Document:

exv10w23w8

 

EXHIBIT 10.23.8

 

AMENDED AND RESTATED

SECURITY AGREEMENT

BETWEEN

EOWS MIDLAND COMPANY

(DEBTOR)

AND

GUARANTY BANK, FSB, AS AGENT

(SECURED PARTY)

DECEMBER 28, 2006

 

 

 

TABLE OF CONTENTS

	 	 	 	 	 	 	 	 	 	 	 
	 	 	 	 	 	 	 	 	Page
	 
	 	 	 	 	 	 	 	 	 	 
	ARTICLE I	DEFINITIONS AND INTERPRETATION	 	 	1	 
	 

	 	 	1.1	 	 	Terms Defined Above
	 	 	1	 
	 

	 	 	1.2	 	 	Terms Defined in Credit Agreement
	 	 	1	 
	 

	 	 	1.3	 	 	Additional Defined Terms
	 	 	1	 
	 

	 	 	1.4	 	 	Undefined Financial Accounting Terms
	 	 	3	 
	 

	 	 	1.5	 	 	References
	 	 	3	 
	 

	 	 	1.6	 	 	Articles and Sections
	 	 	3	 
	 

	 	 	1.7	 	 	Number and Gender
	 	 	3	 
	 
	 	 	 	 	 	 	 	 	 	 
	ARTICLE II	GRANT OF SECURITY INTEREST	 	 	4	 
	 
	 	 	 	 	 	 	 	 	 	 
	ARTICLE III	REPRESENTATIONS AND WARRANTIES	 	 	4	 
	 

	 	 	3.1	 	 	Validity, Perfection and Priority
	 	 	4	 
	 

	 	 	3.2	 	 	No Liens; Other Financing Statements
	 	 	4	 
	 

	 	 	3.3	 	 	Location of Debtor and Collateral
	 	 	5	 
	 

	 	 	3.4	 	 	Accounts
	 	 	5	 
	 

	 	 	3.5	 	 	Tradenames; Prior Names
	 	 	5	 
	 
	 	 	 	 	 	 	 	 	 	 
	ARTICLE IV	COVENANTS	 	 	5	 
	 

	 	 	4.1	 	 	Further Assurances
	 	 	5	 
	 

	 	 	4.2	 	 	Change of Chief Executive Office
	 	 	6	 
	 

	 	 	4.3	 	 	Change of Name or Corporate Structure
	 	 	6	 
	 

	 	 	4.4	 	 	Title, Prohibited Liens and Filings
	 	 	6	 
	 

	 	 	4.5	 	 	Maintain Records and Accounts
	 	 	6	 
	 

	 	 	4.6	 	 	Right of Inspection
	 	 	7	 
	 

	 	 	4.7	 	 	Possession of Collateral
	 	 	7	 
	 

	 	 	4.8	 	 	Financing Statement Filings; Notifications
	 	 	7	 
	 
	 	 	 	 	 	 	 	 	 	 
	ARTICLE V	ACCOUNTS	 	 	7	 
	 

	 	 	5.1	 	 	Debtor Remains Liable under Accounts
	 	 	7	 
	 

	 	 	5.2	 	 	Collections on Accounts
	 	 	7	 
	 
	 	 	 	 	 	 	 	 	 	 
	ARTICLE VI	POWER OF ATTORNEY	 	 	8	 
	 

	 	 	6.1	 	 	Appointment as Attorney-in-Fact
	 	 	8	 
	 

	 	 	6.2	 	 	No Duty on the Part of Secured Party
	 	 	9	 
	 
	 	 	 	 	 	 	 	 	 	 
	ARTICLE VII 	REMEDIES; RIGHTS UPON DEFAULT	 	 	9	 
	 

	 	 	7.1	 	 	Rights and Remedies Generally
	 	 	9	 
	 

	 	 	7.2	 	 	Proceeds
	 	 	9	 
	 

	 	 	7.3	 	 	Collection of Accounts
	 	 	10	 
	 

	 	 	7.4	 	 	Disposition of Collateral
	 	 	10	 
	 

	 	 	7.5	 	 	Debtor’s Accounts
	 	 	10	 
	 

	 	 	7.6	 	 	Possession of Collateral
	 	 	10	 

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	 	 	 	 	 	 	 	 	Page
	 

	 	 	7.7	 	 	Disposition of the Collateral
	 	 	11	 
	 

	 	 	7.8	 	 	Recourse
	 	 	12	 
	 

	 	 	7.9	 	 	Expenses; Attorneys’ Fees
	 	 	12	 
	 

	 	 	7.10	 	 	Application of Proceeds
	 	 	12	 
	 

	 	 	7.11	 	 	Limitation on Duties Regarding Preservation of Collateral
	 	 	12	 
	 

	 	 	7.12	 	 	Waiver of Claims
	 	 	13	 
	 

	 	 	7.13	 	 	Discontinuance of Proceedings
	 	 	13	 
	 
	 	 	 	 	 	 	 	 	 	 
	ARTICLE VIII	INDEMNITY	 	 	13	 
	 

	 	 	8.1	 	 	INDEMNITY
	 	 	13	 
	 

	 	 	8.2	 	 	Indemnity Obligations Secured by Collateral; Survival
	 	 	14	 
	 
	 	 	 	 	 	 	 	 	 	 
	ARTICLE IX	MISCELLANEOUS	 	 	14	 
	 

	 	 	9.1	 	 	No Waiver; Remedies Cumulative
	 	 	14	 
	 

	 	 	9.2	 	 	Termination; Release
	 	 	15	 
	 

	 	 	9.3	 	 	Counterparts
	 	 	15	 
	 

	 	 	9.4	 	 	Marshalling
	 	 	15	 
	 

	 	 	9.5	 	 	Severability
	 	 	15	 
	 

	 	 	9.6	 	 	Financing Statement Filing
	 	 	15	 
	 

	 	 	9.7	 	 	Notices and Other Communications
	 	 	15	 
	 

	 	 	9.8	 	 	Parties in Interest
	 	 	15	 
	 

	 	 	9.9	 	 	Amendments
	 	 	16	 
	 

	 	 	9.10	 	 	Entire Agreement
	 	 	16	 
	 

	 	 	9.11	 	 	Governing Law
	 	 	16	 
	 

	 	 	9.12	 	 	Jurisdiction and Venue
	 	 	16	 

- ii -

 

AMENDED AND RESTATED SECURITY AGREEMENT

     This AMENDED AND RESTATED SECURITY AGREEMENT (this “Agreement”), dated as of December
28, 2006, is by and between EOWS MIDLAND COMPANY, a Texas corporation (the “Debtor”) and GUARANTY
BANK, FSB, a federal savings bank as Agent for the benefit of the Lenders (“Secured Party”).

W I T N E S S E T H:

     WHEREAS, pursuant to the terms and conditions of the Amended and Restated Credit
Agreement dated December 28, 2006, by and among Debtor and the Secured Party and the Lenders
signatory thereto (as amended, restated, or supplemented from time to time, the “Credit
Agreement”), the Secured Party and the Lenders have agreed to extend credit to or for the benefit
of Debtor; and

     WHEREAS, the Debtor and Secured Party entered into a Security Agreement dated as of June 6,
2006, and the parties hereto desire to amend and restate such Security Agreement;

     WHEREAS, pursuant to the Credit Agreement and as an inducement to the Secured Party and the
Lenders to extend credit to or for the benefit of the Debtor pursuant to the Credit Agreement,
Debtor has agreed to execute this Agreement in favor of the Secured Party;

     NOW, THEREFORE, in consideration of the premises 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 AND INTERPRETATION

     1.1 Terms Defined Above. As used herein, each of the terms “Agreement,”
“Credit Agreement,” “Debtor,” and “Secured Party” shall have the meaning assigned to such term
hereinabove.

     1.2 Terms Defined in Credit Agreement. Each capitalized term used but not defined
herein shall have the meaning assigned to such term in the Credit Agreement.

     1.3 Additional Defined Terms. As used herein, each of the following terms shall have
the following meanings:

     “Accounts” shall mean all accounts receivable, book debts, notes, drafts,
instruments, documents, acceptances, and other forms of obligations now owned or
hereafter received or acquired by or belonging or owing to Debtor (including,
without limitation, under any trade names, styles, or divisions thereto), whether
arising from the sale or lease of goods or the rendition of services or any other
transaction (including, without limitation, any such obligation which might be
characterized as an account, general intangible, other than contract rights under
contracts containing prohibitions against assignment of or the granting of a

 

 

security interest in the rights of a party thereunder, or chattel paper under the Uniform
Commercial Code in effect in any jurisdiction), and all rights of Debtor in, to, and under all
purchase orders now owned or hereafter received or acquired by it for goods or services, and all
rights of Debtor to any goods the sale or lease of which gave rise to any of the foregoing
(including, without limitation, returned or repossessed goods and rights of unpaid sellers), and
all moneys due or to become due to Debtor under all contracts for the sale or lease of goods or the
performance of services (whether or not earned by performance) or in connection with any other
transaction, now in existence or hereafter arising, including, without limitation, all collateral
security and guarantees of any kind given by any Person with respect to any of the foregoing.

     “Account Debtor” shall mean each Person obligated on an Account, Chattel Paper, or
General Intangible.

     “Account Records” shall mean (a) all original copies of all documents, instruments,
or other writings evidencing the Accounts, (b) all books, correspondence, credit or other files,
records, ledger sheets or cards, invoices, and other papers relating to the Accounts, including,
without limitation, all tapes, cards, computer tapes, computer discs, computer runs, record
keeping systems, and other papers and documents relating to the Accounts, whether in the
possession or under the control of Debtor or any computer bureau or agent from time to time acting
for or on behalf of Debtor or otherwise, (c) all evidences of the filing of financing statements
and the registration of other instruments in connection therewith and amendments, supplements, or
other modifications thereto, notices to other creditors or secured parties, and certificates,
acknowledgements, or other writings, including, without limitation, lien search reports, from
filing or other registration offices, (d) all credit information, reports, and memoranda relating
thereto, and (e) all other written or non written forms of information related in any way to the
foregoing or any Account.

     “Chattel Paper” shall mean all chattel paper (as such term is defined in Section 9 105(a)(2)
of the UCC) of the Debtor.

     “Collateral” shall have the meaning assigned to it in Article II.

     “Equipment” shall mean all of Debtor’s equipment (including, but not limited to that
described on Exhibit B attached hereto), as defined in Section 9.102(a)(33) of the UCC, in any
form, whether now owned or hereinafter acquired and wherever located including all parts thereof
and all accessories or additions thereto, whether now owned or hereafter acquired.

     “General Intangibles” shall mean all general intangibles (as such term is defined in
Section 9 106 of the UCC) of Debtor, including, without limitation, rights to the payment of
money (other than Accounts), net profit interests, contracts, farmout agreements, licenses, and
franchises (excluding licenses and franchises which prohibit the assignment or grant of a
security interest by

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Debtor), federal income tax refunds, trade names, distributions on
certificated securities (as defined in §8 102(a)(l) of the UCC) and uncertificated
securities (as defined in §8 102(a)(2) of the UCC), computer programs and other
computer software, inventions, designs, trade secrets, goodwill, proprietary rights,
customer lists, supplier contracts, sale orders, correspondence, advertising
materials, payments due in connection with any requisition, confiscation,
condemnation, seizure or forfeiture of any property, reversionary interests in
pension and profit sharing plans and reversionary, beneficial and residual interests
in trusts, credits with and other claims against any Person, together with any
collateral for any of the foregoing and the rights under any security agreement
granting a security interest in such collateral.

     “Indemnitees” shall mean the Secured Party and its shareholders, officers,
directors, employees, agents, attorneys-in-fact, and affiliates.

     “Proceeds” shall mean proceeds (as such term is defined in Section 9 306(a) of the
UCC).

     “Secured Obligations” shall mean the Obligations.

     “UCC” shall mean the Uniform Commercial Code as in effect from time to time in the
State of Texas.

     1.4
Undefined Financial Accounting Terms. Undefined financial accounting terms used
in this Agreement shall have the meanings assigned to such terms according to GAAP.

     1.5
References. The words “hereby,” “herein,” “hereinabove,”
“hereinafter,” “herein below,” “hereof,” “hereunder,” and words of similar import when used in this
Agreement shall refer to this Agreement as a whole and not to any particular Article, Section, or
provision of this Agreement. References in this Agreement to Articles, Sections, or Exhibits are
to such Articles, Sections, or Exhibits of this Agreement unless otherwise specified.

     1.6
Articles and Sections. This Agreement, for convenience only, has been divided
into Articles and Sections; and it is understood that the rights and other legal relations of the
parties hereto shall be determined from this instrument as an entirety and without regard to the
aforesaid division into Articles and Sections and without regard to headings prefixed to such
Articles or Sections.

     1.7
Number and Gender. Whenever the context requires, reference herein made to the
single number shall be understood to include the plural; and likewise, the plural shall be
understood to include the singular. Words denoting sex shall be construed to include the
masculine, feminine and neuter, when such construction is appropriate; and specific enumeration
shall not exclude the general but shall be construed as cumulative. Definitions of terms defined in
the singular or plural shall be equally applicable to the plural or singular, as the case may be,
unless otherwise indicated.

- 3 -

 

ARTICLE II

 

GRANT OF SECURITY INTEREST

     As security for the prompt and complete payment and performance in full of all Secured
Obligations, Debtor hereby assigns and transfers for the purpose of security and pledges to the
Secured Party and grants to the Secured Party a security interest in and continuing lien on all
right, title, and interest of Debtor in, to, and under the following, in each case, whether now
owned or existing or hereafter acquired or arising, and wherever located (all of which is herein
collectively called the “Collateral”):

	 	(a)	 	all Accounts;
	 
	 	(b)	 	all Account Records;
	 
	 	(c)	 	all Chattel Paper;
	 
	 	(d)	 	all Equipment;
	 
	 	(e)	 	all General Intangibles; and
	 
	 	(f)	 	all accessions and additions to any or all of the
foregoing, all substitutions and replacements for any or all of the
foregoing, and all Proceeds and products of any or all of the foregoing.

