Exhibit 10.1

 

AMENDED AND RESTATED CREDIT AGREEMENT

 

DATED AS OF MAY 16, 2005

 

AMONG

 

PLAINS EXPLORATION & PRODUCTION COMPANY,

 

AS BORROWER,

 

JPMORGAN CHASE BANK, N.A.,

 

AS ADMINISTRATIVE AGENT,

 

BANK OF AMERICA, N.A. and HARRIS NESBITT FINANCING, INC.,

 

AS SYNDICATION AGENTS,

 

BNP PARIBAS and THE BANK OF NOVA SCOTIA,

 

AS DOCUMENTATION AGENTS,

 

AND

 

THE LENDERS PARTY HERETO

 

 

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SOLE LEAD ARRANGER AND SOLE BOOKRUNNER

 

J.P. MORGAN SECURITIES INC.

 

 

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TABLE OF CONTENTS

 

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ARTICLE I DEFINITIONS AND ACCOUNTING MATTERS   1 Section 1.01   Terms Defined
Above   1 Section 1.02   Certain Defined Terms   1 Section 1.03   Types of Loans
and Borrowings   22 Section 1.04   Terms Generally; Rules of Construction   22
Section 1.05   Accounting Terms and Determinations; GAAP   23 ARTICLE II THE
CREDITS   23 Section 2.01   Commitments   23 Section 2.02   Loans and Borrowings
  23 Section 2.03   Requests for Borrowings   25 Section 2.04   Interest
Elections   26 Section 2.05   Funding of Borrowings   27 Section 2.06  
Termination and Reduction of Aggregate Maximum Credit Amounts   28 Section 2.07
  Borrowing Base   28 Section 2.08   Letters of Credit   31 ARTICLE III PAYMENTS
OF PRINCIPAL AND INTEREST; PREPAYMENTS; FEES   36 Section 3.01   Repayment of
Loans   36 Section 3.02   Interest   36 Section 3.03   Alternate Rate of
Interest   37 Section 3.04   Prepayments   37 Section 3.05   Fees   38 ARTICLE
IV PAYMENTS; PRO RATA TREATMENT; SHARING OF SET-OFFS.   39 Section 4.01  
Payments Generally; Pro Rata Treatment; Sharing of Set-offs   39 Section 4.02  
Presumption of Payment by the Borrower   40 Section 4.03   Certain Deductions by
the Administrative Agent   41 Section 4.04   Disposition of Proceeds   41
ARTICLE V INCREASED COSTS; BREAK FUNDING PAYMENTS; TAXES; ILLEGALITY   41
Section 5.01   Increased Costs   41 Section 5.02   Break Funding Payments   42
Section 5.03   Taxes.   43 Section 5.04   Mitigation Obligations; Replacement of
Lenders   44 Section 5.05   Illegality   45 ARTICLE VI CONDITIONS PRECEDENT   45
Section 6.01   Effective Date   45 Section 6.02   Each Credit Event   48

 

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ARTICLE VII REPRESENTATIONS AND WARRANTIES   48 Section 7.01   Organization;
Powers   48 Section 7.02   Authority; Enforceability   49 Section 7.03  
Approvals; No Conflicts   49 Section 7.04   Financial Condition; No Material
Adverse Change   49 Section 7.05   Litigation   50 Section 7.06   Environmental
Matters   50 Section 7.07   Compliance with the Laws and Agreements; No Defaults
  51 Section 7.08   Investment Company Act   52 Section 7.09   Public Utility
Holding Company Act   52 Section 7.10   Taxes   52 Section 7.11   ERISA   52
Section 7.12   Disclosure; No Material Misstatements   52 Section 7.13  
Insurance   53 Section 7.14   Restriction on Liens   53 Section 7.15  
Subsidiaries   53 Section 7.16   Location of Business and Offices   53 Section
7.17   Properties; Titles, Etc   54 Section 7.18   Maintenance of Properties  
55 Section 7.19   Gas Imbalances, Prepayments   55 Section 7.20   Marketing of
Production   55 Section 7.21   Swap Agreements   56 Section 7.22   Use of Loans
and Letters of Credit   56 Section 7.23   Solvency   56 Section 7.24  
Designated Senior Indebtedness   56 ARTICLE VIII AFFIRMATIVE COVENANTS   56
Section 8.01   Financial Statements; Ratings Change; Other Information   57
Section 8.02   Notices of Material Events   59 Section 8.03   Existence; Conduct
of Business   60 Section 8.04   Payment of Obligations   60 Section 8.05  
Performance of Obligations under Loan Documents   60 Section 8.06   Operation
and Maintenance of Properties   60 Section 8.07   Insurance   61 Section 8.08  
Books and Records; Inspection Rights   61 Section 8.09   Compliance with Laws  
62 Section 8.10   Environmental Matters   62 Section 8.11   Further Assurances  
63 Section 8.12   Reserve Reports   63 Section 8.13   Title Information   64
Section 8.14   Additional Collateral; Additional Guarantors   65 Section 8.15  
ERISA Compliance   66 Section 8.16   Unrestricted Subsidiaries   67

 

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ARTICLE IX NEGATIVE COVENANTS   67 Section 9.01   Financial Covenants   67
Section 9.02   Debt   67 Section 9.03   Liens   69 Section 9.04   Dividends,
Distributions and Redemptions   70 Section 9.05   Investments, Loans and
Advances   70 Section 9.06   Designation and Conversion of Restricted and
Unrestricted Subsidiaries; Debt of Unrestricted Subsidiaries   72 Section 9.07  
Nature of Business   73 Section 9.08   Limitation on Leases   73 Section 9.09  
Proceeds of Notes   73 Section 9.10   ERISA Compliance   73 Section 9.11   Sale
or Discount of Receivables   74 Section 9.12   Mergers, Etc.   75 Section 9.13  
Sale of Properties   75 Section 9.14   Environmental Matters   76 Section 9.15  
Transactions with Affiliates   76 Section 9.16   Subsidiaries   76 Section 9.17
  Negative Pledge Agreements; Dividend Restrictions   76 Section 9.18   Gas
Imbalances, Take-or-Pay or Other Prepayments   77 Section 9.19   Swap Agreements
  77 ARTICLE X EVENTS OF DEFAULT; REMEDIES   78 Section 10.01   Events of
Default   78 Section 10.02   Remedies   80 ARTICLE XI THE AGENTS   81 Section
11.01   Appointment; Powers   81 Section 11.02   Duties and Obligations of
Administrative Agent   81 Section 11.03   Action by Administrative Agent   82
Section 11.04   Reliance by Administrative Agent   82 Section 11.05   Subagents
  83 Section 11.06   Resignation or Removal of Agents   83 Section 11.07  
Agents as Lenders   83 Section 11.08   No Reliance   83 Section 11.09  
Authority of Administrative Agent to Release Collateral and Liens   84 Section
11.10   Administrative Agent May File Proofs of Claim   84 Section 11.11   The
Syndication Agents, Documentation Agents and Arranger   85 ARTICLE XII
MISCELLANEOUS   85 Section 12.01   Notices   85 Section 12.02   Waivers;
Amendments   86 Section 12.03   Expenses, Indemnity; Damage Waiver.   87 Section
12.04   Successors and Assigns   89 Section 12.05   Survival; Revival;
Reinstatement   92 Section 12.06   Counterparts; Integration; Effectiveness   93

 

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Section 12.07   Severability   93 Section 12.08   Right of Setoff   93 Section
12.09   GOVERNING LAW; JURISDICTION; CONSENT TO SERVICE OF PROCESS   94 Section
12.10   Headings   95 Section 12.11   Confidentiality   95 Section 12.12  
Interest Rate Limitation   96 Section 12.13   EXCULPATION PROVISIONS   97
Section 12.14   Specified Senior Indebtedness   97 Section 12.15   Collateral
Matters; Swap Agreements   97 Section 12.16   No Third Party Beneficiaries   98
Section 12.17   USA Patriot Act Notice   98

 

 

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Annex I   List of Maximum Credit Amounts Exhibit A   Form of Note Exhibit B  
Form of Compliance Certificate Exhibit C-1   Security Instruments Exhibit C-2  
Form of Guaranty and Collateral Agreement Exhibit D   Form of Assignment and
Assumption Schedule 7.15   Subsidiaries and Partnerships; Unrestricted
Subsidiaries Schedule 7.17   Properties; Titles, Etc. Schedule 7.19   Gas
Imbalances Schedule 7.20   Marketing Contracts Schedule 7.21   Swap Agreements
Schedule 9.03   Liens Schedule 9.05   Investments Schedule 9.07   Nature of
Business

 

 

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THIS AMENDED AND RESTATED CREDIT AGREEMENT dated as of May 16, 2005, is among:
PLAINS EXPLORATION & PRODUCTION COMPANY, a corporation duly formed and existing
under the laws of the State of Delaware (the “Borrower”); each of the Lenders
from time to time party hereto; JPMORGAN CHASE BANK, N.A. (as successor by
merger to JPMorgan Chase Bank, in its individual capacity, “JPMorgan”), as
administrative agent for the Lenders (in such capacity, together with its
successors in such capacity, the “Administrative Agent”); Bank of America, N.A.
and Harris Nesbitt Financing, Inc., as syndication agents for the Lenders (each,
in such capacity, a “Syndication Agent”); and BNP Paribas and The Bank of Nova
Scotia, as documentation agents for the Lenders (each, in such capacity, a
“Documentation Agent”).

 

R E C I T A L S

 

A. The Borrower, the Administrative Agent and other financial institutions named
and defined therein as lenders and agents, are parties to that certain Credit
Agreement dated as of April 4, 2003, pursuant to which such lenders provided
certain loans to and extensions of credit on behalf of the Borrower (as
heretofore amended, modified or supplemented, the “Existing Credit Agreement”).

 

B. The Borrower has requested the Lenders, and the Lenders have agreed, to
amend, restate, increase and extend the Existing Credit Agreement, subject to
the terms and conditions of this Agreement.

 

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

 

ARTICLE I

Definitions and Accounting Matters

 

Section 1.01 Terms Defined Above. As used in this Agreement, each term defined
above has the meaning indicated above.

 

Section 1.02 Certain Defined Terms. As used in this Agreement, the following
terms have the meanings specified below:

 

“ABR”, when used in reference to any Loan or Borrowing, refers to whether such
Loan, or the Loans comprising such Borrowing, are bearing interest at a rate
determined by reference to the Alternate Base Rate.

 

“Adjusted LIBO Rate” means, with respect to any Eurodollar Borrowing for any
Interest Period, an interest rate per annum (rounded upwards, if necessary, to
the next 1/16 of 1%) equal to (a) the LIBO Rate for such Interest Period
multiplied by (b) the Statutory Reserve Rate.

 

“Administrative Questionnaire” means an Administrative Questionnaire in a form
supplied by the Administrative Agent.

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“Affected Loans” has the meaning assigned such term in Section 5.05.

 

“Affiliate” means, with respect to a specified Person, another Person that
directly, or indirectly through one or more intermediaries, Controls or is
Controlled by or is under common Control with the Person specified.

 

“Agents” means, collectively, the Administrative Agent, the Syndication Agents
and the Documentation Agents; and “Agent” shall mean either the Administrative
Agent, any Syndication Agent or any Documentation Agent, as the context
requires.

 

“Aggregate Maximum Credit Amounts” at any time shall equal the sum of the
Maximum Credit Amounts, as the same may be reduced or terminated pursuant to
Section 2.06.

 

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

 

“Alternate Base Rate” means, for any day, a rate per annum equal to the greatest
of (a) the Prime Rate in effect on such day, (b) the Base CD Rate in effect on
such day plus 1% and (c) the Federal Funds Effective Rate in effect on such day
plus ½ of 1%. Any change in the Alternate Base Rate due to a change in the Prime
Rate, the Base CD Rate or the Federal Funds Effective Rate shall be effective
from and including the effective date of such change in the Prime Rate, the Base
CD Rate or the Federal Funds Effective Rate, respectively.

 

“Applicable Margin” means, for any day, with respect to any ABR Loan or
Eurodollar Loan, or with respect to the Commitment Fee Rate, as the case may be,
the rate per annum set forth in the Borrowing Base Utilization Grid below based
upon the Borrowing Base Utilization Percentage then in effect:

 

Borrowing Base Utilization Percentage

   <40%   ³40%, but <75%   ³75%, but <90%   ³90%

ABR Loans

   0.000%   0.000%   0.250%   0.500%

Eurodollar Loans

   1.000%   1.250%   1.500%   1.750%

Commitment Fee Rate

   0.250%   0.375%   0.375%   0.500%

 

provided, that at any time when the Borrower’s Index Debt is rated BB+ or higher
from S&P or Ba1 or higher from Moody’s, then the Applicable Margin for
Eurodollar Loans set forth in each portion of the grid shall be reduced by an
amount equal to 0.125%.

 

Each change in the Applicable Margin resulting from either a change in the
Borrowing Base Utilization Percentage or in the Index Debt shall apply during
the period commencing on the effective date of such change and ending on the
date immediately preceding the effective date of the next such change, provided,
however, that if at any time the Borrower fails to deliver

 

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a Reserve Report pursuant to Section 8.12(a), then the “Applicable Margin” means
the rate per annum set forth on the grid when the Borrowing Base Utilization
Percentage is at its highest level.

 

“Applicable Percentage” means, with respect to any Lender, the percentage of the
Aggregate Maximum Credit Amounts represented by such Lender’s Maximum Credit
Amount as such percentage is set forth on Annex I.

 

“Approved Counterparty” means (a) any Lender or any Affiliate of a Lender and
(b) any other Person whose long term senior unsecured debt rating at the time of
entering into the Swap Agreement is BBB+/Baa3 by S&P or Moody’s (or their
equivalent) or higher.

 

“Approved Fund” means any Person (other than a natural person) that is engaged
in making, purchasing, holding or investing in bank loans and similar extensions
of credit in the ordinary course of its business and that is administered or
managed by (a) a Lender, (b) an Affiliate of a Lender or (c) an entity or an
Affiliate of an entity that administers or manages a Lender.

 

“Approved Petroleum Engineers” means (a) Netherland, Sewell & Associates, Inc.,
(b) Ryder Scott Company Petroleum Consultants, L.P. and (c) any other
independent petroleum engineers reasonably acceptable to the Administrative
Agent.

 

“Arranger” means J.P. Morgan Securities Inc., in its capacities as the sole lead
arranger and sole bookrunner hereunder.

 

“Assessment Rate” means, for any day, the annual assessment rate in effect on
such day that is payable by a member of the Bank Insurance Fund classified as
“well-capitalized” and within supervisory subgroup “B” (or a comparable
successor risk classification) within the meaning of 12 C.F.R. Part 327 (or any
successor provision) to the Federal Deposit Insurance Corporation for insurance
by such Corporation of time deposits made in dollars at the offices of such
member in the United States; provided that if, as a result of any change in any
law, rule or regulation, it is no longer possible to determine the Assessment
Rate as aforesaid, then the Assessment Rate shall be such annual rate as shall
be determined by the Administrative Agent to be representative of the cost of
such insurance to the Lenders.

 

“Assignment and Assumption” means an assignment and assumption entered into by a
Lender and an assignee (with the consent of any party whose consent is required
by Section 12.04(b)), and accepted by the Administrative Agent, in the form of
Exhibit D or any other form approved by the Administrative Agent.

 

“Availability Period” means the period from and including the Effective Date to
but excluding the Termination Date.

 

“Base CD Rate” means the sum of (a) the Three-Month Secondary CD Rate multiplied
by the Statutory Reserve Rate plus (b) the Assessment Rate.

 

“Board” means the Board of Governors of the Federal Reserve System of the United
States of America or any successor Governmental Authority.

 

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“Borrowing” means Loans of the same Type, made, converted or continued on the
same date and, in the case of Eurodollar Loans, as to which a single Interest
Period is in effect.

 

“Borrowing Base” means at any time an amount equal to the amount determined in
accordance with Section 2.07, as the same may be adjusted from time to time
pursuant to Section 8.13(c), Section 9.02(k) or Section 9.13(e).

 

“Borrowing Base Deficiency” occurs if at any time the total Revolving Credit
Exposures exceeds the Borrowing Base then in effect.

 

“Borrowing Base Utilization Percentage” means, as of any day, the fraction
expressed as a percentage, the numerator of which is the sum of the Revolving
Credit Exposures of the Lenders on such day, and the denominator of which is the
Borrowing Base in effect on such day.

 

“Borrowing Request” means a request by the Borrower for a Borrowing in
accordance with Section 2.03.

 

“Business Day” means any day that is not a Saturday, Sunday or other day on
which commercial banks in New York City or Houston, Texas are authorized or
required by law to remain closed; and if such day relates to a Borrowing or
continuation of, a payment or prepayment of principal of or interest on, or a
conversion of or into, or the Interest Period for, a Eurodollar Loan or a notice
by the Borrower with respect to any such Borrowing or continuation, payment,
prepayment, conversion or Interest Period, any day which is also a day on which
dealings in dollar deposits are carried out in the London interbank market.

 

“Capital Leases” means, in respect of any Person, all leases which shall have
been, or should have been, in accordance with GAAP, recorded as capital leases
on the balance sheet of the Person liable (whether contingent or otherwise) for
the payment of rent thereunder.

 

“Casualty Event” means any loss, casualty or other insured damage to, or any
nationalization, taking under power of eminent domain or by condemnation or
similar proceeding of, any Oil and Gas Property of the Borrower or any of its
Restricted Subsidiaries having a fair market value in excess of $10,000,000.

 

“Change in Control” means (a) the acquisition of ownership, directly or
indirectly, beneficially or of record, by any person or group (within the
meaning of the Securities Exchange Act of 1934 and the rules of the SEC
thereunder as in effect on the date hereof) other than any Permitted Holders
(except that such person or group shall be deemed to have “beneficial ownership”
of all shares that any person or group has the right to acquire, whether such
right is exercisable immediately or only after the passage of time), of Equity
Interests representing more than 40% of the aggregate ordinary voting power
represented by the issued and outstanding Equity Interests of the Borrower (or
its successor by merger, consolidation or purchase of all or substantially all
of its assets); (b) the first day on which a majority of the members of the
Board of Directors of the Borrower are not Continuing Directors; (c) the sale,
lease, transfer, conveyance or other disposition (other than by way of merger or
consolidation), in one or a series of related transactions, of all or
substantially all of the assets of the Borrower and its Restricted Subsidiaries
taken as a whole to any “person” (as such term is used in Section 13(d) and
14(d) of the Securities and Exchange Act of 1934); or (d) a “Change of Control”
under any Indenture.

 

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“Change in Law” means (a) the adoption of any law, rule or regulation after the
Effective Date, (b) any change in any law, rule or regulation or in the
interpretation or application thereof by any Governmental Authority after the
Effective Date or (c) compliance by any Lender or any Issuing Bank (or, for
purposes of Section 5.01(b), by any lending office of such Lender or by such
Lender’s or such Issuing Bank’s holding company, if any) with any request,
guideline or directive (whether or not having the force of law) of any
Governmental Authority made or issued after the Effective Date.

 

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

 

“Commitment” means, with respect to each Lender, the commitment of such Lender
to make Loans and to acquire participations in Letters of Credit hereunder,
expressed as an amount representing the maximum aggregate amount of such
Lender’s Revolving Credit Exposure hereunder, as such commitment may be (a)
modified from time to time pursuant to Section 2.06 and (b) modified from time
to time pursuant to assignments by or to such Lender pursuant to Section
12.04(b). The amount representing each Lender’s Commitment shall at any time be
the lesser of such Lender’s Maximum Credit Amount and such Lender’s Applicable
Percentage of the then effective Borrowing Base.

 

“Commitment Fee Rate” has the meaning set forth in the definition of “Applicable
Margin”.

 

“Consolidated Net Income” means with respect to the Borrower and the
Consolidated Restricted Subsidiaries, for any period, the aggregate of the net
income (or loss) of the Borrower and the Consolidated Restricted Subsidiaries
after allowances for taxes for such period determined on a consolidated basis in
accordance with GAAP; provided that there shall be excluded from such net income
(to the extent otherwise included therein) the following: (a) the net income of
any Person in which the Borrower or any Consolidated Restricted Subsidiary has
an interest (which interest does not cause the net income of such other Person
to be consolidated with the net income of the Borrower and the Consolidated
Restricted Subsidiaries in accordance with GAAP), except to the extent of the
amount of dividends or distributions actually paid in cash during such period by
such other Person to the Borrower or to a Consolidated Restricted Subsidiary, as
the case may be; (b) the net income (but not loss) during such period of any
Consolidated Restricted Subsidiary to the extent that the declaration or payment
of dividends or similar distributions or transfers or loans by that Consolidated
Restricted Subsidiary is not at the time permitted by operation of the terms of
its charter or any agreement, instrument or Governmental Requirement applicable
to such Consolidated Restricted Subsidiary or is otherwise restricted or
prohibited, in each case determined in accordance with GAAP; (c) the net income
(or loss) of any Person acquired in a pooling-of-interests transaction for any
period prior to the date of such transaction; (d) any extraordinary gains or
losses during such period; (e) non-cash gains, losses or adjustments under FASB
Statement No. 133 as a result of changes in the fair market value of
derivatives; (f) any gains or losses attributable to writeups or writedowns of
assets, including ceiling test writedowns and writedowns under FASB Statements
Nos. 19, 142

 

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and 144; and (g) any charges related to any premium or penalty paid, write off
of deferred financing costs or other financial recapitalization charges in
connection with redeeming or retiring any indebtedness prior to its stated
maturity.

 

“Consolidated Restricted Subsidiaries” means any Restricted Subsidiaries that
are Consolidated Subsidiaries.

 

“Consolidated Subsidiaries” means each Subsidiary of the Borrower (whether now
existing or hereafter created or acquired) the financial statements of which are
or shall be (or should have been) consolidated with the financial statements of
the Borrower in accordance with GAAP.

 

“Consolidated Unrestricted Subsidiaries” means any Unrestricted Subsidiaries
that are Consolidated Subsidiaries.

 

“Continuing Directors” means, as of any date of determination, any member of the
Board of Directors of the Borrower who: (a) was a member of such Board of
Directors on the date hereof; or (b) was nominated for election or elected to
such Board of Directors with the approval of a majority of the Continuing
Directors who were members of such Board at the time of such nomination or
election.

 

“Control” means the possession, directly or indirectly, of the power to direct
or cause the direction of the management or policies of a Person, whether
through the ability to exercise voting power, by contract or otherwise.
“Controlling” and “Controlled” have meanings correlative thereto.

 

“Debt” means, for any Person, the sum of the following (without duplication):
(a) all obligations of such Person for borrowed money or evidenced by bonds,
bankers’ acceptances, debentures, notes or other similar instruments; (b) all
obligations of such Person (whether contingent or otherwise) in respect of
letters of credit, surety or other bonds and similar instruments; (c) all
accounts payable, accrued expenses, liabilities or other obligations of such
Person to pay the deferred purchase price of Property or services not excluded
pursuant to the final sentence of this definition; (d) all obligations under
Capital Leases; (e) all obligations under Synthetic Leases; (f) all Debt (as
defined in the other clauses of this definition) of others secured by a Lien on
any Property of such Person, whether or not such Debt is assumed by such Person;
(g) all Debt (as defined in the other clauses of this definition) of others
guaranteed by such Person or in which such Person otherwise assures a creditor
against loss of the Debt (howsoever such assurance shall be made) to the extent
of the lesser of the amount of such Debt and the maximum stated amount of such
guarantee or assurance against loss; (h) all obligations or undertakings of such
Person to maintain or cause to be maintained the financial position or covenants
of others or to purchase the Debt or Property of others; (i) obligations to
deliver commodities, goods or services, including, without limitation,
Hydrocarbons, in consideration of one or more advance payments, other than gas
balancing arrangements in the ordinary course of business; (j) obligations to
pay for goods or services even if such goods or services are not actually
received or utilized by such Person; (k) any Debt of a partnership for which
such Person is liable either by agreement, by operation of law or by a
Governmental Requirement but only to the extent of such liability; (l)
Disqualified Capital Stock; and (m) the undischarged balance of

 

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any production payment created by such Person or for the creation of which such
Person directly or indirectly received payment. The Debt of any Person shall
include all obligations of such Person of the character described above to the
extent such Person remains legally liable in respect thereof notwithstanding
that any such obligation is not included as a liability of such Person under
GAAP. The Debt of any Person shall not include any accounts payable, accrued
expenses or other liabilities of such Person to trade creditors arising in the
ordinary course of business (including guarantees thereof or instruments
evidencing such liabilities) which are not greater than 120 days past the
invoice or billing date or, if greater than 120 days past the invoice or billing
date, are being contested in good faith by appropriate proceedings if reserves
adequate under GAAP shall have been established therefor; provided that in the
event that the foregoing conditions are not met, such accounts payable, accrued
expenses or other liabilities shall constitute Debt. For the avoidance of doubt,
“Debt” does not include obligations in respect of Swap Agreements or indemnities
incurred in the ordinary course of business.

 

“Default” means any event or condition which constitutes an Event of Default or
which upon notice, lapse of time or both would, unless cured or waived, become
an Event of Default.

 

“Disqualified Capital Stock” means any Equity Interest that, by its terms (or by
the terms of any security into which it is convertible or for which it is
exchangeable) or upon the happening of any event, matures or is mandatorily
redeemable for any consideration other than other Equity Interests (which would
not constitute Disqualified Capital Stock), pursuant to a sinking fund
obligation or otherwise, or is convertible or exchangeable for Debt or
redeemable for any consideration other than other Equity Interests (which would
not constitute Disqualified Capital Stock) at the option of the holder thereof,
in whole or in part, on or prior to the date that is 91 days after the earlier
of (a) the Maturity Date and (b) the date on which there are no Loans, LC
Exposure or other obligations hereunder outstanding and all of the Commitments
are terminated.

 

“dollars” or “$” refers to lawful money of the United States of America.

 

“Domestic Subsidiary” means any Restricted Subsidiary that is organized under
the laws of the United States of America or any state thereof or the District of
Columbia.

 

“Effective Date” means the date on which the conditions specified in Section
6.01 are satisfied (or waived in accordance with Section 12.02).

 

“Engineering Reports” has the meaning assigned such term in Section 2.07(c)(i).

 

“Environmental Laws” means any and all Governmental Requirements pertaining in
any way to health, safety the environment or the preservation or reclamation of
natural resources, in effect in any and all jurisdictions in which the Borrower
or any Restricted Subsidiary is conducting or at any time has conducted
business, or where any Property of the Borrower or any Restricted Subsidiary is
located, including without limitation, the Oil Pollution Act of 1990 (“OPA”), as
amended, the Clean Air Act, as amended, the Comprehensive Environmental,
Response, Compensation, and Liability Act of 1980 (“CERCLA”), as amended, the
Federal Water Pollution Control Act, as amended, the Occupational Safety and
Health Act of 1970, as amended, the Resource Conservation and Recovery Act of
1976 (“RCRA”), as amended, the

 

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Safe Drinking Water Act, as amended, the Toxic Substances Control Act, as
amended, the Superfund Amendments and Reauthorization Act of 1986, as amended,
the Hazardous Materials Transportation Act, as amended, and other environmental
conservation or protection Governmental Requirements. The term “oil” shall have
the meaning specified in OPA, the terms “hazardous substance” and “release” (or
“threatened release”) have the meanings specified in CERCLA, the terms “solid
waste” and “disposal” (or “disposed”) have the meanings specified in RCRA and
the term “oil and gas waste” shall have the meaning specified in Section 91.1011
of the Texas Natural Resources Code (“Section 91.1011”); provided, however, that
(a) in the event either OPA, CERCLA, RCRA or Section 91.1011 is amended so as to
broaden the meaning of any term defined thereby, such broader meaning shall
apply subsequent to the effective date of such amendment and (b) to the extent
the laws of the state or other jurisdiction in which any Property of the
Borrower or any Restricted Subsidiary is located establish a meaning for “oil,”
“hazardous substance,” “release,” “solid waste,” “disposal” or “oil and gas
waste” which is broader than that specified in either OPA, CERCLA, RCRA or
Section 91.1011, such broader meaning shall apply.

