-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, N/9KuFJFAig8Wsx+pQnnDIZKqHMTxG7cMcigo887CjL+owqfi9qqqJbWDh04EzvN WSJ0ec40A3PV/jxfJA6O6Q== 0000899243-01-501167.txt : 20010810 0000899243-01-501167.hdr.sgml : 20010810 ACCESSION NUMBER: 0000899243-01-501167 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 6 CONFORMED PERIOD OF REPORT: 20010630 FILED AS OF DATE: 20010809 FILER: COMPANY DATA: COMPANY CONFORMED NAME: ULTRA PETROLEUM CORP CENTRAL INDEX KEY: 0001022646 STANDARD INDUSTRIAL CLASSIFICATION: CRUDE PETROLEUM & NATURAL GAS [1311] IRS NUMBER: 000000000 FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 000-29370 FILM NUMBER: 1702635 BUSINESS ADDRESS: STREET 1: 16801 GREENSPOINT PARK DR STREET 2: SUITE 370 CITY: HOUSTON STATE: TX ZIP: 77060 BUSINESS PHONE: 2818760120 MAIL ADDRESS: STREET 1: 16801 GREENSPOINT PARK DR STREET 2: SUITE 370 CITY: HOUSTON STATE: TX ZIP: 77060 10-Q 1 d10q.txt FORM 10-Q FOR QUARTER ENDED 06/30/2001 SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-Q [X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 FOR THE QUARTERLY PERIOD ENDED JUNE 30, 2001 OR [ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 FOR THE TRANSITION PERIOD FROM _____________ TO ________________ Commission file number 0-29370 ULTRA PETROLEUM CORP. (Exact name of registrant as specified in its charter) Yukon Territory, Canada N/A (State or other jurisdiction of (I.R.S. Employer incorporation or organization) Identification Number) 16801 Greenspoint Park Drive, Suite 370, Houston, Texas 77060 (Address of Principal Executive Offices) (Zip Code) (281) 876-0120 ------------------------------ (Registrant's Telephone Number, Including Area Code) Indicate by check mark whether the registrant (1) has filed all reports required to be filed by section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. YES X NO --- --- The number of common shares, without par value, of Ultra Petroleum Corp., outstanding as of August 1, 2001 was 73,251,918 PART 1 - FINANCIAL INFORMATION ITEM 1 - FINANCIAL STATEMENTS ULTRA PETROLEUM CORP. CONSOLIDATED STATEMENTS OF INCOME (Unaudited)
For the Three Months Ended For the Six Months Ended June 30, June 30, ---------------------------- --------------------------- 2001 2000 2001 2000 ------------ ------------ ------------ ------------ Revenues Natural gas sales $ 9,296,793 $ 2,456,905 $ 25,274,136 $ 4,598,472 Oil sales 750,809 194,466 1,520,840 410,072 ------------ ------------ ------------ ------------ 10,047,602 2,651,371 26,794,976 5,008,544 Expenses Production expenses and taxes 2,205,705 647,666 5,074,330 1,286,214 Depletion and depreciation 1,743,916 497,935 3,354,244 1,028,344 General and administrative 1,053,978 736,332 2,112,821 1,397,611 Interest 378,393 156,864 667,940 316,480 ------------ ------------ ------------ ------------ 5,381,992 2,038,797 11,209,335 4,028,649 Operating income 4,665,610 612,574 15,585,641 979,895 Other income: Interest 30,307 3,211 88,702 6,251 Other 77,932 - 130,340 - ------------ ------------ ------------ ------------ 108,239 3,211 219,042 6,251 Income for the period 4,773,849 615,785 15,804,683 986,146 Retained earnings, beginning of period (15,144,472) (25,034,398) (15,144,472) (25,034,398) ------------ ------------ ------------ ------------ Retained earnings, end of period $(10,370,623) $(24,418,613) $ 660,211 $(24,048,252) ============ ============ ============ ============ Income per common share - basic $ 0.07 $ 0.01 $ 0.22 $ 0.02 ============ ============ ============ ============ Income per common share - fully diluted $ 0.06 $ 0.01 $ 0.21 $ 0.02 ============ ============ ============ ============ Weighted average common shares outstanding - basic 72,866,710 56,751,125 71,446,112 56,751,125 ============ ============ ============ ============ Weighted average common shares outstanding - fully diluted 76,536,391 58,124,438 74,762,941 58,124,438 ============ ============ ============ ============
2 ULTRA PETROLEUM CORP. CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited)
(Expressed in U.S. Dollars) Six Months Ended June 30, --------------------------- 2001 2000 ------------ ----------- Cash provided by (used in): Operating activities: Income for the period $ 15,804,683 $ 986,146 Add (deduct) Items not involving cash: Depletion and depreciation 3,354,244 1,028,344 Stock compensation 353,241 - Net changes in non-cash working capital: Restricted cash (4,114) 394,995 Accounts receivable 4,178,805 706,421 Prepaid expenses and other current assets 13,826 (36,480) Note receivable (683,137) - Accounts payable and accrued liabilities 4,845,496 (254,965) Deferred revenue (50,000) (50,000) ------------ ----------- 27,813,044 2,774,461 Investing activities: Oil and gas property expenditures (22,536,102) (1,432,250) Purchase of capital assets (163,984) (179,391) Cash received from Pendaries Merger 312,365 359,764 ------------ ----------- (22,387,721) (1,251,877) Financing activities: Long-term debt (3,698,395) (829,117) Issuance of shares 561,023 - ------------ ----------- (3,137,372) (829,117) Increase in cash during the period 2,287,951 693,467 Cash and cash equivalents, beginning of period 1,143,591 401,691 ------------ ----------- Cash and cash equivalents, end of period $ 3,431,542 $ 1,095,158 ============ =========== Supplemental statements of cash flows information Supplemental schedule of non-cash investing activities: Acquisitions Fair value of assets acquired $ 43,950,263 $ - Less: liabilities assumed (4,225,978) - Cash acquired 312,365 - ------------ ----------- Fair value of stock issued 40,036,650 - ============ ===========
3 ULTRA PETROLEUM CORP. CONSOLIDATED BALANCE SHEETS (Unaudited)
(Expressed in U.S. Dollars) June 30, December 31, 2001 2000 ------------ ------------ Assets Current assets Cash and cash equivalents $ 3,431,542 $ 1,143,591 Restricted cash 204,240 200,126 Accounts receivable 4,099,733 8,278,538 Prepaid expenses and other current assets 826,066 839,892 Note receivable - 2,530,976 ------------ ------------ 8,561,581 12,993,123 Oil and gas properties, using the full cost method of accounting 118,683,349 59,728,715 Capital assets 553,186 455,448 ------------ ------------ Total assets $127,798,116 $ 73,177,286 ============= ============ Liabilities and shareholders' equity Current liabilities Accounts payable and accrued liabilities $ 14,116,111 $ 12,752,483 Long-term debt 20,832,217 24,530,612 Deferred revenue 150,000 200,000 Shareholders' equity Share capital 92,039,577 50,838,663 Retained earnings 660,211 (15,144,472) ------------ ------------ 92,699,788 35,694,191 ------------ ------------ Total liabilities and shareholders' equity $127,798,116 $ 73,177,286 ============= ============
ULTRA PETROLEUM CORP. CONSOLIDATED STATEMENT OF SHAREHOLDERS' EQUITY (Unaudited)
(Expressed in U.S. Dollars) Period Ended June 30, 2001 Period Ended June 30, 2000 -------------------------- -------------------------- Number Amount Number Amount ---------- ------------ ---------- ------------ Share Capital Authorized 10,000,000 preferred shares 100,000,000 common shares Issued Common shares Balance, beginning of year 56,939,762 $ 50,838,663 56,751,125 $ 50,666,631 Employee stock option plan 635,000 561,023 - - Stock Compensation 557,198 603,241 - - Merger with Pendaries Petroleum Ltd. 14,994,958 40,036,650 - - ---------- ------------ ---------- ------------ Balance, end of period 73,126,918 $ 92,039,577 56,751,125 $ 50,666,631 Retained earnings (deficit) Balance, beginning of year (15,144,472) (25,034,398) Earnings for period 15,804,683 986,146 ------------ ------------ Balance, end of period $ 660,211 $(24,048,252) ============ ============
4 ULTRA PETROLEUM CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Expressed in U.S. dollars unless otherwise noted) Three months ended June 30, 2001 and 2000 and six months ended June 30, 2001 and 2000 INCORPORATION AND NATURE OF OPERATIONS: Ultra Petroleum Corp. (the "Corporation") is incorporated under the laws of British Columbia, Canada. At March 1, 2000 the Corporation was continued under the laws of the Yukon Territory, Canada. Its principal business activity is the exploration and development of oil and gas properties located in the United States. The Corporation also has operations in China. SIGNIFICANT ACCOUNTING POLICIES: Our financial statements are prepared using Canadian generally accepted accounting principles, which differ from U.S. generally accepted accounting principles. We have described these differences in Note [5]. The accompanying financial statements, other than the balance sheet data as of December 31, 2000, are unaudited and were prepared from our records. Balance sheet data as of December 31, 2000 was derived from our audited financial statements, but do not include all disclosures required by U.S. generally accepted accounting principles. Our management believes that these financial statements include all adjustments necessary for a fair presentation of our financial position and results of operations. All adjustments are of a normal and recurring nature unless specifically noted. We prepared these statements on a basis consistent with our annual audited statements and Regulation S-X. Regulation S-X allows us to omit some of the footnote and policy disclosures required by generally accepted accounting principles and normally included in annual reports on Form 10-K. You should read these interim financial statements together with the financial statements, summary of significant accounting policies and notes to our most recent annual report on Form 20-F. (a) Basis of presentation: The consolidated financial statements include the accounts of the Corporation and its wholly owned subsidiaries, Ultra Petroleum (U.S.A.) Inc., Ultra Resources, Inc. and Pendaries Petroleum. All material intercompany transactions and balances have been eliminated upon consolidation. (b) Accounting principles: The consolidated financial statements are prepared in accordance with accounting principles generally accepted in Canada. (c) Revenue recognition and deferred revenue: Revenues from oil and gas operations are recognized at the time the oil is sold or natural gas is delivered. The cash received upon dedicating certain production volumes to a gas pipeline is deferred and is being included in natural gas sales on a straight line basis over the term of the five year dedication. (d) Restricted cash: Restricted cash represents cash received by the Corporation from production sold where the final division of ownership of the production is unknown or in dispute. Wyoming law states that these funds must reside in a federally insured bank in Wyoming. (e) Capital assets: Capital assets are recorded at cost and depreciated using the declining-balance method based on a seven-year useful life. (f) Oil and gas properties: The Corporation follows the full cost method of accounting for oil and gas operations whereby all costs associated with the exploration for and development of oil and gas reserves are capitalized. Such costs include land acquisition costs, geological and geophysical expenses, carrying charges on non-producing properties, costs of drilling both productive and non-productive wells and overhead charges directly related to acquisition, exploration and development activities. The capitalized cost, together with the costs of production equipment, are depleted and depreciated on the units-of-production method based on the estimated gross proved reserves as determined by independent petroleum engineers. Oil and gas reserves and production are converted into equivalent units based upon relative energy content. Costs of acquiring and evaluating unproved properties are initially excluded from the costs subject to depletion and depreciation. These unproved properties are assessed periodically to ascertain whether impairment has occurred. When proved reserves are assigned or the property is considered to be impaired, the cost of the property or the amount of the impairment is added to the costs subject to depletion and depreciation. The total capitalized cost of oil and gas properties less accumulated depletion and depreciation is limited to an amount equal to the estimated future net revenue from proved reserves, using year-end prices, plus the cost (net of impairment) of unproven properties, less estimated future site restoration costs, general and administrative expenses, financing costs and income taxes. 5 Proceeds from the sale of oil and gas properties are applied against capitalized costs, with no gain or loss recognized, unless such a sale would significantly alter the rate of depletion. Substantially all of the Corporation's exploration, development and production activities are conducted jointly with others and, accordingly, these financial statements reflect only the Corporation's proportionate interest in such activities. The Company recorded no tax provision in the three and six months ended June 30, 2001. The deferred tax asset will be recognized in the financial statements when its realization is more likely than not. (g) Foreign currency translation: The Corporation has adopted the United States dollar as its reporting currency, which is also its functional currency. The Corporation and its subsidiaries are considered to be integrated operations and accounts in Canadian dollars are translated using the temporal method. Under this method, monetary assets and liabilities are translated at the rates of exchange in effect at the balance sheet date; non-monetary assets at historical rates and revenue and expense items at the average rates for the period other than depletion and depreciation which are translated at the same rates of exchange as the related assets. The net effect of the foreign currency translation is included in current operations. (h) Use of estimates: Preparation of consolidated financial statements in accordance with generally accepted accounting principles in Canada requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, the disclosure of contingent assets and liabilities at the date of the financial statements, and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. (i) Reclassifications: Certain amounts in the financial statements of the prior years have been reclassified to conform to the December 31, 2000 financial statement presentation. 2. OIL AND GAS PROPERTIES:
June 30, December 31, 2001 2000 --------------------------------- Developed Properties: Acquisition, equipment, exploration drilling and environmental costs $116,150,388 $54,362,982 Less accumulated depletion, depreciation and amortization (10,280,605) (7,047,605) ------------ ----------- 105,869,783 47,315,377 Unproven Properties: Acquisition and exploration costs 12,813,566 12,413,338 ------------ ----------- $118,683,349 $59,728,715 ============ ===========
3. LONG-TERM DEBT:
June 30, December 31, 2001 2000 --------------------------------- Bank indebtedness $ 17,650,000 $17,650,000 Note payable, including accrued interest - - Short term obligations to be refinanced 3,182,217 6,880,612 ================================= $ 20,832,217 $24,530,612 =================================
BANK INDEBTEDNESS: On November 7, 1997, the Corporation entered into a credit facility (Initial Facility) with Wells Fargo with an initial borrowing base of $2,650,000. The borrowing base at December 31, 1999 was amended to $12,000,000 with a final maturity date of April 1, 2000. The outstanding balance of the Initial Facility bears interest at prime rate plus two percent and is secured by all of the Corporation's oil and gas properties. On March 22, 2000, the Corporation entered into a new senior revolving credit facility (New Facility) with Bank One, Texas N.A. Proceeds from the New Facility were used to pay off the outstanding balance of the Initial Facility at March 22, 2000 and to fund the Corporation's drilling programs. This facility provides for a maximum line of credit of $40 million with an initial borrowing base of $18 million. The borrowing base was increased on January 19, 2001 to $28 million based on increased reserves. The outstanding balance on the line bears interest at the bank's Prime Rate or LIBOR plus two and one half percent and is secured by all of the Corporation's Wyoming oil and gas properties. The New Facility expires on March 1, 2003. Short term obligations to be refinanced: These costs relate to drilling obligations, which will be funded on a long term basis through the use of the available borrowing base of bank indebtedness. 6 4. NOTE RECEIVABLE: In conjunction with the arrangement pursuant to which the Corporation acquired all of the issued and outstanding shares of Pendaries Petroleum Ltd ("Pendaries"), the Corporation has provided a U.S. $5.0 million line of credit to Pendaries' subsidiary, Sino-American Energy Corporation ("Sino-American"). The line of credit bears interest at the prime rate of BankOne Texas, N.A. (9.3% at December 31, 2000). The credit facility was fully guaranteed by Pendaries and secured by all of the stock of Sino-American. The outstanding balance at December 31, 2000 was $2,530,976. On January 16, 2001, the Pendaries acquisition was closed and the note was converted to an inter-company receivable. 5. DIFFERENCES BETWEEN GENERALLY ACCEPTED ACCOUNTING PRINCIPLES IN CANADA AND THE UNITED STATES: The consolidated financial statements have been prepared in accordance with generally accepted accounting principles in Canada ("Canadian GAAP"), which differ in certain respects from generally accepted accounting principles in the United States ("US GAAP"). Had the Corporation followed US GAAP, the carrying value of the oil and gas properties would not be materially different than under Canadian GAAP. Under US GAAP, the Company is required to discount future net revenues at 10% for purposes of calculating any required ceiling test write-down. Under Canadian GAAP, future net revenues are not discounted, however, they are reduced for estimated future general and administrative expenses and interest. For the year ended December 31, 2000, the six months ended December 31, 1999 and the years- ended June 1999 and 1998 the calculations of the ceiling test write downs that were recorded under Canadian GAAP approximated that which was determined under US GAAP. Total Shareholders' Equity under US GAAP would be $169,199 lower due to the manner in which escrowed shares were accounted for in fiscal 1995. ITEM 2 - MANAGEMENT DISCUSSION AND ANALYSIS OF FINANCIAL CONDITIONS AND RESULTS OF OPERATIONS RESULTS OF OPERATIONS THREE MONTHS ENDED JUNE 30, 2001 VS. THREE MONTHS ENDED JUNE 30, 2000 OPERATING REVENUES Oil and gas revenues increased to $10,047,602 for the three months ended June 30, 2001 from $2,651,371 for the same three months in 2000. This increase was primarily attributable to an increase in the Corporation's production and secondarily to an increase in prices received for that production. During this period the Corporation's production increased to 2.8 Bcf of gas, and 29 thousand barrels of condensate, up from 0.8 Bcf of gas and 6 thousand barrels of condensate for the same three months in 2000. During the three months ended June 30, 2001, the average product prices were $3.35 per Mcf and $25.83 per barrel, compared to $2.96 per Mcf and $29.02 per barrel for the same three months in 2000. PRODUCTION EXPENSES During the three months ended June 30, 2001, production expenses and production taxes increased to $2,205,705 from $647,666 in 2000. Direct lease operating expenses increased to $372,691 in 2001 from $157,010 in 2000. On a unit of production basis, direct operating expenses decreased 28% to $0.13 per Mcfe in 2001, as compared to $0.18 per Mcfe in 2000. Production taxes in 2001 were $1,120,386, compared to $264,833 in 2000 or $0.38 per Mcfe in 2001, compared to $0.30 per Mcfe in 2000. Higher production and higher prices caused production taxes, which are calculated, based on a percentage of revenue from production, and production expenses to increase. Gathering fees for the period increased in 2001 to $712,628 from $225,823 in 2000. This increase was attributable to higher production volumes. DEPLETION AND DEPRECIATION Depletion and depreciation expense increased to $1,743,916 during the three months ended June 30, 2001 from 497,935 for the same three months in 2000. On a unit basis, DD&A increased to $0.59 per Mcfe, from $0.57 in 2000 primarily as a result of increases in the proved reserves' full cost pool. GENERAL AND ADMINISTRATIVE General and administrative expenses increased to $1,053,978 during the three months ended June 30, 2001 from $736,332 for the same three months in 2000. The increase was primarily attributable to increase in personnel and overhead expenses associated with the Pendaries merger that took place in January of 2001. INTEREST Interest expense for the three months increased to $378,393 in 2001 from $156,864 in 2000. This increase was attributable to the increase in borrowings under the senior credit facility. SIX MONTHS ENDED JUNE 30, 2001 VS. SIX MONTHS ENDED JUNE 30, 2000 OPERATING REVENUES Oil and gas revenues increased to $26,794,976 for the six-month period ending June 30, 2001 from $5,008,544 for the same period in 2000. This increase was attributable to an increase in both the Corporation's production and the increase in prices received for that production. During this period, the Corporation's production increased to 5.4 Bcf of gas, and 57 thousand barrels of condensate, up from 1.7 Bcf of gas and 14 thousand barrels of condensate for the same period in 2000. During the six-month period ending June 30, 2001, the average product prices were $4.68 per Mcf and $26.63 per barrel, compared to $2.77 per Mcf and $28.62 per barrel for the same period in 2000. 7 PRODUCTION EXPENSES During the six-month period ending June 30, 2001, production expenses and production taxes increased to $5,074,330 from $1,286,214 in 2000. Direct lease operating expenses increased to $607,224 in 2001 from $316,013 in 2000. On a unit of production basis, direct lease operating expenses decreased 44% to $0.10 per Mcfe in 2001, from $0.18 per Mcfe in 2000. Production taxes for this period in 2001 were $2,999,603, compared to $586,986 in 2000. Production taxes are calculated based on a percentage of revenue from production. Higher production and higher prices contributed to the increases. Gathering fees for the period increased in 2001 to $1,467,503 from $463,215 in 2000, which was attributable to higher production volumes. DEPLETION AND DEPRECIATION Depletion and depreciation expenses increased to $3,354,244 during the six-month period ending June 30, 2001 from $1,028,344 for the same period in 2000. On a unit basis, DD&A decreased to $0.58 per Mcf, from $0.59 in 2000 primarily as a result of increases in proved reserves. GENERAL AND ADMINISTRATIVE General and administrative expenses increased to $2,112,821 during the six-month period ending June 30, 2001 from $1,365,634 for the same period in 2000. The increase was attributable primarily to increase in personnel and overhead expenses associated with the Pendaries merger that took place in January of 2001. INTEREST Net interest expense for the period increased to $667,940 in 2001 from $316,480 in 2000. This increase was attributable to both the increase in borrowings under the senior credit facility and reduction in cash balances earning interest. LIQUIDITY AND CAPITAL RESOURCES The Corporation's primary sources of cash during the first six months of 2001 were cash flows from operations, borrowings under its credit facility and issuance of its common shares. During the first six months of 2001, cash flows from operations was $19,158,927, a 293% increase from the same period in 2000. The Corporation has a $40 million revolving credit facility with a group of lenders and BankOne, N.A., as administrative agent, which allows the Corporation to borrow, repay and re-borrow amounts up to a borrowing base. The borrowing base is currently $28 million. The borrowing base is reset periodically by the lenders under the credit facility based on the Corporation's proved reserves and other factors deemed relevant to the lenders, at their discretion. The credit facility matures on March 1, 2003. Borrowings under the credit facility bear interest at the BankOne's prime rate or the London Inter-Bank Offered Rate plus 2.5%. During the first six months of 2001, the weighted average interest rate on outstanding borrowings under the credit facility was 8.8%. As of August 1, 2001, the Corporation had $19,650,000 borrowed under the facility. During January 2001, the Corporation issued 14,995,000 common shares to acquire Pendaries Petroleum. The purchase price for Pendaries was $40 million. During the first six months of 2001, the Corporation's principal capital expenditures were to develop its properties and to acquire Pendaries. During this period, the Corporation spent $20 million to drill exploration and development wells, $16 million of which was spent to drill 17 wells in the United States and $4.0 million of which was spent to drill 9 wells in China. The Corporation believes that cash flows from operations and borrowings under its credit facility will be sufficient to finance its anticipated 2001 capital budget of $47 million. The Corporation may, however, seek to arrange for other sources of capital depending on market conditions. CAUTIONARY STATEMENT PURSUANT TO SAFE HARBOR PROVISION OF THE PRIVATE SECURITIES LITIGATION REFORM ACT OF 1995 This report contains "forward looking statements" within the meaning of the federal securities laws. These forward-looking statements include the Corporation's outlook for the remainder of 2001 with regard to plans for funding operations and capital expenditures; however, future cash flows and continued availability of financing are subject to a number of uncertainties beyond the Corporation's control. There can be no assurances that adequate funding will be available to execute the Corporation's planned future capital program. These risks and uncertainties include, but are not limited to, fluctuations in the price we receive for oil and gas production, reductions in the quantity of oil and gas sold due to increased industry-wide demand and/or curtailments in production from specific properties due to mechanical, marketing or other problems, operating and capital expenditures that are either significantly higher or lower than anticipated because the actual cost of identified projects varied from original estimates and/or from the number of exploration and development opportunities being greater or fewer than currently anticipated and increased financing costs due to a significant increase in interest rates. ITEM 3 - QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK The Corporation's revenues are derived from the sale of its crude oil and natural gas production. The prices for oil and gas have decreased from the prices prevailing on January 1, 2001; however, they remain extremely volatile and sometimes experience large fluctuations as a result of relatively small changes in supplies, weather conditions, economic conditions and government actions. At this time the Corporation has not entered into any derivative financial instruments to hedge oil and gas price risks for the production volumes to which the hedge relates. However, the Corporation may enter into hedges in the future that would reduce the Corporation's exposure on the hedged volumes to decreases in commodity prices and limit the benefit the Corporation might otherwise receive from any increases in commodity prices on the hedged volumes. There have been no significant changes in market risks faced by the Corporation since the end of 2000. 8 PART 2 - OTHER INFORMATION ITEM 1. CHANGES IN SECURITIES None ITEM 2. DEFAULTS UPON SENIOR SECURITIES None ITEM 3. SUBMISSION OF MATTERS TO A VOTE OF THE SECURITY HOLDERS The Corporation held its annual meeting on June 12, 2001. At the annual meeting, the entire board of directors of the Corporation was elected. The votes cast for each of the directors proposed by the Corporation's definitive proxy statement on Schedule 14A was as follows:
IN FAVOUR AGAINST WITHHELD ABSTAIN NOT VOTED Michael D. Watford 44,122,680 0 500 35,135 0 W. Charles Helton 44,072,080 0 51,100 35,135 0 James C. Roe 43,855,483 0 267,697 35,135 0 James E. Nielson 44,120,680 0 2,500 35,135 0 Robert E. Rigney 43,961,830 0 161,350 35,135 0
The shareholders of the Corporation also approved the re-appointment of KPMG, LLP as the Corporation's independent auditors for 2001. There were 44,101,770 votes in favor of approval of the re-appointment of KPMG, LLP as the Corporation's auditors, 35,334 votes against, 1,000 votes withheld, and 19,895 abstentions. A total of 44,158,315 shares were voted by 320 shareholders, representing 60.6% of the Corporation's outstanding shares. ITEM 4. OTHER INFORMATION None ITEM 5. EXHIBITS AND REPORTS ON FORM 8-K (a.) Exhibits 2. Plan of acquisition, reorganization, arrangement, liquidation or succession* 3. Articles of Incorporation and By-Laws 3.1 Articles of Incorporation of Ultra Petroleum Corp. 3.2 By-Laws of Ultra Petroleum Corp. 4. Instruments defining the rights of security holders, including indentures 4.1 Specimen common share certificate 10. Material contracts 10.1 Credit Agreement dated March 22, 2000 10.2 Ratification of and Amendment to Mortgage dated February 15, 2001 11. Statement re computation of per share earnings* 15. Letter re unaudited interim financial information* 18. Letter re change in accounting principles* 19. Report furnished to security holders* 22. Published report regarding matters submitted to vote of security holders* 23. Consents of experts and counsel* 24. Power of attorney* 99. Additional exhibits* - -------------------- *Inapplicable to this filing (b) Reports on Form 8-K None 9 SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized. ULTRA PETROLEUM CORP. Date August 8, 2001 By: /s/ Michael D. Watford --------------------------------- Name: Michael D. Watford ------------------------------- Title: Chief Executive Officer ------------------------------ By: /s/ Kristen J. Miller --------------------------------- Name: Kristen J. Miller ------------------------------- Title: Financial Reporting Manager ------------------------------ 10 EX-3.1 3 dex31.txt ARTICLES OF INCORPORATION EXHIBIT 3.1 YUKON BUSINESS CORPORATIONS ACT Justice FORM 3 CERTIFICATE OF CONTINUANCE ULTRA PETROLEUM CORP. I hereby certify that the above-mentioned corporation was continued into Yukon, as set out in the attached Articles of Continuance, under section 190 of the Business Corporations Act. [SEAL] Corporate Access Number: 27812 J. Athron Date of Continuance: 2000-03-01 ------------------------ M. Richard Roberts f/ Registrar of Corporations YUKON BUSINESS CORPORATIONS ACT (Section 190) Form 3-01 ARTICLES OF CONTINUANCE 1. Name of Corporation: ULTRA PETROLEUM CORP. 2. The classes and any maximum number of shares that the Corporation is authorized to issue: The attached Schedule "A" is incorporated and forms part of the Articles of Continuance. 3. RESTRICTIONS, IF ANY, ON SHARE TRANSFERS: There are no restrictions on share transfers. 4. NUMBER (OR MINIMUM AND MAXIMUM NUMBER) OF DIRECTORS: Not less than one (1), nor more than seven (7) 5. RESTRICTIONS, IF ANY, ON BUSINESS THE CORPORATION MAY CARRY ON: The Corporation is restricted from carrying on the business of a railway, steamship, air transport, canal, telegraph, telephone or irrigation company. 6. IF CHANGE OF NAME EFFECTED, PREVIOUS NAME: Name at time of Incorporation: STARMARK RESOURCES LTD.: November 14, 1979 Name change from Starmark Resources Ltd. to TRANSGLOBE RESOURCES LTD.: April 11, 1984 Name change from Transglobe Resources Ltd. to TRANSGLOBE REAL ESTATE CORP.: June 19, 1990 Name change from Transglobe Real Estate Corp. to ULTRA PETROLEUM CORP.: October 21, 1993 7. DETAILS OF INCORPORATION: Incorporation Date: November 14, 1979 British Columbia Company: Certificate of Incorporation No. 19979 Name at time of Incorporation: Starmark Resources Ltd. November 14, 1979 Incorporating Memorandum and Articles: November 14, 1979