ARTICLE III

 

REPRESENTATIONS AND WARRANTIES

     Debtor hereby represents and warrants to the Secured Party, which representations and
warranties shall survive execution and delivery of this Agreement, as follows:

     3.1
Validity, Perfection and Priority. The security interests in the Collateral
granted to the Secured Party hereunder constitute valid and continuing security interests in the
Collateral. Upon the filing of financing statements, naming Debtor as “debtor” and the Secured
Party as “secured party” and describing the Collateral, in the filing offices set forth on Exhibit
A, the security interests granted to the Secured Party hereunder will constitute valid
first-priority perfected security interests in all Collateral with respect to which a security
interest can be perfected by the filing of a financing statement, subject only to Permitted Liens.

     3.2
No Liens; Other Financing Statements. (a) Except for the Lien granted to the
Secured Party hereunder and Permitted Liens, Debtor owns each item of the Collateral free and clear
of any and all Liens, rights, or claims of all other Persons, and Debtor shall defend the
Collateral against all claims and demands of all Persons at any time claiming the same or any
interest therein adverse to the Secured Party.

          (b) No financing statement or other evidence of Lien covering or purporting to cover any
of the Collateral is on file in any public office other than (i) financing statements in

- 4 -

 

favor of the Secured Party, (ii) financing statements for which proper termination statements have
been delivered to the Secured Party for filing, and (iii) financing statements filed in connection
with Permitted Liens.

     3.3
Location of Debtor and Collateral. The chief executive office of Debtor is located
at One Landmark Square, Stamford, Connecticut 06901. The primary copies of the Account Records
are located at, and all Accounts and General Intangibles are maintained at, and controlled and
directed (including, without limitation, for general accounting purposes) from, such chief
executive office.

     3.4
Accounts. (a) Each Account (i) is and will be, in all material respects, the
genuine, legal, valid, and binding obligation of the Account Debtor in respect thereof,
representing an unsatisfied obligation of such Account Debtor, (ii) is and will be, in all material
respects, enforceable in accordance with its terms, (iii) is not and will not be subject to any
setoffs, defenses, taxes, counterclaims (except (A) with respect to refunds, returns, and
allowances in the ordinary course of business, and (B) to the extent that such Account may not yet
have been earned by performance), and (iv) is and will be, in all material respects, in compliance
with all applicable laws, whether federal, state, local, or foreign.

          (b) No Accounts which are evidenced by Chattel Paper require the consent of the Account
Debtor in respect thereof in connection with their assignment hereunder.

     3.5
Tradenames; Prior Names. Debtor has not conducted business under any name other
than its current name during the last five years.

ARTICLE IV

COVENANTS

     Debtor covenants and agrees with the Secured Party that from and after the date of
this Agreement:

     4.1
Further Assurances. At any time and from time to time, upon the request of the
Secured Party, and at the sole expense of Debtor, Debtor will promptly and duly execute and
deliver any and all such further instruments, endorsements, powers of attorney, and other
documents, make such filings, give such notices, and take such further action as the Secured Party
may reasonably deem desirable in obtaining the full benefits of this Agreement and the rights,
remedies, and powers herein granted, including, without limitation, the following:

          (a) the filing of financing statements, in form acceptable to the Secured Party under the
Uniform Commercial Code in effect in any jurisdiction with respect to the liens and security
interests granted hereby;

          (b) the performance of all searches of public records deemed necessary by the Secured Party to
establish and determine the priority of the security interests of the Secured Party or to determine
the presence or priority of other secured parties; and

- 5 -

 

          (c) the furnishing to the Secured Party from time to time of reports and schedules in
connection with the Collateral as required pursuant to the Credit Agreement, all in reasonable
detail and in form reasonably satisfactory to the Secured Party.

     4.2
Change of Chief Executive Office. Debtor will not move its chief executive
office except to such new location as Debtor may establish in accordance with the last sentence of
this Section. The originals of all Account Records and General Intangibles will be kept at such
chief executive office or at the locations referred to in Section 3.3, or at such new locations as
Debtor may establish in accordance with the last sentence of this Section. All Accounts, Account
Records, and General Intangibles of Debtor will be maintained at and controlled and directed
(including, without limitation, for general accounting purposes) from the locations referred to in
Section 3.3 or such new locations as the Debtor may establish in accordance with the last sentence
of this Section. With respect to any new location, promptly upon the request of the Secured Party,
Debtor shall take all such action as the Secured Party may request to maintain the security
interest of the Secured Party in the Collateral granted hereby at all times fully perfected with
the same or better priority and in full force and effect. Debtor shall not establish a new location
for its chief executive office or such activities (or move any such activities from the locations
referred to in Section 3.3) until it shall have given to the Secured Party not less than ten days’
prior written notice of its intention to do so, clearly describing such new location and providing
such other information in connection therewith as the Secured Party may reasonably request.

     4.3
Change of Name or Corporate Structure. Debtor shall not change its name or
corporate structure or conduct business under any name other than its current name without giving
notice thereof to the Secured Party within ten days thereafter, clearly describing such new name,
or corporate structure or such new tradename and providing such other information in connection
therewith as the Secured Party may reasonably request. With respect to such new name, corporate
structure, or tradename, promptly upon the request of the Secured Party, Debtor shall take all such
action as the Secured Party may reasonably request to maintain the security interest of the Secured
Party in the Collateral granted hereby at all times fully perfected with the same or better
priority and in full force and effect.

     4.4
Title, Prohibited Liens and Filings. Debtor agrees to protect the title to the
Collateral. Debtor will not pledge, mortgage, otherwise encumber, create or suffer a Lien to
exist on any of the Collateral (other than in favor of the Secured Party) or sell, assign or
otherwise transfer any of the Collateral to or in favor of any Person other than the Secured Party
without the Secured Party’s written consent. Debtor will not file or permit to be filed or recorded
any financing statement or other security instrument with respect to the Collateral other than in
favor of Secured Party.

     4.5
Maintain Records and Accounts. Debtor will keep and maintain, or cause to be kept
and maintained, at its own cost and expense satisfactory and complete records of the Collateral,
including, but not limited to, the originals of all documentation with respect to all Accounts and
General Intangibles and records of all payments received and all credits granted on the Accounts,
all merchandise returned, and all other dealings therewith.

- 6 -

 

     4.6
Right of Inspection. The Secured Party shall upon reasonable notice to Debtor
have full and free access during normal business hours of Debtor to all the books,
correspondence, and records and Equipment of Debtor; and the Secured Party and its
representatives may examine the same, take extracts therefrom, and make photocopies thereof.

     4.7
Possession of Collateral. The Collateral shall remain in Debtor’s possession or
control at all times at Debtor’s risk of loss.

     4.8
Financing Statement Filings; Notifications. Debtor recognizes that financing
statements pertaining to the Collateral have been or will be filed with the offices of the
Secretary of State for the States listed in Exhibit A hereto. Debtor will immediately notify the
Secured Party of any condition or event that may change the proper location for the filing of any
financing statement or other public notice or recording for the purpose of perfecting a security
interest in the Collateral. Without limiting the generality of the foregoing, Debtor will (a)
notify the Secured Party within a reasonable period of time in advance of any change to a
jurisdiction other than as represented in Section 3.3 hereof, (i) in the location of Debtor’s chief
place of business, (ii) in the location of the office where Debtor keeps its records concerning the
Accounts and the General Intangibles and the original of all the Accounts Records, or (iii) in the
“location” of Debtor within the meaning of Section 9-103(c) of the UCC, and (b) immediately notify
Secured Party of any change in Debtor’s name. In any notice furnished pursuant to this Section,
Debtor will expressly state that the notice is required by this Agreement and contains facts that
will or may require additional filings of financing statements or other notices for the purpose of
continuing perfection of the Secured Party’s security interest in the Collateral.

ARTICLE V

ACCOUNTS

     5.1
Debtor Remains Liable under Accounts. Anything herein to the contrary
notwithstanding (including, without limitation, the grant of any rights to the Secured Party),
Debtor shall remain liable under each of the Accounts to observe and perform all the conditions and
obligations to be observed and performed by it thereunder, all in accordance with the terms of any
agreement giving rise to each such Account. The Secured Party shall have no obligation or liability
under any Account (or any agreement giving rise thereto) by reason of or arising out of this
Agreement or the receipt by the Secured Party of any payment relating to such Account pursuant
hereto, nor shall the Secured Party be obligated in any manner to perform any of the obligations of
Debtor under or pursuant to any Account (or any agreement giving rise thereto), to make any
payment, to make any inquiry as to the nature or the sufficiency of any payment received by it or
as to the sufficiency of any performance by any party under any Account (or any agreement giving
rise thereto), to present or file any claim, to take any action to enforce any performance, or to
collect the payment of any amounts which may have been assigned to it or to which it may be
entitled at any time or times.

     5.2
Collections on Accounts. Prior to the occurrence of an Event of Default, the
Secured Party hereby authorizes Debtor to collect the Accounts. At any time following and during
the continuance of any Event of Default, the Secured Party may curtail or terminate said authority
at any time and itself, or by its agents, collect all Accounts, and any payments of

- 7 -

 

Accounts collected by Debtor shall be held by Debtor in trust for the Secured Party, segregated
from other funds of Debtor. All Proceeds, while held by the Secured Party (or by Debtor in trust
for the Secured Party) shall continue to be Collateral securing all of the Secured Obligations and
shall not constitute payment thereof until applied as hereinafter provided.

ARTICLE VI

POWER OF ATTORNEY

     6.1
Appointment as Attorney-in-Fact. Debtor hereby irrevocably constitutes and
appoints the Secured Party and any officer or agent thereof, with full power of substitution, as
its true and lawful attorney-in-fact, with full irrevocable power and authority in the place and
stead of Debtor and in the name of Debtor or in its own name, from time to time in the discretion
of the Secured Party, for the purpose of carrying out the terms of this Agreement, to take any and
all appropriate action and to execute any and all documents and instruments which may be necessary
or desirable to accomplish the purposes of this Agreement, and, without limiting the generality of
the foregoing, Debtor hereby gives the Secured Party the power and right, on behalf of Debtor,
without notice to or assent by the Debtor, to do the following:

          (a) in the case of any Account, at any time when the authority of Debtor to collect the
Accounts has been curtailed or terminated pursuant hereto, or in the case of any other Collateral,
at any time when any Event of Default shall have occurred and be continuing, in the name of Debtor
or its own name, or otherwise, to take possession of and indorse and collect any checks, drafts,
notes, acceptances, or other instruments for the payment of moneys due under, or with respect to,
any Collateral; in the name of Debtor or otherwise to direct any party liable for any payment under
any of the Collateral to make payment of any and all moneys due or to become due thereunder
directly to the Secured Party or as the Secured Party shall direct; to ask or demand for, collect,
receive payment of, and receipt for, any and all moneys, claims, and other amounts due or to become
due at any time in respect of or arising out of any Collateral;

          (b) at any time when an Event of Default shall have occurred and be continuing, to prepare,
sign, and file financing statements and amendments thereto in the name of Debtor;

          (c) at any time when an Event of Default shall have occurred and be continuing, to take or
cause to be taken all actions necessary to perform or comply or cause performance or compliance
with the terms of this Agreement, including, without limitation, actions to pay or discharge taxes
and Liens levied or placed on or threatened against the Collateral, to effect any repairs or obtain
any insurance called for by the terms of this Agreement, and to pay all or any part of the premiums
therefor and the costs thereof;

          (d) upon the occurrence and during the continuance of any Event of Default, (i) to sign and
indorse any invoices, freight or express bills, bills of lading, storage or warehouse receipts,
drafts against debtor, assignments, verifications, notices, and other documents in connection with
any of the Collateral, (ii) to commence and prosecute any suits, actions, or proceedings at law or
in equity in any court of competent jurisdiction to collect the Collateral or any portion thereof
and to enforce any other right in respect of any Collateral, (iii) to defend any

- 8 -

 

suit, action, or proceeding brought against Debtor with respect to any Collateral, (iv) to settle,
compromise, or adjust any suit, action, or proceeding described in the preceding clause and, in
connection therewith, to give such discharges or releases as the Secured Party may deem
appropriate, and (v) generally, to sell or transfer and make any agreement with respect to or
otherwise deal with any of the Collateral as fully and completely as though the Secured Party were
the absolute owner thereof for all purposes, and to do, at the option of the Secured Party and the
expense of Debtor, at any time, or from time to time, all acts and things which the Secured Party
deems necessary to protect, preserve, or realize upon the Collateral and the Liens of the Secured
Party thereon and to effect the intent of this Agreement, all as fully and effectively as Debtor
might do; and

          (e) at any time when an Event of Default shall have occurred and be continuing, to execute,
in connection with any foreclosure, any endorsements, assignments, or other instruments of
conveyance or transfer with respect to the Collateral.

     Debtor hereby ratifies all that said attorneys shall lawfully do or cause to be done by
virtue hereof. This power of attorney is a power coupled with an interest and shall be irrevocable
so long as any Obligation remains outstanding or any Commitment exists.

     6.2 No Duty on the Part of Secured Party. The powers conferred on the Secured Party
hereunder are solely to protect the interests of the Secured Party in the Collateral and shall not
impose any duty upon the Secured Party to exercise any such powers. The Secured Party shall be
accountable only for amounts that it actually receives as a result of the exercise of such powers,
and, except for its willful misconduct and/or own gross negligence, neither it nor any of its
officers, directors, employees, or agents shall be responsible to the Debtor for any act or
failure to act hereunder.