 

“Equity Interests” means shares of capital stock, partnership interests,
membership interests in a limited liability company, beneficial interests in a
trust or other equity ownership interests in a Person, and any warrants, options
or other rights entitling the holder thereof to purchase or acquire any such
Equity Interest.

 

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

 

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

 

“ERISA Event” means (a) a “Reportable Event” described in section 4043 of ERISA
and the regulations issued thereunder, (b) the withdrawal of the Borrower, a
Subsidiary or any ERISA Affiliate from a Plan during a plan year in which it was
a “substantial employer” as defined in section 4001(a)(2) of ERISA, (c) the
filing of a notice of intent to terminate a Plan or the treatment of a Plan
amendment as a termination under section 4041 of ERISA, (d) the institution of
proceedings to terminate a Plan by the PBGC, (e) receipt of a notice of
withdrawal liability pursuant to Section 4202 of ERISA or (f) any other event or
condition which might constitute grounds under section 4042 of ERISA for the
termination of, or the appointment of a trustee to administer, any Plan.

 

“Eurodollar”, when used in reference to any Loan or Borrowing, refers to whether
such Loan, or the Loans comprising such Borrowing, are bearing interest at a
rate determined by reference to the Adjusted LIBO Rate.

 

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

 

“Excepted Liens” means: (a) Liens for Taxes, assessments or other governmental
charges or levies which are not delinquent or which are being contested in good
faith by

 

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appropriate action and for which adequate reserves have been maintained in
accordance with GAAP; (b) Liens incurred or deposits made in connection with
workers’ compensation, unemployment insurance or other social security, old age
pension or public liability obligations which are not delinquent or which are
being contested in good faith by appropriate action and for which adequate
reserves have been maintained in accordance with GAAP; (c) statutory landlord’s
Liens, operators’, vendors’, carriers’, warehousemen’s, repairmen’s, mechanics’,
suppliers’, workers’, materialmen’s and construction Liens, Liens on pipelines
and pipeline facilities that arise by operation of law or other like Liens
arising by operation of law in the ordinary course of business or incident to
the exploration, development, operation and maintenance of Oil and Gas
Properties each of which is in respect of obligations that are not delinquent or
which are being contested in good faith by appropriate action and for which
adequate reserves have been maintained in accordance with GAAP; (d) contractual
Liens under lease agreements or which arise in the ordinary course of business
under operating agreements, joint venture agreements, oil and gas partnership
agreements, oil and gas leases, farm-out and farm-in agreements, division
orders, contracts for the sale, transportation or exchange of oil and natural
gas, unitization and pooling declarations and agreements, area of mutual
interest agreements, overriding royalty agreements, marketing agreements,
processing agreements, net profits agreements, development agreements, gas
balancing or deferred production agreements, injection, repressuring and
recycling agreements, salt water or other disposal agreements, seismic or other
geophysical permits or agreements, and other agreements which are usual and
customary in the oil and gas business and are for claims which are not
delinquent or which are being contested in good faith by appropriate action and
for which adequate reserves have been maintained in accordance with GAAP,
provided that any such Lien referred to in this clause does not materially
impair the use of the Property covered by such Lien for the purposes for which
such Property is held by the Borrower or any Restricted Subsidiary or materially
impair the value of such Property subject thereto; (e) 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 and burdening only deposit
accounts or other funds maintained with a creditor depository institution,
provided that no such deposit account is a dedicated cash collateral account or
is subject to restrictions against access by the depositor in excess of those
set forth by regulations promulgated by the Board and no such deposit account is
intended by Borrower or any of its Restricted Subsidiaries to provide collateral
to the depository institution; (f) easements, restrictions, zoning restrictions
servitudes, permits, conditions, covenants, exceptions or reservations in any
Property of the Borrower or any Restricted Subsidiary for the purpose of roads,
pipelines, transmission lines, transportation lines, distribution lines for the
removal of gas, oil, coal or other minerals or timber, and other like purposes,
or for the joint or common use of real estate, rights of way, facilities and
equipment, and which in the aggregate do not materially impair the use of such
Property for the purposes of which such Property is held by the Borrower or any
Restricted Subsidiary or materially impair the value of such Property subject
thereto; (g) Liens on cash or securities pledged to secure performance of
tenders, surety and appeal bonds, government contracts, performance and return
of money bonds, bids, trade contracts, leases, statutory obligations, regulatory
obligations and other obligations of a like nature incurred in the ordinary
course of business, (h) judgment and attachment Liens not giving rise to an
Event of Default, provided that any appropriate legal proceedings which may have
been duly initiated for the review of such judgment shall not have been finally
terminated or the period within which such proceeding may be initiated shall not
have expired and no action to enforce such Lien has

 

9

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been commenced, and (i) Liens arising from Uniform Commercial Code financing
statement filings regarding operating leases entered into by the Borrower and
the Restricted Subsidiaries in the ordinary course of business covering only the
Property under lease; provided, further that Liens described in clauses (a)
through (e) shall remain “Excepted Liens” only for so long as no action to
enforce such Lien has been commenced and no intention to subordinate the first
priority Lien granted in favor of the Administrative Agent and the Lenders is to
be hereby implied or expressed by the permitted existence of such Excepted
Liens.

 

“Excluded Taxes” means, with respect to the Administrative Agent, any Lender,
any Issuing Bank or any other recipient of any payment to be made by or on
account of any obligation of the Borrower or any Guarantor hereunder or under
any other Loan Document, (a) income or franchise taxes imposed on (or measured
by) its income, receipts, total assets, net worth, and capital by the United
States of America or such other jurisdiction under the laws of which such
recipient is organized or in which its principal office is located or, in the
case of any Lender, in which its applicable lending office is located, (b) any
branch profits taxes imposed by the United States of America or any similar tax
imposed by any other jurisdiction in which the Borrower or any Guarantor is
located and (c) in the case of a Foreign Lender (other than an assignee pursuant
to a request by the Borrower under Section 5.04(b)), any withholding tax that is
imposed on amounts payable to such Foreign Lender at the time such Foreign
Lender becomes a party to this Agreement (or designates a new lending office) or
is attributable to such Foreign Lender’s failure to comply with Section 5.03(e),
except to the extent that such Foreign Lender (or its assignor, if any) was
entitled, at the time of designation of a new lending office (or assignment), to
receive additional amounts with respect to such withholding tax pursuant to
Section 5.03(a) or Section 5.03(c).

 

“Existing Credit Agreement” has the meaning set forth in the recitals hereto.

 

“Federal Funds Effective Rate” means, for any day, the weighted average (rounded
upwards, if necessary, to the next 1/100 of 1%) of the rates on overnight
Federal funds transactions with members of the Federal Reserve System arranged
by Federal funds brokers, as published on the next succeeding Business Day by
the Federal Reserve Bank of New York, or, if such rate is not so published for
any day that is a Business Day, the average (rounded upwards, if necessary, to
the next 1/100 of 1%) of the quotations for such day for such transactions
received by the Administrative Agent from three Federal funds brokers of
recognized standing selected by it.

 

“Financial Officer” means the chief financial officer, principal accounting
officer, treasurer or controller of the Borrower.

 

“Financial Statements” means the financial statement or statements of the
Borrower and its Consolidated Subsidiaries referred to in Section 7.04(a).

 

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

 

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“Foreign Subsidiary” means any Restricted Subsidiary that is not a Domestic
Subsidiary.

 

“GAAP” means generally accepted accounting principles in the United States of
America as in effect from time to time subject to the terms and conditions set
forth in Section 1.05.

 

“Governmental Authority” means the government of the United States of America,
any other nation or any political subdivision thereof, whether state or local,
and any agency, authority, instrumentality, regulatory body, court, central bank
or other entity exercising executive, legislative, judicial, taxing, regulatory
or administrative powers or functions of or pertaining to government over the
Borrower, any Restricted Subsidiary, any of their Properties, any Agent, any
Issuing Bank or any Lender.

 

“Governmental Requirement” means any law, statute, code, ordinance, order,
determination, rule, regulation, judgment, decree, injunction, franchise,
permit, certificate, license, authorization or other directive or requirement,
whether now or hereinafter in effect, including, without limitation,
Environmental Laws, energy regulations and occupational, safety and health
standards or controls, of any Governmental Authority.

 

“Guarantors” means

 

(a) Arguello Inc., a Delaware corporation;

 

(b) Plains Resources International Inc., a Delaware corporation;

 

(c) PXP Gulf Coast Inc., a Delaware corporation;

 

(d) Nuevo International Inc., a Delaware corporation;

 

(e) Nuevo Offshore Company, a Delaware corporation;

 

(f) Pacific Interstate Offshore Company, a California corporation;

 

(g) Nuevo Resources Inc., a Delaware corporation;

 

(h) Plains Louisiana Inc., a Delaware corporation;

 

(i) PXP Texas Inc., a Delaware corporation;

 

(j) PXP Permian Inc., a Delaware corporation;

 

(k) PXP Louisiana L.L.C., a Delaware limited liability company;

 

(l) PXP Texas Limited Partnership, a Texas limited partnership;

 

(m) Nuevo Ghana, Inc., a Delaware corporation;

 

(n) each Domestic Subsidiary that guarantees the Indebtedness pursuant to
Section 8.14(b); and

 

11

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(o) any other Person that must guarantee the Indebtedness in order for the
Borrower to comply with Section 9.04(b)(ii)(C).

 

“Guaranty Agreement” means an agreement executed by the Guarantors in
substantially the form of Exhibit C-2 unconditionally guarantying on a joint and
several basis, payment of the Indebtedness, as the same may be amended, modified
or supplemented from time to time.

 

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

 

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

 

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

 

“Indebtedness” means any and all amounts owing or to be owing by the Borrower,
any of its Restricted Subsidiaries or any Guarantor: (a) to the Administrative
Agent, any Issuing Bank or any Lender under any Loan Document; (b) to any Lender
or any Affiliate of a Lender under any Swap Agreement between the Borrower or
any of its Restricted Subsidiaries and such Lender or Affiliate of a Lender
while such Person (or in the case of its Affiliate, the Person affiliated
therewith) is a Lender hereunder; and (c) all renewals, extensions and/or
rearrangements of any of the foregoing.

 

“Indemnified Taxes” means Taxes other than Excluded Taxes.

 

“Indentures” means, collectively, the Senior Indenture, the Senior Subordinated
Indenture and any Permitted Additional Indenture.

 

“Index Debt” means senior, unsecured, long-term indebtedness for borrowed money
of the Borrower that is not guaranteed by any other Person (other than a
Guarantor) or subject to any other credit enhancement.

 

“Initial Reserve Report” means the report of Netherland, Sewell & Associates,
Inc. with respect to the value of certain Oil and Gas Properties of the Borrower
and its Restricted Subsidiaries as of December 31, 2004.

 

“Interest Election Request” means a request by the Borrower to convert or
continue a Borrowing in accordance with Section 2.04.

 

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“Interest Payment Date” means (a) with respect to any ABR Loan, the last day of
each March, June, September and December and (b) with respect to any Eurodollar
Loan, the last day of the Interest Period applicable to the Borrowing of which
such Loan is a part and, in the case of a Eurodollar Borrowing with an Interest
Period of more than three months’ duration, each day prior to the last day of
such Interest Period that occurs at intervals of three months’ duration after
the first day of such Interest Period.

 

“Interest Period” means with respect to any Eurodollar Borrowing, the period
commencing on the date of such Borrowing and ending on the numerically
corresponding day in the calendar month that is one, two, three or six months
thereafter, as the Borrower may elect; provided, that (a) if any Interest Period
would end on a day other than a Business Day, such Interest Period shall be
extended to the next succeeding Business Day unless such next succeeding
Business Day would fall in the next calendar month, in which case such Interest
Period shall end on the next preceding Business Day, and (b) any Interest Period
pertaining to a Eurodollar Borrowing that commences on the last Business Day of
a calendar month (or on a day for which there is no numerically corresponding
day in the last calendar month of such Interest Period) shall end on the last
Business Day of the last calendar month of such Interest Period. For purposes
hereof, the date of a Borrowing initially shall be the date on which such
Borrowing is made and thereafter shall be the effective date of the most recent
conversion or continuation of such Borrowing.

 

“Interim Redetermination” has the meaning assigned such term in Section 2.07(b).

 

“Interim Redetermination Date” means the date on which a Borrowing Base that has
been redetermined pursuant to an Interim Redetermination becomes effective as
provided in Section 2.07(d).

 

“Investment” means, for any Person: (a) the acquisition (whether for cash,
Property, services or securities or otherwise) of Equity Interests of any other
Person or any agreement to make any such acquisition (including, without
limitation, any “short sale” or any sale of any securities at a time when such
securities are not owned by the Person entering into such short sale); (b) the
making of any deposit with, or advance, loan or capital contribution to,
assumption of Debt of, purchase or other acquisition of any other Debt or equity
participation or interest in, or other extension of credit to, any other Person
(including the purchase of Property from another Person subject to an
understanding or agreement, contingent or otherwise, to resell such Property to
such Person, but excluding any such advance, loan or extension of credit having
a term not exceeding ninety (90) days representing the purchase price of
inventory or supplies sold by such Person in the ordinary course of business);
(c) the purchase or acquisition (in one or a series of transactions) of Property
of another Person that constitutes a business unit or (d) the entering into of
any guarantee of, or other contingent obligation (including the deposit of any
Equity Interests to be sold) with respect to, Debt or other liability of any
other Person and (without duplication) any amount committed to be advanced, lent
or extended to such Person.

 

“Issuing Bank” means JPMorgan and each Lender that agrees to act as an issuer of
Letters of Credit hereunder at the request of the Borrower, in each case, in its
capacity as an issuer of Letters of Credit hereunder, and its successors in such
capacity as provided in Section 2.08(i). Any Issuing Bank may, in its
discretion, arrange for one or more Letters of Credit to be issued by Affiliates
of such Issuing Bank, in which case the term “Issuing Bank” shall include any
such Affiliate with respect to Letters of Credit issued by such Affiliate.

 

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“LC Commitment” at any time means Seventy-Five Million dollars ($75,000,000).

 

“LC Disbursement” means a payment made by any Issuing Bank pursuant to a Letter
of Credit issued by such Issuing Bank.

 

“LC Exposure” means, at any time, the sum of (a) the aggregate undrawn and
unexpired stated amount of all outstanding Letters of Credit at such time plus
(b) the aggregate amount of all LC Disbursements that have not yet been
reimbursed by or on behalf of the Borrower at such time. The LC Exposure of any
Lender at any time shall be its Applicable Percentage of the total LC Exposure
at such time.

 

“Lenders” means the Persons listed on Annex I and any Person that shall have
become a party hereto pursuant to an Assignment and Assumption, other than any
such Person that ceases to be a party hereto pursuant to an Assignment and
Assumption.

 

“Letter of Credit” means any letter of credit issued pursuant to this Agreement.

 

“Letter of Credit Agreements” means all letter of credit applications and other
agreements (including any amendments, modifications or supplements thereto)
submitted by the Borrower, or entered into by the Borrower, with any Issuing
Bank relating to any Letter of Credit issued by such Issuing Bank.

 

“LIBO Rate” means, with respect to any Eurodollar Borrowing for any Interest
Period, the rate appearing on Page 3750 of the Dow Jones Market Service (or on
any successor or substitute page of such Service, or any successor to or
substitute for such Service, providing rate quotations comparable to those
currently provided on such page of such Service, as determined by the
Administrative Agent from time to time for purposes of providing quotations of
interest rates applicable to dollar deposits in the London interbank market) at
approximately 11:00 a.m., London time, two Business Days prior to the
commencement of such Interest Period, as the rate for dollar deposits with a
maturity comparable to such Interest Period. In the event that such rate is not
available at such time for any reason, then the “LIBO Rate” with respect to such
Eurodollar Borrowing for such Interest Period shall be the rate at which dollar
deposits of $5,000,000 and for a maturity comparable to such Interest Period are
offered by the principal London office of the Administrative Agent in
immediately available funds in the London interbank market at approximately
11:00 a.m., London time, two Business Days prior to the commencement of such
Interest Period.

 

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

 

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

 

“Loan Documents” means this Agreement, the Notes, all Letter of Credit
Agreements, the Letters of Credit and the Security Instruments.

 

“Loans” means the loans made by the Lenders to the Borrower pursuant to this
Agreement.

 

“Majority Lenders” means, at any time while no Loans or LC Exposure is
outstanding, Lenders having more than fifty percent (50%) of the Aggregate
Maximum Credit Amounts; and at any time while any Loans or LC Exposure is
outstanding, Lenders holding more than fifty percent (50%) of the outstanding
aggregate principal amount of the Loans or participation interests in Letters of
Credit (without regard to any sale by a Lender of a participation in any Loan
under Section 12.04(c)).

 

“Master Separation Agreement” means the Master Separation Agreement dated as of
July 3, 2002 between the Borrower and PLX.

 

“Material Adverse Effect” means a material adverse effect on (a) the business,
operations, Property or financial condition of the Borrower and the Restricted
Subsidiaries taken as a whole, (b) the validity or enforceability of any of the
Loan Documents taken as a whole or the ability of the Borrower, any Restricted
Subsidiary or any Guarantor to perform any of its obligations under any Loan
Document or (c) the rights and remedies of or benefits available to the
Administrative Agent, any Issuing Bank or any Lender under any Loan Document.

 

“Material Indebtedness” means Debt (other than the Loans and Letters of Credit),
or obligations in respect of one or more Swap Agreements, of any one or more of
the Borrower and its Restricted Subsidiaries in an aggregate principal amount
exceeding $20,000,000. For purposes of determining Material Indebtedness, the
“principal amount” of the obligations of the Borrower or any Restricted
Subsidiary in respect of any Swap Agreement at any time shall be the maximum
aggregate amount (giving effect to any netting agreements) that the Borrower or
such Subsidiary would be required to pay if such Swap Agreement were terminated
at such time.

 

“Maturity Date” means May 16, 2010.

 

“Maximum Credit Amount” means, as to each Lender, the amount set forth opposite
such Lender’s name on Annex I under the caption “Maximum Credit Amounts”, as the
same may be (a) reduced or terminated from time to time in connection with a
reduction or termination of the Aggregate Maximum Credit Amounts pursuant to
Section 2.06(b) or (b) modified from time to time pursuant to any assignment
permitted by Section 12.04(b).

 

“Moody’s” means Moody’s Investors Service, Inc. and any successor thereto that
is a nationally recognized rating agency.

 

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“Mortgaged Property” means any Property owned by the Borrower or any Guarantor
which is subject to the Liens existing and to exist under the terms of the
Security Instruments.

 

“Multiemployer Plan” means a Plan which is a multiemployer plan as defined in
section 3(37) or 4001 (a)(3) of ERISA.

 

“Net Cash Proceeds” means, with respect to the sale of any Equity Interests of
the Borrower, all cash received by the Borrower or any of its Restricted
Subsidiaries from such sale after payment of, or provision for, all underwriter
fees and expenses, SEC and blue sky fees, printing costs, fees and expenses of
accountants, lawyers and other professional advisors, brokerage commissions and
other out-of-pocket fees and expenses actually incurred in connection with such
sale of Equity Interests.

 

“New Borrowing Base Notice” has the meaning assigned such term in Section
2.07(d).

 

“Non-Recourse Debt” means any Debt of any Unrestricted Subsidiary or other
Person in which the Borrower or a Restricted Subsidiary made an Investment
permitted by Section 9.05(j), in each case in respect of which: (a) the holder
or holders thereof (i) shall have recourse only to, and shall have the right to
require the obligations of such Unrestricted Subsidiary or such Person to be
performed, satisfied, and paid only out of, the Property of such Unrestricted
Subsidiary or such Person and/or one or more of its Subsidiaries (but only to
the extent that such Subsidiaries are Unrestricted Subsidiaries or not
Subsidiaries of the Borrower) and/or any other Person (other than Borrower
and/or any Restricted Subsidiary) and (ii) shall have no direct or indirect
recourse (including by way of guaranty, support or indemnity) to the Borrower or
any Restricted Subsidiary or to any of the Property of Borrower or any
Restricted Subsidiary, whether for principal, interest, fees, expenses or
otherwise; and (b) the terms and conditions relating to the non-recourse nature
of such Debt are in form and substance reasonably acceptable to the
Administrative Agent.

 

“Notes” means the promissory notes of the Borrower described in Section 2.02(d)
and being substantially in the form of Exhibit A, together with all amendments,
modifications, replacements, extensions and rearrangements thereof.

 

“Oil and Gas Properties” means (a) Hydrocarbon Interests; (b) the Properties now
or hereafter pooled or unitized with Hydrocarbon Interests; (c) all presently
existing or future unitization, pooling agreements and declarations of pooled
units and the units created thereby (including without limitation all units
created under orders, regulations and rules of any Governmental Authority) which
may affect all or any portion of the Hydrocarbon Interests; (d) all operating
agreements, contracts and other agreements, including production sharing
contracts and agreements, which relate to any of the Hydrocarbon Interests or
the production, sale, purchase, transportation, exchange or processing of
Hydrocarbons from or attributable to such Hydrocarbon Interests; (e) all
Hydrocarbons in and under and which may be produced and saved or attributable to
the Hydrocarbon Interests, including all oil in tanks, and all rents, issues,
profits, proceeds, products, revenues and other incomes from or attributable to
the Hydrocarbon Interests; (f) all tenements, hereditaments, appurtenances and
Properties in any manner appertaining, belonging, affixed or incidental to the
Hydrocarbon Interests and (g) all Properties, rights, titles, interests and
estates described or referred to above, including any and all Property,

 

16

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real or personal, now owned or hereinafter acquired and situated upon, used,
held for use or useful in connection with the operating, working or development
of any of such Hydrocarbon Interests or Property (excluding drilling rigs,
automotive equipment, rental equipment or other personal Property which may be
on such premises for the purpose of drilling a well or for other similar
temporary uses) and including any and all oil wells, gas wells, injection wells
or other wells, buildings, structures, fuel separators, liquid extraction
plants, plant compressors, pumps, pumping units, field gathering systems, tanks
and tank batteries, fixtures, valves, fittings, machinery and parts, engines,
boilers, meters, apparatus, equipment, appliances, tools, implements, cables,
wires, towers, casing, tubing and rods, surface leases, rights-of-way, easements
and servitudes together with all additions, substitutions, replacements,
accessions and attachments to any and all of the foregoing.

 

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

 

“Participant” has the meaning set forth in Section 12.04(c)(i).

 

“PBGC” means the Pension Benefit Guaranty Corporation, or any successor thereto.

 

“Permitted Additional Notes” means senior subordinated notes and/or senior
unsecured notes issued or assumed by the Borrower pursuant to one or more
Permitted Additional Indentures, in compliance with Section 9.02(k).

 

“Permitted Additional Indenture” means an indenture among the Borrower, as
issuer, any subsidiary guarantors party thereto and a trustee, pursuant to which
Permitted Additional Notes are issued, as amended or supplemented as permitted
by Section 9.04(b).

 

“Permitted Holders” means (i) James C. Flores and his spouse and lineal
descendants, their respective estates or legal representatives, (ii) trusts
created for the benefit of such Persons and (iii) entities of which 80% or more
of the Equity Interest having ordinary voting power is directly or indirectly
owned by an of the preceding Persons.

 

“Person” means any natural person, corporation, limited liability company,
trust, joint venture, association, company, partnership, Governmental Authority
or other entity.

 

“PLX” means Vulcan Energy Corporation, a Delaware corporation.

 

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

 

“Point Arguello Partnerships” means the following partnerships of which Arguello
Inc. is a managing general partner: (i) Gaviota Gas Plant Company, (ii) Point
Arguello Natural Gas Line Company, (iii) Point Arguello Pipeline Company and
(iv) Point Arguello Terminal Company.

 

17

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“Prime Rate” means the rate of interest per annum publicly announced from time
to time by JPMorgan as its prime rate in effect at its principal office in New
York City; each change in the Prime Rate shall be effective from and including
the date such change is publicly announced as being effective. Such rate is set
by the Administrative Agent as a general reference rate of interest, taking into
account such factors as the Administrative Agent may deem appropriate; it being
understood that many of the Administrative Agent’s commercial or other loans are
priced in relation to such rate, that it is not necessarily the lowest or best
rate actually charged to any customer and that the Administrative Agent may make
various commercial or other loans at rates of interest having no relationship to
such rate.

 

“Property” means any interest in any kind of property or asset, whether real,
personal or mixed, or tangible or intangible, including, without limitation,
cash, securities, accounts and contract rights.

 

“Proposed Borrowing Base” has the meaning assigned to such term in Section
2.07(c)(i).

 

“Proposed Borrowing Base Notice” has the meaning assigned to such term in
Section 2.07(c)(ii).

 

“Redemption” means with respect to any Debt, the repurchase, redemption,
prepayment, repayment, defeasance or any other acquisition or retirement for
value (or the segregation of funds with respect to any of the foregoing) of such
Debt. “Redeem” has the correlative meaning thereto.

 

“Redetermination Date” means, with respect to any Scheduled Redetermination or
any Interim Redetermination, the date that the redetermined Borrowing Base
related thereto becomes effective pursuant to Section 2.07(d).

 

“Register” has the meaning assigned such term in Section 12.04(b)(iv).

 

“Regulation D” means Regulation D of the Board, as the same may be amended,
supplemented or replaced from time to time.

 

“Related Parties” means, with respect to any specified Person, such Person’s
Affiliates and the respective directors, officers, employees, agents and
attorneys, accountants and experts of such Person and such Person’s Affiliates.

 

“Remedial Work” has the meaning assigned such term in Section 8.10(a).

 

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

 

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“Responsible Officer” means, as to any Person, the Chief Executive Officer, the
President, any Financial Officer or any Vice President of such Person. Unless
otherwise specified, all references to a Responsible Officer herein shall mean a
Responsible Officer of the Borrower.

 

“Restricted Payment” means (a) any dividend or other distribution (whether in
cash, securities or other Property) with respect to any Equity Interests in the
Borrower or any of its Subsidiaries, or any payment (whether in cash, securities
or other Property), including any sinking fund or similar deposit, on account of
the purchase, redemption, retirement, acquisition, cancellation or termination
of any such Equity Interests in the Borrower or any of its Subsidiaries or any
option, warrant or other right to acquire any such Equity Interests in the
Borrower or any of its Subsidiaries or (b) any payment or other distribution in
respect of any indemnity obligation of the Borrower or any of its Subsidiaries
under the Master Separation Agreement, or the Tax Allocation Agreement.

 

“Restricted Subsidiary” means any Subsidiary of the Borrower that is not an
Unrestricted Subsidiary.

 

“Revolving Credit Exposure” means, with respect to any Lender at any time, the
sum of the outstanding principal amount of such Lender’s Loans and its LC
Exposure at such time.

 

“Scheduled Redetermination” has the meaning assigned such term in Section
2.07(b).

 

“Scheduled Redetermination Date” means the date on which a Borrowing Base that
has been redetermined pursuant to a Scheduled Redetermination becomes effective
as provided in Section 2.07(d).