Altered Memorandum - consolidated shares on a 3 for 1 basis April 11, 1984 Altered Articles - new form of Articles were adopted: March 7, 1990 Altered Articles - new form of Articles were adopted: October 12, 1993 Altered Memorandum - altered the authorized share capital: July 15, 1994 Altered Memorandum and Articles - Altered Memorandum increased the authorized capital by the creation of 10,000,000 preferred shares. Articles altered by addition of Part 26 - Special Rights and Restrictions Attached to Preferred Shares: December 15, 1998
8. OTHER PROVISIONS, IF ANY: The attached Schedule "B" is incorporated and forms part of the Articles of Continuance. 9. DATE: February 8, 2000 SIGNATURE: /s/ Michael D. Watford TITLE: Chairman, CEO and ------------------------ President Michael D. Watford SCHEDULE "A" ULTRA PETROLEUM CORPORATION The classes and any maximum number of shares that the Corporation is authorized to issue: The Corporation is authorized to issue an unlimited number of shares without nominal or par value and the authorized capital of the Corporation is to be divided into: 1. Common shares which shall have attached thereto the following preferences, rights, conditions, restrictions, limitations, or prohibitions: (a) VOTING Holders of common shares shall be entitled to receive notice of and to attend all meetings of the shareholders of the Corporation and shall have one vote for each common share held at all meetings of the shareholders of the Corporation, except meetings at which only holders of another specified class of shares of the Corporation are entitled to vote separately. (b) DIVIDENDS Subject to the prior rights of the holders of preferred shares and any other shares ranking senior to the common shares with respect to priority in the payment of dividends, the holders of common shares shall be entitled to receive dividends and the Corporation shall pay dividends thereon, as and when declared by the board of directors of the Corporation out of moneys properly applicable to the payment of dividends, in such amount and in such form as the board of directors of the Corporation may from time to time determine and all dividends which the board of directors of the Corporation may declare on the common shares shall be declared and paid in equal amounts per share on all common shares at the time outstanding. (c) PARTICIPATION IN ASSETS ON DISSOLUTION In the event of the dissolution, liquidation or winding-up of the Corporation, whether voluntary or involuntary, or any other distribution of assets of the Corporation among its shareholders for the purpose of winding-up its affairs, subject to the prior rights of the holders of the preferred shares and any other shares ranking senior to the common shares with respect to priority in the distribution of assets upon dissolution, liquidation, winding-up or distribution for the purpose of winding-up, the holders of the common shares shall be entitled to receive the remaining property and assets of the Corporation. 2. 10,000,000 preferred shares which shall have attached thereto the following preferences, rights, conditions, restrictions, limitations, or prohibitions: (a) DIRECTORS' AUTHORITY TO ISSUE IN ONE OR MORE SERIES The board of directors of the Corporation may issue the preferred shares at any time and from time to time in one or more series before the first shares of any particular series are issued, and shall fix the number of preferred shares in such series and, determine, subject to the limitations in the Articles, the designation, rights, privileges, restrictions and conditions attached to the shares of such series including without limitation, the rate or rates, amount or method or methods of calculation of dividends thereon, the time and place of payment of dividends, whether cumulative or non-cumulative or partially cumulative and whether such rate, amount or method of calculation shall be subject to change or adjustment in the future, the currency or currencies of payment of dividends, the priorities thereof in relation to other shares or the priorities of other shares in relation thereto, if any, the consideration and the terms and conditions of any purchase for cancellation, retraction or redemption rights, if any, the conversion or exchange rights attached thereto, if any, the voting rights attached thereto, if any, and the terms and conditions of any share purchase plan or sinking fund with respect thereto. Before the issue of the first shares of a series, the board of directors of the Corporation shall send to the Registrar, as defined in the Yukon Business Corporations Act, Articles of Amendment containing the description of such series including the designation, rights, privileges, restrictions and conditions attached thereto as determined by the board of directors of the Corporation. (b) RANKING OF PREFERRED SHARES No rights, privileges, restrictions or conditions attached to a series of preferred shares shall confer upon a series a priority in respect of voting dividends or return of capital over any other series of preferred shares then outstanding. The preferred shares shall be entitled to priority over the common shares of the Corporation and over any other shares of the Corporation ranking junior to the preferred shares with respect to the payment of dividends and the distribution of assets in the event of the liquidation, dissolution or winding-up of the Corporation, whether voluntary or involuntary, or any other distribution of the assets of the Corporation among its shareholders for the purpose of winding-up its affairs. If any cumulative dividends or amounts payable on a return of capital in respect of a series of preferred shares are not paid in full the preferred shares of all series shall participate rateably in respect of such dividends, including accumulations, of any, in accordance with the sums that would be payable on such shares if all such dividends were declared and paid in full, and in respect of any repayment of capital in accordance with the sums that would be payable on such repayment of capital if all sums so payable were paid in full, provided however, that in the event of there being insufficient assets to satisfy in full all such claims to dividends and return of capital, the claims of the holders of the preferred shares with respect to repayment of capital shall first be paid and satisfied and any assets remaining thereafter shall be applied towards the payment and satisfaction of claims in respect of dividends. After payment to the holders of preferred shares of each series of the amounts of dividends and capital payable in accordance with these provisions and the rights, privileges and restrictions attached to each series of preferred shares, the holders of preferred shares shall not be entitled to share in any further distribution of the property and assets of the Corporation. The preferred shares of any series may also be given such other preferences, consistent with the Articles, over the common shares and over any other shares raking junior to the preferred shares as may be determined in the case of such series of preferred shares. (c) APPROVAL OF HOLDERS OF PREFERRED SHARES The rights, privileges, restrictions and conditions attaching to the preferred shares as a class may be added to, changed or removed but only with the approval of the holders of the preferred shares given as hereinafter specified. The approval of the holders of preferred shares to add to, change or remove any rights, privilege, restriction or condition attaching to the preferred shares as a class or to any other matter requiring the consent of the holders of the preferred shares as a class may be given in such manner as may then be required by law, subject to a minimum requirement that such approval shall be given by resolution passed by the affirmative vote of at least two-thirds of the votes cast at a meeting of the holders of preferred shares duly called for that purpose. The formalities to be observed in respect of the giving of notice of any such meeting or any adjourned meeting and the conduct thereof shall be those from time to time required by the Yukon Business Corporations Act (as from time to time amended, varied or replaced) and prescribed in the Bylaws of the Corporation with respect to meetings of shareholders. On every poll taken at a meeting of holders of preferred shares as a class, each holder entitled to vote thereat shall have one vote in respect of each preferred share held by him. SCHEDULE "B" ULTRA PETROLEUM CORP. Other provisions, if any: 1. A meeting of the shareholders of the Corporation may, in the Directors' unfettered discretion, be held at any location in North America and Europe specified by the Directors in the Notice of such meeting. 2. The Directors may, between annual general meetings, appoint one or more additional Directors of the Corporation to serve until the next annual general meeting, but the number of additional Directors shall not at any time exceed one third of the number of Directors who held office at the expiration of the last annual general meeting of the Corporation, provided that the total number of directors shall not exceed the maximum number of directors fixed pursuant to the Articles. EX-3.2 4 dex32.txt BY-LAWS EXHIBIT 3.2 BYLAW NO. 1 A Bylaw relating generally to the transaction of the business and affairs of ULTRA PETROLEUM CORP. (the "Corporation") SECTION ONE - INTERPRETATION 1.1 INTERPRETATION. Words and expressions defined in the Business Corporations Act, Revised Statutes of the Yukon 1986, Chapter 15 as amended from time to time, and any Statute that may be substituted therefor, as amended from time to time (the "Act") have the same meanings when used in the Bylaws. Words importing the singular number include the plural and vice versa and words importing gender include masculine, feminine and neuter genders as required by the context. 1.2 CONFLICT WITH ACT OR ARTICLES. The Bylaws are subject to the provisions of the Act and the articles of the Corporation and in the event of conflict between the provisions of any Bylaws and the provisions of the Act or the articles, the provisions of the Act or the articles shall prevail over the Bylaws. 1.3 HEADINGS. The headings and indices used in the Bylaws are inserted for convenience of reference only and do not affect the interpretation of the Bylaws or any part thereof. SECTION TWO - BUSINESS OF THE CORPORATION 2.1 CORPORATE SEAL. The Board of Directors of the Corporation (the "Board") may adopt and change a corporate seal which shall contain the name of the Corporation and the Board may cause to be created as many duplicates thereof as the Board shall determine. 2.2 EXECUTION OF INSTRUMENTS. The Board may from time to time direct the manner in which, and the person or persons by whom, any particular document or class of documents may or shall be signed and delivered. In the absence of a directors' resolution concerning the execution of any particular documents, documents shall be signed and delivered on behalf of the Corporation by one person, who holds the office of Chairman of the Board, President, Managing Director, Vice- President, Secretary, Treasury or director or any other office created by bylaw or by resolution of the Board, including affixing the corporate seal to all such documents as may require the same. 2.3 BANKING AND FINANCIAL ARRANGEMENTS. The banking and financial business of the Corporation including, without limitation, the borrowing of money and the giving of security therefor, shall be transacted with such banks, trust companies or other bodies corporate or organizations as may from time to time be designated by or under the authority of the Board. Such banking and financial business or any part thereof shall be transacted under such agreements, instructions and delegations of powers as the Board may from time to time prescribe or authorize. 2 2.4 VOTING RIGHTS IN OTHER BODIES CORPORATE. The signing officer of the Corporation may execute and deliver proxies and arrange for the issuance of voting certificates or other evidence of the rights to exercise the voting rights attaching to any securities held by the Corporation. Such instruments, certificates or other evidence shall be in favour of such person or persons as may be determined by the officer executing such proxies or arranging for the issuance of voting certificates or such other evidence of the right to exercise such voting rights. In addition, the Board may from time to time direct the manner in which and the person or persons by whom any particular voting rights or class of voting rights may or shall be exercised. 2.5 WITHHOLDING INFORMATION FROM SHAREHOLDERS. Subject to the provisions of the Act, no shareholder shall be entitled to discovery of any information respecting any details or conduct of the Corporation's business which, in the opinion of the Board, it would be inexpedient in the interests of the shareholders or the Corporation to communicate to the public. The Board may from time to time determine whether and to what extent and at what time and place and under what conditions or regulations the accounts, records and documents of the Corporation shall be open to the inspection of shareholders and no shareholder shall have any right of inspection of any account, record or document of the Corporation except as conferred by the Act or authorized by the Board or by resolution passed at a general meeting of shareholders. SECTION THREE - DIRECTORS AND BOARD 3.1 CALLING OF MEETING. Meetings of the Board shall be held from time to time and at such place as the Board, the Chairman of the Board, the Managing Director, the President or any two directors may determine. 3.2 NOTICE OF MEETINGS. Notice of the time and place of Board meetings shall be given to each director in the manner provided in Section 10.1 not less than 48 hours before the time of the meeting. 3.3 TELECOMMUNICATION. A director may participate in a Board meeting or a meeting of a committee of directors by means of telephone or other communication facilities that permit all directors participating in the meeting to hear each other. 3.4 QUORUM. A quorum for Board meetings shall be a majority of the directors present in person or by telecommunication. If a quorum is not present within 15 minutes of the time fixed for the holding of the meeting, the meeting shall be adjourned for not less than 72 hours and notice of the time and place of the adjourned meeting shall be given to each director not less than 48 hours before the time of the adjourned meeting. If a quorum is not present within 15 minutes of the time fixed for the holding of the adjourned meeting, those directors present in person or by telecommunication shall constitute a quorum for the purpose of the adjourned meeting. 3.5 FIRST MEETING OF NEW BOARD. Provided a quorum of directors is present, each newly elected Board may, without notice, hold its first meeting immediately following the meeting of shareholders at which such Board is elected. 3 3.6 REGULAR MEETINGS. The Board may appoint a day or days in any month or months and a place and hour for regular meetings of the Board. A copy of any resolution of the Board fixing the day or days, the place and time of such regular meetings shall be sent to each director forthwith after being passed, but no other notice shall be required for any such regular meeting except where the Act requires the purpose thereof or the business to be transacted thereat to be specified. 3.7 CASTING VOTE. At all Board meetings, each director shall have one vote and every question shall be decided by a majority of votes cast on each question. In the case of an equality of votes, the chairman of the meeting shall not be entitled to a second or casting vote in addition to the vote to which he may be entitled as a director. 3.8 CHAIRMAN. The chairman of any meeting of the Board shall be the first mentioned of such of the following officers as have been appointed and who is present at the meeting: a) the Chairman of the Board; or b) the President; or c) any Vice-President (and where more than one Vice-President is present at the meeting, then the priority to act as chairman as between them shall be in order of their appointment to the office of Vice-President). If no such officer is present within 15 minutes from the time fixed for the holding of the meeting of the Board, the persons present shall choose one of their number then present to be chairman of that meeting. 3.9 COMMITTEES OF DIRECTORS. Unless otherwise ordered by the Board each committee of directors shall have power to fix its quorum at not less than a majority of its members, to elect its chairman and to regulate its procedure. 3.10 REMUNERATION AND EXPENSES. The directors shall be paid such remuneration for their services as the Board may from time to time determine. The directors shall also be entitled to be reimbursed for travel expenses and other expenses properly incurred by them in attending meetings of the Board or any committee thereof. Nothing herein contained shall preclude any director from serving the Corporation in any other capacity and receiving remuneration therefor. 4 SECTION FOUR - OFFICERS 4.1 APPOINTMENT. The Board may from time to time appoint a Chairman of the Board, a President, one or more Vice-Presidents, a Secretary, a Treasurer and such other officers as the Board may determine, including one or more assistants to any of the officers so appointed. Subject to those powers and authority which pursuant to the Act may only be exercised by the directors, the officers of the Corporation may exercise, respectively, such powers and authority and shall perform such duties, in addition to those specified in the Bylaws, as may from time to time be prescribed by the Board. Except for the Chairman of the Board, if appointed, and the Managing Director, if appointed, an officer may, but need not be, a director. 4.2 DELEGATION. In case of the absence of any officer or employee of the Corporation or for any other reason that the Board may deem sufficient, the Board may delegate for the time being the powers and authority of such officer or employee to any other officer or employee or to any director of the Corporation. 4.3 CHAIRMAN OF THE BOARD. The Chairman of the Board, if appointed, shall be a director of the Corporation and shall be the chief executive officer of the Corporation. The Chairman of the Board shall preside at all meetings of the Board and may exercise such other powers and authority and shall perform the duties which the directors may from time to time prescribe. During the absence of disability of the Chairman of the Board, his or her duties shall be performed and his or her powers exercised by the Managing Director, if any, or if no Managing Director, by the President. 4.4 MANAGING DIRECTOR. The Managing Director, if appointed, shall be a director of the Corporation, shall manage the operations of the Corporation generally, and may exercise such other powers and authority and shall perform such other duties as may from time to time be prescribed by the Board. During the absence or disability of the Chairman of the Board and/or the President, or if no Chairman of the Board and/or President have been appointed, the Managing Director shall also have the powers and duties of the Chairman of the Board and/or the President. 4.5 PRESIDENT. The President shall, subject to the authority of the Board, be responsible for the general supervision of the business and affairs of the Corporation and shall have such other powers and duties as the Board may specify. During the absence or disability of the Chairman of the Board and/or the Managing Director, or if no Chairman of the Board and/or Managing Director have been appointed, in the event the President is a Director of the Corporation, the President shall also have the powers and duties of the Chairman of the Board and/or the Managing Director. 4.6 VICE-PRESIDENT. The Vice-President, or if more than one Vice-President has been appointed, the Vice-Presidents, may exercise such powers and authority and shall perform such duties as may from time to time be prescribed by the Board. Subject to Sections 4.3 and 4.4, one of the Vice-Presidents, being a shareholder and/or director, as the case may be, where required by the Act or these Bylaws, may exercise the powers and perform the duties of the Chairman of the Board and/or the Managing Director and/or the President. 5 4.7 SECRETARY. Except as may be otherwise determined from time to time by the Board, the Secretary shall attend and be the secretary to all meetings of the Board, shareholders and committees of the Board and shall enter or cause to be entered in records kept for that purpose minutes of all proceedings at such meetings. The Secretary shall give or cause to be given as and when instructed all notices to shareholders, directors, officers, auditors and members of committees of the Board. The Secretary shall be the custodian of the corporate seal, if any, of the Corporation and shall have charge of all books, papers, reports, certificates, records, documents, registers and instruments belonging to the Corporation, except when some other officer or agent has been appointed for that purpose and may exercise such other powers and authority and shall perform such other duties as may from time to time be prescribed by the Board or by the President. 4.8 TREASURER. The Treasurer shall be responsible for the keeping of proper accounting records in compliance with the Act and shall be responsible for the deposit of monies and other valuable effects of the Corporation in the name and to the credit of the Corporation in such banks or other depositories as the Board may from time to time designate and shall be responsible for the disbursement of the funds of the Corporation. The Treasurer shall render to the Board whenever so directed an account of all financial transactions and of the financial position of the Corporation. The Treasurer may exercise such other duties as may from time to time be prescribed by the Board or by the President. 4.9 OTHER OFFICERS. The powers and duties of all other officers shall be those prescribed by the Board from time to time. Any of the powers and duties of an officer to whom an assistant has been appointed may be exercised and performed by such assistant, unless the Board or the President otherwise direct. 4.10 VARIATION OF THE POWERS AND DUTIES. The Board may from time to time vary, add to or limit the powers, authority and duties of any officer. 4.11 REMOVAL AND DISCHARGE. The Board may remove any officer of the Corporation, with or without cause, at any meeting called for that purpose and may elect or appoint others in their place or places. Any officer or employee of the Corporation, not being a member of the Board, may also be removed and discharged, either with or without cause, by the Chairman of the Board or the President. If, however, there be a contract with an officer or employee derogating from the provisions of this Section, such removal or discharge shall be subject to the provisions of such contract. 4.12 TERM OF OFFICE. Each officer appointed by the Board shall hold office until a successor is appointed, or until his earlier resignation or removal by the Board. 4.13 TERMS OF EMPLOYMENT AND REMUNERATION. The terms of employment and the remuneration of officers appointed by the Board shall be settled by the Board from time to time. 4.14 AGENTS AND ATTORNEYS. The Board, the Chairman of the Board or the President may also from time to time appoint other agents, attorneys, officers and employees of the Corporation within or without Canada, who may be given such titles and who may exercise such powers and 6 authority (including the power of subdelegation) and shall perform such duties of management or otherwise, as the Board may from time to time prescribe. 4.15 FIDELITY BONDS. The Board, the Chairman of the Board or the President may require such officers, employees and agents of the Corporation as the Board deems advisable to furnish bonds for the faithful performance of their powers and duties, in such form and with such surety as the Board may from time to time determine. SECTION FIVE - INDEMNIFICATION 5.1 INDEMNIFICATION OF DIRECTORS AND OFFICERS AGAINST ACTIONS BY THIRD PARTIES. Except in respect of an action by or on behalf of the Corporation or body corporate to procure a judgment in its favour, the Corporation shall indemnify a director or officer of the Corporation, a former director or officer of the Corporation or a person who acts or acted at the Corporation's request as a director or officer of a body corporate of which the Corporation is or was a shareholder or creditor, or a person who undertakes or has undertaken any liability on behalf of the Corporation or any such body corporate, and his heirs and legal representatives, against all costs, charges and expenses, including an amount paid to settle an action or satisfy a judgment, reasonably incurred by him in respect of any civil, criminal or administrative action or proceeding to which he is made a party by reason of being or having been a director or officer of that Corporation or body corporate, if: a) He acted honestly and in good faith with a view to the best interests of the Corporation, and b) In the case of a criminal or administrative action or proceeding that is enforced by a monetary penalty, he had reasonable grounds for believing that his conduct was lawful. 5.2 INDEMNIFICATION OF DIRECTORS AND OFFICERS AGAINST ACTIONS BY THE CORPORATION. The Corporation may, with the approval of the Supreme Court of the Yukon Territory, indemnify a person referred to in paragraph 5.1 in respect of an action by or on behalf of the Corporation or body corporate to procure a judgment in its favour, to which he is made a party by reason of being or having been a director or an officer of the Corporation or body corporate, against all costs, charges and expenses reasonably incurred by him in connection with the action if he fulfills the conditions set out in subparagraphs 5.1(a) and (b). 5.3 RIGHT OF INDEMNIFY AND EXCLUSIVE. The provisions for indemnification contained in the Bylaws shall not be deemed exclusive of any other rights to which a person seeking indemnification may be entitled under any Bylaw, agreement, vote of shareholders or disinterested directors or otherwise, both as to an action in his official capacity and as to an action in any other capacity while holding such office. This section shall also apply to a person who has ceased to be a director or officer, and shall enure to the benefit of the heirs and legal representatives of such person. 7 5.4 INSURANCE. Subject to the limitations contained in the Act, the Corporation may purchase and maintain such insurance for the benefit of its directors and officers as the Board may from time to time determine. SECTION SIX - SHARES 6.1 OPTIONS. The Board may from time to time grant options to purchase the whole or any part of the authorized and unissued shares of the Corporation at such times and to such persons and for such consideration as the Board shall determine, provided that no share shall be issued until it is fully paid as provided in the Act. 6.2 NON-RECOGNITION OF TRUSTS. The Corporation shall treat as absolute owner of any share the person in whose name the share is registered in the securities register as if that person had full legal capacity and authority to exercise a right of ownership, irrespective of any indication to the contrary through knowledge or notice or description in the Corporation's records or on the share certificate. 6.3 JOINT SHAREHOLDERS. If two or more persons are registered as joint holders of any share, any one of such persons may give effectual receipts for the certificate issued in respect thereof or for any dividend, bonus, return of capital or other money payable or warrant issuable in respect of such share. SECTION SEVEN - DIVIDENDS AND RIGHTS 7.1 DIVIDEND CHEQUES. A dividend payable in cash shall be paid by cheque drawn on the Corporation's bankers or one of them to the order of each registered holder of shares of the class or series in respect of which a dividend has been declared, and mailed by prepaid ordinary mail to such registered holder at the address shown in the records of the Corporation, unless such holder otherwise directs. The mailing of such cheque as aforesaid, unless the same is not paid on due presentation, shall satisfy and discharge the liability for the dividend to the extent of the sum represented thereby plus the amount of any tax which the Corporation is required to and does withhold. 7.2 JOINT SHAREHOLDERS. In the case of joint holders, a cheque for payment of dividends, bonuses, returns of capital or other money payable, shall, unless such joint holders otherwise direct, be made payable to the order of all of such joint holders and mailed to them at the address shown in the records of the Corporation. 7.3 NON-RECEIPT OF CHEQUES. In the event of non-receipt of any dividend cheque by the person to whom it is sent as aforesaid, the Corporation shall issue to such person a replacement cheque for a like amount on such terms as to indemnify, reimbursement of expenses and evidence of non-receipt and of title as the Board may from time to time prescribe, whether generally or in any particular case. 8 7.4 UNCLAIMED DIVIDENDS. Any dividend unclaimed after a period of six (6) years from the date on which the same has been declared to be payable shall be forfeited and shall revert to the Corporation. SECTION EIGHT - MEETINGS OF SHAREHOLDERS 8.1 ANNUAL MEETINGS. The annual meeting of shareholders shall be held at such time in each year and, subject to the articles of the Corporation, at such place as the Board, or failing it, the Chairman of the Board, the Managing Director or the President, may from time to time determine. 8.2 TIME FOR DEPOSITS OF PROXIES. The Board may specify in a notice calling a meeting of shareholders a time, preceding the time of such meeting by not more than 48 hours exclusive of non-business days, before which proxies to be used at such meeting must be deposited. A proxy shall be acted upon only if, prior to the time so specified, it shall have been deposited with the Corporation or an agent thereof specified in such notice, or if no such time is specified in such notice, unless it has been received by the Secretary of the Corporation or by the chairman of the meeting or any adjournment thereof prior to the time of voting. 8.3 PERSONS ENTITLED TO BE PRESENT. The only persons entitled to be present at a meeting of the shareholders shall be those persons entitled to vote thereat, the directors and auditor (if any) of the Corporation and others who, although not entitled to vote, are entitled or required under any provision of the Act or the articles or Bylaws to be present at the meeting. Any other persons may be admitted only on the invitation of the chairman of the meeting or with the consent of the meeting. 8.4 QUORUM. A quorum of shareholders is present at a meeting of shareholders, irrespective of the number of persons actually present at the meeting, if the holder or holders of five percent (5%) of the shares entitled to vote at the meeting are present in person or represented by proxy. No business shall be transacted at any meeting unless the requisite quorum is present at the time of the transaction of such business. 8.5 ADJOURNMENT. Should a quorum not be present at any meeting of shareholders, those present in person or by proxy and entitled to vote shall have power to adjourn the meeting for a period of not more than 30 days without notice other than announcement at the meeting. At any such adjourned meeting, provided a quorum is present, any business may be transacted which might have been transacted at the meeting adjourned. Notice of meetings adjourned for more than 30 days and for more than 90 days shall be given as required by the Act. 8.6 CHAIRMAN. The chairman of any meeting of the shareholders shall be the first mentioned of such of the following officers as have been appointed and who is present at the meeting: a) the Chairman of the Board; b) the President; 9 c) any Vice-President (and where more than one Vice-President is present at the meeting, then the priority to act as chairman as between them shall be in order of their appointment to the office of Vice-President). If no such officer is present within 15 minutes from the time fixed for the holding of the meeting of the shareholders, the persons present and entitled to vote shall choose one of their number then present to be chairman of that meeting. 