ARTICLE VII

REMEDIES; RIGHTS UPON DEFAULT

     7.1 Rights and Remedies Generally. If an Event of Default shall occur and be
continuing, then and in every such case, the Secured Party shall have all the rights of a secured
party under the UCC, all rights now or hereafter existing under all other applicable laws, and,
subject to any mandatory requirements of applicable law then in effect, all rights set forth in
this Agreement and the other Loan Documents. No enumeration of rights in this Section or
elsewhere in this Agreement or in any other Loan Document or other agreement shall be deemed to in
any way limit the rights of the Secured Party as described in this Section.

     7.2 Proceeds. If an Event of Default shall occur and be continuing, in addition to the
rights of the Secured Party specified with respect to the payment of Accounts, (a) all Proceeds
received by Debtor consisting of cash, checks, and other near cash items shall be held by Debtor in
trust for the Secured Party, segregated from other funds of Debtor, and shall forthwith upon
receipt by Debtor, be turned over to the Secured Party, in the same form received by Debtor
(appropriately indorsed or assigned by the Debtor to the order of the Secured Party or in such
other manner as shall be satisfactory to the Secured Party), and (b) any and all such Proceeds

- 9 -

 

received by the Secured Party (whether from Debtor or otherwise), or any part thereof, shall be
applied by the Secured Party as provided in Section 7.10 hereof.

     7.3 Collection of Accounts. If an Event of Default shall occur and be continuing:

          (a) the Secured Party may instruct the obligor or obligors on any obligation owing or
purporting to be owed to Debtor constituting the Collateral (including, without limitation, the
Accounts) to make any payment required by the terms of such obligation directly to the Secured
Party;

          (b) the Secured Party shall have the right from time to time to modify (including, without
limitation, to extend the time for payment or arrange for payment in installments) or waive
rights under any such obligation and to compromise or settle counterclaims or setoffs
with the obligor under any such obligation; and

          (c) any and all of such proceeds of such collections paid to the Secured Party, or any part
thereof, (after deduction of the Secured Party’s expenses of collection, including, without
limitation, reasonable attorneys’ fees and disbursements), shall be applied by the Secured Party as
provided in Section 7.10 hereof.

     7.4 Disposition of Collateral. If an Event of Default shall occur and be continuing:

          (a) the Secured Party may direct Debtor to sell, assign, or otherwise liquidate or dispose of
all or from time to time any portion of the Collateral, and Debtor shall do so, and the Secured
Party may take possession of the Proceeds of such Collateral. The Secured Party may direct Debtor
to direct that all Proceeds of such Collateral be paid directly to the Secured Party or may permit
the Proceeds of such Collateral to be paid to Debtor and all such Proceeds consisting of cash,
checks, or near cash items shall be held by Debtor in trust for the Secured Party, segregated from
other funds of Debtor in a separate deposit account containing only Proceeds and shall forthwith
upon receipt by Debtor, be turned over to the Secured Party, in the same form received by Debtor
(appropriately indorsed or assigned by Debtor to the order of the Secured Party or in such other
manner as shall be satisfactory to the Secured Party); and

          (b) any and all such Proceeds received by the Secured Party (whether from Debtor or
otherwise), shall be applied by the Secured Party as provided in Section 7.10 hereof.

     7.5 Debtor’s Accounts. If an Event of Default shall occur and be continuing, the
Secured Party may liquidate any securities held in any accounts of Debtor and apply the proceeds
thereof and any other amounts held in any accounts of Debtor as provided in Section 7.10 hereof.

     7.6 Possession of Collateral. If an Event of Default shall occur and be continuing,
(a) the Secured Party may, personally or by agents or attorneys, immediately retake possession of
the Collateral (including the originals of all or any Accounts and Account Records) or any part
thereof, from Debtor or any other Person which then has possession of any part thereof with or
without notice or judicial process, and for that purpose may enter upon Debtor’s premises where any
of the Collateral is located and remove the same and may make reasonable use in connection

- 10 -

 

with such removal of any and all services, supplies, aids, and other facilities of Debtor, and (b)
upon three days’ notice to Debtor, Debtor shall, at its own expense, assemble the Collateral,
including, without limitation, the originals of all Account Records (or from time to time any
portion thereof) and make it available to the Secured Party by delivery to the Secured Party at any
location designated by the Secured Party which is reasonably convenient to both parties, whether at
the premises of Debtor or the Secured Party or elsewhere. Debtor shall, at its sole expense, store
and keep any Collateral so assembled at such place or places pending further action by the Secured
Party and while the Collateral shall be so stored and kept, provide such guards and maintenance
services as shall be reasonably necessary to protect the same and to preserve and maintain the
Collateral in good condition. Debtor’s obligation to so assemble and deliver the Collateral is of
the essence of this Agreement and, accordingly, upon application to a court of equity having
jurisdiction, the Secured Party shall be entitled to a decree requiring specific performance by the
Debtor of such obligation.

     7.7 Disposition of the Collateral. If an Event of Default shall occur and be
continuing, the Secured Party may sell, assign, lease, give an option or options to purchase, or
otherwise dispose of the Collateral (or contract to do any of the foregoing) under one or more
contracts or as an entirety, and, to the extent permitted by applicable law, without the necessity
of gathering at the place of sale the property to be sold, at public or private sale or sales,
conducted by any officer, nominee or agent of, or auctioneer or attorney for the Secured Party at
any location of any third party conducting or otherwise involved in such sale or any office of the
Secured Party or elsewhere and in general in such manner, at such time or times and upon such
terms and conditions and at such price as may be commercially reasonable, for cash or on credit or
for future delivery without assumption of any credit risk. Any of the Collateral may be sold,
leased, assigned, or options or contracts entered to do so, or otherwise disposed of, in the
condition in which the same existed when taken by the Secured Party or after any overhaul or
repair which may be commercially reasonable. Any such disposition which shall be a private sale or
other private proceeding shall be made upon not less than ten days’ written notice to Debtor
specifying the time after which such disposition is to be made and the intended sale price or
other consideration therefor. Any such disposition which shall be a public sale shall be made upon
not less than ten days’ written notice to Debtor (which Debtor agrees to be commercially
reasonable) specifying the time and place of such sale and, in the absence of applicable
requirements of law to the contrary, shall be by public auction (which may, at the option or the
Secured Party, be subject to reserve), after publication of commercially reasonable notice of such
auction. To the extent permitted by applicable law, the Secured Party may bid for and become the
purchaser of the Collateral or any item thereof, offered for sale in accordance with this Section
without accountability to Debtor (except to the extent of surplus money received) as provided
below. In the payment of the purchase price of the Collateral, the purchaser shall be entitled to
have credit on account of the purchase price thereof of amounts owing to such purchaser on account
of any of the Secured Obligations and any such purchaser may deliver notes, claims for interest,
or claims for other payment with respect to such Secured Obligations in lieu of cash up to the
amount which would, upon distribution of the net proceeds of such sale, be payable thereon. Such
notes, if the amount payable hereunder shall be less than the amount due thereon, shall be
returned to the holder thereof after being appropriately stamped to show partial payment.
Notwithstanding the foregoing, if the Collateral or any portion thereof is

- 11 -

 

perishable or threatens to decline speedily in value or is of a type customarily sold in a
recognized market only such notice as shall be reasonably practicable shall be required.

     7.8 Recourse. Debtor shall remain liable for any deficiency if the proceeds of any
sale or other disposition of the Collateral are insufficient to satisfy the Secured Obligations.
Debtor shall also be liable for all reasonable expenses of the Secured Party incurred in
connection with collecting such deficiency, including, without limitation, the reasonable fees and
disbursements of any attorneys employed by the Secured Party to collect such deficiency.

     7.9 Expenses: Attorneys’ Fees. Debtor shall reimburse the Secured Party for all its
reasonable expenses in connection with the exercise of its rights and remedies hereunder,
including, without limitation, reasonable attorneys’ fees and legal expenses incurred by the
Secured Party.

     7.10 Application of Proceeds. The proceeds of any disposition of Collateral shall be
applied as follows:

          (a) first, to payment or reimbursement of that portion of the Obligations constituting fees,
expenses and indemnities payable to the Agent in its capacity as such;

          (b) second, pro rata to payment or reimbursement of that portion of the Obligations
constituting fees, expenses and indemnities payable to the Lenders;

          (c) third, pro rata to payment of accrued interest on the Loans;

          (d) fourth, pro rata to payment of principal outstanding on the Loans and Obligations owed to
any Lender or affiliate of any Lender under any Commodity Hedge Agreement or Rate Management
Transaction;

          (e) fifth, pro rata to any other Obligations;

          (f) sixth, to serve as cash collateral to be held by the Agent to secure the LC Exposure; and

          (g) seventh, any excess, after all of the Obligations shall have been indefeasibly
paid in full in cash, shall be paid to the Borrower or as otherwise required by any Governmental
Authority.

     7.11 Limitation on Duties Regarding Preservation of Collateral. The Secured Party’s
sole duty with respect to the custody, safekeeping, and physical preservation of the Collateral in
its possession, under Section 9.207 of the UCC or otherwise, shall be to deal with it in the same
manner as the Secured Party deals with similar property for its own account. The Secured Party
shall have no obligation to take any steps to preserve rights against prior parties to any
Collateral. Except for matters constituting willful misconduct and/or gross negligence, neither
the Secured Party nor any of its directors, officers, employees, or agents shall be liable for
failure to demand, collect, or realize upon all or any part of the Collateral or for any delay in
doing so or shall be under any obligation to sell or otherwise dispose of any Collateral upon the
request of the Debtor or otherwise.

- 12 -

 

     7.12 Waiver of Claims. Except as otherwise provided in this Agreement, Debtor
hereby waives, to the extent permitted by applicable law, notice of and judicial hearing in
connection with the Secured Party’s taking possession or the Secured Party’s disposition of any of
the Collateral in accordance herewith, including, without limitation, any and all prior notice and
hearing for any prejudgment remedy or remedies and any such right which the Debtor would otherwise
have under the constitution or any statute of the United States or any state, and Debtor hereby
further waives, to the extent permitted by law:

          (a) all damages occasioned by such taking of possession except any damages which are the
direct result of the willful misconduct and/or gross negligence of the Secured Party;

          (b) all other requirements as to the time, place, and terms of sale or other requirements with
respect to the enforcement of the rights of the Secured Party hereunder;

          (c) demand of performance or other demand, notice of intent to demand or accelerate, notice of
acceleration, presentment, protest, advertisement, or notice of any kind to or upon Debtor or any
other Person, except as may be required by the Credit Agreement; and

          (d) all rights of redemption, appraisement, valuation, diligence, stay,
extension, or moratorium now or hereafter in force under any applicable law in order to stay or
delay the enforcement of this Agreement, including the absolute sale of the Collateral or any
portion thereof, and Debtor, for itself and all who may claim under it, insofar as it or they now
or hereafter lawfully may, hereby waives the benefit of all such laws.

     7.13 Discontinuance of Proceedings. In case the Secured Party shall have instituted
any proceeding to enforce any right, power, or remedy under this Agreement by foreclosure, sale,
entry, or otherwise, and such proceeding shall have been discontinued or abandoned for any reason,
then and in every such case, Debtor and the Secured Party shall be returned to their former
positions and rights hereunder with respect to the Collateral subject to the security interest
created under this Agreement, and all rights, remedies, and powers of the Secured Party shall
continue as if no such proceeding had been instituted.

ARTICLE VIII

INDEMNITY

     8.1 INDEMNITY. (a) DEBTOR AGREES TO INDEMNIFY, REIMBURSE, AND HOLD THE INDEMNITEES
HARMLESS FROM ANY AND ALL LIABILITIES, OBLIGATIONS, LOSSES, DAMAGES, PENALTIES, CLAIMS, ACTIONS,
JUDGMENTS, SUITS, COSTS, EXPENSES, OR DISBURSEMENTS (INCLUDING REASONABLE ATTORNEYS’ FEES AND
EXPENSES) (FOR THE PURPOSES OF THIS SECTION ALL OF THE FOREGOING ARE COLLECTIVELY CALLED
“EXPENSES”) OF WHATSOEVER KIND OR NATURE WHICH MAY BE IMPOSED ON, ASSERTED AGAINST, OR INCURRED BY
ANY OF SUCH INDEMNITEES IN ANY WAY RELATING TO OR ARISING OUT OF THIS AGREEMENT OR THE DOCUMENTS
EXECUTED IN CONNECTION HEREWITH OR IN ANY OTHER WAY

- 13 -

 

CONNECTED WITH THE ADMINISTRATION OF THE TRANSACTIONS CONTEMPLATED HEREBY OR THE ENFORCEMENT OF
ANY OF THE TERMS OF OR THE PRESERVATION OF ANY RIGHTS HEREUNDER, INCLUDING, WITHOUT LIMITATION,
THOSE ARISING FROM THE NEGLIGENCE, WHETHER SOLE OR CONCURRENT, OF ANY INDEMNITEE; PROVIDED THAT NO
SUCH INDEMNITEE SHALL BE INDEMNIFIED PURSUANT TO THIS SECTION FOR EXPENSES TO THE EXTENT ARISING
FROM THE WILLFUL MISCONDUCT AND/OR GROSS NEGLIGENCE OF SUCH INDEMNITEE.

