loans or on amounts receivable by it in respect of Loans and
of the amounts required to compensate such Lender under this Section 5.01, shall be
conclusive and binding for all purposes, provided that such determinations and allocations are made
on a reasonable basis. Any request for additional compensation under this Section 5.01
shall be paid by the Borrower within 30 days of the receipt by the Borrower of the notice described
in this Section 5.01(d).

     Section 5.02 Limitation on LIBOR Loans. Anything herein to the contrary
notwithstanding, if, on or prior to the determination of any LIBOR Rate for any Interest Period:

     (a) the Administrative Agent determines (which determination shall be conclusive, absent
manifest error) that quotations of interest rates for the relevant deposits referred to in the
definition of “LIBOR Rate” in Section 1.02 are not being provided in the relevant amounts
or for the relevant maturities for purposes of determining rates of interest for LIBOR Loans as
provided herein; or

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     (b) the Administrative Agent determines (which determination shall be conclusive, absent
manifest error) that the relevant rates of interest referred to in the definition of “LIBOR Rate”
in Section 1.02 upon the basis of which the rate of interest for LIBOR Loans for such
Interest Period is to be determined are not sufficient to adequately cover the cost to the Lenders
of making or maintaining LIBOR Loans;

then the Administrative Agent shall give the Borrower prompt notice thereof, and so long as such
condition remains in effect, the Revolving Loan Lender shall be under no obligation to make
additional LIBOR Loans.

     Section 5.03 Illegality. Notwithstanding any other provision of this Agreement, in
the event that it becomes unlawful for any Lender or the Revolving Loan Lender or its Applicable
Lending Office to honor its obligation to make or maintain its participation LIBOR Loans hereunder,
then such Lender or the Revolving Loan Lender shall promptly notify the Borrower thereof and such
Lender’s or the Revolving Loan Lender’s obligation to make LIBOR Loans shall be suspended until
such time as such Lender or the Revolving Loan may again make and maintain LIBOR Loans (in which
case the provisions of Section 5.04 shall be applicable).

     Section 5.04 Base Rate Loans Pursuant to Sections 5.01, 5.02 and 5.03. If the
obligation of any Lender to participate in or the Revolving Loan Lender to make LIBOR Loans shall
be suspended pursuant to Section 5.01, 5.02 or 5.03 (“Affected Loans”), the
participation in all Affected Loans which would otherwise be made by such Lender shall be made
instead as a participation in Base Rate Loans or all Affected Loans of the Revolving Loan Lender
shall instead be made as Base Rate Loans (and, if an event referred to in Section 5.01(b)
or Section 5.03 has occurred and such Lender or the Revolving Loan Lender so requests by
notice to the Borrower, the participation in all Affected Loans of such Lender or all Affected
Loans of the Revolving Loan Lender then outstanding shall be automatically converted into Base Rate
Loans on the date specified by such Lender or the Revolving Loan Lender in such notice) and, to the
extent that Affected Loans are so made as (or converted into) Base Rate Loans, all payments of
principal which would otherwise be applied to such Lender’s participation in the Affected Loans or
the Revolving Loan Lender’s Affected Loans shall be applied instead to its Base Rate Loans.

     Section 5.05 Compensation. The Borrower shall pay to each Lender and the Revolving
Loan Lender within 30 days of receipt of written request of such Lender or the Revolving Loan
Lender (which request shall set forth, in reasonable detail, the basis for requesting such amounts
and which shall be conclusive and binding for all purposes provided that such determinations are
made on a reasonable basis), such amount or amounts as shall compensate it for any loss, cost,
expense or liability which such Lender or the Revolving Loan Lender determines are attributable to:

     (a) any payment, prepayment or conversion of a LIBOR Loan for any reason (including, without
limitation, the acceleration of the Loans pursuant to Section 10.01) on a date other than
the last day of the Interest Period for such Loan; or

     (b) any failure by the Borrower for any reason (including but not limited to, the failure of
any of the conditions precedent specified in Article VI to be satisfied) to borrow,

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continue or convert a LIBOR Loan on the date for such borrowing, continuation or conversion
specified in the relevant notice given pursuant to Section 2.02(a).

Without limiting the effect of the preceding sentence, such compensation shall include an amount
equal to the excess, if any, of (i) the amount of interest which would have accrued on the
principal amount so paid, prepaid or converted or not borrowed for the period from the date of such
payment, prepayment or conversion or failure to borrow to the last day of the Interest Period for
such Loan (or, in the case of a failure to borrow, the Interest Period for such Loan which would
have commenced on the date specified for such borrowing) at the applicable rate of interest for
such Loan provided for herein over (ii) the interest component of the amount such Lender or the
Revolving Loan Lender would have bid in the London interbank market for Dollar deposits of leading
banks in amounts comparable to such principal amount and with maturities comparable to such period
(as reasonably determined by such Lender or the Revolving Loan Lender).

     Section 5.06 Time Limit; Etc.

     (a) Time Limited. Notwithstanding anything to the contrary contained in Sections
5.01 through 5.05, the Borrower shall not be required to reimburse or pay any costs or expenses
to any Lender or the Revolving Loan Lender as required by such sections which have accrued more
than 180 days prior to such Lender’s or the Revolving Loan Lender’s giving notice to the Borrower
that such Lender or the Revolving Loan Lender has suffered or incurred such costs or expenses.

     (b) Non Discriminatory Basis. None of the Lenders or the Revolving Loan Lender shall
be permitted to pass through to the Borrower costs and expenses under Sections 5.01 through
5.05 which are not also passed through by such Lender or the Revolving Loan Lender to other
customers of such Lender or the Revolving Loan Lender similarly situated when such customer is
subject to documents containing similar provisions as those contained in such Sections.

     Section 5.07 Replacement Lenders.

     (a) Terminated Lenders. If (i) any Lender has notified the Borrower and the
Administrative Agent of its incurring Additional Costs under Section 5.01 or has required
the Borrower to make payments for Taxes under Section 4.06 or it is unable to participate
in LIBOR Loans under Section 5.03 or (ii) any Lender does not consent to a proposed
amendment, waiver, consent or release with respect to any Credit Document that requires the consent
of each Lender by a date specified by the Borrower (or gives the Borrower written notice prior to
such date of its intention not to do so), and such amendment, waiver, consent or release has
otherwise been approved by the Required Lenders, then the Borrower may, unless such Lender has
notified the Borrower and the Administrative Agent that the circumstances giving rise to such
notice no longer apply, terminate, in whole but not in part, the Commitment of any Lender (other
than the Administrative Agent or Merrill) (the “Terminated Lender”) at any time upon five
Business Days’ prior written notice to the Terminated Lender and the Administrative Agent (such
notice referred to herein as a “Notice of Termination”).

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     (b) Replacement Lenders. In order to effect the termination of the Commitment of the
Terminated Lender, the Borrower shall: (i) obtain an agreement with one or more Lenders to increase
their Commitment and/or (ii) request any one or more other banking institutions to become parties
to this Agreement in place and instead of such Terminated Lender and agree to accept a Commitment;
provided, however, that such one or more other banking institutions are reasonably
acceptable to the Administrative Agent and become parties by executing an Assignment (the lenders
or other banking institutions that agree to accept in whole or in part the Commitment of the
Terminated Lender being referred to herein as the “Replacement Lenders”), such that the
aggregate increased and/or accepted Commitments of the Replacement Lenders under clauses (i) and
(ii) above equal the Commitment of the Terminated Lender.

     (c) Content of Notice of Termination. The Notice of Termination shall include the
name of the Terminated Lender, the date the termination will occur (the “Lender Termination
Date”), and the Replacement Lender or Replacement Lenders to which the Terminated Lender will
assign its Commitment and, if there will be more than one Replacement Lender, the portion of the
Terminated Lender’s Commitment to be assigned to each Replacement Lender.

     (d) Effecting Termination. On the Lender Termination Date, (i) the Terminated Lender
shall by execution and delivery of an Assignment assign its Commitment to the Replacement Lender or
Replacement Lenders (pro rata, if there is more than one Replacement Lender, in proportion to the
portion of the Terminated Lender’s Commitment to be assigned to each Replacement Lender) indicated
in the Notice of Termination and shall assign to the Replacement Lender or Replacement Lenders each
of its Loans (if any) then outstanding pro rata as aforesaid), (ii) the Replacement Lender or
Replacement Lenders shall purchase the participations in the Loans held by the Terminated Lender
(pro rata as aforesaid) at a price equal to the unpaid principal amount thereof plus interest and
facility and other fees accrued and unpaid to the Lender Termination Date and the Deposit of the
Terminated Lender plus any interest accrued thereon, and (iii) the Replacement Lender or
Replacement Lenders will thereupon (pro rata as aforesaid) succeed to and be substituted in all
respects for the Terminated Lender with like effect as if becoming a Lender pursuant to the terms
of Section 12.06(b), and the Terminated Lender will have the rights and benefits of an
assignor under Section 12.06(b). To the extent not in conflict, the terms of Section
12.06(b) shall supplement the provisions of this Section 5.06(d). For each assignment
made under this Section 5.06, the Replacement Lender shall pay to the Administrative Agent
the processing fee provided for in Section 12.06(b). The Borrower will be responsible for
the payment of any breakage costs associated with termination and Replacement Lenders, as set forth
in Section 5.05 and, in the case of the termination of a Lender in accordance with
Section 5.07(a)(ii), shall pay on the Lender Termination Date any amounts that would be
payable under Section 2.03(e) or (f) to the Terminated Lender as if such Terminated
Lender’s Commitment had been reduces to zero.

ARTICLE VI

Conditions Precedent

     Section 6.01 Conditions Precedent to Effectiveness of this Agreement. The
effectiveness of this Agreement is subject to the conditions precedent that the Administrative
Agent shall have received on or before such date all fees due and payable pursuant to Section

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2.04 and the following duly executed documents and satisfaction of the other
conditions provided in this Section 6.01, each of which shall be satisfactory to the
Administrative Agent in form and substance:

     (a) this Agreement and the Notes;

     (b) the Security Instruments described on Exhibit D, duly completed and executed in
sufficient number of counterparts for recording, if necessary;

     (c) an amendment of the Borrower’s UBOC Credit Agreement to permit the Acquisition and the
other Transactions;

     (d) a certificate of the Secretary or an Assistant Secretary of the Borrower setting forth (i)
resolutions of its board of directors with respect to the authorization of the Borrower to execute
and deliver this Agreement and the other Credit Documents to which it is a party and to enter into
the transactions contemplated in those documents, (ii) the officers of the Borrower (y) who are
authorized to sign this Agreement and the other Credit Documents to which the Borrower is a party
and (z) who will, until replaced by another officer or officers duly authorized for that purpose,
act as its representative for the purposes of signing documents and giving notices and other
communications in connection with this Agreement and the transactions contemplated hereby, (iii)
specimen signatures of the authorized officers, and (iv) the articles or certificate of
incorporation and bylaws of the Borrower, certified as being true and complete;

     (e) a certificate of the Secretary or an Assistant Secretary of each of the Guarantors setting
forth (i) resolutions of its board of directors with respect to the authorization of such Guarantor
to execute and deliver the Credit Documents to which it is a party and to enter into the
transactions contemplated in those documents, (ii) the officers of such Guarantor (y) who are
authorized to sign the Credit Documents to which such Guarantor is a party and (z) who will, until
replaced by another officer or officers duly authorized for that purpose, act as its representative
for the purposes of signing documents and giving notices and other communications in connection
with this Agreement and the transactions contemplated hereby, (iii) specimen signatures of the
authorized officers, and (iv) the articles or certificate of incorporation and bylaws of such
Guarantor, certified as being true and complete;

     (f) certificates of the appropriate state agencies with respect to the existence,
qualification and good standing of the Borrower and each of the Guarantors;

     (g) an opinion of (i) Haynes and Boone, LLP, counsel to the Borrower and the Guarantors, in
form and substance satisfactory to the Administrative Agent and its counsel, as to such matters
incident to the transactions herein contemplated as the Administrative Agent and its counsel may
reasonably request and (ii) Simon, Peragrine, Smith & Redfearn, L.L.P., Louisiana counsel
satisfactory to the Administrative Agent and its counsel, in form and substance satisfactory to the
Administrative Agent and its counsel, as to such matters incident to the transactions herein
contemplated as the Administrative Agent and its counsel may reasonably request including, without
limitation, opinions that all mortgage taxes have been properly paid;

     (h) a certificate of insurance coverage of the Borrower evidencing that the Borrower is
carrying insurance in accordance with Section 7.18;

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     (i) title information satisfactory to the Administrative Agent setting forth a status of title
acceptable to the Administrative Agent to the Oil and Gas Properties in the Entrada Field;

     (j) appropriate UCC search certificates reflecting no prior Liens other than those permitted
pursuant to Section 9.02;

     (k) environmental assessment reports relating to the Oil and Gas Properties of the Borrower
and the Subsidiaries as may be requested by the Administrative Agent, including environmental
audits, phase I reports or other environmental reports of any nature whatsoever (whether prepared
internally or by third party consultants); and the Administrative Agent must be satisfied with the
results of the review of such reports and environmental condition of such Oil and Gas Properties;

     (l) since December 31, 2006, there shall not have occurred any event or condition that could
reasonably be expected to have a material adverse effect on the business, assets, operations,
properties, or financial condition of the Borrower and its Subsidiaries, taken as a whole;

     (m) the Acquisition shall have been consummated in all material respects in accordance with
the terms of the Acquisition Agreement and all related agreements (without the waiver or amendment
of any material condition unless consented to by the Administrative Agent), and each of the parties
thereto shall have complied in all material respects with all covenants set forth in the
Acquisition Agreement to be complied with by it on or prior to the Closing Date (without the waiver
or amendment of any of the material terms thereof unless consented to by the Administrative Agent);

     (n) the Lenders shall have received a pro forma consolidated balance sheet of the Borrower as
of a date reasonably close to the Closing Date, after giving effect to the Transactions, which
balance sheet shall not be materially inconsistent with the forecasts previously provided to the
Lenders, except for changes occurring in the ordinary course of business; and the Administrative
Agent shall have received reasonably detailed pro forma consolidated financial projections prepared
by or on behalf of the Borrower for the Borrower and its Consolidated Subsidiaries that are not
different in a materially adverse manner as compared with those made available to the
Administrative Agent prior to the date hereof;

     (o) the Administrative Agent and the Lenders shall have received reasonably satisfactory
evidence (including satisfactory supporting schedules and other data) that on a pro forma basis
after giving effect to the Transactions (a) the ratio of (i) the PV10 of the proved reserves on the
Borrower’s and its Subsidiaries’ Oil and Gas Properties as set forth in the Borrower’s most recent
Reserve Report to (ii) the Consolidated Net Debt is not less than 2.5 to 1.0; (b) the Borrowing
Base shall equal or exceed $300,000,000; and (c) the ratio of Consolidated Net Debt to EBITDA for
the four quarter period ending December 31, 2006 is less than 3.5 to 1.0;

     (p) the Administrative Agent and the Lenders shall have received the Initial Reserve Report;

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     (q) the Administrative Agent and the Lenders shall have received evidence of Borrower’s
receipt from BP of unencumbered title to the Oil and Gas Properties acquired in connection with the
Transactions, subject only to Permitted Encumbrances (as defined in the Acquisition Agreement);

     (r) the Administrative Agent and the Lenders shall have received copies of all material
agreements reasonably requested by them with respect to the Borrower’s Oil and Gas Properties,
including operating agreements, production agreements, transportation agreements, and hedging
agreements;

     (s) the Administrative Agent and the Lenders shall have received a certificate on behalf of
the Borrower from the Borrower’s chief financial officer in form and substance reasonably
satisfactory to the Administrative Agent with respect to the solvency (on a consolidated basis) of
the Borrower and of each Credit Party immediately after the consummation of the Transactions to
occur on the Closing Date; and

     (t) such other documents as the Administrative Agent or any Lender or special counsel to the
Administrative Agent may reasonably request.

     Section 6.02 Initial and Subsequent Loans. The obligation of the Lenders to make
Loans to the Borrower upon the occasion of each borrowing hereunder is subject to the further
conditions precedent that, as of the date of such Loans and after giving effect thereto:

     (a) no Default or Event of Default shall exist; and

     (b) the representations and warranties made by the Borrower in Article VII and in the Security
Instruments shall be true on and as of the date of the making of such Loans with the same force and
effect as if made on and as of such date and following such new borrowing, except to the extent
such representations and warranties are expressly limited to an earlier date or the Required
Lenders may expressly consent in writing to the contrary.

     Each request for a borrowing by the Borrower hereunder shall constitute a certification by the
Borrower to the effect set forth in Section 6.02(b) (both as of the date of such notice
and, unless the Borrower otherwise notifies the Administrative Agent prior to the date of and
immediately following such borrowing as of the date thereof).

     Section 6.03 Conditions Precedent for the Benefit of Lenders. All conditions
precedent to the obligations of the Lenders to make any Loan are imposed hereby solely for the
benefit of the Lenders and no other Person may require satisfaction of any such condition precedent
or be entitled to assume that the Lenders will refuse to make any Loan in the absence of strict
compliance with such conditions precedent.

     Section 6.04 No Waiver. No waiver of any condition precedent shall preclude the
Administrative Agent or the Lenders from requiring such condition to be met prior to making any
subsequent Loan or preclude the Lenders from thereafter declaring that the failure of the Borrower
to satisfy such condition precedent constitutes a Default.

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ARTICLE VII

Representations and Warranties

     The Borrower represents and warrants to the Administrative Agent and the Lenders that (each
representation and warranty herein is given as of the Closing Date and shall be deemed repeated and
reaffirmed on the dates of each borrowing as provided in Section 6.02):

     Section 7.01 Corporate Existence. Each of the Borrower and each Guarantor: (i) is a
corporation duly organized, legally existing and in good standing under the laws of the
jurisdiction of its incorporation; (ii) has all requisite corporate power, and has all material
governmental licenses, authorizations, consents and approvals necessary to own its assets and carry
on its business as now being or as proposed to be conducted; and (iii) is qualified to do business
in all jurisdictions in which the nature of the business conducted by it makes such qualification
necessary and where failure so to qualify would have a Material Adverse Effect.

     Section 7.02 Financial Condition. The audited consolidated balance sheet of the
Borrower and its Consolidated Subsidiaries as at December 31, 2006 and the related consolidated
statement of income, stockholders’ equity and cash flow of the Borrower and its Consolidated
Subsidiaries for the fiscal year ended on said date, with the opinion thereon of Ernst & Young LLP
heretofore furnished to the Administrative Agent, are complete and correct in all material respects
and fairly present the consolidated financial condition of the Borrower and its Consolidated
Subsidiaries as of such date and the results of its operations for the fiscal year ending on such
date, all in accordance with GAAP, as applied on a consistent basis. Neither the Borrower nor any
Subsidiary has on the Closing Date any material Debt, contingent liabilities, liabilities for
taxes, unusual forward or long-term commitments or unrealized or anticipated losses from any
unfavorable commitments, except as referred to or reflected or provided for in the Financial
Statements or in Schedule 7.02. Since December 31, 2006, there has been no event or
circumstance that could reasonably be expected to have a Material Adverse Effect.