 

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

 

“Security Instruments” means the Guaranty Agreement, mortgages, deeds of trust
and other agreements, instruments or certificates described or referred to in
Exhibit C-1, and any and all other agreements, instruments or certificates now
or hereafter executed and delivered by the Borrower or any other Person (other
than Swap Agreements with the Lenders or any Affiliate of a Lender or
participation or similar agreements between any Lender and any other lender or
creditor with respect to any Indebtedness pursuant to this Agreement) in
connection with, or as security for the payment or performance of the
Indebtedness, the Notes, this Agreement, or reimbursement obligations under the
Letters of Credit, as such agreements may be amended, modified, supplemented or
restated from time to time.

 

“Senior Indenture” means that certain indenture, dated as of June 30, 2004,
among the Borrower, as issuer, the subsidiary guarantors party thereto and Wells
Fargo Bank, N.A., as trustee, pursuant to which Senior Notes are issued, as
amended or supplemented as permitted by Section 9.04(b).

 

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“Senior Notes” means the $250,000,000 7-1/8% senior notes due 2014 issued by the
Borrower pursuant to the Senior Indenture.

 

“Senior Subordinated Indenture” means that certain Amended and Restated Senior
Subordinated Indenture, dated as of June 18, 2004, among the Borrower, as
issuer, the subsidiary guarantors party thereto and JPMorgan, as trustee,
pursuant to which the Senior Subordinated Notes are issued, as hereafter amended
or supplemented as permitted by Section 9.04(b).

 

“Senior Subordinated Notes” means the $275,000,000 8-3/4% senior subordinated
notes due 2012 issued by the Borrower pursuant to the Senior Subordinated
Indenture.

 

“S&P” means Standard & Poor’s Ratings Group, a division of The McGraw-Hill
Companies, Inc., and any successor thereto that is a nationally recognized
rating agency.

 

“Statutory Reserve Rate” means a fraction (expressed as a decimal), the
numerator of which is the number one and the denominator of which is the number
one minus the aggregate of the maximum reserve percentages (including any
marginal, special, emergency or supplemental reserves) expressed as a decimal
established by the Board to which the Administrative Agent is subject (a) with
respect to the Base CD Rate, for new negotiable nonpersonal time deposits in
dollars of over $100,000 with maturities approximately equal to three months and
(b) with respect to the Adjusted LIBO Rate, for eurocurrency funding (currently
referred to as “Eurocurrency Liabilities” in Regulation D of the Board). Such
reserve percentages shall include those imposed pursuant to such Regulation D.
Eurodollar Loans shall be deemed to constitute eurocurrency funding and to be
subject to such reserve requirements without benefit of or credit for proration,
exemptions or offsets that may be available from time to time to any Lender
under such Regulation D or any comparable regulation. The Statutory Reserve Rate
shall be adjusted automatically on and as of the effective date of any change in
any reserve percentage.

 

“Subsidiary” means: (a) any Person of which at least a majority of the
outstanding Equity Interests having by the terms thereof ordinary voting power
to elect a majority of the board of directors, manager or other governing body
of such Person (irrespective of whether or not at the time Equity Interests of
any other class or classes of such Person shall have or might have voting power
by reason of the happening of any contingency) is at the time directly or
indirectly owned or controlled by the Borrower or one or more of its
Subsidiaries or by the Borrower and one or more of its Subsidiaries and (b) any
partnership of which the Borrower or any of its Subsidiaries is a general
partner other than the Point Arguello Partnerships. Unless otherwise indicated
herein, each reference to the term “Subsidiary” shall mean a Subsidiary of the
Borrower.

 

“Super-majority Lenders” means, at any time while no Loans or LC Exposure is
outstanding, Lenders having at least sixty-six and two thirds percent (66-2/3%)
of the Aggregate Maximum Credit Amounts; and at any time while any Loans or LC
Exposure is outstanding, Lenders holding at least sixty-six and two thirds
percent (66-2/3%) of the outstanding aggregate principal amount of the Loans or
participation interests in such Letters of Credit (without regard to any sale by
a Lender of a participation in any Loan under Section 12.04(c)).

 

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“Swap Agreement” means any agreement with respect to any swap, cap, collar,
forward, future or derivative transaction or option or similar agreement,
whether exchange traded, “over-the-counter” or otherwise, involving, or settled
by reference to, one or more rates, currencies, commodities, equity or debt
instruments or securities, or economic, financial or pricing indices or measures
of economic, financial or pricing risk or value or any similar transaction or
any combination of these transactions; provided that no phantom stock or similar
plan providing for payments only on account of services provided by current or
former directors, officers, employees or consultants of the Borrower or the
Subsidiaries shall be a Swap Agreement.

 

“Synthetic Leases” means, in respect of any Person, all leases which shall have
been, or should have been, in accordance with GAAP, treated as operating leases
on the financial statements of the Person liable (whether contingently or
otherwise) for the payment of rent thereunder and which were properly treated as
indebtedness for borrowed money for purposes of U.S. federal income taxes, if
the lessee in respect thereof is obligated to either purchase for an amount in
excess of, or pay upon early termination an amount in excess of, 80% of the
residual value of the Property subject to such operating lease upon expiration
or early termination of such lease.

 

“Tangible Net Worth” means, at any date: (a) the consolidated shareholder’s
equity of the Borrower and its Consolidated Restricted Subsidiaries (determined
in accordance with GAAP) less (b) the accumulated other income balance
associated with FASB Statement 133 calculations and less (c) the aggregate
amount of treasury stock, goodwill, deferred development costs, franchises,
licenses, patents, trademarks, trade names, copyrights, service marks and brand
names and all other intangible assets of the Borrower and its Consolidated
Restricted Subsidiaries classified as such under GAAP. Notwitstanding the
foregoing, Tangible Net Worth shall exclude in aggregate: (1) any extraordinary
gains or losses during such period; (2) non-cash gains, losses or adjustments
under FASB Statement 133 as a result of changes in the fair market value of
derivatives; (3) any gains or losses attributable to writeups or writedowns of
assets, including ceiling test writedowns and writedowns under FASB Statements
Nos. 19, 142 and 144; and (4) any charges related to any premium or penalty
paid, write off of deferred financing costs or other financial recapitalization
charges in connection with redeeming or retiring any indebtedness prior to its
stated maturity.

 

“Tax Allocation Agreement” means the Tax Allocation Agreement dated as of July
3, 2002 between the Borrower and PLX.

 

“Taxes” means any and all present or future taxes, levies, imposts, duties,
deductions, charges or withholdings imposed by any Governmental Authority.

 

“Termination Date” means the earlier of the Maturity Date and the date of
termination of the Commitments.

 

“Three-Month Secondary CD Rate” means, for any day, the secondary market rate
for three-month certificates of deposit reported as being in effect on such day
(or, if such day is not a Business Day, the next preceding Business Day) by the
Board through the public information telephone line of the Federal Reserve Bank
of New York (which rate will, under the current practices of the Board, be
published in Federal Reserve Statistical Release H.15(519) during the

 

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week following such day) or, if such rate is not so reported on such day or such
next preceding Business Day, the average of the secondary market quotations for
three-month certificates of deposit of major money center banks in New York City
received at approximately 10:00 a.m., New York City time, on such day (or, if
such day is not a Business Day, on the next preceding Business Day) by the
Administrative Agent from three negotiable certificate of deposit dealers of
recognized standing selected by it.

 

“Transactions” means, with respect to (a) the Borrower, the execution, delivery
and performance by the Borrower of this Agreement, each other Loan Document, the
borrowing of Loans, the use of the proceeds thereof and the issuance of Letters
of Credit hereunder, and the grant of Liens by the Borrower on Mortgaged
Properties and other Properties pursuant to the Security Instruments and (b)
each Guarantor, the execution, delivery and performance by such Guarantor of
each Loan Document, the guaranteeing of the Indebtedness and the other
obligations under the Guaranty Agreement by such Guarantor and such Guarantor’s
grant of the security interests and provision of collateral pursuant to the
Security Instruments, and the grant of Liens by such Guarantor on Mortgaged
Properties and other Properties pursuant to the Security Instruments.

 

“Type”, when used in reference to any Loan or Borrowing, refers to whether the
rate of interest on such Loan, or on the Loans comprising such Borrowing, is
determined by reference to the Alternate Base Rate or the Adjusted LIBO Rate.

 

“Unrestricted Subsidiary” means any Subsidiary of the Borrower designated as
such on Schedule 7.15 or which the Borrower has designated in writing to the
Administrative Agent to be an Unrestricted Subsidiary pursuant to Section 9.06.

 

“Wholly-Owned Subsidiary” means any Restricted Subsidiary of which all of the
outstanding Equity Interests (other than any directors’ qualifying shares
mandated by applicable law), on a fully-diluted basis, are owned by the Borrower
or one or more of the Wholly-Owned Subsidiaries or are owned by the Borrower and
one or more of the Wholly-Owned Subsidiaries.

 

Section 1.03 Types of Loans and Borrowings. For purposes of this Agreement,
Loans and Borrowings, respectively, may be classified and referred to by Type
(e.g., a “Eurodollar Loan” or a “Eurodollar Borrowing”).

 

Section 1.04 Terms Generally; Rules of Construction. The definitions of terms
herein shall apply equally to the singular and plural forms of the terms
defined. Whenever the context may require, any pronoun shall include the
corresponding masculine, feminine and neuter forms. The words “include”,
“includes” and “including” shall be deemed to be followed by the phrase “without
limitation”. The word “will” shall be construed to have the same meaning and
effect as the word “shall”. Unless the context requires otherwise (a) any
definition of or reference to any agreement, instrument or other document herein
shall be construed as referring to such agreement, instrument or other document
as from time to time amended, supplemented or otherwise modified (subject to any
restrictions on such amendments, supplements or modifications set forth in the
Loan Documents), (b) any reference herein to any law shall be construed as
referring to such law as amended, modified, codified or reenacted, in whole or
in part, and in effect from time to time, (c) any reference herein to any Person
shall be construed to

 

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include such Person’s successors and assigns (subject to the restrictions
contained in the Loan Documents), (d) the words “herein”, “hereof” and
“hereunder”, and words of similar import, shall be construed to refer to this
Agreement in its entirety and not to any particular provision hereof, (e) with
respect to the determination of any time period, the word “from” means “from and
including” and the word “to” means “to and including” and (f) any reference
herein to Articles, Sections, Annexes, Exhibits and Schedules shall be construed
to refer to Articles and Sections of, and Annexes, Exhibits and Schedules to,
this Agreement. No provision of this Agreement or any other Loan Document shall
be interpreted or construed against any Person solely because such Person or its
legal representative drafted such provision.

 

Section 1.05 Accounting Terms and Determinations; GAAP. Unless otherwise
specified herein, all accounting terms used herein shall be interpreted, all
determinations with respect to accounting matters hereunder shall be made, and
all financial statements and certificates and reports as to financial matters
required to be furnished to the Administrative Agent or the Lenders hereunder
shall be prepared, in accordance with GAAP, applied on a basis consistent with
the Financial Statements except for changes in which Borrower’s independent
certified public accountants concur and which are disclosed to Administrative
Agent on the next date on which financial statements are required to be
delivered to the Lenders pursuant to Section 8.01(a); provided that, unless the
Borrower and the Majority Lenders shall otherwise agree in writing, no such
change shall modify or affect the manner in which compliance with the covenants
contained herein is computed such that all such computations shall be conducted
utilizing financial information presented consistently with prior periods.

 

ARTICLE II

The Credits

 

Section 2.01 Commitments. Subject to the terms and conditions set forth herein,
each Lender agrees to make Loans to the Borrower during the Availability Period
in an aggregate principal amount that will not result in (a) such Lender’s
Revolving Credit Exposure exceeding such Lender’s Commitment or (b) the total
Revolving Credit Exposures exceeding the total Commitments. Within the foregoing
limits and subject to the terms and conditions set forth herein, the Borrower
may borrow, repay and reborrow the Loans.

 

Section 2.02 Loans and Borrowings.

 

(a) Borrowings; Several Obligations. Each Loan shall be made as part of a
Borrowing consisting of Loans made by the Lenders ratably in accordance with
their respective Commitments. The failure of any Lender to make any Loan
required to be made by it shall not relieve any other Lender of its obligations
hereunder; provided that the Commitments are several and no Lender shall be
responsible for any other Lender’s failure to make Loans as required.

 

(b) Types of Loans. Subject to Section 3.03, each Borrowing shall be comprised
entirely of ABR Loans or Eurodollar Loans as the Borrower may request in
accordance herewith. Each Lender at its option may make any Eurodollar Loan by
causing any domestic or foreign branch or Affiliate of such Lender to make such
Loan; provided that any exercise of such option shall not affect the obligation
of the Borrower to repay such Loan in accordance with the terms of this
Agreement. No such designation or transfer shall result in any

 

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liability on the part of the Borrower for increased costs or expenses resulting
solely from such designation or transfer (except any such transfer which is made
by a Lender pursuant to Section 5.04 or Section 5.05, or otherwise for the
purpose of complying with any Governmental Requirement). Increased costs for
expenses resulting from a change in law occurring subsequent to any such
designation or transfer shall be deemed not to result solely from such
designation or transfer.

 

(c) Minimum Amounts; Limitation on Number of Borrowings. At the commencement of
each Interest Period for any Eurodollar Borrowing, such Borrowing shall be in an
aggregate amount that is an integral multiple of $1,000,000 and not less than
$5,000,000. At the time that each ABR Borrowing is made, such Borrowing shall be
in an aggregate amount that is an integral multiple of $100,000 and not less
than $1,000,000; provided that an ABR Borrowing may be in an aggregate amount
that is equal to the entire unused balance of the total Commitments or that is
required to finance the reimbursement of an LC Disbursement as contemplated by
Section 2.08(e). Borrowings of more than one Type may be outstanding at the same
time; provided that there shall not at any time be more than a total of eight
(8) Eurodollar Borrowings outstanding. Notwithstanding any other provision of
this Agreement, the Borrower shall not be entitled to request, or to elect to
convert or continue, any Borrowing if the Interest Period requested with respect
thereto would end after the Maturity Date.

 

(d) Notes. The Loans made by each Lender shall be evidenced by a single
promissory note of the Borrower in substantially the form of Exhibit A, dated,
in the case of (i) any Lender party hereto as of the date of this Agreement, as
of the Effective Date or (ii) any Lender that becomes a party hereto pursuant to
an Assignment and Assumption, as of the effective date of the Assignment and
Assumption, payable to the order of such Lender in a principal amount equal to
its Maximum Credit Amount as in effect on such date, and otherwise duly
completed. In the event that any Lender’s Maximum Credit Amount increases or
decreases for any reason (whether pursuant to Section 2.06, Section 12.04(b) or
otherwise), the Borrower shall deliver or cause to be delivered on the effective
date of such increase or decrease, a new Note payable to the order of such
Lender in a principal amount equal to its Maximum Credit Amount after giving
effect to such increase or decrease, and otherwise duly completed. The date,
amount, Type, interest rate and, if applicable, Interest Period of each Loan
made by each Lender, and all payments made on account of the principal thereof,
shall be recorded by such Lender on its books for its Note, and, prior to any
transfer, may be endorsed by such Lender on a schedule attached to such Note or
any continuation thereof or on any separate record maintained by such Lender.
Failure to make any such notation or to attach a schedule shall not affect any
Lender’s or the Borrower’s rights or obligations in respect of such Loans or
affect the validity of such transfer by any Lender of its Note.

 

(e) On the Effective Date (or as soon as practicable after the Effective Date
with respect to (iii)):

 

(i) the Borrower shall pay all accrued and unpaid commitment fees, break funding
fees under Section 5.02, if any, associated with refunded “Eurodollar Loans”
outstanding under the Existing Credit Agreement and all other fees that are
outstanding under the Existing Credit Agreement for the account of each “Lender”
or “Issuing Bank” under the Existing Credit Agreement;

 

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(ii) each “ABR Loan” outstanding under the Existing Credit Agreement shall be
deemed to be repaid with the proceeds of a new ABR Loan under this Agreement;
and each “Eurodollar Loan” outstanding under the Existing Credit Agreement shall
be repaid with the proceeds of a new Eurodollar Loan under this Agreement made
by the Lenders in accordance with their respective Applicable Percentage of the
Borrowing;

 

(iii) the Administrative Agent shall use reasonable efforts to cause such
“Lender” under the Existing Credit Agreement to deliver to the Borrower as soon
as practicable after the Effective Date any promissory note issued by the
Borrower to it under the Existing Credit Agreement, marked “canceled” or
otherwise similarly defaced;

 

(iv) any “Letters of Credit” issued under the Existing Credit Agreement shall be
deemed issued under this Agreement (without payment of additional fees); and

 

(v) the Existing Credit Agreement and the commitments thereunder shall be
superceded by this Agreement and such commitments shall terminate.

 

(f) It is the intent of the parties hereto that this Agreement not constitute a
novation of the obligations and liabilities existing under the Existing Credit
Agreement or evidence repayment of any such obligations and liabilities and that
this Agreement amend and restate in its entirety the Existing Credit Agreement
and re-evidence the obligations of the Borrower outstanding thereunder.

 

Section 2.03 Requests for Borrowings. To request a Borrowing, the Borrower shall
notify the Administrative Agent of such request by telephone (a) in the case of
a Eurodollar Borrowing, not later than 12:00 noon, New York City time, three
Business Days before the date of the proposed Borrowing or (b) in the case of an
ABR Borrowing, not later than 12:00 noon, New York City time, on the date of the
proposed Borrowing; provided that no such notice shall be required for any
deemed request of an ABR Borrowing to finance the reimbursement of an LC
Disbursement as provided in Section 2.08(e). Each such telephonic Borrowing
Request shall be irrevocable and shall be confirmed promptly by hand delivery or
telecopy to the Administrative Agent of a written Borrowing Request in a form
approved by the Administrative Agent and signed by the Borrower. Each such
telephonic and written Borrowing Request shall specify the following information
in compliance with Section 2.02:

 

(i) the aggregate amount of the requested Borrowing;

 

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

 

(iii) whether such Borrowing is to be an ABR Borrowing or a Eurodollar
Borrowing;

 

(iv) in the case of a Eurodollar Borrowing, the initial Interest Period to be
applicable thereto, which shall be a period contemplated by the definition of
the term “Interest Period”;

 

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(v) the amount of the then effective Borrowing Base, the current total Revolving
Credit Exposures (without regard to the requested Borrowing) and the pro forma
total Revolving Credit Exposures (giving effect to the requested Borrowing); and

 

(vi) the location and number of the Borrower’s account to which funds are to be
disbursed, which shall comply with the requirements of Section 2.05.

 

If no election as to the Type of Borrowing is specified, then the requested
Borrowing shall be an ABR Borrowing. If no Interest Period is specified with
respect to any requested Eurodollar Borrowing, then the Borrower shall be deemed
to have selected an Interest Period of one month’s duration. Each Borrowing
Request shall constitute a representation that the amount of the requested
Borrowing shall not cause the total Revolving Credit Exposures to exceed the
total Commitments (i.e., the lesser of the Aggregate Maximum Credit Amounts and
the then effective Borrowing Base).

 

Promptly following receipt of a Borrowing Request in accordance with this
Section 2.03, the Administrative Agent shall advise each Lender of the details
thereof and of the amount of such Lender’s Loan to be made as part of the
requested Borrowing.

 

Section 2.04 Interest Elections.

 

(a) Conversion and Continuance. Each Borrowing initially shall be of the Type
specified in the applicable Borrowing Request and, in the case of a Eurodollar
Borrowing, shall have an initial Interest Period as specified in such Borrowing
Request. Thereafter, the Borrower may elect to convert such Borrowing to a
different Type or to continue such Borrowing and, in the case of a Eurodollar
Borrowing, may elect Interest Periods therefor, all as provided in this Section
2.04. The Borrower may elect different options with respect to different
portions of the affected Borrowing, in which case each such portion shall be
allocated ratably among the Lenders holding the Loans comprising such Borrowing,
and the Loans comprising each such portion shall be considered a separate
Borrowing. No such conversion or continuation shall be deemed the making of a
new Borrowing for purposes of this Agreement, including without limitation
ARTICLE VI.

 

(b) Interest Election Requests. To make an election pursuant to this Section
2.04, the Borrower shall notify the Administrative Agent of such election by
telephone by the time that a Borrowing Request would be required under Section
2.03 if the Borrower were requesting a Borrowing of the Type resulting from such
election to be made on the effective date of such election. Each such telephonic
Interest Election Request shall be irrevocable and shall be confirmed promptly
by hand delivery or telecopy to the Administrative Agent of a written Interest
Election Request in a form approved by the Administrative Agent and signed by
the Borrower.

 

(c) Information in Interest Election Requests. Each telephonic and written
Interest Election Request shall specify the following information in compliance
with Section 2.02:

 

(i) the Borrowing to which such Interest Election Request applies and, if
different options are being elected with respect to different portions thereof,
the portions thereof to be allocated to each resulting Borrowing (in which case
the information to be specified pursuant to Section 2.04(c)(iii) and (iv) shall
be specified for each resulting Borrowing);

 

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(ii) the effective date of the election made pursuant to such Interest Election
Request, which shall be a Business Day;

 

(iii) whether the resulting Borrowing is to be an ABR Borrowing or a Eurodollar
Borrowing; and

 

(iv) if the resulting Borrowing is a Eurodollar Borrowing, the Interest Period
to be applicable thereto after giving effect to such election, which shall be a
period contemplated by the definition of the term “Interest Period”.

 

If any such Interest Election Request requests a Eurodollar Borrowing but does
not specify an Interest Period, then the Borrower shall be deemed to have
selected an Interest Period of one month’s duration.

 

(d) Notice to Lenders by the Administrative Agent. Promptly following receipt of
an Interest Election Request, the Administrative Agent shall advise each Lender
of the details thereof and of such Lender’s portion of each resulting Borrowing.

 

(e) Effect of Failure to Deliver Timely Interest Election Request and Events of
Default on Interest Election. If the Borrower fails to deliver a timely Interest
Election Request with respect to a Eurodollar Borrowing prior to the end of the
Interest Period applicable thereto, then, unless such Borrowing is repaid as
provided herein, at the end of such Interest Period such Borrowing shall be
converted to an ABR Borrowing. Notwithstanding any contrary provision hereof, if
an Event of Default has occurred and is continuing: (i) no outstanding Borrowing
may be converted to or continued as a Eurodollar Borrowing (and any Interest
Election Request that requests the conversion of any Borrowing to, or
continuation of any Borrowing as, a Eurodollar Borrowing shall be ineffective)
and (ii) unless repaid, each Eurodollar Borrowing shall be converted to an ABR
Borrowing at the end of the Interest Period applicable thereto.

 

Section 2.05 Funding of Borrowings.

 

(a) Funding by Lenders. Each Lender shall make each Loan to be made by it
hereunder on the proposed date thereof by wire transfer of immediately available
funds by 2:00 p.m., New York City time, to the account of the Administrative
Agent most recently designated by it for such purpose by notice to the Lenders.
The Administrative Agent will make such Loans available to the Borrower by
promptly crediting the amounts so received, in like funds, to an account of the
Borrower maintained with the Administrative Agent in Houston, Texas and
designated by the Borrower in the applicable Borrowing Request; provided that
ABR Loans made to finance the reimbursement of an LC Disbursement as provided in
Section 2.08(e) shall be remitted by the Administrative Agent to the Issuing
Bank that made such LC Disbursement. Nothing herein shall be deemed to obligate
any Lender to obtain the funds for its Loan in any particular place or manner or
to constitute a representation by any Lender that it has obtained or will obtain
the funds for its Loan in any particular place or manner.

 

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(b) Presumption of Funding by the Lenders. Unless the Administrative Agent shall
have received notice from a Lender prior to the proposed date of any Borrowing
that such Lender will not make available to the Administrative Agent such
Lender’s share of such Borrowing, the Administrative Agent may assume that such
Lender has made such share available on such date in accordance with Section
2.05(a) and may, in reliance upon such assumption, make available to the
Borrower a corresponding amount. In such event, if a Lender has not in fact made
its share of the applicable Borrowing available to the Administrative Agent,
then the applicable Lender and the Borrower severally agree to pay to the
Administrative Agent forthwith on demand such corresponding amount with interest
thereon, for each day from and including the date such amount is made available
to the Borrower to but excluding the date of payment to the Administrative
Agent, at (i) in the case of such Lender, the greater of the Federal Funds
Effective Rate and a rate determined by the Administrative Agent in accordance
with banking industry rules on interbank compensation or (ii) in the case of the
Borrower, the interest rate applicable to ABR Loans. If such Lender pays such
amount to the Administrative Agent, then such amount shall constitute such
Lender’s Loan included in such Borrowing.

 

Section 2.06 Termination and Reduction of Aggregate Maximum Credit Amounts.

 

(a) Scheduled Termination of Commitments. Unless previously terminated, the
Commitments shall terminate on the Maturity Date. If at any time the Aggregate
Maximum Credit Amounts or the Borrowing Base is terminated or reduced to zero,
then the Commitments shall terminate on the effective date of such termination
or reduction.

 

(b) Optional Termination and Reduction of Aggregate Credit Amounts.

 

(i) The Borrower may at any time terminate, or from time to time reduce, the
Aggregate Maximum Credit Amounts; provided that (A) each reduction of the
Aggregate Maximum Credit Amounts shall be in an amount that is an integral
multiple of $1,000,000 and not less than $5,000,000 and (B) the Borrower shall
not terminate or reduce the Aggregate Maximum Credit Amounts if, after giving
effect to any concurrent prepayment of the Loans in accordance with Section
3.04(c), the total Revolving Credit Exposures would exceed the total
Commitments.

 

(ii) The Borrower shall notify the Administrative Agent of any election to
terminate or reduce the Aggregate Maximum Credit Amounts under Section
2.06(b)(i) at least three Business Days prior to the effective date of such
termination or reduction, specifying such election and the effective date
thereof. Promptly following receipt of any notice, the Administrative Agent
shall advise the Lenders of the contents thereof. Each notice delivered by the
Borrower pursuant to this Section 2.06(b)(ii) shall be irrevocable. Any
termination or reduction of the Aggregate Maximum Credit Amounts shall be
permanent and may not be reinstated. Each reduction of the Aggregate Maximum
Credit Amounts shall be made ratably among the Lenders in accordance with each
Lender’s Applicable Percentage.

 

Section 2.07 Borrowing Base.

 

(a) Initial Borrowing Base. For the period from and including the Effective Date
to but excluding the first Redetermination Date, the amount of the Borrowing
Base shall be $750,000,000. Notwithstanding the foregoing, the Borrowing Base
may be subject to further adjustments from time to time pursuant to Section
8.13(c), Section 9.02(k) or Section 9.13.

 

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(b) Scheduled and Interim Redeterminations. Subject to Section 2.07(d), the
Borrowing Base shall be redetermined (a “Scheduled Redetermination”) on May 1st
and November 1st of each year, commencing November 1, 2005. In addition, the
Borrower may, by notifying the Administrative Agent thereof, and the
Administrative Agent may, at the direction of the Super-majority Lenders, by
notifying the Borrower thereof, one time during any 12-month period, each elect
to cause the Borrowing Base to be redetermined between Scheduled
Redeterminations (an “Interim Redetermination”) in accordance with this Section
2.07.

 

(c) Scheduled and Interim Redetermination Procedure.

 

(i) Each Scheduled Redetermination and each Interim Redetermination shall be
effectuated as follows: Upon receipt by the Administrative Agent of (A) the
Reserve Report and the certificate required to be delivered by the Borrower to
the Administrative Agent, in the case of a Scheduled Redetermination, pursuant
to Section 8.12(a) and (c), and, in the case of an Interim Redetermination,
pursuant to Section 8.12(b) and (c), and (B) such other reports, data and
supplemental information, including, without limitation, the information
provided pursuant to Section 8.12(c), as may, from time to time, be reasonably
requested by the Majority Lenders (the Reserve Report, such certificate and such
other reports, data and supplemental information being the “Engineering
Reports”), the Administrative Agent shall evaluate the information contained in
the Engineering Reports and shall, in good faith, propose a new Borrowing Base
(the “Proposed Borrowing Base”) based upon such information and such other
information (including, without limitation, the status of title information with
respect to the Oil and Gas Properties as described in the Engineering Reports
and the existence of any other Debt) as the Administrative Agent deems
appropriate and consistent with its normal oil and gas lending criteria as it
exists at the particular time.