          (b) Debtor agrees that upon written notice by any such Indemnitee of any assertion that could
give rise to an Expense, Debtor shall assume full responsibility for the defense thereof. Without
limiting the application of part (a) of this Section, Debtor agrees to pay or reimburse such
Indemnitee on demand for any and all reasonable fees, costs, and expenses of whatever kind or
nature incurred in connection with the creation, preservation, or protection of the Secured Party’s
Liens on, and security interests in, the Collateral, including, without limitation, all reasonable
fees and taxes in connection with the recording or filing of instruments and documents in public
offices, payment, or discharge of any taxes or Liens or security interests upon or in respect of
the Collateral, premiums for insurance with respect to the Collateral, all reasonable expenses
incurred in the custody, preservation, use, or operation of the Collateral when Collateral is in
the Secured Party’s possession, and all other reasonable fees, costs, and expenses in connection
with protecting, maintaining, or preserving the Collateral and the Secured Party’s interest
therein, whether through judicial proceedings or otherwise, or in defending or prosecuting any
actions, suits, or proceedings arising out of or relating to the Collateral.

          (c) Without limiting the application of parts (a) or (b) of this Section, Debtor agrees to
pay, indemnify, and hold each Indemnitee harmless from and against any Expenses which such
Indemnitee may suffer, expend, or incur in consequence of or growing out of any misrepresentation
by any Debtor in this Agreement or in any statement or writing contemplated by or made or delivered
pursuant to or in connection with this Agreement.

          (d) If and to the extent that the obligations of Debtor under this Section are unenforceable
for any reason, Debtor hereby agrees to make the maximum contribution to the payment and
satisfaction of such obligations which is permissible under applicable law.

     8.2 Indemnity Obligations Secured by Collateral: Survival. Any amounts paid by any
Indemnitee as to which such Indemnitee has the right to reimbursement shall constitute Secured
Obligations secured by the Collateral. The indemnity obligations of the Debtor contained in this
Article VIII shall continue in full force and effect notwithstanding the full payment and
performance of the Secured Obligations and the termination of this Agreement.

ARTICLE IX

MISCELLANEOUS

     9.1 No Waiver; Remedies Cumulative. No failure or delay on the part of the Secured
Party in exercising any right, power, or privilege hereunder and no course of dealing between any
Debtor and the Secured Party shall operate as a waiver thereof; nor shall any single or partial

- 14 -

 

exercise of any right, power, or privilege hereunder preclude any other or further exercise thereof
or the exercise of any other right, power, or privilege. A waiver by the Secured Party of any right
or remedy hereunder on any one occasion shall not be construed as a bar to any right or remedy
which the Secured Party would otherwise have on any future occasion. The rights and remedies herein
expressly provided are cumulative, may be exercised singly or concurrently and as often and in such
order as the Secured Party deems expedient, and are not exclusive of any rights or remedies which
the Secured Party would otherwise have whether by agreement or now or hereafter existing under
applicable law. No notice to or demand on Debtor in any case shall entitle Debtor to any other or
further notice or demand in similar or other circumstances or constitute a waiver of the rights of
the Secured Party to any other or further action in any circumstances without notice or demand.

     9.2 Termination; Release. When the Secured Obligations have been indefeasibly paid and
performed in full and the Commitment has terminated, this Agreement shall terminate, and the
Secured Party, at the request and sole expense of Debtor, will execute and deliver to Debtor the
proper instruments (including Uniform Commercial Code termination statements)
acknowledging the termination of this Agreement, and will duly assign, transfer, and deliver to
Debtor, without recourse, representation, or warranty of any kind whatsoever, such of the
Collateral as may be in possession of the Secured Party and has not theretofore been disposed of,
applied, or released.

     9.3 Counterparts. This Agreement may be executed in any number of counterparts and
by the different parties hereto on separate counterparts, each of which when so executed and
delivered shall be an original, but all of which shall together constitute one and the same
instrument.

     9.4 Marshalling. The Secured Party shall not be under any obligation to marshall any
assets in favor of Debtor or any other Person or against or in payment of any or all of the Secured
Obligations.

     9.5 Severability. In case any provision in or obligation under this Agreement or the
Secured Obligations shall be invalid, illegal, or unenforceable in any jurisdiction, the validity,
legality, and enforceability of the remaining provisions or obligations, or of such provision or
obligation in any other jurisdiction, shall not in any way be affected or impaired thereby.

     9.6 Financing Statement Filing. A photocopy or other reproduction of this
Agreement shall be sufficient as a financing statement and may be filed in lieu of the original to
the extent permitted by applicable law.

     9.7 Notices and Other Communications. Except as to oral notices expressly
authorized herein, all notices, requests, and communications under this Agreement shall be in
writing (including by telecopy). Unless otherwise expressly provided herein, any such notice,
request, or communication shall be deemed to have been duly given or made when provided in
accordance with the terms of the Credit Agreement.

     9.8 Parties in Interest. This Agreement shall be binding upon and inure to the benefit
of Debtor, the Secured Party, and their respective legal representatives, successors, and assigns.

- 15 -

 

No other Person shall have any right, benefit, priority, or interest hereunder or as a result
hereof or have standing to require satisfaction of provisions hereof in accordance with their
terms, and any or all of such provisions may be freely waived in whole or in part by the Secured
Party at any time if the Secured Party in its sole discretion deems it advisable to do so.

     9.9 Amendments. Neither this Agreement nor any provision hereof may be amended,
supplemented, modified, discharged, or terminated orally, but only by an instrument in writing
signed by the party against whom enforcement of the amendment, supplement, modification, discharge,
or termination is sought.

     9.10 Entire Agreement. This Agreement constitutes the entire Agreement
between the Parties hereto with respect to the subject hereof and shall supersede any prior
agreements, whether written or oral, between the Parties hereto relating to the subject hereof.
Furthermore, in this regard, this Agreement and the other written Loan Documents represent,
collectively, the final agreement among the Parties hereto and may not be contradicted by evidence
of prior, contemporaneous, or subsequent oral agreements of such Parties. There are no unwritten
oral agreements among such Parties.

     9.11 Governing Law.  This Agreement shall be governed by and construed in
accordance with the Laws of the State of Texas (without giving effect to principles thereof
relating to conflicts of laws).

     9.12 Jurisdiction and Venue.  All actions or proceedings with respect to,
ARISING DIRECTLY OF INDIRECTLY IN CONNECTION WITH, OUT OF RELATED
TO OR FROM THIS
Agreement or any other Loan Document to which any Debtor is a Party may be
litigated At the SOLE discretion and election of the Secured Party, in courts having situs in
Dallas, Dallas County, Texas. Debtor hereby submits to the jurisdiction of any local, state, or
federal court located in Dallas, Dallas County, Texas, and hereby waives any rights it may have to
transfer or change the jurisdiction or venue of any litigation brought against it by the Secured
Party in accordance with this Section.

- 16 -

 

     IN WITNESS WHEREOF, this Agreement is executed as of the date first above written.

	 	 	 	 	 	 	 
	 	 	DEBTOR:	 	 
	 	 	 	 	 
	 
	 	 	 	 	 	 
	 	 	EOWS MIDLAND COMPANY	 	 
	 
	 	 	 	 	 	 
	 

	 	By:
	 	/s/ Beverly A. Cummings
 

Beverly A. Cummings
	 	 
	 

	 	 	 	Executive Vice President, Treasurer, and	 	 
	 

	 	 	 	Chief Financial Officer	 	 

- 17 -

 

	 	 	 	 	 	 	 
	 	 	SECURED PARTY:	 	 
	 	 	 	 	 
	 
	 	 	 	 	 	 
	 	 	GUARANTY BANK, FSB	 	 
	 
	 	 	 	 	 	 
	 

	 	By:
	 	/s/ David M. Butler
 

David M. Butler
	 	 
	 

	 	 	 	Vice President	 	 

- 18 -

 

EXHIBIT A

	 	 	 
	Section 3.1:

	 	FILING LOCATIONS
	 
	 	 
	 

	 	Secretary of State of Texas

A-i

 

 

EXHIBIT B 

DESCRIPTION OF EQUIPMENT

	I.	 	Mustang 550-C Rig described as:

	 	(a)	 	Carrier is S/N RW 550-104
	 
	 	(b)	 	Draw Works is S/N DD 550-104
	 
	 	(c)	 	Mast is S/N RW 96-104
	 
	 	(d)	 	See Price Quotation below for further description:

	 	1.	 	RIG WORKS MODEL

Mustang 550-C-Series
 Self-Propelled
Service
 Rig Carrier, 5 Axle, 13’6” road
ht.
	 
	 	2.	 	RIG WORKS MODEL

Mustang 550 Series

double drum draw works,

46 x 10 main drum ass’y,

21.250” O.S. main drum spool diameter,

35” wide, w/ Lebus grooving f/ 1” line,

Twin Disc P.O. 324 clutch,

46 x 08 sandline drum ass’y,

open loop splash water cooling,

central lubrication with 14” O.S.

drum barrel, Twin Disc P.O. 124

clutch w/ 16,500’ capacity.
	 
	 	3.	 	OPERATOR CONTROLS

Operator friendly control consoles

conveniently located @ rear of carrier

f/ main drum operation & near sandline

for sandline operation.

Common pneumatic control valves are used in panels.

Engine emergency shutdown switches are housed in same.

Mechanical brakes controls are located near consoles.
	 
	 	4.	 	ASSIST BRAKE

Parmac 202 brake will be installed 
complete with
clutch, piping, reservoir & 
controls @ operator
console.
	 
	 	5.	 	BRAKE SPLASH 

60 gallon tank w/ plumbing to brake 
rims @ bath
drums & remote controls @
 operator’s stations.

B-i

 

 

	 	6.	 	DIESEL ENGINE

Detroit Diesel Series “60”,
 DDEC, Tier 3
emissions,
 14 Liter, up to 500 hp complete w/

radiator, muffler, air cleaner, hood,
 batteries
p.s. pump.
	 
	 	7.	 	TRANSMISSION

Allison Automatic, max. 500HP input,
model
M5610 H-2 w/ electronic 
shift, cab & rear mounted
controls.
	 
	 	8.	 	HYDRAULIC SYSTEM

Gear pump rated @ 65 GPM @ 2150 
PSI intermittent operation with
pump, 
relief valves, by-pass valve, tong selector valve, 
rig up/down
controls, reservoir, filtration, 
plumbed pump to rear to tank.
	 
	 	9.	 	CARRIER 

5 Axle H.D. fabricated steel carrier with 
lights for reading, tandem
22,000# steering 
axles, tandem 44,000# drive 
axles, single 25,000# 
tag
axle, all axles with suspension;
 steering-spring drive-Hendrickson,
tag-air.
	 
	 	10.	 	CAB

Complete with air ride seat, safety seat belt,

safety glass, windshield wiper/washer, dual O.S. mirrors,

heater/defroster, hydraulic power assist steering controls,

carrier brakes controls, engine throttle controls,

engine start/kill controls, instrument panel, 12 volt lighting.
	 
	 	11.	 	FUEL TANK 

(1) — 110 gallon fuel reservoir.
	 
	 	12.	 	TOOL BOXES

(2) —  18” W x 18”T x 48” L Boxes, horizontal below deck.

(1) — 18” D x 36” T x 40” W Vertical, above deck.
	 
	 	13.	 	HYDRAULIC JACKS

(4) — Hydraulic Jacks w/ mechanical lock nuts, with stands;

(2) — near steering axles;

(2) — near rear bumper for leveling rig carrier.
	 
	 	14.	 	HANDLING WINCH

Braden PD12 hydraulic planetary winch with man-lift capability

B-ii

 

 

	 	15.	 	HINGED WALKWAYS

30” wide hinged walkways from engine, operator side, 
front of draw
works to rear w/ 42” T hinged handrails.
	 
	 	16.	 	TIRES

Steering:        (4) 445/65 R 22.5

Drive:            (8) 11: R 24.5

Tag:               (4) 11: R 24.5
	 
	 	17.	 	MAST 

Designed to meet A.P.I. Spec. 4F, with finite analysis performed by a
Professional Engineer, A.P.I. monogram pending, all welding procedures
are certified, welders are qualified, certified materials are tracked.
104’ T x 252,000# Hook Load Tubular Steel Mast. Hydraulically Raised
& Telescoped, Constructed in (3) main sections: Base; Lower, Upper.
Rod Basket w/ spacing for 1.250 rods on operator side & standard 1”
spacing @ offside hanger, fully automatic positioning.
Tubing Board w/ 20,000’ of 2-7/8”
E.U.E. racking capacity with end lock, fully automatic, w/escape way @
rear hinged gate.
(5) sheave main line crown block with additional (1) sandline sheave.
	 
	 	18.	 	PAINT 

Rig to be painted max. (2) colors with polyurethane enamels applied over zinc type
base coats.

Mast to be (1) primary color with contrasting crown with polyurethane topcoats applied over
base zinc coat.

B-iiiexv10w25

 

EXHIBIT
10.25

CREDIT AGREEMENT

Dated as of June 1, 2006

(but effective for all purposes as of August 22, 2005)

Between

PRIME OFFSHORE L.L.C.

as Borrower

and

PRIMEENERGY CORPORATION

as Lender

$40,000,000

 

 

TABLE OF CONTENTS

	 	 	 	 	 	 	 
	 	 	 	 	Page	 
	ARTICLE I

	Definitions and Accounting Matters

	 
	 	 	 	 	 	 
	Section 1.01
	 	Terms Defined Above	 	 	1	 
	Section 1.02
	 	Certain Defined Terms	 	 	1	 
	Section 1.03
	 	Accounting Terms and Determinations	 	 	5	 
	 
	 	 	 	 	 	 
	ARTICLE II

	Revolving Credit Borrowing Base

	 
	 	 	 	 	 	 
	Section 2.01
	 	Borrowing Base	 	 	6	 
	Section 2.02
	 	Note	 	 	6	 
	Section 2.03
	 	Borrowing Base Amount	 	 	6	 
	Section 2.04
	 	Request for Loans	 	 	6	 
	Section 2.05
	 	Funding of Loans	 	 	6	 
	 
	 	 	 	 	 	 
	ARTICLE III

	Payments of Principal and Interest

	 
	 	 	 	 	 	 
	Section 3.01
	 	Repayment of Loans and Interest	 	 	7	 
	Section 3.02
	 	Interest	 	 	7	 
	Section 3.03
	 	Prepayments	 	 	7	 
	Section 3.04
	 	Conversion	 	 	7	 
	 
	 	 	 	 	 	 
	ARTICLE IV

	Payments; Computations; Etc.