     Section 7.03 Litigation. Except as disclosed to the Lenders in Schedule 7.03
hereto, at the Closing Date there is no litigation, legal, administrative or arbitral proceeding,
investigation or other action of any nature pending or, to the knowledge of the Borrower threatened
against or affecting the Borrower or any Subsidiary which involves the possibility of any judgment
or liability against the Borrower or any Subsidiary not fully covered by insurance (except for
normal deductibles). There is no litigation, legal, administrative or arbitral proceeding,
investigation or other action of any nature pending or, to the knowledge of the Borrower threatened
against or affecting the Borrower or any Subsidiary that could reasonably be expected to have a
Material Adverse Effect.

     Section 7.04 No Breach. Neither the execution and delivery of this Agreement and the
other Credit Documents, nor compliance with the terms and provisions hereof will conflict with or
result in a breach of, or require any consent which has not been obtained as of the Closing Date
under, the respective charter or by laws of the Borrower or any Subsidiary, or any Governmental
Requirement or any agreement or instrument to which the Borrower or any Subsidiary is a party or by
which it is bound or to which it or its Properties are subject, or constitute a default under any
such agreement or instrument, or result in the creation or

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imposition of any Lien upon any of the revenues or assets of the Borrower or any Subsidiary
pursuant to the terms of any such agreement or instrument other than the Liens created by this
Agreement and the other Credit Documents.

     Section 7.05 Authority. The Borrower and each Guarantor have all necessary corporate
power and authority to execute, deliver and perform its obligations under this Agreement and the
other Credit Documents to which it is a party; and the execution, delivery and performance by the
Borrower and each Guarantor of this Agreement and the other Credit Documents to which it is a
party, have been duly authorized by all necessary corporate action on its part; and this Agreement
and the other Credit Documents constitute the legal, valid and binding obligations of the Borrower
and each Guarantor, enforceable in accordance with their terms.

     Section 7.06 Approvals. No authorizations, approvals or consents of, and no filings
or registrations with, any Governmental Authority are necessary for the execution, delivery or
performance by the Borrower or any Guarantor of this Agreement and the other Credit Documents or
for the validity or enforceability thereof or the consummation of the Transactions, except for the
recording and filing of the Security Instruments as required by this Agreement.

     Section 7.07 Use of Loans. The proceeds of the Loans shall be used for (a) the
acquisition of the Entrada Field and related expenses, (b) exploration and development of Oil and
Gas Properties in the Entrada Field acquired, and (c) general corporate purposes. None of the
Guarantors or the Borrower is engaged principally, or as one of its important activities, in the
business of extending credit for the purpose, whether immediate, incidental or ultimate, of buying
or carrying margin stock (within the meaning of Regulation T, U or X of the Board of Governors of
the Federal Reserve System) and no part of the proceeds of any Loan hereunder will be used to buy
or carry any margin stock.

     Section 7.08 ERISA.

     (a) The Borrower, each Subsidiary and each ERISA Affiliate have complied in all material
respects with ERISA and, where applicable, the Code regarding each Plan.

     (b) Each Plan is, and has been, maintained in substantial compliance with ERISA and, where
applicable, the Code.

     (c) No act, omission or transaction has occurred which could result in imposition on the
Borrower, any Subsidiary or any ERISA Affiliate (whether directly or indirectly) of (i) either a
civil penalty assessed pursuant to section 502(c), (i) or (l) of ERISA or a tax imposed pursuant to
Chapter 43 of Subtitle D of the Code or (ii) breach of fiduciary duty liability damages under
section 409 of ERISA.

     (d) No Plan (other than a defined contribution plan) or any trust created under any such Plan
has been terminated since September 2, 1974. No liability to the PBGC (other than for the payment
of current premiums which are not past due) by the Borrower, any Subsidiary or any ERISA Affiliate
has been or is expected by the Borrower, any Subsidiary or any ERISA Affiliate to be incurred with
respect to any Plan. No ERISA Event with respect to any Plan has occurred.

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     (e) Full payment when due has been made of all amounts which the Borrower, any Subsidiary or
any ERISA Affiliate is required under the terms of each Plan or applicable law to have paid as
contributions to such Plan, and no accumulated funding deficiency (as defined in section 302 of
ERISA and section 412 of the Code), whether or not waived, exists with respect to any Plan.

     (f) The actuarial present value of the benefit liabilities under each Plan which is subject to
Title IV of ERISA does not, as of the end of the Borrower’s most recently ended fiscal year, exceed
the current value of the assets (computed on a plan termination basis in accordance with Title IV
of ERISA) of such Plan allocable to such benefit liabilities. The term “actuarial present value of
the benefit liabilities” shall have the meaning specified in section 4041 of ERISA.

     (g) None of the Borrower, any Subsidiary or any ERISA Affiliate sponsors, maintains, or
contributes to an employee welfare benefit plan, as defined in section 3(1) of ERISA, including,
without limitation, any such plan maintained to provide benefits to former employees of such
entities, that may not be terminated by the Borrower, a Subsidiary or any ERISA Affiliate in its
sole discretion at any time without any material liability.

     (h) None of the Borrower, any Subsidiary or any ERISA Affiliate sponsors, maintains or
contributes to, or has at any time in the preceding six calendar years, sponsored, maintained or
contributed to, any Multiemployer Plan.

     (i) None of the Borrower, any Subsidiary or any ERISA Affiliate is required to provide
security under section 401(a)(29) of the Code due to a Plan amendment that result in an increase in
current liability for the Plan.

     Section 7.09 Taxes. Except as set out in Schedule 7.09, each of the Borrower
and its Subsidiaries has filed all United States Federal income tax returns and all other tax
returns which are required to be filed by them and have paid all material taxes due pursuant to
such returns or pursuant to any assessment received by the Borrower or any Subsidiary. The
charges, accruals and reserves on the books of the Borrower and its Subsidiaries in respect of
taxes and other governmental charges are, in the opinion of the Borrower, adequate. No tax lien
has been filed and, to the knowledge of the Borrower, no claim is being asserted with respect to
any such tax, fee or other charge.

     Section 7.10 Titles, Etc.

     (a) Except as set out in Schedule 7.10, each of the Borrower and the Guarantors has
good and defensible title to its material (individually or in the aggregate) Properties, free and
clear of all Liens, except Liens permitted by Section 9.02. Except as set forth in
Schedule 7.10, after giving full effect to the Excepted Liens, the Borrower owns at least
the net interests in production attributable to the Hydrocarbon Interests reflected in the most
recently delivered Reserve Report and the ownership of such Properties does not in any material
respect obligate the Borrower to bear the costs and expenses relating to the maintenance,
development and operations of each such Property in an amount in excess of the working interest of
each Property set forth in the most recently delivered Reserve Report without a corresponding
increase in net

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revenue interest for such Properties. All information contained in the most recently
delivered Reserve Report is true and correct in all material respects as of the date thereof.

     (b) All material leases and agreements necessary for the conduct of the business of the
Borrower and the Guarantors are valid and subsisting, in full force and effect and there exists no
default or event or circumstance which with the giving of notice or the passage of time or both
would give rise to a default under any such lease or agreement, which would affect in any material
respect the conduct of the business of the Borrower and the Guarantors.

     (c) The rights, Properties and other assets presently owned, leased or licensed by the
Borrower and the Guarantors including, without limitation, all easements and rights of way, include
all rights, Properties and other assets reasonably necessary to permit the Borrower and the
Guarantors to conduct their business in all material respects in the same manner as its business
has been conducted prior to the Closing Date.

     (d) All of the assets and Properties of the Borrower and the Guarantors which are reasonably
necessary for the operation of its business are in good working condition and are maintained in
accordance with customary industry standards.

     Section 7.11 No Material Misstatements. No written information, statement, exhibit,
certificate, document or report furnished to the Administrative Agent and the Lenders (or any of
them) by the Borrower or any Subsidiary in connection with the negotiation of this Agreement
contained any material misstatement of fact or omitted to state a material fact or any fact
necessary to make the statement contained therein not materially misleading in the light of the
circumstances in which made and with respect to the Borrower and its Subsidiaries taken as a whole.
There is no fact peculiar to the Borrower or any Subsidiary which has a Material Adverse Effect or
in the future is reasonably likely to have (so far as the Borrower can now foresee) a Material
Adverse Effect and which has not been disclosed in writing to the Administrative Agent and the
Lenders by or on behalf of the Borrower or any Subsidiary prior to, or on, the Closing Date in
connection with the transactions contemplated hereby.

     Section 7.12 Investment Company Act. Neither the Borrower nor any Subsidiary is an
“investment company” or a company “controlled” by an “investment company,” within the meaning of
the Investment Company Act of 1940, as amended.

     Section 7.13 Subsidiaries. Except as set forth on Schedule 7.13, as of the
Closing Date the Borrower has no Subsidiaries.

     Section 7.14 Location of Business, Offices and Inventory. On the Closing Date, the
Borrower’s principal place of business and chief executive offices are located at the address set
forth in Schedule 12.02. On the Closing Date, the principal place of business and chief
executive office of each Subsidiary are located at the address for chief executive office stated on
Schedule 7.13. Schedule 7.13 sets forth as of the Closing Date each of the
jurisdictions where the Borrower and its Subsidiaries are qualified to do business.

     Section 7.15 Defaults. Neither the Borrower nor any Subsidiary is in default nor has
any event or circumstance occurred which, but for the expiration of any applicable grace period or
the giving of notice, or both, would constitute a default under any material agreement or

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instrument to which the Borrower or any Subsidiary is a party or by which the Borrower or any
Subsidiary is bound which default would have a Material Adverse Effect. No Default hereunder has
occurred and is continuing.

     Section 7.16 Environmental Matters. Except (i) as provided in Schedule 7.16
or (ii) as would not have a Material Adverse Effect (or with respect to (c), (d) and (e) below,
where the failure to take such actions would not have a Material Adverse Effect):

     (a) Neither any Property of the Borrower or any Subsidiary nor the operations conducted
thereon violate any order or requirement of any court or Governmental Authority or any
Environmental Laws;

     (b) Without limitation of clause (a) above, no Property of the Borrower or any Subsidiary nor
the operations currently conducted thereon or, to the best knowledge of the Borrower, by any prior
owner or operator of such Property or operation, are in violation of, or subject to any existing,
pending or threatened action, suit, investigation, inquiry or proceeding by or before any court or
Governmental Authority or to any remedial obligations under, any Environmental Laws;

     (c) All notices, permits, licenses or similar authorizations, if any, required to be obtained
or filed in connection with the operation or use of any and all Property of the Borrower and each
Subsidiary, including without limitation past or present treatment, storage, disposal or release of
a hazardous substance or solid waste into the environment, have been duly obtained or filed and are
in full force and effect, and the Borrower and each Subsidiary are in compliance with the terms and
conditions of all such notices, permits, licenses and similar authorizations;

     (d) All hazardous substances, solid waste, and oil and gas exploration and production wastes,
if any, generated at any and all Property of the Borrower or any Subsidiary have in the past been
transported, treated and disposed of in accordance with Environmental Laws and so as not to pose an
imminent and substantial endangerment to public health or welfare or the environment, and, to the
best knowledge of the Borrower, all such transport carriers and treatment and disposal facilities
have been and are operating in compliance with Environmental Laws and so as not to pose an imminent
and substantial endangerment to public health or welfare or the environment or to give rise to any
liability or remedial obligation under any Environmental Law, and are not the subject of any
existing, pending or threatened action, investigation or inquiry by any Governmental Authority in
connection with any Environmental Laws;

     (e) The Borrower has taken all steps reasonably necessary to determine and has determined that
no hazardous substances, solid waste, or oil and gas exploration and production wastes, have been
disposed of or otherwise released and there has been no threatened release of any hazardous
substances on or to any Property of the Borrower or any Subsidiary except in compliance with, and
so as not to give rise to any liability or remedial obligation under any, Environmental Laws and
so as not to pose an imminent and substantial endangerment to public health or welfare or the
environment;

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     (f) To the extent applicable, all Property of the Borrower and each Subsidiary currently
satisfies all design, operation, and equipment requirements imposed by the OPA or scheduled as of
the Closing Date to be imposed by OPA during the term of this Agreement, and the Borrower does not
have any reason to believe that such Property, to the extent subject to OPA, will not be able to
maintain compliance with the OPA requirements during the term of this Agreement;

     (g) Neither the Borrower nor any Subsidiary has any known contingent liability in connection
with any release or threatened release of any oil, hazardous substance or solid waste into the
environment; and

     (h) Borrower has made available to the Lenders all environmental reports, assessments, and
other documents of which it is aware that describe or relate to issues of compliance or
noncompliance with or liability or obligations under Environmental Laws with respect to the
Borrower, any Subsidiary, or any of their Property, where such issues could be reasonably
anticipated to have a Material Adverse Effect.

     Section 7.17 Compliance with the Law. Neither the Borrower nor any Subsidiary has
violated any Governmental Requirement or failed to obtain any license, permit, franchise or other
governmental authorization necessary for the ownership of any of its Properties or the conduct of
its business, which violation or failure would have (in the event such violation or failure were
asserted by any Person through appropriate action) a Material Adverse Effect. Except for such acts
or failures to act as would not have a Material Adverse Effect, the Oil and Gas Properties (and
properties unitized therewith) have been maintained, operated and developed in a good and
workmanlike manner and in conformity with all applicable laws and all rules, regulations and orders
of all duly constituted authorities having jurisdiction and in conformity with the provisions of
all leases, subleases or other contracts comprising a part of the Hydrocarbon Interests and other
contracts and agreements forming a part of the Oil and Gas Properties; specifically in this
connection, (i) after the Closing Date, no Oil and Gas Property is subject to having allowable
production reduced below the full and regular allowable (including the maximum permissible
tolerance) because of any overproduction (whether or not the same was permissible at the time)
prior to the Closing Date and (ii) none of the wells comprising a part of the Oil and Gas
Properties (or properties unitized therewith) are deviated from the vertical more than the maximum
permitted by applicable laws, regulations, rules and orders, and such wells are, in fact, bottomed
under and are producing from, and the well bores are wholly within, the Oil and Gas Properties (or
in the case of wells located on properties unitized therewith, such unitized properties).

     Section 7.18 Insurance. Schedule 7.18 attached hereto contains an accurate
and complete description of all material policies of fire, liability, workmen’s compensation and
other forms of insurance owned or held by the Borrower and each Subsidiary. All such policies are
in full force and effect, all premiums with respect thereto covering all periods up to and
including the date of the closing have been paid, and no notice of cancellation or termination has
been received with respect to any such policy. Such policies are sufficient for compliance with
all requirements of law and of all material agreements to which the Borrower or any Subsidiary is a
party; are valid, outstanding and enforceable policies; provide adequate insurance coverage in at
least such amounts and against at least such risks (but including in any event public liability) as

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are customarily insured against in the same general area by companies engaged in the same or a
similar business for the assets and operations of the Borrower and each Subsidiary; will remain in
full force and effect through the respective dates set forth in Schedule 7.18 without the
payment of additional premiums; and will not in any way be affected by, or terminate or lapse by
reason of, the transactions contemplated by this Agreement. Schedule 7.18 identifies all
material risks, if any, which the Borrower and its Subsidiaries and their respective Board of
Directors or officers have designated as being self insured. Neither the Borrower nor any
Subsidiary has been refused any insurance with respect to its assets or operations, nor has its
coverage been limited below usual and customary policy limits, by an insurance carrier to which it
has applied for any such insurance or with which it has carried insurance during the last three
years.

     Section 7.19 Hedging Agreements. Schedule 7.19 sets forth, as of the Closing
Date, a true and complete list of all Hedging Agreements (including commodity price swap
agreements, forward agreements (for terms in excess of thirty days) or contracts of sale which
provide for prepayment for deferred shipment or delivery of oil, gas or other commodities) of the
Borrower and each Subsidiary, the material terms thereof (including the type, term, effective date,
termination date and notional amounts or volumes), the net mark to market value thereof, all credit
support agreements relating thereto (including any margin required or supplied), and the counter
party to each such agreement.

     Section 7.20 Restriction on Liens. Neither the Borrower nor any of the Guarantors is
a party to any agreement or arrangement (other than this Agreement, the Security Instruments and
the agreements and instruments governing the Senior Notes and the UBOC Credit Agreement), or
subject to any order, judgment, writ or decree, which either restricts or purports to restrict its
ability to grant Liens to other Persons on or in respect of their respective assets or Properties.

     Section 7.21 Material Agreements. Set forth on Schedule 7.21 hereto is a
complete and correct list of all material agreements, leases, indentures, purchase agreements,
obligations in respect of letters of credit, guarantees, joint venture agreements, and other
instruments in effect or to be in effect as of the Closing Date (other than Hedging Agreements and
agreements relating to Debt of the type described in clause (c) in the definition of Debt or clause
(g) in the definition of Debt to the extent relating to primary obligations of the type described
in clause (c) in the definition of Debt) providing for, evidencing, securing or otherwise relating
to any Debt of the Borrower or any of its Subsidiaries, and all obligations of the Borrower or any
of its Subsidiaries to issuers of surety or appeal bonds issued for account of the Borrower or any
such Subsidiary, and such list correctly sets forth the names of the debtor or lessee and creditor
or lessor with respect to the Debt or lease obligations outstanding or to be outstanding and the
Property subject to any Lien securing such Debt or lease obligation. The Borrower has heretofore
delivered to the Administrative Agent a complete and correct copy of all such material credit
agreements, indentures, purchase agreements, contracts, letters of credit, guarantees, joint
venture agreements, or other instruments, including any modifications or supplements thereto, as in
effect on the Closing Date, which the Administrative Agent has requested.