 

(ii) The Administrative Agent shall notify the Borrower and the Lenders of the
Proposed Borrowing Base (the “Proposed Borrowing Base Notice”):

 

(A) in the case of a Scheduled Redetermination (1) if the Administrative Agent
shall have received the Engineering Reports required to be delivered by the
Borrower pursuant to Section 8.12(a) and (c) in a timely and complete manner,
then on or before the April 15th and October 15th of such year following the
date of delivery or (2) if the Administrative Agent shall not have received the
Engineering Reports required to be delivered by the Borrower pursuant to Section
8.12(a) and (c) in a timely and complete manner, then promptly after the
Administrative Agent has received complete Engineering Reports from the Borrower
and has had a reasonable opportunity to determine the Proposed Borrowing Base in
accordance with Section 2.07(c)(i); and

 

(B) in the case of an Interim Redetermination, promptly, and in any event,
within fifteen (15) days after the Administrative Agent has received the
required Engineering Reports.

 

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(iii) Any Proposed Borrowing Base that would increase the Borrowing Base then in
effect must be approved or deemed to have been approved by all of the Lenders as
provided in this Section 2.07(c)(iii); and any Proposed Borrowing Base that
would decrease or maintain the Borrowing Base then in effect must be approved or
be deemed to have been approved by the Super-majority Lenders as provided in
this Section 2.07(c)(iii). Upon receipt of the Proposed Borrowing Base Notice,
each Lender shall have fifteen (15) days to agree with the Proposed Borrowing
Base or disagree with the Proposed Borrowing Base by proposing an alternate
Borrowing Base. If at the end of such fifteen (15) days, any Lender has not
communicated its approval or disapproval in writing to the Administrative Agent,
such silence shall be deemed to be an approval of the Proposed Borrowing Base.
If, at the end of such 15-day period, all of the Lenders, in the case of a
Proposed Borrowing Base that would increase the Borrowing Base then in effect,
or the Super-majority Lenders, in the case of a Proposed Borrowing Base that
would decrease or maintain the Borrowing Base then in effect, have approved or
deemed to have approved, as aforesaid, then the Proposed Borrowing Base shall
become the new Borrowing Base, effective on the date specified in Section
2.07(d). If, however, at the end of such 15-day period, all of the Lenders or
the Super-majority Lenders, as applicable, have not approved or deemed to have
approved, as aforesaid, then the Administrative Agent shall poll the Lenders to
ascertain the highest Borrowing Base then acceptable to a number of Lenders
sufficient to constitute all of the Lenders or the Super-majority Lenders, as
applicable, and such amount shall become the new Borrowing Base, effective on
the date specified in Section 2.07(d).

 

(d) Effectiveness of a Redetermined Borrowing Base. After a redetermined
Borrowing Base is approved or is deemed to have been approved by all of the
Lenders or the Super-majority Lenders, as applicable, pursuant to Section
2.07(c)(iii), the Administrative Agent shall notify the Borrower and the Lenders
of the amount of the redetermined Borrowing Base (the “New Borrowing Base
Notice”), and such amount shall become the new Borrowing Base, effective and
applicable to the Borrower, the Agents, each Issuing Bank and the Lenders:

 

(i) in the case of a Scheduled Redetermination, (A) if the Administrative Agent
shall have received the Engineering Reports required to be delivered by the
Borrower pursuant to Section 8.12(a) and (c) in a timely and complete manner,
then on the May 1st or November 1st, as applicable following such notice, or (B)
if the Administrative Agent shall not have received the Engineering Reports
required to be delivered by the Borrower pursuant to Section 8.12(a) and (c) in
a timely and complete manner, then on the Business Day next succeeding delivery
of such notice; and

 

(ii) in the case of an Interim Redetermination, on the Business Day next
succeeding delivery of such notice.

 

Such amount shall then become the Borrowing Base until the next Scheduled
Redetermination Date, the next Interim Redetermination Date or the next
adjustment to the Borrowing Base under Section 8.13(c), Section 9.02(k) or
Section 9.13, whichever occurs first. Notwithstanding the foregoing, no
Scheduled Redetermination or Interim Redetermination shall become effective
until the New Borrowing Base Notice related thereto is received by the Borrower.

 

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Section 2.08 Letters of Credit.

 

(a) General. Subject to the terms and conditions set forth herein, the Borrower
may request any Issuing Bank to issue dollar denominated Letters of Credit for
its own account or for the account of any of its Restricted Subsidiaries, in a
form reasonably acceptable to the Administrative Agent and such Issuing Bank, at
any time and from time to time during the Availability Period. In the event of
any inconsistency between the terms and conditions of this Agreement and the
terms and conditions of any form of letter of credit application or other
agreement submitted by the Borrower to, or entered into by the Borrower with, an
Issuing Bank relating to any Letter of Credit, the terms and conditions of this
Agreement shall control.

 

(b) Notice of Issuance, Amendment, Renewal, Extension; Certain Conditions. To
request the issuance of a Letter of Credit (or the amendment, renewal or
extension of an outstanding Letter of Credit), the Borrower shall hand deliver
or telecopy (or transmit by electronic communication, if arrangements for doing
so have been approved by the Issuing Bank) to any Issuing Bank and the
Administrative Agent (not less than three (3) Business Days in advance of the
requested date of issuance, amendment, renewal or extension) a notice:

 

(i) requesting the issuance of a Letter of Credit or identifying the Letter of
Credit issued by such Issuing Bank to be amended, renewed or extended;

 

(ii) specifying the date of issuance, amendment, renewal or extension (which
shall be a Business Day);

 

(iii) specifying the date on which such Letter of Credit is to expire (which
shall comply with Section 2.08(c));

 

(iv) specifying the amount of such Letter of Credit;

 

(v) specifying the name and address of the beneficiary thereof and such other
information as shall be necessary to prepare, amend, renew or extend such Letter
of Credit; and

 

(vi) specifying the amount of the then effective Borrowing Base, the current
total Revolving Credit Exposures (without regard to the requested Letter of
Credit or the requested amendment, renewal or extension of an outstanding Letter
of Credit) and the pro forma total Revolving Credit Exposures (giving effect to
the requested Letter of Credit or the requested amendment, renewal or extension
of an outstanding Letter of Credit).

 

Each notice shall constitute a representation that, after giving effect to the
requested issuance, amendment, renewal or extension, as applicable, (i) the LC
Exposure shall not exceed the LC Commitment and (ii) the total Revolving Credit
Exposures shall not exceed the total Commitments (i.e. the lesser of the
Aggregate Maximum Credit Amounts and the then effective Borrowing Base).

 

If requested by any Issuing Bank, the Borrower also shall submit a letter of
credit application on such Issuing Bank’s standard form in connection with any
request for a Letter of Credit.

 

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(c) Expiration Date. Each Letter of Credit shall expire at or prior to the close
of business on the earlier of (i) the date one year after the date of the
issuance of such Letter of Credit (or, in the case of any renewal or extension
thereof, one year after such renewal or extension) and (ii) the date that is
five Business Days prior to the Maturity Date.

 

(d) Participations. By the issuance of a Letter of Credit (or an amendment to a
Letter of Credit increasing the amount thereof) and without any further action
on the part of the Issuing Bank that issues such Letter of Credit or the
Lenders, each Issuing Bank that issues a Letter of Credit hereunder hereby
grants to each Lender, and each Lender hereby acquires from such Issuing Bank, a
participation in such Letter of Credit equal to such Lender’s Applicable
Percentage of the aggregate amount available to be drawn under such Letter of
Credit. In consideration and in furtherance of the foregoing, each Lender hereby
absolutely and unconditionally agrees to pay to the Administrative Agent, for
the account of any Issuing Bank that issues a Letter of Credit hereunder, such
Lender’s Applicable Percentage of each LC Disbursement made by such Issuing Bank
and not reimbursed by the Borrower on the date due as provided in Section
2.08(e), or of any reimbursement payment required to be refunded to the Borrower
for any reason. Each Lender acknowledges and agrees that its obligation to
acquire participations pursuant to this Section 2.08(d) in respect of Letters of
Credit is absolute and unconditional and shall not be affected by any
circumstance whatsoever, including any amendment, renewal or extension of any
Letter of Credit or the occurrence and continuance of a Default or reduction or
termination of the Commitments, and that each such payment shall be made without
any offset, abatement, withholding or reduction whatsoever.

 

(e) Reimbursement. If any Issuing Bank shall make any LC Disbursement in respect
of a Letter of Credit issued by such Issuing Bank, the Borrower shall reimburse
such LC Disbursement by paying to the Administrative Agent an amount equal to
such LC Disbursement not later than 12:00 noon, New York City time, on the date
that such LC Disbursement is made, if the Borrower shall have received notice of
such LC Disbursement prior to 10:00 a.m., New York City time, on such date, or,
if such notice has not been received by the Borrower prior to such time on such
date, then not later than 12:00 noon, New York City time, on (i) the Business
Day that the Borrower receives such notice, if such notice is received prior to
10:00 a.m., New York City time, on the day of receipt, or (ii) the Business Day
immediately following the day that the Borrower receives such notice, if such
notice is not received prior to such time on the day of receipt; provided that
if such LC Disbursement is equal to or greater than $1,000,000, the Borrower
shall, subject to the conditions to Borrowing set forth herein, be deemed to
have requested, and the Borrower does hereby request under such circumstances,
that such LC Disbursement be financed with an ABR Borrowing in an equivalent
amount and, to the extent so financed, the Borrower’s obligation to make such
payment shall be discharged and replaced by the resulting ABR Borrowing. For
purposes of the first sentence of Section 2.01, the amount of the ABR Borrowing
shall be considered, but the amount of the LC Disbursement to be concurrently
reimbursed shall not be considered. If the Borrower fails to make such payment
when due, the Administrative Agent shall notify each Lender of the applicable LC
Disbursement, the payment then due from the Borrower in respect thereof and such
Lender’s Applicable Percentage thereof. Promptly following receipt of such
notice, each Lender shall pay to the Administrative Agent its Applicable
Percentage of the payment then due from the Borrower, in the same manner as
provided in Section 2.05 with respect to Loans made by such Lender (and Section
2.05 shall apply, mutatis mutandis, to the payment obligations of the Lenders),
and the

 

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Administrative Agent shall promptly pay to the Issuing Bank that issued such
Letter of Credit the amounts so received by it from the Lenders. Promptly
following receipt by the Administrative Agent of any payment from the Borrower
pursuant to this Section 2.08(e), the Administrative Agent shall distribute such
payment to the Issuing Bank that issued such Letter of Credit or, to the extent
that Lenders have made payments pursuant to this Section 2.08(e) to reimburse
such Issuing Bank, then to such Lenders and such Issuing Bank as their interests
may appear. Any payment made by a Lender pursuant to this Section 2.08(e) to
reimburse an Issuing Bank for any LC Disbursement (other than the funding of ABR
Loans as contemplated above) shall not constitute a Loan and shall not relieve
the Borrower of its obligation to reimburse such LC Disbursement.

 

(f) Obligations Absolute. The Borrower’s obligation to reimburse LC
Disbursements as provided in Section 2.08(e) shall be absolute, unconditional
and irrevocable, and shall be performed strictly in accordance with the terms of
this Agreement under any and all circumstances whatsoever and irrespective of
(i) any lack of validity or enforceability of any Letter of Credit, any Letter
of Credit Agreement or this Agreement, or any term or provision therein, (ii)
any draft or other document presented under a Letter of Credit proving to be
forged, fraudulent or invalid in any respect or any statement therein being
untrue or inaccurate in any respect, (iii) payment by any Issuing Bank under a
Letter of Credit issued by such Issuing Bank against presentation of a draft or
other document that does not comply with the terms of such Letter of Credit or
any Letter of Credit Agreement, or (iv) any other event or circumstance
whatsoever, whether or not similar to any of the foregoing, that might, but for
the provisions of this Section 2.08(f), constitute a legal or equitable
discharge of, or provide a right of setoff against, the Borrower’s obligations
hereunder. Neither the Administrative Agent, the Lenders nor any Issuing Bank,
nor any of their Related Parties shall have any liability or responsibility by
reason of or in connection with the issuance or transfer of any Letter of Credit
or any payment or failure to make any payment thereunder (irrespective of any of
the circumstances referred to in the preceding sentence), or any error,
omission, interruption, loss or delay in transmission or delivery of any draft,
notice or other communication under or relating to any Letter of Credit
(including any document required to make a drawing thereunder), any error in
interpretation of technical terms or any consequence arising from causes beyond
the control of any Issuing Bank; provided that the foregoing shall not be
construed to excuse any Issuing Bank from liability to the Borrower to the
extent of any direct damages (as opposed to consequential damages, claims in
respect of which are hereby waived by the Borrower to the extent permitted by
applicable law) suffered by the Borrower that are caused by such Issuing Bank’s
failure to exercise care when determining whether drafts and other documents
presented under a Letter of Credit comply with the terms thereof. The parties
hereto expressly agree that, in the absence of gross negligence or willful
misconduct on the part of any Issuing Bank (as finally determined by a court of
competent jurisdiction), such Issuing Bank shall be deemed to have exercised all
requisite care in each such determination. In furtherance of the foregoing and
without limiting the generality thereof, the parties agree that, with respect to
documents presented which appear on their face to be in substantial compliance
with the terms of a Letter of Credit, the Issuing Bank that issued such Letter
of Credit may, in its sole discretion, either accept and make payment upon such
documents without responsibility for further investigation, regardless of any
notice or information to the contrary, or refuse to accept and make payment upon
such documents if such documents are not in strict compliance with the terms of
such Letter of Credit.

 

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(g) Disbursement Procedures. Each Issuing Bank shall, promptly following its
receipt thereof, examine all documents purporting to represent a demand for
payment under a Letter of Credit issued by such Issuing Bank. Such Issuing Bank
shall promptly notify the Administrative Agent and the Borrower by telephone
(confirmed by telecopy) of such demand for payment and whether such Issuing Bank
has made or will make an LC Disbursement thereunder; provided that any failure
to give or delay in giving such notice shall not relieve the Borrower of its
obligation to reimburse such Issuing Bank and the Lenders with respect to any
such LC Disbursement.

 

(h) Interim Interest. If any Issuing Bank shall make any LC Disbursement, then,
until the Borrower shall have reimbursed such Issuing Bank for such LC
Disbursement (either with its own funds or a Borrowing under Section 2.08(e)),
the unpaid amount thereof shall bear interest, for each day from and including
the date such LC Disbursement is made to but excluding the date that the
Borrower reimburses such LC Disbursement, at the rate per annum then applicable
to ABR Loans. Interest accrued pursuant to this Section 2.08(h) shall be for the
account of such Issuing Bank, except that interest accrued on and after the date
of payment by any Lender pursuant to Section 2.08(e) to reimburse such Issuing
Bank shall be for the account of such Lender to the extent of such payment.

 

(i) Replacement of an Issuing Bank. Any Issuing Bank may be replaced or resign
at any time by written agreement among the Borrower, the Administrative Agent,
such retiring or replaced Issuing Bank and, in the case of a replacement, the
successor Issuing Bank. The Administrative Agent shall notify the Lenders of any
such resignation or replacement of an Issuing Bank. At the time any such
resignation or replacement shall become effective, the Borrower shall pay all
unpaid fees accrued for the account of the retiring or replaced Issuing Bank
pursuant to Section 3.05(b). In the case of the replacement of an Issuing Bank,
from and after the effective date of such replacement, (i) the successor Issuing
Bank shall have all the rights and obligations of the replaced Issuing Bank
under this Agreement with respect to Letters of Credit to be issued thereafter
and (ii) references herein to “Issuing Bank” shall be deemed to refer to such
successor or to any previous Issuing Bank, or to such successor and all previous
Issuing Banks, as the context shall require. After the resignation or
replacement of an Issuing Bank hereunder, the retiring or replaced Issuing Bank
shall remain a party hereto and shall continue to have all the rights and
obligations of an Issuing Bank under this Agreement with respect to Letters of
Credit issued by it prior to such resignation or replacement, but shall not be
required to issue additional Letters of Credit.

 

(j) Cash Collateralization. If (i) any Event of Default shall occur and be
continuing and the Borrower receives notice from the Administrative Agent or the
Majority Lenders demanding the deposit of cash collateral pursuant to this
Section 2.08(j), or (ii) the Borrower is required to pay to the Administrative
Agent the excess attributable to an LC Exposure in connection with any
prepayment pursuant to Section 3.04(c), then the Borrower shall deposit, in an
account with the Administrative Agent, in the name of the Administrative Agent
and for the benefit of the Lenders, an amount in cash equal to, in the case of
an Event of Default, the LC Exposure, and in the case of a payment required by
Section 3.04(c), the amount of such excess as provided in Section 3.04(c), as of
such date plus any accrued and unpaid interest thereon; provided that the
obligation to deposit such cash collateral shall become effective immediately,
and such deposit shall become immediately due and payable, without

 

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demand or other notice of any kind, upon the occurrence of any Event of Default
with respect to the Borrower or any Restricted Subsidiary described in Section
10.01(h) or Section 10.01(i). The Borrower hereby grants to the Administrative
Agent, for the benefit of each Issuing Bank and the Lenders, an exclusive first
priority and continuing perfected security interest in and Lien on such account
and all cash, checks, drafts, certificates and instruments, if any, from time to
time deposited or held in such account, all deposits or wire transfers made
thereto, any and all investments purchased with funds deposited in such account,
all interest, dividends, cash, instruments, financial assets and other Property
from time to time received, receivable or otherwise payable in respect of, or in
exchange for, any or all of the foregoing, and all proceeds, products,
accessions, rents, profits, income and benefits therefrom, and any substitutions
and replacements therefor. The Borrower’s obligation to deposit amounts pursuant
to this Section 2.08(j) shall be absolute and unconditional, without regard to
whether any beneficiary of any such Letter of Credit has attempted to draw down
all or a portion of such amount under the terms of a Letter of Credit, and, to
the fullest extent permitted by applicable law, shall not be subject to any
defense or be affected by a right of set-off, counterclaim or recoupment which
the Borrower or any of its Subsidiaries may now or hereafter have against any
such beneficiary, any Issuing Bank, the Administrative Agent, the Lenders or any
other Person for any reason whatsoever. Such deposit shall be held as collateral
securing the payment and performance of the Borrower’s and the Guarantor’s
obligations under this Agreement and the other Loan Documents. The
Administrative Agent shall have exclusive dominion and control, including the
exclusive right of withdrawal, over such account. Other than any interest earned
on the investment of such deposits, which investments shall be made at the
option and sole discretion of the Administrative Agent and at the Borrower’s
risk and expense, such deposits shall not bear interest. Interest or profits, if
any, on such investments shall accumulate in such account. Moneys in such
account shall be applied by the Administrative Agent to reimburse, on a pro rata
basis, each Issuing Bank for LC Disbursements for which it has not been
reimbursed and, to the extent not so applied, shall be held for the satisfaction
of the reimbursement obligations of the Borrower for the LC Exposure at such
time or, if the maturity of the Loans has been accelerated, be applied to
satisfy other obligations of the Borrower and the Guarantors under this
Agreement or the other Loan Documents. In the event of any such payment by the
Borrower of amounts contingently owing under outstanding Letters of Credit and
in the event that thereafter drafts or other demands for payment complying with
the terms of such Letters of Credit are not made on or prior to the respective
expiration dates thereof, the Administrative Agent agrees, if no Event of
Default is then continuing or if no other amounts are then outstanding under
this Agreement, the Notes or the Loan Documents, to remit to the Borrower
amounts for which the contingent obligations evidenced by the Letters of Credit
have ceased. If the Borrower is required to provide an amount of cash collateral
hereunder as a result of the occurrence of an Event of Default, and the Borrower
is not otherwise required to pay to the Administrative Agent the excess
attributable to an LC Exposure in connection with any prepayment pursuant to
Section 3.04(c), then such amount (to the extent not applied as aforesaid) shall
be returned to the Borrower within three Business Days after all Events of
Default have been cured or waived.

 

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ARTICLE III

Payments of Principal and Interest; Prepayments; Fees

 

Section 3.01 Repayment of Loans. The Borrower hereby unconditionally promises to
pay to the Administrative Agent for the account of each Lender the then unpaid
principal amount of each Loan on the Termination Date.

 

Section 3.02 Interest.

 

(a) ABR Loans. The Loans comprising each ABR Borrowing shall bear interest at
the Alternate Base Rate plus the Applicable Margin, but in no event to exceed
the Highest Lawful Rate.

 

(b) Eurodollar Loans. The Loans comprising each Eurodollar Borrowing shall bear
interest at the Adjusted LIBO Rate for the Interest Period in effect for such
Borrowing plus the Applicable Margin, but in no event to exceed the Highest
Lawful Rate.

 

(c) Post-Default Rate. Notwithstanding the foregoing, if any principal of or
interest on any Loan or any fee or other amount payable by the Borrower or any
Guarantor hereunder or under any other Loan Document is not paid when due,
whether at stated maturity, upon acceleration or otherwise, such overdue amount
shall bear interest, after as well as before judgment, at a rate per annum equal
to two percent (2%) plus the rate applicable to ABR Loans as provided in Section
3.02(a), but in no event to exceed the Highest Lawful Rate.

 

(d) Interest Payment Dates. Accrued interest on each Loan shall be payable in
arrears on each Interest Payment Date for such Loan and on the Termination Date;
provided that (i) interest accrued pursuant to Section 3.02(c) shall be payable
on demand, (ii) in the event of any repayment or prepayment of any Loan (other
than an optional prepayment of an ABR Loan prior to the Termination Date),
accrued interest on the principal amount repaid or prepaid shall be payable on
the date of such repayment or prepayment, and (iii) in the event of any
conversion of any Eurodollar Loan prior to the end of the current Interest
Period therefor, accrued interest on such Loan shall be payable on the effective
date of such conversion (but only to the extent so converted).

 

(e) Interest Rate Computations. All interest hereunder shall be computed on the
basis of a year of 360 days, unless such computation would exceed the Highest
Lawful Rate, in which case interest shall be computed on the basis of a year of
365 days (or 366 days in a leap year), except that interest computed by
reference to the Alternate Base Rate at times when the Alternate Base Rate is
based on the Prime Rate shall be computed on the basis of a year of 365 days (or
366 days in a leap year), and in each case shall be payable for the actual
number of days elapsed (including the first day but excluding the last day). The
applicable Alternate Base Rate, Adjusted LIBO Rate or LIBO Rate shall be
determined by the Administrative Agent, and such determination shall be
conclusive absent manifest error, and be binding upon the parties hereto.

 

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Section 3.03 Alternate Rate of Interest. If prior to the commencement of any
Interest Period for a Eurodollar Borrowing:

 

(a) the Administrative Agent determines (which determination shall be conclusive
absent manifest error) that adequate and reasonable means do not exist for
ascertaining the Adjusted LIBO Rate or the LIBO Rate for such Interest Period;
or

 

(b) the Administrative Agent is advised by the Majority Lenders that the
Adjusted LIBO Rate or LIBO Rate, as applicable, for such Interest Period will
not adequately and fairly reflect the cost to such Lenders of making or
maintaining their Loans included in such Borrowing for such Interest Period;

 

then the Administrative Agent shall give notice thereof to the Borrower and the
Lenders by telephone or telecopy as promptly as practicable thereafter and,
until the Administrative Agent notifies the Borrower and the Lenders that the
circumstances giving rise to such notice no longer exist, (i) any Interest
Election Request that requests the conversion of any Borrowing to, or
continuation of any Borrowing as, a Eurodollar Borrowing shall be ineffective,
and (ii) if any Borrowing Request requests a Eurodollar Borrowing, such
Borrowing shall be made as an ABR Borrowing.

 

Section 3.04 Prepayments.

 

(a) Optional Prepayments. The Borrower shall have the right at any time and from
time to time to prepay any Borrowing in whole or in part, subject to prior
notice in accordance with Section 3.04(b).

 

(b) Notice and Terms of Optional Prepayment. The Borrower shall notify the
Administrative Agent by telephone (confirmed by telecopy) of any prepayment
hereunder (i) in the case of prepayment of a Eurodollar Borrowing, not later
than 12:00 noon, New York City time, three Business Days before the date of
prepayment, or (ii) in the case of prepayment of an ABR Borrowing, not later
than 12:00 noon, New York City time, on the date of prepayment. Each such notice
shall be irrevocable and shall specify the prepayment date and the principal
amount of each Borrowing or portion thereof to be prepaid. Promptly following
receipt of any such notice relating to a Borrowing, the Administrative Agent
shall advise the Lenders of the contents thereof. Each partial prepayment of any
Borrowing shall be in an amount that would be permitted in the case of an
advance of a Borrowing of the same Type as provided in Section 2.02. Each
prepayment of a Borrowing shall be applied ratably to the Loans included in the
prepaid Borrowing. Prepayments shall be accompanied by accrued interest to the
extent required by Section 3.02.

 

(c) Mandatory Prepayments.

 

(i) If, after giving effect to any termination or reduction of the Aggregate
Maximum Credit Amounts pursuant to Section 2.06(b), the total Revolving Credit
Exposures exceeds the total Commitments, then the Borrower shall (A) prepay the
Borrowings on the date of such termination or reduction in an aggregate
principal amount equal to such excess, and (B) if any excess remains after
prepaying all of the Borrowings as a result of an LC Exposure, pay to the
Administrative Agent on behalf of the Lenders an amount equal to such excess to
be held as cash collateral as provided in Section 2.08(j).

 

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(ii) Upon any redetermination of or adjustment to the amount of the Borrowing
Base in accordance with Section 2.07 or Section 8.13(c), if the total Revolving
Credit Exposures exceeds the redetermined or adjusted Borrowing Base, then the
Borrower shall (A) prepay the Borrowings in an aggregate principal amount equal
to such excess, and (B) if any excess remains after prepaying all of the
Borrowings as a result of an LC Exposure, pay to the Administrative Agent on
behalf of the Lenders an amount equal to such excess to be held as cash
collateral as provided in Section 2.08(j). The Borrower shall be obligated to
make such prepayment and/or deposit of cash collateral within sixty (60) days
following its receipt of the New Borrowing Base Notice in accordance with
Section 2.07(d) or the date the adjustment occurs; provided that all payments
required to be made pursuant to this Section 3.04(c)(ii) must be made on or
prior to the Termination Date.

 

(iii) Upon any adjustments to the Borrowing Base pursuant to Section 9.13, if
the total Revolving Credit Exposures exceeds the Borrowing Base as adjusted,
then the Borrower shall (A) prepay the Borrowings in an aggregate principal
amount equal to such excess, and (B) if any excess remains after prepaying all
of the Borrowings as a result of an LC Exposure, pay to the Administrative Agent
on behalf of the Lenders an amount equal to such excess to be held as cash
collateral as provided in Section 2.08(j). The Borrower shall be obligated to
make such prepayment and/or deposit of cash collateral on the date it or any
Subsidiary receives proceeds as a result of such disposition; provided that all
payments required to be made pursuant to this Section 3.04(c)(iii) must be made
on or prior to the Termination Date.

 

(iv) Each prepayment of Borrowings pursuant to this Section 3.04(c) shall be
applied, first, ratably to any ABR Borrowings then outstanding, and, second, to
any Eurodollar Borrowings then outstanding, and if more than one Eurodollar
Borrowing is then outstanding, to each such Eurodollar Borrowing in order of
priority beginning with the Eurodollar Borrowing with the least number of days
remaining in the Interest Period applicable thereto and ending with the
Eurodollar Borrowing with the most number of days remaining in the Interest
Period applicable thereto.