	 
	 	 	 	 	 	 
	Section 4.01
	 	Payments	 	 	8	 
	Section 4.02
	 	Taxes	 	 	8	 
	 
	 	 	 	 	 	 
	ARTICLE V

	Conditions Precedent

	 
	 	 	 	 	 	 
	Section 5.01
	 	Execution of Documentation	 	 	8	 
	Section 5.02
	 	Additional Conditions	 	 	9	 
	 
	 	 	 	 	 	 
	ARTICLE VI

	Representations and Warranties

	 
	 	 	 	 	 	 
	Section 6.01
	 	Existence	 	 	9	 
	Section 6.02
	 	Financial Condition	 	 	10	 
	Section 6.03
	 	Litigation	 	 	10	 
	Section 6.04
	 	No Breach	 	 	10	 
	Section 6.05
	 	Authority	 	 	10	 
	Section 6.06
	 	Approvals	 	 	10	 
	Section 6.07
	 	Use of Loan Proceeds	 	 	10	 

i

 

	 	 	 	 	 	 	 
	 	 	 	 	Page	 
	Section 6.08
	 	No Material Misstatements	 	 	11	 
	Section 6.09
	 	Subsidiaries	 	 	11	 
	Section 6.10
	 	Defaults	 	 	11	 
	Section 6.11
	 	Compliance with the Law	 	 	11	 
	Section 6.12
	 	Security Agreement	 	 	11	 
	Section 6.13
	 	Titles, etc	 	 	11	 
	 
	 	 	 	 	 	 
	ARTICLE VII

	Affirmative Covenants

	 
	 	 	 	 	 	 
	Section 7.01
	 	Financial Statements	 	 	11	 
	Section 7.02
	 	Litigation	 	 	12	 
	Section 7.03
	 	Maintenance, Etc	 	 	12	 
	Section 7.04
	 	Further Assurances	 	 	12	 
	Section 7.05
	 	Performance of Obligations	 	 	12	 
	Section 7.06
	 	Insurance	 	 	13	 
	Section 7.07
	 	Taxes and Other Liens	 	 	13	 
	Section 7.08
	 	Environmental Laws	 	 	13	 
	Section 7.09
	 	Maintenance of Liens	 	 	13	 
	Section 7.10
	 	Adequate Capitalization	 	 	13	 
	 
	 	 	 	 	 	 
	ARTICLE VIII

	Negative Covenants

	 
	 	 	 	 	 	 
	Section 8.01
	 	No Amendments of Organizational Documents	 	 	14	 
	Section 8.02
	 	Use of Proceeds	 	 	14	 
	Section 8.03
	 	Sale of Assets, Consolidation, Merger, Dissolution, Etc	 	 	14	 
	Section 8.04
	 	Indebtedness	 	 	14	 
	Section 8.05
	 	Liens	 	 	14	 
	Section 8.06
	 	Negative Pledge Clauses	 	 	14	 
	Section 8.07
	 	Investments, Loans and Advances	 	 	14	 
	Section 8.08
	 	Dividends, Distributions and Redemptions	 	 	14	 
	Section 8.09
	 	Nature of Business	 	 	15	 
	Section 8.10
	 	Transactions with Affiliates	 	 	15	 
	 
	 	 	 	 	 	 
	ARTICLE IX

	Events of Default; Remedies

	 
	 	 	 	 	 	 
	Section 9.01
	 	Events of Default	 	 	15	 
	Section 9.02
	 	Remedies	 	 	16	 
	 
	 	 	 	 	 	 
	ARTICLE X

	Miscellaneous

	 
	 	 	 	 	 	 
	Section 10.01
	 	Waiver	 	 	17	 
	Section 10.02
	 	Notices	 	 	17	 
	Section 10.03
	 	Payment of Expenses, Indemnities, Etc	 	 	17	 
	Section 10.04
	 	Amendments, Etc	 	 	19	 
	Section 10.05
	 	Successors and Assigns	 	 	19	 

ii

 

	 	 	 	 	 	 	 
	 	 	 	 	Page	 
	Section 10.06
	 	Assignments	 	 	19	 
	Section 10.07
	 	Invalidity	 	 	20	 
	Section 10.08
	 	Counterparts	 	 	20	 
	Section 10.09
	 	References	 	 	20	 
	Section 10.10
	 	Survival	 	 	20	 
	Section 10.11
	 	Captions	 	 	21	 
	Section 10.12
	 	No Oral Agreements	 	 	21	 
	Section 10.13
	 	Governing Law	 	 	21	 
	Section 10.14
	 	Interest	 	 	21	 
	 
	 	 	 	 	 	 
	Exhibit A
	–	Form of Note	 	 	 	 
	Exhibit B
	–	 Form of Borrowing Request	 	 	 	 

iii

 

CREDIT AGREEMENT

     THIS CREDIT AGREEMENT, dated as of June 1, 2006, but effective for all purposes as of August
22, 2005 (the “Effective Date”) is between PRIME OFFSHORE L.L.C., a Delaware limited liability
company (the “Borrower”), and PRIMEENERGY CORPORATION, a Delaware corporation (the
“Lender”).

R E C I T A L S

     A. The Borrower has requested that the Lender provide certain loans to the Borrower.

     B. The Lender has agreed to make such loans subject to the terms and conditions of this
Agreement.

     C. In consideration of the mutual covenants and agreements herein contained and of the loans
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
“Borrower” and “Lender” 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 the same meanings when used in the plural and vice versa):

     “Affiliate” of any Person shall mean (i) any Person directly or indirectly controlled
by, controlling or under common control with such first Person, (ii) any director or officer of
such first Person or of any Person referred to in clause (i) above and (iii) if any Person in
clause (i) 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. As used in this definition, any Person that owns directly or indirectly 10% 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. For purposes of this Agreement, the Borrower shall
not be considered an Affiliate of Lender and vice versa.

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

     “Borrowing Base Amount” shall mean the maximum amount of credit the Lender, in its
sole discretion and determination, is willing to loan and have outstanding to Borrower in
accordance with Section 2.03.

 

 

     “Borrowing Request” shall mean a request by the Borrower for a Loan in accordance
with Section 2.04 and substantially in the form of Exhibit B.

     “Business Day” shall mean any day other than a day on which commercial banks are
authorized or required to close in Houston, Texas.

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

     “Change of Control” shall mean when any Person and its Affiliates (or a group of
Persons otherwise acting in concert), other than the Members (as defined in the Limited Liability
Company Agreement of the Borrower) of the Borrower as of the date hereof (together with their
permitted transferees who are Affiliates of such Members as of the date hereof), acquire more than
50% of the Capital Stock of the Borrower.

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

     “Closing Date” shall mean the date of this Agreement.

     “Debt” shall mean, for any Person the sum of the following (without duplication): (i)
all obligations of such Person for borrowed money or evidenced by bonds, debentures, notes or other
similar instruments (including principal, interest, fees and charges); (ii) all obligations of such
Person (whether contingent or otherwise) in respect of bankers’ acceptances, letters of credit,
surety or other bonds and similar instruments; (iii) all obligations of such Person to pay the
deferred purchase price of Property or services (other than for borrowed money); (iv) 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); (v) all obligations under leases which require such Person or its Affiliate to make
payments over the term of such lease, including payments at termination, which are substantially
equal to at least 80% of the purchase price of the Property subject to such lease plus interest as
an imputed rate of interest; (vi) all Debt 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; (vii) 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; (viii) 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; (ix) any Capital Stock of such Person which such Person has a mandatory obligation to
redeem such stock; (x) obligations to deliver goods or services in consideration of advance
payments; (xi) obligations to pay for goods or services whether or not such goods or services are
actually received or utilized by such Person; and (xii) all obligations of such Person under
Hedging Agreements.

     “Default” shall mean an Event of Default or an event that with notice or lapse of
time or both would become an Event of Default.

2

 

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

     “Effective Rate” shall mean the rate per annum (expressed as a percentage) published
by Federal National Mortgage Association as the one month London Interbank Offered Rate (LIBOR)
for the previous month, plus four percent (4%), but in no event exceeding the Highest Lawful Rate.

     “Environmental Laws” shall mean any and all Governmental Requirements pertaining to
health or the environment in effect in any and all jurisdictions in which the Borrower is
conducting or at any time has conducted business, or where any Property of the Borrower 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” shall have 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
(i) 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 on and subsequent to the effective date of such
amendment and (ii) to the extent the laws of the state in which any Property of any of the
Borrower 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” shall mean the Employee Retirement Income Security Act of 1974, as amended
from time to time, and any successor statute.

     “Event of Default” shall have the meaning assigned such term in Section 9.01.

     “Excepted Liens” shall mean Liens for taxes, assessments or other governmental
charges or levies not yet due or which are being contested in good faith by appropriate action.

     “Final Maturity Date” shall mean the earliest of (i) thirty days following receipt by
the Borrower of written notice from the Lender demanding payment of all Indebtedness, (ii) the
date on which the Loans are declared due and payable pursuant to Section 9.02 or (iii) December
15, 2008.

     “GAAP” shall mean 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,

3

 

commission, board, bureau or instrumentality of any of them including monetary authorities that
exercises valid jurisdiction over any such Person or such Person’s Property. Unless otherwise
specified, all references to Governmental Authority herein shall mean a Governmental Authority
having jurisdiction over, where applicable, the Borrower or any of its Property or the Lender.

     “Governmental Requirement” shall mean 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, ERISA, the Code and Environmental Laws, energy regulations and
occupational, safety and health standards or controls, of any Governmental Authority.

     “Hedging Agreements” shall mean any commodity, interest rate or currency swap, cap,
floor, collar, forward agreement or other exchange or protection agreements or any option with
respect to any such transaction.

     “Highest Lawful Rate” shall mean 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 Note or on other Indebtedness under laws applicable to the 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.

     “Indebtedness” shall mean any and all amounts owing or to be owing by the Borrower to
the Lender in connection with the Loan Documents and all renewals, extensions and/or
rearrangements of any of the above.

     “Indemnified Parties” shall have the meaning assigned such term in Section 10.03(b).

     “Indemnity Matters” shall mean 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 or reasonable
costs and expenses of any kind or nature whatsoever incurred by such Person.

     “Lien” shall mean 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 (i) 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. The term “Lien” shall include reservations, exceptions,
encroachments, easements, rights of way, covenants, conditions, restrictions, leases and other
title exceptions and encumbrances affecting Property. For the purposes of this Agreement, the
Borrower 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” shall mean the loans as provided for by Section 2.01.

     “Loan Documents” shall mean this Agreement, the Security Agreement and the Note.

4

 

     “Material Adverse Effect” shall mean any condition or circumstance that would
materially and adversely affect (i) the assets, liabilities, financial condition, business or
operations of the Borrower as compared to the status of same as of the Closing Date, or (ii) the
ability of the Borrower to carry out its business as conducted at the Closing Date or as proposed
as of the Closing Date to be conducted or (iii) the ability of the Borrower to meet its
obligations under the Loan Documents on a timely basis.

     “Note” shall mean the note provided for by Section 2.02, together with any and all
renewals, extensions for any period, increases, rearrangements, substitutions or modifications
thereof.

     “Organizational Documents” shall have the meaning assigned in Section 6.01.

     “Person” shall mean any individual, corporation, limited liability 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.

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

     “Responsible Officer” shall mean, with respect to the Borrower, such individual(s) as
the Borrower may from time to time designate is writing as a “Responsible Officer” for purposes of
this Agreement. Unless otherwise specified, all references to a Responsible Officer herein shall
mean a Responsible Officer of the Borrower.

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

     “Security Agreement” shall mean the security agreement, mortgage or similar agreement
executed by the Borrower in favor of the Lender covering all assets of the Borrower described
therein.

     “Subsidiary” shall mean, with respect to any Person, any other Person of which at
least a majority of the outstanding equity interests having by the terms thereof ordinary voting
power to elect a majority of the board of directors, managers or similar governing body with
responsibility for the oversight of the management and operations of such other Person
(irrespective of whether or not at the time equity interests of any other class or classes of such
Person 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 such first Person.

     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, in accordance with GAAP.

5

 

ARTICLE II

Revolving Credit Borrowing Base

     Section 2.01 Borrowing Base. The Lender may at its sole discretion and subject to the
terms of this Agreement, to make Loans to the Borrower on the Closing Date and on any date prior
to Final Maturity Date up to the Borrowing Base Amount. Within the foregoing limits and subject to
the terms and conditions set forth herein, the Borrower may borrow, prepay and reborrow Loans.

     Section 2.02 Note. The Loans shall be evidenced by a single promissory note of the
Borrower in the original principal amount of $40,000,000 in substantially the form of Exhibit A
hereto, dated as of the Closing Date, payable to the order of the Lender and otherwise duly
completed. The date and amount of the Loans, and all payments made on account of the principal
thereof, shall be recorded by the Lender on its books for the Note and, prior to any transfer, may
be endorsed by the Lender on a schedule attached to such Note or on any separate record maintained
by the Lender. Failure to make any such notation or attach a schedule shall not affect the
Lender’s or the Borrower’s rights or obligations in respect of the Loans or affect the validity of
such transfer by the Lender of the Note.