     Section 7.22 Labor Matters. Except as could not, individually or in the aggregate, be
reasonably expected to have a Material Adverse Effect, there (a) is no unfair labor practice
complaint pending against the Borrower or any of its Subsidiaries or, to the knowledge of any
Responsible Officer of a Credit Party, threatened against any of them, before the National Labor

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Relations Board (or any successor United States federal agency that administers the National
Labor Relations Act), and no grievance or arbitration proceeding arising out of or under any
collective bargaining agreement is so pending against the Borrower or any of its Subsidiaries or,
to the knowledge of any Responsible Officer of a Credit Party, threatened against any of them, (b)
are no strikes, lockouts, slowdowns or stoppage against the Borrower or any Subsidiary pending or,
to the knowledge of any Credit Party, threatened and (c) no union representation petition existing
with respect to the employees of the Borrower or any of its Subsidiaries and no union organizing
activities are taking place. The hours worked by and payments made to employees of the Borrower
and the Subsidiaries have not been in violation of the Fair Labor Standards Act or any other
applicable federal, state, provincial, local or foreign law dealing with such matters, except where
such violation, either individually or in the aggregate, could not reasonably be expected to have a
Material Adverse Effect. All payments due from the Borrower or any Subsidiary, or for which any
claim may be made against the Borrower or any Subsidiary, on account of wages and employee health
and welfare insurance and other benefits, have been paid or accrued as a liability on the books of
the Borrower or such Subsidiary, except where the failure to do the same, either individually or in
the aggregate, could not reasonably be expected to result in a Material Adverse Effect.

     Section 7.23 Foreign Assets Control Regulations, etc. Neither the borrowing of the
Loans by the Borrower nor the Borrower’s use of the proceeds thereof will violate, and the Borrower
and its Subsidiaries is in compliance with, (a) the Trading with the Enemy Act, as amended, or any
of the foreign assets control regulations of the United States Treasury Department (31 CFR,
Subtitle B, Chapter V, as amended) or any enabling legislation or executive order relating thereto
and (b) the Uniting And Strengthening America By Providing Appropriate Tools Required To Intercept
And Obstruct Terrorism (USA Patriot Act of 2001). No part of the proceeds of the Loans will be
used, directly or indirectly, for any payments to any governmental official or employee, political
party, official of a political party, candidate for political office, or anyone else acting in an
official capacity, in order to obtain, retain or direct business or obtain any improper advantage,
in violation of the United States Foreign Corrupt Practices Act of 1977, as amended.

ARTICLE VIII

Affirmative Covenants

     The Borrower covenants and agrees that, so long as any of the Commitments are in effect and
until payment in full of all Loans hereunder, all interest thereon and all other amounts payable by
the Borrower hereunder:

     Section 8.01 Reporting Requirements. The Borrower shall deliver, or shall cause to be
delivered, to the Administrative Agent with sufficient copies of each for the Lenders:

     (a) Annual Financial Statements. As soon as available and in any event within 90 days
after the end of each fiscal year of the Borrower, the audited consolidated statement of income,
stockholders’ equity, changes in financial position and cash flows of the Borrower and its
Consolidated Subsidiaries for such fiscal year, and the related consolidated balance sheet of the
Borrower and its Consolidated Subsidiaries as at the end of such fiscal year, and setting forth

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in each case in comparative form the corresponding figures for the preceding fiscal year, and
accompanied by the related opinion of independent public accountants of recognized national
standing reasonably acceptable to the Administrative Agent which opinion shall state that said
financial statements fairly present the consolidated and consolidating financial condition and
results of operations of the Borrower and its Consolidated Subsidiaries as at the end of, and for,
such fiscal year and that such financial statements have been prepared in accordance with GAAP,
except for such changes in such principles with which the independent public accountants shall have
concurred and such opinion shall not contain a “going concern” or like qualification or exception,
and a certificate of such accountants stating that, in making the examination necessary for their
opinion, they obtained no knowledge, except as specifically stated, of any Default.

     (b) Quarterly Financial Statements. As soon as available and in any event within 45
days after the end of each of the first three fiscal quarterly periods of each fiscal year of the
Borrower, consolidated statements of income, changes in financial position and cash flows of the
Borrower and its Consolidated Subsidiaries for such period and for the period from the beginning of
the respective fiscal year to the end of such period, and the related balance sheet as at the end
of such period, and setting forth in each case in comparative form the corresponding figures for
the corresponding period in the preceding fiscal year, accompanied by the certificate of a
Responsible Officer, which certificate shall state that said financial statements fairly present
the consolidated financial condition and results of operations of the Borrower and its Consolidated
Subsidiaries in accordance with GAAP, as at the end of, and for, such period (subject to normal
year-end audit adjustments).

     (c) Notice of Default, Etc. Promptly after the Borrower knows that any Default or any
event or circumstance that could reasonably be expected to have a Material Adverse Effect has
occurred, a notice of such Default or Material Adverse Effect, describing the same in reasonable
detail and the action the Borrower proposes to take with respect thereto.

     (d) Other Accounting Reports. Promptly upon receipt thereof, a copy of each other
material report or letter submitted to the Borrower or any Subsidiary by independent accountants in
connection with any annual, interim or special audit made by them of the books of the Borrower and
its Subsidiaries, and a copy of any response by the Borrower or any Subsidiary of the Borrower, or
the Board of Directors of the Borrower or any Subsidiary of the Borrower, to such letter or report.

     (e) SEC Filings, Etc. Promptly upon its becoming available, each financial statement,
report, notice or proxy statement sent by the Borrower to stockholders generally and each regular
or periodic report and any registration statement, prospectus or material written communication
(other than transmittal letters) in respect thereof filed by the Borrower with or received by the
Borrower in connection therewith from any securities exchange or the SEC or any successor agency.

     (f) Notices Under Other Loan Agreements. Promptly after the furnishing thereof,
copies of any statement, report or notice furnished to any Person pursuant to the terms of any
indenture, loan or credit or other similar agreement, other than this Agreement and not otherwise
required to be furnished to the Lenders pursuant to any other provision of this Section
8.01.

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     (g) Other Matters. From time to time such other information regarding the business,
affairs or financial condition of the Borrower or any Subsidiary (including, without limitation,
any Plan or Multiemployer Plan, any reports or other information required to be filed under ERISA),
and any operating reports with respect to the operation of Oil and Gas Properties as any Lender or
the Administrative Agent may reasonably request.

     (h) Hedging Agreements. As soon as available and in any event within forty five days
after the last day of each calendar quarter, a report, in form and substance satisfactory to the
Administrative Agent, setting forth as of the last Business Day of such calendar quarter a true and
complete list of all Hedging Agreements (including commodity price swap agreements, forward
agreements with terms in excess of thirty days or contracts of sale which provide for prepayment
for deferred shipment or delivery of oil, gas or other commodities) of the Borrower and each
Subsidiary, the material terms thereof (including the type, term, effective date, termination date
and notional amounts or volumes), the net mark to market value therefor, any new credit support
agreements relating thereto not listed on Schedule 7.20, any margin required or supplied
under any credit support document, and the counter party to each such agreement.

     (i) Monthly Production Reports. As soon as available and in any event within 45 days
after the end of each month, a report in form and substance satisfactory to the Administrative
Agent prepared by the Borrower for each of its producing Oil and Gas Properties constituting
Collateral detailing for such month production, revenue, expense, production taxes and price
information;

     (j) Annual Projected Budget. At the time it furnishes each set of financial
statements pursuant to paragraph (a) above, an annual operating budget for the Borrower and its
Subsidiaries in form and substance reasonably acceptable to the Administrative Agent, which budget
shall include revenues, expenses and capital expenditures (detailing the projected capital
expenditures with respect to drilling (both development and exploration), leasehold, geological and
geophysical, capitalized general and administrative expenses, and capitalized interest) for the
following fiscal year.

     (k) Sales and Leasebacks. Prompt written notice if the Borrower or any Subsidiary
enters into any arrangement permitted by Section 9.05.

     (l) Future Subsidiaries. (i) Prompt written notice if the Borrower or any Subsidiary
forms any new Subsidiary that is not a Guarantor under this Agreement and (ii) a quarterly summary
(due on the same days that quarterly financial statements are required to be delivered pursuant to
Section 8.01(b) above) of any changes in loans, advances or investments by the Borrower or
any Guarantor in or to any Subsidiary that is not a Guarantor under this Agreement.

The Borrower will furnish to the Administrative Agent, at the time it furnishes each set of
financial statements pursuant to paragraph (a) or (b) above, a certificate substantially in the
form of Exhibit C executed by a Responsible Officer (i) certifying as to the matters set
forth therein and stating that no Default has occurred and is continuing (or, if any Default has
occurred and is continuing, describing the same in reasonable detail), and (ii) setting forth in
reasonable detail the computations necessary to determine whether the Borrower is in compliance
with Sections 9.10, 9.11 and 9.12 as of the end of the respective fiscal quarter or fiscal
year.

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     Section 8.02 Litigation. The Borrower shall promptly give to the Administrative Agent
notice of: (a) all legal or arbitral proceedings, and of all proceedings before any Governmental
Authority affecting the Borrower or any Subsidiary, except proceedings which, if adversely
determined, could not reasonably be expected to have a Material Adverse Effect and (b) of any
litigation or proceeding against or adversely affecting in any material respect the Borrower or any
Subsidiary in which the amount involved is not covered in full by insurance (subject to normal and
customary deductibles and for which the insurer has not assumed the defense) or injunctive or
similar relief is sought. The Borrower will, and will cause each of its Subsidiaries to, promptly
notify the Administrative Agent and each of the Lenders of any claim, judgment, Lien (other than
those permitted under Section 9.02) or other encumbrance affecting any producing Oil and
Gas Property of the Borrower or any Subsidiary (other than any Entrada Asset) if the value of the
claim, judgment, Lien or other encumbrance affecting such Property shall exceed $2,000,000 and any
Entrada Asset if the value of the claim, judgment, Lien, or other encumbrance affecting such
Property shall exceed $500,000.

     Section 8.03 Maintenance, Etc.

     (a) Generally. The Borrower shall and shall cause each Subsidiary to: preserve and
maintain its corporate existence and all of its material rights, privileges and franchises; keep
books of record and account in which full, true and correct entries will be made of all dealings or
transactions in relation to its business and activities; comply with all Governmental Requirements
if failure to comply with such requirements will have a Material Adverse Effect; pay and discharge
all taxes, assessments and governmental charges or levies imposed on it or on its income or profits
or on any of its Property prior to the date on which penalties attach thereto, except for any such
tax, assessment, charge or levy the payment of which is being contested in good faith and by proper
proceedings and against which adequate reserves are being maintained; upon reasonable notice,
permit representatives of the Administrative Agent or any Lender, during normal business hours, to
examine, copy and make extracts from its books and records, to inspect its Properties, and to
discuss its business and affairs with its officers, all to the extent reasonably requested by such
Lender or the Administrative Agent (as the case may be); and keep, or cause to be kept, insured by
financially sound and reputable insurers all Property of a character usually insured by Persons
engaged in the same or similar business similarly situated against loss or damage of the kinds and
in the amounts customarily insured against by such Persons and carry such other insurance as is
usually carried by such Persons. The Borrower shall promptly obtain endorsements to any insurance
policies covering the Collateral naming “Merrill Lynch Capital Corporation, as Administrative Agent
for the Beneficiaries” as joint loss payee and containing provisions that such policies will not be
canceled without 30 days prior written notice having been given by the insurance company to the
Administrative Agent.

     (b) Proof of Insurance. Contemporaneously with the delivery of the financial
statements required by Section 8.01(a) to be delivered for each year, the Borrower will
furnish or cause to be furnished to the Administrative Agent and the Lenders a certificate of
insurance coverage from the insurer in form and substance satisfactory to the Administrative Agent
and, if requested, will furnish the Administrative Agent and the Lenders copies of the applicable
policies.

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     (c) Oil and Gas Properties. The Borrower will and will cause each Subsidiary to, at
its own expense, (i) do or cause to be done all things reasonably necessary to preserve and keep in
good repair, working order and efficiency all of its Oil and Gas Properties and other material
Properties including, without limitation, all equipment, machinery and facilities, and from time to
time will make all the reasonably necessary repairs, renewals and replacements so that at all times
the state and condition of its Oil and Gas Properties and other material Properties will be
preserved and maintained in accordance with customary industry standards, except to the extent a
portion of such Properties is no longer capable of producing Hydrocarbons in economically
reasonable amounts and (ii) maintain good and defensible title to its material (individually and in
the aggregate) Properties, free and clear of all Liens, except Liens permitted by Section
9.02. The Borrower will and will cause each Subsidiary to promptly: (i) pay and discharge, or
make reasonable and customary efforts to cause to be paid and discharged, all delay rentals,
royalties, expenses and indebtedness accruing under the material leases or other agreements
affecting or pertaining to its Oil and Gas Properties, (ii) perform or make reasonable and
customary efforts to cause to be performed, in accordance with customary industry standards, the
material obligations required by each and all of the material assignments, deeds, leases, sub
leases, contracts and agreements affecting its interests in its Oil and Gas Properties and other
material Properties, and (iii) will and will cause each Subsidiary to do all other things
reasonably necessary to keep unimpaired, except for Liens permitted under Section 9.02, its
rights with respect to its Oil and Gas Properties and other material Properties and prevent any
material forfeiture thereof or default thereunder, except to the extent a portion of such
Properties is no longer capable of producing Hydrocarbons in economically reasonable amounts and
except for dispositions permitted by Section 9.13. The Borrower will and will cause each
Subsidiary to operate its Oil and Gas Properties and other material Properties or cause or make
reasonable and customary efforts to cause such Oil and Gas Properties and other material Properties
to be operated in a reasonably prudent manner in accordance with the customary practices of the
industry and in compliance in all material respects with all applicable contracts and agreements
and in compliance in all material respects with all Governmental Requirements. The Borrower will
not amend, waive, or release any such contract if such amendment, waiver or release could
reasonably be expected to cause a Material Adverse Effect.

     Section 8.04 Environmental Matters.

     (a) Establishment of Procedures. The Borrower will and will cause each Subsidiary to
establish and implement such procedures as may be reasonably necessary to continuously determine
and assure that any failure of the following could not reasonably be expected to have a Material
Adverse Effect: (i) all Property of the Borrower and its Subsidiaries and the operations conducted
thereon and other activities of the Borrower and its Subsidiaries are in compliance with and do not
violate the requirements of any Environmental Laws, (ii) no oil, hazardous substances or solid
wastes are disposed of or otherwise released on or to any Property owned by any such party except
in compliance with Environmental Laws, (iii) no hazardous substance will be released on or to any
such Property in a quantity equal to or exceeding that quantity which requires reporting pursuant
to Section 103 of CERCLA or other applicable Environmental Laws, and (iv) no oil, oil and gas
exploration and production wastes or hazardous substance is released on or to any such Property so
as to violate or give rise to liability under any Environmental Laws or to pose an imminent and
substantial endangerment to public health or welfare or the environment.

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     (b) Notice of Action. The Borrower will promptly notify the Administrative Agent and
the Lenders in writing of any threatened action, investigation or inquiry by any Governmental
Authority of which the Borrower has knowledge in connection with any Environmental Laws, excluding
routine testing, monitoring and corrective action.

     (c) Future Acquisitions. The Borrower will and will cause each Subsidiary to provide
environmental audits and tests as reasonably requested by the Administrative Agent or the Lenders
(or as otherwise required to be obtained by the Administrative Agent or the Lenders by any
Governmental Authority) in connection with any material Oil and Gas Properties constituting
Collateral.

     Section 8.05 Further Assurances.

     (a) The Borrower will and will cause each Guarantor to cure promptly any defects in the
creation and issuance of the Notes and the execution and delivery of the Security Instruments and
this Agreement. The Borrower at its expense will and will cause each Guarantor to promptly execute
and deliver to the Administrative Agent upon request all such other documents, agreements and
instruments to comply with or accomplish the covenants and agreements of the Borrower or any
Guarantor, as the case may be, in the Security Instruments and this Agreement, or to further
evidence and more fully describe the collateral intended as security for the Notes, or to correct
any omissions in the Security Instruments, or to state more fully the security obligations set out
herein or in any of the Security Instruments, or to perfect, protect or preserve any Liens created
pursuant to any of the Security Instruments, or to make any recordings, to file any notices or
obtain any consents, all as may be necessary or appropriate in connection therewith.

     (b) The Borrower will, and will cause CPOC to, use reasonable efforts in accordance with
customary industry standards to perfect CPOC’s rights and security interests under the Joint
Operating Agreement.

     (c) Within 20 days after the Closing Date, the title opinions delivered under Section
6.01(i) on the Closing Date shall be brought down to reflect the consummation of the
transactions and the release of Liens on the Closing Date.

     Section 8.06 Performance of Obligations. The Borrower will pay the Notes according to
the reading, tenor and effect thereof; and the Borrower will and will cause each Subsidiary to do
and perform every act and discharge all of the obligations to be performed and discharged by them
under the Security Instruments and this Agreement, at the time or times and in the manner
specified.

     Section 8.07 Engineering Reports.

     (a) Not less than 30 days prior to April 1 and October 1 of each year, commencing with October
1, 2008, the Borrower shall furnish to the Administrative Agent and the Lenders a Reserve Report.
The Reserve Report due 30 days prior to October 1 of each year shall be for reserves attributable
to the Borrower and its Subsidiaries’ proved Oil and Gas Properties in the Entrada Field or
otherwise constituting Collateral as of the previous July 1 and be prepared by or under the
supervision of the chief engineer of the Borrower who shall certify such Reserve

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Report to be true and accurate and to have been prepared in all material respects in
accordance with the procedures (other than forecasted product prices) used in the immediately
preceding Reserve Report. The Reserve Report due 30 days prior to April 1 of each year shall be
for reserves attributable to the Borrower and its Subsidiaries’ proved Oil and Gas Properties in
the Entrada Field or otherwise constituting Collateral as of the previous January 1 and be prepared
by Huddleston & Co., Inc. or another certified independent petroleum engineers or other independent
petroleum consultant(s) acceptable to the Administrative Agent.

     (b) In the event of an unscheduled redetermination, the Borrower shall furnish to the
Administrative Agent and the Lenders a Reserve Report prepared by or under the supervision of the
chief engineer of the Borrower who shall certify such Reserve Report to be true and accurate and to
have been prepared in all material respects in accordance with the procedures (other than
forecasted product prices) used in the immediately preceding Reserve Report. For any unscheduled
redetermination requested by the Required Lenders or the Borrower pursuant to Section
2.08(d)), the Borrower shall provide such Reserve Report with an “as of” date as required by
the Required Lenders as soon as possible, but in any event no later than 30 days following the
receipt of the request by the Administrative Agent.

     (c) With the delivery of each Reserve Report, the Borrower shall provide to the Administrative
Agent and the Lenders, a certificate from a Responsible Officer certifying that, to the best of his
knowledge and in all material respects: (i) the information contained in the Reserve Report and any
other information delivered in connection therewith is true and correct and (ii) the Borrower owns
good and defensible title to the Oil and Gas Properties evaluated in such Reserve Report and such
Properties are free of all Liens except for Liens permitted by Section 9.02.

     Section 8.08 Collateral.