 

(v) Each prepayment of Borrowings pursuant to this Section 3.04(c) shall be
applied ratably to the Loans included in the prepaid Borrowings. Prepayments
pursuant to this Section 3.04(c) shall be accompanied by accrued interest to the
extent required by Section 3.02.

 

(d) No Premium or Penalty. Prepayments permitted or required under this Section
3.04 shall be without premium or penalty, except as required under Section 5.02.

 

Section 3.05 Fees.

 

(a) Commitment Fees. The Borrower agrees to pay to the Administrative Agent for
the account of each Lender a commitment fee, which shall accrue at the
applicable Commitment Fee Rate on the average daily amount of the unused amount
of the Commitment of such Lender during the period from and including the
Effective Date to but excluding the Termination Date. Accrued commitment fees
shall be payable in arrears on the last day of March, June, September and
December of each year and on the Termination Date, commencing

 

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on the first such date to occur after the Effective Date. All commitment fees
shall be computed on the basis of a year of 365 days (or 366 days in a leap
year), and shall be payable for the actual number of days elapsed (including the
first day but excluding the last day).

 

(b) Letter of Credit Fees. The Borrower agrees to pay (i) to the Administrative
Agent for the account of each Lender a participation fee with respect to its
participations in Letters of Credit, which shall accrue at the same Applicable
Margin used to determine the interest rate applicable to Eurodollar Loans on the
average daily amount of such Lender’s LC Exposure (excluding any portion thereof
attributable to unreimbursed LC Disbursements) during the period from and
including the Effective Date to but excluding the later of the date on which
such Lender’s Commitment terminates and the date on which such Lender ceases to
have any LC Exposure, (ii) to each Issuing Bank a fronting fee, which shall
accrue at the rate of 0.125% per annum on the average daily amount of that
portion of the LC Exposure attributable to such Issuing Bank (excluding any
portion thereof attributable to unreimbursed LC Disbursements) during the period
from and including the Effective Date to but excluding the later of the date of
termination of the Commitments and the date on which there ceases to be any LC
Exposure attributable to such Issuing Bank, provided that in no event shall such
fee be less than $125 during any quarter, and (iii) to each Issuing Bank, for
its own account, its standard fees with respect to the issuance, amendment,
renewal or extension of any Letter of Credit or processing of drawings
thereunder. Participation fees and fronting fees accrued through and including
the last day of March, June, September and December of each year, shall be
payable on the third Business Day following such last day, commencing on the
first such date to occur after the Effective Date; provided that all such fees
shall be payable on the Termination Date and any such fees accruing after the
Termination Date shall be payable on demand. Any other fees payable to an
Issuing Bank pursuant to this Section 3.05(b) shall be payable within 10 days
after demand. All participation fees and fronting fees shall be computed on the
basis of a year of 365 days (or 366 days in a leap year), and shall be payable
for the actual number of days elapsed (including the first day but excluding the
last day).

 

(c) Administrative Agent Fees. The Borrower agrees to pay to the Administrative
Agent, for its own account, fees payable in the amounts and at the times
separately agreed upon between the Borrower and the Administrative Agent.

 

ARTICLE IV

Payments; Pro Rata Treatment; Sharing of Set-offs.

 

Section 4.01 Payments Generally; Pro Rata Treatment; Sharing of Set-offs.

 

(a) Payments by the Borrower. The Borrower shall make each payment required to
be made by it hereunder (whether of principal, interest, fees or reimbursement
of LC Disbursements, or of amounts payable under Section 5.01, Section 5.02,
Section 5.03 or otherwise) prior to 12:00 noon, New York City time, on the date
when due (for purposes of computing interest and fees, each such payment made
after such time on such due date to be deemed to have been made on the next
succeeding Business Day), in immediately available funds, without defense,
deduction, recoupment, set-off or counterclaim. Fees, once paid, shall not be
refundable under any circumstances. Any amounts received after such time on any
date may, in the discretion of the Administrative Agent, be deemed to have been
received on the next

 

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succeeding Business Day for purposes of calculating interest thereon. All such
payments shall be made to the Administrative Agent at its offices specified in
Section 12.01, except payments to be made directly to an Issuing Bank as
expressly provided herein and except that payments pursuant to Section 5.01,
Section 5.02, Section 5.03 and Section 12.03 shall be made directly to the
Persons entitled thereto. The Administrative Agent shall distribute any such
payments received by it for the account of any other Person to the appropriate
recipient promptly following receipt thereof. If any payment hereunder shall be
due on a day that is not a Business Day, the date for payment shall be extended
to the next succeeding Business Day, and, in the case of any payment accruing
interest, interest thereon shall be payable for the period of such extension.
All payments hereunder shall be made in dollars.

 

(b) Application of Insufficient Payments. If at any time insufficient funds are
received by and available to the Administrative Agent to pay fully all amounts
of principal, unreimbursed LC Disbursements, interest and fees then due
hereunder, such funds shall be applied (i) first, towards payment of interest
and fees then due hereunder, ratably among the parties entitled thereto in
accordance with the amounts of interest and fees then due to such parties, and
(ii) second, towards payment of principal and unreimbursed LC Disbursements then
due hereunder, ratably among the parties entitled thereto in accordance with the
amounts of principal and unreimbursed LC Disbursements then due to such parties.

 

(c) Sharing of Payments by Lenders. If any Lender shall, by exercising any right
of set-off or counterclaim or otherwise, obtain payment in respect of any
principal of or interest on any of its Loans or participations in LC
Disbursements resulting in such Lender receiving payment of a greater proportion
of the aggregate amount of its Loans and participations in LC Disbursements and
accrued interest thereon than the proportion received by any other Lender, then
the Lender receiving such greater proportion shall purchase (for cash at face
value) participations in the Loans and participations in LC Disbursements of
other Lenders to the extent necessary so that the benefit of all such payments
shall be shared by the Lenders ratably in accordance with the aggregate amount
of principal of and accrued interest on their respective Loans and
participations in LC Disbursements; provided that (i) if any such participations
are purchased and all or any portion of the payment giving rise thereto is
recovered, such participations shall be rescinded and the purchase price
restored to the extent of such recovery, without interest, and (ii) the
provisions of this Section 4.01(c) shall not be construed to apply to any
payment made by the Borrower pursuant to and in accordance with the express
terms of this Agreement or any payment obtained by a Lender as consideration for
the assignment of or sale of a participation in any of its Loans or
participations in LC Disbursements to any assignee or participant, other than to
the Borrower or any Subsidiary or Affiliate thereof (as to which the provisions
of this Section 4.01(c) shall apply). The Borrower consents to the foregoing and
agrees, to the extent it may effectively do so under applicable law, that any
Lender acquiring a participation pursuant to the foregoing arrangements may
exercise against the Borrower rights of set-off and counterclaim with respect to
such participation as fully as if such Lender were a direct creditor of the
Borrower in the amount of such participation.

 

Section 4.02 Presumption of Payment by the Borrower. Unless the Administrative
Agent shall have received notice from the Borrower prior to the date on which
any payment is due to the Administrative Agent for the account of the Lenders or
any Issuing Bank that the Borrower will not make such payment, the
Administrative Agent may assume that the Borrower has made such

 

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payment on such date in accordance herewith and may, in reliance upon such
assumption, distribute to the Lenders or such Issuing Bank, as the case may be,
the amount due. In such event, if the Borrower has not in fact made such
payment, then each of the Lenders or such Issuing Bank, as the case may be,
severally agrees to repay to the Administrative Agent forthwith on demand the
amount so distributed to such Lender or such Issuing Bank with interest thereon,
for each day from and including the date such amount is distributed to it to but
excluding the date of payment to the Administrative Agent, at the greater of the
Federal Funds Effective Rate and a rate determined by the Administrative Agent
in accordance with banking industry rules on interbank compensation.

 

Section 4.03 Certain Deductions by the Administrative Agent. If any Lender shall
fail to make any payment required to be made by it pursuant to Section 2.05(b),
Section 2.08(d), Section 2.08(e) or Section 4.02 then the Administrative Agent
may, in its discretion (notwithstanding any contrary provision hereof), apply
any amounts thereafter received by the Administrative Agent for the account of
such Lender to satisfy such Lender’s obligations under such Sections until all
such unsatisfied obligations are fully paid.

 

Section 4.04 Disposition of Proceeds. The Security Instruments contain an
assignment by the Borrower and/or the Guarantors unto and in favor of the
Administrative Agent for the benefit of the Lenders of all of the Borrower’s or
each Guarantor’s interest in and to production and all proceeds attributable
thereto which may be produced from or allocated to the Mortgaged Property. The
Security Instruments further provide in general for the application of such
proceeds to the satisfaction of the Indebtedness and other obligations described
therein and secured thereby. Notwithstanding the assignment contained in such
Security Instruments, until the occurrence of an Event of Default, (a) the
Administrative Agent and the Lenders agree that they will neither notify the
purchaser or purchasers of such production nor take any other action to cause
such proceeds to be remitted to the Administrative Agent or the Lenders, but the
Lenders will instead permit such proceeds to be paid to the Borrower and its
Restricted Subsidiaries and (b) the Lenders hereby authorize the Administrative
Agent to take such actions as may be necessary to cause such proceeds to be paid
to the Borrower and/or such Restricted Subsidiaries.

 

ARTICLE V

Increased Costs; Break Funding Payments; Taxes; Illegality

 

Section 5.01 Increased Costs.

 

(a) Eurodollar Changes in Law. If any Change in Law shall:

 

(i) impose, modify or deem applicable any reserve, special deposit or similar
requirement against assets of, deposits with or for the account of, or credit
extended by, any Lender (except any such reserve requirement reflected in the
Adjusted LIBO Rate); or

 

(ii) impose on any Lender or the London interbank market any other condition
affecting this Agreement or Eurodollar Loans made by such Lender;

 

and the result of any of the foregoing shall be to increase the cost to such
Lender of making or maintaining any Eurodollar Loan (or of maintaining its
obligation to make any such Loan) or to

 

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reduce the amount of any sum received or receivable by such Lender (whether of
principal, interest or otherwise, but not including Excluded Taxes), then the
Borrower will pay to such Lender such additional amount or amounts as will
compensate such Lender for such additional costs incurred or reduction suffered.

 

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

 

(c) Certificates. A certificate of a Lender or any Issuing Bank setting forth
the amount or amounts necessary to compensate such Lender or such Issuing Bank
or its holding company, as the case may be, as specified in Section 5.01(a) or
(b) shall be delivered to the Borrower and shall be conclusive absent manifest
error. The Borrower shall pay such Lender or such Issuing Bank, as the case may
be, the amount shown as due on any such certificate within 10 days after receipt
thereof.

 

(d) Effect of Failure or Delay in Requesting Compensation. Failure or delay on
the part of any Lender or any Issuing Bank to demand compensation pursuant to
this Section 5.01 shall not constitute a waiver of such Lender’s or such Issuing
Bank’s right to demand such compensation; provided that the Borrower shall not
be required to compensate a Lender or an Issuing Bank pursuant to this Section
5.01 for any increased costs or reductions incurred more than 180 days prior to
the date that such Lender or such Issuing Bank, as the case may be, notifies the
Borrower of the Change in Law giving rise to such increased costs or reductions
and of such Lender’s or such Issuing Bank’s intention to claim compensation
therefor; provided further that, if the Change in Law giving rise to such
increased costs or reductions is retroactive, then the 180-day period referred
to above shall be extended to include the period of retroactive effect thereof.

 

Section 5.02 Break Funding Payments. In the event of (a) the payment of any
principal of any Eurodollar Loan other than on the last day of an Interest
Period applicable thereto (including as a result of an Event of Default), (b)
the conversion of any Eurodollar Loan into an ABR Loan other than on the last
day of the Interest Period applicable thereto, (c) the failure to borrow,
convert, continue or prepay any Eurodollar Loan on the date specified in any
notice delivered pursuant hereto or (d) the assignment of any Eurodollar Loan
other than on the last day of the Interest Period applicable thereto as a result
of a request by the Borrower pursuant to Section 5.04(b), then, in any such
event, the Borrower shall compensate each Lender for the loss, cost and expense
attributable to such event (exclusive of any lost profits or opportunity costs).
In

 

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the case of a Eurodollar Loan, such loss, cost or expense to any Lender shall be
deemed to include an amount determined by such Lender to be the excess, if any,
of (i) the amount of interest which would have accrued on the principal amount
of such Loan had such event not occurred, at the Adjusted LIBO Rate that would
have been applicable to such Loan, for the period from the date of such event to
the last day of the then current Interest Period therefor (or, in the case of a
failure to borrow, convert or continue, for the period that would have been the
Interest Period for such Loan), over (ii) the amount of interest which would
accrue on such principal amount for such period at the interest rate which such
Lender would bid were it to bid, at the commencement of such period, for dollar
deposits of a comparable amount and period from other banks in the eurodollar
market.

 

A certificate of any Lender setting forth any amount or amounts that such Lender
is entitled to receive pursuant to this Section 5.02 shall be delivered to the
Borrower and shall be conclusive absent manifest error. The Borrower shall pay
such Lender the amount shown as due on any such certificate within 10 days after
receipt thereof.

 

Section 5.03 Taxes.

 

(a) Payments Free of Taxes. Any and all payments by or on account of any
obligation of the Borrower or any Guarantor under any Loan Document shall be
made free and clear of and without deduction for any Indemnified Taxes or Other
Taxes; provided that if the Borrower shall be required to deduct any Indemnified
Taxes or Other Taxes from such payments, then (i) the sum payable shall be
increased as necessary so that after making all required deductions (including
deductions applicable to additional sums payable under this Section 5.03(a)),
the Administrative Agent, Lender or Issuing Bank (as the case may be) receives
an amount equal to the sum it would have received had no such deductions been
made, (ii) the Borrower shall make such deductions and (iii) the Borrower shall
pay the full amount deducted to the relevant Governmental Authority in
accordance with applicable law.

 

(b) Payment of Other Taxes by the Borrower. The Borrower shall pay any Other
Taxes to the relevant Governmental Authority in accordance with applicable law.

 

(c) Indemnification by the Borrower. The Borrower shall indemnify the
Administrative Agent, each Lender and each Issuing Bank, within 10 days after
written demand therefor, for the full amount of any Indemnified Taxes or Other
Taxes paid by the Administrative Agent, such Lender or such Issuing Bank, as the
case may be, on or with respect to any payment by or on account of any
obligation of the Borrower hereunder (including Indemnified Taxes or Other Taxes
imposed or asserted on or attributable to amounts payable under this Section
5.03) and any penalties, interest and reasonable expenses arising therefrom or
with respect thereto, whether or not such Indemnified Taxes or Other Taxes were
correctly or legally imposed or asserted by the relevant Governmental Authority;
provided that the Borrower shall not be required to indemnify the Administrative
Agent, any Lender or any Issuing Bank for any amounts under this Section 5.03(c)
to the extent that such Person fails to notify the Borrower of its intent to
make a claim for indemnification under this Section 5.03(c) within 180 days
after a claim is asserted against such Person by the relevant Governmental
Authority. A certificate of the Administrative Agent, a Lender or an Issuing
Bank as to the amount of such payment or liability under this Section 5.03 shall
be delivered to the Borrower and shall be conclusive absent manifest error.

 

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(d) Evidence of Payments. As soon as practicable after any payment of
Indemnified Taxes or Other Taxes by the Borrower to a Governmental Authority,
the Borrower shall deliver to the Administrative Agent the original or a
certified copy of a receipt issued by such Governmental Authority evidencing
such payment, a copy of the return reporting such payment or other evidence of
such payment reasonably satisfactory to the Administrative Agent.

 

(e) Foreign Lenders. Any Foreign Lender that is entitled to an exemption from or
reduction of withholding tax under the law of the jurisdiction in which the
Borrower is located, or any treaty to which such jurisdiction is a party, with
respect to payments under this Agreement or any other Loan Document shall
deliver to the Borrower (with a copy to the Administrative Agent), at the time
or times prescribed by applicable law, such properly completed and executed
documentation prescribed by applicable law or reasonably requested by the
Borrower as will permit such payments to be made without withholding or at a
reduced rate.

 

(f) Tax Refunds. If the Administrative Agent or a Lender determines, in its sole
discretion, that it has received a refund of any Taxes or Other Taxes as to
which it has been indemnified by the Borrower or with respect to which the
Borrower has paid additional amounts pursuant to Section 5.03, it shall pay over
such refund to the Borrower (but only to the extent of indemnity payments made,
or additional amounts paid, by the Borrower under Section 5.03 with respect to
the Taxes or Other Taxes giving rise to such refund), net of all out-of-pocket
expenses of the Administrative Agent or such Lender and without interest (other
than any interest paid by the relevant Governmental Authority with respect to
such refund); provided, that the Borrower, upon the request of the
Administrative Agent or such Lender, agrees to repay the amount paid over to the
Borrower (plus any penalties, interest or other charges imposed by the relevant
Governmental Authority) to the Administrative Agent or such Lender in the event
the Administrative Agent or such Lender is required to repay such refund to such
Governmental Authority. This Section 5.03(f)shall not be construed to require
the Administrative Agent or any Lender to make available its tax returns (or any
other information relating to its taxes which it deems confidential) to the
Borrower or any other Person.

 

Section 5.04 Mitigation Obligations; Replacement of Lenders.

 

(a) Designation of Different Lending Office. If any Lender requests compensation
under Section 5.01, or if the Borrower is required to pay any additional amount
to any Lender or any Governmental Authority for the account of any Lender
pursuant to Section 5.03, then such Lender shall use reasonable efforts to
designate a different lending office for funding or booking its Loans hereunder
or to assign its rights and obligations hereunder to another of its offices,
branches or affiliates, if, in the judgment of such Lender, such designation or
assignment (i) would eliminate or reduce amounts payable pursuant to Section
5.01 or Section 5.03, as the case may be, in the future and (ii) would not
subject such Lender to any unreimbursed cost or expense and would not otherwise
be disadvantageous to such Lender. The Borrower hereby agrees to pay all
reasonable costs and expenses incurred by any Lender solely as a result of such
designation or assignment.

 

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(b) Replacement of Lenders. If any Lender requests compensation under Section
5.01, or if the Borrower is required to pay any additional amount to any Lender
or any Governmental Authority for the account of any Lender pursuant to Section
5.03, or if any Lender defaults in its obligation to fund Loans hereunder or if
any Lender has asserted that any adoption or change of the type described in
Section 5.05 has occurred, then the Borrower may, at its sole expense and
effort, upon notice to such Lender and the Administrative Agent, require such
Lender to assign and delegate, without recourse (in accordance with and subject
to the restrictions contained in Section 12.04(b)), all its interests, rights
and obligations under this Agreement to an assignee that shall assume such
obligations (which assignee may be another Lender, if a Lender accepts such
assignment); provided that (i) if such assignee is not a Lender, the Borrower
shall have received the prior written consent of the Administrative Agent, which
consent shall not unreasonably be withheld, (ii) such Lender shall have received
payment of an amount equal to the outstanding principal of its Loans and
participations in LC Disbursements, accrued interest thereon, accrued fees and
all other amounts payable to it hereunder, from the assignee (to the extent of
such outstanding principal and accrued interest and fees) or the Borrower (in
the case of all other amounts) and (iii) in the case of any such assignment
resulting from a claim for compensation under Section 5.01 or payments required
to be made pursuant to Section 5.03, such assignment will result in a reduction
in such compensation or payments. A Lender shall not be required to make any
such assignment and delegation if, prior thereto, as a result of a waiver by
such Lender or otherwise, the circumstances entitling the Borrower to require
such assignment and delegation cease to apply.

 

Section 5.05 Illegality. Notwithstanding any other provision of this Agreement,
in the event that it becomes unlawful for any Lender or its applicable lending
office to honor its obligation to make or maintain Eurodollar Loans either
generally or having a particular Interest Period hereunder, then (a) such Lender
shall promptly notify the Borrower and the Administrative Agent thereof and such
Lender’s obligation to make such Eurodollar Loans shall be suspended (the
“Affected Loans”) until such time as such Lender may again make and maintain
such Eurodollar Loans and (b) all Affected Loans which would otherwise be made
by such Lender shall be made instead as ABR Loans (and, if such Lender so
requests by notice to the Borrower and the Administrative Agent, all Affected
Loans of such Lender then outstanding shall be automatically converted into ABR
Loans on the date specified by such Lender in such notice) and, to the extent
that Affected Loans are so made as (or converted into) ABR Loans, all payments
of principal which would otherwise be applied to such Lender’s Affected Loans
shall be applied instead to its ABR Loans.

 

ARTICLE VI

Conditions Precedent

 

Section 6.01 Effective Date. The obligations of the Lenders to amend and restate
the Existing Credit Agreement, to make Loans and of any Issuing Bank to issue
Letters of Credit hereunder shall not become effective until the date on which
each of the following conditions is satisfied (or waived in accordance with
Section 12.02):

 

(a) The Administrative Agent, the Arranger and the Lenders shall have received
all fees and other amounts due and payable on or prior to the Effective Date,
including, to the extent invoiced, reimbursement or payment of all out-of-pocket
expenses for which invoices have been presented required to be reimbursed or
paid by the Borrower hereunder.

 

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(b) The Administrative Agent shall have received a certificate of the Secretary
or an Assistant Secretary of the Borrower and of each Guarantor dated as of the
Effective Date setting forth (i) resolutions of its board of directors with
respect to the authorization of the Borrower or such Guarantor to execute and
deliver the Loan Documents to which the Borrower or such Guarantor is a party
and to enter into the transactions contemplated in those documents, (ii) the
officers of the Borrower or such Guarantor (y) who are authorized to sign the
Loan Documents to which the Borrower or such Guarantor is a party and (z) who
will, until replaced by another officer or officers duly authorized for that
purpose, act as its representative for the purposes of signing documents and
giving notices and other communications in connection with this Agreement and
the transactions contemplated hereby, (iii) specimen signatures of such
authorized officers, and (iv) the articles or certificate of incorporation and
bylaws of the Borrower and such Guarantor, certified as being true and complete.
The Administrative Agent and the Lenders may conclusively rely on such
certificate until the Administrative Agent receives notice in writing from the
Borrower to the contrary.

 

(c) The Administrative Agent shall have received certificates of the appropriate
State agencies with respect to the existence, qualification and good standing of
the Borrower and each Guarantor.

 

(d) The Administrative Agent shall have received a compliance certificate which
shall be substantially in the form of Exhibit B, duly and properly executed by a
Responsible Officer and dated as of the date of Effective Date.

 

(e) The Administrative Agent shall have received from each party hereto
counterparts (in such number as may be requested by the Administrative Agent) of
this Agreement signed on behalf of such party.

 

(f) The Administrative Agent shall have received duly executed Notes payable to
the order of each Lender in a principal amount equal to its Maximum Credit
Amount dated as of the Effective Date.

 

(g) The Administrative Agent shall have received from each party thereto duly
executed counterparts (in such number as may be requested by the Administrative
Agent) of the Security Instruments, including the Guaranty Agreement and the
other Security Instruments described on Exhibit C-1. In connection with the
execution and delivery of the Security Instruments, the Administrative Agent
shall:

 

(i) be reasonably satisfied that the Security Instruments create first priority,
perfected Liens (subject only to Excepted Liens identified in clauses (a) to (d)
and (f) of the definition thereof, but subject to the provisos at the end of
such definition and the Liens described on Schedule 9.03) on at least 80% of the
total value of the Oil and Gas Properties evaluated in the Initial Reserve
Report; and

 

(ii) have received certificates, together with undated, blank stock powers for
each such certificate, representing all of the issued and outstanding Equity
Interests of each of the Guarantors and not less than 65% of all of the issued
and outstanding capital stock of each Foreign Subsidiary, which is directly
owned by either the Borrower or a Domestic Subsidiary.

 

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(h) The Administrative Agent shall have received an opinion dated as of the
Effective Date of Bracewell & Giuliani LLP, special counsel to the Borrower, in
form and substance reasonably satisfactory to the Administrative Agent.

 

(i) The Administrative Agent shall have received a certificate of insurance
coverage of the Borrower evidencing that the Borrower is carrying insurance in
accordance with Section 7.13.

 

(j) The Administrative Agent shall have received the financial statements
referred to in Section 7.04(a) and the Initial Reserve Report accompanied by a
certificate covering the matters described in Section 8.12(c).

 

(k) The Administrative Agent shall have received appropriate UCC search
certificates reflecting no prior Liens encumbering the personal property related
to the Oil and Gas Properties of the Borrower and the Restricted Subsidiaries
for each of the following jurisdictions: Delaware, Texas, California, Louisiana,
New Mexico, Oklahoma and any other jurisdiction requested by the Administrative
Agent; other than those being assigned or released on or prior to the Effective
Date or Liens permitted by Section 9.03.

 

(l) The Administrative Agent shall have received a copy, certified by a
Responsible Officer as true and complete, of the Senior Subordinated Indenture
and the Senior Indenture (together with all amendments, if any).

 

(m) The Administrative Agent shall have received a letter from CT Corporation
evidencing the appointment of CT Corporation as authorized agent for service of
process on each of the Borrower and each Obligor (as defined in the Guaranty
Agreement) under each Loan Document to which it is a party.

 

(n) The Administrative Agent shall have received such other documents as the
Administrative Agent or special counsel to the Administrative Agent may
reasonably request.

 

The Administrative Agent shall notify the Borrower and the Lenders of the
Effective Date, and such notice shall be conclusive and binding. Notwithstanding
the foregoing, the obligations of the Lenders to make Loans and of any Issuing
Bank to issue Letters of Credit hereunder shall not become effective unless each
of the foregoing conditions is satisfied (or waived pursuant to Section 12.02)
at or prior to 3:00 p.m., New York City time on June 30, 2005 (and, in the event
such conditions are not so satisfied or waived, the Commitments shall terminate
at such time).

 

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Section 6.02 Each Credit Event. The obligation of each Lender to make a Loan on
the occasion of any Borrowing (including the initial funding) (excluding any
Loan made pursuant to Section 2.08(e)), and of any Issuing Bank to issue, amend,
renew or extend any Letter of Credit, is subject to the satisfaction of the
following conditions:

 

(a) At the time of and immediately after giving effect to such Borrowing or the
issuance, amendment, renewal or extension of such Letter of Credit, as
applicable, no Default shall have occurred and be continuing.

 

(b) At the time of and immediately after giving effect to such Borrowing or the
issuance, amendment, renewal or extension of such Letter of Credit, as
applicable, no Material Adverse Effect shall have occurred.

 

(c) The representations and warranties of the Borrower and the Guarantors set
forth in this Agreement and in the other Loan Documents shall be true and
correct in all material respects on and as of the date of such Borrowing or the
date of issuance, amendment, renewal or extension of such Letter of Credit, as
applicable, except to the extent any such representations and warranties are
expressly limited to an earlier date, in which case, on and as of the date of
such Borrowing or the date of issuance, amendment, renewal or extension of such
Letter of Credit, as applicable, such representations and warranties shall
continue to be true and correct in all material respects as of such specified
earlier date.

 

(d) The making of such Loan or the issuance, amendment, renewal or extension of
such Letter of Credit, as applicable, would not conflict with, or cause any
Lender or any Issuing Bank to violate or exceed, any applicable Governmental
Requirement, and no Change in Law shall have occurred, and no litigation shall
be pending or threatened, which does or, with respect to any threatened
litigation, seeks to, enjoin, prohibit or restrain, the making or repayment of
any Loan, the issuance, amendment, renewal, extension or repayment of any Letter
of Credit or any participations therein or the consummation of the transactions
contemplated by this Agreement or any other Loan Document.