     Section 2.03 Borrowing Base Amount. The initial Borrowing Base Amount shall be
$40,000,000, but may at any time at the sloe discretion of the Lender be redetermined to any
amount not less than the current outstanding balance and indebtedness, and shall be subject to
reduction in accordance with Section 3.04.

     Section 2.04 Request for Loans. To request a Loan, the Borrower shall notify the
Lender of such request by telephone not later than 11:00 a.m., Houston, Texas time, two Business
Days before the date of the proposed borrowing. Each such telephonic Borrowing Request shall be
irrevocable and shall be confirmed promptly by hand delivery or telecopy to the Lender of a
written Borrowing Request in the form of Exhibit B, signed by a Responsible Officer of the
Borrower. Each such telephonic and written Borrowing Request shall specify the following
information:

               (i) the aggregate amount of the requested Loan, which shall not be less than $100,000;

               (ii) the date of such Loan, which shall be a Business Day; and

               (iii) the location and number of the Borrower’s account to which funds are to be
disbursed.

     Section 2.05 Funding of Loans. Subject to Article V and the other provisions hereof,
the Lender shall make each Loan to be made by it hereunder on the proposed date thereof by wire
transfer of immediately available funds by 2:00 p.m., Houston, Texas time, to the applicable
account of the Borrower referred to in Section 2.04(iii).

6

 

ARTICLE III

Payments of Principal and Interest

     Section 3.01 Repayment of Loans and Interest. Accrued and unpaid interest on each
outstanding Loan shall be due and payable quarterly commencing on the first day of January 2006,
and continuing on the first day of each April, July, October and January thereafter while any Loan
remains outstanding, the payment in each instance to be the amount of interest which has accrued
and remains unpaid in respect of the Loans. The Borrower will pay to the Lender the outstanding
principal balance on the Loans as well as all other Indebtedness on the Final Maturity Date. The
Borrower shall, however, have the right at any time and from time to time to prepay any Loan in
whole or in part, subject to prior notice in accordance with Section 3.03.

     Section 3.02 Interest. Subject to the terms of this Agreement (including, without
limitation, Section 10.14) interest on the Loans shall accrue and be payable at a rate per annum
equal to the Effective Rate. Interest shall be computed on the basis of a year of 365 or 366 days,
as applicable, for the actual days elapsed (including the first day but excluding the last day)
during the period for which payable. Interest provided for herein shall be calculated on unpaid
sums actually advanced and outstanding pursuant to the terms of this Agreement and only for the
period from the date or dates of such advances until repayment.

     Section 3.03 Prepayments.

          (a) The Borrower may prepay any Loan in whole or in part upon not less than ten Business
Day’s prior notice to the Lender, which notice shall specify the prepayment date (which shall be a
Business Day) and the amount of the prepayment (which shall be in multiples of $100,000 or the
remaining principal balance outstanding on the Note) and shall be irrevocable and effective upon
receipt by the Lender, provided that interest on the principal prepaid, accrued to the prepayment
date, shall be paid on the prepayment date.

          (b) Subject to the exercise by Lender of the conversion option provided in Section 3.04,
following the closing of any sale of Capital Stock of the Borrower whereupon the Borrower receives
gross proceeds in excess of $50,000,000, the Borrower shall promptly prepay all loans outstanding
hereunder and all other Indebtedness.

          (c) Upon prepayment of all Loans pursuant to Section 3.03(a) and/or (b) and subject to
payment of all other Indebtedness, the Borrower may terminate this Agreement upon written notice
from a Responsible Officer to the Lender, which notice shall be irrevocable and effective upon
receipt by the Lender.

          (d) Prepayments permitted under this Section 3.03 shall be without premium or penalty.

     Section 3.04 Conversion.

          (a) The Lender may elect to convert all or any part of the outstanding Loans and any accrued
interest thereon into Capital Stock in accordance with the Note provided pursuant to Section 2.02.

7

 

          (b) In the event the Lender elects to convert less than all of the outstanding Loans and
accrued interest thereon into Capital Stock in accordance with Section 3.04(a) or is otherwise
restricted from doing so, the un-converted portion of the Loans and accrued interest thereon
shall, subject to the other terms of this Agreement and the Note, remain outstanding and, at the
option of the Lender, the Commitment Amount shall immediately be reduced to match the total amount
of all outstanding Loans.

ARTICLE IV

Payments; 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
other Loan Documents shall be made in Dollars to the Lender at such account in Houston, Texas or
elsewhere as the Lender shall specify by notice to the Borrower from time to time, not later than
11:00 a.m. Houston, Texas 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 to be made to the Lender under this
Agreement or the other Loan Documents shall be paid promptly to the Lender, in immediately
available funds. If the due date of any payment under this Agreement or the other Loan Documents
would otherwise fall on a day that 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.

     Section 4.02 Taxes. 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 other Loan
Documents (other than any taxes measured by or imposed on the net income or profit or gross
receipts of the Lender).

ARTICLE V

Conditions Precedent

     Section 5.01 Execution of Documentation. Concurrently with the execution hereof, the
following documents shall have been received by the Lender and satisfaction of the other
conditions provided in this Section 5.01 shall have occurred, each of which shall be satisfactory
to the Lender in form and substance:

          (a) A certificate of the Secretary or an Assistant Secretary of the Borrower setting forth (i)
resolutions of its board of directors or respective governing body with respect to its
authorization to execute and deliver the Credit Agreement and the other Loan Documents, (ii) its
officers (y) who are authorized to sign the Loan Documents 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 the
Loan Documents and the transactions contemplated hereby and (iii) Organizational Documents
certified as being true and complete.

8

 

          (b) Certificates of the state agencies of the jurisdiction of organization and of each other
jurisdiction where activities require qualification with respect to the existence, qualification
and good standing, where applicable, of the Borrower.

          (c) The Note, duly completed and executed.

          (d) The Security Agreement, duly completed and executed in form satisfactory to the each of
the parties thereto.

          (e) Payment of all amounts then due and payable pursuant to Section 10.03.

          (f) Such other documents as the Lender or special counsel to the Lender may reasonably
request.

     Section 5.02 Additional Conditions. The obligation of the Lender to make each Loan
hereunder, including the initial Loan, is subject to the further conditions precedent that, as of
the date of such Loan and after giving effect thereto:

          (a) The Lender shall have received a Borrowing Request;

          (b) No Default shall have occurred and be continuing;

          (c) No Material Adverse Effect shall have occurred; and

          (d) The representations and warranties made by the Borrower in the Loan Documents shall be
true on and as of the date of the making of such Loan with the same force and effect as if made on
and as of such date and following such Loan, except to the extent such representations and
warranties are expressly limited to an earlier date or to the extent the Lender may expressly
consent in writing to the contrary.

ARTICLE VI

Representations and Warranties

     The Borrower represents and warrants to the Lender that (each representation and warranty
herein is given as of the Closing Date and shall be deemed repeated and reaffirmed on each date of
a Loan):

     Section 6.01 Existence. The Borrower: (i) is duly organized or formed, legally
existing and in good standing, where applicable, under the laws of the jurisdiction of its
incorporation, organization or formation; (ii) has all requisite organizational power, and has all
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 the lack of which would have a
Material Adverse Effect; and (iii) is qualified to do business in all jurisdictions in which the
nature of the business conducted by it makes such qualification necessary where failure so to
qualify would have a Material Adverse Effect. A true and complete copy of the certificates of
formation, operating agreements and/or articles of incorporation and bylaws (as the case may be) of
the Borrower, and all other documents creating and governing such entities (collectively the
“Organizational Documents”), have been furnished to the Lender. The
Organizational

9

 

Documents of the Borrower were duly executed and delivered, are in full force and effect, and
binding upon and enforceable in accordance with their respective terms. The Borrower’s
Organizational Documents constitute the entire understanding among its members. No breach exists
under any of the Organizational Documents and no act has occurred and no condition exists which,
with the giving of notice or the passage of time would constitute a breach under the
Organizational Documents.

     Section 6.02 Financial Condition. The Borrower does not have 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.

     Section 6.03 Litigation. 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, that involves the
possibility of any judgment or liability against the Borrower that could reasonably be expected to
have a Material Adverse Effect or that challenges the validity of any Loan Document.

     Section 6.04 No Breach. Neither the execution and delivery of the Loan Documents, nor
compliance with the terms and provisions hereof will conflict with or result in a breach of the
Organizational Documents of the Borrower, or any Governmental Requirement or any agreement or
instrument to which the Borrower 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 imposition of any Lien upon any of the revenues or assets of the Borrower
pursuant to the terms of any such agreement or instrument.

     Section 6.05 Authority. The Borrower has all necessary limited liability company,
power and authority to execute, deliver and perform its obligations under the Loan Documents; and
the execution, delivery and performance by the Borrower of the Loan Documents has been duly
authorized by all necessary action on its part; and the Loan Documents constitute the legal, valid
and binding obligations of the Borrower, enforceable in accordance with their terms, except as the
enforceability thereof may be limited by bankruptcy, insolvency or similar laws affecting the
enforcement of creditors’ rights generally and the application of general principles of equity.

     Section 6.06
Approvals. No authorizations, approvals or consents of, and no filings
or registrations with, any Governmental Authority or of any other Person are necessary for the
execution, delivery or performance by the Borrower of the Loan Documents or for the validity or
enforceability thereof that have not been provided to the Lender prior to the date hereof.

     Section 6.07 Use of Loan Proceeds. The proceeds of the Loans shall be used only for
the leasing of offshore state lease blocks or federal outer continental shelf lease blocks,
expenses associated with exploration drilling in such blocks and general corporate purposes. The
Borrower is not 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 G, U or X of the Board of Governors of the Federal
Reserve System) and no part of the proceeds of the Loans hereunder will be used to buy or carry any
margin stock.

10

 

     Section 6.08 No Material Misstatements. No written information, statement, exhibit,
certificate, document or report furnished to the Lender by the Borrower in connection with the
negotiation of this Agreement or any other Loan Document contains any material misstatement of
fact or omits 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. There is no
fact specific to the Borrower that 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 that has not
been set forth in this Agreement or the other documents, certificates and statements furnished to
the Lender by or on behalf of the Borrower, prior to, or on, the Closing Date in connection with
the transactions contemplated hereby.

     Section 6.09 Subsidiaries. The Borrower currently has no Subsidiaries.

     Section 6.10 Defaults. The Borrower is not in default and no event or circumstance
has 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 instrument to which the
Borrower is a party or by which the Borrower is bound. No Default hereunder has occurred and is
continuing.

     Section 6.11 Compliance with the Law. The Borrower has not 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.

     Section 6.12 Security Agreement. The provisions of the Security Agreement are
effective to grant to the Lender legal, valid and enforceable mortgage liens and security
interests on all of the risks, title and interest of the Borrower in the property described
therein.

     Section 6.13 Titles, etc. The Borrower has good title to its respective material
(individually or in the aggregate) Properties, free and clear of all Liens except for Liens
otherwise permitted or contemplated by this Agreement or the other Loan Documents.

ARTICLE VII

Affirmative Covenants

     The Borrower covenants and agrees that, so long as the Commitment is in effect and until
payment in full of all Indebtedness hereunder, all interest thereon and all other amounts payable
by the Borrower hereunder:

     Section 7.01 Financial Statements. The Borrower shall deliver, or shall cause to be
delivered, to the Lender:

          (a) As soon as available and in any event within 60 Days after the end of each fiscal year of
the Borrower, the statements of income and members’ or owner’s equity of the Borrower for such
fiscal year, and the related balance sheet of the Borrower as at the end of such fiscal year, and
setting forth in each case in comparative form the corresponding figures for the preceding fiscal
year, and accompanied by the certificate of a Responsible Officer, which

11

 

certificate shall state that said financial statements fairly present the financial condition and
results of operations of the Borrower as at the end of, and for, such fiscal year and that such
financial statements have been prepared in accordance with GAAP.

          (b) Promptly after the Borrower knows that any Default or any 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.

          (c) Promptly upon receipt thereof, a copy of each report or letter submitted to the Borrower
by independent accountants in connection with any annual, interim or special audit made by them of
the books of the Borrower and a copy of any response by the Borrower or the governing body of the
Borrower to such letter or report.

          (d) From time to time such other information regarding the business, affairs or financial
condition of the Borrower as the Lender may reasonably request.

     Section 7.02 Litigation. The Borrower shall promptly give to the Lender notice of:
(i) all material legal or arbitral proceedings, all material proceedings before any Governmental
Authority and all legal proceedings in which injunctive or similar relief is sought, against or
affecting the Borrower, or any of its Properties, that individually or in the aggregate, could
reasonably be expected to have a Material Adverse Effect and (ii) of any litigation or proceeding
involving any Loan Document. The Borrower will promptly notify the Lender of any claim, judgment,
Lien or other encumbrance affecting any Property of the Borrower, if such claim, judgment, Lien,
or other encumbrance could reasonably be expected to have a Material Adverse Effect.

     Section 7.03
Maintenance, Etc. The Borrower shall: preserve and maintain its legal
existence (except as permitted by Section 8.03) 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 would have a Material
Adverse Effect; upon reasonable notice, permit representatives of the 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 the Lender.

     Section 7.04 Further Assurances. The Borrower will cure promptly any defects in the
creation and issuance of the Note and the execution and delivery of the Loan Documents. The
Borrower at its expense will promptly execute and deliver to the Lender upon request all such
other documents, agreements and instruments to comply with or accomplish the covenants and
agreements of the Borrower in the Loan Documents.

     Section 7.05 Performance of Obligations. The Borrower will pay the Note according to
its terms; and the Borrower will do and perform every act and discharge all of the obligations
provided to be performed and discharged by them under this Agreement or the other Loan Documents,
at the time or times and in the manner specified.