     (a) Collateral. The Obligations shall be secured by a perfected first priority Lien
(subject only to Liens permitted under Section 9.02 entitled to priority under applicable
law or under Section 9.02) granted to the Administrative Agent for the benefit of the
Beneficiaries (i) in the Entrada Field and related equipment, accounts receivable, general
intangibles and other assets related thereto and any proceeds therefrom (collectively, the
“Entrada Assets”) and (ii) the capital stock of any special purpose subsidiary of the
Borrower formed to hold title to the Borrower’s ownership interests only in the Entrada Field,
except in each case for those properties and assets as to which the Administrative Agent shall
determine in its sole discretion that the costs of obtaining such security interest are excessive
in relation to the value of the security to be afforded thereby.

     (b) Title Information. Concurrently with the granting of the Lien or other action
referred to in Section 8.08(a) above, the Borrower will provide to the Administrative Agent
title information in form and substance satisfactory to the Administrative Agent in its sole
discretion with respect to the Borrower’s interests in the Collateral.

     (c) Legal Opinions. Also, promptly after the filing of any new Security Instrument in
any state, upon the reasonable request of the Administrative Agent, the Borrower will provide to
the Administrative Agent an opinion addressed to the Administrative Agent for the benefit of the

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Lenders in form and substance satisfactory to the Administrative Agent in its sole discretion
from counsel acceptable to Administrative Agent, stating that the Security Instrument is valid,
binding and enforceable in accordance with its terms in legally sufficient form for such
jurisdiction, and the means by which such Security Instrument will perfect the Lien created
thereby.

     Section 8.09 ERISA Information and Compliance. The Borrower will promptly furnish and
will cause the Subsidiaries and any ERISA Affiliate to promptly furnish to the Administrative Agent
with sufficient copies to the Lenders (a) promptly after the filing thereof with the United States
Secretary of Labor, the Internal Revenue Service or the PBGC, copies of each annual and other
report with respect to each Plan or any trust created thereunder, (b) immediately upon becoming
aware of the occurrence of any ERISA Event or of any “prohibited transaction,” as described in
section 406 of ERISA or in section 4975 of the Code, in connection with any Plan or any trust
created thereunder, a written notice signed by a Responsible Officer specifying the nature thereof,
what action the Borrower, the Subsidiary or the ERISA Affiliate is taking or proposes to take with
respect thereto, and, when known, any action taken or proposed by the Internal Revenue Service, the
Department of Labor or the PBGC with respect thereto, and (c) immediately upon receipt thereof,
copies of any notice of the PBGC’s intention to terminate or to have a trustee appointed to
administer any Plan. With respect to each Plan (other than a Multiemployer Plan), the Borrower
will, and will cause each Subsidiary and ERISA Affiliate to, (i) satisfy in full and in a timely
manner, without incurring any late payment or underpayment charge or penalty and without giving
rise to any lien, all of the contribution and funding requirements of section 412 of the Code
(determined without regard to subsections (d), (e), (f) and (k) thereof) and of section 302 of
ERISA (determined without regard to sections 303, 304 and 306 of ERISA), and (ii) pay, or cause to
be paid, to the PBGC in a timely manner, without incurring any late payment or underpayment charge
or penalty, all premiums required pursuant to sections 4006 and 4007 of ERISA.

     Section 8.10 Inspection; Books and Records. Upon reasonable notice, the Borrower will
and will cause each Guarantor to permit the Administrative Agent and any Lender or any of their
respective agents or representatives thereof, during normal business hours and subject to the terms
of any applicable confidentiality or non-disclosure agreements to which the Borrower or such
Guarantor may be bound, to (a) examine and make copies of and abstracts from the records and books
of account of, and visit and inspect at their reasonable discretion the Properties of, the Borrower
or such Guarantor, and (b) discuss the affairs, finances and accounts of the Borrower or such
Guarantor with any of their respective officers or directors, all to the extent reasonably
requested by the Administrative Agent or such Lender, as the case may be. The Borrower will and
will cause each Guarantor to keep proper books of records and account in which full, true and
correct entries in conformity with GAAP and all Governmental Requirements in all material respects
shall be made of all dealings and transactions in relation to its business and activities.

     Section 8.11 Interest Rate Management. Within 30 days after the Closing Date the
interest accruing on at least 50% of the principal amount of the Borrower’s Funded Debt must be
fixed rate on terms and for a period of time reasonably satisfactory to the Administrative Agent.

     Section 8.12 Additional Guarantors. The Borrower shall notify the Administrative
Agent at the time that any Person becomes a Subsidiary, and promptly thereafter (and in any

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event within 30 days), cause such Person to (a) become a Guarantor by executing and delivering
to the Administrative Agent a counterpart of the Guaranty Agreement or such other document as the
Administrative Agent shall deem appropriate for such purpose and (b) deliver to the Administrative
Agent documents of the types referred to in Sections 6.01(e) and (f) and favorable opinions
of counsel to such Person (which shall cover, among other things, the legality, validity, binding
effect and enforceability of the documentation referred to in clause (a)), all in form, content and
scope reasonably satisfactory to the Administrative Agent.

     Section 8.13 Entrada Field. On or before January 18, 2008, the Borrower shall enter
into a production handling agreement with ConocoPhillips and Devon Energy Corporation in form and
substance reasonably satisfactory to the Administrative Agent.

ARTICLE IX

Negative Covenants

     The Borrower covenants and agrees that, so long as any of the Commitments are in effect and
until payment in full of Loans hereunder, all interest thereon and all other amounts payable by the
Borrower hereunder, without the prior written consent of the Required Lenders:

     Section 9.01 Debt. Neither the Borrower nor any Subsidiary will incur, create, assume
or permit to exist any Debt, except:

     (a) the Notes or other Obligations or any guaranty of or suretyship arrangement for the Notes
or other Obligations;

     (b) Debt of the Borrower and its Subsidiaries existing on the Closing Date (other than the
Senior Notes and the UBOC Credit Agreement) which is reflected in the Financial Statements or is
disclosed in Schedule 9.01, and any renewals or extensions (but not increases) thereof;

     (c) accounts payable (for the deferred purchase price of Property or services) from time to
time incurred in the ordinary course of business which, if greater than 120 days past the invoice
or billing date, are being contested in good faith by appropriate proceedings, provided that
reserves adequate under GAAP shall have been established therefor;

     (d) purchase money Debt and Debt under capital leases (as required to be reported on the
financial statements of the Borrower pursuant to GAAP) in addition to any obligations that are Debt
as permitted under Section 9.05, not to exceed $10,000,000, provided, however, that the
obligations due under the Hanover Processing Agreement shall not be considered capital lease
obligations for purposes of the limitation on capital leases contained in this Section
9.01(d);

     (e) Debt in addition to any Debt not otherwise permitted this Section 9.01 that is
unsecured and not to exceed $10,000,000 in the aggregate outstanding at one time;

     (f) on and after the date on which the Aggregate Maximum Credit Amount has been reduced to
$125,000,000 or less, Subordinated Debt in an amount not to exceed $40,000,000 in the aggregate
outstanding at any one time, provided that such Subordinated Debt has (i) a final

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maturity after September 30, 2014 and (ii) no sinking fund payments, scheduled principal
payments, or mandatory redemption obligations on or prior to September 30, 2014;

     (g) the Senior Notes and any refinancings, renewals or extensions (but not increases) of the
Senior Notes, provided that any such refinancing (i) provides for a final maturity after September
30, 2014, (ii) has no sinking fund payments, scheduled principal payments, or mandatory redemption
obligations on or prior to September 30, 2014, and (iii) is otherwise pursuant to terms and
conditions satisfactory to the Required Lenders, provided further that if any such refinancing is
being accomplished by using the proceeds from an issuance of preferred stock of the Borrower, then
such issuance complies with Section 9.18 hereof;

     (h) Debt associated with bonds or surety obligations required by Governmental Requirements in
connection with the operation of the Oil and Gas Properties of the Borrower and its Subsidiaries;

     (i) Hedging Agreements covering (i) estimated oil and gas production from proved Oil and Gas
Properties of the Borrower or any Guarantor; provided, however, that such Hedging
Agreements related to oil or gas production shall not, either individually or in the aggregate,
cover more than 90% of estimated production of oil or gas of the Borrower and the Guarantors for
each individual period covered by the Hedging Agreements and (ii) fluctuations in interest rates
for notional principal amounts not to exceed at any time outstanding 80% of the Debt for borrowed
money of the Borrower and its Consolidated Subsidiaries; and

     (j) Debt under the UBOC Credit Agreement in a maximum principal amount not to exceed (i) until
the Aggregate Maximum Credit Amount has been reduced to $125,000,000, $75,000,000, (ii) thereafter
until the Aggregate Maximum Credit Amount has been reduced to $100,000,000, $100,000,000, and (iii)
thereafter, at any time after the Aggregate Maximum Credit Amount has been reduced below
$100,000,000, $125,000,000.

     Section 9.02 Liens. Neither the Borrower nor any Subsidiary will create, incur,
assume or permit to exist any Lien on any of its Properties (now owned or hereafter acquired),
except:

     (a) Liens securing the payment of any Obligations (provided that any Lien securing any of the
Obligations must secure all of the Obligations);

     (b) Excepted Liens;

     (c) Liens securing leases allowed under Section 9.01(d), but only on the Property
under lease;

     (d) Liens disclosed on Schedule 9.02;

     (e) Liens on cash or securities of the Borrower or any Subsidiary securing the Debt described
in Section 9.01(h) and 9.01(i); provided, however that the aggregate amount
of cash or securities which may secure Debt described in Section 9.01(i) shall not exceed
$10,000,000;

     (f) Liens securing the obligations under the UBOC Credit Agreement in assets other than the
Collateral; and

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     (g) other Liens securing Debt permitted under Section 9.01 not exceeding $10,000,000
in the aggregate at any time.

     Section 9.03 Investments, Loans and Advances. Neither the Borrower nor any Guarantor
will make or permit to remain outstanding any loans or advances to or investments in any Person,
except that the foregoing restriction shall not apply to:

     (a) investments, loans or advances reflected in the Financial Statements or which are
disclosed to the Lenders in Schedule 9.03;

     (b) accounts receivable arising in the ordinary course of business;

     (c) direct obligations of the United States or any agency thereof, or obligations guaranteed
by the United States or any agency thereof, in each case maturing within one year from the date of
creation thereof;

     (d) commercial paper maturing within one year from the date of creation thereof rated in one
of the two highest grades by Standard & Poor’s Corporation or Moody’s Investors Service, Inc.;

     (e) deposits maturing within one year from the date of creation thereof with, including
certificates of deposit issued by, any Lender or any office located in the United States of any
other bank or trust company which is organized under the laws of the United States or any state
thereof, has capital, surplus and undivided profits aggregating at least $500,000,000 (as of the
date of such Lender’s or bank or trust company’s most recent financial reports) and has a short
term deposit rating of no lower than A2 or P2, as such rating is set forth from time to time, by
Standard & Poor’s Corporation or Moody’s Investors Service, Inc., respectively;

     (f) deposits in money market funds investing exclusively in investments described in
Section 9.03(c), 9.03(d) or 9.03(e);

     (g) investments, loans or advances made by the Borrower in or to the Guarantors or by any
Guarantor in or to the Borrower or another Guarantor;

     (h) investments by the Borrower in direct ownership interests in additional Oil and Gas
Properties and gas gathering systems related thereto, and investments, loans or advances in
connection with or related to farm out agreements, farm in agreements, joint operating agreements,
joint venture or area of mutual interest agreements, processing facilities, seismic acquisition and
evaluation, pipelines or other similar or customary arrangements made in the ordinary course of
business only insofar as they do not (i) reduce the net revenue interest of the Credit Parties in
the Entrada Field and/or (ii) increase the Credit Parties undivided working interest in the Entrada
Field without a corresponding increase in the Credit Parties net revenue interest in the Entrada
Field;

     (i) loans or advances to employees of the Borrower and the Guarantors in the ordinary course
of business not to exceed an amount equal to $1,000,000 in the aggregate at any time outstanding;
and

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     (j) other investments, loans or advances not to exceed, in the aggregate at any time
outstanding, an amount equal to $10,000,000.

     Section 9.04 Dividends, Distributions and Redemptions. The Borrower will not declare
or pay any dividend, purchase, redeem or otherwise acquire for value any of its stock now or
hereafter outstanding, return any capital to its stockholders or make any distribution of its
assets to its stockholders, except that, if no Default exists or would result therefrom, the
Borrower may (a) pay cash dividends on preferred stock issued to refinance Subordinated Debt or the
Senior Notes pursuant to Section 9.01(g), (b) redeem preferred stock with the proceeds of
or in connection with the issuance of equity securities, and (c) pay stock dividends only in common
stock of the Borrower.

     Section 9.05 Sales and Leasebacks. Neither the Borrower nor any Subsidiary will enter
into any arrangement, directly or indirectly, with any Person whereby the Borrower or any
Subsidiary shall sell or transfer any of its proved Oil and Gas Properties having a value, in the
aggregate at any time outstanding, in excess of $5,000,000, whether now owned or hereafter
acquired, and whereby the Borrower or any Subsidiary shall then or thereafter rent or lease as
lessee such Property or any part thereof or other Property which the Borrower or any Subsidiary
intends to use for substantially the same purpose or purposes as the Property sold or transferred;
provided, however, that the sale of Property undertaken pursuant to the Hanover
Sales Documents shall not be deemed to be a sale and leaseback for purposes of the limitations on
sales and leasebacks of Property contained in this Section 9.05.

     Section 9.06 Nature of Business. Neither the Borrower nor any Subsidiary will allow
any material change to be made in the character of its business as an independent oil and gas
exploration and production company.

     Section 9.07 Mergers, Etc. Neither the Borrower nor any Subsidiary will merge into or
with or consolidate with any other Person, or sell, lease or otherwise dispose of (whether in one
transaction or in a series of transactions) all or substantially all of its Property or assets to
any other Person, except that, provided no Default or Change of Control exists or would result
therefrom, (a) any Subsidiary may merge into, or transfer all or substantially all of its Property
or assets to, the Borrower (provided the Borrower is the surviving entity) or with any other
Guarantor and (b) the Borrower or any Subsidiary may merge with, or transfer all or substantially
all of its Property or assets to, another Person if the Borrower or such Subsidiary is the
surviving entity. The Borrower shall provide the Administrative Agent with at least 30 days prior
written notice of any merger or consolidation permitted by this Section 9.07

     Section 9.08 Proceeds of Notes. The Borrower will not permit the proceeds of the
Notes to be used for any purpose other than those permitted by Section 7.07. Neither the
Borrower nor any Person acting on behalf of the Borrower has taken or will take any action which
might cause this Agreement and any of the other Credit Documents to violate Regulation T, U or X or
any other regulation of the Board of Governors of the Federal Reserve System or to violate Section
7 of the Securities Exchange Act of 1934 or any rule or regulation thereunder, in each case as now
in effect or as the same may hereinafter be in effect.

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     Section 9.09 ERISA Compliance. The Borrower will not at any time:

     (a) Engage in, or permit any Subsidiary or ERISA Affiliate to engage in, any transaction in
connection with which the Borrower, any Subsidiary or any ERISA Affiliate could be subjected to
either a civil penalty assessed pursuant to section 502(c), (i) or (l) of ERISA or a tax imposed by
Chapter 43 of Subtitle D of the Code;

     (b) Terminate, or permit any Subsidiary or ERISA Affiliate to terminate, any Plan in a manner,
or take any other action with respect to any Plan, which could result in any material liability to
the Borrower, any Subsidiary or any ERISA Affiliate to the PBGC;

     (c) Fail to make, or permit any Subsidiary or ERISA Affiliate to fail to make, full payment
when due of all amounts which, under the provisions of any Plan, agreement relating thereto or
applicable law, the Borrower, a Subsidiary or any ERISA Affiliate is required to pay as
contributions thereto;

     (d) Permit to exist, or allow any Subsidiary or ERISA Affiliate to permit to exist, any
accumulated funding deficiency within the meaning of Section 302 of ERISA or section 412 of the
Code, whether or not waived, with respect to any Plan;

     (e) Permit, or allow any Subsidiary or ERISA Affiliate to permit, the actuarial present value
of the benefit liabilities under any Plan maintained by the Borrower, any Subsidiary or any ERISA
Affiliate which is regulated under Title IV of ERISA to exceed the current value of the assets
(computed on a plan termination basis in accordance with Title IV of ERISA) of such Plan allocable
to such benefit liabilities. The term “actuarial present value of the benefit liabilities” shall
have the meaning specified in section 4041 of ERISA;

     (f) Contribute to or assume an obligation to contribute to, or permit any Subsidiary or ERISA
Affiliate to contribute to or assume an obligation to contribute to, any Multiemployer Plan;

     (g) Acquire, or permit any Subsidiary or ERISA Affiliate to acquire, an interest in any Person
that causes such Person to become an ERISA Affiliate with respect to the Borrower, any Subsidiary
or any ERISA Affiliate if such Person sponsors, maintains or contributes to, or at any time in the
six year period preceding such acquisition has sponsored, maintained, or contributed to, (1) any
Multiemployer Plan, or (2) any other Plan that is subject to Title IV of ERISA under which the
actuarial present value of the benefit liabilities under such Plan exceeds the current value of the
assets (computed on a plan termination basis in accordance with Title IV of ERISA) of such Plan
allocable to such benefit liabilities;

     (h) Incur, or permit any Subsidiary or ERISA Affiliate to incur, a liability to or on account
of a Plan under sections 515, 4062, 4063, 4064, 4201 or 4204 of ERISA;

     (i) Contribute to or assume an obligation to contribute to, or permit any Subsidiary or ERISA
Affiliate to contribute to or assume an obligation to contribute to, any employee welfare benefit
plan, as defined in section 3(1) of ERISA, including, without limitation, any such plan maintained
to provide benefits to former employees of such entities, that may not be terminated by such
entities in their sole discretion at any time without any material liability; or

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     (j) Amend or permit any Subsidiary or ERISA Affiliate to amend, a Plan resulting in an
increase in current liability such that the Borrower, any Subsidiary or any ERISA Affiliate is
required to provide security to such Plan under section 401(a)(29) of the Code.

     Section 9.10 Interest Coverage Ratio. The Borrower will not permit its Interest
Coverage Ratio as of the end of any fiscal quarter of the Borrower (calculated quarterly at the end
of each fiscal quarter) to be less than (a) for each fiscal quarter through the fiscal quarter
ending September 30, 2009, 2.35 to 1.00 and (b) thereafter, 2.50 to 1.00. For purposes of this
Section 9.10, “Interest Coverage Ratio” means the ratio of (a) EBITDA for the
immediately preceding four fiscal quarters to (b) the Consolidated Interest Expense during such
four fiscal quarters.

     Section 9.11 Leverage Ratio. The Borrower will not permit its Leverage Ratio as of
the end of any fiscal quarter of the Borrower (calculated quarterly at the end of each fiscal
quarter) to be greater than (a) for each fiscal quarter through the fiscal quarter ending September
30, 2009, 4.00 to 1.00 and (b) thereafter, 3.75 to 1.00. For the purposes of this Section
9.11, “Leverage Ratio” means the ratio of (a) Consolidated Net Debt as of the end of
such fiscal quarter to (b) EBITDA for the immediately preceding four fiscal quarters then ended.