8.7 SECRETARY OF MEETING. If the Secretary of the Corporation is absent, the chairman of a meeting of shareholders shall appoint some person, who need not be a shareholder, to act as secretary of the meeting. 8.8 CHAIRMAN'S CASTING VOTE. At any meeting of shareholders every question shall be determined by the majority of the votes cast on the question. In the case of an equality of votes at a meeting of shareholders, the chairman of the meeting shall not be entitled to a second or casting vote in addition to the vote or votes to which he may be entitled as a shareholder. 8.9 CHAIRMAN'S DECLARATION. At any meeting of shareholders, unless a ballot is demanded, a declaration by the chairman of the meeting that a resolution has been carried or carried unanimously or by a particular majority or lost or not carried by a particular majority shall be conclusive evidence of the fact without proof of the number of proportion of votes recorded in favour of or against the motion. 8.10 VOTING BY BALLOT. If a ballot is demanded by a shareholder or proxy holder entitled to vote at a shareholder's meeting and the demand is not withdrawn, the ballot upon the motion shall be taken in such manner as the chairman of the meeting shall direct. Upon a ballot each shareholder who is present in person or represented by proxy shall be entitled, in respect of the shares which he is entitled to vote at the meeting upon the question, to that number of votes provided by the Act or the articles. The declaration by the Chairman of the meeting that the vote upon the question has been carried, or carried unanimously or by a particular majority, or lost or not carried by a particular majority and an entry in the minutes of the meeting shall be prima facie evidence of the fact without proof of the number of proportion of votes recorded in favour of or against any resolution or question. 8.11 SCRUTINEERS. The chairman or the secretary at any meeting of the shareholders or the shareholders then present may appoint one or more scrutineers, who need not be shareholders, to count and report upon the results of the voting which is done by ballot. SECTION NINE - NOTICES 9.1 NOTICES. In addition to any other method of service permitted by the Act, any notice or document required by the Act, the regulations, the articles or the Bylaws may be sent to any person entitled to receive same in the manner set out in the Act for service upon a shareholder or director and by any means of telecommunication with respect to which a written record is made. A notice sent by means of telecommunication shall be deemed to have been given on the first business day after the date upon which the written record is made. 10 9.2 NOTICE TO JOINT SHAREHOLDERS. If two or more persons hold shares jointly, notice may be given to one of such persons and such notice shall be sufficient notice to all of them. 9.3 CHANGE OF ADDRESS. The Secretary or Assistant Secretary may change or cause to be changed the address in the records of the Corporation of any shareholder, director, officer, auditor or member of a committee of the Board in accordance with any information believed by him to be reliable. 9.4 SIGNATURE ON NOTICE. The signature on any notice to be given by the Corporation may be lithographed, written, printed or otherwise mechanically reproduced. SECTION TEN - EFFECTIVE DATE AND AMENDMENT 10.1 EFFECTIVE DATE. This Bylaw is effective from the date of the resolution of the Board adopting same and shall continue to be effective, unless amended by the Board, until the next meeting of shareholders of the Corporation, whereupon if same is confirmed or confirmed as amended, this Bylaw shall continue in effect in the form of which it was so confirmed. 10.2 AMENDING BYLAW. The Board may by resolution amend or repeal this Bylaw and such amendment or repeal shall have force and effect unless rejected by ordinary resolution of the shareholders entitled to vote at an annual general meeting. EX-4.1 5 dex41.txt SPECIMEN COMMON SHARE CERTIFICATE EXHIBIT 4.1 INCORPORATED (BY CONTINUANCE) UNDER THE BUSINESS CORPORATIONS ACT (YUKON TERRITORY) NUMBER SHARES 08270 ULTRA PETROLEUM CORP. CUSIP 903914 10 9 THIS CERTIFIES THAT is the registered holder of FULLY PAID AND NON-ASSESSABLE COMMON SHARE WITHOUT PAR VALUE in the Capital of the above named Corporation subject to the Articles of Continuance and By-Laws of the Corporation transferable on the books of the Corporation by the registered holder in person or by Attorney duly authorized in writing upon surrender of this certificate properly endorsed. This certificate is not valid unless countersigned by the Transfer Agent and Registrar of the Corporation. IN WITNESS WHEREOF the Corporation has caused this certificate to be signed on its behalf by the facsimile signatures of its duly authorized officer at Houston, Texas, USA. DATED COUNTERSIGNED AND REGISTERED /s/ Michael D. Watford MONTREAL TRUST COMPANY OF CANADA VANCOUVER - ---------------------- TRANSFER AGENT AND REGISTRAR TORONTO Chief Executive Officer By ___________________________________ Authorized Officer The Shares represented by this certificate are transferable at the offices of Montreal Trust Company of Canada, Vancouver, B.C. or Toronto, Ont. FOR VALUE RECEIVED the undersigned hereby sells, assigns and transfers unto PLEASE INSERT SOCIAL INSURANCE NUMBER OF TRANSFEREE ___-___-___ - -------------------------------------------------------------------------- (Name and address of transferee) - -------------------------------------------------------------------------- - ----------------------------------------------------------------- shares registered in the name of the undersigned on the books of the Corporation named on the face of this certificate and represented hereby, and irrevocably constitutes and appoints _______________________________________________ the attorney of the undersigned to transfer the said shares on the register of transfers and books of the Corporation with full power of substitution hereunder. DATED: - ----------------------------------- ------------------------------------ (Signature of Witness) (Signature of Shareholder) NOTICE: The signature of this assignment must correspond with the name as written upon the face of the certificate, in every particular, without alteration or enlargement, or any change whatsoever, and must be guaranteed by a bank, trust company or a member of a recognized stock exchange. Signature Guaranteed By: EX-10.1 6 dex101.txt CREDIT AGREEMENT EXHIBIT 10.1 CREDIT AGREEMENT BETWEEN ULTRA PETROLEUM (USA) INC. ULTRA RESOURCES, INC. AND BANK ONE, TEXAS, NATIONAL ASSOCIATION March 22, 2000 REVOLVING LINE OF CREDIT OF UP TO $40,000,000 TABLE OF CONTENTS Page ARTICLE I DEFINITIONS AND INTERPRETATION 1.1 Terms Defined Above 1 1.2 Additional Defined Terms 1 1.3 Undefined Financial Accounting Terms 14 1.4 References 14 1.5 Articles and Sections 14 1.6 Number and Gender 14 1.7 Incorporation of Exhibits 14 ARTICLE II TERMS OF FACILITY 2.1 Revolving Line of Credit 14 2.2 Letter of Credit Facility 15 2.3 Use of Loan Proceeds and Letters of Credit 15 2.4 Interest 15 2.5 Repayment of Loans and Interest 16 2.6 Outstanding Amounts 16 2.7 Time, Place, and Method of Payments 16 2.8 Borrowing Base Determinations 17 2.9 Mandatory Prepayments 17 2.10 Voluntary Prepayments and Conversions of Loans 18 2.11 Commitment Fee 18 2.12 Engineering Fee 18 2.13 Facility Fee 18 2.14 Letter of Credit Fee 18 2.15 Loans to Satisfy Obligations of Borrower 19 2.16 Security Interest in Accounts; Right of Offset 19 2.17 General Provisions Relating to Interest 19 2.18 Yield Protection 20 2.19 Limitation on Types of Loans 22 2.20 Illegality 23 2.21 Regulatory Change 23 2.22 Limitations on Interest Periods 23 2.23 Letters in Lieu of Transfer Orders 23 2.24 Power of Attorney 23 ARTICLE III CONDITIONS 3.1 Receipt of Loan Documents and Other Items 24 3.2 Each Loan and Letter of Credit 26 i ARTICLE IV REPRESENTATIONS AND WARRANTIES 4.1 Due Authorization 27 4.2 Corporate Existence 28 4.3 Valid and Binding Obligations 28 4.4 Security Instruments 28 4.5 Title to Assets 28 4.6 Scope and Accuracy of Financial Statements 28 4.7 No Material Misstatements 28 4.8 Liabilities, Litigation, and Restrictions 28 4.9 Authorizations; Consents 29 4.10 Compliance with Laws 29 4.11 ERISA 29 4.12 Environmental Laws 29 4.13 Compliance with Federal Reserve Regulations 29 4.14 Investment Company Act Compliance 30 4.15 Public Utility Holding Company Act Compliance 30 4.16 Proper Filing of Tax Returns; Payment of Taxes Due 30 4.17 Refunds 30 4.18 Gas Contracts 30 4.19 Intellectual Property 30 4.20 Casualties or Taking of Property 30 4.21 Locations of Borrower 31 4.22 Subsidiaries 31 4.23 Existing Indebtedness; No Defenses 31 ARTICLE V AFFIRMATIVE COVENANTS 5.1 Maintenance and Access to Records 31 5.2 Quarterly Financial Statements; Compliance Certificates 31 5.3 Annual Financial Statements 31 5.4 Oil and Gas Reserve Reports 32 5.5 Title Opinions; Title Defects 32 5.6 Notices of Certain Events 32 5.7 Letters in Lieu of Transfer Orders; Division Orders 33 5.8 Additional Information 33 5.9 Compliance with Laws 34 5.10 Payment of Assessments and Charges 34 5.11 Maintenance of Corporate Existence and Good Standing 34 5.12 Payment of Notes; Performance of Obligations 34 5.13 Further Assurances 34 5.14 Initial Fees and Expenses of Counsel to Lender 34 5.15 Subsequent Fees and Expenses of Lender 34 5.16 Operation of Oil and Gas Properties 35 5.17 Maintenance and Inspection of Properties 35 5.18 Maintenance of Insurance 35 5.19 INDEMNIFICATION 36 ii ARTICLE VI NEGATIVE COVENANTS 6.1 Indebtedness 37 6.2 Contingent Obligations 37 6.3 Liens 37 6.4 Sales of Assets 37 6.5 Leasebacks 38 6.6 Loans or Advances 38 6.7 Investments 38 6.8 Dividends 38 6.9 Issuance of Stock; Changes in Corporate Structure 38 6.10 Transactions with Affiliates 38 6.11 Lines of Business 39 6.12 Plan Obligations 39 6.13 Current Ratio 39 6.14 Debt Service 39 6.15 Tangible Net Worth 39 6.16 General and Administrative Expenses 39 ARTICLE VII EVENTS OF DEFAULT 7.1 Enumeration of Events of Default 39 7.2 Remedies 41 ARTICLE VIII MISCELLANEOUS 8.1 Transfers; Participations 42 8.2 Survival of Representations, Warranties, and Covenants 42 8.3 Notices and Other Communications 42 8.4 Parties in Interest 43 8.5 Rights of Third Parties 43 8.6 Renewals; Extensions 43 8.7 No Waiver; Rights Cumulative 43 8.8 Survival Upon Unenforceability 43 8.9 Amendments; Waivers 44 8.10 Controlling Agreement 44 8.11 Disposition of Collateral 44 8.12 GOVERNING LAW 44 8.13 JURISDICTION AND VENUE 44 8.14 WAIVER OF RIGHTS TO JURY TRIAL 44 8.15 ENTIRE AGREEMENT 45 8.16 Release by Borrower 45 8.17 Counterparts 45 iii LIST OF EXHIBITS Exhibit I - Form of Note Exhibit II - Form of Borrowing Request Exhibit III - Form of Compliance Certificate Exhibit IV - Form of Opinion of Counsel Exhibit V - Form of Opinion of Local Counsel Exhibit VI - Disclosures iv CREDIT AGREEMENT THIS CREDIT AGREEMENT is made and entered into this 22nd day of March, 2000, by and between ULTRA PETROLEUM (USA) INC., a Colorado corporation, and ULTRA RESOURCES, INC., a Wyoming corporation, (collectively, the "Borrower"), and BANK ONE, TEXAS, NATIONAL ASSOCIATION, a national banking association (the "Lender"). W I T N E S S E T H: In consideration of the mutual covenants and agreements herein contained, the Borrower and the Lender hereby agree as follows, amending and restating in its entirety the Credit Agreement dated as of November 3, 1997, by and between the Borrower and Wells Fargo Bank (the "Existing Lender"), as heretofore amended, restated, or supplemented (the "Existing Credit Agreement"). ARTICLE I DEFINITIONS AND INTERPRETATION 1.1 Terms Defined Above. As used in this Credit Agreement, the terms "Borrower", "Existing Credit Agreement", "Existing Lender", and "Lender" shall have the meaning assigned to them hereinabove. 1.2 Additional Defined Terms. As used in this Credit Agreement, each of the following terms shall have the meaning assigned thereto in this Section, unless the context otherwise requires: "Additional Costs" shall mean costs which the Lender determines are attributable to its obligation to make or its making or maintaining any LIBO Rate Loan, or any reduction in any amount receivable by the Lender in respect of any such obligation or any LIBO Rate Loan, resulting from any Regulatory Change which (a) changes the basis of taxation of any amounts payable to the Lender under this Credit Agreement or the Note in respect of any LIBO Rate Loan (other than taxes imposed on the overall net income of the Lender), (b) imposes or modifies any reserve, special deposit, minimum capital, capital rates, or similar requirements relating to any extensions of credit or other assets of, or any deposits with or other liabilities of, the Lender (including LIBO Rate Loans and Dollar deposits in the London interbank market in connection with LIBO Rate Loans), or any commitments of the Lender hereunder, (c) increases the Assessment Rate, or (d) imposes any other condition affecting this Credit Agreement or any of such extensions of credit, liabilities, or commitments. "Adjusted LIBO Rate" shall mean, for any LIBO Rate Loan, an interest rate per annum (rounded upwards, if necessary, to the nearest 1/100 of 1%) determined by the Lender to be equal to the sum of the LIBO Rate for such Loan plus the Applicable Margin, but in no event exceeding the Highest Lawful Rate. "Affiliate" shall mean any Person directly or indirectly controlling, or under common control with, any other Person and includes any Subsidiary of such Person and any "affiliate" of such Person within the meaning of Reg. (S)240.12b-2 of the Securities Exchange Act of 1934, as amended, with "control," as used in this definition, meaning possession, directly or indirectly, of the power to direct or cause the direction of management, policies or action through ownership of voting securities, contract, voting trust, or membership in management or in the group appointing or electing management or otherwise through formal or informal arrangements or business relationships. "Applicable Lending Office" shall mean, for each type of Loan, the lending office of the Lender (or an affiliate of the Lender) designated for such type of Loan on the signature pages hereof or such other office of the Lender (or an affiliate of the Lender) as the Lender may from time to time specify to the Borrower as the office by which Loans of such type are to be made and maintained. "Applicable Margin" shall mean as to each LIBO Rate Loan, two and one- half percent (2 1/2%). "Assessment Rate" shall mean, for any Interest Period, the average rate (rounded upwards if necessary to the nearest 1/100 of 1%) charged by the Federal Deposit Insurance Corporation (or any successor thereto) to the Lender for deposit insurance for Dollar time deposits with the Lender at the Principal Office during such Interest Period, as determined by the Lender. "Assignment" shall mean the Assignment of Notes, Liens, Security Interests, and Other Rights, in form and substance satisfactory to the Lender, executed by the Existing Lender, assigning to the Lender the Existing Note, the indebtedness evidenced thereby, the Liens securing the Existing Note, and the rights of the Existing Lender under the Existing Loan Documents, and financing statement changes constituent thereto. "Available Commitment" shall mean, at any time, an amount equal to the remainder, if any, of (a) the Borrowing Base in effect at such time minus (b) the sum of the Loan Balance at such time plus the L/C Exposure at such time. "Borrowing Base" shall mean, at any time, the amount determined by the Lender in accordance with Section 28 and then in effect. 2 "Borrowing Request" shall mean each written request, in substantially the form attached hereto as Exhibit II, by the Borrower to the Lender for a borrowing, conversion, or prepayment pursuant to Sections 2.1 or 2.10, each of which shall: (a) be signed by a Responsible Officer of the Borrower; (b) when requesting a borrowing, be accompanied by a Compliance Certificate; (c) specify the amount and type of Loan requested, and, as applicable, the Loan to be converted or prepaid and the date of the borrowing, conversion, or prepayment (which shall be a Business Day); (d) when requesting a Floating Rate Loan, be delivered to the Lender no later than 10:00 a.m., Central Standard or Daylight Savings Time, as the case may be, on the Business Day of the requested borrowing, conversion, or prepayment; (e) when requesting a LIBO Rate Loan, be delivered to the Lender no later than 10:00 a.m., Central Standard or Daylight Savings Time, as the case may be, two Business Days preceding the requested borrowing, conversion, or prepayment and designate the Interest Period requested with respect to such Loan. "Business Day" shall mean (a) for all purposes other than as covered by clause (b) of this definition, a day other than a Saturday, Sunday, legal holiday for commercial banks under the laws of the State of Texas, or any other day when banking is suspended in the State of Texas, and (b) with respect to all requests, notices, and determinations in connection with, and payments of principal and interest on, LIBO Rate Loans, a day which is a Business Day described in clause (a) of this definition and which is a day for trading by and between banks for Dollar deposits in the London interbank market. "Cash Flow" shall mean, as of the end of any fiscal quarter period, net income of the Borrower and Guarantor from operations for such period plus depreciation, amortization, depletion, and other non-cash expenses of the Borrower and Guarantor on a consolidated basis for the two fiscal quarter periods then ending. "Closing Date" shall mean the effective date of this Credit Agreement. "Collateral" shall mean the Mortgaged Properties and any other Property subject to a Lien in Favor of the Lender, subject only to Permitted Liens, as security for the payment or performance of all or any portion of the Obligations and the Guaranty. 3 "Commitment" shall mean the obligation of the Lender, subject to applicable provisions of this Credit Agreement, to make Loans to or for the benefit of the Borrower pursuant to Section 2.1 and to issue Letters of Credit pursuant to Section 2.2. "Commitment Fee" shall mean each fee payable to the Lender by the Borrower pursuant to Section 2.11. "Commitment Period" shall mean the period from and including the Closing Date to but not including the Commitment Termination Date. "Commitment Termination Date" shall mean March 1, 2003. "Commodity Hedge Agreement" shall mean any crude oil, natural gas, or other hydrocarbon floor, collar, cap, price protection, swap agreement, or other similar agreements, in form and substance with a Person acceptable to the Lender. "Commonly Controlled Entity" shall mean any Person which is under common control with the Borrower within the meaning of Section 4001 of ERISA. "Compliance Certificate" shall mean each certificate, substantially in the form attached hereto as Exhibit III, executed by a Responsible Officer of the Borrower and furnished to the Lender from time to time in accordance with Sections 5.2 and 5.3. "Contingent Obligation" shall mean, as to any Person, any obligation of such Person guaranteeing or in effect guaranteeing any Indebtedness, leases, dividends, or other obligations of any other Person (for purposes of this definition, a "primary obligation") in any manner, whether directly or indirectly, including, without limitation, any obligation of such Person, regardless of whether such obligation is contingent, (a) to purchase any primary obligation or any Property constituting direct or indirect security therefor, (b) to advance or supply funds (i) for the purchase or payment of any primary obligation, or (ii) to maintain working or equity capital of any other Person in respect of any primary obligation, or otherwise to maintain the net worth or solvency of any other Person, (c) to purchase Property, securities or services primarily for the purpose of assuring the owner of any primary obligation of the ability of the Person primarily liable for such primary obligation to make payment thereof, or (d) otherwise to assure or hold harmless the owner of any such primary obligation against loss in respect thereof, with the amount of any Contingent Obligation being deemed to be equal to the stated or determinable amount of the primary obligation in respect of which such Contingent Obligation is made or, if not stated or determinable, the maximum reasonably anticipated liability in respect thereof as determined by such Person in good faith. "Credit Agreement" shall mean this agreement, as it may be amended, supplemented, or restated from time to time. 4 "Current Assets" shall mean all assets which would, in accordance with GAAP, be included as current assets on a consolidated balance sheet of the Borrower and Guarantor as of the date of calculation, plus an amount equal to the Available Commitment. "Current Liabilities" shall mean all liabilities which would, in accordance with GAAP, be included as current liabilities plus short term liabilities (which have been reclassified as non-current) to be refinanced with the Available Commitment on a consolidated balance sheet of the Borrower and Guarantor as of the date of calculation less current maturities on the Obligations. "Debt Service" shall mean an amount equal to 1/12 of the Loan Balance plus outstanding Letters of Credit at each quarter's end. "Default" shall mean any event or occurrence which with the lapse of time or the giving of notice or both would become an Event of Default. "Default Rate" shall mean a per annum interest rate equal to the Prime Rate plus five percent (5%), but in no event exceeding the Highest Lawful Rate. "Dollars" and "$" shall mean dollars in lawful currency of the United States of America. "Engineering Fee" shall mean each fee payable to the Lender by the Borrower pursuant to Section 212. "Environmental Complaint" shall mean any written complaint, order, directive, claim, citation, notice of environmental report or investigation, or other notice by any Governmental Authority or any other Person with respect to (a) air emissions, (b) spills, releases, or discharges to soils, any improvements located thereon, surface water, groundwater, or the sewer, septic, waste treatment, storage, or disposal systems servicing any Property of the Borrower, (c) solid or liquid waste disposal, (d) the use, generation, storage, transportation, or disposal of any Hazardous Substance, or (e) other environmental, health, or safety matters affecting any Property of the Borrower or the business conducted thereon. "Environmental Laws" shall mean (a) the following federal laws as they may be cited, referenced, and amended from time to time: the Clean Air Act, the Clean Water Act, the Safe Drinking Water Act, the Comprehensive Environmental Response, Compensation and Liability Act, the Endangered Species Act, the Resource Conservation and Recovery Act, the Occupational Safety and Health Act, the Hazardous Materials Transportation Act, the Superfund Amendments and Reauthorization Act, and the Toxic Substances Control Act; (b) any and all equivalent environmental statutes of any state in which Property of the Borrower is situated, as they may be cited, referenced and amended from time to time; (c) any 5 rules or regulations promulgated under or adopted pursuant to the above federal and state laws; and (d) any other equivalent federal, state, or local statute or any requirement, rule, regulation, code, ordinance, or order adopted pursuant thereto, including, without limitation, those relating to the generation, transportation, treatment, storage, recycling, disposal, handling, or release of Hazardous Substances. "ERISA" shall mean the Employee Retirement Income Security Act of 1974, as amended from time to time, and the regulations thereunder and interpretations thereof. "Event of Default" shall mean any of the events specified in Section 7.1. "Existing Loan Documents" shall mean the Loan Documents, as such term is defined in the Existing Credit Agreement, in existence on the Closing Date immediately prior to the Assignment. "Existing Note" shall mean the Note, as such term is defined in the Existing Credit Agreement, in existence on the Closing Date immediately prior to the Assignment. "Existing Security Instruments" shall mean the Security Instruments, as such term is defined in the Existing Credit Agreement, in existence on the Closing Date immediately prior to the Assignment. "Facility Fee" shall mean the fee payable to the Lender by the Borrower pursuant to Section 2.13. "Federal Funds Rate" shall mean, for any day, the rate per annum (rounded upwards, if necessary, to the nearest 1/100 of 1%) equal to the weighted average of the rates on overnight federal funds transactions with members of the Federal Reserve System arranged by federal funds brokers on such day, as published by the Federal Reserve Bank of Dallas, Texas, on the Business Day next succeeding such day, provided that (a) if the day for which such rate is to be determined is not a Business Day, the Federal Funds Rate for such day shall be such rate on such transactions on the next preceding Business Day as so published on the next succeeding Business Day, and (b) if such rate is not so published for any day, the Federal Funds Rate for such day shall be the average rate charged to Lender on such day on such transactions as determined by the Lender. "Final Maturity" shall mean March 1, 2003. "Financial Statements" shall mean statements of the financial condition in U.S. Dollars of the Borrower as at the point in time and for the period indicated and consisting of at least a balance sheet and related statements of operations, common stock and other stockholders' equity, and cash flows for each Borrower alone or, where indicated, on a consolidated and consolidating basis with the other Borrower 6 and the Guarantor and, when required by applicable provisions of this Credit Agreement to be audited, accompanied by the unqualified certification of a nationally-recognized firm of independent certified public accountants or other independent certified public accountants acceptable to the Lender and footnotes to any of the foregoing, all of which shall be prepared in accordance with GAAP consistently applied and in comparative form with respect to the corresponding period of the preceding fiscal period. "Floating Rate" shall mean an interest rate per annum equal to the greater of (a) the Prime Rate from time to time in effect, or (b) the Federal Funds Rate from time to time in effect plus one-half percent (1/2%), but in no event exceeding the Highest Lawful Rate. "Floating Rate Loan" shall mean any Loan and any portion of the Loan Balance which the Borrower has requested, in the initial Borrowing Request for such Loan or a subsequent Borrowing Request for such portion of the Loan Balance, bearing interest at the Floating Rate, or which pursuant to the terms hereof is otherwise required to bear interest at the Floating Rate. "GAAP" shall mean generally accepted accounting principles established by the Financial Accounting Standards Board or the American Institute of Certified Public Accountants and in effect in the United States from time to time after December 31, 1999 and prior to that time shall mean Canadian GAAP. "General and Administrative Expenses" shall mean total expenses excluding lease operating expenses; gathering, transportation and processing expenses; depletion, depreciation, and amortization; all income and property taxes; and interest expense. "Governmental Authority" shall mean any nation, country, commonwealth, territory, government, state, county, parish, municipality, or other political subdivision and any entity exercising executive, legislative, judicial, regulatory, or administrative functions of or pertaining to government. "Guarantor" shall mean Ultra Petroleum Corporation, a Yukon corporation. "Guaranty" shall mean the Guaranty dated the Closing Date executed by the Guarantor in favor of the Lender, guaranteeing the payment and performance of the Obligations, as it may be ratified, amended, restated, or supplemented from time to time. "Hazardous Substances" shall mean flammables, explosives, radioactive materials, hazardous wastes, asbestos, or any material containing asbestos, polychlorinated biphenyls (PCBs), toxic substances or related materials, petroleum, petroleum products, associated oil or natural gas exploration, production, and development wastes, or any substances defined as "hazardous substances," 7 "hazardous materials," "hazardous wastes," or "toxic substances" under the Comprehensive Environmental Response, Compensation and Liability Act, as amended, the Superfund Amendments and Reauthorization Act, as amended, the Hazardous Materials Transportation Act, as amended, the Resource Conservation and Recovery Act, as amended, the Toxic Substances Control Act, as amended, or any other law or regulation now or hereafter enacted or promulgated by any Governmental Authority. "Highest Lawful Rate" shall mean the maximum non-usurious interest rate, if any (or, if the context so requires, an amount calculated at such rate), that at any time or from time to time may be contracted for, taken, reserved, charged, or received under applicable laws of the State of Texas or the United States of America, whichever authorizes the greater rate, as such laws are presently in effect or, to the extent allowed by applicable law, as such laws may hereafter be in effect and which allow a higher maximum non-usurious interest rate than such laws now allow. "Indebtedness" shall mean, as to any Person, without duplication, (a) all liabilities (excluding reserves for deferred income taxes, deferred compensation liabilities, and other deferred liabilities and credits) which in accordance with GAAP would be included in determining total liabilities as shown on the liability side of a balance sheet, (b) all obligations of such Person evidenced by bonds, debentures, promissory notes, or similar evidences of indebtedness, (c) all other indebtedness of such Person for borrowed money, and (d) all obligations of others, to the extent any such obligation is secured by a Lien on the assets of such Person (whether or not such Person has assumed or become liable for the obligation secured by such Lien). "Insolvency Proceeding" shall mean application (whether voluntary or instituted by another Person) for or the consent to the appointment of a receiver, trustee, conservator, custodian, or liquidator of any Person or of all or a substantial part of the Property of such Person, or the filing of a petition (whether voluntary or instituted by another Person) commencing a case under Title 11 of the United States Code, seeking liquidation, reorganization, or rearrangement or taking advantage of any bankruptcy, insolvency, debtor's relief, or other similar law of the United States, the State of Texas, or any other jurisdiction. "Intellectual Property" shall mean patents, patent applications, trademarks, tradenames, copyrights, technology, know-how, and processes. "Interest Period" shall mean, subject to the limitations set forth in Section 2.22, with respect to any LIBO Rate Loan, a period commencing on the date such Loan is made or converted from a Loan of another type pursuant to this Credit Agreement or the last day of the next preceding Interest Period with respect to such Loan and ending on the numerically corresponding day in the calendar month that is one, two, three, or, subject to availability, six months thereafter, as the Borrower may request in the Borrowing Request for such Loan. 8 "Investment" in any Person shall mean any stock, bond, note, or other evidence of Indebtedness, or any other security (other than current trade and customer accounts) of, investment or partnership interest in or loan to, such Person. "L/C Exposure" shall mean, at any time, the aggregate maximum amount available to be drawn under outstanding Letters of Credit at such time. "Letter of Credit" shall mean any standby letter of credit issued by the Lender for the account