 

(e) The receipt by the Administrative Agent of a Borrowing Request in accordance
with Section 2.03 or a request for a Letter of Credit in accordance with Section
2.08(b), as applicable.

 

Each Borrowing (excluding any Borrowing made pursuant to Section 2.08(e)) and
each issuance, amendment, renewal or extension of any Letter of Credit shall be
deemed to constitute a representation and warranty by the Borrower on the date
thereof as to the matters specified in Section 6.02(a) through (e).

 

ARTICLE VII

Representations and Warranties

 

The Borrower represents and warrants to the Lenders that:

 

Section 7.01 Organization; Powers. Each of the Borrower and the Restricted
Subsidiaries is duly organized, validly existing and in good standing under the
laws of the jurisdiction of its organization, has all requisite power and
authority, and has all material

 

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governmental licenses, authorizations, consents and approvals necessary, to own
its assets and to carry on its business as now conducted, and is qualified to do
business in, and is in good standing in, every jurisdiction where such
qualification is required, except where failure to have such power, authority,
licenses, authorizations, consents, approvals and qualifications could not
reasonably be expected to have a Material Adverse Effect.

 

Section 7.02 Authority; Enforceability. The Transactions are within the
Borrower’s and each Guarantor’s corporate powers and have been duly authorized
by all necessary corporate and, if required, stockholder action. Each Loan
Document to which the Borrower and each Guarantor is a party has been duly
executed and delivered by the Borrower and such Guarantor and constitutes a
legal, valid and binding obligation of the Borrower and such Guarantor, as
applicable, enforceable in accordance with its terms, subject to applicable
bankruptcy, insolvency, reorganization, fraudulent transfer or conveyance,
moratorium or other laws affecting creditors’ rights generally and subject to
general principles of equity, regardless of whether considered in a proceeding
in equity or at law and an implied covenant of good faith and fair dealing.

 

Section 7.03 Approvals; No Conflicts. The Transactions (a) do not require any
consent or approval of, registration or filing with, or any other action by, any
Governmental Authority or any other third Person, nor is any such consent,
approval, registration, filing or other action necessary for the validity or
enforceability of any Loan Document or the consummation of the transactions
contemplated thereby, except such as have been obtained or made and are in full
force and effect other than (i) the recording and filing of the Security
Instruments as required by this Agreement, (ii) filings, consents or approvals
required for the exercise by the Administrative Agent of its rights under the
Security Instruments, (iii) filings under the Securities and Exchange Act of
1934, as amended, (iv) routine filings to be made after the date hereof to
maintain “good standing” in such jurisdictions and to maintain licenses and
permits, (v) those third party approvals or consents which, if not made or
obtained, would not cause a Default hereunder, could not reasonably be expected
to have a Material Adverse Effect or do not have an adverse effect on the
enforceability of the Loan Documents, (b) will not violate (i) the charter,
by-laws or other organizational documents of the Borrower or any Restricted
Subsidiary or (ii) any applicable law or regulation or any order of any
Governmental Authority applicable to or binding upon the Borrower or any
Restricted Subsidiary which would reasonably be expected to have a Material
Adverse Effect, (c) will not violate or result in a default under any indenture,
agreement or other instrument pursuant to which any Material Indebtedness is
outstanding, including the Indentures, binding upon the Borrower or any
Restricted Subsidiary or its Properties, or give rise to a right thereunder to
require any payment to be made by the Borrower or such Restricted Subsidiary
that could reasonably be expected to have a Material Adverse Effect and (d) will
not result in the creation or imposition of any Lien on any Property of the
Borrower or any Restricted Subsidiary (other than the Liens created by the Loan
Documents).

 

Section 7.04 Financial Condition; No Material Adverse Change.

 

(a) The Borrower has furnished to the Lenders on or before the Effective Date
its consolidated balance sheet and statements of income, shareholders’ equity
and cash flows as of and for the fiscal year ended December 31, 2004, audited by
PricewaterhouseCoopers LLP, independent public accountants. Such financial
statements present fairly, in all material respects, the financial position and
results of operations and cash flows of the Borrower and its Consolidated
Subsidiaries as of such date and for such period in accordance with GAAP.

 

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(b) Since December 31, 2004, (i) there has been no material adverse change in
the business, operations, Property or financial condition, of the Borrower and
its Restricted Subsidiaries taken as a whole and (ii) the business of the
Borrower and its Restricted Subsidiaries has been conducted only in the ordinary
course consistent with past business practices.

 

(c) Neither the Borrower nor any Restricted Subsidiary has any material Debt
(including Disqualified Capital Stock) other than, the Senior Notes, the Senior
Subordinated Notes and, if and when issued, the Permitted Additional Notes, or
any contingent liabilities, off-balance sheet liabilities or partnerships,
liabilities for taxes, unusual forward or long-term commitments or unrealized or
anticipated losses from any unfavorable commitments, except as referred to or
reflected or provided for, as of the Effective Date, in the Financial
Statements, and after the Effective Date, in the financial statements furnished
pursuant to Section 8.01.

 

(d) Neither the Borrower nor any Restricted Subsidiary is a party to any
material agreement with PLX or any Affiliate of PLX except for the Tax
Allocation Agreement and the Master Separation Agreement.

 

Section 7.05 Litigation.

 

(a) Except as disclosed in the Borrower’s Annual Report on Form 10-K for the
fiscal year ended December 31, 2004, there are no actions, suits, investigations
or proceedings by or before any arbitrator or Governmental Authority pending
against or, to the knowledge of the Borrower, threatened against or affecting
the Borrower or any Restricted Subsidiary (i) not fully covered by insurance
(except for normal deductibles) as to which there is a reasonable possibility of
an adverse determination that, if adversely determined, could reasonably be
expected, individually or in the aggregate, to result in a Material Adverse
Effect or (ii) that involve any Loan Document, any Spin-off Document or the
Transactions.

 

(b) Since December 31, 2004, there has been no change in the status of the
matters disclosed in the Borrower’s Annual Report on Form 10-K for the fiscal
year ended December 31, 2004, that, individually or in the aggregate, has
resulted in, or materially increased the likelihood of, a Material Adverse
Effect.

 

Section 7.06 Environmental Matters. Except as disclosed in the Borrower’s Annual
Report on Form 10-K for the fiscal year ended December 31, 2004, and as could
not be reasonably expected to have a Material Adverse Effect (or with respect to
(c), (d) and (e) below, where the failure to take such actions could not be
reasonably expected to have a Material Adverse Effect):

 

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

 

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(b) no Property of the Borrower or any Restricted Subsidiary nor the operations
currently conducted thereon or, to the knowledge of the Borrower, by any prior
owner or operator of such Property or operation, are in violation of or subject
to any existing, pending or threatened action, suit, investigation, inquiry or
proceeding by or before any court or Governmental Authority or to any remedial
obligations under Environmental Laws.

 

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

 

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

 

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

 

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

 

(g) neither the Borrower nor any Restricted Subsidiary has any known contingent
liability or Remedial Work in connection with any release or threatened release
of any oil, hazardous substance, solid waste or oil and gas waste into the
environment.

 

Section 7.07 Compliance with the Laws and Agreements; No Defaults.

 

(a) Each of the Borrower and each Restricted Subsidiary is in compliance with
all Governmental Requirements applicable to it or its Property and all
agreements and other instruments binding upon it or its Property, and possesses
all licenses, permits, franchises, exemptions, approvals and other governmental
authorizations necessary for the ownership of its Property and the conduct of
its business, except where the failure to do so, individually or in the
aggregate, could not reasonably be expected to result in a Material Adverse
Effect.

 

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(b) Neither the Borrower nor any Restricted Subsidiary is in default nor has any
event or circumstance occurred which, but for the expiration of any applicable
grace period or the giving of notice, or both, would constitute a default or
would require the Borrower or a Restricted Subsidiary to Redeem or make any
offer to Redeem under any indenture, note, credit agreement or instrument
pursuant to which any Material Indebtedness is outstanding or by which the
Borrower or any Restricted Subsidiary or any of their Properties is bound.

 

(c) No Default has occurred and is continuing.

 

Section 7.08 Investment Company Act. Neither the Borrower nor any Subsidiary is
an “investment company” or a company “controlled” by an “investment company,”
within the meaning of, or subject to regulation under, the Investment Company
Act of 1940, as amended.

 

Section 7.09 Public Utility Holding Company Act. Neither the Borrower nor any
Subsidiary is a “holding company,” or a “subsidiary company” of a “holding
company,” or an “affiliate” of a “holding company” or of a “subsidiary company”
of a “holding company,” or a “public utility” within the meaning of, or subject
to regulation under, the Public Utility Holding Company Act of 1935, as amended.

 

Section 7.10 Taxes. Each of the Borrower and its Subsidiaries has timely filed
or caused to be filed all federal income and other material Tax returns and
reports required to have been filed (or obtained extensions with respect
thereto) and has paid or caused to be paid all Taxes required to have been paid
by it, except (a) Taxes that are being contested in good faith by appropriate
proceedings and for which the Borrower or such Subsidiary, as applicable, has
set aside on its books adequate reserves in accordance with GAAP or (b) to the
extent that the failure to do so could not reasonably be expected to result in a
Material Adverse Effect. The charges, accruals and reserves on the books of the
Borrower and its Subsidiaries in respect of Taxes and other governmental charges
are, in the reasonable opinion of the Borrower, adequate. No action to enforce
any Tax Lien has been commenced.

 

Section 7.11 ERISA. The Borrower and the ERISA Affiliates have fulfilled their
respective obligations under the minimum funding standards of ERISA and the Code
with respect to each Plan and are in compliance in all material respects with
the presently applicable provisions of ERISA and the Code, and have not incurred
any liability to the PBGC or any Plan or Multiemployer Plan (other than to make
contributions in the ordinary course of business) which liability could
reasonably be expected to have a Material Adverse Effect.

 

Section 7.12 Disclosure; No Material Misstatements. None of the reports,
financial statements, certificates or other written information furnished by or
on behalf of the Borrower or any Restricted Subsidiary to the Administrative
Agent or any Lender or any of their Affiliates in connection with the
negotiation of this Agreement or any other Loan Document or delivered hereunder
or under any other Loan Document (as modified or supplemented by other
information so furnished) contains any material misstatement of fact or omits to
state any material fact necessary to make the statements therein, in the light
of the circumstances under

 

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which they were made, not misleading (other than omissions that pertain to
matters of a general economic nature or matters of public knowledge that
generally affect any of the industry segments of the Borrower or its
Subsidiaries); provided that, with respect to projected financial information,
the Borrower represents only that such information was prepared in good faith
based upon assumptions believed to be reasonable at the time. There is no fact
peculiar to the Borrower or any Restricted Subsidiary which could reasonably be
expected to have a Material Adverse Effect or in the future is reasonably likely
to have a Material Adverse Effect and which has not been set forth in this
Agreement or the Loan Documents or the other documents, certificates and written
statements furnished to the Administrative Agent or the Lenders by or on behalf
of the Borrower or any Restricted Subsidiary prior to, or on, the date hereof in
connection with the transactions contemplated hereby. There are no statements or
conclusions in any Reserve Report which are based upon or include misleading
information or fail to take into account material information regarding the
matters reported therein, it being understood that projections concerning
volumes attributable to the Oil and Gas Properties and production and cost
estimates contained in each Reserve Report are necessarily based upon
professional opinions, estimates and projections and that the Borrower and the
Restricted Subsidiaries do not warrant that such opinions, estimates and
projections will ultimately prove to have been accurate.

 

Section 7.13 Insurance. The Borrower has, and has caused all of its Restricted
Subsidiaries to have, (a) all insurance policies sufficient for the compliance
by each of them with all material Governmental Requirements and all material
agreements and (b) insurance coverage in at least amounts and against such risk
(including, without limitation, public liability) that are usually insured
against by companies similarly situated and engaged in the same or a similar
business for the assets and operations of the Borrower and its Restricted
Subsidiaries. The Administrative Agent and the Lenders have been named as
additional insureds in respect of such liability insurance policies and the
Administrative Agent has been named as loss payee with respect to Property loss
insurance.

 

Section 7.14 Restriction on Liens. Except as permitted by Section 9.17, neither
the Borrower nor any of the Restricted Subsidiaries is a party to any material
agreement or arrangement, or subject to any order, judgment, writ or decree,
which either restricts or purports to restrict its ability to grant Liens to the
Administrative Agent and the Lenders on or in respect of their Properties to
secure the Indebtedness and the Loan Documents.

 

Section 7.15 Subsidiaries. Except as set forth on Schedule 7.15 or as disclosed
in writing to the Administrative Agent (which shall promptly furnish a copy to
the Lenders), which shall be a supplement to Schedule 7.15, the Borrower has no
Subsidiaries. Schedule 7.15 identifies each Subsidiary as either Restricted or
Unrestricted, and each Restricted Subsidiary on such schedule is a Wholly-Owned
Subsidiary. The Borrower has no Foreign Subsidiaries, except as set forth in
Schedule 7.15.

 

Section 7.16 Location of Business and Offices. As of the Effective Date, the
Borrower’s jurisdiction of organization is Delaware; the name of the Borrower as
listed in the public records of its jurisdiction of organization is Plains
Exploration & Production Company; and the organizational identification number
of the Borrower in its jurisdiction of organization is 3569131. As of the
Effective Date, each Restricted Subsidiary’s jurisdiction of organization, name
as listed in the public records of its jurisdiction of organization,
organizational identification number in its jurisdiction of organization, and
the location of its principal place of business and chief executive office is
stated on Schedule 7.15.

 

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Section 7.17 Properties; Titles, Etc.

 

(a) Except as disclosed in Schedule 7.17, each of the Borrower and the
Restricted Subsidiaries has good and defensible title to the Oil and Gas
Properties evaluated in the most recently delivered Reserve Report and good
title to all its personal Properties that are necessary to permit the Borrower
and the Restricted Subsidiaries to conduct their business in all material
respects in the same manner as its business has been conducted prior to the date
hereof, in each case, free and clear of all Liens except Liens permitted by
Section 9.03. After giving full effect to the Excepted Liens, the Borrower or
the Restricted Subsidiary specified as the owner owns the net interests in
production attributable to the Hydrocarbon Interests as reflected in the most
recently delivered Reserve Report, and the ownership of such Properties shall
not in any material respect obligate the Borrower or such Restricted Subsidiary
to bear the costs and expenses relating to the maintenance, development and
operations of each such Property in an amount in excess of the working interest
of each Property set forth in the most recently delivered Reserve Report that is
not offset by a corresponding proportionate increase in the Borrower’s or such
Restricted Subsidiary’s net revenue interest in such Property.

 

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

 

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

 

(d) The Borrower and each Restricted Subsidiary owns, or is licensed to use, all
trademarks, tradenames, copyrights, patents and other intellectual Property
material to its business, and the use thereof by the Borrower and such
Restricted Subsidiary does not infringe upon the rights of any other Person,
except for any such infringements that, individually or in the aggregate, could
not reasonably be expected to result in a Material Adverse Effect. The Borrower
and its Restricted Subsidiaries either own or have valid licenses or other
rights to use all databases, geological data, geophysical data, engineering
data, seismic data, maps, interpretations and other technical information used
in their businesses as presently conducted, subject to the limitations contained
in the agreements governing the use of the same, which limitations are customary
for companies engaged in the business of the exploration and production of
Hydrocarbons, with such exceptions as could not reasonably be expected to have a
Material Adverse Effect.

 

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Section 7.18 Maintenance of Properties. Except for such acts or failures to act
as could not be reasonably expected to have a Material Adverse Effect, the Oil
and Gas Properties (and Properties unitized therewith) of the Borrower and its
Restricted Subsidiaries have been maintained, operated and developed in a good
and workmanlike manner and in conformity with all Government Requirements and in
conformity with the provisions of all leases, subleases or other contracts
comprising a part of the Hydrocarbon Interests and other contracts and
agreements forming a part of the Oil and Gas Properties of the Borrower and its
Restricted Subsidiaries. Specifically in connection with the foregoing, except
for those as could not be reasonably expected to have a Material Adverse Effect,
(i) no Oil and Gas Property of the Borrower or its Restricted Subsidiaries is
subject to having allowable production reduced below the full and regular
allowable (including the maximum permissible tolerance) because of any
overproduction (whether or not the same was permissible at the time) and (ii)
none of the wells comprising a part of the Oil and Gas Properties (or Properties
unitized therewith) of the Borrower or its Restricted Subsidiaries is deviated
from the vertical more than the maximum permitted by Government Requirements,
and such wells are, in fact, bottomed under and are producing from, and the well
bores are wholly within, the Oil and Gas Properties (or in the case of wells
located on Properties unitized therewith, such unitized Properties) of the
Borrower or its Restricted Subsidiaries, as applicable. All pipelines, wells,
gas processing plants, platforms and other material improvements, fixtures and
equipment owned in whole or in part by the Borrower or any of its Restricted
Subsidiaries that are necessary to conduct normal operations are being
maintained in a state adequate to conduct normal operations, and with respect to
such of the foregoing which are operated by the Borrower or any of its
Restricted Subsidiaries, in a manner consistent with the Borrower’s or its
Restricted Subsidiaries’ past practices (other than those the failure of which
to maintain in accordance with this Section 7.18 could not reasonably be expect
to have a Material Adverse Effect).

 

Section 7.19 Gas Imbalances, Prepayments. Except as set forth on Schedule 7.19
or on the most recent certificate delivered pursuant to Section 8.12(c), on a
net basis there are no gas imbalances, take or pay or other prepayments which
would require the Borrower or any of its Restricted Subsidiaries to deliver
Hydrocarbons produced from the Oil and Gas Properties at some future time
without then or thereafter receiving full payment therefor exceeding two bcf of
gas (on an mcf equivalent basis) in the aggregate.

 

Section 7.20 Marketing of Production. Except for contracts listed and in effect
on the date hereof on Schedule 7.20, and thereafter either disclosed in writing
to the Administrative Agent or included in the most recently delivered Reserve
Report (with respect to all of which contracts the Borrower represents that it
or its Restricted Subsidiaries are receiving a price for all production sold
thereunder which is computed substantially in accordance with the terms of the
relevant contract and are not having deliveries curtailed substantially below
the subject Property’s delivery capacity), no material agreements exist which
are not cancelable on 90 days notice or less without penalty or detriment for
the sale of production from the Borrower’s or its Restricted Subsidiaries’
Hydrocarbons (including, without limitation, calls on or other rights to
purchase, production, whether or not the same are currently being exercised)
that (a) pertain to the sale of production at a fixed price and (b) have a
maturity or expiry date of longer than six (6) months from the date hereof.

 

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Section 7.21 Swap Agreements. Schedule 7.21, as of the Effective Date, and after
the Effective Date, each report required to be delivered by the Borrower
pursuant to Section 8.01(e), sets forth, a true and complete list of all Swap
Agreements of the Borrower and each Restricted Subsidiary, the material terms
thereof (including the type, term, effective date, termination date and notional
amounts or volumes), the net mark to market value thereof, all credit support
agreements relating thereto (including any margin required or supplied) and the
counterparty to each such agreement.

 

Section 7.22 Use of Loans and Letters of Credit. The proceeds of the Loans and
the Letters of Credit shall be used to provide working capital for exploration
and production operations and for general corporate purposes. The Borrower and
its Subsidiaries are not engaged principally, or as one of its or their
important activities, in the business of extending credit for the purpose,
whether immediate, incidental or ultimate, of buying or carrying margin stock
(within the meaning of Regulation T, U or X of the Board). No part of the
proceeds of any Loan or Letter of Credit will be used for any purpose which
violates the provisions of Regulations T, U or X of the Board.

 

Section 7.23 Solvency. After giving effect to the transactions contemplated
hereby, (a) the aggregate assets (after giving effect to amounts that could
reasonably be received by reason of indemnity, offset, insurance or any similar
arrangement), at a fair valuation, of the Borrower and the Guarantors, taken as
a whole, will exceed the aggregate Debt of the Borrower and the Guarantors on a
consolidated basis, as the Debt becomes absolute and matures, (b) each of the
Borrower and the Guarantors will not have incurred or intended to incur, and
does not believe that it will have incurred, Debt beyond its ability to pay such
Debt (after taking into account the timing and amounts of cash to be received by
each of the Borrower and the Guarantors and the amounts to be payable on or in
respect of its liabilities, and giving effect to amounts that could reasonably
be received by reason of indemnity, offset, insurance or any similar
arrangement) as such Debt becomes absolute and matures and (c) each of the
Borrower and the Guarantors will not have (and will have no reason to believe
that it will have thereafter) unreasonably small capital for the conduct of its
business.

 

Section 7.24 Designated Senior Indebtedness. The Indebtedness of the Borrower
constitutes “Senior Indebtedness” and “Designated Senior Indebtedness,” and the
Indebtedness of each Guarantor under the Loan Documents to which it is a party
constitutes “Guarantor Senior Indebtedness”, in each case, under and as defined
in the Senior Subordinated Indenture, and, if applicable, under any Permitted
Additional Indenture (using such similar terms as therein defined).

 

ARTICLE VIII

Affirmative Covenants

 

Until the Commitments have expired or been terminated and the principal of and
interest on each Loan and all fees payable hereunder and all other amounts
payable under the Loan Documents shall have been paid in full and all Letters of
Credit shall have expired or terminated and all LC Disbursements shall have been
reimbursed, the Borrower covenants and agrees with the Lenders that:

 

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Section 8.01 Financial Statements; Ratings Change; Other Information. The
Borrower will furnish to the Administrative Agent:

 

(a) Annual Financial Statements. As soon as available, but in any event in
accordance with then applicable law and not later than 90 days after the end of
each fiscal year of the Borrower, its audited consolidated balance sheet and
related statements of operations, stockholders’ equity and cash flows as of the
end of and for such year, setting forth in each case in comparative form the
figures for the previous fiscal year, all reported on by PricewaterhouseCoopers
LLP or other independent public accountants of recognized national standing
(without a “going concern” or like qualification or exception and without any
qualification or exception as to the scope of such audit) to the effect that
such consolidated financial statements present fairly in all material respects
the financial condition and results of operations of the Borrower and its
Consolidated Subsidiaries on a consolidated basis in accordance with GAAP
consistently applied.

 

(b) Quarterly Financial Statements. As soon as available, but in any event in
accordance with then applicable law and not later than 45 days after the end of
each of the first three fiscal quarters of each fiscal year of the Borrower, its
consolidated balance sheet and related statements of operations, stockholders’
equity and cash flows as of the end of and for such fiscal quarter and the then
elapsed portion of the fiscal year, setting forth in each case in comparative
form the figures for the corresponding period or periods of (or, in the case of
the balance sheet, as of the end of) the previous fiscal year, all certified by
one of its Financial Officers as presenting fairly in all material respects the
financial condition and results of operations of the Borrower and its
Consolidated Subsidiaries on a consolidated basis in accordance with GAAP
consistently applied, subject to normal year-end audit adjustments and the
absence of footnotes.

 

(c) Certificate of Financial Officer — Compliance. Concurrently with any
delivery of financial statements under Section 8.01(a) or Section 8.01(b), a
certificate of a Financial Officer in substantially the form of Exhibit B hereto
(i) certifying as to whether a Default has occurred and, if a Default has
occurred, specifying the details thereof and any action taken or proposed to be
taken with respect thereto, (ii) setting forth reasonably detailed calculations
demonstrating compliance with Section 9.01 and (iii) stating whether any change
in GAAP or in the application thereof has occurred since the date of the audited
financial statements referred to in Section 7.04 and, if any such change has
occurred, specifying the effect of such change on the financial statements
accompanying such certificate.

 

(d) Certificate of Financial Officer — Consolidating Information. If, at any
time, all of the Consolidated Subsidiaries of the Borrower are not Consolidated
Restricted Subsidiaries, then concurrently with any delivery of financial
statements under Section 8.01(a) or Section 8.01(b), a certificate of a
Financial Officer setting forth consolidating spreadsheets that show all
Consolidated Unrestricted Subsidiaries and the eliminating entries, in such form
as would be presentable to the auditors of the Borrower.

 

(e) Certificate of Financial Officer – Swap Agreements. Concurrently with the
delivery of any Reserve Report under Section 8.12(a) and Section 8.12(b), a true
and complete list of all Swap Agreements of the Borrower and each Restricted
Subsidiary in form

 

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and substance satisfactory to the Administrative Agent, setting forth as of the
date that such Reserve Report is required to be delivered, the material terms
thereof (including the type, term, effective date, termination date and notional
amounts or volumes), the net mark to market value therefor, any new credit
support agreements relating thereto not listed on Schedule 7.21, any margin
required or supplied under any credit support document, and the counterparty to
each such agreement.

 

(f) Certificate of Insurer — Insurance Coverage. Concurrently with the annual
renewal thereof, a certificate of insurance coverage from each insurer with
respect to the insurance required by Section 8.07, in form and substance
satisfactory to the Administrative Agent, and, if requested by the
Administrative Agent or any Lender, all copies of the applicable policies.

 

(g) SEC and Other Filings; Reports to Shareholders. Promptly after the same
become publicly available, copies of all periodic and other reports, proxy
statements and other materials (other than filings under Section 16 of the
Securities Exchange Act of 1934) filed by the Borrower or any Subsidiary with
the SEC or with any national securities exchange, or distributed by the Borrower
to its shareholders generally, as the case may be.

 

(h) Notices Under Material Instruments. Promptly after the furnishing thereof,
copies of any financial statement, report or notice furnished to or by any
Person pursuant to the terms of any preferred stock designation or indenture,
loan or credit or other similar agreement in respect of Material Indebtedness,
other than this Agreement and not otherwise required to be furnished to the
Lenders pursuant to any other provision of this Section 8.01.

 

(i) Lists of Purchasers. Concurrently with the delivery of any Reserve Report to
the Administrative Agent pursuant to Section 8.12, a list of Persons purchasing
Hydrocarbons from the Borrower and its Restricted Subsidiaries constituting at
least 75% of the total revenues from such purchases for the six-month period
ending on the date of such Reserve Report (such list to include and specify in
descending order the largest purchasers of Hydrocarbons for such period based on
the percentage of total revenues that each such purchaser represents); and
during the continuance of a Default, promptly upon the request therefor by the
Administrative Agent or any Lender, a list of all Persons purchasing
Hydrocarbons from the Borrower and its Restricted Subsidiaries for the six-month
period ending on the date of such request.

 

(j) Notice of Sales of Oil and Gas Properties. In the event the Borrower or any
Restricted Subsidiary sells, transfers, assigns or otherwise disposes of any Oil
or Gas Properties included in the most recently delivered Reserve Report during
any period between two successive Scheduled Redetermination Dates having a fair
market value in excess of 5% of the Borrowing Base then in effect, written
notice of such disposition, the price thereof and the date of closing.

 

(k) Notice of Casualty Events. Prompt written notice, and in any event within
three Business Days, of the occurrence of any Casualty Event or the commencement
of any action or proceeding that could reasonably be expected to result in a
Casualty Event.

 

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(l) Issuance of Permitted Additional Notes. In the event the Borrower intends to
issue any Permitted Additional Notes, prior written notice of such intended
offering therefor, the amount thereof and the anticipated date of closing and
will furnish a copy of the preliminary offering memorandum (if any) and the
final offering memorandum (if any).

 

(m) Information Regarding Borrower and Guarantors. Prompt written notice of any
change (i) in the Borrower or any Guarantor’s corporate name or in the trade
name used to identify such Person in the conduct of its business or the
ownership of its Properties, (ii) in the Borrower or any Guarantor’s identity or
corporate structure or in the jurisdiction in which such Person is incorporated
or formed, (iii) in the Borrower or any Guarantor’s jurisdiction of organization
or such Person’s organizational identification number in such jurisdiction of
organization, and (iv) in the Borrower or any Guarantor’s federal taxpayer
identification number.