     Section 9.12 PV10 Ratio. The Borrower will not permit its PV10 Ratio as of the end of
any fiscal quarter of the Borrower (calculated quarterly at the end of each fiscal quarter) to be
less than 2.00 to 1.00. For the purposes of this Section 9.12, “PV10 Ratio” means
the ratio of (a) PV10 for the Borrower and its Subsidiaries proved Oil and Gas Properties as of the
end of such fiscal quarter based on the most recent Reserve Report delivered pursuant to Section
8.07 to (b) Consolidated Net Debt as of the end of such fiscal quarter.

     Section 9.13 Sale of Oil and Gas Properties. The Borrower will not, and will not
permit any Guarantor to, sell, assign, farm-out, convey or otherwise transfer any producing Oil and
Gas Property or the Oil and Gas Properties in the Entrada Field or any interest in any such
Property (a “Transfer”) except for (a) the sale of Hydrocarbons in the ordinary course of
business; (b) farmouts of undeveloped acreage and assignments in connection with such farmouts of
Oil and Gas Properties other than those in the Entrada Field; (c) the sale or transfer of equipment
that is no longer necessary for the business of the Borrower or such Guarantor or is
contemporaneously replaced by equipment of at least comparable value and use; (d) during any
consecutive 12 month period, sales in the ordinary course of business of producing Oil and Gas
Properties (other than those in the Entrada Field) whose value shall not exceed 25% of the
aggregate value of all of such producing Oil and Gas Properties based upon the most recent year end
Reserve Report; and (e) dispositions of the Collateral or any interests in the Collateral
(including farmouts of undeveloped acreage and assignments in connection therewith) if (i) the
Credit Parties retain at least a majority interest in the Entrada Field and (ii) any buyer of an
interest in the Entrada Field enters into an operating agreement with a Credit Party for the
Entrada Field on the same terms as the Joint Operating Agreement as in effect on the Closing Date
or with any different terms to which the Administrative Agent has consented in writing in
connection with such buyer’s acquisition of an interest in the Entrada Field.

     Section 9.14 Environmental Matters. Neither the Borrower nor any Subsidiary will
cause or permit any of its Property to be in violation of, or do anything or permit anything to be

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done which will subject any such Property to any remedial obligations under any Environmental
Laws, assuming disclosure to the applicable Governmental Authority of all relevant facts,
conditions and circumstances, if any, pertaining to such Property where such violations or remedial
obligations would have a Material Adverse Effect.

     Section 9.15 Transactions with Affiliates. Neither the Borrower nor any Subsidiary
will enter into any transaction, including, without limitation, any purchase, sale, lease or
exchange of Property or the rendering of any service, with any Affiliate (other than the Borrower
or a Guarantor) unless such transactions are otherwise permitted under this Agreement, are in the
ordinary course of its business and are upon fair and reasonable terms no less favorable to it than
it would obtain in a comparable arm’s length transaction with a Person not an Affiliate.

     Section 9.16 Subsidiaries. The Borrower shall not and shall not permit any Subsidiary
to sell or to issue any stock or ownership interest of a Subsidiary unless such sale or issuance
would be in compliance with Section 9.03 and the other terms and provisions of this
Agreement.

     Section 9.17 Negative Pledge Agreements. Except for provisions in the Senior Notes
indenture and the UBOC Credit Agreement, each as in effect on the Closing Date, neither the
Borrower nor any Guarantor will create, incur, assume or permit to exist any contract, agreement or
understanding (other than this Agreement and the Security Instruments, and the agreements and
instruments creating Liens otherwise permitted under Section 9.02 with respect to the
Property covered by such Liens only) which in any way prohibits or restricts the granting,
conveying, creation or imposition of any Lien on any of its Property or restricts any Guarantor
from paying dividends to the Borrower, or which requires the consent of or notice to other Persons
in connection therewith.

     Section 9.18 Subordinated Debt; Senior Notes. Neither the Borrower nor any Guarantor
shall make any voluntary prepayment in respect of any Subordinated Debt or the Senior Notes, nor
will they make any other payment thereon that would not be allowed under the subordination
provisions of any Subordinated Debt; provided that, the Borrower and the Guarantor may prepay such
Subordinated Debt or the Senior Notes with proceeds from (a) an issuance of preferred stock of the
Borrower; provided further that, (i) the maximum aggregate amount of such prepayments may not
exceed $75,000,000, (ii) the dividend rate on such preferred stock may not be greater than the
interest rate on the Debt being repaid, and (iii) such preferred stock may not provide for
mandatory redemption obligations on or prior to one year after the Maturity Date and (b)
refinancing of the Senior Notes permitted under Section 9.01(g). The Borrower will not
amend, supplement or otherwise modify any instruments evidencing, or agreements relating to or
executed in connection with, any Subordinated Debt or the Senior Notes, in any manner which would
have the effect of (i) accelerating the timing or amount of any scheduled payments of principal or
interest thereon, (ii) increasing the rate of interest payable thereon or (iii) resulting in a
Material Adverse Effect.

     Section 9.19 Hanover Agreements. Without the prior written consent of the Lenders,
the Borrower will not, and will not permit any Subsidiary to, amend, supplement, restate or
otherwise modify the Hanover Processing Agreement, the Hanover Sales Documents or any other
document executed in connection therewith that could adversely affect in any material

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respect the Lenders and their rights and remedies under this Agreement and any other Credit
Document.

     Section 9.20 Permitted Medusa Transactions. Notwithstanding anything in this
Agreement or any other Credit Document to the contrary, so long as no Default or Event of Default
has occurred and is continuing at the time Borrower or any of its Subsidiaries enters into any
Permitted Medusa Transaction, the entering into and carrying out of such Permitted Medusa
Transaction shall be allowed hereunder and shall not in itself constitute a breach of,
non-compliance with, or Default or Event of Default under this Agreement or any other Credit
Document.

     Section 9.21 Change of Fiscal Year. The Borrower will not change its fiscal year end
from December 31.

     Section 9.22 Speculative Trading and Hedging. The Borrower shall not and shall not,
permit any of its Subsidiaries to, directly or indirectly, enter into or assume any commodity
hedging or trading transaction except in the ordinary course of business and not for speculative
purposes.

ARTICLE X

Events of Default; Remedies

     Section 10.01 Events of Default. One or more of the following events shall constitute
an “Event of Default”:

     (a) the Borrower shall default in the payment or prepayment when due of any principal of or
interest on any Loan or any fees or other amount payable by it hereunder or under any Security
Instrument and such default, other than a default of a payment or prepayment of principal (which
shall have no cure period), shall continue unremedied for a period of three Business Days; or

     (b) the Borrower or any Subsidiary shall default in the payment when due of any principal of
or interest on any of its other Debt aggregating $10,000,000 or more, or any event specified in any
note, agreement, indenture or other document evidencing or relating to any such Debt shall occur if
the effect of such event is to cause, or (with the giving of any notice or the lapse of time or
both) to permit the holder or holders of such Debt (or a trustee or agent on behalf of such holder
or holders) to cause, such Debt to become due prior to its stated maturity; or

     (c) any representation, warranty or certification made or deemed made herein or in any
Security Instrument by the Borrower or any Subsidiary, or any certificate furnished to any Lender
or the Administrative Agent pursuant to the provisions hereof or any Security Instrument, shall
prove to have been false or misleading as of the time made or furnished in any material respect; or

     (d) the Borrower shall default in the performance of any of its obligations under Article
IX, Section 8.01(c) or any other Article of this Agreement other than under Article
VIII (excluding Section 8.01(c)); or the Borrower shall default in the performance of
any of its

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obligations under Article VIII or any Security Instrument (other than the payment of
amounts due which shall be governed by Section 10.01(a)) and such default shall continue
unremedied for a period of 30 days after the earlier to occur of (i) notice thereof to the Borrower
by the Administrative Agent or any Lender (through the Administrative Agent), or (ii) the Borrower
otherwise becoming aware of such default; or

     (e) the Borrower shall admit in writing its inability to, or be generally unable to, pay its
debts as such debts become due; or

     (f) the Borrower shall (i) apply for or consent to the appointment of, or the taking of
possession by, a receiver, custodian, trustee or liquidator of itself or of all or a substantial
part of its property, (ii) make a general assignment for the benefit of its creditors, (iii)
commence a voluntary case under the Federal Bankruptcy Code (as now or hereafter in effect), (iv)
file a petition seeking to take advantage of any other law relating to bankruptcy, insolvency,
reorganization, winding-up, liquidation or composition or readjustment of debts, (v) fail to
controvert in a timely and appropriate manner, or acquiesce in writing to, any petition filed
against it in an involuntary case under the Federal Bankruptcy Code, or (vi) take any corporate
action for the purpose of effecting any of the foregoing; or

     (g) a proceeding or case shall be commenced, without the application or consent of the
Borrower, in any court of competent jurisdiction, seeking (i) its liquidation, reorganization,
dissolution or winding-up, or the composition or readjustment of its debts, (ii) the appointment of
a trustee, receiver, custodian, liquidator or the like of the Borrower of all or any substantial
part of its assets, or (iii) similar relief in respect of the Borrower under any law relating to
bankruptcy, insolvency, reorganization, winding-up, or composition or adjustment of debts, and such
proceeding or case shall continue undismissed, or an order, judgment or decree approving or
ordering any of the foregoing shall be entered and continue unstayed and in effect, for a period of
60 days; or (iv) an order for relief against the Borrower shall be entered in an involuntary case
under the Federal Bankruptcy Code; or

     (h) a judgment or judgments for the payment of money in excess of $10,000,000 in the aggregate
shall be rendered by a court against the Borrower or any Subsidiary and the same shall not be
discharged (or provision shall not be made for such discharge), or a stay of execution thereof
shall not be procured, within 30 days from the date of entry thereof and the Borrower or such
Subsidiary shall not, within said period of 30 days, or such longer period during which execution
of the same shall have been stayed, appeal therefrom and cause the execution thereof to be stayed
during such appeal; or

     (i) the Security Instruments after delivery thereof shall for any reason, except to the extent
permitted by the terms thereof, cease to be in full force and effect and valid, binding and
enforceable in accordance with their terms, or cease to create a valid and perfected Lien of the
priority required thereby on any of the collateral purported to be covered thereby, except to the
extent permitted by the terms of this Agreement, or the Borrower shall so state in writing; or

     (j) a Change of Control occurs; or

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     (k) Any Guarantor takes, suffers or permits to exist any of the events or conditions referred
to in paragraphs (e), (f), (g) or (h) or if any provision of any guaranty agreement related thereto
shall for any reason cease to be valid and binding on such Guarantor or if such Guarantor shall so
state in writing; or

     (l) an Event of Default (as defined thereunder) shall occur under the Hanover Processing
Agreement or Hanover Sales Documents.

     Section 10.02 Remedies.

     (a) In the case of an Event of Default other than one referred to in clause (e), (f), or
(g) of Section 10.01 or in clause (k) to the extent it relates to clause (e), (f),
or (g), the Administrative Agent, upon request of the Required Lenders, shall, by notice to the
Borrower, cancel the Commitments (in whole or part) and/or declare the principal amount then
outstanding of, and the accrued interest on all (but not less than all) of, the Loans and all other
amounts payable by the Borrower hereunder and under the Notes to be forthwith due and payable,
whereupon such amounts shall be immediately due and payable without presentment, demand, protest,
notice of intent to accelerate, notice of acceleration or other formalities of any kind, all of
which are hereby expressly waived by the Borrower.

     (b) In the case of the occurrence of an Event of Default referred to in clause (e), (f),
or (g) of Section 10.01 or in clause (k) to the extent it relates to clause (e),
(f), or (g), the Commitments shall be automatically canceled and the principal amount then
outstanding of, and the accrued interest on, the Loans and all other amounts payable by the
Borrower hereunder and under the Notes shall become automatically immediately due and payable
without presentment, demand, protest, notice of intent to accelerate, notice of acceleration or
other formalities of any kind, all of which are hereby expressly waived by the Borrower.

     (c) In the case of an acceleration of the Loans pursuant to the foregoing clause (a) or (b) of
this Section 10.02, or if the Borrower defaults in the full and complete payment of all of
the Loans or other Obligations due on the Maturity Date, then the Administrative Agent, upon
request of the Required Lenders, shall take reasonable actions to liquidate the Collateral.

     (d) All proceeds received after maturity of the Notes, whether by acceleration or otherwise
shall be applied as provided in Section 3.03.

ARTICLE XI

The Administrative Agent

     Section 11.01 Appointment, Powers and Immunities. Each Lender, the Revolving Loan
Lender, and the Deposit Bank hereby irrevocably appoints and authorizes the Administrative Agent to
act as its agent hereunder and under the Security Instruments with such powers as are specifically
delegated to the Administrative Agent by the terms of this Agreement and the Security Instruments,
together with such other powers as are reasonably incidental thereto. The Administrative Agent
(which term as used in this sentence and in Section 11.05 and the first sentence of
Section 11.06 shall include reference to its Affiliates and its and its Affiliates’
officers, directors, employees, attorneys, accountants, experts and agents): (a) shall have no

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duties or responsibilities except those expressly set forth in this Agreement and the other
Credit Documents, and shall not by reason of this Agreement and the other Credit Documents be a
trustee or fiduciary for any Lender, the Revolving Loan Lender, or the Deposit Bank; (b) makes no
representation or warranty to any Lender, the Revolving Loan Lender, or the Deposit Bank and shall
not be responsible to the Lenders, the Revolving Loan Lender, or the Deposit Bank for any recitals,
statements, representations or warranties contained in this Agreement, or in any certificate or
other document referred to or provided for in, or received by any of them under, this Agreement, or
for the value, validity, effectiveness, genuineness, execution, effectiveness, legality,
enforceability or sufficiency of this Agreement, any Note or any other document referred to or
provided for herein or for any failure by the Borrower or any other Person (other than the
Administrative Agent) to perform any of its obligations hereunder or thereunder or for the
existence, value, perfection or priority of any collateral security or the financial or other
condition of the Borrower, its Subsidiaries or any other obligor or guarantor; (c) except pursuant
to Section 11.07 shall not be required to initiate or conduct any litigation or collection
proceedings hereunder; and (d) shall not be responsible for any action taken or omitted to be taken
by it hereunder or under any other document or instrument referred to or provided for herein or in
connection herewith including its own ordinary negligence, except for its own gross negligence or
willful misconduct. The Administrative Agent may employ agents, accountants, attorneys and experts
and shall not be responsible for the negligence or misconduct of any such agents, accountants,
attorneys or experts selected by it in good faith or any action taken or omitted to be taken in
good faith by it in accordance with the advice of such agents, accountants, attorneys or experts.
The Administrative Agent may deem and treat the payee of any Note as the holder thereof for all
purposes hereof unless and until a written notice of the assignment or transfer thereof permitted
hereunder shall have been filed with the Administrative Agent. The Administrative Agent is
authorized to release any collateral that is permitted to be sold or released pursuant to the terms
of this Agreement and the other Credit Documents.

     Section 11.02 Reliance by Administrative Agent. The Administrative Agent shall be
entitled to rely upon any certification, notice or other communication (including any thereof by
telephone, telex, telecopier, telegram or cable) believed by it to be genuine and correct and to
have been signed or sent by or on behalf of the proper Person or Persons, and upon advice and
statements of legal counsel, independent accountants and other experts selected by the
Administrative Agent.

     Section 11.03 Defaults. The Administrative Agent shall not be deemed to have
knowledge of the occurrence of a Default (other than the non payment of principal of or interest on
Loans or of fees) unless the Administrative Agent has received notice from a Lender or the Borrower
specifying such Default and stating that such notice is a “Notice of Default.” In the event that
the Administrative Agent receives such a notice of the occurrence of a Default, the Administrative
Agent shall give prompt notice thereof to the Lenders, the Revolving Loan Lender, and the Deposit
Bank. In the event of a payment Default, the Administrative Agent shall give each Lender and the
Revolving Loan Lender prompt notice of each such payment Default.

     Section 11.04 Rights as a Lender. With respect to its Commitments and the
participation in the Loan it holds, Merrill (and any successor acting as Administrative Agent) in
its capacity as a Lender hereunder shall have the same rights and powers hereunder as any other
Lender and may exercise the same as though it were not acting as the Administrative Agent, and the
term

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“Lender” or “Lenders” shall, unless the context otherwise indicates, include the
Administrative Agent in its individual capacity. Merrill (and any successor acting as
Administrative Agent) and its Affiliates may (without having to account therefor to any Lender)
accept deposits from, lend money to and generally engage in any kind of banking, trust or other
business with the Borrower (and any of its Affiliates) as if it were not acting as the
Administrative Agent, and Merrill and its Affiliates may accept fees and other consideration from
the Borrower for services in connection with this Agreement or otherwise without having to account
for the same to the Lenders.

     Section 11.05 Indemnification. The Lenders agree to indemnify each of
the Administrative Agent, the Revolving Loan Lender, and the Deposit Bank in accordance with its
Percentage Shares for the Indemnity Matters as described in section 12.03 to the extent not
indemnified or reimbursed by the Borrower under section 12.03, but without limiting the
obligations of the Borrower under said section 12.03 and for any and all other liabilities,
obligations, losses, damages, penalties, actions, judgments, suits, costs, expenses or
disbursements of any kind and nature whatsoever which may be imposed on, incurred by or asserted
against the Administrative Agent, the Revolving Loan Lender, or the Deposit Bank in any way
relating to or arising out of: (i) this Agreement, the Security Instruments or any other documents
contemplated by or referred to herein or the transactions contemplated hereby, but excluding,
unless a Default has occurred and is continuing, normal administrative costs and expenses incident
to the performance of its duties hereunder or (ii) the enforcement of any of the terms of this
Agreement, any Security Instrument or of any such other documents; whether or not any of the
foregoing specified in this section 11.05 arises from the sole or concurrent negligence of
the Administrative Agent, the Revolving Loan Lender, or the Deposit Bank provided that no Lender
shall be liable for any of the foregoing to the extent they arise from the gross negligence or
willful misconduct of the Administrative Agent, the Revolving Loan Lender, or the Deposit Bank, as
applicable.