of the Borrower pursuant to Section 2.2. "Letter of Credit Application" shall mean the standard letter of credit application employed by the Lender from time to time in connection with letters of credit. "Letter of Credit Fee" shall mean each fee payable to the Lender by the Borrower pursuant to Section 2.14 upon or in connection with the issuance of a Letter of Credit. "LIBO Rate" means, with respect to a LIBO Rate Loan for the relevant Interest Period, the applicable British Banker's Association Interest Settlement Rate for deposits in U.S. dollars appearing on Reuters Screen FRBD as of 11:00 a.m. (London time) two Business Days prior to the first day of such Interest Period, and having a maturity equal to such Interest Period, provided that, (i) if Reuters Screen FRBD is not available to the Lender for any reason, the applicable LIBO rate for the relevant Interest Period shall instead be the applicable British Bankers' Association Interest Settlement Rate for deposits in U.S. dollars as reported by any other generally recognized financial information service as of 11:00 a.m. (London time) two Business Days prior to the first day of such Interest Period, and having a maturity equal to such Interest Period, and (ii) if no such British Bankers' Association Interest Settlement Rate is available to the Lender, the applicable LIBO Rate for the relevant Interest Period shall instead be the rate determined by the Lender to be the rate at which Lender or one of its affiliate banks offers to place deposits in U.S. dollars with first-class banks in the London interbank market at approximately 11:00 a.m. (London time) two Business Day prior to the first day of such Interest Period, in the approximate amount of Bank One's relevant LIBO Rate Loan and having a maturity equal to such Interest Period. "LIBO Rate Loan" shall mean any Loan and any portion of the Loan Balance which the Borrower has requested, in the initial Borrowing Request for such Loan or a subsequent Borrowing Request for such portion of the Loan Balance, bearing interest at the Adjusted LIBO Rate and which is permitted by the terms hereof to bear interest at the Adjusted LIBO Rate. "Lien" shall mean any interest in Property securing an obligation owed to, or a claim by, a Person other than the owner of such Property, whether such interest is based on common law, statute, or contract, and including, but not limited to, the lien 9 or security interest arising from a mortgage, ship mortgage, encumbrance, pledge, security agreement, conditional sale or trust receipt, or a lease, consignment, or bailment for security purposes (other than true leases or true consignments), liens of mechanics, materialmen, and artisans, maritime liens and reservations, exceptions, encroachments, easements, rights of way, covenants, conditions, restrictions, leases, and other title exceptions and encumbrances affecting Property which secure an obligation owed to, or a claim by, a Person other than the owner of such Property (for the purpose of this Credit 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, financing lease, or other arrangement pursuant to which title to the Property has been retained by or vested in some other Person for security purposes), and the filing or recording of any financing statement or other security instrument in any public office. "Limitation Period" shall mean any period while any amount remains owing on the Note and interest on such amount, calculated at the applicable interest rate, plus any fees or other sums payable under any Loan Document and deemed to be interest under applicable law, would exceed the amount of interest which would accrue at the Highest Lawful Rate. "Loan" shall mean any loan made by the Lender to or for the benefit of the Borrower pursuant to this Credit Agreement and any payment made by the Lender under a Letter of Credit. "Loan Balance" shall mean, at any time, the outstanding principal balance of the Note at such time. "Loan Documents" shall mean this Credit Agreement, the Note, the Guaranty, the Letter of Credit Applications, the Letters of Credit, the Security Instruments, and all other documents and instruments now or hereafter delivered pursuant to the terms of or in connection with this Credit Agreement, the Note, the Guaranty, the Letter of Credit Applications, the Letters of Credit, or the Security Instruments, and all renewals and extensions of, amendments and supplements to, and restatements of, any or all of the foregoing from time to time in effect. "Material Adverse Effect" shall mean (a) any material adverse effect on the business, operations, properties, condition (financial or otherwise), or prospects of the Borrower, (b) any adverse effect upon the business operations, properties, condition (financial or otherwise), or prospects of the Borrower which increases the risk that any of the Obligations will not be repaid as and when due, or (c) any adverse effect upon the Collateral. "Mortgaged Properties" shall mean all Oil and Gas Properties of the Borrower subject to a perfected first-priority Lien in favor of the Lender, subject only to Permitted Liens, as security for the Obligations. 10 "Net Income" shall mean, for any period, the net income (or loss) of the Borrower for such period, determined in accordance with GAAP. "Note" shall mean the promissory note of the Borrower, in the form attached hereto as Exhibit I, together with all renewals, extensions for any period, increases, and rearrangements thereof. "Obligations" shall mean, without duplication, (a) all Indebtedness evidenced by the Note, (b) the Reimbursement Obligations, (c) the undrawn, unexpired amount of all outstanding Letters of Credit, (d) the obligation of the Borrower for the payment of Commitment Fees, Facility Fees, Letter of Credit Fees, and Engineering Fees, (e) the obligations of the Guarantor under the Guaranty, (f) all obligations and liabilities whether now existing or hereafter arising of the Borrower to the Lender in connection with any Commodity Hedge Agreement or Rate Management Transaction, and (g) all other obligations and liabilities of the Borrower to the Lender, now existing or hereafter incurred, under, arising out of or in connection with any Loan Document, and to the extent that any of the foregoing includes or refers to the payment of amounts deemed or constituting interest, only so much thereof as shall have accrued, been earned and which remains unpaid at each relevant time of determination. "Oil and Gas" shall mean petroleum, natural gas and other related hydrocarbons or mineral or any of them and all other substances produced or extracted in association therewith. "Oil and Gas Properties" shall mean fee, leasehold, or other interests in or under mineral estates or oil, gas, and other liquid or gaseous hydrocarbon leases with respect to Properties situated in the United States or offshore from any State of the United States, including, without limitation, overriding royalty and royalty interests, leasehold estate interests, net profits interests, production payment interests, and mineral fee interests, together with contracts executed in connection therewith and all tenements, hereditaments, appurtenances and Properties appertaining, belonging, affixed, or incidental thereto. "Permitted Liens" shall mean (a) Liens for taxes, assessments, or other governmental charges or levies not yet due or which (if foreclosure, distraint, sale, or other similar proceedings shall not have been initiated) are being contested in good faith by appropriate proceedings, and such reserve as may be required by GAAP shall have been made therefor, (b) Liens in connection with workers' compensation, unemployment insurance or other social security (other than Liens created by Section 4068 of ERISA), old-age pension, or public liability obligations which are not yet due or which are being contested in good faith by appropriate proceedings, if such reserve as may be required by GAAP shall have been made therefor, (c) Liens in favor of landlords, vendors, carriers, warehousemen, repairmen, mechanics, workmen, materialmen, construction, or similar Liens arising by operation of law in the ordinary course of business in respect of obligations which are not yet due or 11 which are being contested in good faith by appropriate proceedings, if such reserve as may be required by GAAP shall have been made therefor, (d) Liens in favor of operators and non-operators under joint operating agreements or similar contractual arrangements arising in the ordinary course of the business of the Borrower to secure amounts owing, which amounts are not yet due or are being contested in good faith by appropriate proceedings, if such reserve as may be required by GAAP shall have been made therefor, (e) Liens under production sales agreements, division orders, operating agreements, and other agreements customary in the oil and gas business for processing, producing, and selling hydrocarbons securing obligations not constituting Indebtedness and provided that such Liens do not secure obligations to deliver hydrocarbons at some future date without receiving full payment therefor within 90 days of delivery, (f) easements, rights of way, restrictions, and other similar encumbrances, and minor defects in the chain of title which are customarily accepted in the oil and gas financing industry, none of which interfere with the ordinary conduct of the business of the Borrower or materially detract from the value or use of the Property to which they apply, (g) Liens arising solely by virtue of any statutory or common law provision relating to banker's liens, rights of set-off or similar rights and remedies as to deposit accounts or other funds maintained with a creditor depository institution; or under any deposit account agreement entered into in the ordinary course of business, (h) purchase money Liens upon or in any equipment acquired by Borrower or Guarantor to secure the deferred purchase price of such equipment or any indebtedness incurred to finance the acquisition of such equipment, provided, the Indebtedness secured thereby is permitted pursuant to Section 6.1, and (i) Liens in favor of the Lender and other Liens expressly permitted under the Security Instruments. "Person" shall mean an individual, corporation, partnership, trust, unincorporated organization, government, any agency or political subdivision of any government, or any other form of entity. "Plan" shall mean, at any time, any employee benefit plan which is covered by ERISA and in respect of which the Borrower or any Commonly Controlled Entity is (or, if such plan were terminated at such time, would under Section 4069 of ERISA be deemed to be) an "employer" as defined in Section 3(5) of ERISA. "Prime Rate" shall mean a rate per annum equal to the prime rate of interest announced from time to time by Lender or its parent (which is not necessarily the lowest rate charged to any customer), changing when and as said prime rate changes. "Principal Office" shall mean the principal office of the Lender in Houston, Texas, presently located at 910 Travis, 6th Floor, Houston, Texas 77002-5860. "Property" shall mean any interest in any kind of property or asset, whether real, personal or mixed, tangible or intangible. 12 "Rate Management Transaction" shall mean any transaction (including an agreement with respect thereto) now existing or hereafter entered into between Borrower and Lender which is a rate swap, basis swap, forward rate transaction, commodity swap, commodity option, equity or equity index swap, equity or equity index option, bond option, interest rate option, foreign exchange transaction, cap transaction, floor transaction, collar transaction, forward transaction, currency swap transaction, cross-currency rate swap transaction, currency option or any other similar transaction (including any option with respect to any of these transactions) or any combination thereof, whether linked to one or more interest rates, foreign currencies, commodity prices, equity prices or other financial measures. "Regulation D" shall mean Regulation D of the Board of Governors of the Federal Reserve System, as the same may be amended or supplemented from time to time. "Regulatory Change" shall mean the passage, adoption, institution, or amendment of any federal, state, local, or foreign Requirement of Law (including, without limitation, Regulation D), or any interpretation, directive, or request (whether or not having the force of law) of any Governmental Authority or monetary authority charged with the enforcement, interpretation, or administration thereof, occurring after the Closing Date and applying to a class of banks including the Lender or its Applicable Lending Office. "Reimbursement Obligation" shall mean the obligation of the Borrower to provide to the Lender or reimburse the Lender for any amounts payable, paid, or incurred by the Lender with respect to Letters of Credit. "Release of Hazardous Substances" shall mean any emission, spill, release, disposal, or discharge, except in accordance with a valid permit, license, certificate, or approval of the relevant Governmental Authority, of any Hazardous Substance into or upon (a) the air, (b) soils or any improvements located thereon, (c) surface water or groundwater, or (d) the sewer or septic system, or the waste treatment, storage, or disposal system servicing any Property of the Borrower. "Requirement of Law" shall mean, as to any Person, the certificate or articles of incorporation and by-laws or other organizational or governing documents of such Person, and any applicable law, treaty, ordinance, order, judgment, rule, decree, regulation, or determination of an arbitrator, court, or other Governmental Authority, including, without limitation, rules, regulations, orders, and requirements for permits, licenses, registrations, approvals, or authorizations, in each case as such now exist or may be hereafter amended and are applicable to or binding upon such Person or any of its Property or to which such Person or any of its Property is subject. "Reserve Report" shall mean each report delivered to the Lender pursuant to Section 54. 13 "Reserve Requirement" means, with respect to an Interest Period, the maximum aggregate reserve requirement (including all basic, supplemental, marginal and other reserves) which is imposed under Regulation D on Eurocurrency liabilities. "Responsible Officer" shall mean, as to any Person, its President, Chief Executive Officer or any Vice President. "Security Instruments" shall mean the Existing Security Instruments and the security instruments executed and delivered in satisfaction of the condition set forth in Section 3.1(g), and all other documents and instruments at any time executed as security for all or any portion of the Obligations, as such instruments may be amended, restated, or supplemented from time to time. "Subordinated Debt" shall mean any Indebtedness or other obligations of the Borrower, to the extent that the rights of the holders thereof to enforce such Indebtedness or other obligations of Borrower thereunder have been subordinated to the rights of the Lender hereunder or in connection herewith by subordination agreements executed by the holders of the Subordinated Debt and satisfactory in form and substance to the Lender. "Subsidiary" shall mean, as to any Person, a corporation of which shares of stock having ordinary voting power (other than stock having such power only by reason of the happening of a contingency) to elect a majority of the board of directors or other managers of such corporation are at the time owned, or the management of which is otherwise controlled, directly or indirectly through one or more intermediaries, or both, by such Person. "Superfund Site" shall mean those sites listed on the Environmental Protection Agency National Priority List and eligible for remedial action or any comparable state registries or list in any state of the United States. "Tangible Net Worth" shall mean (a) total assets, as would be reflected on a balance sheet of the Borrower and Guarantor prepared on a consolidated basis and in accordance with GAAP, exclusive of Intellectual Property, experimental or organization expenses, franchises, licenses, permits, and other intangible assets, treasury stock, unamortized underwriters' debt discount and expenses, and goodwill minus (b) total liabilities, as would be reflected on a balance sheet of the Borrower prepared on a consolidated basis and in accordance with GAAP. "Transferee" shall mean any Person to which the Lender has sold, assigned, transferred, or granted a participation in any of the Obligations, as authorized pursuant to Section 8.1, and any Person acquiring, by purchase, assignment, transfer, or participation, from any such purchaser, assignee, transferee, or participant, any part of such Obligations. 14 "UCC" shall mean the Uniform Commercial Code as from time to time in effect in the State of Texas. 1.3 Undefined Financial Accounting Terms. Undefined financial accounting terms used in this Credit Agreement shall be defined according to GAAP at the time in effect. 1.4 References. References in this Credit Agreement to Exhibit, Article, or Section numbers shall be to Exhibits, Articles, or Sections of this Credit Agreement, unless expressly stated to the contrary. References in this Credit Agreement to "hereby," "herein," "hereinafter," "hereinabove," "hereinbelow," "hereof," "hereunder" and words of similar import shall be to this Credit Agreement in its entirety and not only to the particular Exhibit, Article, or Section in which such reference appears. 1.5 Articles and Sections. This Credit 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. 1.6 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. 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. 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. 1.7 Incorporation of Exhibits. The Exhibits attached to this Credit Agreement are incorporated herein and shall be considered a part of this Credit Agreement for all purposes. ARTICLE II TERMS OF FACILITY 2.1 Revolving Line of Credit. (a) Upon the terms and conditions (including, without limitation, the right of the Lender to decline to make any Loan so long as any Default or Event of Default exists) and relying on the representations and warranties contained in this Credit Agreement, the Lender agrees, during the Commitment Period, to make Loans, in immediately available funds at the Applicable Lending Office or the Principal Office, to or for the benefit of the Borrower, from time to time on any Business Day designated by the Borrower following receipt by the Lender of a Borrowing Request; provided, however, no Loan shall exceed the then existing Available Commitment. (b) Subject to the terms of this Credit Agreement, during the Commitment Period, the Borrower may borrow, repay, and reborrow and convert Loans of one type or with one Interest 15 Period into Loans of another type or with a different Interest Period. Except for prepayments made pursuant to Section 2.9, each borrowing, conversion, and prepayment of principal of Loans shall be in an amount at least equal to $100,000. Each borrowing, prepayment, or conversion of or into a Loan of a different type or, in the case of a LIBO Rate Loan, having a different Interest Period, shall be deemed a separate borrowing, conversion, and prepayment for purposes of the foregoing, one for each type of Loan or Interest Period. Anything in this Credit Agreement to the contrary notwithstanding, the aggregate principal amount of LIBO Rate Loans having the same Interest Period shall be at least equal to $100,000; and if any LIBO Rate Loan would otherwise be in a lesser principal amount for any period, such Loan shall be a Floating Rate Loan during such period. (c) The Loans shall be made and maintained at the Applicable Lending Office or the Principal Office and shall be evidenced by the Note. 2.2 Letter of Credit Facility. (a) Upon the terms and conditions (including, without limitation, the right of the Lender to decline to issue any Letter of Credit so long as any Default or Event of Default exists) and relying on the representations and warranties contained in this Credit Agreement, the Lender agrees, during the Commitment Period, to issue Letters of Credit following the receipt not less than two Business Days prior to the requested date for issuance of the relevant Letter of Credit, of a Letter of Credit Application executed by the Borrower; provided, however, (a) no Letter of Credit shall have an expiration date which is more than 360 days after the issuance thereof or subsequent to the Commitment Termination Date, and (b) the Lender shall not be obligated to issue any Letter of Credit if (i) the face amount thereof would exceed the Available Commitment, or (ii) after giving effect to the issuance thereof, (A) the L/C Exposure, when added to the Loan Balance then outstanding, would exceed the Borrowing Base then in effect, or (B) the L/C Exposure would exceed $2,000,000. (b) Should the Lender be called upon by the beneficiary of any Letter of Credit to honor all or any portion of the commitment thereunder, whether upon the presentation of drafts or otherwise, such payment by the Lender on account of such Letter of Credit shall be treated, for all purposes, as a Floating Rate Loan and an advance against the Note. 2.3 Use of Loan Proceeds and Letters of Credit. (a) As of the date hereof, indebtedness in the principal amount of $6,150,000 is outstanding under the Existing Note. The Lender shall use proceeds of the initial Loan to purchase such indebtedness. Such indebtedness shall be renewed, extended, and rearranged pursuant to the terms of this Credit Agreement, the Note, and the relevant Borrowing Request and shall for all purposes be deemed a borrowing hereunder. Proceeds of all subsequent Loans shall be used solely for (i) the acquisition and development of Oil and Gas Properties, (ii) working capital, (iii) Letters of Credit, and (iv) general corporate purposes. (b) Letters of Credit shall be used solely for general corporate purposes. 2.4 Interest. Subject to the terms of this Credit Agreement (including, without limitation, Section 2.17), interest on the Loans shall accrue and be payable at a rate per annum equal to the Floating Rate for each Floating Rate Loan and the Adjusted LIBO Rate for each LIBO Rate Loan. Interest on all Floating Rate Loans shall be computed on the basis of a year of 365 or 366 days, as the case may be, and actual days elapsed (including the first day but excluding the last day) 16 during the period for which payable. Interest on all LIBO Rate Loans shall be computed on the basis of a year of 360 days, and actual days elapsed (including the first day but excluding the last day) during the period for which payable. Notwithstanding the foregoing, interest on past-due principal and, to the extent permitted by applicable law, past-due interest, shall accrue at the Default Rate, computed on the basis of a year of 365 or 366 days, as the case may be, and actual days elapsed (including the first day but excluding the last day) during the period for which payable, and shall be payable upon demand by the Lender at any time as to all or any portion of such interest. In the event that the Borrower fails to select the duration of any Interest Period for any LIBO Rate Loan within the time period and otherwise as provided herein, such Loan (if outstanding as a LIBO Rate Loan) will be automatically converted into a Floating Rate Loan on the last day of the then current Interest Period for such Loan or (if outstanding as a Floating Rate Loan) will remain as, or (if not then outstanding) will be made as, a Floating Rate Loan. Interest provided for herein shall be calculated on unpaid sums actually advanced and outstanding pursuant to the terms of this Credit Agreement and only for the period from the date or dates of such advances until repayment. 2.5 Repayment of Loans and Interest. Accrued and unpaid interest on each outstanding Floating Rate Loan shall be due and payable monthly commencing on the first day of April, 2000, and continuing on the first day of each calendar month thereafter while any Floating Rate Loan remains outstanding, the payment in each instance to be the amount of interest which has accrued and remains unpaid in respect of the relevant Loan. Accrued and unpaid interest on each outstanding LIBO Rate Loan shall be due and payable on the last day of the Interest Period for such LIBO Rate Loan and, in the case of any Interest Period in excess of three months, on the day of the third calendar month following the commencement of such Interest Period corresponding to the day of the calendar month on which such Interest Period commenced, the payment in each instance to be the amount of interest which has accrued and remains unpaid in respect of the relevant Loan. The Loan Balance, together with all accrued and unpaid interest thereon, shall be due and payable at Final Maturity. At the time of making each payment hereunder or under the Note, the Borrower shall specify to the Lender the Loans or other amounts payable by the Borrower hereunder to which such payment is to be applied. In the event the Borrower fails to so specify, or if an Event of Default has occurred and is continuing, the Lender may apply such payment as it may elect in its sole discretion. 2.6 Outstanding Amounts. The outstanding principal balance of the Note reflected by the notations by the Lender on its records shall be deemed rebuttably presumptive evidence of the principal amount owing on the Note. The liability for payment of principal and interest evidenced by the Note shall be limited to principal amounts actually advanced and outstanding pursuant to this Credit Agreement and interest on such amounts calculated in accordance with this Credit Agreement. 2.7 Time, Place, and Method of Payments. All payments required pursuant to this Credit Agreement or the Note shall be made in lawful money of the United States of America and in immediately available funds, shall be deemed received by the Lender on the next Business Day following receipt if such receipt is after 2:00 p.m., Central Standard or Daylight Savings Time, as the case may be, on any Business Day, and shall be made at the Principal Office. Except as provided to the contrary herein, if the due date of any payment hereunder or under the Note would otherwise fall on a day which is not a Business Day, such date shall be extended to the next succeeding 17 Business Day, and interest shall be payable for any principal so extended for the period of such extension. 2.8 Borrowing Base Determinations. (a) The Borrowing Base as of the Closing Date is acknowledged by the Borrower and the Lender to be $18,000,000. (b) The Borrowing Base shall be redetermined semi-annually 45 days after receipt of the Reserve Report delivered pursuant to Section 5.4 on the basis of information supplied by the Borrower in compliance with the provisions of this Credit Agreement, including, without limitation, Reserve Reports, and all other information available to the Lender. In addition, the Lender shall, in the normal course of business following a request of the Borrower, redetermine the Borrowing Base; provided, however, the Lender shall not be obligated to respond to more than two such requests during any calendar year, and in no event shall the Lender be required to redetermine the Borrowing Base more than once in any three-month period, including, without limitation, each scheduled semi-annual redetermination provided for above. Notwithstanding the foregoing, the Lender may at its discretion redetermine the Borrowing Base at any time and from time to time. (c) Upon each determination of the Borrowing Base by the Lender, the Lender shall notify the Borrower orally (confirming such notice promptly in writing) of the amount of the Borrowing Base resulting from such determination. The Borrowing Base so communicated to the Borrower shall become effective upon such written notification and shall remain in effect until notice of the next subsequent determination of the Borrowing Base. (d) The Borrowing Base shall represent the determination by the Lender, in accordance with the applicable definitions and provisions herein contained and its customary lending practices for loans of this nature, of the value, for loan purposes, of the Mortgaged Properties, subject, in the case of any increase in the Borrowing Base, to the credit approval process of the Lender. Furthermore, the Borrower acknowledges that the determination of the Borrowing Base contains an equity cushion (market value in excess of loan value), which is acknowledged by the Borrower to be essential for the adequate protection of the Lender. 2.9 Mandatory Prepayments. If at any time the sum of the Loan Balance and the L/C Exposure exceeds the Borrowing Base then in effect, the Borrower shall, within 60 days of notice from the Lender of such occurrence, (a) prepay, or make arrangements acceptable to the Lender for the prepayment of, the amount of such excess for application on the Loan Balance, (b) provide additional collateral, of character and value satisfactory to the Lender in its sole discretion, to secure the Obligations by the execution and delivery to the Lender of security instruments in form and substance satisfactory to the Lender, or (c) effect any combination of the alternatives described in clauses (a) and (b) of this Section and acceptable to the Lender in its sole discretion. In the event that a mandatory prepayment is required under this Section and the Loan Balance is less than the amount required to be prepaid, the Borrower shall repay the entire Loan Balance and, in accordance with the provisions of the relevant Letter of Credit Applications executed by the Borrower or otherwise to the satisfaction of the Lender, deposit with the Lender, as additional collateral securing the Obligations, an amount of cash, in immediately available funds, equal to the L/C Exposure minus the Borrowing Base. The cash deposited with the Lender in satisfaction of the requirement provided in this Section may be invested, at the sole discretion of the Lender and then only at the express 18 direction of the Borrower as to investment vehicle and maturity (which shall be no later than the latest expiry date of any then outstanding Letter of Credit), for the account of the Borrower in cash or cash equivalent investments offered by or through the Lender. 2.10 Voluntary Prepayments and Conversions of Loans. Subject to applicable provisions of this Credit Agreement, the Borrower shall have the right at any time or from time to time to prepay Loans and to convert Loans of one type or with one Interest Period into Loans of another type or with a different Interest Period; provided, however, that (a) the Borrower shall give the Lender notice of each such prepayment or conversion of all or any portion of a LIBO Rate Loan no less than two Business Days prior to prepayment or conversion, (b) any LIBO Rate Loan may be prepaid or converted only on the last day of an Interest Period for such Loan, (c) the Borrower shall pay all accrued and unpaid interest on the amounts prepaid or converted, and (d) no such prepayment or conversion shall serve to postpone the repayment when due of any Obligation. 2.11 Commitment Fee. In addition to interest on the Note as provided herein and all other fees payable hereunder and to compensate the Lender for maintaining funds available, the Borrower shall pay to the Lender, in immediately available funds, on the first day of April, 2000, and on the first day of each third calendar month thereafter during the Commitment Period, a fee in the amount of three-eighths percent (3/8%) per annum, calculated on the basis of a year of 365 or 366 days, as the case may be, and actual days elapsed (including the first day but excluding the last day), on the average daily amount of the Available Commitment during the preceding quarterly period. 2.12 Engineering Fee. In addition to interest on the Note as provided herein and all other fees payable hereunder and to compensate the Lender for the costs of evaluating the Mortgaged Properties and reviewing the Reserve Reports, the Borrower shall pay to the Lender, in immediately available funds, on the date of each redetermination of the Borrowing Base, an engineering fee in the amount of $7,500. 