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     Section 7.06 Insurance. From and after the date hereof, the Borrower shall
maintain and shall continue to maintain with financially sound and reputable insurers, insurance
with respect to their respective Properties and business against such liabilities, casualties,
risks and contingencies and in such types and amounts as provided in the Security Agreement and as
is customary in the case of Persons engaged in the same or similar businesses and similarly
situated. Upon request of the Lender, the Borrower will furnish or cause to be furnished to the
Lender from time to time a summary of the insurance coverage of the Borrower in form and substance
satisfactory to the Lender and if requested will furnish the Lender copies of the applicable
policies.

     Section 7.07 Taxes and Other Liens. The Borrower will pay and discharge promptly all
taxes, assessments and governmental charges or levies imposed upon the Borrower or upon the income
or any Property of the Borrower as well as all claims of any kind (including claims for labor,
materials, supplies and rent) which, if unpaid, might become a Lien upon any or all of the
Property of the Borrower; provided, the Borrower shall not be required to pay any such tax,
assessment, charge, levy or claim if the amount, applicability or validity thereof shall currently
be contested in good faith by appropriate proceedings diligently conducted by or on behalf of the
Borrower, and if the Borrower shall have set up reserves therefore adequate under GAAP.

     Section 7.08 Environmental Laws. The Borrower shall, except as, individually or in
the aggregate, could not reasonably be expected to have a Material Adverse Effect, (i) comply with
all Environmental Laws, and obtain, comply with and maintain any and all environmental permits
necessary for its operations as conducted and as planned, (ii) take all reasonable efforts to
ensure that all of its tenants, subtenants, contractors, subcontractors, and invitees comply with
all Environmental Laws, and obtain, comply with and maintain any and all applicable environmental
permits and (iii) comply with all orders and directives of all Governmental Authorities regarding
Environmental Laws, other than such orders and directives as to which an appeal or other
appropriate action to contest such order or directive has been timely and properly taken in good
faith.

     Section 7.09 Maintenance of Liens. The Borrower will cause to be performed any and
all acts to ensure that the Lender have first priority perfected liens on, and security interests
in, the Properties described in the Security Agreement.

     Section 7.10 Adequate Capitalization. If the Borrower engages in an offering of
Capital Stock, the Borrower will ensure that there are sufficient authorized shares, after giving
effect to all outstanding options, warrants, convertible securities, calls, rights, commitments,
preemptive rights or agreements or instruments or understandings of any character, to permit the
Lender to exercise fully its conversion option under this Agreement and the Note.

ARTICLE VIII

Negative Covenants

     The Borrower covenants and agrees that, so long as the Commitment is in effect and until
payment in full of the Loans hereunder and all other Indebtedness, all interest thereon and all

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other amounts payable by the Borrower hereunder, without the prior written consent of the Lender:

     Section 8.01 No Amendments of Organizational Documents. The Borrower shall not amend
or modify its Organizational Documents without the prior written consent of the Lender, unless
such amendments or modifications are ministerial in nature.

     Section 8.02 Use of Proceeds. The proceeds of the Loans shall not be used for
anything other than the uses specified in Section 6.07.

     Section 8.03 Sale of Assets, Consolidation, Merger, Dissolution, Etc. The Borrower
shall not directly or indirectly, (a) merge into or with or consolidate with any other Person or
permit any other Person to merge into or with or consolidate with it, or (b) wind up, liquidate or
dissolve, or (c) sell, lease, transfer or assign any of its material Properties, or (d) agree to
do any of the foregoing.

     Section 8.04 Indebtedness. The Borrower will not incur, create, assume or suffer to
exist any Debt other than (a) the Indebtedness, (b) letters of credit, surety or other bonds and
similar instruments provided by the Borrower in connection with its leasing of or exploration
drilling in state offshore lease blocks and federal outer continental shelf lease blocks, (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 ninety (90) days past the
invoice or billing date, are being contested in good faith by appropriate proceedings and the
Borrower shall have established reserves adequate under GAAP therefore and (d) other Debt not
exceeding, at any time, $100,000 in the aggregate.

     Section 8.05 Liens. The Borrower will not create, incur, assume or permit to exist
any Lien on any of its Properties (now owned or hereafter acquired) other than (a) Liens securing
the payment of any Indebtedness, (b) Excepted Liens and (c) Liens to secure Debt permitted under
Section 8.04.

     Section 8.06 Negative Pledge Clauses. The Borrower will not enter into with any
Person any agreement, other than this Agreement, which prohibits or limits the ability of the
Borrower to create, incur, assume or suffer to exist any Lien upon any of its Properties, assets
or revenues, whether now owned or hereafter acquired.

     Section 8.07
Investments, Loans and Advances. The Borrower will not 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 in direct obligations of the United States of
America or any agency thereof, (b) investments in certificates of deposit of maturities less than
one year, issued by commercial lenders in the United States having capital and surplus in excess of
$50,000,000, and (c) investments in commercial paper of maturities less than one year if at the
time of purchase such paper is rated in either of the two highest rating categories of Standard &
Poors Corporation, Moody’s Investors Service, Inc., or any other rating agency satisfactory to
Lender.

     Section 8.08
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

14

 

hereafter outstanding, return any capital to its stockholders, or make any distribution of its
assets to its stockholders as such.

     Section 8.09 Nature of Business. The Borrower will not materially change the
character of its business as carried on at the date hereof.

     Section 8.10 Transactions with Affiliates. The Borrower will not enter into any
transaction, including, without limitation, any purchase, sale, lease or exchange of Property or
the rendering of any service, with any Affiliate unless such transactions are otherwise permitted
under this Agreement 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.

ARTICLE IX

Events of Default; Remedies

     Section 9.01 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 Loan Document
and such default, other than a default of a payment or prepayment of principal, shall continue
unremedied for a period of two Business Days; or

          (b) The Borrower shall default in the payment when due of any principal of or interest on any
of its other Debt aggregating $100,000 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 other
Loan Document by the Borrower or any certificate furnished to the Lender pursuant to the
provisions hereof or any other Loan Document, 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
VIII or any other Article of this Agreement other than under Article VII; or the Borrower shall
default in the performance of any of its obligations under Article VII or under any other Loan
Document (other than the payment of amounts due which shall be governed by Section 9.01(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 Lender 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

15

 

          (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 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 $100,000 in the aggregate
shall be rendered by a court against the Borrower 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 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;

          (i) a Change of Control to which the Lender has not consented in writing shall occur; or

          (j) the occurrence of any event having a Material Adverse Effect.

     Section 9.02 Remedies.

          (a) In the case of an Event of Default other than one referred to in clauses (e), (f) or (g)
of Section 9.01, the Lender may, by notice to the Borrower, cancel the Commitment and/or declare
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 Note 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 clauses (e), (f) or
(g) of Section 9.01, the Commitment shall be automatically canceled and the principal amount then
outstanding of, and the accrued interest on, the Loans and all other amounts payable

16

 

by the Borrower hereunder and under the Note shall become 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) All proceeds received after maturity of the Note, whether by acceleration or otherwise
shall be applied first to reimbursement of expenses and indemnities provided for in the Loan
Documents; second to accrued interest on the Note; third to fees; fourth to principal outstanding
on the Note and other Indebtedness; and, to the extent of any excess, to the Borrower or as
otherwise required by any Governmental Requirement.

ARTICLE X

Miscellaneous

     Section 10.01 Waiver. No failure on the part of the Lender to exercise and no delay
in exercising, and no course of dealing with respect to, any right, power or privilege under any
of the Loan Documents shall operate as a waiver thereof, nor shall any single or partial exercise
of any right, power or privilege under any of the Loan 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 10.02 Notices. Except as otherwise provided herein, all notices and other
communications hereunder shall be given or made by telecopy, courier or U.S. Mail or in writing
and telecopied, mailed or delivered to the intended recipient at the “Address for Notices”
specified below its name on the signature pages hereof 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, all such communications shall be deemed to have been duly given when received
by the party to whom it is addressed, except that if sent by telecopy after 1:00 p.m. local time,
such communication shall be deemed duly given on the next succeeding Business Day.

     Section 10.03
Payment of Expenses, Indemnities, Etc. The Borrower agrees:

          (a) whether or not the transactions hereby contemplated are consummated, to pay upon request
all reasonable expenses of the Lender in the administration (both before and after the execution
hereof and including advice of counsel as to the rights and duties of the Lender with respect
thereto) of, and in connection with, the negotiation, investigation, preparation, execution and
delivery of, preservation of rights under, enforcement of, and refinancing, renegotiation or
restructuring of, the Loan Documents and any amendment, waiver or consent relating thereto
(including, without limitation, travel, photocopy, mailing, courier, telephone and other similar
expenses of the Lender, the reasonable fees and disbursements of counsel and other outside
consultants for the Lender and, in the case of enforcement, the reasonable fees and disbursements
of counsel for the Lender); and promptly reimburse the Lender upon request for all amounts
expended, advanced or incurred by the Lender to satisfy any obligation of the Borrower under this
Agreement;

          (b) TO
RELEASE, INDEMNIFY AND DEFEND THE LENDER AND ITS AFFILIATES, AND EACH OF
THEIR OFFICERS, DIRECTORS, EMPLOYEES, REPRESENTATIVES, AGENTS,

17

 

ATTORNEYS,
ACCOUNTANTS AND EXPERTS (“INDEMNIFIED PARTIES”) FROM AND AGAINST ALL CLAIMS,
ACTION SUITS AND OTHER LEGAL ACTIONS COMMENCED OR ASSERTED AGAINST ANY ONE OR MORE OF THE
INDEMNIFIED PARTIES (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 THE LOANS, (II) THE EXECUTION, DELIVERY AND PERFORMANCE OF THE LOAN DOCUMENTS, (III)
THE OPERATIONS OF THE BUSINESS OF THE BORROWER, (IV) THE FAILURE OF THE BORROWER TO COMPLY WITH
THE TERMS OF ANY LOAN DOCUMENT, OR WITH ANY GOVERNMENTAL REQUIREMENT, (V) ANY INACCURACY OF ANY
REPRESENTATION OR ANY BREACH OF ANY WARRANTY OF THE BORROWER SET FORTH IN ANY OF THE LOAN
DOCUMENTS, (VI) ANY ASSERTION THAT THE LENDER WAS NOT ENTITLED TO RECEIVE THE PROCEEDS RECEIVED
PURSUANT TO THE LOAN DOCUMENTS OR (VII) ANY OTHER ASPECT OF THE LOAN 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

          (c) TO RELEASE, INDEMNIFY AND HOLD HARMLESS EACH INDEMNIFIED
PARTY 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 OF ITS PROPERTIES, INCLUDING WITHOUT LIMITATION, THE TREATMENT
OR DISPOSAL OF HAZARDOUS SUBSTANCES ON ANY OF ITS PROPERTIES, (II) AS A RESULT OF THE
BREACH OR NON-COMPLIANCE BY THE BORROWER WITH ANY ENVIRONMENTAL LAW
APPLICABLE TO THE BORROWER, (III) DUE TO PAST OWNERSHIP BY THE BORROWER OF ANY OF
ITS PROPERTIES OR PAST ACTIVITY ON ANY OF ITS 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 (V) ANY OTHER
ENVIRONMENTAL, HEALTH OR SAFETY CONDITION IN CONNECTION WITH THE LOAN
DOCUMENTS.

          (d) No Indemnified Party may settle any claim to be indemnified without the consent of the
indemnitor, such consent not to be unreasonably withheld; provided, that the indemnitor may not
reasonably withhold consent to any settlement that an Indemnified Party proposes, if the
indemnitor does not have the financial ability to pay all its obligations outstanding and
asserted against the indemnitor at that time, including the maximum potential claims against the
Indemnified Party to be indemnified pursuant to this Section 10.03.

          (e) In the case of any indemnification hereunder, the Lender 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 assumes and prosecutes the defense of such claim or demand, the
Indemnified Party shall bear its own cost of defense unless there is a conflict between the
Borrower and such Indemnified Party.

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          (f) 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 IDENTD7IED 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.

          (g) The Borrower’s obligations under this Section 10.03 shall survive any
termination of this Agreement and the payment of the Note and shall continue thereafter in
full force and effect.

          (h) The Borrower shall pay any amounts due under this Section 10.03 within 10 days of the
receipt by the Borrower of notice of the amount due.

     Section 10.04
Amendments, Etc. Any provision of any Loan Document may be amended,
modified or waived with the Borrower’s and the Lender’s prior written consent.

     Section 10.05 Successors and Assigns. Subject to compliance with Section 10.06 below,
this Agreement shall be binding upon and inure to the benefit of the parties hereto and their
respective successors and permitted assigns.

     Section 10.06 Assignments.

          (a) The Borrower may not assign its rights or obligations hereunder or under the Note without
the prior written consent of the Lender.

          (b) The Lender may at any time assign all or a portion of its rights and obligations under
this Agreement to one or more Affiliates of the Lender. Upon receipt of such executed assignment,
the Borrower, will, at its own expense, execute and deliver a new Note to the assignor and/or
assignee, as appropriate, in accordance with their respective interests as they appear. Upon the
effectiveness of any assignment pursuant to this Section 10.06(b), the assignee will become a
“Lender,” if not already a “Lender,” for all purposes of this Agreement. 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 4.02 and 10.03 shall not be
affected).

          (c) Except as provided in (b) above, the Lender may, upon the written consent of the Borrower
(which consent shall not be unreasonably withheld and the Borrower shall only have the right to
consent so long as no Default or Event of Default exists hereunder) assign to one or more assignees
all or a portion of its rights and obligations under this Agreement. Any assignment will become
effective upon the execution and delivery of the assignment to the Borrower. Upon receipt and
acceptance of such executed assignment, the Borrower, will, at its

19

 

own expense, execute and deliver a new Note to the assignor and/or assignee, as appropriate, in
accordance with their respective interests as they appear. Upon the effectiveness of any
assignment pursuant to this Section 10.06(c), the assignee will become a “Lender,” if not already
a “Lender,” for all purposes of this Agreement. 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 4.02 and 10.03 shall not be affected).