 

(n) Ratings Change. Promptly after Moody’s or S&P shall have announced a change
in the rating established or deemed to have been established for the Index Debt
or any other Material Indebtedness, written notice of such rating change.

 

(o) Other Requested Information. Promptly following any request therefor, such
other information regarding the operations, business affairs and financial
condition of the Borrower or any Subsidiary (including, without limitation, any
Plan or Multiemployer Plan and any reports or other information required to be
filed under ERISA), or compliance with the terms of this Agreement or any other
Loan Document, as the Administrative Agent or any Lender may reasonably request.

 

Documents required to be delivered pursuant to Section 8.01 may be delivered
electronically and if so delivered, shall be deemed to have been delivered on
the date (i) on which the Borrower posts such documents, or provides a link
thereto on the Borrower’s website on the Internet at www.plainsxp.com or (ii) on
which such documents are delivered to the Administrative Agent. The
Administrative Agent shall post such documents on the Borrower’s behalf on an
Internet or intranet website, if any, to which each Lender and the
Administrative Agent have access (whether a commercial, third-party website or
whether sponsored by the Administrative Agent); provided that the Borrower shall
deliver such documents in a form acceptable to the Administrative Agent.
Notwithstanding anything contained herein, in every instance the Borrower shall
be required to provide paper copies of the compliance certificate required by
Section 8.01(c) to the Administrative Agent. Except for such compliance
certificates, the Administrative Agent shall have no obligation to request the
delivery or to maintain copies of the documents referred to above, and in any
event shall have no responsibility to monitor compliance by the Borrower with
any such request for delivery, and each Lender shall be solely responsible for
requesting delivery to it or maintaining its copies of such documents.

 

Section 8.02 Notices of Material Events. The Borrower will furnish to the
Administrative Agent and each Lender prompt written notice of the following:

 

(a) the occurrence of any Default;

 

(b) the filing or commencement of any action, suit or proceeding by or before
any arbitrator or Governmental Authority against or affecting the Borrower or
any Affiliate thereof that, if adversely determined could reasonably be expected
to result in liability in excess of $20,000,000 per claim not fully covered by
insurance, subject to normal deductibles;

 

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(c) the occurrence of any ERISA Event that, alone or together with any other
ERISA Events that have occurred, could reasonably be expected to result in
liability of the Borrower and its Subsidiaries in an aggregate amount exceeding
$20,000,000; and

 

(d) any other development that results in, or could reasonably be expected to
result in, a Material Adverse Effect.

 

Each notice delivered under this Section 8.02 shall be accompanied by a
statement of a Responsible Officer setting forth the details of the event or
development requiring such notice and any action taken or proposed to be taken
with respect thereto.

 

Section 8.03 Existence; Conduct of Business. The Borrower will, and will cause
each Restricted Subsidiary to, do or cause to be done all things necessary to
preserve, renew and keep in full force and effect its legal existence and the
rights, licenses, permits, privileges and franchises material to the conduct of
its business and maintain, if necessary, its qualification to do business in
each other jurisdiction in which its Oil and Gas Properties is located or the
ownership of such Properties requires such qualification, except where the
failure to so qualify could not reasonably be expected to have a Material
Adverse Effect; provided that the foregoing shall not prohibit any merger,
consolidation, liquidation or dissolution permitted under Section 9.12.

 

Section 8.04 Payment of Obligations. The Borrower will, and will cause each
Restricted Subsidiary to, pay its obligations, including Tax liabilities of the
Borrower and all of its Subsidiaries, before the same shall become delinquent or
in default, except where (a) the validity or amount thereof is being contested
in good faith by appropriate proceedings, (b) the Borrower or such Restricted
Subsidiary has set aside on its books adequate reserves with respect thereto in
accordance with GAAP and (c) the failure to make payment pending such contest
could not reasonably be expected to result in a Material Adverse Effect or
result in the seizure or levy of any Property of the Borrower or any Subsidiary.

 

Section 8.05 Performance of Obligations under Loan Documents. The Borrower will
pay the Notes according to the reading, tenor and effect thereof, and the
Borrower will and will cause each Restricted Subsidiary to do and perform every
act and discharge all of the obligations to be performed and discharged by them
under the Loan Documents, including, without limitation, this Agreement, at the
time or times and in the manner specified.

 

Section 8.06 Operation and Maintenance of Properties. Except, in each case,
where the failure to comply could not reasonably be expected to have a Material
Adverse Effect, the Borrower, at its own expense, will, and will cause each
Restricted Subsidiary to:

 

(a) operate its Oil and Gas Properties or cause such Oil and Gas Properties to
be operated in a careful and efficient manner in accordance with the practices
of the industry and in compliance with all applicable contracts and agreements
and in compliance with all Governmental Requirements, including, without
limitation, applicable pro ration requirements and Environmental Laws, and all
applicable laws, rules and regulations of every other

 

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Governmental Authority from time to time constituted to regulate the development
and operation of its Oil and Gas Properties and the production and sale of
Hydrocarbons and other minerals therefrom, except, in each case, where the
failure to comply could not reasonably be expected to have a Material Adverse
Effect.

 

(b) keep and maintain all Oil and Gas Property material to the conduct of its
business in good working order and condition, ordinary wear and tear excepted
preserve, maintain and keep in good repair, working order and efficiency
(ordinary wear and tear excepted) all of its material Oil and Gas Properties,
including, without limitation, all equipment, machinery and facilities.

 

(c) promptly pay and discharge, or make reasonable and customary efforts to
cause to be paid and discharged, all delay rentals, royalties, expenses and
indebtedness accruing under the leases or other agreements affecting or
pertaining to its Oil and Gas Properties and will do all other things necessary
to keep unimpaired their rights with respect thereto and prevent any forfeiture
thereof or default thereunder.

 

(d) promptly perform or make reasonable and customary efforts to cause to be
performed, in accordance with industry standards, the obligations required by
each and all of the assignments, deeds, leases, sub-leases, contracts and
agreements affecting its interests in its Oil and Gas Properties.

 

(e) operate its Oil and Gas Properties or cause or make reasonable and customary
efforts to cause such Oil and Gas Properties to be operated in accordance with
the practices of the industry and in material compliance with all applicable
contracts and agreements and in compliance in all material respects with all
Governmental Requirements.

 

(f) to the extent the Borrower is not the operator of any Oil and Gas Property,
the Borrower shall use reasonable efforts to cause the operator to comply with
this Section 8.06.

 

Section 8.07 Insurance. The Borrower will, and will cause each Restricted
Subsidiary to, maintain, with financially sound and reputable insurance
companies, insurance in such amounts and against such risks as are customarily
maintained by companies engaged in the same or similar businesses operating in
the same or similar locations. The loss payable clauses or provisions in said
insurance policy or policies insuring any of the collateral for the Loans shall
be endorsed in favor of and made payable to the Administrative Agent as its
interests may appear and such policies shall name the Administrative Agent and
the Lenders as “additional insureds” and provide that the insurer will endeavor
to give at least 30 days prior notice of any cancellation to the Administrative
Agent.

 

Section 8.08 Books and Records; Inspection Rights. The Borrower will, and will
cause each Restricted Subsidiary to, keep proper books of record and account in
which full, true and correct entries are made of all dealings and transactions
in relation to its business and activities. The Borrower will, and will cause
each Restricted Subsidiary to, permit any representatives designated by the
Administrative Agent or any Lender, upon reasonable prior notice, to visit and
inspect its Properties, to examine and make extracts from its books and records,
and to discuss its affairs, finances and condition with its officers and
independent accountants, all at such reasonable times and as often as reasonably
requested.

 

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Section 8.09 Compliance with Laws. The Borrower will, and will cause each
Restricted Subsidiary to, comply with all laws, rules, regulations and orders of
any Governmental Authority applicable to it or its Property, except where the
failure to do so, individually or in the aggregate, could not reasonably be
expected to result in a Material Adverse Effect.

 

Section 8.10 Environmental Matters.

 

(a) The Borrower shall at its sole expense: (i) comply, and shall cause its
Properties and operations and each Subsidiary and each Subsidiary’s Properties
and operations to comply, with all applicable Environmental Laws, the breach of
which could be reasonably expected to have a Material Adverse Effect; (ii) not
dispose of or otherwise release, and shall cause each Subsidiary not to dispose
of or otherwise release, any oil, oil and gas waste, hazardous substance, or
solid waste on, under, about or from any of the Borrower’s or its Subsidiaries’
Properties or any other Property to the extent caused by the Borrower’s or any
of its Subsidiaries’ operations except in compliance with applicable
Environmental Laws, the disposal or release of which could reasonably be
expected to have a Material Adverse Effect; (iii) timely obtain or file, and
shall cause each Subsidiary to timely obtain or file, all notices, permits,
licenses, exemptions, approvals, registrations or other authorizations, if any,
required under applicable Environmental Laws to be obtained or filed in
connection with the operation or use of the Borrower’s or its Subsidiaries’
Properties, which failure to obtain or file could reasonably be expected to have
a Material Adverse Effect; (iv) promptly commence and diligently prosecute to
completion, and shall cause each Subsidiary to promptly commence and diligently
prosecute to completion, any assessment, evaluation, investigation, monitoring,
containment, cleanup, removal, repair, restoration, remediation or other
remedial obligations (collectively, the “Remedial Work”) in the event any
Remedial Work is required or reasonably necessary under applicable Environmental
Laws because of or in connection with the actual or suspected past, present or
future disposal or other release of any oil, oil and gas waste, hazardous
substance or solid waste on, under, about or from any of the Borrower’s or its
Subsidiaries’ Properties, which failure to commence and diligently prosecute to
completion could reasonably be expected to have a Material Adverse Effect; and
(v) establish and implement, and shall cause each Subsidiary to establish and
implement, such procedures as may be necessary to continuously determine and
assure that the Borrower’s and its Subsidiaries’ obligations under this Section
8.10(a) are timely and fully satisfied, which failure to establish and implement
could reasonably be expected to have a Material Adverse Effect.

 

(b) The Borrower will, and will cause each Subsidiary to, provide environmental
audits and tests in accordance with American Society of Testing Materials
standards upon request by the Administrative Agent and the Lenders and no more
than once per year in the absence of any Event of Default (or as otherwise
required to be obtained by the Administrative Agent or the Lenders by any
Governmental Authority), in connection with any future acquisitions of Oil and
Gas Properties or other Properties individually having a fair market value in
excess of $20,000,000.

 

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Section 8.11 Further Assurances.

 

(a) The Borrower at its expense will, and will cause each Restricted Subsidiary
to, promptly execute and deliver to the Administrative Agent all such other
documents, agreements and instruments reasonably requested by the Administrative
Agent to comply with, cure any defects or accomplish the conditions precedent,
covenants and agreements of the Borrower or any Restricted Subsidiary, as the
case may be, in the Loan Documents, including the Notes, or to further evidence
and more fully describe the collateral intended as security for the
Indebtedness, or to correct any omissions in this Agreement or the Security
Instruments, or to state more fully the obligations secured therein, or to
perfect, protect or preserve any Liens created pursuant to this Agreement or any
of the Security Instruments or the priority thereof, or to make any recordings,
file any notices or obtain any consents, all as may be reasonably necessary or
appropriate, in the sole discretion of the Administrative Agent, in connection
therewith.

 

(b) The Borrower hereby authorizes the Administrative Agent to file one or more
financing or continuation statements, and amendments thereto, relative to all or
any part of the Mortgaged Property without the signature of the Borrower or any
other Guarantor where permitted by law. A carbon, photographic or other
reproduction of the Security Instruments or any financing statement covering the
Mortgaged Property or any part thereof shall be sufficient as a financing
statement where permitted by law.

 

Section 8.12 Reserve Reports.

 

(a) On or before April 1st and October 1st of each year, commencing October 1,
2005, the Borrower shall furnish to the Administrative Agent and the Lenders a
Reserve Report. The January 1 Reserve Report of each year shall be prepared by
or under the supervision of the chief engineer of the Borrower who shall certify
such Reserve Report to be true and accurate, and shall be audited by one or more
Approved Petroleum Engineers, and the July 1 Reserve Report of each year shall
be prepared by or under the supervision of the chief engineer of the Borrower
who shall certify such Reserve Report to be true and accurate and to have been
prepared in accordance with the procedures used in the immediately preceding
January 1 Reserve Report.

 

(b) In the event of an Interim Redetermination, the Borrower shall furnish to
the Administrative Agent and the Lenders a Reserve Report prepared by or under
the supervision of the chief engineer of the Borrower who shall certify such
Reserve Report to be true and accurate and to have been prepared in accordance
with the procedures used in the immediately preceding January 1 Reserve Report.
For any Interim Redetermination requested by the Administrative Agent or the
Borrower pursuant to Section 2.07(b), the Borrower shall provide such Reserve
Report with an “as of” date as required by the Administrative Agent as soon as
possible, but in any event no later than thirty (30) days following the receipt
of such request.

 

(c) With the delivery of each Reserve Report, the Borrower shall provide to the
Administrative Agent and the Lenders a certificate from a Responsible Officer
certifying that in all material respects: (i) to the best of his knowledge the
information contained in the Reserve Report and any other information delivered
in connection therewith is true and correct, except

 

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that with respect to the projections in the Reserve Report, the Borrower only
represents that such projections were prepared in good faith based upon
assumptions believed to be reasonable at this time, (ii) except as set forth in
Schedule 7.17, the Borrower or its Restricted Subsidiaries owns good and
defensible title to the Oil and Gas Properties evaluated in such Reserve Report
and such Properties are free of all Liens except for Liens permitted by Section
9.03, (iii) except as set forth on an exhibit to the certificate, on a net basis
there are no gas imbalances, take or pay or other prepayments in excess of the
volume specified in Section 7.19 with respect to its Oil and Gas Properties
evaluated in such Reserve Report which would require the Borrower or any
Restricted Subsidiary to deliver Hydrocarbons either generally or produced from
such Oil and Gas Properties at some future time without then or thereafter
receiving full payment therefor, (iv) none of their Oil and Gas Properties have
been sold since the date of the last Borrowing Base determination except as set
forth on an exhibit to the certificate, which certificate shall list all of its
Oil and Gas Properties sold and in such detail as reasonably required by the
Administrative Agent, (v) attached to the certificate is a list of all marketing
agreements entered into subsequent to the later of the date hereof or the most
recently delivered Reserve Report which the Borrower could reasonably be
expected to have been obligated to list on Schedule 7.20 had such agreement been
in effect on the date hereof and (vi) attached thereto is a schedule of the Oil
and Gas Properties evaluated by such Reserve Report that are Mortgaged
Properties and demonstrating the percentage of the Borrowing Base that the value
of such Mortgaged Properties represent in compliance with Section 8.14(a).

 

Section 8.13 Title Information.

 

(a) If requested by the Administrative Agent, on or before the delivery to the
Administrative Agent and the Lenders of each Reserve Report required by Section
8.12(a), the Borrower will deliver title information in form and substance
acceptable to the Administrative Agent covering enough of the Oil and Gas
Properties evaluated by such Reserve Report that were not included in the
immediately preceding Reserve Report, so that the Administrative Agent shall
have received together with title information previously delivered to the
Administrative Agent, satisfactory title information on at least 80% of the
total value of the Oil and Gas Properties evaluated by such Reserve Report.

 

(b) If the Borrower has provided title information for additional Properties
under Section 8.13(a), the Borrower shall, within 60 days of notice from the
Administrative Agent that title defects or exceptions exist with respect to such
additional Properties, either (i) cure any such title defects or exceptions
(including defects or exceptions as to priority) which are not permitted by
Section 9.03 raised by such information, (ii) substitute acceptable Mortgaged
Properties with no title defects or exceptions except for Excepted Liens (other
than Excepted Liens described in clauses (e), (g) and (h) of such definition)
having an equivalent value or (iii) deliver title information in form and
substance acceptable to the Administrative Agent so that the Administrative
Agent shall have received, together with title information previously delivered
to the Administrative Agent, satisfactory title information on at least 80% of
the value of the Oil and Gas Properties evaluated by such Reserve Report.

 

(c) If the Borrower is unable to cure any title defect requested by the
Administrative Agent or the Lenders to be cured within the 60-day period or the
Borrower does not comply with the requirements to provide acceptable title
information covering 80% of the

 

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value of the Oil and Gas Properties evaluated in the most recent Reserve Report,
such default shall not be a Default, but instead the Administrative Agent and/or
the Majority Lenders shall have the right to exercise the following remedy in
their sole discretion from time to time, and any failure to so exercise this
remedy at any time shall not be a waiver as to future exercise of the remedy by
the Administrative Agent or the Lenders. To the extent that the Administrative
Agent or the Majority Lenders are not satisfied with title to any Mortgaged
Property after the 60-day period has elapsed, such unacceptable Mortgaged
Property, shall not count towards the 80% requirement, and the Administrative
Agent may send a notice to the Borrower and the Lenders that the then
outstanding Borrowing Base shall be reduced by an amount as determined by the
Majority Lenders to cause the Borrower to be in compliance with the requirement
to provide acceptable title information on 80% of the value of the Oil and Gas
Properties. This new Borrowing Base shall become effective immediately after
receipt of such notice.

 

Section 8.14 Additional Collateral; Additional Guarantors.

 

(a) In connection with each redetermination of the Borrowing Base, the Borrower
shall review the Reserve Report and the list of current Mortgaged Properties (as
described in Section 8.12(c)(vi)) to ascertain whether the Mortgaged Properties
represent at least 80% of the total value of the Oil and Gas Properties
evaluated in the most recently completed Reserve Report after giving effect to
exploration and production activities, acquisitions, dispositions and
production. In the event that the Mortgaged Properties do not represent at least
80% of such total value, then the Borrower shall, and shall cause its Restricted
Subsidiaries to, grant, within thirty (30) days of delivery of the certificate
required under Section 8.12(c), to the Administrative Agent as security for the
Indebtedness a first-priority Lien interest (provided that Excepted Liens of the
type described in clauses (a) to (d) and (f) of the definition thereof may
exist, but subject to the provisos at the end of such definition) on additional
Oil and Gas Properties not already subject to a Lien of the Security Instruments
such that after giving effect thereto, the Mortgaged Properties will represent
at least 80% of such total value. All such Liens will be created and perfected
by and in accordance with the provisions of deeds of trust, security agreements
and financing statements or other Security Instruments, all in form and
substance reasonably satisfactory to the Administrative Agent and in sufficient
executed (and acknowledged where necessary or appropriate) counterparts for
recording purposes.

 

(b) The Borrower shall cause each Domestic Subsidiary to guarantee the
Indebtedness pursuant to the Guaranty Agreement. In connection with any such
guaranty, the Borrower shall, or shall cause such Domestic Subsidiary to,
promptly, but in any event no later than 30 days after the formation or
acquisition (or other similar event) of such Domestic Subsidiary, (i) execute
and deliver a supplement to the Guaranty Agreement executed by such Domestic
Subsidiary, (ii) pledge all of the Equity Interests of such Domestic Subsidiary
(including, without limitation, delivery of original stock certificates
evidencing the Equity Interests of such Domestic Subsidiary, together with an
appropriate undated stock powers for each certificate duly executed in blank by
the registered owner thereof) and (iii) execute and deliver such other
additional closing documents, certificates and legal opinions as shall
reasonably be requested by the Administrative Agent.

 

(c) In the event that the Borrower or any Domestic Subsidiary becomes the owner
of a Foreign Subsidiary, then the Borrower shall, or shall cause such Domestic
Subsidiary

 

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to, promptly, but in any event no later than 30 days after the date of becoming
an owner thereof, (i) pledge 65% of all the Equity Interests of such Foreign
Subsidiary (including, without limitation, delivery of original stock
certificates evidencing such Equity Interests of such Foreign Subsidiary,
together with appropriate stock powers for each certificate duly executed in
blank by the registered owner thereof) and (ii) execute and deliver such other
additional closing documents, certificates and legal opinions as shall
reasonably be requested by the Administrative Agent.

 

(d) Any Person that must guarantee the Indebtedness in order for the Borrower to
be in compliance with Section 9.04(b)(ii)(C) shall guarantee the Indebtedness
pursuant to the Guaranty Agreement. In connection with any such guaranty, the
Borrower shall, or shall cause such Person to, promptly, but in any event no
later than 30 days after the date required thereby, (A) execute and deliver a
supplement to the Guaranty Agreement executed by such Person, and (B) execute
and deliver such other additional closing documents, certificates and legal
opinions as shall reasonably be requested by the Administrative Agent. If at any
time such Person is not otherwise required to guarantee the Indebtedness
hereunder (whether pursuant to the other provisions of this Section 8.14 or
otherwise) or under any other Loan Document, then upon receipt by the
Administrative Agent of evidence satisfactory to it that such Person has been
fully and finally released from its guarantee obligations in respect of the
Senior Notes, the Senior Subordinated Notes or, if applicable, any Permitted
Additional Notes, as the case may be, such Person shall be released from its
guarantee obligations with respect to the Indebtedness and the Administrative
Agent shall, at the sole cost and expense of the Borrower, execute such further
documents and do all such further acts so as to reasonably evidence such
release.

 

Section 8.15 ERISA Compliance. The Borrower will promptly furnish and will cause
the Subsidiaries and any ERISA Affiliate to promptly furnish to the
Administrative Agent (i) immediately upon becoming aware of the occurrence of
any ERISA Event or of any “prohibited transaction,” as described in section 406
of ERISA or in section 4975 of the Code, in connection with any Plan or any
trust created thereunder that could reasonably be expected to have a Material
Adverse Effect, a written notice signed by the President or the principal
Financial Officer, the Subsidiary or the ERISA Affiliate, as the case may be,
specifying the nature thereof, what action the Borrower, the Subsidiary or the
ERISA Affiliate is taking or proposes to take with respect thereto, and, when
known, any action taken or proposed by the Internal Revenue Service, the
Department of Labor or the PBGC with respect thereto, and (ii) immediately upon
receipt thereof, copies of any notice of the PBGC’s intention to terminate or to
have a trustee appointed to administer any Plan that could reasonably be
expected to have a Material Adverse Effect. With respect to each Plan (other
than a Multiemployer Plan), the Borrower will, and will cause each Subsidiary
and ERISA Affiliate to, (i) satisfy in full and in a timely manner, without
incurring any late payment or underpayment charge or penalty that could
reasonably be expected to have a Material Adverse Effect and without giving rise
to any lien securing an amount in excess of $20,000,000, all of the contribution
and funding requirements of section 412 of the Code (determined without regard
to subsections (d), (e), (f) and (k) thereof) and of section 302 of ERISA
(determined without regard to sections 303, 304 and 306 of ERISA), and (ii) pay,
or cause to be paid, to the PBGC in a timely manner, without incurring any late
payment or underpayment charge or penalty that could reasonably be expected to
have a Material Adverse Effect, all premiums required pursuant to sections 4006
and 4007 of ERISA.

 

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Section 8.16 Unrestricted Subsidiaries. The Borrower:

 

(a) will cause the management, business and affairs of each of the Borrower and
its Restricted Subsidiaries to be conducted in such a manner (including, without
limitation, by keeping separate books of account, furnishing separate financial
statements of Unrestricted Subsidiaries to creditors and potential creditors
thereof and by not permitting Properties of the Borrower and its respective
Restricted Subsidiaries to be commingled) so that each Unrestricted Subsidiary
that is a corporation will be treated as a corporate entity separate and
distinct from Borrower and the Restricted Subsidiaries.

 

(b) will not, and will not permit any of the Restricted Subsidiaries to, incur,
assume, guarantee or be or become liable for any Debt of any of the Unrestricted
Subsidiaries.

 

(c) will not permit any Unrestricted Subsidiary to hold any Equity Interest in,
or any Debt of, the Borrower or any Restricted Subsidiary.

 

ARTICLE IX

Negative Covenants

 

Until the Commitments have expired or terminated and the principal of and
interest on each Loan and all fees payable hereunder and all other amounts
payable under the Loan Documents have been paid in full and all Letters of
Credit have expired or terminated and all LC Disbursements shall have been
reimbursed, the Borrower covenants and agrees with the Lenders that:

 

Section 9.01 Financial Covenants.

 

(a) Minimum Tangible Net Worth. The Borrower will not permit its Tangible Net
Worth at any time to be less than the sum of (i) 80% of its Tangible Net Worth
as of June 30, 2005 plus (ii) 50% of the Borrower’s Consolidated Net Income (but
not loss) for each fiscal quarter occurring after the June 30, 2005 taken as a
single accounting period plus (iii) 100% of the Net Cash Proceeds from the sale
of any Equity Interests of the Borrower after June 30, 2005 plus (iv) 80% of the
value of Equity Interests issued in connection with any merger permitted by
Section 9.12.

 

(b) Current Ratio. The Borrower will not permit, as of the last day of any
fiscal quarter, beginning with the first fiscal quarter ending after the
Effective Date, its ratio of (i) consolidated current assets (including the
unused amount of the total Commitments but excluding all non-cash assets under
FAS 133) of the Borrower and its Restricted Subsidiaries to (ii) consolidated
current liabilities (excluding non-cash obligations under FAS 133) of the
Borrower and its Restricted Subsidiaries to be less than 1.0 to 1.0.

 

Section 9.02 Debt. The Borrower will not, and will not permit any Restricted
Subsidiary to, incur, create, assume or suffer to exist any Debt, except:

 

(a) the Notes or other Indebtedness arising under the Loan Documents or any
guaranty of or suretyship arrangement for the Notes or other Indebtedness
arising under the Loan Documents.

 

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(b) Debt of the Borrower and its Restricted Subsidiaries existing on the date
hereof that is reflected in the Financial Statements.

 

(c) purchase money Debt and Debt under Capital Leases not to exceed $20,000,000
in the aggregate.

 

(d) Debt associated with workers’ compensation claims, performance, bid, surety
or similar bonds or surety obligations required by Governmental Requirements or
third parties in connection with the operation of the Oil and Gas Properties.

 

(e) intercompany Debt between the Borrower and any Restricted Subsidiary or
between Restricted Subsidiaries to the extent permitted by Section 9.05(g);
provided that such Debt is not held, assigned, transferred, negotiated or
pledged to any Person other than the Borrower or one of its Wholly-Owned
Subsidiaries, and, provided further, that any such Debt owed by either the
Borrower or a Guarantor shall be subordinated to the Indebtedness on terms set
forth in the Guaranty Agreement.

 

(f) Debt secured by Liens permitted by Section 9.03(d) and Section 9.03(e), the
principal amount of which does not exceed $10,000,000 in the aggregate at any
one time.

 

(g) endorsements of negotiable instruments for collection in the ordinary course
of business.

 

(h) Debt under the Senior Notes and any guarantees thereof by the Guarantors,
the principal amount of which does not exceed $250,000,000 in the aggregate.

 

(i) Debt under the Senior Subordinated Notes and any guarantees thereof by the
Guarantors, the principal amount of which does not exceed $275,000,000 in the
aggregate.

 

(j) Debt outstanding under one or more unsecured short term credit facilities
the principal amount of which does not exceed $30,000,000 in the aggregate.