2.13 Facility Fee. In addition to interest on the Note as provided herein and all other fees payable hereunder and to compensate the Lender for the costs of the extension of credit hereunder, the Borrower shall pay to the Lender on the Closing Date, in immediately available funds, a facility fee in the amount of $90,000. Any future increases in the Borrowing Base shall entitle the Lender to a one-half percent (1/2%) fee of the increase in the Borrowing Base which shall be paid by the Borrower within two days of such notification. 2.14 Letter of Credit Fee. In addition to interest on the Note as provided herein and all other fees payable hereunder, the Borrower agrees to pay to the Lender, on the date of issuance of each Letter of Credit, a fee equal to the greater of the Lender's minimum rate at the time of issuance of the Letter of Credit or two and one-half percent (2 1/2%) per annum, calculated on the basis of a year of 360 days 365 or 366 days, as the case may be, and actual days elapsed (including the first day but excluding the last day), on the face amount of such Letter of Credit during the period for which such Letter of Credit is issued; provided, however, in the event such Letter of Credit is canceled prior to its original expiry date or a payment is made by the Lender with respect to such Letter of Credit, the Lender shall, within 30 days after such cancellation or the making of such payment, rebate to the Borrower the unearned portion of such fee. The Borrower also agrees to pay 19 to the Lender on demand its customary letter of credit transactional fees, including, without limitation, amendment fees, payable with respect to each Letter of Credit. 2.15 Security Interest in Accounts; Right of Offset. As security for the payment and performance of the Obligations, the Borrower hereby transfers, assigns, and pledges to the Lender and grants to the Lender a security interest in all funds of the Borrower now or hereafter or from time to time on deposit with the Lender, with such interest of the Lender to be retransferred, reassigned, and/or released by the Lender, as the case may be, at the expense of the Borrower upon payment in full and complete performance by the Borrower of all Obligations. All remedies as secured party or assignee of such funds shall be exercisable by the Lender upon the occurrence of any Event of Default, regardless of whether the exercise of any such remedy would result in any penalty or loss of interest or profit with respect to any withdrawal of funds deposited in a time deposit account prior to the maturity thereof. Furthermore, the Borrower hereby grants to the Lender the right, exercisable at such time as any Obligation shall mature, whether by acceleration of maturity or otherwise, of offset or banker's lien against all funds of the Borrower now or hereafter or from time to time on deposit with the Lender, regardless of whether the exercise of any such remedy would result in any penalty or loss of interest or profit with respect to any withdrawal of funds deposited in a time deposit account prior to the maturity thereof. 2.16 General Provisions Relating to Interest. (a) It is the intention of the parties hereto to comply strictly with the usury laws of the State of Texas and the United States of America. In this connection, there shall never be collected, charged, or received on the sums advanced hereunder interest in excess of that which would accrue at the Highest Lawful Rate. For purposes of Chapter 303 of the Texas Finance Code (Vernon's 1999), the Borrower agrees that the Highest Lawful Rate shall be the "weekly ceiling" as defined in such Section, provided that the Lender may also rely, to the extent permitted by applicable laws of the State of Texas or the United States of America, on alternative maximum rates of interest under other laws of the State of Texas or the United States of America applicable to the Lender, if greater. (b) Notwithstanding anything herein or in the Note to the contrary, during any Limitation Period, the interest rate to be charged on amounts evidenced by the Note shall be the Highest Lawful Rate, and the obligation, if any, of the Borrower for the payment of fees or other charges deemed to be interest under applicable law shall be suspended. During any period or periods of time following a Limitation Period, to the extent permitted by applicable laws of the State of Texas or the United States of America, the interest rate to be charged hereunder shall remain at the Highest Lawful Rate until such time as there has been paid to the Lender (i) the amount of interest in excess of that accruing at the Highest Lawful Rate that the Lender would have received during the Limitation Period had the interest rate remained at the otherwise applicable rate, and (ii) all interest and fees otherwise payable to the Lender but for the effect of such Limitation Period. (c) If, under any circumstances, the aggregate amounts paid on the Note or under this Credit Agreement or any other Loan Document include amounts which by law are deemed interest and which would exceed the amount permitted if the Highest Lawful Rate were in effect, the Borrower stipulates that such payment and collection will have been and will be deemed to have been, to the extent permitted by applicable laws of the State of Texas or the United States of America, the result of mathematical error on the part of the Borrower and the Lender; and the Lender 20 shall promptly refund the amount of such excess (to the extent only of such interest payments in excess of that which would have accrued and been payable on the basis of the Highest Lawful Rate) upon discovery of such error by the Lender or notice thereof from the Borrower. In the event that the maturity of any Obligation is accelerated, by reason of an election by the Lender or otherwise, or in the event of any required or permitted prepayment, then the consideration constituting interest under applicable laws may never exceed the Highest Lawful Rate; and excess amounts paid which by law are deemed interest, if any, shall be credited by the Lender on the principal amount of the Obligations, or if the principal amount of the Obligations shall have been paid in full, refunded to the Borrower. (d) All sums paid, or agreed to be paid, to the Lender for the use, forbearance and detention of the proceeds of any advance hereunder shall, to the extent permitted by applicable law, be amortized, prorated, allocated, and spread throughout the full term hereof until paid in full so that the actual rate of interest is uniform but does not exceed the Highest Lawful Rate throughout the full term hereof. 2.17 Yield Protection. (a) Without limiting the effect of the other provisions of this Section (but without duplication), the Borrower shall pay to the Lender from time to time such amounts as the Lender may determine are necessary to compensate it for any Additional Costs incurred by the Lender. (b) Without limiting the effect of the other provisions of this Section (but without duplication), the Borrower shall pay to the Lender from time to time on request such amounts as the Lender may determine are necessary to compensate the Lender for any costs attributable to the maintenance by the Lender (or any Applicable Lending Office), pursuant to any Regulatory Change, of capital in respect of the Commitment, such compensation to include, without limitation, an amount equal to any reduction of the rate of return on assets or equity of the Lender (or any Applicable Lending Office) to a level below that which the Lender (or any Applicable Lending Office) could have achieved but for such Regulatory Change. (c) Without limiting the effect of the other provisions of this Section (but without duplication), in the event that any Requirement of Law or Regulatory Change or the compliance by the Lender therewith shall (i) impose, modify, or hold applicable any reserve, special deposit, or similar requirement against any Letter of Credit or obligation to issue Letters of Credit, or (ii) impose upon the Lender any other condition regarding any Letter of Credit or obligation to issue Letters of Credit, and the result of any such event shall be to increase the cost to the Lender of issuing or maintaining any Letter of Credit or obligation to issue Letters of Credit or any liability with respect to payments by the Lender under Letters of Credit, or to reduce any amount receivable in connection therewith, then upon demand by the Lender, the Borrower shall pay to the Lender, from time to time as specified by the Lender, additional amounts which shall be sufficient to compensate the Lender for such increased cost or reduced amount receivable. (d) Without limiting the effect of the other provisions of this Section (but without duplication), the Borrower shall pay to the Lender such amounts as shall be sufficient in the reasonable opinion of the Lender to compensate it for any loss, cost, or expense incurred by and as a result of: 21 (i) any payment, prepayment, or conversion by the Borrower of a LIBO Rate Loan on a date other than the last day of an Interest Period for such Loan; or (ii) any failure by the Borrower to borrow a LIBO Rate Loan from the Lender on the date for such borrowing specified in the relevant Borrowing Request; such compensation to include, without limitation, with respect to any LIBO Rate Loan, an amount equal to the excess, if any, of (A) the amount of interest which would have accrued on the principal amount so paid, prepaid, converted, or not borrowed for the period from the date of such payment, prepayment, conversion, or failure to borrow to the last day of the then current Interest Period for such Loan (or, in the case of a failure to borrow, the Interest Period for such Loan which would have commenced on the date of such failure to borrow) at the LIBO Rate of interest for such Loan provided for herein over (B) the interest component (as reasonably determined by the Lender) of the amount (as reasonably determined by the Lender) the Lender would have bid in the London interbank market for Dollar deposits of amounts comparable to such principal amount and maturities comparable to such period. (e) Determinations by the Lender for purposes of this Section of the effect of any Regulatory Change on capital maintained, its costs or rate of return, maintaining Loans, issuing Letters of Credit, its obligation to make Loans and issue Letters of Credit, or on amounts receivable by it in respect of Loans, Letters of Credit, or such obligations, and the additional amounts required to compensate the Lender under this Section shall be conclusive, absent manifest error, provided that such determinations are made on a reasonable basis. The Lender shall furnish the Borrower with a certificate setting forth in reasonable detail the basis and amount of increased costs incurred or reduced amounts receivable as a result of any such event, and the statements set forth therein shall be conclusive, absent manifest error. The Lender shall (i) notify the Borrower, as promptly as practicable after the Lender obtains knowledge of any Additional Costs or other sums payable pursuant to this Section and determines to request compensation therefor, of any event occurring after the Closing Date which will entitle the Lender to compensation pursuant to this Section; provided that the Borrower shall not be obligated for the payment of any Additional Costs or other sums payable pursuant to this Section to the extent such Additional Costs or other sums accrued more than 90 days prior to the date upon which the Borrower was given such notice; and (ii) designate a different Applicable Lending Office for the Loans of the Lender affected by such event if such designation will avoid the need for or reduce the amount of such compensation and will not, in the sole opinion of the Lender, be disadvantageous to the Lender. If the Lender requests compensation from the Borrower under this Section, the Borrower may, by notice to the Lender, require that the Loans by the Lender of the type with respect to which such compensation is requested be converted into Floating Rate Loans in accordance with Section 2.10. Any compensation requested by the Lender pursuant to this Section shall be due and payable to the Lender within five days of delivery of any such notice by the Lender to the Borrower. (f) The Lender agrees that it shall not request, and the Borrower shall not be obligated to pay, any Additional Costs or other sums payable pursuant to this Section unless similar additional costs and other sums payable are also generally assessed by the Lender against other customers of 22 the Lender similarly situated where such customers are subject to documents providing for such assessment. 2.18 Limitation on Types of Loans. Anything herein to the contrary notwithstanding, no more than 5 separate Loans shall be outstanding at any one time, with, for purposes of this Section, all Floating Rate Loans constituting one Loan and all LIBO Rate Loans for the same Interest Period constituting one Loan. Anything herein to the contrary notwithstanding, if, on or prior to the determination of any interest rate for any LIBO Rate Loan for any Interest Period therefor: (a) the Lender determines (which determination shall be conclusive) that quotations of interest rates for the deposits referred to in the definition of "LIBO Rate" in Section 1.2 are not being provided in the relevant amounts or for the relevant maturities for purposes of determining the rate of interest for such Loan as provided in this Credit Agreement; or (b) the Lender determines (which determination shall be conclusive) that the rates of interest referred to in the definition of "LIBO Rate" in Section 1.2 upon the basis of which the rate of interest for such Loan for such Interest Period is to be determined do not accurately reflect the cost to the Lender of making or maintaining such Loan for such Interest Period, then the Lender shall give the Borrower prompt notice thereof; and so long as such condition remains in effect, the Lender shall be under no obligation to make LIBO Rate Loans or to convert Loans of any other type into LIBO Rate Loans, and the Borrower shall, on the last day of the then current Interest Period for each outstanding LIBO Rate Loan, either prepay such LIBO Rate Loan or convert such Loan into another type of Loan in accordance with Section 2.10. Before giving such notice pursuant to this Section, the Lender will designate a different available Applicable Lending Office for LIBO Rate Loans or take such other action as the Borrower may request if such designation or action will avoid the need to suspend the obligation of the Lender to make LIBO Rate Loans hereunder and will not, in the opinion of the Lender, be disadvantageous to the Lender. 2.19 Illegality. Notwithstanding any other provision of this Credit Agreement, in the event that it becomes unlawful for the Lender or its Applicable Lending Office to (a) honor its obligation to make any type of LIBO Rate Loans hereunder, or (b) maintain any type of LIBO Rate Loans hereunder, then the Lender shall promptly notify the Borrower thereof; and the obligation of the Lender hereunder to make such type of LIBO Rate Loans and to convert other types of Loans into LIBO Rate Loans of such type shall be suspended until such time as the Lender may again make and maintain LIBO Rate Loans of such type, and the outstanding LIBO Rate Loans of such type shall be converted into Floating Rate Loans in accordance with Section 2.10. Before giving such notice pursuant to this Section, the Lender will designate a different available Applicable Lending Office for LIBO Rate Loans or take such other action as the Borrower may request if such designation or action will avoid the need to suspend the obligation of the Lender to make LIBO Rate Loans and will not, in the opinion of the Lender, be disadvantageous to the Lender. 23 2.20 Regulatory Change. In the event that by reason of any Regulatory Change, the Lender (a) incurs Additional Costs based on or measured by the excess above a specified level of the amount of a category of deposits or other liabilities of the Lender which includes deposits by reference to which the interest rate on any LIBO Rate Loan is determined as provided in this Credit Agreement or a category of extensions of credit or other assets of such Lender which includes any LIBO Rate Loan, or (b) becomes subject to restrictions on the amount of such a category of liabilities or assets which it may hold, then, at the election of the Lender with notice to the Borrower, the obligation of the Lender to make such LIBO Rate Loans and to convert Floating Rate Loans into such LIBO Rate Loans shall be suspended until such time as such Regulatory Change ceases to be in effect, and all such outstanding LIBO Rate Loans shall be converted into Floating Rate Loans in accordance with Section 2.10. 2.21 Limitations on Interest Periods. Each Interest Period selected by the Borrower (a) which commences on the last Business Day of a calendar month (or, with respect to any LIBO Rate Loan, any day for which there is no numerically corresponding day in the appropriate subsequent calendar month) shall end on the last Business Day of the appropriate subsequent calendar month, (b) which would otherwise end on a day which is not a Business Day shall end on the next succeeding Business Day (or, if such next succeeding Business Day falls in the next succeeding calendar month, on the next preceding Business Day), (c) which would otherwise commence before and end after Final Maturity shall end on Final Maturity, and (d) shall have a duration of not less than one month, as to any LIBO Rate Loan, and, if any Interest Period would otherwise be a shorter period, the relevant Loan shall be a Floating Rate Loan during such period. 2.22 Letters in Lieu of Transfer Orders. The Lender agrees that none of the letters in lieu of transfer or division orders provided by the Borrower pursuant to Section 3.1(g)(iii) or Section 5.7 will be sent to the addressees thereof prior to the occurrence of an Event of Default, at which time the Lender may, at its option and in addition to the exercise of any of its other rights and remedies, send any or all of such letters pursuant to Section 7.1(a), (f) and (g). 2.23 Power of Attorney. The Borrower hereby designates the Lender as its agent and attorney-in-fact, to act in its name, place, and stead for the purpose of completing and, upon the occurrence of an Event of Default, delivering any and all of the letters in lieu of transfer orders delivered by the Borrower to the Lender pursuant to Section 3.1(g)(iii) or Section 5.7, including, without limitation, completing any blanks contained in such letters and attaching exhibits thereto describing the relevant Collateral. The Borrower hereby ratifies and confirms all that the Lender shall lawfully do or cause to be done by virtue of this power of attorney and the rights granted with respect to such power of attorney. This power of attorney is coupled with the interests of the Lender in the Collateral, shall commence and be in full force and effect as of the Closing Date and shall remain in full force and effect and shall be irrevocable so long as any Obligation remains outstanding or unpaid or any Commitment exists. The powers conferred on the Lender by this appointment are solely to protect the interests of the Lender under the Loan Documents and shall not impose any duty upon the Lender to exercise any such powers. The Lender shall be accountable only for amounts that it actually receives as a result of the exercise of such powers and shall not be responsible to the Borrower or any other Person for any act or failure to act with respect to such powers, except for gross negligence or willful misconduct. 24 ARTICLE III CONDITIONS The obligations of the Lender to enter into this Credit Agreement and to make Loans and issue Letters of Credit are subject to the satisfaction of the following conditions precedent: 3.1 Receipt of Loan Documents and Other Items. The Lender shall have no obligation under this Credit Agreement unless and until all matters incident to the consummation of the transactions contemplated herein, including, without limitation, the review by the Lender or its counsel of the title of the Borrower to its Oil and Gas Properties, shall be satisfactory to the Lender, and the Lender shall have received, reviewed, and approved the following documents and other items, appropriately executed when necessary and, where applicable, acknowledged by one or more authorized officers of the Borrower, all in form and substance satisfactory to the Lender and dated, where applicable, of even date herewith or a date prior thereto and acceptable to the Lender: (a) multiple counterparts of this Credit Agreement, the Guaranty, and the Assignment, as requested by the Lender; (b) the Existing Notes, endorsed payable to the Lender; (c) the Note; (d) copies of the Articles of Incorporation or Certificate of Incorporation and all amendments thereto and the bylaws and all amendments thereto of the Borrower and the Guarantor, accompanied by a certificate issued by the secretary or an assistant secretary of the Borrower, to the effect that each such copy is correct and complete; (e) certificates of incumbency and signatures of all officers of the Borrower and the Guarantor who are authorized to execute Loan Documents on behalf of the Borrower, each such certificate being executed by the secretary or an assistant secretary of the Borrower and the Guarantor; (f) copies of corporate resolutions approving the Loan Documents and authorizing the transactions contemplated herein and therein, duly adopted by the boards of directors of the Borrower and the Guarantor, accompanied by certificates of the secretary or an assistant secretary of the Borrower and the Guarantor, to the effect that such copies are true and correct copies of resolutions duly adopted at a meeting or by unanimous consent of the board of directors of the Borrower and the Guarantor, and that such resolutions constitute all the resolutions adopted with respect to such transactions, have not been amended, modified, or revoked in any respect, and are in full force and effect as of the date of such certificate; (g) the following documents ratifying, amending, and/or restating the Existing Security Instruments and otherwise establishing Liens in favor of the Lender in and to the Collateral: 25 (i) Amended and Restated Mortgage, Deed of Trust, Indenture, Security Agreement, Assignment of Production, and Financing Statement from the Borrower covering substantially all of the Oil and Gas Properties of the Borrower and all improvements, personal property, and fixtures related thereto; (ii) Financing Statements from the Borrower, as debtors, constituent to the instrument described in clause (i) above; (iii) undated letters, in form and substance satisfactory to the Lender, from the Borrower to each purchaser of production and disburser of the proceeds of production from or attributable to the Mortgaged Properties, together with additional letters with the addressees left blank, authorizing and directing the addressees to make future payments attributable to production from the Mortgaged Properties directly to the Lender; (h) unaudited Financial Statements of the Borrower as of September 30, 1999; (i) certificates dated as of a recent date from the Secretary of State or other appropriate Governmental Authority evidencing the existence or qualification and good standing of the Borrowers in their respective jurisdictions of incorporation and in any other jurisdictions where they do business; (j) results of searches of the UCC Records of the Secretary of State of the States of Colorado, Wyoming and Texas from a source acceptable to the Lender and reflecting no Liens against any of the Collateral as to which perfection of a Lien is accomplished by the filing of a financing statement other than in favor of the Lender; (k) confirmation, acceptable to the Lender, of the title of the Borrower to the Mortgaged Properties, free and clear of Liens other than Permitted Liens; (l) all operating, lease, sublease, royalty, sales, exchange, processing, farmout, bidding, pooling, unitization, communitization, and other agreements relating to the Mortgaged Properties requested by the Lender; (m) engineering reports covering the Mortgaged Properties; (n) the opinion of Haynes and Boone, L.L.P., counsel to the Borrower, in the form attached hereto as Exhibit IV, with such changes thereto as may be approved by the Lender; (o) the opinion of special counsel to the Borrower in the state of Wyoming, in the form attached hereto as Exhibit V, with such changes thereto as may be approved by the Lender; 26 (p) certificates evidencing the insurance coverage required pursuant to Section 5.18; and (q) such other agreements, documents, instruments, opinions, certificates, waivers, consents, and evidence as the Lender may reasonably request. 3.2 Each Loan and Letter of Credit. In addition to the conditions precedent stated elsewhere herein, the Lender shall not be obligated to make any Loan or issue any Letter of Credit unless: (a) the Borrower shall have delivered to the Lender a Borrowing Request at least the requisite time prior to the requested date for the relevant Loan, or a Letter of Credit Application at least two Business Days prior to the requested issuance date for the relevant Letter of Credit; and each statement or certification made in such Borrowing Request or Letter of Credit Application, as the case may be, shall be true and correct in all material respects on the requested date for such Loan or the issuance of such Letter of Credit; (b) no Event of Default or Default shall exist or will occur as a result of the making of the requested Loan or the issuance of the requested Letter of Credit; (c) no event shall have occurred which, in the reasonable opinion of the Lender, could have a Material Adverse Effect; (d) each of the representations and warranties contained in this Credit Agreement shall be true and correct in all material respects and shall be deemed to be repeated by the Borrower as if made on the requested date for such Loan or the issuance of such Letter of Credit (except to the extent such representations and warranties expressly refer to an earlier date, in which case they shall be true and correct as of such date); (e) the Guaranty and all of the Security Instruments shall be in full force and effect and provide to the Lender the security intended thereby; (f) neither the consummation of the transactions contemplated hereby nor the making of such Loan or the issuance of such Letter of Credit shall contravene, violate, or conflict with any Requirement of Law; (g) the Borrower shall have good and defensible title to all of its Mortgaged Properties and to all other Oil and Gas Properties, except for such defects in title as would not, individually or in the aggregate, reasonably be expected to have a Material Adverse Effect, free and clear of all Liens except Permitted Liens. (h) the Lender shall have received the payment of all Engineering Fees, Facility Fees, Letter of Credit Fees, and other fees payable to the Lender hereunder and reimbursement from the Borrower, or special legal counsel for the Lender shall 27 have received payment from the Borrower, for (i) all reasonable fees and expenses of counsel to the Lender for which the Borrower is responsible pursuant to applicable provisions of this Credit Agreement and for which invoices have been presented as of or prior to the date of the relevant Loan or Letter of Credit Application, and (ii) estimated fees charged by filing officers and other public officials incurred or to be incurred in connection with the filing and recordation of any Security Instruments, for which invoices have been presented as of or prior to the date of the requested Loan or Letter of Credit Application; and ARTICLE IV REPRESENTATIONS AND WARRANTIES To induce the Lender to enter into this Credit Agreement and to make the Loans and issue Letters of Credit, the Borrower represents and warrants to the Lender (which representations and warranties shall survive the delivery of the Note) that: 4.1 Due Authorization. The execution and delivery by the Borrower of this Credit Agreement and the borrowings hereunder, the execution and delivery by the Borrower of the Note, the repayment of the Note and interest and fees provided for in the Note and this Credit Agreement, the execution and delivery of the Security Instruments by the Borrower and the performance of all obligations of the Borrower under the Loan Documents are within the power of the Borrower, have been duly authorized by all necessary corporate action by the Borrower, and do not and will not (a) require the consent of any Governmental Authority, (b) contravene or conflict with any Requirement of Law, (c) contravene or conflict with any indenture, instrument, or other agreement to which the Borrower is a party or by which any Property of the Borrower may be presently bound or encumbered, or (d) result in or require the creation or imposition of any Lien in, upon or of any Property of the Borrower under any such indenture, instrument, or other agreement, other than the Loan Documents. 4.2 Corporate Existence. The Borrowers are corporations duly organized, legally existing, and in good standing under the laws of their states of incorporation and are duly qualified as a foreign corporations and are in good standing in all jurisdictions wherein the ownership of Property or the operation of their business necessitates same, other than those jurisdictions wherein the failure to so qualify will not have a Material Adverse Effect. 4.3 Valid and Binding Obligations. All Loan Documents, when duly executed and delivered by the Borrower, will be the legal, valid, and binding obligations of the Borrower, enforceable against the Borrower in accordance with their respective terms. 4.4 Security Instruments. The provisions of each Security Instrument are effective to create in favor of the Lender, a legal, valid, and enforceable Lien in all right, title, and interest of the Borrower in the Collateral described therein, which Liens, assuming the accomplishment of recording and filing in accordance with applicable laws prior to the intervention of rights of other 28 Persons, shall constitute fully perfected first-priority Liens subject to Permitted Liens on all right, title, and interest of the Borrower in the Collateral described therein. 4.5 Title to Assets. The Borrower has good and defensible title to all of its Mortgaged Properties and to all other Oil and Gas Properties except for such defects in title as would not, individually or in the aggregate, reasonably be expected to have a Material Adverse Effect, free and clear of all Liens except Permitted Liens. 4.6 Scope and Accuracy of Financial Statements. The Financial Statements of the Borrower as of September 30, 1999, present fairly the financial position and results of operations and cash flows of the Borrower in accordance with GAAP as at the relevant point in time or for the period indicated, as applicable. No event or circumstance has occurred since September 30, 1999, which could reasonably be expected to have a Material Adverse Effect. 4.7 No Material Misstatements. No information, exhibit, statement, or report furnished to the Lender by or at the direction of the Borrower in connection with this Credit Agreement contains any material misstatement of fact or omits to state a material fact or any fact necessary to make the statements contained therein not misleading as of the date made or deemed made. 4.8 Liabilities, Litigation, and Restrictions. Other than as listed under the heading "Liabilities" on Exhibit VI attached hereto, the Borrower has no liabilities, direct, or contingent, which may materially and adversely affect its business or operations or its ownership of the Collateral. Except as set forth under the heading "Litigation" on Exhibit VI hereto, no litigation or other action of any nature affecting the Borrower is pending before any Governmental Authority or, to the best knowledge of the Borrower, threatened against or affecting the Borrower which might reasonably be expected to result in any impairment of its ownership of any Collateral or have a Material Adverse Effect. To the best knowledge of the Borrower, after due inquiry, no unusual or unduly burdensome restriction, restraint or hazard exists by contract, Requirement of Law, or otherwise relative to the business or operations of the Borrower or the ownership and operation of the Collateral other than such as relate generally to Persons engaged in business activities similar to those conducted by the Borrower. 