     Section 11.06 Non-Reliance on Administrative Agent and other Lenders. Each of each
Lender and the Revolving Loan Lender acknowledges and agrees that it has, independently and without
reliance on the Administrative Agent or any other Lender or the Revolving Loan Lender, and based on
such documents and information as it has deemed appropriate, made its own credit analysis of the
Borrower and its decision to enter into this Agreement, and that it will, independently and without
reliance upon the Administrative Agent, the Revolving Loan, or any other Lender, and based on such
documents and information as it shall deem appropriate at the time, continue to make its own
analysis and decisions in taking or not taking action under this Agreement. The Administrative
Agent shall not be required to keep itself informed as to the performance or observance by the
Borrower of this Agreement, the Notes, the Security Instruments or any other document referred to
or provided for herein or to inspect the properties or books of the Borrower. Except for notices,
reports and other documents and information expressly required to be furnished to the Lenders or
the Revolving Loan Lender by the Administrative Agent hereunder, the Administrative Agent shall not
have any duty or responsibility to provide any Lender with any credit or other information
concerning the affairs, financial condition or business of the Borrower (or any of its Affiliates)
which may come into the possession of the Administrative Agent or any of its Affiliates. In this
regard, each Lender and

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acknowledges that Bracewell & Giuliani LLP is acting in this transaction as special counsel to
the Administrative Agent, the Revolving Loan Lender, and the Deposit Bank only, except to the
extent otherwise expressly stated in any legal opinion this Agreement or any other Credit Document.
Each Lender will consult with its own legal counsel to the extent that it deems necessary in
connection with this Agreement and the other Credit Documents and the matters contemplated therein.

     Section 11.07 Action by Administrative Agent. Except for action or other matters
expressly required of the Administrative Agent hereunder, the Administrative Agent shall in all
cases be fully justified in failing or refusing to act hereunder unless it shall (a) receive
written instructions from the Required Lenders (or all of the Lenders as expressly required by
Section 12.04) specifying the action to be taken, and (b) be indemnified to its
satisfaction by the Lenders against any and all liability and expenses which may be incurred by it
by reason of taking or continuing to take any such action. The instructions of the Required
Lenders (or all of the Lenders as expressly required by Section 12.04) and any action taken
or failure to act pursuant thereto by the Administrative Agent shall be binding on all of the
Lenders and the Revolving Loan Lender. If a Default has occurred and is continuing, the
Administrative Agent shall take such action with respect to such Default as shall be directed by
the Required Lenders (or all of the Lenders as required by Section 12.04) in the written
instructions (with indemnities) described in this Section 11.07, 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 as it shall deem advisable in the best interests of the Lenders and the Revolving
Loan Lender. In no event, however, shall the Administrative Agent be required to take any action
which exposes the Administrative Agent to personal liability or which is contrary to this Agreement
and the other Credit Documents or applicable law.

     Section 11.08 Resignation or Removal of Administrative Agent. Subject to the
appointment and acceptance of a successor Administrative Agent as provided below, the
Administrative Agent may resign at any time by giving notice thereof to the Lenders and the
Borrower, and the Administrative Agent may be removed at any time with or without cause by the
Required Lenders. Upon any such resignation or removal, the Required Lenders shall have the right
to appoint a successor Administrative Agent with the consent of the Borrower (such consent not to
be unreasonably withheld). If no successor Administrative Agent shall have been so appointed by
the Required Lenders and shall have accepted such appointment within 30 days after the retiring
Administrative Agent’s giving of notice of resignation or the Required Lenders’ removal of the
retiring Administrative Agent, then the retiring Administrative Agent may, on behalf of the
Lenders, appoint a successor Administrative Agent with the consent of the Borrower (such consent
not to be unreasonably withheld). Upon the acceptance of such appointment hereunder by a successor
Administrative Agent, such successor Administrative Agent shall thereupon succeed to and become
vested with all the rights, powers, privileges and duties of the retiring Administrative Agent, and
the retiring Administrative Agent shall be discharged from its duties and obligations hereunder.
After any retiring Administrative Agent’s resignation or removal hereunder as Administrative Agent,
the provisions of this Article XI and Section 12.03 shall continue in effect for
its benefit in respect of any actions taken or omitted to be taken by it while it was acting as the
Administrative Agent.

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     Section 11.09 Resignation or Removal of Revolving Loan Lender and Deposit Bank. The
Revolving Loan Lender or the Deposit Bank may resign at any time by giving prior written notice
thereof to the Administrative Agent, the Lenders, and the Borrower, such resignation to be
effective upon the appointment of a successor Revolving Loan Lender or Deposit Bank. Upon any such
resignation, the Required Lenders shall have the right to appoint, on behalf of the Borrower and
the Lenders and after consultation with the Borrower, a successor Revolving Loan Lender or Deposit
Bank. If no successor Revolving Loan Lender or Deposit Bank shall have been so appointed by the
Required Lenders within 30 days after the resigning Revolving Loan Lender or the Deposit Bank has
given notice of its intention to resign, then the resigning Revolving Loan Lender or Deposit Bank
may appoint, on behalf of the Borrower and the Lenders and after consultation with the Lenders and
the Borrower, a successor Revolving Loan Lender or Deposit Bank. No successor Revolving Loan
Lender or Deposit Bank shall be deemed to be appointed hereunder until such successor Revolving
Loan Lender or Deposit Bank has accepted the appointment. Any such successor Revolving Loan Lender
or Deposit Bank shall be a commercial bank having capital and retained earnings of at least
$500,000,000 unless such requirement is waived by the Required Lenders and the Borrower. Upon the
acceptance of any appointment as Revolving Loan Lender or Deposit Bank hereunder by a successor
Revolving Loan Lender or Deposit Bank, such successor Revolving Loan Lender or Deposit Bank shall
thereupon succeed to and become vested with all the rights, powers, privileges and duties of the
resigning Revolving Loan Lender or Deposit Bank. Upon the effectiveness of the resignation of the
Revolving Loan Lender or Deposit Bank, the resigning Revolving Loan Lender or Deposit Bank shall be
discharged from its duties and obligations hereunder and under the Credit Documents;
provided that the succeeding Revolving Loan Lender or Deposit Bank shall make arrangements
satisfactory to the retiring Revolving Loan Lender or Deposit Bank to effectively assume the
obligations of the retiring Revolving Loan Lender or Deposit Bank with respect to outstanding Loans
or Deposits. After the effectiveness of the resignation of the Revolving Loan Lender or Deposit
Bank, the provisions of this Article XI shall continue in effect for the benefit of the
Revolving Loan Lender in respect of any actions taken or omitted to be taken by it while it was
acting as the Revolving Loan Lender or Deposit Bank hereunder and under the other Credit Documents.

ARTICLE XII

Miscellaneous

     Section 12.01 Waiver. No failure on the part of the Administrative Agent, the
Revolving Loan Lender, the Deposit Bank, or any Lender to exercise and no delay in exercising, and
no course of dealing with respect to, any right, power or privilege under this Agreement and any of
the other Credit Documents shall operate as a waiver thereof, nor shall any single or partial
exercise of any right, power or privilege under this Agreement and any of the other Credit
Documents preclude any other or further exercise thereof or the exercise of any other right, power
or privilege. The remedies provided herein are cumulative and not exclusive of any remedies
provided by law.

     Section 12.02 Notices. All notices and other communications provided for herein and
in the other Credit Documents (including, without limitation, any modifications of, or waivers or
consents under, this Agreement or the other Credit Documents) shall be given or made in

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writing by telecopy, courier or U.S. Mail and telecopied, mailed or delivered to the intended
recipient at the “Address for Notices” specified in Schedule 12.02 or, as to any party, at
such other address as shall be designated by such party in a notice to each other party. Except as
otherwise provided in this Agreement or in the other Credit Documents, all such communications
shall be deemed to have been duly given when transmitted, if transmitted before 1:00 p.m. local
time on a Business Day (otherwise on the next succeeding Business Day) by telex or telecopier and
evidence or confirmation of receipt is obtained, or personally delivered or, in the case of a
mailed notice, three Business Days after the date deposited in the mails, postage prepaid, in each
case given or addressed as aforesaid.

     Section 12.03 Payment of Expenses, Indemnities, etc.

     (a) The Borrower agrees:

          (i) whether or not the transactions hereby contemplated are consummated, to pay all
reasonable expenses of the Administrative Agent, the Revolving Loan Lender, and the Deposit
Bank in the administration (both before and after the execution hereof and including advice
of counsel as to the rights and duties of the Administrative Agent, the Revolving Loan
Lender, and the Deposit Bank and the Lenders with respect thereto) of, and in connection
with the negotiation, syndication, investigation, preparation, execution and delivery of,
recording or filing of, preservation of rights under, enforcement of, and refinancing,
renegotiation or restructuring of, this Agreement and the other Credit Documents and any
amendment, waiver or consent relating thereto (including, without limitation, travel,
photocopy, mailing, courier, telephone and other similar expenses of the Administrative
Agent, the Revolving Loan Lender, and the Deposit Bank, the cost of environmental audits,
surveys and appraisals at reasonable intervals, the reasonable fees and disbursements of
counsel and other outside consultants for the Administrative Agent, the Revolving Loan
Lender, and the Deposit Bank and, in the case of enforcement, the reasonable fees and
disbursements of counsel for the Administrative Agent, the Revolving Loan Lender, and the
Deposit Bank and any of the Lenders); and promptly reimburse the Administrative Agent for
all amounts expended, advanced or incurred by the Administrative Agent, the Revolving Loan
Lender, the Deposit Bank or the Lenders to satisfy any obligation of the Borrower under this
Agreement or any Security Instrument, including without limitation, all costs and expenses
of foreclosure;

          (ii) To indemnify the Administrative Agent, the Revolving Loan Lender, the
Deposit Bank and each Lender and each of their Affiliates and each of their officers,
directors, employees, representatives, agents, attorneys, accountants and experts
(“Indemnified Parties”) from, hold each of them harmless against and promptly upon
demand pay or reimburse each of them for, the Indemnity Matters which may be incurred by or
asserted against or involve any of them (whether or not any of them is designated a party
thereto) as a result of, arising out of or in any way related to (i) any actual or proposed
use by the Borrower of the proceeds of any of the Loans, (ii) the execution, delivery and
performance of this agreement and the other Credit Documents, (iii) the 

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operations of the business of the Borrower and its Subsidiaries, (iv) the failure
of the Borrower or any Subsidiary to comply with the terms of any Security Instrument or
this Agreement, or with any Governmental Requirement, (v) any inaccuracy of any
representation or any breach of any warranty of the Borrower or any Guarantor set forth in
this agreement and any of the other Credit Documents, (vi) any assertion that the Lenders
were not entitled to receive the proceeds received pursuant to the Security Instruments or
(vii) any other aspect of this agreement and the other Credit Documents, including, without
limitation, the reasonable fees and disbursements of counsel and all other expenses incurred
in connection with investigating, defending or preparing to defend any such action, suit,
proceeding (including any investigations, litigation or inquiries) or claim and including
all Indemnity Matters arising by reason of the ordinary negligence of any Indemnified Party,
but excluding all Indemnity Matters arising solely by reason of claims between the Lenders
or any Lender and the Administrative Agent or a Lender’s shareholders against the
Administrative Agent or Lender or by reason of the gross negligence or willful misconduct on
the part of any Indemnified Party; and

          (iii) to indemnify and hold harmless from time to time the Indemnified
Parties from and against any and all losses, claims, cost recovery actions, administrative
orders or proceedings, damages and liabilities to which any such Person may become subject
(i) under any Environmental Law applicable to the Borrower or any Subsidiary or any of their
Properties, including without limitation, the treatment or disposal of hazardous substances
on any of their Properties, (ii) as a result of the breach or non-compliance by the Borrower
or any Subsidiary with any Environmental Law applicable to the Borrower or any Subsidiary,
(iii) due to past ownership by the Borrower or any Subsidiary of any of their Properties or
past activity on any of their Properties which, though lawful and fully permissible at the
time, could result in present liability, (iv) the presence, use, release, storage, treatment
or disposal of hazardous substances on or at any of the Properties owned or operated by the
Borrower or any Subsidiary, or (v) any other environmental, health or safety condition in
connection with this agreement and the other Credit Documents; provided,
however, no indemnity shall be afforded under this section 12.03(a)(iii) in
respect of any Property for any occurrence arising from the acts or omissions of the
Administrative Agent or any Lender during the period after which such Person, its successors
or assigns shall have obtained possession of such Property (whether by foreclosure or deed
in lieu of foreclosure, as mortgagee-in-possession or otherwise).

     (b) No Indemnified Party may settle any claim to be indemnified without the consent of the
Borrower, such consent not to be unreasonably withheld; provided, however, that the
Borrower may not reasonably withhold consent to any settlement that an Indemnified Party
proposes, if the Borrower does not have the financial ability to pay all its obligations
outstanding

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and asserted against the Borrower at that time, including the maximum potential claims
against the Indemnified Party to be indemnified pursuant to this Section 12.03.

     (c) In the case of any indemnification hereunder, the Administrative Agent or Lender, as
appropriate shall give notice to the Borrower of any such claim or demand being made against the
Indemnified Party and the Borrower shall have the non exclusive right to join in the defense
against any such claim or demand provided that if the Borrower provides a defense, the Indemnified
Party shall bear its own cost of defense unless there is a conflict between the Borrower and such
Indemnified Party.

     (d) The foregoing indemnities shall extend to the Indemnified Parties
notwithstanding the sole or concurrent negligence of every kind or character whatsoever, whether
active or passive, whether an affirmative act or an omission, including without limitation, all
types of negligent conduct identified in the restatement (second) of torts of one or more of the
Indemnified Parties or by reason of strict liability imposed without fault on any one or more of
the Indemnified Parties. To the extent that an Indemnified Party is found to have committed an act
of gross negligence or willful misconduct, this contractual obligation of indemnification shall
continue but shall only extend to the portion of the claim that is deemed to have occurred by
reason of events other than the gross negligence or willful misconduct of the Indemnified
Party.

     (e) The Borrower’s obligations under this Section 12.03 shall survive any termination
of this Agreement and the payment of the Notes and shall continue thereafter in full force and
effect.

     (f) The Borrower shall pay any amounts due under this Section 12.03 within 30 days of
the receipt by the Borrower of notice of the amount due.

     Section 12.04 Amendments, Etc. Any provision of this Agreement or any Security
Instrument may be amended, modified or waived with the Borrower’s and the Required Lenders’ prior
written consent; provided that (a) no amendment, modification or waiver which extends the
final maturity of the Loans, increases the Aggregate Maximum Credit Amount, forgives the principal
amount of any Obligations outstanding under this Agreement, releases any guarantor of the
Obligations or releases all or substantially all of the collateral, reduces the interest rate
applicable to the Loans or the fees or premiums payable to the Lenders generally, affects
Section 2.03(a), this Section 12.04 or Section 12.06(a), releases any
amounts deposited in the Deposit Account other than as expressly provided herein, or modifies the
definition of “Required Lenders” shall be effective without consent of all Lenders; (b) no
amendment, modification or waiver which increases the Maximum Credit Amount or the Commitment of
any Lender shall be effective without the consent of such Lender; (c) no amendment, modification or
waiver which modifies the rights, duties or obligations of the Administrative Agent shall be
effective without the consent of the Administrative Agent; (d) no amendment, modification or waiver
which modifies the rights, duties or obligations of the Deposit Bank shall be effective without the
consent of the Deposit Bank; and (e) no amendment, modification or waiver which modifies the
rights, duties or obligations of the Revolving Loan Lender shall be effective without the
consent of the Revolving Loan Lender.

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     Section 12.05 Successors and Assigns. This Agreement shall be binding upon and inure
to the benefit of the parties hereto and their respective successors and permitted assigns.

     Section 12.06 Assignments and Participations.

     (a) The Borrower may not assign its rights or obligations hereunder or under the Notes without
the prior consent of all of the Lenders and the Administrative Agent.

     (b) Any Lender may, upon the written consent of the Administrative Agent and, if no Event of
Default has occurred and is continuing, the Borrower (which consent will not be unreasonably
withheld, delayed or conditioned), assign to one or more assignees all or a portion of its rights
and obligations under this Agreement pursuant to an Assignment Agreement substantially in the form
of Exhibit E (an “Assignment”); provided, however, that (i)
assignments are pro rata between Loans and Commitments; (ii) any such assignment of a partial
interest in a Commitment shall be in the amount of at least $1,000,000 or such lesser amount to
which the Borrower and the Administrative Agent has consented or unless the assigning Lender’s
exposure is thereby reduced to zero; (iii) the assignee or assignor shall pay to the Administrative
Agent a processing and recordation fee of $3,500 for each assignment; and (iv) no consent of the
Administrative Agent or the Borrower shall be required for any assignment by a Lender to any Lender
or any nominee or Affiliate of any Lender. Any such assignment will become effective upon the
execution and delivery to the Administrative Agent of the Assignment and the consent of the
Administrative Agent and, if applicable, the Borrower. Promptly after receipt of an executed
Assignment, the Administrative Agent shall send to the Borrower a copy of such executed Assignment.
Upon the effectiveness of any assignment pursuant to this Section 12.06(b), the assignee
will become a “Lender,” if not already a “Lender,” for all purposes of this Agreement and the other
Credit Documents. The assignor shall be relieved of its obligations hereunder to the extent of
such assignment (and if the assigning Lender no longer holds any rights or obligations under this
Agreement, such assigning Lender shall cease to be a “Lender” hereunder except that its rights
under Sections 4.06, 5.01, 5.05, and 12.03 shall not be affected). The Administrative
Agent agrees to provide current list of Lenders and their Percentage Shares from time to time upon
request of Borrower.

     (c) Each Lender may transfer, grant or assign participations in all or any part of such
Lender’s interests hereunder pursuant to this Section 12.06(c) to any Person,
provided that: (i) such Lender shall remain a “Lender” for all purposes of this Agreement
and the transferee of such participation shall not constitute a “Lender” hereunder; and (ii) no
participant under any such participation shall have rights to approve any amendment to or waiver of
this Agreement and any of the other Credit Documents except to the extent such amendment or waiver
would (x) forgive any principal owing on any Obligations or extend the final maturity of the Loans,
(y) reduce the interest rate (other than as a result of waiving the applicability of any
post-default increases in interest rates) or fees applicable to any of the Commitments or Loans in
which such participant is participating, or postpone the payment of any thereof, or (z) release any
guarantor of the Obligations or release all or substantially all of the collateral (except as
provided in this Agreement and the other Credit Documents) supporting any of the Commitments or
Loans in
which such participant is participating. In the case of any such participation, the
participant shall not have any rights under this Agreement or any of the Security Instruments (the
participant’s rights against the granting Lender in respect of such participation to be those set
forth in the

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agreement with such Lender creating such participation), and all amounts payable by
the Borrower hereunder shall be determined as if such Lender had not sold such participation,
provided that such participant shall be entitled to receive additional amounts under
Article V on the same basis as if it were a Lender and be indemnified under Section
12.03 as if it were a Lender. In addition, each agreement creating any participation must
include an agreement by the participant to be bound by the provisions of Section 12.15.