          (d) The Lender may furnish any information concerning the Borrower in its possession from
time to time to assignees (including prospective assignees).

          (e) Notwithstanding any other provisions of this Section 10.06, no transfer or assignment of
the interests or obligations of the Lender or any grant of participations therein shall be
permitted if such transfer, assignment or grant would (i) require the Borrower to file a
registration statement with the SEC or to qualify the Loans under the “Blue Sky” laws of any state
or (ii) subject the Borrower to any withholding tax or other charge pursuant to Section 4.02.

          (f) If any assignment by the Lender pursuant to this Section 10.06 shall be of less than all
of the Lender’s rights and obligations under this Agreement, then the Borrower shall continue to
deal solely and directly with the Lender as if such assignment had not taken place.

     Section 10.07 Invalidity. In the event that any one or more of the provisions
contained in any of the Loan 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 any of the other Loan Documents.

     Section 10.08 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 10.09 References. 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 shall be deemed to
refer to the applicable Section of this Agreement unless otherwise stated herein. Any reference
herein to an exhibit or schedule shall be deemed to refer to the applicable exhibit or schedule
attached hereto unless otherwise stated herein.

     Section 10.10 Survival. The obligations of the parties under Section 4.02 and
Section 10.03 shall survive the repayment of the Loans and the termination of the Commitment. To
the extent that any payments on the Indebtedness 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 Indebtedness so satisfied shall be revived and continue as if such
payment or proceeds had not been received and the Lender’s rights, powers and remedies under each
Loan Document shall continue in full force and effect. In such event, each Loan Document shall be
automatically reinstated and the Borrower shall take such action as may be reasonably requested
by the Lender to effect such reinstatement.

20

 

     Section 10.11 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 10.12 No Oral Agreements. THE LOAN 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. THE LOAN
DOCUMENTS REPRESENT THE FINAL AGREEMENT BETWEEN THE PARTIES AND MAY NOT BE CONTRADICTED BY
EVIDENCE OF PRIOR, CONTEMPORANEOUS OR SUBSEQUENT ORAL AGREEMENTS OF THE PARTIES. THERE ARE NO
UNWRITTEN ORAL AGREEMENTS BETWEEN THE PARTIES.

     Section 10.13 Governing Law. THIS AGREEMENT AND THE NOTE SHALL BE GOVERNED
BY, AND CONSTRUED IN ACCORDANCE WITH, THE INTERNAL LAWS OF THE STATE OF TEXAS (EXCLUDING ANY
CONFLICT-OF-LAW OR CHOICE-OF-LAW RULES THAT MIGHT LEAD TO THE APPLICATION OF THE INTERNAL LAWS OF
ANY OTHER JURISDICTION).

     Section 10.14 Interest. It is the intention of the parties hereto that Lender shall
conform strictly to usury laws applicable to it. Accordingly, if the transactions contemplated
hereby would be usurious as to the Lender under laws applicable to it (including the laws of the
United States of America or any other jurisdiction whose laws may be mandatorily applicable to the
Lender notwithstanding the other provisions of this Agreement), then, in that event,
notwithstanding anything to the contrary in the Loan Documents or any agreement entered into in
connection with or as security for the Note, it is agreed as follows: (i) the aggregate of all
consideration that constitutes interest under law applicable to the Lender that is contracted for,
taken, reserved, charged or received by the Lender under any of the Loan Documents or agreements or
otherwise in connection with the Note 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 the Lender on the principal amount of the Indebtedness (or, to the extent
that the principal amount of the Indebtedness shall have been or would thereby be paid in full,
refunded by the Lender to the Borrower); and (ii) in the event that the maturity of the Note 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 the 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 the Lender as of the date of
such acceleration or prepayment and, if theretofore paid, shall be credited by the Lender on the
principal amount of the Indebtedness (or, to the extent that the principal amount of the
Indebtedness shall have been or would thereby be paid in full, refunded by the Lender to the
Borrower). All sums paid or agreed to be paid to the Lender for the use, forbearance or detention
of sums due hereunder shall, to the extent permitted by law applicable to the Lender, be amortized,
prorated, allocated and spread throughout the full term of the Loans evidenced by the Note until
payment in full so that the rate or amount of interest on account of the 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 the Lender on any date shall be computed at the Highest Lawful
Rate applicable to the Lender pursuant to this Section 10.14 and (ii) in respect of any subsequent
interest computation period

21

 

the amount of interest otherwise payable to the Lender would be less than the amount of
interest payable to the Lender computed at the Highest Lawful Rate applicable to the Lender, then
the amount of interest payable to the Lender in respect of such subsequent interest computation
period shall continue to be computed at the Highest Lawful Rate applicable to the Lender until the
total amount of interest payable to the Lender shall equal the total amount of interest which would
have been payable to the Lender if the total amount of interest had been computed without giving
effect to this Section 10.14.

[SIGNATURE PAGE NEXT PAGE]

22

 

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

	 	 	 	 	 	 	 
	BORROWER:	 	PRIME OFFSHORE L.L.C	 	 
	 
	 	 	 	 	 	 
	 

	 	By:

Name:
	 	/s/ Jim R. Brock
 

Jim R. Brock
	 	   
	 

	 	Title:
	 	President and Chief Financial Officer	 	 

	 	 	 
	 

	 	Address for Notices:
	 

	 	 9821 Katy Freeway, Suite 1050
	 

	 	 Houston, Texas 77024
	 
	 	 
	 

	 	Facsimile No.: (713) 461-9231
	 

	 	Telephone No.: (713) 461-7221
	 

	 	Attention: Jim R. Brock

	 	 	 	 	 	 	 
	LENDER:	 	PRIMEENERGY CORPORATION	 	 
	 
	 	 	 	 	 	 
	 

	 	By:

Name:
	 	/s/ Beverly A. Cummings
 

Beverly A. Cummings
	 	   
	 

	 	Title:
	 	Executive Vice President	 	 

	 	 	 
	 

	 	Address for Notices:
	 

	 	 1 Landmark Square, 11th Floor 

Stamford,
Connecticut 06901
	 
	 	 
	 

	 	Facsimile No.: (203) 358-5786

Telephone No.: (203) 358-5701

Attention: Charles E. Drimal, Jr.

SIGNATURE PAGE

CREDIT AGREEMENT

 

 

EXHIBIT A

FORM OF CONVERTIBLE NOTE

	 	 	 
	$40,000,000

	 	August 22, 2005

     FOR VALUE RECEIVED, Prime Offshore L.L.C., a Delaware limited liability company (the
“Borrower”), hereby promises to pay to the order of PrimeEnergy Corporation, a Delaware
corporation (the “Lender”), at such account in Houston, Texas or elsewhere as the Lender shall
specify by notice to the Borrower from time to time, the principal sum of Forty Million Dollars
($40,000,000) (or so much as is advanced pursuant to the terms of Credit Agreement described
below) 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, at such
office, in like money and funds, at the rates per annum and on the dates provided in the Credit
Agreement.

     The date and amount of each Loan and each payment made on account of the principal and
interest hereof shall be recorded by the Lender on its books.

     This Note is the Note referred to in the Credit Agreement effective as of even date herewith
between the Borrower and the Lender and evidences Loans made by the Lender thereunder (such Credit
Agreement as the same may be amended or supplemented from time to time, the “Credit
Agreement”). 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 Loan 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 the
Note.

Conversion of Note

     If, while this Note is outstanding, the Borrower consummates a public offering or private
placement of any class of Capital Stock (all such interests of the Borrower, howsoever
denominated being “New Equity”) in excess of $50.0 million (such offering or placement of
New Equity being an “Equity Offering”), then all or any portion of this Note (including
accrued and unpaid interest to the date of conversion) may be converted, at the option of the
Lender, into New Equity of the Borrower in accordance with the terms hereof.

     If the Borrower intends to conduct an Equity Offering, the Borrower shall give the Lender
written notice of such intention and a time period during which it reasonably anticipates such
Equity Offering to be consummated. The Borrower will further deliver any prospectus or offering
circular (both a preliminary and final) or other offering material prepared in connection with
such proposed Equity Offering. The Lender shall, within 10 days following its receipt of the final
prospectus or offering circular, notify the Borrower of its election to (i) have all or a

A-1

 

portion of outstanding principal balance of the Note and accrued and unpaid interest thereon
repaid in full in cash or (ii) convert all or a portion of outstanding principal balance of the
Note and accrued and unpaid interest thereon into shares of New Equity at the same offering price
and terms upon which the New Equity is sold and the amount so converted will be deemed to have
been paid. If more than one class of New Equity is sold or to be sold, the Lender will have the
option to select from among the classes and shall specify the class and amounts in its notice to
the Borrower and if no election is made among classes, but an election is made to convert into
New Equity, such conversion shall be allocated among the classes at the discretion of the
Borrower. If the Lender fails to make any affirmative election, the Lender shall be deemed to
have elected to have the entire outstanding principal balance of the Note, together with all
accrued and unpaid interest, paid in cash on the 10th day following the date on which the Equity
Offering was consummated. All elections, once made, are irrevocable.

     To the extent of the Borrower’s delivery to the Lender of the fixed number of shares of New
Equity into which this Note is convertible pursuant to the election made above (together with the
cash payment in lieu of any fractional share of New Equity as contemplated below), such delivery
will be deemed to satisfy the Borrower’s obligation to pay the principal amount of this Note
including the accrued and unpaid interest.

     Elections are subject to the following additional terms:

     1) The Lender may convert the Note in part so long as such part is an integral multiple of
$100.

     2) No conversion shall result in the issuance of fractional shares of New Equity. If the
Lender would otherwise be entitled to a fractional share, then the Borrower shall pay to the
Lender equal to the then current market value of such fractional share unless the Lender has
elected to maintain its Commitment under the Credit Agreement.

     3) To convert this Note, the Lender must (i) deliver written notice of its conversion
election to the Borrower, (ii) surrender the Note to the Borrower, (iii) if required, furnish
appropriate endorsements and transfer documents and (iv) if required, pay all transfer or similar
taxes. All such actions should occur no later than the 10th day following the completion of the
Equity Offering.

     4) In the case of (i) any reclassification of the New Equity, or (ii) a consolidation, merger
or combination involving the Borrower or a sale or conveyance to another person of the property and
assets of the Borrower as an entirety or substantially as an entirety in each case as a result of
which holders of the New Equity shall be entitled to receive stock, other securities, other
property or assets (including cash) with respect to or in exchange for such New Equity, the Lender
will generally be entitled thereafter to convert this Note into the kind and amount of shares of
stock, other securities or other property or assets which they would have owned or been entitled to
receive upon such reclassification, change, consolidation, merger, combination, sale or conveyance
had this Note been converted into New Equity immediately prior to such reclassification,
consolidation, merger, combination, sale or conveyance assuming that the Lender would not have
exercised any rights of election as to the stock, other securities or other property or assets
receivable in connection therewith.

A-2

 

     THIS NOTE SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE INTERNAL LAWS OF THE
STATE OF TEXAS (EXCLUDING ANY CONFLICT-OF-LAW OR CHOICE-OF-LAW RULES THAT MIGHT LEAD TO THE
APPLICATION OF THE INTERNAL LAWS OF ANY OTHER JURISDICTION).

	 	 	 	 	 
	 	 	PRIME OFFSHORE L.L.C.
	 
	 	 	 	 
	 

	 	By:	 	 
	 

	 	 	 	 
	 

	 	Name:
	 	Jim R. Brock
	 

	 	Title:
	 	President and Chief Financial Officer

A-3

 

EXHIBIT
B

FORM OF BORROWING REQUEST

                                         _, 200 _

Mr. Charles
E. Drimal, Jr.

PrimeEnergy Corporation

	 
	                                                            

	 

	                                                            

     Reference
is made to the Credit Agreement, dated as of ________ ___, 2005 (as
amended, modified, supplemented, or restated from time to time, “Agreement”), between the
undersigned and Prime Energy Corporation. Capitalized terms used herein and not otherwise defined
herein shall have the meanings assigned to such terms in the Agreement. The undersigned hereby
gives notice pursuant to Section 2.04 of the Agreement that it requests a Loan under the
Agreement, and in that connection sets forth below the terms on which such Loan is requested to be
made:

	 	 	 
	Date of Loan

	 	                                                                                
	 
	 	 
	Amount of Loan

	 	$                                                                                
	 
	 	 
	Location of the Borrower’s account

	 	                                                                                

     The Borrower hereby certifies that the following statements are true and correct on the date
hereof, and will be true and correct on the date of such Loan requested herein after giving effect
to such Loan:

          (a) this Loan will not cause the total amount of all Loans outstanding after giving effect to
the Loan requested hereby to exceed the Commitment Amount;

          (b) the representations and warranties of the Borrower set forth in the Loan Documents are
true and correct in all material respects, except for such representations and warranties that are
expressly limited to an earlier date or to the extent that the Lender may expressly consent in
writing to the contrary;

          (c) no Default or Event of Default has occurred and is continuing; and

          (d) no Material Adverse Effect has occurred since the Closing Date.
 

B-1

 

     The Borrower further certifies that the proceeds of the Loan requested hereunder will be used
in accordance with Section 6.07 of the Agreement.

	 	 	 	 	 
	 	 	Very truly yours,
	 
	 	 	 	 
	 	 	PRIME OFFSHORE, L.L.C.
	 
	 	 	 	 
	 

	 	By:	 	 
	 

	 	 	 	 
	 

	 	Name:	 	 
	 

	 	Title:	 	 

B-2

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