4.9 Authorizations; Consents. Except as expressly contemplated by this Credit Agreement, no authorization, consent, approval, exemption, franchise, permit, or license of, or filing with, any Governmental Authority or any other Person is required to authorize or is otherwise required in connection with the valid execution and delivery by the Borrower of the Loan Documents or any instrument contemplated hereby, the repayment by the Borrower of the Note and interest and fees provided in the Note and this Credit Agreement, or the performance by the Borrower of the Obligations. 4.10 Compliance with Laws. The Borrower and its Property, including, without limitation, the Mortgaged Property, are in compliance with all applicable Requirements of Law, including, without limitation, Environmental Laws, the Natural Gas Policy Act of 1978, as amended, and ERISA, except to the extent non-compliance with any such Requirements of Law could not reasonably be expected to have a Material Adverse Effect. 29 4.11 ERISA. The Borrower does not maintain nor has it maintained any Plan. The Borrower does not currently contribute to or have any obligation to contribute to or otherwise have any liability with respect to any Plan. 4.12 Environmental Laws. To the best knowledge and belief of the Borrower, except as would not have a Material Adverse Effect, or as described on Exhibit VI under the heading "Environmental Matters:" (a) no Property of the Borrower is currently on or has ever been on, or is adjacent to any Property which is on or has ever been on, any federal or state list of Superfund Sites; (b) no Hazardous Substances have been generated, transported, and/or disposed of by the Borrower at a site which was, at the time of such generation, transportation, and/or disposal, or has since become, a Superfund Site; (c) except in accordance with applicable Requirements of Law or the terms of a valid permit, license, certificate, or approval of the relevant Governmental Authority, no Release of Hazardous Substances by the Borrower or from, affecting, or related to any Property of the Borrower or adjacent to any Property of the Borrower has occurred; and (d) no Environmental Complaint has been received by the Borrower. 4.13 Compliance with Federal Reserve Regulations. No transaction contemplated by the Loan Documents is in violation of any regulations promulgated by the Board of Governors of the Federal Reserve System, including, without limitation, Regulations T, U, or X. 4.14 Investment Company Act Compliance. The Borrower is not, nor is the Borrower directly or indirectly controlled by or acting on behalf of any Person which is, an "investment company" or an "affiliated person" of an "investment company" within the meaning of the Investment Company Act of 1940, as amended. 4.15 Public Utility Holding Company Act Compliance. The Borrower is not a "holding company," or an "affiliate" of a "holding company" or of a "subsidiary company" of a "holding company," within the meaning of the Public Utility Holding Company Act of 1935, as amended. 4.16 Proper Filing of Tax Returns; Payment of Taxes Due. The Borrower has duly and properly filed its United States income tax return and all other tax returns which are required to be filed and has paid all taxes due except such as are being contested in good faith and as to which adequate provisions and disclosures have been made. The respective charges and reserves on the books of the Borrower with respect to taxes and other governmental charges are adequate. 4.17 Refunds. Except as described on Exhibit VI under the heading "Refunds," no orders of, proceedings pending before, or other requirements of, the Federal Energy Regulatory 30 Commission, the Texas Railroad Commission, or any Governmental Authority exist which could result in the Borrower being required to refund any material portion of the proceeds received or to be received from the sale of hydrocarbons constituting part of the Mortgaged Property. 4.18 Gas Contracts. Except as described on Exhibit VI under the heading "Gas Contracts," the Borrower (a) is not obligated in any material respect by virtue of any prepayment made under any contract containing a "take- or-pay" or "prepayment" provision or under any similar agreement to deliver hydrocarbons produced from or allocated to any of the Mortgaged Property at some future date without receiving full payment therefor within 90 days of delivery, and (b) has not produced gas, in any material amount, subject to, and neither the Borrower nor any of the Mortgaged Properties is subject to, balancing rights of third parties or subject to balancing duties under governmental requirements, except as to such matters for which the Borrower has established monetary reserves adequate in amount to satisfy such obligations and has segregated such reserves from other accounts. 4.19 Intellectual Property. The Borrower owns or is licensed to use all Intellectual Property necessary to conduct all business material to its condition (financial or otherwise), business, or operations as such business is currently conducted. No claim has been asserted or is pending by any Person with the respect to the use of any such Intellectual Property or challenging or questioning the validity or effectiveness of any such Intellectual Property; and the Borrower knows of no valid basis for any such claim. The use of such Intellectual Property by the Borrower does not infringe on the rights of any Person, except for such claims and infringements as do not, in the aggregate, give rise to any material liability on the part of the Borrower. 4.20 Casualties or Taking of Property. Except as disclosed on Exhibit VI under the heading "Casualties," since September 30, 1999, neither the business nor any Property of the Borrower has been materially adversely affected as a result of any fire, explosion, earthquake, flood, drought, windstorm, accident, strike or other labor disturbance, embargo, requisition or taking of Property, or cancellation of contracts, permits, or concessions by any Governmental Authority, riot, activities of armed forces, or acts of God. 4.21 Locations of Borrower. The principal place of business and chief executive office of the Borrower is located at the address of the Borrower set forth in Section 8.3 or at such other location as the Borrower may have, by proper written notice hereunder, advised the Lender, provided that such other location is within a state in which appropriate financing statements from the Borrower in favor of the Lender have been filed. 4.22 Subsidiaries. As of the Closing Date, the Borrowers have no Subsidiaries except those described on Exhibit under the heading "Subsidiaries". 4.23 Existing Indebtedness; No Defenses. As of the date hereof, (a) the Borrower is indebted to the Existing Lender under the Existing Note in the aggregate principal amount of $6,150,000 and (b) the Borrower has no defenses to, rights of setoff against, claims or counterclaims with respect to, and no default exists under or with respect to, any of the Existing Loan Documents or any Indebtedness or obligation of the Borrower to the Existing Lender. 31 ARTICLE V AFFIRMATIVE COVENANTS So long as any Obligation remains outstanding or unpaid or any Commitment exists, the Borrower shall: 5.1 Maintenance and Access to Records. Keep adequate records, in accordance with GAAP, of all its transactions so that at any time, and from time to time, its true and complete financial condition may be readily determined, and promptly following the reasonable request of the Lender, make such records available for inspection by the Lender and, at the expense of the Borrower, allow the Lender to make and take away copies thereof. 5.2 Quarterly Financial Statements; Compliance Certificates. Deliver to the Lender, (a) on or before the 60th day after the close of each of the first three quarterly periods of each fiscal year of each Borrower, a copy of the unaudited consolidated and consolidating Financial Statements of the Borrowers and the Guarantor as at the close of such quarterly period and from the beginning of such fiscal year to the end of such period, such Financial Statements to be certified by Responsible Officers of the Borrowers and the Guarantor as having been prepared in accordance with GAAP consistently applied and as a fair presentation of the condition of the Borrowers and the Guarantor, subject to changes resulting from normal year-end audit adjustments, and (b) on or before the 45th day after the close of each fiscal quarter, with the exception of the last fiscal quarter, a Compliance Certificate. 5.3 Annual Financial Statements. Deliver to the Lender, on or before the 120th day after the close of each fiscal year of the Borrowers, a copy of the annual audited consolidated and consolidating Financial Statements of the Borrowers and the Guarantor and a Compliance Certificate. 5.4 Oil and Gas Reserve Reports. (a) Deliver to the Lender no later than April 1 of each year during the term of this Credit Agreement, engineering reports in form and substance satisfactory to the Lender, certified by any nationally- or regionally-recognized independent consulting petroleum engineers acceptable to the Lender as fairly and accurately setting forth (i) the proven and producing, shut-in, behind-pipe, and undeveloped oil and gas reserves (separately classified as such) attributable to the Mortgaged Properties as of January 1 of the year for which such reserve reports are furnished, (ii) the aggregate present value of the future net income with respect to such Mortgaged Properties, discounted at a stated per annum discount rate of proven and producing reserves, (iii) projections of the annual rate of production, gross income, and net income with respect to such proven and producing reserves, and (iv) information with respect to the "take-or-pay," "prepayment," and gas- balancing liabilities of the Borrower. (b) Deliver to the Lender no later than October 1 of each year during the term of this Credit Agreement except for the first such report, which shall be delivered by August 1, 2000, engineering reports in form and substance satisfactory to the Lender prepared by or under the supervision of the chief petroleum engineer of the Borrower evaluating the Mortgaged Properties 32 as of July 1 of the year for which such reserve reports are furnished and updating the information provided in the reports pursuant to Section 5.4(a). (c) Each of the reports provided pursuant to this Section shall be submitted to the Lender together with additional data concerning pricing, quantities of production from the Mortgaged Properties, volumes of production sold, purchasers of production, gross revenues, expenses, and such other information and engineering and geological data with respect thereto as the Lender may reasonably request. 5.5 Title Opinions; Title Defects. Promptly upon the request of the Lender, furnish to the Lender title opinions, in form and substance and by counsel satisfactory to the Lender, or other information regarding title acceptable to the Lender, covering Oil and Gas Properties constituting not less than 81% of the value, determined by the Lender in its sole discretion, of the Mortgaged Properties; and promptly, but in any event within 60 days after notice by the Lender of any defect, material in the opinion of the Lender in value, in the title of the Borrower to any of its Oil and Gas Properties, clear such title defects, and, in the event any such title defects are not cured in a timely manner, pay all related costs and fees incurred by the Lender to do so. 5.6 Notices of Certain Events. Deliver to the Lender, immediately upon having knowledge of the occurrence of any of the following events or circumstances, a written statement with respect thereto, signed by a Responsible Officer of the Borrower and setting forth the relevant event or circumstance and the steps being taken by the Borrower or the Guarantor with respect to such event or circumstance: (a) any Default or Event of Default; (b) any default or event of default under any contractual obligation of the Borrower or the Guarantor, or any litigation, investigation, or proceeding between the Borrower or the Guarantor and any Governmental Authority which, in either case, if not cured or if adversely determined, as the case may be, could reasonably be expected to have a Material Adverse Effect; (c) any litigation or proceeding involving the Borrower or the Guarantor as a defendant or in which any Property of the Borrower or the Guarantor is subject to a claim and in which the amount involved is $100,000 or more and which is not covered by insurance or in which injunctive or similar relief is sought; (d) the receipt by the Borrower of any Environmental Complaint; (e) any actual, proposed, or threatened testing or other investigation by any Governmental Authority or other Person concerning the environmental condition of, or relating to, any Property of the Borrower or adjacent to any Property of the Borrower following any allegation of a violation of any Requirement of Law; (f) any Release of Hazardous Substances by the Borrower or from, affecting, or related to any Property of the Borrower or adjacent to any Property of the 33 Borrower except in accordance with applicable Requirements of Law or the terms of a valid permit, license, certificate, or approval of the relevant Governmental Authority, or the violation of any Environmental Law, or the revocation, suspension, or forfeiture of or failure to renew, any permit, license, registration, approval, or authorization which could reasonably be expected to have a Material Adverse Effect; (g) the change in identity or address of any Person remitting to the Borrower proceeds from the sale of hydrocarbon production from or attributable to any Mortgaged Property; (h) any change in the senior management of the Borrower; and (i) any other event or condition which could reasonably be expected to have a Material Adverse Effect. 5.7 Letters in Lieu of Transfer Orders; Division Orders. Promptly upon request by the Lender at any time and from time to time, and without limitation on the rights of the Lender pursuant to Sections 2.23 and 2.24, execute such letters in lieu of transfer orders, in addition to the letters signed by the Borrower and delivered to the Lender in satisfaction of the condition set forth in Section 3.1(g)(iii) and/or division and/or transfer orders as are necessary or appropriate to transfer and deliver to the Lender proceeds from or attributable to any Mortgaged Property. 5.8 Additional Information. Furnish to the Lender, promptly upon the request of the Lender, such additional financial or other information concerning the assets, liabilities, operations, and transactions of the Borrower as the Lender reasonably may from time to time request; and promptly notify the Lender 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 Lien in any Collateral, including, without limitation, any change in its name or the location of its principal place of business or chief executive office; and upon the request of the Lender, execute such additional Security Instruments as may be necessary or appropriate in connection therewith. 5.9 Compliance with Laws. Except to the extent the failure to comply or cause compliance would not have a Material Adverse Effect, comply with all applicable Requirements of Law, including, without limitation, (a) the Natural Gas Policy Act of 1978, as amended, (b) ERISA, (c) Environmental Laws, and (d) all permits, licenses, registrations, approvals, and authorizations (i) related to any natural or environmental resource or media located on, above, within, in the vicinity of, related to or affected by any Property of the Borrower, (ii) required for the performance of the operations of the Borrower, or (iii) applicable to the use, generation, handling, storage, treatment, transport, or disposal of any Hazardous Substances; and cause all employees, crew members, agents, contractors, subcontractors, and future lessees (pursuant to appropriate lease provisions) of the Borrower, while such Persons are acting within the scope of their relationship with the Borrower, to comply with all such Requirements of Law as may be necessary or appropriate to enable the Borrower to so comply. 5.10 Payment of Assessments and Charges. Pay all taxes, assessments, governmental charges, rent, and other Indebtedness which, if unpaid, might become a Lien against 34 the Property of the Borrower, except any of the foregoing being contested in good faith and as to which adequate reserve in accordance with GAAP has been established or unless failure to pay would not have a Material Adverse Effect. 5.11 Maintenance of Corporate Existence and Good Standing. Maintain its corporate existence or qualification and good standing in its jurisdictions of incorporation and in all jurisdictions wherein the Property now owned or hereafter acquired or business now or hereafter conducted necessitates same, unless the failure to do so would not have a Material Adverse Effect. 5.12 Payment of Notes; Performance of Obligations. Pay the Note according to the reading, tenor, and effect thereof, as modified hereby, and do and perform every act and discharge all of its other Obligations. 5.13 Further Assurances. Promptly cure any defects in the execution and delivery of any of the Loan Documents and all agreements contemplated thereby, and execute, acknowledge, and deliver such other assurances and instruments as shall, in the opinion of the Lender, be necessary to fulfill the terms of the Loan Documents. 5.14 Initial Fees and Expenses of Counsel to Lender. Upon request by the Lender, promptly reimburse the Lender for all reasonable fees and expenses of Jackson Walker L.L.P., special counsel to the Lender, in connection with the preparation of this Credit Agreement and all documentation contemplated hereby, the satisfaction of the conditions precedent set forth herein, the filing and recordation of Security Instruments, and the consummation of the transactions contemplated in this Credit Agreement. 5.15 Subsequent Fees and Expenses of Lender. Upon request by the Lender, promptly reimburse the Lender (to the fullest extent permitted by law) for all amounts reasonably expended, advanced, or incurred by or on behalf of the Lender to satisfy any obligation of the Borrower under any of the Loan Documents; to collect the Obligations; to ratify, amend, restate, or prepare additional Loan Documents, as the case may be; for the filing and recordation of Security Instruments; to enforce the rights of the Lender under any of the Loan Documents; and to protect the Properties or business of the Borrower, including, without limitation, the Collateral, which amounts shall be deemed compensatory in nature and liquidated as to amount upon notice to the Borrower by the Lender and which amounts shall include, but not be limited to (a) all court costs, (b) reasonable attorneys' fees, (c) reasonable fees and expenses of auditors and accountants incurred to protect the interests of the Lender, (d) fees and expenses incurred in connection with the participation by the Lender as a member of the creditors' committee in a case commenced under any Insolvency Proceeding, (e) fees and expenses incurred in connection with lifting the automatic stay prescribed in (S)362 Title 11 of the United States Code, and (f) fees and expenses incurred in connection with any action pursuant to (S)1129 Title 11 of the United States Code all reasonably incurred by the Lender in connection with the collection of any sums due under the Loan Documents, together with interest at the per annum interest rate equal to the Floating Rate, calculated on a basis of a calendar year of 365 or 366 days, as the case may be, counting the actual number of days elapsed, on each such amount from the date of notification that the same was expended, advanced, or incurred by the Lender until the date it is repaid to the Lender, with the obligations under this Section surviving the non- assumption of this Credit Agreement in a case commenced under any Insolvency Proceeding 35 and being binding upon the Borrower and/or a trustee, receiver, custodian, or liquidator of the Borrower appointed in any such case. 5.16 Operation of Oil and Gas Properties. Develop, maintain, and operate its Oil and Gas Properties in a prudent and workmanlike manner in accordance with industry standards. 5.17 Maintenance and Inspection of Properties. Maintain all of its tangible Properties in good repair and condition, ordinary wear and tear excepted; make all necessary replacements thereof and operate such Properties in a good and workmanlike manner; and permit any authorized representative of the Lender to visit and inspect, at the expense of the Borrower, any tangible Property of the Borrower. 5.18 Maintenance of Insurance. Maintain insurance with respect to its Properties and businesses against such liabilities, casualties, risks, and contingencies as is customary in the relevant industry and sufficient to prevent a Material Adverse Effect, all such insurance to be in amounts and from insurers acceptable to the Lender and, within 30 days of the Closing Date for property damage insurance covering Collateral and business interruption insurance, if any, maintained by Borrower, naming the Lender as loss payee, and, upon any renewal of any such insurance and at other times upon request by the Lender, furnish to the Lender evidence, satisfactory to the Lender, of the maintenance of such insurance. The Lender shall have the right to collect, and the Borrower hereby assigns to the Lender, any and all monies that may become payable under any policies of insurance relating to business interruption or by reason of damage, loss, or destruction of any of the Collateral. In the event of any damage, loss, or destruction for which insurance proceeds relating to business interruption or Collateral exceed $1,000,000, the Lender may, at its option, apply all such sums or any part thereof received by it toward the payment of the Obligations, whether matured or unmatured, application to be made first to interest and then to principal, and shall deliver to the Borrower the balance, if any, after such application has been made. In the event of any such damage, loss, or destruction for which insurance proceeds are $1,000,000 or less, provided that no Default or Event of Default has occurred and is continuing, the Lender shall deliver any such proceeds received by it to the Borrower. In the event the Lender receives insurance proceeds not attributable to Collateral or business interruption, the Lender shall deliver any such proceeds to the Borrower. 5.19 INDEMNIFICATION. INDEMNIFY AND HOLD THE LENDER AND ITS SHAREHOLDERS, OFFICERS, DIRECTORS, EMPLOYEES, AGENTS, ATTORNEYS-IN-FACT, AND AFFILIATES AND EACH TRUSTEE FOR THE BENEFIT OF THE LENDER (EACH AN "INDEMNIFIED PERSON") UNDER ANY SECURITY INSTRUMENT HARMLESS FROM AND AGAINST ANY AND ALL CLAIMS, LOSSES, DAMAGES, LIABILITIES, FINES, PENALTIES, CHARGES, ADMINISTRATIVE AND JUDICIAL PROCEEDINGS AND ORDERS, JUDGMENTS, REMEDIAL ACTIONS, REQUIREMENTS AND ENFORCEMENT ACTIONS OF ANY KIND, AND ALL COSTS AND EXPENSES INCURRED IN CONNECTION THEREWITH (INCLUDING, WITHOUT LIMITATION, ATTORNEYS' FEES AND EXPENSES), ARISING DIRECTLY OR INDIRECTLY, IN WHOLE OR IN PART, FROM (A) THE PRESENCE OF ANY HAZARDOUS SUBSTANCES ON, UNDER, OR FROM ANY PROPERTY OF THE BORROWER, WHETHER PRIOR TO OR DURING THE TERM HEREOF, (B) ANY ACTIVITY CARRIED ON OR UNDERTAKEN ON OR OFF ANY PROPERTY OF THE BORROWER, 36 WHETHER PRIOR TO OR DURING THE TERM HEREOF, AND WHETHER BY THE BORROWER OR ANY PREDECESSOR IN TITLE, EMPLOYEE, AGENT, CONTRACTOR, OR SUBCONTRACTOR OF THE BORROWER OR ANY OTHER PERSON AT ANY TIME OCCUPYING OR PRESENT ON SUCH PROPERTY, IN CONNECTION WITH THE HANDLING, TREATMENT, REMOVAL, STORAGE, DECONTAMINATION, CLEANUP, TRANSPORTATION, OR DISPOSAL OF ANY HAZARDOUS SUBSTANCES AT ANY TIME LOCATED OR PRESENT ON OR UNDER SUCH PROPERTY, (C) ANY RESIDUAL CONTAMINATION ON OR UNDER ANY PROPERTY OF THE BORROWER, (D) ANY CONTAMINATION OF ANY PROPERTY OR NATURAL RESOURCES ARISING IN CONNECTION WITH THE GENERATION, USE, HANDLING, STORAGE, TRANSPORTATION OR DISPOSAL OF ANY HAZARDOUS SUBSTANCES BY THE BORROWER OR ANY EMPLOYEE, AGENT, CONTRACTOR, OR SUBCONTRACTOR OF THE BORROWER WHILE SUCH PERSONS ARE ACTING WITHIN THE SCOPE OF THEIR RELATIONSHIP WITH THE BORROWER, IRRESPECTIVE OF WHETHER ANY OF SUCH ACTIVITIES WERE OR WILL BE UNDERTAKEN IN ACCORDANCE WITH APPLICABLE REQUIREMENTS OF LAW, OR (E) THE PERFORMANCE AND ENFORCEMENT OF ANY LOAN DOCUMENT, ANY ALLEGATION BY ANY BENEFICIARY OF A LETTER OF CREDIT OF A WRONGFUL DISHONOR BY THE LENDER OF A CLAIM OR DRAFT PRESENTED THEREUNDER, OR ANY OTHER ACT OR OMISSION IN CONNECTION WITH OR RELATED TO ANY LOAN DOCUMENT OR THE TRANSACTIONS CONTEMPLATED THEREBY, INCLUDING, WITHOUT LIMITATION, ANY OF THE FOREGOING IN THIS SECTION ARISING FROM NEGLIGENCE, WHETHER SOLE OR CONCURRENT, ON THE PART OF THE LENDER OR ANY OF ITS SHAREHOLDERS, OFFICERS, DIRECTORS, EMPLOYEES, AGENTS, ATTORNEYS-IN-FACT, OR AFFILIATES OR ANY TRUSTEE FOR THE BENEFIT OF THE LENDER UNDER ANY SECURITY INSTRUMENT; PROVIDED THAT THE BORROWER SHALL HAVE NO OBLIGATION HEREUNDER TO ANY INDEMNIFIED PERSON WITH RESPECT TO ANY OF THE FOREGOING IN THIS SECTION TO THE EXTENT SAME ARISE FROM THE GROSS NEGLIGENCE OR WILFUL MISCONDUCT OF ANY INDEMNIFIED PERSON WITH THE FOREGOING INDEMNITY SURVIVING SATISFACTION OF ALL OBLIGATIONS AND THE TERMINATION OF THIS CREDIT AGREEMENT, UNLESS ALL SUCH OBLIGATIONS HAVE BEEN SATISFIED WHOLLY IN CASH FROM THE BORROWER AND NOT BY WAY OF REALIZATION AGAINST ANY COLLATERAL OR THE CONVEYANCE OF ANY PROPERTY IN LIEU THEREOF, PROVIDED THAT SUCH INDEMNITY SHALL NOT EXTEND TO ANY ACT OR OMISSION BY THE LENDER AND ITS SHAREHOLDERS, OFFICERS, DIRECTORS, EMPLOYEES, AGENTS, ATTORNEYS-IN-FACT AND AFFILIATES AND EACH TRUSTEE FOR THE BENEFIT OF THE LENDER UNDER ANY SECURITY INSTRUMENT WITH RESPECT TO ANY PROPERTY THROUGH THE EXERCISE OF LENDER'S REMEDIES HEREUNDER OR UNDER ANY OF THE SECURITY DOCUMENTS SUBSEQUENT TO THE LENDER BECOMING THE OWNER OF SUCH PROPERTY AND WITH RESPECT TO WHICH PROPERTY SUCH CLAIM, LOSS, DAMAGE, LIABILITY, FINE, PENALTY, CHARGE, PROCEEDING, ORDER, JUDGMENT, ACTION, OR REQUIREMENT ARISES SUBSEQUENT TO THE ACQUISITION OF TITLE THERETO BY THE LENDER OR OTHER PERSON. 37 ARTICLE VI NEGATIVE COVENANTS So long as any Obligation remains outstanding or unpaid or any Commitment exists, the Borrower will not without the prior written consent of Lender: 6.1 Indebtedness. Create, incur, assume, or suffer to exist any Indebtedness, whether by way of loan or otherwise; provided, however, the foregoing restriction shall not apply to (a) the Obligations, (b) unsecured accounts payable incurred in the ordinary course of business, which are not unpaid in excess of 60 days beyond invoice due date or are being contested in good faith and as to which such reserve as is required by GAAP has been made, (c) loans owing to the Guarantor which are subordinate to the Lender; (d) capital leases and Indebtedness incurred to finance the acquisition of equipment in an amount not to exceed $1,000,000 in the aggregate, (d) Subordinated Debt, (e) taxes, assessments and government charges or levies incurred in the ordinary course of business or (h) additional Indebtedness not to exceed $100,000 in the aggregate. 6.2 Contingent Obligations. Create, incur, assume, or suffer to exist any Contingent Obligation; provided, however, the foregoing restriction shall not apply to (a) performance guarantees and performance surety or other bonds, letters of credit, endorsements for collection or deposit provided in the ordinary course of business, including without limitation, plugging and abandonment bonds, appeal bonds and environmental indemnities associated with the acquisition or divestiture of Oil and Gas Properties, (b) trade credit incurred or operating leases entered into in the ordinary course of business, (c) those arising under this Agreement or in favor of Lender, (d) Commodity Hedge Agreements, as permitted by Section 6.17, (e) Rate Management Transactions, or (f) additional Contingent Obligations of Borrower not to exceed $100,000 in the aggregate. 6.3 Liens. Create, incur, assume, or suffer to exist any Lien on any of its Oil and Gas Properties or any other Property, whether now owned or hereafter acquired; provided, however, the foregoing restrictions shall not apply to Permitted Liens. 6.4 Sales of Assets. Without the prior written consent of the Lender, sell, transfer, or otherwise dispose of, in one or any series of transactions, assets, whether now owned or hereafter acquired, provided, however, the foregoing restriction shall not apply to (a) the sale of hydrocarbons or inventory in the ordinary course of business provided that no contract for the sale of hydrocarbons shall obligate the Borrower to deliver hydrocarbons produced from any of the Mortgaged Property at some future date without receiving full payment therefor within 90 days of delivery, (b) the sale or other disposition of Property destroyed, lost, worn out, damaged, or having only salvage value or no longer used or useful in the business of the Borrower, (c) sales not exceeding an aggregate of $1,000,000 (based on Lender's Borrowing Base value) between Borrowing Base reviews with the proceeds applied as a prepayment of principal. 6.5 Leasebacks. Enter into any agreement to sell or transfer any Property and thereafter rent or lease as lessee such Property or other Property intended for the same use or purpose as the Property sold or transferred. 38 6.6 Loans or Advances. Make or agree to make or allow to remain outstanding any loans or advances to any Person in excess of $100,000; provided, however, the foregoing restrictions shall not apply to (a) advances or extensions of credit in the form of accounts receivable incurred in the ordinary course of business and upon terms common in the industry for such accounts receivable, (b) advances to employees of the Borrower for the payment of expenses in the ordinary course of business, or (c) loans or advances to Affiliates of the Borrower which are senior obligations and shall not exceed $1,500,000 including any investment in Affiliates of the Borrower allowed by Section 6.7. 6.7 Investments. Acquire Investments in, or purchase or otherwise acquire all or substantially all of the assets of, any Person; provided, however, the foregoing restriction shall not apply to the purchase or acquisition of (a) Oil and Gas Properties, (b) Investments in the form of (i) debt securities issued or directly and fully guaranteed or insured by the United States Government or any agency or instrumentality thereof, with maturities of no more than one year, (ii) commercial paper of a domestic issuer rated at the date of acquisition at least P-2 by Moody's Investor Service, Inc. or A-2 by Standard & Poor's Corporation and with maturities of no more than one year from the date of acquisition, or (iii) repurchase agreements covering debt securities or commercial paper of the type permitted in this Section, certificates of deposit, demand deposits, eurodollar time deposits, overnight bank deposits and bankers' acceptances, with maturities of no more than one year from the date of acquisition, issued by or acquired from or through the Lender or any bank or trust company organized under the laws of the United States or any state thereof and having capital surplus and undivided profits aggregating at least $100,000,000, (c) other short-term Investments similar in nature and degree of risk to those described in clause (b) of this Section, (d) money-market funds, (e) Commodity Hedge Agreements, as permitted by Section 6.17, (f) Rate Management Transactions, or (g) investments in Affiliates of the Borrower not to exceed $1,500,000 which shall include the loans allowed in Section 6.6. 