     (d) The Lenders may furnish any information concerning the Borrower in the possession of the
Lenders from time to time to assignees and participants (including prospective assignees and
participants); provided that, such Persons agree to be bound by the provisions of
Section 12.15.

     (e) Notwithstanding anything in this Section 12.06 to the contrary, any Lender may
assign and pledge its Note to any Federal Reserve Bank. No such assignment and/or pledge shall
release the assigning and/or pledging Lender from its obligations hereunder.

     (f) Notwithstanding any other provisions of this Section 12.06, no transfer or
assignment of the interests or obligations of any Lender or any grant of participations therein
shall be permitted if such transfer, assignment or grant would require the Borrower to file a
registration statement with the SEC or to qualify the Loans under the “Blue Sky” laws of any state.

     Section 12.07 Invalidity. In the event that any one or more of the provisions
contained in this Agreement and any of the other Credit Documents shall, for any reason, be held
invalid, illegal or unenforceable in any respect, such invalidity, illegality or unenforceability
shall not affect any other provision of the Notes, this Agreement or any other Credit Document.

     Section 12.08 Counterparts. This Agreement may be executed in any number of
counterparts, all of which taken together shall constitute one and the same instrument and any of
the parties hereto may execute this Agreement by signing any such counterpart.

     Section 12.09 References; Use of Word “Including”. The words “herein,” “hereof,”
“hereunder” and other words of similar import when used in this Agreement refer to this Agreement
as a whole, and not to any particular article, section or subsection. Any reference herein to a
Section or Article shall be deemed to refer to the applicable Section or Article of this Agreement
unless otherwise stated herein. Any reference herein to an exhibit, schedule, or other attachment
shall be deemed to refer to the applicable exhibit, schedule, or other attachment attached hereto
unless otherwise stated herein. The word “including”, “includes” and words of similar import means
“including, without limitation”.

     Section 12.10 Survival. The obligations of the parties under Section 4.06,
Article V, and Sections 11.05 and 12.03 shall survive the repayment of the Loans and the
termination of the Commitments. To the extent that any payments on the Obligations or proceeds of
any collateral are subsequently invalidated, declared to be fraudulent or preferential, set aside
or required to be
repaid to a trustee, debtor in possession, receiver or other Person under any bankruptcy law,
common law or equitable cause, then to such extent, the Obligations so satisfied shall be revived
and continue as if such payment or proceeds had not been received and the Administrative

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Agent’s,
the Revolving Loan Lender’s, the Deposit Bank’s, and the Lenders’ Liens, security interests,
rights, powers and remedies under this Agreement and each Security Instrument shall continue in
full force and effect. In such event, each Security Instrument shall be automatically reinstated
and the Borrower shall take such action as may be reasonably requested by the Administrative Agent,
the Revolving Loan Lender’s, the Deposit Bank’s, and the Lenders to effect such reinstatement.

     Section 12.11 Captions. Captions and section headings appearing herein are included
solely for convenience of reference and are not intended to affect the interpretation of any
provision of this Agreement.

     Section 12.12 No Oral Agreements. This Agreement and the other Credit
Documents embody the entire agreement and understanding between the parties and supersede all other
agreements and understandings between such parties relating to the subject matter hereof and
thereof. This Agreement and the other Credit Documents represent the final agreement between the
parties and may not be contradicted by evidence of prior, contemporaneous or subsequent oral
agreements of the parties. There are no unwritten oral agreements between the parties.

     Section 12.13 Governing Law; Submission to Jurisdiction.

     (a) This Agreement and the Notes shall be governed by, and construed in
accordance with, the laws of the State of New York, except to the extent that United States federal
law permits any Lender to charge interest at the rate allowed by the laws of the state where such
Lender is located.

     (b) Any legal action or proceeding with respect to this Agreement and the other
Credit Documents shall be brought in the courts of the State of New York or of the United States of
America for the Southern District of New York, and, by execution and delivery of this Agreement,
the Borrower hereby accepts for itself and (to the extent permitted by law) in respect of its
Property, generally and unconditionally, the jurisdiction of the aforesaid courts. The Borrower
hereby irrevocably waives any objection, including, without limitation, any objection to the laying
of venue or based on the grounds of forum non conveniens, which it may now or hereafter have to the
bringing of any such action or proceeding in such respective jurisdictions. This submission to
jurisdiction is non-exclusive and does not preclude the Administrative Agent or any Lender from
obtaining jurisdiction over the Borrower in any court otherwise having jurisdiction.

     (c) The Borrower hereby irrevocably consents to the service of process of any of
the aforementioned courts in any such action or proceeding by the mailing of copies thereof by
registered or certified mail, postage prepaid, to the Borrower at its said address, such service to become effective 30 days after such
mailing. Nothing herein shall affect the right of the Administrative Agent, any Lender or any
holder of a Note to serve process in any other manner 

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 permitted by law or to commence legal
proceedings or otherwise proceed against the Borrower or its Properties in any other
jurisdiction.

     (d) The Borrower, the Administrative Agent, the Revolving Loan Lender, the
Deposit Bank, and each Lender hereby (i) irrevocably and unconditionally waive, to the fullest
extent permitted by law, trial by jury in any legal action or proceeding relating to this Agreement
or any other Credit Document and for any counterclaim therein; (ii) irrevocably waive, to the
maximum extent not prohibited by law, any right it may have to claim or recover in any such
litigation any special, exemplary, punitive or consequential damages, or damages other than, or in
addition to, actual damages; (iii) certify that no party hereto nor any representative, agent or
counsel for any party hereto has represented, expressly or otherwise, or implied that such party
would not, in the event of litigation, seek to enforce the foregoing waivers, and (iv) acknowledge
that it has been induced to enter into this Agreement and the other Credit Documents and the
transactions contemplated hereby and thereby by, among other things, the mutual waivers and
certifications contained in this section 12.13.

     Section 12.14 Interest. It is the intention of the parties hereto that each Lender
and the Revolving Loan Lender shall conform strictly to usury laws applicable to it. Accordingly,
if the transactions contemplated hereby would be usurious as to any Lender or the Revolving Loan
Lender under laws applicable to it (including the laws of the United States of America and the
State of New York or any other jurisdiction whose laws may be mandatorily applicable to such Lender
or the Revolving Loan Lender notwithstanding the other provisions of this Agreement), then, in that
event, notwithstanding anything to the contrary in this Agreement and any of the other Credit
Documents or any agreement entered into in connection with or as security for the Notes, it is
agreed as follows: (a) the aggregate of all consideration which constitutes interest under law
applicable to any Lender that is contracted for, taken, reserved, charged or received by such
Lender or the Revolving Loan Lender under this Agreement and any of the other Credit Documents or
agreements or otherwise in connection with the Notes shall under no circumstances exceed the
maximum amount allowed by such applicable law, and any excess shall be canceled automatically and
if theretofore paid shall be credited by such Lender or the Revolving Loan Lender on the principal
amount of the Obligations (or, to the extent that the principal amount of the Obligations shall
have been or would thereby be paid in full, refunded by such Lender or the Revolving Loan Lender to
the Borrower) and (b) in the event that the maturity of the Notes is accelerated by reason of an
election of the holder thereof resulting from any Event of Default under this Agreement or
otherwise, or in the event of any required or permitted prepayment, then such consideration that
constitutes interest under law applicable to any Lender or the Revolving Loan Lender may never
include more than the maximum amount allowed by such applicable law, and excess interest, if any,
provided for in this Agreement or otherwise shall be canceled automatically by such Lender or the
Revolving Loan Lender as of the date of such acceleration or prepayment and, if theretofore paid,
shall be credited by such Lender or the Revolving Loan Lender on the principal amount of the
Obligations (or, to the
extent that the principal amount of the Obligations shall have been or would thereby be paid
in full, refunded by such Lender or the Revolving Loan Lender to the Borrower). All sums paid or
agreed to be paid to any Lender or the Revolving Loan Lender for the use, forbearance or

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detention
of sums due hereunder shall, to the extent permitted by law applicable to such Lender or the
Revolving Loan Lender, be amortized, prorated, allocated and spread throughout the full term of the
Loans evidenced by the Notes until payment in full so that the rate or amount of interest on
account of any Loans hereunder does not exceed the maximum amount allowed by such applicable law.
If at any time and from time to time (i) the amount of interest payable to any Lender or the
Revolving Loan Lender on any date shall be computed at the Highest Lawful Rate applicable to such
Lender or the Revolving Loan Lender pursuant to this Section 12.14 and (ii) in respect of
any subsequent interest computation period the amount of interest otherwise payable to such Lender
or the Revolving Loan Lender or the Revolving Loan Lender would be less than the amount of interest
payable to such Lender or the Revolving Loan Lender computed at the Highest Lawful Rate applicable
to such Lender, then the amount of interest payable to such Lender or the Revolving Loan Lender in
respect of such subsequent interest computation period shall continue to be computed at the Highest
Lawful Rate applicable to such Lender or the Revolving Loan Lender until the total amount of
interest payable to such Lender or the Revolving Loan Lender shall equal the total amount of
interest which would have been payable to such Lender or the Revolving Loan Lender if the total
amount of interest had been computed without giving effect to this Section 12.14.

     Section 12.15 Confidentiality. In the event that the Borrower or any Subsidiary
provides to the Administrative Agent, the Revolving Loan Lender, the Deposit Bank, or the Lenders
confidential information belonging to the Borrower or such Subsidiary, which the Borrower or any
Subsidiary shall designate in writing as “confidential”, the Administrative Agent, the Revolving
Loan Lender, the Deposit Bank, and the Lenders shall thereafter maintain such information in
confidence in accordance with the standards of care and diligence that each utilizes in maintaining
its own confidential information. This obligation of confidence shall not apply to such portions
of the information which (a) are in the public domain, (b) hereafter become part of the public
domain without the Administrative Agent, the Revolving Loan Lender, the Deposit Bank, or any
Lender’s breaching their obligation of confidence to the Borrower, (c) are previously known by the
Administrative Agent, the Revolving Loan Lender, the Deposit Bank, or the Lenders from some source
other than the Borrower, (d) are hereafter developed by the Administrative Agent, the Revolving
Loan Lender, the Deposit Bank, or the Lenders without using the Borrower’s information, (e) are
hereafter obtained by or available to the Administrative Agent, the Revolving Loan Lender, the
Deposit Bank, or the Lenders from a third party who owes no obligation of confidence to the
Borrower with respect to such information or through any other means other than through disclosure
by the Borrower, (f) are disclosed with the Borrower’s consent, (g) must be disclosed either
pursuant to any Governmental Requirement or to Persons regulating the activities of the
Administrative Agent, the Revolving Loan Lender, the Deposit Bank, or the Lenders, or (h) as may be
required by law or regulation or order of any Governmental Authority in any judicial, arbitration
or governmental proceeding. Further, the Administrative Agent, the Revolving Loan Lender, the
Deposit Bank, or a Lender may disclose any such information to the Administrative Agent, the
Revolving Loan Lender, the Deposit Bank, any other Lender or any Affiliate of any of the foregoing,
any independent petroleum engineers or consultants, any independent certified public accountants,
any legal counsel employed by such Person in connection with this Agreement or any Security
Instrument,
including without limitation, the enforcement or exercise of all rights and remedies
thereunder, or any assignee or participant (including prospective assignees and participants) in
the Loans; provided, however, that the Administrative Agent, the Revolving Loan
Lender, the Deposit

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Bank, or the Lenders shall receive a confidentiality agreement from the Person
to whom such information is disclosed such that said Person shall have the same obligation to
maintain the confidentiality of such information as is imposed upon the Administrative Agent, the
Revolving Loan Lender, the Deposit Bank, or the Lenders hereunder. Notwithstanding anything to the
contrary provided herein, this obligation of confidence shall cease three years from the date the
information was furnished, unless the Borrower requests in writing at least 30 days prior to the
expiration of such three year period, to maintain the confidentiality of such information for an
additional three year period. The Borrower waives any and all other rights it may have to
confidentiality as against the Administrative Agent, the Revolving Loan Lender, the Deposit Bank,
and the Lenders arising by contract, agreement, statute or law except as expressly stated in this
Section 12.15.

     Section 12.16 Exculpation Provisions. Each of the parties hereto
specifically agrees that it has a duty to read this Agreement and the Security Instruments and
agrees that it is charged with notice and knowledge of the terms of this Agreement and the Security
Instruments; that it has in fact read this Agreement and is fully informed and has full notice and
knowledge of the terms, conditions and effects of this Agreement; that it has been represented by
independent legal counsel of its choice throughout the negotiations preceding its execution of this
Agreement and the Security Instruments; and has received the advice of its attorney in entering
into this Agreement and the Security Instruments; and that it recognizes that certain of the terms
of this Agreement and the Security Instruments result in one party assuming the liability inherent
in some aspects of the transaction and relieving the other party of its responsibility for such
liability. Each party hereto agrees and covenants that it will not contest the validity or
enforceability of any exculpatory provision of this Agreement and the Security Instruments on the
basis that the party had no notice or knowledge of such provision or that the provision is not
“conspicuous.”

     Section 12.17 Hedging Agreement Substitution of Collateral. If the Obligations are
paid in full and this Agreement is terminated, the Administrative Agent, the Revolving Loan Lender,
the Deposit Bank, and the Lenders shall execute and deliver or cause to be executed and delivered
such instruments of satisfaction and reassignment as may be appropriate in order to release all
liens and security interests created by the Security Instruments, provided,
however, that in lieu of paying off any such Obligations arising under any Hedging
Agreement with any Lender or Affiliate of any Lender, the Borrower may provide substitute credit
support under a standard form ISDA Credit Support Annex acceptable to such Lender (or its
Affiliate) in the form of a letter of credit or cash equivalents in an amount equal to 110% of the
then current exposure under such Hedging Agreement.

     Section 12.18 Obligations as Senior Indebtedness; Specified Senior Indebtedness. It
is the intent of all the parties hereto that all of the Obligations arising under this Agreement
and the other Credit Documents shall constitute (and to the extent, if any, required are hereby
designated
by Borrower to constitute) “Senior Indebtedness” and “Specified Senior Indebtedness” or any
other similar term as such terms are defined in any indentures or agreement governing Subordinated
Debt. This Agreement and the other Credit Documents represent a “Credit Facility” or a “Senior
Secured Credit Facility”, as the case may be, as defined in the indenture

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governing the Senior
Notes. Notwithstanding the foregoing, the acknowledgment of intent contained in this Section
12.18 shall not be deemed to modify or amend any provision of this Agreement or any of the
other Credit Documents.

     Section 12.19 USA PATRIOT Act Notice. Each Lender that is subject to the Act (as
hereinafter defined), the Revolving Loan Lender, the Deposit Bank and the Administrative Agent (for
itself and not on behalf of any Lender) hereby notifies the Borrower that pursuant to the
requirements of the USA PATRIOT Act (Title III of Pub. L. 107-56 (signed into law October 26,
2001)) (the “Act”), it is required to obtain, verify and record information that identifies
the Borrower, which information includes the name and address of the Borrower and other information
that will allow such Lender or the Administrative Agent, as applicable, to identify the Borrower in
accordance with the Act.

[SIGNATURES BEGIN ON NEXT PAGE]

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     The parties hereto have caused this Agreement to be duly executed as of the day and year first
above written.

	 	 	 	 	 
	BORROWER:	CALLON PETROLEUM COMPANY

 	 
	 	By:  	
 	 
	 	 	Rodger W. Smith, Jr. 	 
	 	 	Treasurer 	 
	 

 

 

ADMINISTRATIVE AGENT, REVOLVING

LOAN LENDER AND LENDER:

	 	 	 	 	 
	 	MERRILL LYNCH CAPITAL CORPORATION, as

Administrative Agent, Revolving Loan

Lender, and Lender

 	 
	 	By:	 	 
	 	Name:	 	 
	 	Title:	 	 

 

 

DEPOSIT BANK:

	 	 	 	 	 
	 	MERRILL LYNCH BANK USA

 	 
	 	By:	 	 
	 	Name:	 	 
	 	Title:	 	 

 

 

ANNEX I

LIST OF PERCENTAGE SHARES AND 

MAXIMUM CREDIT AMOUNTS

	 	 	 	 	 	 	 	 	 
	 	 	Percentage	 	 	Maximum Credit	 
	Name of Lender	 	Share	 	 	Amount	 
	Merrill Lynch Capital Corporation
	 	 	100	%	 	$	200,000,000	 
	 
	 	 	 	 	 	 
	TOTAL
	 	 	100	%	 	$	200,000,000	 
	 
	 	 	 	 	 	 

 

 

EXHIBIT A

FORM OF NOTE

			
	 	 	 
	$200,000,000.00
	 	                                        , 20                    

     For value received, Callon Petroleum Company, a Delaware corporation (the “Borrower”),
hereby promises to pay to the order of                                          (the “Revolving Loan
Lender”), at the office of Merrill Lynch Capital Corporation (the “Administrative
Agent”), at 4 World Financial Center, 250 Vesey Street, New York New York 10080 or such other
address as the Administrative Agent shall specify to the Revolving Loan Lender, the principal sum
of Two-Hundred Million and No/100 Dollars ($200,000,000.00) (or such lesser amount as shall equal
the aggregate unpaid principal amount of the Loans made by the Revolving Loan Lender to the
Borrower under the Credit Agreement, as hereinafter defined), in lawful money of the United States
of America and in immediately available funds, on the dates and in the principal amounts provided
in the Credit Agreement, and to pay interest on the unpaid principal amount of each such Loan, at
such office, in like money and funds, for the period commencing on the date of such Loan until such
Loan shall be paid in full, at the rates per annum and on the dates provided in the Credit
Agreement.

     The date, amount, Type, interest rate, Interest Period and maturity of each Loan made by the
Revolving Loan Lender to the Borrower, and each payment made on account of the principal thereof,
shall be recorded by the Revolving Loan Lender on its books and, prior to any transfer of this
Note, endorsed by the Revolving Loan Lender on the schedules attached hereto or any continuation
thereof.

     This Note is one of the Notes referred to in the Credit Agreement dated as of April 18, 2007
among the Borrower, the Lenders which are or become parties thereto (including the Lender), the
Revolving Loan Lender, Merrill Lynch Bank USA, as deposit bank, and the Administrative Agent (as
the same may be amended or supplemented from time to time, the “Credit Agreement”), and
evidences Loans made by the Revolving Loan Lender thereunder. Capitalized terms used in this Note
have the respective meanings assigned to them in the Credit Agreement.

     This Note is issued pursuant to the Credit Agreement and is entitled to the benefits provided
for in the Credit Agreement and the other Credit Documents. The Credit Agreement provides for the
acceleration of the maturity of this Note upon the occurrence of certain events, for prepayments of
Loans upon the terms and conditions specified therein and other provisions relevant to this Note.