6.8 Dividends. Declare, pay, or make, whether in cash or Property of the Borrower, any dividend or distribution on, or purchase, redeem, or otherwise acquire for value, any share of any class of its capital stock; provided, however, the foregoing restriction shall not apply to dividends paid in capital stock of the Borrower. 6.9 Issuance of Stock; Changes in Corporate Structure. Issue or agree to issue additional shares of capital stock, in one or any series of transactions; enter into any transaction of consolidation, merger, or amalgamation; liquidate, wind up, or dissolve (or suffer any liquidation or dissolution); provided, however, (a) any Person may merge with the Borrower, provided the Borrower shall be the continuing or surviving entity, or (b) any Subsidiary may sell, convey, transfer, lease or otherwise dispose of all or substantially all of its assets to the Borrower. 6.10 Transactions with Affiliates. Directly or indirectly, enter into any transaction (including the sale, lease, or exchange of Property or the rendering of service) with any of its Affiliates, other than upon fair and reasonable terms no less favorable than could be obtained in an arm's length transaction with a Person which was not an Affiliate. 39 6.11 Lines of Business. Expand, on its own or through any Subsidiary, into any line of business other than the business of the exploration for and development, acquisition, production and upstream marketing of Oil and Gas. 6.12 Plan Obligations. Assume or otherwise become subject to an obligation to contribute to or maintain any Plan or acquire any Person which has at any time had an obligation to contribute to or maintain any Plan. 6.13 Current Ratio. Permit, as of the close of any fiscal quarter, the ratio of Current Assets to Current Liabilities on a consolidated basis, to be less than 1.00 to 1.00 for each quarterly reporting period through September 30, 2000, and 1.25 to 1.00 for the reporting period ending December 31, 2000, and thereafter. 6.14 Debt Service. Permit, on a consolidated basis, as of the close of any fiscal quarter, the ratio of Cash Flow to Debt Service to be less than 1.25 to 1.00. 6.15 Tangible Net Worth. Permit, on a consolidated basis, Tangible Net Worth as of the close of any fiscal quarter to be less than $24,000,000, plus 75% of positive consolidated Net Income and 100% of net proceeds of equity contributions on a consolidated basis for all fiscal periods ending subsequent to March 31, 2000. 6.16 General and Administrative Expenses. Permit, on a consolidated basis, General and Administrative Expenses to be more than 35% of gross production revenue for each quarterly reporting period through September 30, 2000, and 25% thereafter. 6.17 Commodity Hedge Agreements. Enter into or in any manner be liable on any Commodity Hedging Agreement except those (a) approved by the Lender, (b) constituting not more than 75% of month production of proven producing reserves as forecast in Lender's most recent engineering evaluation, (c) where the strike prices in such agreements are not less than the prices used by the Lender in its most recent Borrowing Base determination, (d) where the maturities of such agreements shall be 24 months or less, and (e) where the Lender shall receive a security interest in the Commodity Hedge Agreements. 6.18 Subsidiaries. Borrowers will not form any subsidiaries. ARTICLE VII EVENTS OF DEFAULT 7.1 Enumeration of Events of Default. Any of the following events shall constitute an Event of Default: (a) default shall be made in the payment when due of any installment of principal or interest under this Credit Agreement or the Note or in the payment when 40 due of any fee or other sum payable under any Loan Document and such default as to interest or fees only shall have continued for three days; (b) default shall be made by the Borrower or the Guarantor in the due observance or performance of any of their respective obligations under the Loan Documents, and such default shall continue for 30 days after the earlier of notice thereof to the Borrower by the Lender or knowledge thereof by a Responsible Officer of the Borrower; (c) any representation or warranty made by the Borrower or the Guarantor in any of the Loan Documents proves to have been untrue in any material respect or any representation, statement (including Financial Statements), certificate, or data furnished or made to the Lender in connection herewith proves to have been untrue in any material respect as of the date the facts therein set forth were stated or certified; (d) default shall be made by the Borrower or the Guarantor (as principal or guarantor or other surety) in the payment or performance of any bond, debenture, note, or other Indebtedness or under any credit agreement, loan agreement, indenture, promissory note, or similar agreement or instrument executed in connection with any of the foregoing, and such default shall remain unremedied for in excess of the period of grace, if any, with respect thereto; (e) the Borrower or the Guarantor shall (i) apply for or consent to the appointment of a receiver, trustee, or liquidator of it or all or a substantial part of its assets, (ii) file a voluntary petition commencing an Insolvency Proceeding, (iii) make a general assignment for the benefit of creditors, (iv) be unable, or admit in writing its inability, to pay its debts generally as they become due, or (v) file an answer admitting the material allegations of a petition filed against it in any Insolvency Proceeding; (f) an order, judgment, or decree shall be entered against either the Borrower or the Guarantor by any court of competent jurisdiction or by any other duly authorized authority, on the petition of a creditor or otherwise, granting relief in any Insolvency Proceeding or approving a petition seeking reorganization or an arrangement of its debts or appointing a receiver, trustee, conservator, custodian, or liquidator of it or all or any substantial part of its assets, and such order, judgment, or decree shall not be dismissed or stayed within 30 days; (g) the levy against any significant portion of the Property of the Borrower or the Guarantor, or any execution, garnishment, attachment, sequestration, or other writ or similar proceeding which is not permanently dismissed or discharged within 30 days after the levy; (h) a final and non-appealable order, judgment, or decree shall be entered against the Borrower or the Guarantor for money damages and/or Indebtedness due 41 (to the extent not covered by independent third-party insurance as to which the insurer does not dispute coverage) in an amount in excess of $500,000, and such order, judgment, or decree shall not be dismissed or stayed within 30 days; (i) any charges are filed or any other action or proceeding is instituted by any Governmental Authority against either the Borrower or the Guarantor under the Racketeering Influence and Corrupt Organizations Statute (18 U.S.C. (S)1961 et seq.), the result of which could be the forfeiture or transfer of any material Property of the Borrower subject to a Lien in favor of the Lender without (i) satisfaction or provision for satisfaction of such Lien, or (ii) such forfeiture or transfer of such Property being expressly made subject to such Lien; (j) either the Borrower or the Guarantor shall have (i) concealed, removed, or diverted, or permitted to be concealed, removed, or diverted, any part of its Property, with intent to hinder, delay, or defraud its creditors or any of them, (ii) made or suffered a transfer of any of its Property which may be fraudulent under any bankruptcy, fraudulent conveyance, or similar law, (iii) made any transfer of its Property to or for the benefit of a creditor at a time when other creditors similarly situated have not been paid, or (iv) shall have suffered or permitted, while insolvent, any creditor to obtain a Lien upon any of its Property through legal proceedings or distraint which is not vacated within 30 days from the date thereof; (k) any Security Instrument shall for any reason not, or cease to, create valid and perfected first-priority Liens subject to Permitted Liens against the Collateral purportedly covered thereby; (l) Michael D. Watford shall cease to be the Chairman and Chief Executive officer of the Guarantor; (m) Guarantor shall cease to be the sole stockholder of the Borrowers; (n) if one party or an Affiliate of that party obtains 51% of the combined voting power of the securities of the Guarantor which are entitled to vote generally in the election of directors and which are outstanding on the date immediately prior to the date such party or Affiliate of such party obtains such voting power of Guarantor; (o) the occurrence of a Material Adverse Effect and the same shall remain unremedied for in excess of 30 days after notice given by the Lender. 7.2 Remedies. (a) Upon the occurrence of an Event of Default specified in Sections 7.1(f) or 7.1(g), immediately and without notice, (i) all Obligations shall automatically become immediately due and payable, without presentment, demand, protest, notice of protest, default, or dishonor, notice of intent to accelerate maturity, notice of acceleration of maturity, or other notice of any kind, except as may be provided to the contrary elsewhere herein, all of which are hereby expressly waived by the Borrower; (ii) the Commitment shall immediately cease and 42 terminate unless and until reinstated by the Lender in writing; and (iii) the Lender is hereby authorized at any time and from time to time, without notice to the Borrower (any such notice being expressly waived by the Borrower), to set- off and apply any and all deposits (general or special, time or demand, provisional or final) held by the Lender and any and all other indebtedness at any time owing by the Lender to or for the credit or account of the Borrower against any and all of the Obligations although such Obligations may be unmatured. (b) Upon the occurrence of any Event of Default other than those specified in Sections 7.1(f) or 7.1(g), (i) the Lender may, by notice to the Borrower, declare all Obligations immediately due and payable, without presentment, demand, protest, notice of protest, default, or dishonor, notice of intent to accelerate maturity, notice of acceleration of maturity, or other notice of any kind, except as may be provided to the contrary elsewhere herein, all of which are hereby expressly waived by the Borrower; (ii) the Commitment shall immediately cease and terminate unless and until reinstated by the Lender in writing; and (iii) the Lender is hereby authorized at any time and from time to time, without notice to the Borrower (any such notice being expressly waived by the Borrower), to set-off and apply any and all deposits (general or special, time or demand, provisional or final) held by the Lender and any and all other indebtedness at any time owing by the Lender to or for the credit or account of the Borrower against any and all of the Obligations although such Obligations may be unmatured. (c) Upon the occurrence of any Event of Default, the Lender may, in addition to the foregoing in this Section, exercise any or all of its rights and remedies provided by law or pursuant to the Loan Documents. ARTICLE VII MISCELLANEOUS 8.1 Successors and Assigns. The terms and provisions of the Loan Documents shall be binding upon and inure to the benefit of the Borrower and the Lender and their respective successors and assigns, except that (i) the Borrower shall not have the right to assign its rights or obligations under the Loan Documents and (ii) any assignment by the Lender must be made in compliance with Section 8.3. Notwithstanding clause (ii) of this Section, the Lender may at any time, without the consent of the Borrower, assign all or any portion of its rights under this Agreement and any Note to a Federal Reserve bank; provided, however, that no such assignment to a Federal Reserve Bank shall release the transferor Lender from its obligations hereunder. Any assignee or transferee of the rights to any Loan or any Note agrees by acceptance thereof to be bound by all the terms and provisions of the Loan Documents. Any request, authority or consent of any Person, who at the time of making such request or giving such authority or consent is the owner of the rights to any Loan (whether or not a Note has been issued in evidence thereof), shall be conclusive and binding on any subsequent holder, transferee or assignee of the rights to such Loan. 8.2 Participations. The Lender may, in the ordinary course of its business and in accordance with applicable law, at any time sell to one or more banks or other entities ("Participants") participating interests in any Loan owing to it, any Note held by it, the Commitment 43 or any other interest of the Lender under the Loan Documents. In the event of any such sale by the Lender of participating interests to a Participant, the Lender's obligations under the Loan Documents shall remain unchanged, the Lender shall remain solely responsible to the other parties hereto for the performance of such obligations, the Lender shall remain the owner of its Loans and the holder of any Note issued to it in evidence thereof for all purposes under the Loan Documents, all amounts payable by the Borrower under this Agreement shall be determined as if the Lender had not sold such participating interests, and the Borrower and the Lender shall continue to deal solely and directly with each other in connection with the Lender's rights and obligations under the Loan Documents. The Borrower agrees that each Participant shall be deemed to have the right of setoff in respect of its participating interest in amounts owing under the Loan Documents to the same extent as if the amount of its participating interest were owing directly to it as a Lender under the Loan Documents, provided that the Lender shall retain the right of setoff with respect to the amount of participating interests sold to each Participant. The Lender agrees to share with each Participant, and each Participant, by exercising the right of setoff agrees to share with the Lender, any amount received pursuant to the exercise of its right of setoff, such amounts to be shared in accordance as if each Participant were a Lender. 8.3 Assignments. The Lender may, in the ordinary course of its business and in accordance with applicable law, at any time assign to one or more banks or other entities ("Purchasers") all or any part of its rights and obligations under the Loan Documents. Each Borrower and the Lender hereby agree to execute any amendment and/or any other document that may be necessary to effectuate such an assignment. Such documents shall be in form and substance reasonably acceptable to each Borrower and the Lender. Such assignment shall be evidenced by the Lender's standard form (to be supplied upon request). The consent of the Borrower shall be required prior to an assignment becoming effective with respect to a Purchaser that is not a Lender or an affiliate thereof; provided, however, that if a Default has occurred and is continuing, the consent of the Borrower shall not be required. Upon delivering to the Borrower a notice of assignment, together with any required consent, such assignment shall become effective on the effective date specified in such notice of assignment. On and after the effective date of such assignment, such Purchaser shall for all purposes be a Lender party to the other Loan Documents and shall have all the rights and obligations of a Lender under the Loan Documents, to the same extent as if it were an original party hereto, and no further consent or action by the Borrower shall be required to release the Lender with respect to the percentage of the Commitment and Loans assigned to such Purchaser. Upon the consummation of any such assignment to a Purchaser, the transferor Lender, the Lender and the Borrower shall, if the Lender or the Purchaser desires, make appropriate arrangements so that new Notes or, as appropriate, replacement Notes, are issued to the Lender and Purchaser, in each case in principal amounts reflecting their respective Commitments, as adjusted pursuant to such assignment. 8.4 Dissemination of Information; Tax Treatment. The Borrower authorizes the Lender to disclose to any Participant or Purchaser or any other Person acquiring an interest in the Loan Documents by operation of law (each a "Transferee") and any prospective Transferee any and all information in the Lender's possession concerning the creditworthiness of the Borrower and its Subsidiaries. If any interest in any Loan Document is transferred to any Transferee which is organized under the laws of any jurisdiction other than the United States or any State thereof, the transferor Lender shall cause such Transferee, concurrently with the effectiveness of such transfer, 44 to deliver to the Lender such completed forms with respect to withholding taxes as the Borrower may reasonably require. 8.5 Survival of Representations, Warranties, and Covenants. All representations and warranties of the Borrower and all covenants and agreements herein made shall survive the execution and delivery of the Note and the Security Instruments and shall remain in force and effect so long as any Obligation is outstanding or any Commitment exists. 8.6 Notices and Other Communications. Except as to oral notices expressly authorized herein, which oral notices shall be confirmed in writing, all notices, requests, and communications hereunder shall be in writing (including by telecopy). Unless otherwise expressly provided herein, any such notice, request, demand, or other communication shall be deemed to have been duly given or made when delivered by hand, or, in the case of delivery by mail, when deposited in the mail, certified mail, return receipt requested, postage prepaid, or, in the case of telecopy notice, when receipt thereof is acknowledged orally or by written confirmation report, addressed as follows: (a) if to the Lender, to: Bank One, Texas, National Association 910 Travis, 6th Floor Houston, Texas 77002-5860 Attention: Energy Group, 6th Floor (or for notice by mail, to: P.O. Box 2629 Houston, Texas 77252-2629 Attention: Energy Group, 6th Floor Telecopy: (713) 751-7894 (b) if to the Borrower and Guarantor, to: Ultra Petroleum Corporation Ultra Petroleum (USA) Inc. Ultra Resources, Inc. 16801 Greenspoint Park, Suite 370 Houston, Texas 77060 Attention: Mr. Michael D. Watford Telecopy: (281) 876-2831 Any party may, by proper written notice hereunder to the others, change the individuals or addresses to which such notices to it shall thereafter be sent. 8.7 Parties in Interest. Subject to the restrictions on changes in corporate structure set forth in Section 6.9 and other applicable restrictions contained herein, all covenants and agreements herein contained by or on behalf of the Borrower or the Lender shall be binding upon and inure to the benefit of the Borrower or the Lender, as the case may be, and their respective legal representatives, successors, and assigns. 45 8.8 Rights of Third Parties. All provisions herein are imposed solely and exclusively for the benefit of the Lender and the Borrower. 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 Lender at any time if in its sole discretion it deems it advisable to do so. 8.9 Renewals; Extensions. All provisions of this Credit Agreement relating to the Note shall apply with equal force and effect to each promissory note hereafter executed which in whole or in part represents a renewal or extension of any part of the Indebtedness of the Borrower under this Credit Agreement, the Note, or any other Loan Document. 8.10 No Waiver; Rights Cumulative. No course of dealing on the part of the Lender, its officers or employees, nor any failure or delay by the Lender with respect to exercising any of its rights under any Loan Document shall operate as a waiver thereof. The rights of the Lender under the Loan Documents shall be cumulative and the exercise or partial exercise of any such right shall not preclude the exercise of any other right. Neither the making of any Loan nor the issuance of a Letter of Credit shall constitute a waiver of any of the covenants, warranties, or conditions of the Borrower contained herein. In the event the Borrower is unable to satisfy any such covenant, warranty, or condition, neither the making of any Loan nor the issuance of a Letter of Credit shall have the effect of precluding the Lender from thereafter declaring such inability to be an Event of Default as hereinabove provided. 8.11 Survival Upon Unenforceability. In the event any one or more of the provisions contained in any of the Loan Documents or in any other instrument referred to herein or executed in connection with the Obligations shall, for any reason, be held to be invalid, illegal, or unenforceable in any respect, such invalidity, illegality, or unenforceability shall not affect any other provision of any Loan Document or of any other instrument referred to herein or executed in connection with such Obligations. 8.12 Amendments; Waivers. Neither this Credit Agreement nor any provision hereof may be amended, waived, discharged, or terminated orally, but only by an instrument in writing signed by the party against whom enforcement of the amendment, waiver, discharge, or termination is sought. 8.13 Controlling Agreement. In the event of a conflict between the provisions of this Credit Agreement and those of any other Loan Document, the provisions of this Credit Agreement shall control. 8.14 Disposition of Collateral. Notwithstanding any term or provision, express or implied, in any of the Security Instruments, the realization, liquidation, foreclosure, or any other disposition on or of any or all of the Collateral shall be in the order and manner and determined in the sole discretion of the Lender; provided, however, that in no event shall the Lender violate applicable law or exercise rights and remedies other than those provided in such Security Instruments or otherwise existing at law or in equity. 46 8.15 GOVERNING LAW. THIS CREDIT AGREEMENT AND THE NOTE SHALL BE DEEMED TO BE CONTRACTS MADE UNDER AND SHALL BE CONSTRUED IN ACCORDANCE WITH AND GOVERNED BY THE LAWS OF THE STATE OF TEXAS WITHOUT GIVING EFFECT TO PRINCIPLES THEREOF RELATING TO CONFLICTS OF LAW; PROVIDED, HOWEVER, THAT CHAPTER 345 OF THE TEXAS FINANCE CODE (WHICH REGULATES CERTAIN REVOLVING CREDIT LOAN ACCOUNTS AND REVOLVING TRIPARTY ACCOUNTS) SHALL NOT APPLY. 8.16 JURISDICTION AND VENUE. ALL ACTIONS OR PROCEEDINGS WITH RESPECT TO, ARISING DIRECTLY OR INDIRECTLY IN CONNECTION WITH, OUT OF, RELATED TO, OR FROM THIS CREDIT AGREEMENT OR ANY OTHER LOAN DOCUMENT MAY BE LITIGATED, AT THE SOLE DISCRETION AND ELECTION OF THE LENDER, IN COURTS HAVING SITUS IN HOUSTON, HARRIS COUNTY, TEXAS. THE BORROWER HEREBY SUBMITS TO THE JURISDICTION OF ANY LOCAL, STATE, OR FEDERAL COURT LOCATED IN HOUSTON, HARRIS 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 LENDER IN ACCORDANCE WITH THIS SECTION. 8.17 WAIVER OF RIGHTS TO JURY TRIAL. THE BORROWER AND THE LENDER HEREBY KNOWINGLY, VOLUNTARILY, INTENTIONALLY, IRREVOCABLY, AND UNCONDITIONALLY WAIVE ALL RIGHTS TO TRIAL BY JURY IN ANY ACTION, SUIT, PROCEEDING, COUNTERCLAIM, OR OTHER LITIGATION THAT RELATES TO OR ARISES OUT OF ANY OF THIS CREDIT AGREEMENT OR ANY OTHER LOAN DOCUMENT OR THE ACTS OR OMISSIONS OF THE LENDER IN THE ENFORCEMENT OF ANY OF THE TERMS OR PROVISIONS OF THIS CREDIT AGREEMENT OR ANY OTHER LOAN DOCUMENT OR OTHERWISE WITH RESPECT THERETO. THE PROVISIONS OF THIS SECTION ARE A MATERIAL INDUCEMENT FOR THE LENDER ENTERING INTO THIS CREDIT AGREEMENT. 8.18 ENTIRE AGREEMENT. THIS CREDIT AGREEMENT AMENDS, RESTATES, AND REPLACES THE EXISTING CREDIT AGREEMENT AND CONSTITUTES THE ENTIRE CREDIT AGREEMENT BETWEEN THE PARTIES HERETO WITH RESPECT TO THE SUBJECT HEREOF AND SHALL SUPERSEDE ANY PRIOR AGREEMENT BETWEEN THE PARTIES HERETO, WHETHER WRITTEN OR ORAL, RELATING TO THE SUBJECT HEREOF, INCLUDING, WITHOUT LIMITATION, THE EXISTING CREDIT AGREEMENT AND THE CORRESPONDENCE DATED JANUARY 7, 2000, FROM THE LENDER TO THE BORROWER AND THE TERM SHEET ENCLOSED THEREWITH. FURTHERMORE, IN THIS REGARD, THIS CREDIT AGREEMENT AND THE OTHER WRITTEN LOAN DOCUMENTS REPRESENT, COLLECTIVELY, THE FINAL CREDIT AGREEMENT AMONG THE PARTIES THERETO 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. 47 8.19 Release by Borrower. Notwithstanding the assignment made and evidenced by the Assignment and the assumption by the Lender of certain obligations and liabilities of the Existing Lender pursuant thereto, the Borrower hereby releases and discharges the Lender from all obligations, claims, losses, causes of action, and liabilities, of whatsoever kind or nature, whether heretofore or hereafter accruing, whether now known or unknown, arising under or in connection with any Existing Loan Document or Existing Letter of Credit or any act or omission by the Existing Lender under or in connection with any Existing Loan Document or Existing Letter of Credit; provided, however, nothing set forth in this Section shall relieve the Lender from its obligations and liabilities under the Loan Documents (other than the Assignment) to which it is a party. 8.20 Counterparts. For the convenience of the parties, this Credit Agreement may be executed in multiple counterparts, each of which for all purposes shall be deemed to be an original, and all such counterparts shall together constitute but one and the same Credit Agreement. IN WITNESS WHEREOF, this Credit Agreement is deemed executed effective as of the date first above written. BORROWER: ULTRA PETROLEUM (USA) INC. By: /s/ Michael D. Watford --------------------------------------- Michael D. Watford Chairman and Chief Executive Officer ULTRA RESOURCES, INC. By: /s/ Michael D. Watford --------------------------------------- Michael D. Watford Chairman and Chief Executive Officer GUARANTOR: ULTRA PETROLEUM CORPORATION By: /s/ Michael D. Watford --------------------------------------- Michael D. Watford Chairman and Chief Executive Officer 48 LENDER: BANK ONE, TEXAS, NATIONAL ASSOCIATION By: /s/ Stephen Shatto ---------------------------------- Stephen Shatto Vice President 49 EXHIBIT I FORM OF NOTE PROMISSORY NOTE $40,000,000 Houston, Texas March 22, 2000 FOR VALUE RECEIVED and WITHOUT GRACE, the undersigned ("Maker") promises to pay to the order of BANK ONE, TEXAS, NATIONAL ASSOCIATION ("Payee"), at its banking quarters in Houston, Harris County, Texas, the sum of FORTY MILLION DOLLARS ($40,000,000), or so much thereof as may be advanced against this Note pursuant to the Credit Agreement dated of even date herewith by and between Maker and Payee (as amended, restated, or supplemented from time to time, the "Credit Agreement"), together with interest at the rates and calculated as provided in the Credit Agreement. Reference is hereby made to the Credit Agreement for matters governed thereby, including, without limitation, certain events which will entitle the holder hereof to accelerate the maturity of all amounts due hereunder. Capitalized terms used but not defined in this Note shall have the meanings assigned to such terms in the Credit Agreement. This Note is issued pursuant to, is the "Note" under, and is payable as provided in the Credit Agreement. Subject to compliance with applicable provisions of the Credit Agreement, Maker may at any time pay the full amount or any part of this Note without the payment of any premium or fee, but such payment shall not, until this Note is fully paid and satisfied, excuse the payment as it becomes due of any payment on this Note provided for in the Credit Agreement. Without being limited thereto or thereby, this Note is secured by the Security Instruments. This Note is issued, in whole or in part, in renewal and extension, but not in novation or discharge, of the remaining principal balance of the Existing Note. THIS NOTE SHALL BE GOVERNED AND CONTROLLED BY THE LAWS OF THE STATE OF TEXAS WITHOUT GIVING EFFECT TO PRINCIPLES THEREOF RELATING TO CONFLICTS OF LAW; PROVIDED, HOWEVER, THAT CHAPTER 345 OF THE TEXAS FINANCE CODE (WHICH REGULATES CERTAIN REVOLVING CREDIT LOAN ACCOUNTS AND REVOLVING TRIPARTY ACCOUNTS) SHALL NOT APPLY TO THIS NOTE. ULTRA PETROLEUM (USA) INC. By: ----------------------------------------- Printed Name: Title: (Page One of Two Page Note) I-i ULTRA RESOURCES, INC. By: ----------------------------------------- Printed Name: Title: (Page Two of Two Page Note) I-ii EXHIBIT II FORM OF BORROWING REQUEST Bank One, Texas, National Association 910 Travis Houston, Texas 77002-5860 Attention: Energy Group, 6th Floor Re: Credit Agreement dated as of March 22, 2000, by and between BANK ONE, TEXAS, NATIONAL ASSOCIATION, ULTRA PETROLEUM (USA) INC., and ULTRA RESOURCES, INC. (as amended, restated, or supplemented from time to time, the "Credit Agreement") Ladies and Gentlemen: Pursuant to the Credit Agreement, the Borrower hereby makes the requests indicated below: [ ] 1. Loans (a) Amount of new Loan: $________________ (b) Requested funding date: ___________, 20___ (c) $________________ of such Loan is to be a Floating Rate Loan; $________________ of such Loan is to be a LIBO Rate Loan. (d) Requested Interest Period for LIBO Rate Loan: ____ months. [ ] 2. Continuation or conversion of LIBO Rate Loan maturing on __________: (a) Amount to be continued as a LIBO Rate Loan is $______________________, with an Interest Period of ____ months; (b) Amount to be converted to a Floating Rate Loan is $________________; and [ ] 3. Conversion of Floating Rate Loan: (a) Requested conversion date: __________, 20____. (b) Amount to be converted to a LIBO Rate Loan is $________, with an Interest Period of _____ months. II-i The undersigned certifies that she is the __________ of the Borrower, has obtained all consents necessary, and as such she is authorized to execute this request on behalf of the Borrower. The undersigned further certifies, represents, and warrants on behalf of the Borrower that the Borrower is entitled to receive the requested borrowing, continuation, or conversion under the terms and conditions of the Credit Agreement. Each capitalized term used but not defined herein shall have the meaning assigned to such term in the Credit Agreement. ULTRA PETROLEUM (USA) INC. By: -------------------------------------- Printed Name: Title: ULTRA RESOURCES, INC. By: -------------------------------------- Printed Name: Title: II-ii EXHIBIT III FORM OF COMPLIANCE CERTIFICATE ______________, 20__ Bank One, Texas, National Association 910 Travis Houston, Texas 77002-5860 Attention: Energy Group, 6th Floor Re: Credit Agreement dated as of March 22, 2000, by and between BANK ONE, TEXAS, NATIONAL ASSOCIATION, ULTRA PETROLEUM (USA) INC., and ULTRA RESOURCES, INC. (as amended, restated, or supplemented from time to time, the "Credit Agreement") Ladies and Gentlemen: Pursuant to applicable requirements of the Credit Agreement, the undersigned, as a Responsible Officer of the Borrower, hereby certifies to you the following information as true and correct as of the date hereof or for the period indicated, as the case may be: 1. To the best of the knowledge of the undersigned, no Default or Event of Default exists as of the date hereof or has occurred since the date of our previous certification to you, if any. 1. To the best of the knowledge of the undersigned, the following Defaults or Events of Default exist as of the date hereof or have occurred since the date of our previous certification to you, if any, and the actions set forth below are being taken to remedy such circumstances: 2. The compliance of the Borrower with the financial covenants of the Credit Agreement, as of the close of business on ____________________, is evidenced by the following: (a) Section 6.13: Current Ratio. Permit, as of the close of any fiscal quarter, the ratio of Current Assets to Current Liabilities, on a consolidated basis, to be less than 1.00 to 1.00 for each quarterly reporting period through September 30, 2000, and 1.25 to 1.00 for the reporting period ending December 31, 2000, and thereafter. Actual to 1.0 III-i (b) Section 6.14: Debt Service. Permit, on a consolidated basis, as of the close of any fiscal quarter, the ratio of Cash Flow to Debt Service to be less than 1.25 to 1.00. Actual to 1.0 (c) Section 6.15: Tangible Net Worth. Permit, on a consolidated basis, Tangible Net Worth as of the close of any fiscal quarter to be less than $24,000,000, plus 75% of positive consolidated Net Income and 100% of net proceeds of equity contributions on a consolidated basis for all fiscal periods ending subsequent to March 31, 2000. Required Actual (d) Section 6.16: General and Administrative Expenses. Permit, on a consolidated basis, General and Administrative Expenses to be more than 35% of production revenue for each quarterly reporting period through September 30, 2000, and 25% thereafter. Actual 3. No Material Adverse Effect has occurred since the date of the Financial Statements dated as of ______________________. Each capitalized term used but not defined herein shall have the meaning assigned to such term in the Credit Agreement. ULTRA PETROLEUM (USA) INC. By: ------------------------------------- Printed Name: Title: ULTRA RESOURCES, INC. By: ------------------------------------- Printed Name: Title: III-ii EXHIBIT IV FORM OF OPINION OF COUNSEL Closing Date Bank One, Texas, National Association 910 Travis Houston, Texas 77002-5860 Attention: Energy Group, 6th Floor Re: Credit Agreement dated as of March 22, 2000, by and between BANK ONE, TEXAS, NATIONAL ASSOCIATION, ULTRA PETROLEUM (USA) INC., and ULTRA RESOURCES, INC. (as amended, restated, or supplemented from time to time, the "Credit Agreement") Ladies and Gentlemen: We have acted as counsel to Ultra Petroleum (USA) Inc. and Ultra Resources, Inc. (collectively, the "Borrower") and Ultra Petroleum Corporation. (the "Guarantor") in connection with the transactions contemplated in the Credit Agreement. This Opinion is delivered pursuant to Section 3.1(n) of the Credit Agreement, and the Lender is hereby authorized to rely upon this Opinion in connection with the transactions contemplated in the Credit Agreement. Each capitalized term used but not defined herein shall have the meaning assigned to such term in the Credit Agreement. In our representation of the Borrower and the Guarantor, we have examined an executed counterpart of each of the following (the "Loan Documents"): (a) the Credit Agreement; (b) the Note; (c) the Guaranty; (d) Mortgage, Deed of Trust, Indenture, Security Agreement, Assignment of Production, and Financing Statement dated of even date herewith from the Borrower in favor of the Lender (the "Mortgage"); and (e) Financing Statements from the Borrower, as debtors, constituent to the Mortgage (the "Financing Statement"). We have also examined the originals, or copies certified to our satisfaction, of such other records of the Borrower and the Guarantor, certificates of public officials and officers of the IV-i Borrower and the Guarantor, agreements, instruments, and documents as we have deemed necessary as a basis for the opinions hereinafter expressed. In making such examinations, we have, with your permission, assumed: (a) the genuineness of all signatures to the Loan Documents other than those of the Borrower and the Guarantor; (b) the authenticity of all documents submitted to us as originals and the conformity with the originals of all documents submitted to us as copies; (c) the Lender is authorized and has the power to enter into and perform its obligations under the Credit Agreement; (d) the due authorization, execution, and delivery of all Loan Documents by each party thereto other than the Borrower and the Guarantor; and (e) the Borrower has title to all Property covered or affected by the Mortgage. Based upon the foregoing and subject to the qualifications set forth herein, we are of the opinion that: 1. The Borrower and the Guarantor are corporations duly organized, legally existing, and in good standing under the laws of its their respective states of incorporation and is are duly qualified as a foreign corporations and is are in good standing in all jurisdictions wherein the ownership of its their respective Property or the operation of its their respective businesses necessitates same. 2. The execution and delivery by the Borrower of the Credit Agreement and the borrowings thereunder, the execution and delivery by the Borrower of the other Loan Documents to which the Borrower is a party, and the payment and performance of all Obligations of the Borrower thereunder are within the power of the Borrower, have been duly authorized by all necessary corporate action, and do not (a) require the consent of any Governmental Authority, (b) contravene or conflict with any Requirement of Law, (c) to our knowledge after due inquiry, contravene or conflict with any indenture, instrument, or other agreement to which the Borrower is a party or by which any Property of the Borrower may be presently bound or encumbered, or (d) result in or require the creation or imposition of any Lien upon any Property of the Borrower other than as contemplated by the Loan Documents. 3. The execution and delivery of the Guaranty and the other Loan Documents executed by the Guarantor and the performance of all Obligations of the Guarantor thereunder are within the power of the Guarantor, have been duly authorized by all necessary corporate action, and do not (a) require the consent of any Governmental Authority, (b) contravene or conflict with any Requirement of Law, IV-ii (c) to our knowledge after due inquiry, contravene or conflict with any indenture, instrument, or other agreement to which the Guarantor is a party or by which any Property of the Guarantor may be presently bound or encumbered, or (d) result in or require the creation or imposition of any Lien upon any Property of the Guarantor other than as contemplated by the Loan Documents. 4. The Loan Documents to which the Borrower is a party constitute legal, valid, and binding obligations of the Borrower, enforceable against the Borrower in accordance with their respective terms. 5. The Loan Documents to which the Guarantor is a party constitute legal, valid, and binding obligations of the Guarantor, enforceable against the Guarantor in accordance with their respective terms. 6. The forms of the Mortgage and the Financing Statement and the description of the Mortgaged Property (as such term is defined in the Mortgage and so used herein) situated in the State of Texas (the "State") satisfy all applicable Requirements of Law of the State and are legally sufficient under the laws of the State to enable the Lender to realize the practical benefits purported to be afforded by the Mortgage. 7. The Mortgage creates a valid lien upon and security interest in all Mortgaged Property situated in the State to secure the Indebtedness (as such term is defined in the Mortgage and so used herein). 8. The Mortgage and the Financing Statement are in satisfactory form for filing and recording in the offices described below. 9. The filing and/or recording, as the case may be, of (a) the Mortgage in the office of the county clerk of each county in the State in which any portion of the Mortgaged Property is located, and as a financing statement and utility security instrument in the office of the Secretary of State of the State, and (b) the Financing Statement in the Uniform Commercial Code records in each county in the State in which any portion of the Mortgaged Property is located are the only recordings or filings in the State necessary to perfect the liens and security interests in the Mortgaged Property created by the Mortgage or to permit the Lender to enforce in the State its rights under the Mortgage. No subsequent filing, re-filing, recording, or re-recording will be required in the State in order to continue the perfection of the liens and security interests created by the Mortgage except that (a) a continuation statement must be filed with respect to the Mortgage filed as a financing statement in the office of the Secretary of State of the State and with respect to the Financing Statement in the Uniform Commercial Code records in each county in the State in which any portion of the Mortgaged Property is located, each within six months prior to the expiration of five years from the date of the relevant initial financing statement filing, (b) a subsequent continuation statement must be filed within six months prior to the expiration of each subsequent five-year period from the date of each initial IV-iii financing statement filing, and (c) amendments or supplements to the Mortgage filed as a financing statement and the Financing Statement and/or additional financing statements may be required to be filed in the event of a change in the name, identity, or structure of the Borrower or in the event the financing statement filing otherwise becomes inaccurate or incomplete. 10. To our knowledge after due inquiry, except as disclosed in Exhibit VI to the Credit Agreement, no litigation or other action of any nature affecting the Borrower or the Guarantor is pending before any Governmental Authority or threatened against the Borrower or the Guarantor. To our knowledge after due inquiry, no unusual or unduly burdensome restriction, restraint, or hazard exists by contract, Requirement of Law, or otherwise relative to the business or operations of the Borrower or the Guarantor or the ownership and operation of any Properties of the Borrower or the Guarantor other than such as relate generally to Persons engaged in business activities similar to those conducted by the Borrower or the Guarantor, as the case may be. 11. No authorization, consent, approval, exemption, franchise, permit or license of, or filing (other than filing of Security Instruments in appropriate filing offices) with, any Governmental Authority or any other Person is required to authorize or is otherwise required in connection with the valid execution and delivery by the Borrower and the Guarantor of the Loan Documents or any instrument contemplated thereby, or the payment performance by the Borrower and the Guarantor of the Obligations. 12. No transaction contemplated by the Loan Documents is in violation of any regulations promulgated by the Board of Governors of the Federal Reserve System, including, without limitation, Regulations G, T, U, or X. 13. The Borrower is not, nor is the Borrower directly or indirectly controlled by or acting on behalf of any Person which is, an "investment company" or an "affiliated person" of an "investment company" within the meaning of the Investment Company Act of 1940, as amended. 14. The Borrower is not a "holding company," or an "affiliate" of a "holding company" or of a "subsidiary company" of a "holding company," within the meaning of the Public Utility Holding Company Act of 1935, as amended. The opinions expressed herein are subject to the following qualifications and limitations: A. We are licensed to practice law only in the State and other jurisdictions whose laws are not applicable to the opinions expressed herein; accordingly, the foregoing opinions are limited solely to the laws of the State, applicable United States federal law, and the corporation laws of the State of _______________. IV-iv B. The validity, binding effect, and enforceability of the Loan Documents may be limited or affected by bankruptcy, insolvency, moratorium, reorganization, or other similar laws affecting rights of creditors generally, including, without limitation, statutes or rules of law which limit the effect of waivers of rights by a debtor or grantor; provided, however, that the limitations and other effects of such statutes or rules of law upon the validity and binding effect of the Loan Documents should not differ materially from the limitations and other effects of such statutes or rules of law upon the validity and binding effect of credit agreements, promissory notes, guaranties, and security instruments generally. C. The enforceability of the respective obligations of the Borrower under the Loan Documents is subject to general principles of equity (whether such enforceability is considered in a suit in equity or at law). This Opinion is furnished by us solely for the benefit of the Lender in connection with the transactions contemplated by the Loan Documents and is not to be quoted in whole or in part or otherwise referred to or disclosed in any other transaction. Very truly yours, IV-v EXHIBIT V FORM OF OPINION OF LOCAL COUNSEL Closing Date Bank One, Texas, National Association 910 Travis Houston, Texas 77002-5860 Attention: Energy Group, 6th Floor Re: Credit Agreement dated as of March 22, 2000, by and between BANK ONE, TEXAS, NATIONAL ASSOCIATION, ULTRA PETROLEUM (USA) INC., and ULTRA RESOURCES, INC. (as amended, restated, or supplemented from time to time, the "Credit Agreement") Ladies and Gentlemen: We have acted as special counsel in the State of Wyoming (the "State") to Ultra Petroleum Corporation, Ultra Petroleum (USA) Inc., and Ultra Resources, Inc. (collectively, the "Borrower") in connection with the transactions contemplated in the Loan Documents described below which were executed pursuant to the Credit Agreement. In such capacity, we furnish this Opinion with the intention and understanding that it is to be relied upon by ________________ (the "Lender") in the closing of the transactions contemplated in the Credit Agreement. In our representation of the Borrower, we have examined an executed counterpart of each of the following (the "Loan Documents"): (a) Mortgage, Deed of Trust, Indenture, Security Agreement, Assignment of Production and Financing Statement dated of even date herewith from the Borrower in favor of the Lender (the "Mortgage"); and (b) Non-Standard Financing Statement constituent to the Mortgage (the "Financing Statement"). In making such examination, we have, with your permission, assumed: (a) the genuineness of all signatures to the Loan Documents; (b) the authenticity of all documents submitted to us as originals and the conformity with the originals of all documents submitted to us as copies; V-i (c) each party to any Loan Document is authorized and has the power to enter into and perform its obligations under such Loan Document; (d) the due authorization, execution, and delivery of all Loan Documents by each party thereto; (e) the Borrower is a duly organized and validly existing corporation validly formed limited partnership under the laws of the State of ___________; (f) the Borrower has title to all Mortgaged Property (as such term is defined in the Mortgage and so used herein) situated in the State. Based upon the foregoing and subject to the qualifications set forth herein, we are of the opinion that: 1. No consent, approval, or other authorization of, or filing or registration (other than as described in paragraph A.7 hereof) with, any court, governmental agency, commission, or other authority of the State or any subdivision thereof is required for the due execution and delivery of the Loan Documents or for the enforceability, performance, or observance of the terms thereof. 2. The execution and delivery by the Borrower of each Loan Document to which it is a party, compliance with the provisions thereof, and the consummation of the transactions contemplated thereby will not conflict with or result in a violation of any law or governmental rule or regulation of the State or any subdivision thereof. 3. The Loan Documents to which the Borrower is a party constitute legal, valid, and binding obligations of the Borrower, enforceable against the Borrower in accordance with their respective terms. 4. The forms of the Mortgage and the Financing Statement and the description of the Mortgaged Property situated in the State satisfy all applicable laws of the State and are legally sufficient under the laws of the State to enable the Lender to realize the practical benefits purported to be afforded by the Mortgage. 5. The Mortgage (a) creates a lien upon and a security interest in all Mortgaged Property situated in the State to secure the Indebtedness (as such term is defined in the Mortgage and so used herein), and (b) provides for nonjudicial foreclosure remedies customarily used in the State. 6. The Mortgage and the Financing Statement are in satisfactory form for filing and recording in the offices described below. 7. The filing and/or recording, as the case may be, of (a) the Mortgage in the office of the county clerk of each county in the State in which any portion of the Mortgaged Property is located and as a financing statement in the office of the V-ii Secretary of State of the State, and (b) the Financing Statement in the Uniform Commercial Code records in each county in the State in which any portion of the Mortgaged Property is located are the only recordings or filings in the State necessary to perfect the liens and security interests in the Mortgaged Property created by the Mortgage or to permit the Lender to enforce in the State its rights under the Mortgage. No subsequent filing, re-filing, recording, or re-recording will be required in the State in order to continue the perfection of the liens and security interests created by the Mortgage except that (a) a continuation statement must be filed with respect to the Mortgage filed as a financing statement in the office of the Secretary of State of the State and with respect to the Financing Statement in the Uniform Commercial Code records in each county in the State in which any portion of the Mortgaged Property is located, each within six months prior to the expiration of five years from the date of the relevant initial financing statement filing, (b) a subsequent continuation statement must be filed within six months prior to the expiration of each subsequent five-year period from the date of each initial financing statement filing, and (c) amendments or supplements to the Mortgage filed as a financing statement and the Financing Statement and/or additional financing statements may be required to be filed in the event of a change in the name, identity, or structure of the Borrower or in the event the financing statement filing otherwise becomes inaccurate or incomplete. 8. No state or local mortgage recording tax, stamp tax, or other similar fee, tax, or governmental charge (other than statutory filing and recording fees to be paid upon filing) is required to be paid to the State or any subdivision thereof in connection with the execution, delivery, filing, or recording of any of the Loan Documents or the consummation of the transactions contemplated therein. 9. It is not necessary for the Lender to qualify to do business in the State or file in the State any designation for service of process or reports solely by reason of the interests conveyed or assigned to it or for its benefit under the Mortgage, nor will such conveyances or assignments alone result in the imposition upon the Lender of any taxes by the State or by any subdivision thereof, including, without limitation, franchise, license, tax on interest received or income taxes, other than recording and filing fees in connection with the filings referred to in paragraph A.7 above and taxes which the Lender may owe in the event it becomes the actual and record owner of any Mortgaged Property situated in the State. 10. The foreclosure of, or exercise of the power of sale under, the Mortgage will not in any manner restrict, affect or impair the liability of the Borrower with respect to the indebtedness or the rights and remedies of the Lender with respect to the foreclosure or enforcement of any other security interests or liens securing the Indebtedness to the extent any deficiency remains unpaid after application to the Indebtedness of the proceeds of such foreclosure or the exercise of such power of sale. V-iii 11. The priority of the liens and security interests created by the Mortgage with respect to Indebtedness incurred by the Borrower on or before the date on which the Mortgage is filed in the appropriate recording offices referred to hereinabove will be determined by the date of such filings. The priority of the lien created by the Mortgage with respect to Indebtedness incurred by the Borrower after the date the Mortgage is recorded will be determined by the dates the Mortgage is filed. 12. The priority of the lien created by the Mortgage will not be affected by any prepayment of a portion, but less than all, of the Indebtedness, or any reduction or increase of the outstanding amount of the Indebtedness from time to time. 13. The limitations period for enforcement of the Mortgage in the State is ______________. The opinions expressed herein are subject to the following qualifications and limitations: A. We are licensed to practice law only in the State and other jurisdictions whose laws are not applicable to the opinions expressed herein; accordingly, the foregoing opinions are limited solely to the laws of the State and applicable United States federal law. B. The validity, binding effect, and enforceability of the Loan Documents may be limited or affected by bankruptcy, insolvency, moratorium, reorganization, or other similar laws affecting rights of creditors generally, including, without limitation, statutes or rules of law which limit the effect of waivers of rights by a debtor or grantor; provided, however, that the limitations and other effects of such statutes or rules of law upon the validity and binding effect of the Loan Documents should not differ materially from the limitations and other effects of such statutes or rules of law upon the validity and binding effect of assignments and security instruments generally. C. The enforceability of the respective obligations of the Borrower under the Loan Documents to which it is a party is subject to general principles of equity (whether such enforceability is considered in a suit in equity or at law). This Opinion is furnished by us solely for the benefit of the Lender in connection with the transactions contemplated by the Loan Documents and is not to be quoted in whole or in part or otherwise referred to or disclosed in any other transaction. Very truly yours, V-iv EXHIBIT VI DISCLOSURES Section 4.8 Liabilities Litigation Section 4.12 Environmental Matters Section 4.17 Refunds Section 4.18 Gas Contracts Section 4.20 Casualties Section 4.22, 4.23 Subsidiaries VI-i EX-10.2 7 dex102.txt RATIFICATION OF MORTGAGE EXHIBIT 10.2 RATIFICATION OF AND AMENDMENT TO MORTGAGE, DEED OF TRUST, SECURITY AGREEMENT, FINANCING STATEMENT, FIXTURE FILING AND ASSIGNMENT OF PRODUCTION This instrument, dated effective as of the 15th day of February, 2001, is by ULTRA PETROLEUM (USA) INC., a Colorado corporation, whose Taxpayer Identification Number is 84-1241154, and ULTRA RESOURCES, INC., a Wyoming corporation, whose Taxpayer Identification Number is 83-0320643 (collectively, "Mortgagor"), the address for which for all purposes hereof is 16801 Greenspoint Park Drive, Suite 370, Houston, Texas 77060-2396, and BANK ONE, NA, as successor by merger to Bank One, Texas, National Association, with its main office in Chicago, Illinois, and the mailing address for which is P.O. Box 2629, Houston, Texas 77252-2629 ("Mortgagee"). W I T N E S S E T H: WHEREAS, Mortgagor has heretofore executed certain security instruments more particularly described in Exhibit A attached hereto and incorporated herein for all purposes by this reference (the "Security Instruments," whether one or more); and WHEREAS, the Security Instruments were executed and delivered to secure the payment or performance of certain indebtedness and other obligations of Mortgagor, as more fully described in said instruments (the "Indebtedness"); and WHEREAS, pursuant to the Credit Agreement dated March 22, 2000, by and between Mortgagor and Mortgagee, described in the Security Instruments (as amended, restated, or supplemented from time to time, the "Credit Agreement"), the parties desire to amend the Security Instruments as described below; NOW, THEREFORE, in consideration of the foregoing, the benefits to be derived by Mortgagor and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged by Mortgagor, the parties hereto agree as follows, with capitalized terms used but not defined herein having meanings assigned to such terms in the Credit Agreement. 1. AMENDMENTS. a. AMENDMENT OF MORTGAGEE. All references to Mortgagee and Secured Party in the Security Instruments are hereby amended to refer to Bank One, NA, with its main office in Chicago, Illinois, together with its successors in such capacity, whose address is as set forth hereinabove. b. AMENDMENT OF TRUSTEE. All references to trustee in the Security Instruments are amended to refer to Stephen M. Shatto, whose address is c/o Bank One, NA, P.O. Box 2629, Houston, Texas 77252-2629, and his successors and substitutes in trust for the benefit of Bank One, NA, with its main office in Chicago, Illinois. c. INCLUSION OF ADDITIONAL MORTGAGED PROPERTY. The Security Instruments are hereby amended so as to subject to the liens and security interests thereof the oil, gas and mineral interests described in Exhibit B and all elements of personalty associated therewith and as to which a security interest therein may be created pursuant to the Uniform Commercial Code, including those enumerated in the Security Instruments (together with the oil, gas and mineral interests and personalty associated therewith presently subject to the Security Instruments (the "Mortgaged Property"). All references to the Mortgaged Property in the Security Instruments or herein shall be deemed to include the oil, gas and mineral interests described in Exhibit B and the personalty associated therewith. 2. WARRANTIES, REPRESENTATIONS, AND COVENANTS. The warranties, representations and covenants of Mortgagor contained in the Security Instruments are hereby remade by Mortgage to Mortgagee and are in full force and effect as of the date hereof. Said warranties, representations, and covenants shall apply with equal force and effect to the oil, gas and mineral interests described in Exhibit B and personalty associated therewith. 3. REAFFIRMATION OF SECURITY INSTRUMENTS. To secure the Indebtedness, Mortgagor has granted, bargained, sold, mortgaged, assigned, transferred and conveyed, and by these presents does grant, bargain, sell, mortgage, assign, transfer and convey, unto the Trustee named in the Security Instruments as amended herein ("Trustee"), for the benefit of Mortgagee, and grants to Mortgagee a security interest in, all of Mortgagor's right, title and interest, whether now owned or hereafter acquired, in and to the Mortgaged Property, including, without limitation, the oil, gas and mineral interests described in Exhibit B and personalty associated therewith. TO HAVE AND TO HOLD the Mortgaged Property, together with the rights, privileges and appurtenances now or hereafter at any time before the release of the Security Instruments in anywise belonging or appertaining thereto, unto said Trustee, as Trustee forever, IN TRUST, NEVERTHELESS, for the benefit of Mortgagee, to secure the payment of the Indebtedness and the performance of the agreements and covenants of Mortgagor herein and in the Security Instruments. 4. MISCELLANEOUS. This instrument shall be considered as an amendment to and ratification of the Security Instruments, and the Security Instruments, as herein expressly amended, and hereby ratified, approved and confirmed in every respect. All liens created, extended or renewed by the Security Instruments are hereby extended, renewed and carried forward by this instrument and incorporated herein. All references to the Security Instruments in any documents 2 heretofore or hereafter executed shall be deemed to refer to the Security Instruments as amended by this instrument. For the convenience of the parties, this instrument may be executed in multiple counterparts. Each of the counterparts hereof so executed shall for all purposes be deemed to be an original, and all such counterparts shall together constitute but one and the same instrument. IN WITNESS WHEREOF, Mortgagor and Mortgagee have executed this instrument on the date of their respective acknowledgments below but effective as of the date first above written. MORTGAGOR: ULTRA PETROLEUM (USA) INC. By: /s/ Michael D. Watford ------------------------------ Michael D. Watford Chairman and Chief Executive Officer Taxpayer Identification Number 84-1241154 ULTRA RESOURCES, INC. By: /s/ Michael D. Watford ------------------------------ Michael D. Watford Chairman and Chief Executive Officer Taxpayer Identification Number 83-0320643 MORTGAGEE: BANK ONE, NA By: /s/ Stephen M. Shatto ------------------------------ Stephen M. Shatto Vice President Taxpayer Identification Number 74-1508719 3 THE STATE OF TEXAS COUNTY OF HARRIS The foregoing was acknowledged before me by MICHAEL D. WATFORD, Chairman and Chief Executive Officer of ULTRA PETROLEUM (USA) INC., a Colorado corporation, and Chairman and Chief Executive Officer of ULTRA RESOURCES, INC., a Wyoming corporation, this 5th day of March, 2001. WITNESS my hand and official seal. My Commission Expires: /s/ Dena Renae DuBose 12-07-04 -------------------------------- NOTARY PUBLIC in and for the State of Texas [SEAL] THE STATE OF TEXAS COUNTY OF HARRIS The foregoing was acknowledged before me by STEPHEN M. SHATTO, Vice President of BANK ONE, NA, this 13th day of March, 2001. WITNESS my hand and official seal. My Commission Expires: /s/ Frankie L. Morgan 09-07-03 -------------------------------- NOTARY PUBLIC in and for the State of Texas [SEAL] 4 EXHIBIT A TO RATIFICATION OF AND AMENDMENT TO MORTGAGE, DEED OF TRUST, SECURITY AGREEMENT, FINANCING STATEMENT, FIXTURE FILING AND ASSIGNMENT OF PRODUCTION SECURITY INSTRUMENTS 1. Mortgage, Deed of Trust, Security Agreement, Financing Statement, Fixture Filing and Assignment of Production dated March 22, 2000, from Ultra Petroleum (USA) Inc. and Ultra Resources, Inc., to Arthur R. Gralla, Jr., Trustee for the benefit of Bank One, Texas, National Association, filed and recorded as follows: JURISDICTION FILING DATA ------------ ----------- SUBLETTE COUNTY, WYOMING Filed April 17, 2000, under Clerk's Entry No. 278180, Book 114 O&G, Page 629 2. Non-Standard Financing Statement from Ultra Petroleum (USA) Inc. and Ultra Resources, Inc., as Debtors, to Bank One, Texas, National Association, Secured Party, filed as follows: JURISDICTION FILING DATA ------------ ----------- SUBLETTE COUNTY, WYOMING Filed April 17, 2000, Financing Statement No. 278184 and/or 035811 SECRETARY OF STATE OF WYOMING Filed April 11, 2000, Financing Statement No. 00-102-13-1CO2 A-i EXHIBIT B TO RATIFICATION OF AND AMENDMENT TO MORTGAGE, DEED OF TRUST, SECURITY AGREEMENT, FINANCING STATEMENT, FIXTURE FILING AND ASSIGNMENT OF PRODUCTION OIL, GAS AND MINERAL INTERESTS SUBLETTE COUNTY, WYOMING
INSOFAR AND ONLY INSOFAR AS WELL NAME WI NRI LEASE LESSEE DATE LEASE COVERS STUD HORSE BUTTE 2-23 63.7500% 51.0000% BLM WYM-118155 ONAGER ENTERPRISES 12/1/89 29N-108W-23-NWNE STUD HORSE BUTTE 4-24 63.7500% 51.0000% BLM WYM-118155 ONAGER ENTERPRISES 12/1/89 29N-108W-24-NWNW STUD HORSE BUTTE 6-23 63.7500% 51.0000% BLM WYM-118155 ONAGER ENTERPRISES 12/1/89 29N-108W-23-SENW STUD HORSE BUTTE 8-23 63.7500% 51.0000% BLM WYM-118155 ONAGER ENTERPRISES 12/1/89 29N-108W-23-SENE STUD HORSE BUTTE 10-23 63.7500% 51.0000% BLM WYM-118155 ONAGER ENTERPRISES 12/1/89 29N-108W-23-NWSE STUD HORSE BUTTE 10-24 63.7500% 51.0000% BLM WYM-118155 ONAGER ENTERPRISES 12/1/89 29N-108W-24-NWSE STUD HORSE BUTTE 12-24 63.7500% 51.0000% BLM WYM-118155 ONAGER ENTERPRISES 12/1/89 29N-108W-24-NWSW STUD HORSE BUTTE 14-23 63.7500% 51.0000% BLM WYM-118155 ONAGER ENTERPRISES 12/1/89 29N-108W-23-SESW STUD HORSE BUTTE 14-24 63.7500% 51.0000% BLM WYM-118155 ONAGER ENTERPRISES 12/1/89 29N-108W-24-SESW STUD HORSE BUTTE 16-23 63.7500% 51.0000% BLM WYM-118155 ONAGER ENTERPRISES 12/1/89 29N-108W-23-SESE
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INSOFAR AND ONLY INSOFAR AS WELL NAME WI NRI LEASE LESSEE DATE LEASE COVERS STEWART POINT WELLS - ------------------- STEWART POINT 6-32 50.0000% 38.8500% BLM WYW-015315 MARY ALICE GUENSEL 6/1/52 33N-109W-32-SENW PINEDALE 4A 63.7500% 51.0000% BLM WYW-06286 DONALD B ANDERSON 6/1/51 32N-109W-34-NW
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