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

	 	 	 	 	 
	 	CALLON PETROLEUM COMPANY

 	 
	 	By:  	
 	 
	 	 	Name:  	 	 
	 	 	Title:  	 	 
	 

 

 

EXHIBIT B

FORM OF BORROWING, CONTINUATION AND CONVERSION REQUEST

                                        , 20                    

     Callon Petroleum Company, a Delaware corporation (the “Borrower”), pursuant to the Credit
Agreement dated as of April 18, 2007 among the Borrower, Merrill Lynch Capital Corporation, as
Administrative Agent for the lenders (the “Lenders”) which are or become parties thereto, Merrill
Lynch Bank USA, as deposit bank, and such Lenders (together with all amendments or supplements
thereto, the “Credit Agreement”), hereby makes the requests indicated below (unless
otherwise defined herein, capitalized terms are defined in the Credit Agreement):

	 	 	 	 	 	 	 
	o

	 	 	1.	 	 	Loans:
	 
	 	 	 	 	 	 
	 

	 	 	(a	)	 	Aggregate amount of new Loans to be $                                        ;
	 
	 	 	 	 	 	 
	 

	 	 	(b	)	 	Requested funding date is                                         , 200                    ;
	 
	 	 	 	 	 	 
	 

	 	 	(c	)	 	$                                         of such borrowings are to be LIBOR Loans;
	 
	 	 	 	 	 	 
	 

	 	 	 	 	 	$                                         of such borrowings are to be Base Rate Loans; and
	 
	 	 	 	 	 	 
	 

	 	 	(d	)	 	Length of Interest Period for LIBOR Loans is:                                         .
	 
	 	 	 	 	 	 
	o

	 	 	2.	 	 	LIBOR Loan Continuation for LIBOR Loans maturing on                                         :
	 
	 	 	 	 	 	 
	 

	 	 	(a	)	 	Aggregate amount to be continued as LIBOR Loans is $                                        ;
	 
	 	 	 	 	 	 
	 

	 	 	(b	)	 	Aggregate amount to be converted to Base Rate Loans is $                                        ;
	 
	 	 	 	 	 	 
	 

	 	 	(c	)	 	Length of Interest Period for continued LIBOR Loans is                                         .
	 
	 	 	 	 	 	 
	o

	 	 	3.	 	 	Conversion of Outstanding Base Rate Loans to LIBOR Loans:
	 
	 	 	 	 	 	 
	 

	 	 	 	 	 	Convert $                                         of the outstanding Base Rate Loans to LIBOR Loans on
                                         with an Interest Period of                                   
      .
	 
	 	 	 	 	 	 
	o

	 	 	4.	 	 	Conversion of outstanding LIBOR Loans to Base Rate Loans:
	 
	 	 	 	 	 	 
	 

	 	 	 	 	 	Convert $                                         of the outstanding LIBOR Loans with Interest Period
maturing on                                         , 20                    , to Base Rate Loans.

     The undersigned certifies that he is the                                          of the Borrower, and that as
such he is authorized to execute this certificate on behalf of the Borrower. The undersigned
further certifies, represents and warrants on behalf of the Borrower that the

 

 

Borrower is entitled to receive the requested borrowing, continuation or conversion under the
terms and conditions of the Credit Agreement.

	 	 	 	 	 
	 	CALLON PETROLEUM COMPANY

 	 
	 	By:	 	 
	 	Name:	 	 
	 	Title:	 	 

-2-

 

EXHIBIT C

FORM OF COMPLIANCE CERTIFICATE

     The undersigned hereby certifies that he is the                                          of Callon Petroleum Company,
a Delaware corporation (the “Borrower”), and that as such he is authorized to execute this
certificate on behalf of the Borrower. With reference to the Credit Agreement dated as of April
18, 2007 among the Borrower, Merrill Lynch Capital Corporation, as Administrative Agent for the
lenders (the “Lenders”) which are or become a party thereto, Merrill Lynch Bank USA, as
deposit bank, and such Lenders (together with all amendments or supplements thereto being the
“Credit Agreement”), the undersigned represents and warrants as follows (each capitalized
term used herein having the same meaning given to it in the Credit Agreement unless otherwise
specified):

     (a) The representations and warranties of the Borrower contained in Article VII
of the Credit Agreement and in the Security Instruments and otherwise made in
writing by or on behalf of the Borrower pursuant to the Credit Agreement and the
Security Instruments were true and correct when made, and are repeated at and as of
the time of delivery hereof and are true and correct at and as of the time of
delivery hereof, except to the extent any such representations and warranties are
expressly limited to an earlier date or the Required Lenders have expressly
consented in writing to the contrary.

     (b) The Borrower has performed and complied with all agreements and conditions
contained in the Credit Agreement and in the Security Instruments required to be
performed or complied with by it prior to or at the time of delivery hereof.

     (c) Since December 31, 2006, no event or circumstance has occurred that could
reasonably be expected to have a Material Adverse Effect.

     (d) There exists, and, after giving effect to the loan or loans with respect to
which this certificate is being delivered, will exist, no Default under the Credit
Agreement.

     (e) The financial statements furnished to the Administrative Agent with this
certificate fairly present the consolidated financial condition and results of
operations of the Borrower and its Consolidated Subsidiaries as at the end of, and
for, the [fiscal quarter] [fiscal year] ending                                          and such
financial statements have been prepared in accordance with the accounting procedures
specified in the Credit Agreement.

     (f) Attached hereto are the detailed computations necessary to determine
whether the Borrower and its Consolidated Subsidiaries are in compliance with
Sections 9.10, 9.11 and 9.12 of the Credit Agreement as of the end of the
[fiscal quarter] [fiscal year] ending                                         .

 

 

     EXECUTED AND DELIVERED this                      day of                                     
    .

	 	 	 	 	 
	 	CALLON PETROLEUM COMPANY

 	 
	 	By:	 	 
	 	Name:	 	 
	 	Title:	 	 

-2-

 

EXHIBIT D

SECURITY INSTRUMENTS

	1.	 	Guaranty executed by Callon Petroleum Operating Company, Callon Offshore Production, Inc.,
and Mississippi Marketing, Inc.
	 
	2.	 	Security Agreement executed by CPOC.
	 
	3.	 	Act of Mortgage, Security Agreement, Fixture Filing and Financing Statement (Louisiana)
executed by CPOC and UCC-1 Financing Statements related thereto.
	 
	4.	 	Intercreditor Agreement executed by Union Bank of California, N.A. as Administrative Agent
under the UBOC Credit Agreement and Merrill Lynch Capital Corporation as Administrative Agent
under the Credit Agreement.

 

 

EXHIBIT E

FORM OF ASSIGNMENT AGREEMENT

     ASSIGNMENT AGREEMENT (“Agreement”) dated as of                                         , 20              
       between:
                                         (the “Assignor”) and                                 
                                                 (the “Assignee”).

RECITALS

     A. The Assignor is a party to the Credit Agreement dated as of April 18, 2007 (as amended and
supplemented and in effect from time to time, the “Credit Agreement”) among Callon
Petroleum Company, a Delaware corporation (the “Borrower”), each of the lenders that is or
becomes a party thereto as provided in Section 12.06 of the Credit Agreement (individually,
together with its successors and assigns, a “Lender”, and collectively, together with their
successors and assigns, the “Lenders”), Merrill Lynch Capital Corporation, in its
individual capacity (“Merrill”) and as agent for the Lenders (in such capacity, together
with its successors in such capacity, the “Administrative Agent”), and Merrill Lynch Bank
USA, as deposit bank.

     B. The Assignor proposes to sell, assign and transfer to the Assignee, and the Assignee
proposes to purchase and assume from the Assignor, [all][a portion] of the Assignor’s Maximum
Credit Amount and participations in outstanding Loans and its Deposit, all on the terms and
conditions of this Agreement.

     C. In consideration of the foregoing and the mutual agreements contained herein, and for other
good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the
parties hereto agree as follows:

ARTICLE I

Definitions.

     Section 1.01 Definitions. All capitalized terms used but not defined herein have the
respective meanings given to such terms in the Credit Agreement.

     Section 1.02 Other Definitions. As used herein, the following terms have the
following respective meanings:

     “Assigned Interest” means all of Assignor’s (in its capacity as a
“Lender”) rights and obligations (i) under the Credit Agreement and the
other Security Instruments in respect of the Maximum Credit Amount of the Assignor
in the principal amount equal to $                                        , (ii) to participate in Loans
under the Maximum Credit Amount and any right to receive payments for the
participation in Loans outstanding under the Maximum Credit Amount assigned hereby
of equal to $                                         (the “Loan Balance”), and (iii) in its
Deposit in the principal amount of $                                         plus the interest and fees
which will accrue from and after the Assignment Date.

 

 

“Assignment
Date” means                                         , 200                    .

ARTICLE II

Sale and Assignment.

     Section 2.01 Sale and Assignment. On the terms and conditions set forth herein,
effective on and as of the Assignment Date, the Assignor hereby sells, assigns and transfers to the
Assignee, and the Assignee hereby purchases and assumes from the Assignor, all of the right, title
and interest of the Assignor in and to, and all of the obligations of the Assignor in respect of,
the Assigned Interest. Such sale, assignment and transfer is without recourse and, except as
expressly provided in this Agreement, without representation or warranty.

     Section 2.02 Assumption of Obligations. The Assignee agrees with the Assignor (for
the express benefit of the Assignor and the Borrower) that the Assignee will, from and after the
Assignment Date, perform all of the obligations of the Assignor in respect of the Assigned
Interest. From and after the Assignment Date: (a) the Assignor shall be released from the
Assignor’s obligations in respect of the Assigned Interest, and (b) the Assignee shall be entitled
to all of the Assignor’s rights, powers and privileges under the Credit Agreement and the other
Security Instruments in respect of the Assigned Interest.

     Section 2.03 Consent by Administrative Agent [and the Borrower]. By executing this
Agreement as provided below, in accordance with Section 12.06(b) of the Credit Agreement,
the Administrative Agent [and the Borrower] hereby acknowledge[s] notice of the transactions
contemplated by this Agreement and consents to such transactions.

ARTICLE III

Payments.

     Section 3.01 Payments. As consideration for the sale, assignment and transfer
contemplated by Section 2.01 hereof, the Assignee shall, on the Assignment Date, assume
Assignor’s obligations in respect of the Assigned Interest and pay to the Assignor an amount equal
to the Loan Balance, if any, and shall assume Assignor’s rights with respect to the Deposit. An
amount equal to all accrued and unpaid interest and fees shall be paid to the Assignor as provided
in Section 3.02(iii) below. Except as otherwise provided in this Agreement, all payments
hereunder shall be made in Dollars and in immediately available funds, without setoff, deduction or
counterclaim.

     Section 3.02 Allocation of Payments. The Assignor and the Assignee agree that (i) the
Assignor shall be entitled to any payments of principal with respect to the Assigned Interest made
prior to the Assignment Date, together with any interest and fees with respect to the Assigned
Interest accrued prior to the Assignment Date, (ii) the Assignee shall be entitled to any payments
of principal with respect to the Assigned Interest made from and after the Assignment Date,
together with any and all interest and fees with respect to the Assigned Interest accruing from and
after the Assignment Date, and (iii) the Administrative Agent is authorized and

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instructed to allocate payments received by it for account of the Assignor and the Assignee as
provided in the foregoing clauses. Each party hereto agrees that it will hold any interest, fees
or other amounts that it may receive to which the other party hereto shall be entitled pursuant to
the preceding sentence for account of such other party and pay, in like money and funds, any such
amounts that it may receive to such other party promptly upon receipt.

     Section 3.03 Further Assurances. The Assignor and the Assignee hereby agree to
execute and deliver such other instruments, and take such other actions, as either party may
reasonably request in connection with the transactions contemplated by this Agreement.

ARTICLE IV

Conditions Precedent.

     Section 4.01 Conditions Precedent. The effectiveness of the sale, assignment and
transfer contemplated hereby is subject to the satisfaction of each of the following conditions
precedent:

     (a) the execution and delivery of this Agreement by the Assignor and the Assignee;

     (b) the receipt by the Assignor of the payment required to be made by the Assignee
under Section 3.01 hereof; and

     (c) the acknowledgment and consent by the Administrative Agent [and the Borrower]
contemplated by Section 2.03 hereof.

ARTICLE V

Representations and Warranties.

     Section 5.01 Representations and Warranties of the Assignor. The Assignor represents
and warrants to the Assignee as follows:

     (a) it has all requisite power and authority, and has taken all action necessary to
execute and deliver this Agreement and to fulfill its obligations under, and consummate the
transactions contemplated by, this Agreement;

     (b) the execution, delivery and compliance with the terms hereof by Assignor and the
delivery of all instruments required to be delivered by it hereunder do not and will not
violate any Governmental Requirement applicable to it;

     (c) this Agreement has been duly executed and delivered by it and constitutes the
legal, valid and binding obligation of the Assignor, enforceable against it in accordance
with its terms;

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     (d) all approvals and authorizations of, all filings with and all actions by any
Governmental Authority necessary for the validity or enforceability of its obligations under
this Agreement have been obtained;

     (e) the Assignor has good title to, and is the sole legal and beneficial owner of, the
Assigned Interest, free and clear of all Liens, claims, participations or other charges of
any nature whatsoever; and

     (f) the transactions contemplated by this Agreement are commercial banking transactions
entered into in the ordinary course of the banking business of the Assignor.

     Section 5.02 Disclaimer. Except as expressly provided in Section 5.01 hereof,
the Assignor does not make any representation or warranty, nor shall it have any responsibility to
the Assignee, with respect to the accuracy of any recitals, statements, representations or
warranties contained in the Credit Agreement or in any certificate or other document referred to or
provided for in, or received by any Lender under, the Credit Agreement, or for the value, validity,
effectiveness, genuineness, execution, effectiveness, legality, enforceability or sufficiency of
the Credit Agreement, the Notes or any other document referred to or provided for therein or for
any failure by the Borrower or any other Person (other than Assignor) to perform any of its
obligations thereunder prior or for the existence, value, perfection or priority of any collateral
security or the financial or other condition of the Borrower or the Subsidiaries [or any other
obligor or guarantor], or any other matter relating to the Credit Agreement or any other Security
Instrument or any extension of credit thereunder.

     Section 5.03 Representations and Warranties of the Assignee. The Assignee represents
and warrants to the Assignor as follows:

     (a) it has all requisite power and authority, and has taken all action necessary to
execute and deliver this Agreement and to fulfill its obligations under, and consummate the
transactions contemplated by, this Agreement;

     (b) the execution, delivery and compliance with the terms hereof by Assignee and the
delivery of all instruments required to be delivered by it hereunder do not and will not
violate any Governmental Requirement applicable to it;

     (c) this Agreement has been duly executed and delivered by it and constitutes the
legal, valid and binding obligation of the Assignee, enforceable against it in accordance
with its terms;

     (d) all approvals and authorizations of, all filings with and all actions by any
Governmental Authority necessary for the validity or enforceability of its obligations under
this Agreement have been obtained;

     (e) the Assignee has fully reviewed the terms of the Credit Agreement and the other
Security Instruments and has independently and without reliance upon the Assignor, and based
on such information as the Assignee has deemed appropriate, made its own credit analysis and
decision to enter into this Agreement;

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     (f) the Assignee hereby affirms that the representations contained in Section
4.06(d)[(i)][ii)] of the Credit Agreement are true and accurate as to it [IF (ii) IS
SELECTED ADD: and, the Assignee has contemporaneously herewith delivered to the
Administrative Agent and the Borrower such certifications as are required thereby to avoid
the withholding taxes referred to in Section 4.06]; and

     (g) the transactions contemplated by this Agreement are commercial lending transactions
entered into in the ordinary course of the lending business of the Assignee.

ARTICLE VI

Miscellaneous.

     Section 6.01 Notices. All notices and other communications provided for herein
(including, without limitation, any modifications of, or waivers, requests or consents under, this
Agreement) shall be given or made in writing (including, without limitation, by telex or telecopy)
to the intended recipient at its “Address for Notices” specified below its name on the signature
pages hereof or, as to either party, at such other address as shall be designated by such party in
a notice to the other party.

     Section 6.02 Amendment, Modification or Waiver. No provision of this Agreement may be
amended, modified or waived except by an instrument in writing signed by the Assignor and the
Assignee, and consented to by the Administrative Agent.

     Section 6.03 Successors and Assigns. This Agreement shall be binding upon and inure
to the benefit of the parties hereto and their respective successors and permitted assigns. The
representations and warranties made herein by the Assignee are also made for the benefit of the
Administrative Agent and the Borrower, and the Assignee agrees that the Administrative Agent and
the Borrower are entitled to rely upon such representations and warranties.

     Section 6.04 Assignments. Neither party hereto may assign any of its rights or
obligations hereunder except in accordance with the terms of the Credit Agreement.

     Section 6.05 Captions. The captions and section headings appearing herein are
included solely for convenience of reference and are not intended to affect the interpretation of
any provision of this Agreement.

     Section 6.06 Counterparts. This Agreement may be executed in any number of
counterparts, each of which shall be identical and all of which, taken together, shall constitute
one and the same instrument, and each of the parties hereto may execute this Agreement by signing
any such counterpart.

     Section 6.07 Governing Law. This Agreement shall be governed by, and construed in
accordance with, the law of the State of New York.

     Section 6.08 Expenses. To the extent not paid by the Borrower pursuant to the terms
of the Credit Agreement, each party hereto shall bear its own expenses in connection with the
execution, delivery and performance of this Agreement.

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     Section 6.09 Waiver of Jury Trial. EACH OF THE PARTIES HERETO HEREBY IRREVOCABLY
WAIVES, TO THE FULLEST EXTENT PERMITTED BY LAW, ANY AND ALL RIGHT TO TRIAL BY JURY IN ANY LEGAL
PROCEEDING ARISING OUT OF OR RELATING TO THIS AGREEMENT OR THE TRANSACTIONS CONTEMPLATED HEREBY.

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

	 	 	 	 	 
	 	ASSIGNOR:

 	 
	 	By:	 	 
	 	Name:	 	 
	 	Title:	 	 
	 
	 	Address for Notices:

Telecopier No.:

Telephone No.:

Attention:

 	 

	 	 	 	 	 
	 	ASSIGNEE:

 	 
	 	By:	 	 
	 	Name:	 	 
	 	Title:	 	 
	 
	 	Address for Notices:

Telecopier No.:

Telephone No.:

Attention:

 	 

ACKNOWLEDGED AND CONSENTED TO:

	 	 	 	 	 
	 	, 	 	 	 
	as Administrative Agent
	 	 	 	 

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	 	By:	 	 
	 	Name:	 	 
	 	Title:	 	 
	 
	 	[CALLON PETROLEUM COMPANY]

 	 
	 	By:	 	 
	 	Name:	 	 
	 	Title:	 	 

-7-

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