 

(k) Debt under Permitted Additional Notes and any guarantees thereof by the
Guarantors (including any Persons becoming Guarantors simultaneously with the
incurrence of such Debt), provided that: (i) immediately before, and after
giving effect to, the incurrence of any such Debt (and any concurrent repayment
of Debt with the proceeds of such incurrence), no Default exists or would exist,
(ii) the cash pay interest rate on such Permitted Additional Notes is reasonably
satisfactory to the Administrative Agent, (iii) such Permitted Additional Notes
do not have any scheduled amortization of principal prior to the Maturity Date,
(iv) such Permitted Additional Notes have a stated maturity no earlier than five
(5) years after the Maturity Date, (v) such Permitted Additional Notes do not
have mandatory redemption events that are not Events of Default hereunder, (vi),
such Permitted Additional Notes do not prohibit prior repayment of Loans, and
(vii) at the time any such Permitted Additional Notes are issued or assumed, the
Borrowing Base then in effect shall be automatically reduced by an amount equal
to the product of 0.30 multiplied by the stated principal amount of such
Permitted Additional Notes, rounded to the nearest $1,000,000, and the Borrowing
Base as so reduced shall become the new Borrowing Base immediately upon the date
of such issuance or assumption, effective and applicable to the Borrower, the
Agents, each Issuing Bank and the Lenders on such date until the next

 

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redetermination or modification thereof hereunder. For purposes of this Section
9.02(k), the “stated principal amount” shall mean the stated face amount of the
Permitted Additional Notes without giving effect to any original issue discount.

 

(l) other Debt not to exceed $25,000,000 in the aggregate at any one time
outstanding.

 

Section 9.03 Liens. The Borrower will not, and will not permit any Restricted
Subsidiary to, create, incur, assume or permit to exist any Lien on any of its
Properties (now owned or hereafter acquired), except:

 

(a) Liens securing the payment of any Indebtedness.

 

(b) Excepted Liens.

 

(c) Liens securing purchase money Debt and Debt under Capital Leases to the
extent permitted by Section 9.02(c) or Section 9.02(l) but only on the Property
and improvements and accessions thereof and proceeds thereof acquired or under
lease; provided that such Liens are created within 180 days of construction,
acquisition or lease of such Property.

 

(d) Liens (other than Liens under ERISA or Environmental Laws) on Property of
any Person that becomes a Restricted Subsidiary of the Borrower after the
Effective Date; provided that (i) such Liens are in existence at the time such
Person becomes a Restricted Subsidiary of the Borrower and were not created in
anticipation thereof and (ii) no such Liens shall extend to or cover any
Property of such Person other than such Property.

 

(e) Liens (other than Liens under ERISA or Environmental Laws) upon real and/or
tangible personal Property acquired after the Effective Date (by purchase,
construction or otherwise) by the Borrower or its Restricted Subsidiaries, each
of which Liens either (i) existed on such Property before the time of its
acquisition and was not created in anticipation thereof or (ii) was created
solely for the purpose of securing Debt representing, or incurred to finance,
refinance or refund, the cost (including the cost of construction) of such
Property; provided that no such Lien shall extend to or cover any Property of
the Borrower or such Restricted Subsidiary other than the Property so acquired
and improvements thereon and accessions and proceeds thereof.

 

(f) (i) Liens on Letters of Credit issued hereunder pledged to secure
obligations under any Swap Agreement permitted by Section 9.19 in an aggregate
amount at any time not to exceed $30,000,000 (other than as permitted by clause
(ii) of this Section 9.03(f)), and (ii) Liens on cash, letters of credit and
other financial assets pledged to secure obligations under any Swap Agreement
permitted by Section 9.19 in an aggregate amount at any time not to exceed
$10,000,000 (other than as permitted by clause (i) of this Section 9.03(f)).

 

(g) Liens on Property not constituting collateral for the Indebtedness and not
otherwise permitted by the foregoing clauses of this Section 9.03; provided that
the aggregate principal or face amount of all Debt secured under this Section
9.03(g) shall not exceed $20,000,000 at any time.

 

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(h) Liens disclosed on Schedule 9.03.

 

Section 9.04 Dividends, Distributions and Redemptions.

 

(a) Restricted Payments. The Borrower will not, and will not permit any of its
Subsidiaries to, declare or make, or agree to pay or make, directly or
indirectly, any Restricted Payment, return any capital to its stockholders or
make any distribution of its Property to its Equity Interest holders, except (i)
the Borrower may declare and pay dividends with respect to its Equity Interests
payable solely in additional shares of its Equity Interests (other than
Disqualified Capital Stock), (ii) Subsidiaries may declare and pay dividends
ratably with respect to their Equity Interests, (iii) the Borrower may make
Restricted Payments pursuant to and in accordance with stock option plans or
other benefit plans for management or employees of the Borrower and its
Subsidiaries, (iv) the Borrower may declare and pay cash dividends to PLX in any
fiscal year to pay the Borrower’s allocated share of Taxes (as defined in the
Tax Allocation Agreement as it exists on the date hereof) due in the fiscal year
such dividend is declared under the Tax Allocation Agreement as it exists on the
date hereof, and (v) to the extent not permitted by clauses (i) to (iv) above,
the Borrower may make Restricted Payments in respect of Equity Interests of the
Borrower in an amount not to exceed $2,500,000 in the aggregate minus the
aggregate principal amount of Senior Notes, Senior Subordinated Notes and
Permitted Additional Notes Redeemed under Section 9.04(b)(i).

 

(b) Repayment of Senior Subordinated Notes, Senior Notes and Permitted
Additional Notes; Amendment of Indentures. The Borrower will not, and will not
permit any Restricted Subsidiary to, prior to the Termination Date: (i) call,
make or offer to make any optional or voluntary Redemption (whether in whole or
in part) of any Senior Notes, Senior Subordinated Notes or Permitted Additional
Notes, provided that the Borrower may Redeem Senior Notes, Senior Subordinated
Notes or Permitted Additional Notes to the extent that it could make a
Restricted Payment in respect of Equity Interests under Section 9.04(a)(v), (ii)
amend, modify, waive or otherwise change, consent or agree to any amendment,
modification, waiver or other change to, any of the terms of the Senior Notes,
Senior Subordinated Notes or Permitted Additional Notes, or the Indentures if
(A) the effect thereof would be to shorten its maturity or average life or
increase the amount of any payment of principal thereof or increase the rate or
shorten any period for payment of interest thereon, (B) such action requires the
payment of a consent fee (other than in connection with a consent solicitation
solely to conform all or a portion of the covenants contained in any Permitted
Additional Indenture to the Senior Indenture or any other Permitted Additional
Indenture, provided that such consent fee is reasonably acceptable to the
Administrative Agent) or (C) the effect thereof would be to add any guarantor or
surety, unless such guarantor or surety also guarantees the Indebtedness
pursuant to the Guaranty Agreement and each of the Borrower and such guarantor
or surety otherwise complies with Section 8.14(d), or (iii) designate any Debt
(other than obligations of the Borrower and the Restricted Subsidiaries pursuant
to the Loan Documents) as “Designated Senior Indebtedness” or “Designated
Guarantor Senior Indebtedness” or give any such other Debt any other similar
designation for the purposes of any Indenture.

 

Section 9.05 Investments, Loans and Advances. The Borrower will not, and will
not permit any Restricted Subsidiary to, make or permit to remain outstanding
any Investments in or to any Person, except that the foregoing restriction shall
not apply to:

 

(a) Investments reflected in the Financial Statements or which are disclosed to
the Lenders in Schedule 9.05.

 

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

 

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

 

(d) commercial paper maturing within one year from the date of creation thereof
rated in the highest grade by S&P or Moody’s.

 

(e) deposits maturing within one year from the date of creation thereof with,
including certificates of deposit issued by, any Lender or any office located in
the United States of any other bank or trust company which is organized under
the laws of the United States or any state thereof, has capital, surplus and
undivided profits aggregating at least $100,000,000 (as of the date of such bank
or trust company’s most recent financial reports) and has a short term deposit
rating of no lower than A2 or P2, as such rating is set forth from time to time,
by S&P or Moody’s, respectively.

 

(f) deposits in money market funds investing exclusively in Investments
described in Section 9.05(c), Section 9.05(d) or Section 9.05(e).

 

(g) Investments (i) made by the Borrower in or to the Guarantors, (ii) made by
any Restricted Subsidiary in or to the Borrower or any Guarantor and (iii) made
by the Borrower or any Restricted Subsidiary in or to all other Restricted
Subsidiaries which are not Guarantors in an aggregate amount at any one time
outstanding not to exceed $5,000,000.

 

(h) Investments (including, without limitation, capital contributions) in
general or limited partnerships or other types of entities (each a “venture”)
entered into by the Borrower or a Restricted Subsidiary with others in the
ordinary course of business; provided that (i) any such venture is engaged
exclusively in oil and gas exploration, development, production, processing and
related activities, including transportation, (ii) the interest in such venture
is acquired in the ordinary course of business and on fair and reasonable terms
and (iii) such venture interests acquired and capital contributions made (valued
as of the date such interest was acquired or the contribution made) do not
exceed, in the aggregate at any time outstanding an amount equal to $10,000,000.

 

(i) Investments received in settlement of amounts owing to the Borrower or any
Restricted Subsidiary as a result of a bankruptcy or other insolvency proceeding
of the obligor in respect of such amounts or upon the enforcement of any Lien in
favor of the Borrower or any of its Restricted Subsidiaries; provided that the
Borrower shall give the Administrative Agent prompt written notice in the event
that the aggregate amount of all Investments held at any one time under this
Section 9.05(i) exceeds $2,000,000.

 

(j) entry into operating agreements, working interests, royalty interests,
mineral leases, processing agreements, farm-out agreements, contracts for the
sale, transportation or exchange of oil and natural gas, unitization agreements,
pooling arrangements, area of mutual

 

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interest agreements, production sharing agreements or other similar or customary
agreements, transactions, properties, interests or arrangements, and Investments
and expenditures in connection therewith or pursuant thereto, in each case made
or entered into in the ordinary course of the oil and gas business, excluding,
however, Investments in other Persons other than joint ventures; provided,
however, that none of the foregoing shall involve the incurrence of any Debt not
permitted by Section 9.02, and provided further that this Section 9.05(j) shall
not be construed to permit Investments by the Borrower or any Restricted
Subsidiary in any Person which maintains or incurs in the future any Debt other
than Non-Recourse Debt;

 

(k) loans and advances to directors, officers and employees not to exceed
$1,000,000 in the aggregate at any time.

 

(l) Investments in Unrestricted Subsidiaries, provided that (i) the aggregate
amount of all such Investments at any one time shall not exceed $5,000,000 (or
its equivalent in other currencies as of the date of Investment) and (ii) the
Borrowing Base Utilization Percentage is less than 80% immediately before and
immediately after giving effect to such Investment.

 

(m) Guarantees by the Borrower and the Restricted Subsidiaries of Debt permitted
by Section 9.02(a), Section 9.02(c), Section 9.02(d), Section 9.02(k) and
Section 9.02(l).

 

(n) Indemnities entered into in the ordinary course of business.

 

(o) Investments of surface rights in fee property in California in Unrestricted
Subsidiaries.

 

(p) other Investments not to exceed $5,000,000 in the aggregate at any time.

 

Section 9.06 Designation and Conversion of Restricted and Unrestricted
Subsidiaries; Debt of Unrestricted Subsidiaries.

 

(a) Unless designated as an Unrestricted Subsidiary on Schedule 7.15 as of the
Effective Date or thereafter, assuming compliance with Section 9.06(b), any
Person that becomes a Subsidiary of the Borrower or any of its Restricted
Subsidiaries shall be classified as a Restricted Subsidiary.

 

(b) The Borrower may designate by written notification thereof to the
Administrative Agent, any Restricted Subsidiary, including a newly formed or
newly acquired Subsidiary, as an Unrestricted Subsidiary if (i) prior, and after
giving effect, to such designation, neither a Default nor a Borrowing Base
deficiency would exist and (ii) such designation is deemed to be an Investment
in an Unrestricted Subsidiary in an amount equal to the fair market value as of
the date of such designation of the Borrower’s direct and indirect ownership
interest in such Subsidiary and such Investment would be permitted to be made at
the time of such designation under Section 9.05(l). Except as provided in this
Section 9.06(b), no Restricted Subsidiary may be redesignated as an Unrestricted
Subsidiary.

 

(c) The Borrower may designate any Unrestricted Subsidiary to be a Restricted
Subsidiary if after giving effect to such designation, (i) the representations
and

 

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warranties of the Borrower and its Restricted Subsidiaries contained in each of
the Loan Documents are true and correct on and as of such date as if made on and
as of the date of such redesignation (or, if stated to have been made expressly
as of an earlier date, were true and correct as of such date), (ii) no Default
would exist and (iii) the Borrower complies with the requirements of Section
8.14, Section 8.16 and Section 9.16. Any such designation shall be treated as a
cash dividend in an amount equal to the lesser of the fair market value of the
Borrower’s direct and indirect ownership interest in such Subsidiary or the
amount of the Borrower’s cash investment previously made for purposes of the
limitation on Investments under Section 9.05(l).

 

(d) The Borrower shall not permit the aggregate principal amount of all
Non-Recourse Debt outstanding at any one time to exceed $50,000,000.

 

Section 9.07 Nature of Business. The Borrower will not, and will not permit any
Restricted Subsidiary to, allow any material change to be made in the character
of its business as an independent oil and gas exploration and production
company. Notwithstanding the foregoing, this Section 9.07 shall not prohibit the
Borrower and its Restricted Subsidiaries from holding and developing the
Properties described on Schedule 9.07.

 

Section 9.08 Limitation on Leases. The Borrower will not, and will not permit
any Restricted Subsidiary to, create, incur, assume or suffer to exist any
obligation for the payment of rent or hire of Property of any kind whatsoever
(real or personal but excluding Capital Leases and leases of Hydrocarbon
Interests), under leases or lease agreements which would cause the aggregate
amount of all payments made by the Borrower and the Restricted Subsidiaries
pursuant to all such leases or lease agreements, including, without limitation,
any residual payments at the end of any lease, to exceed $10,000,000 in any
period of twelve consecutive calendar months during the life of such leases.

 

Section 9.09 Proceeds of Notes. The Borrower will not permit the proceeds of the
Notes to be used for any purpose other than those permitted by Section 7.22.
Neither the Borrower nor any Person acting on behalf of the Borrower has taken
or will take any action which might cause any of the Loan Documents to violate
Regulations T, U or X or any other regulation of the Board or to violate Section
7 of the Securities Exchange Act of 1934 or any rule or regulation thereunder,
in each case as now in effect or as the same may hereinafter be in effect. If
requested by the Administrative Agent, the Borrower will furnish to the
Administrative Agent and each Lender a statement to the foregoing effect in
conformity with the requirements of FR Form U-1 or such other form referred to
in Regulation U, Regulation T or Regulation X of the Board, as the case may be.

 

Section 9.10 ERISA Compliance. The Borrower will not, and will not permit any
Subsidiary to, at any time:

 

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

 

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(b) terminate, or permit any ERISA Affiliate to terminate, any Plan in a manner,
or take any other action with respect to any Plan, which could result in any
liability of the Borrower, a Subsidiary or any ERISA Affiliate to the PBGC which
could reasonably be expected to have a Material Adverse Effect.

 

(c) fail to make, or permit any ERISA Affiliate to fail to make, full payment
when due of all amounts which, under the provisions of any Plan, agreement
relating thereto or applicable law, the Borrower, a Subsidiary or any ERISA
Affiliate is required to pay as contributions thereto if such failure could
reasonably be expected to have a Material Adverse Effect.

 

(d) permit to exist, or allow any ERISA Affiliate to permit to exist, any
accumulated funding deficiency within the meaning of section 302 of ERISA or
section 412 of the Code, whether or not waived, with respect to any Plan which
exceeds $20,000,000.

 

(e) except as permitted in Section 9.10(f), permit, or allow any ERISA Affiliate
to permit, the actuarial present value of the benefit liabilities under any Plan
maintained by the Borrower, a Subsidiary or any ERISA Affiliate which is
regulated under Title IV of ERISA to exceed the current value of the assets
(computed on a plan termination basis in accordance with Title IV of ERISA) of
such Plan allocable to such benefit liabilities by more than $20,000,000. The
term “actuarial present value of the benefit liabilities” shall have the meaning
specified in section 4041 of ERISA.

 

(f) acquire, or permit any ERISA Affiliate to acquire, an interest in any Person
that causes such Person to become an ERISA Affiliate with respect to the
Borrower or a Subsidiary or with respect to any ERISA Affiliate of the Borrower
or a Subsidiary if such Person sponsors, maintains or contributes to, or at any
time in the six-year period preceding such acquisition has sponsored,
maintained, or contributed to, (i) any Multiemployer Plan, or (ii) any other
Plan that is subject to Title IV of ERISA under which the actuarial present
value of the benefit liabilities under such Plan exceeds the current value of
the assets (computed on a plan termination basis in accordance with Title IV of
ERISA) of such Plan allocable to such benefit liabilities by an amount in excess
of $20,000,000.

 

(g) incur, or permit any ERISA Affiliate to incur, a liability to or on account
of a Plan under sections 515, 4062, 4063, 4064, 4201 or 4204 of ERISA which
could reasonably be expected to have a Material Adverse Effect.

 

(h) amend, or permit any ERISA Affiliate to amend, a Plan resulting in an
increase in current liability such that the Borrower, a Subsidiary or any ERISA
Affiliate is required to provide security to such Plan under section 401(a)(29)
of the Code which could reasonably be expected to have a Material Adverse
Effect.

 

Section 9.11 Sale or Discount of Receivables. Except for receivables obtained by
the Borrower or any Restricted Subsidiary out of the ordinary course of business
or the settlement of joint interest billing accounts in the ordinary course of
business or discounts granted to settle collection of accounts receivable or the
sale of defaulted accounts arising in the ordinary course of business in
connection with the compromise or collection thereof and not in connection with
any financing transaction, the Borrower will not, and will not permit any
Restricted Subsidiary to, discount or sell (with or without recourse) any of its
notes receivable or accounts receivable.

 

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Section 9.12 Mergers, Etc. The Borrower will not, and will not permit any
Restricted Subsidiary to, merge into or with or consolidate with any other
Person, or sell, lease or otherwise dispose of (whether in one transaction or in
a series of transactions) all or substantially all of its Property to any other
Person (any such transaction, a “consolidation”); provided that (a) any
Restricted Subsidiary may participate in a consolidation with the Borrower
(provided that the Borrower shall be the continuing or surviving corporation) or
any other Restricted Subsidiary (provided that if a Guarantor is a party to such
transaction, the survivor is such Guarantor or becomes a party to the Guaranty
Agreement as a Guarantor) or transfer all or substantially all of its assets to
a Guarantor or a Person that becomes a party to the Guaranty Agreement as a
Guarantor, (b) the Borrower or any Restricted Subsidiary may participate in a
consolidation (other than as described in clause (a) above) if (i) at the time
thereof and immediately after giving effect thereto, no Default shall occur and
be continuing and no Borrowing Base deficiency would result therefrom and (ii)
the Borrower or such Restricted Subsidiary, as the case may be, is the surviving
entity or the recipient of any such sale, lease or other disposition of
Property, provided that no such consolidation shall have the effect of releasing
the Borrower or any Restricted Subsidiary from any of its obligations under this
Agreement or any other Loan Document, (c) the liquidation and dissolution of
Subsidiaries shall be permitted if (i) the continued existence and operation of
such Subsidiary is no longer in the best interests of the Borrower and its
Subsidiaries taken as a whole (as reasonably determined by the board of
directors or any Responsible Officer of the Borrower), (ii) such liquidation and
dissolution is not disadvantageous in any material respect to the Lenders, and
(iii) at the time thereof and immediately after giving effect thereto, no
Default shall occur and be continuing and no Borrowing Base Deficiency would
result therefrom.

 

Section 9.13 Sale of Properties. The Borrower will not, and will not permit any
Restricted Subsidiary to, sell, assign, farm-out, convey or otherwise transfer
any Oil and Gas Property or any interest therein or any Restricted Subsidiary
owning any Oil and Gas Properties except for (a) the sale of Hydrocarbons in the
ordinary course of business; (b) farmouts of undeveloped acreage and assignments
in connection with such farmouts or the abandonment, farm-out, exchange, lease
or sublease of Oil and Gas Properties not containing proved reserves capable of
being produced in economic quantities and which are not included in the most
recently delivered Reserve Report in the ordinary course of business; (c) the
sale or transfer of equipment that is no longer necessary for the business of
the Borrower or such Restricted Subsidiary or is replaced by equipment of at
least comparable value and use; (d) the sale or other disposition (including
Casualty Events) of any Oil and Gas Property or any interest therein or any
Restricted Subsidiary owning Oil and Gas Properties; provided that (i) the
consideration received in respect of such sale or other disposition shall be
equal to or greater than the fair market value of the Oil and Gas Property
(other than in the case of a Casualty Event), interest therein or Restricted
Subsidiary subject of such sale or other disposition (as reasonably determined
by the board of directors or any Responsible Officer of the Borrower), (ii) if
such sale or other disposition of Oil and Gas Property or Restricted Subsidiary
owning Oil and Gas Properties included in the most recently delivered Reserve
Report during any period between two successive Scheduled Redetermination Dates
has a fair market value in excess of five percent (5%) of the Borrowing Base
then in effect (as reasonably determined by the board of

 

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directors of the Borrower), individually or in the aggregate, the Borrowing Base
shall be reduced, effective immediately upon such sale or disposition, by an
amount equal to the value, if any, assigned such Property in the most recently
delivered Reserve Report and (iii) if any such sale or other disposition is of a
Restricted Subsidiary owning Oil and Gas Properties, such sale or other
disposition shall include all the Equity Interests of such Restricted
Subsidiary; (e) the sale of Oil and Gas Properties in connection with tax credit
transactions complying with §29 of the Code or any other analogous provision
whether now existing or hereafter enacted, which sale does not result in a
reduction in the Borrower’s or its Restricted Subsidiaries’, as the case may be,
right to receive the cash flow from such Oil and Gas Properties and which sale
is on terms reasonably acceptable to the Administrative Agent; (f) transfers and
other dispositions among the Borrower and the Restricted Subsidiaries subject to
the limitations set forth in Section 9.05(g)(iii); and (g) transfers permitted
by Section 9.12.

 

Section 9.14 Environmental Matters. The Borrower will not, and will not permit
any Restricted Subsidiary to, cause or permit any of its Property to be in
violation of, or do anything or permit anything to be done which will subject
any such Property to any Remedial Work under any Environmental Laws, assuming
disclosure to the applicable Governmental Authority of all relevant facts,
conditions and circumstances, if any, pertaining to such Property where such
violations or remedial obligations could reasonably be expected to have a
Material Adverse Effect.

 

Section 9.15 Transactions with Affiliates. Except for the Tax Allocation
Agreement and the Master Separation Agreement, The Borrower will not, and will
not permit any Restricted Subsidiary to, enter into any transaction, including,
without limitation, any purchase, sale, lease or exchange of Property or the
rendering of any service, with any Affiliate (other than the Guarantors and
Wholly-Owned Subsidiaries of the Borrower) unless such transactions are not
otherwise prohibited under this Agreement and are upon fair and reasonable terms
no less favorable to it than it would obtain in a comparable arm’s length
transaction with a Person not an Affiliate.

 

Section 9.16 Subsidiaries. The Borrower will not, and will not permit any
Restricted Subsidiary to, create or acquire any additional Restricted Subsidiary
or redesignate an Unrestricted Subsidiary as a Restricted Subsidiary unless the
Borrower gives written notice to the Administrative Agent of such creation or
acquisition and complies with Section 8.14(b) and Section 8.14(c). The Borrower
shall not, and shall not permit any Restricted Subsidiary to, sell, assign or
otherwise dispose of any Equity Interests in any Restricted Subsidiary except in
compliance with Section 9.13(d).

 

Section 9.17 Negative Pledge Agreements; Dividend Restrictions. The Borrower
will not, and will not permit any Restricted Subsidiary to, create, incur,
assume or suffer to exist any contract, agreement or understanding which in any
way prohibits or restricts the granting, conveying, creation or imposition of
any Lien on any of its Property in favor of the Administrative Agent and the
Lenders or restricts any Restricted Subsidiary from paying dividends or making
distributions to the Borrower or any Guarantor, or which requires the consent of
or notice to other Persons in connection therewith; provided, however, that the
preceding restrictions will not apply to encumbrances or restrictions arising
under or by reason of (i) this Agreement or the Security Instruments, (ii) Debt
securing Liens permitted by Section 9.03(c)

 

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or Section 9.03(g) or any contract, agreement or understanding creating Liens
permitted by Section 9.03(d) and Section 9.03(e) or Section 9.03(g) (but only to
the extent related to the Property on which such Liens were created), (iii) any
leases or licenses or similar contracts as they affect any Property or Lien
subject to a lease or license, (iv) any restriction with respect to a Restricted
Subsidiary imposed pursuant to an agreement entered into for the direct or
indirect sale or disposition of all or substantially all the equity or Property
of such Restricted Subsidiary (or the Property that is subject to such
restriction) pending the closing of such sale or disposition, or (v) customary
provisions with respect to the distribution of Property in joint venture
agreements.

 

Section 9.18 Gas Imbalances, Take-or-Pay or Other Prepayments. The Borrower will
not, and will not permit any Restricted Subsidiary to, allow gas imbalances,
take-or-pay or other prepayments with respect to the Oil and Gas Properties of
the Borrower or any Restricted Subsidiary that would require the Borrower or
such Restricted Subsidiary to deliver Hydrocarbons at some future time without
then or thereafter receiving full payment therefor to exceed two bcf of gas (on
an mcf equivalent basis) in the aggregate.

 

Section 9.19 Swap Agreements. The Borrower will not, and will not permit any
Restricted Subsidiary to, enter into any Swap Agreements with any Person other
than (a) Swap Agreements in respect of commodities (i) with an Approved
Counterparty and (ii) the notional volumes for which (when aggregated with other
commodity Swap Agreements then in effect other than basis differential swaps on
volumes already hedged pursuant to other Swap Agreements) do not exceed, as of
the date such Swap Agreement is executed, for (A) natural gas, 85% of the
reasonably anticipated projected production from proved, developed, producing
Oil and Gas Properties for each month during the period during which such Swap
Agreement is in effect and (B) crude oil, 90% of the reasonably anticipated
projected production from proved Oil and Gas Properties for each month during
the period commencing on such date and ending on the date twelve months
thereafter, and for each month during any period after such twelve-month period,
85% of the reasonably anticipated projected production from proved Oil and Gas
Properties for each month during such period, provided, however, that for
purposes of this Section 9.19(a), put options and price floors for crude oil and
natural gas shall be disregarded, and (b) Swap Agreements in respect of interest
rates with an Approved Counterparty, as follows: (i) Swap Agreements effectively
converting interest rates from fixed to floating, the notional amounts of which
(when aggregated with all other Swap Agreements of the Borrower and its
Restricted Subsidiaries then in effect effectively converting interest rates
from fixed to floating) do not exceed 50% of the then outstanding principal
amount of the Borrower’s Debt for borrowed money which bears interest at a fixed
rate and (ii) Swap Agreements effectively converting interest rates from
floating to fixed, the notional amounts of which (when aggregated with all other
Swap Agreements of the Borrower and its Restricted Subsidiaries then in effect
effectively converting interest rates from floating to fixed) do not exceed 75%
of the then outstanding principal amount of the Borrower’s Debt for borrowed
money which bears interest at a floating rate. In no event shall any Swap
Agreement contain any requirement, agreement or covenant for the Borrower or any
Restricted Subsidiary to post collateral or margin to secure their obligations
under such Swap Agreement or to cover market exposures except to the extent
permitted by Section 9.03(a) and Section 9.03(f).

 

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ARTICLE X

Events of Default; Remedies

 

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

 

(a) the Borrower shall fail to pay any principal of any Loan or any
reimbursement obligation in respect of any LC Disbursement when and as the same
shall become due and payable, whether at the due date thereof or at a date fixed
for prepayment thereof, by acceleration or otherwise.

 

(b) the Borrower shall fail to pay any interest on any Loan or any fee or any
other amount (other than an amount referred to in Section 10.01(a)) payable
under any Loan Document, when and as the same shall become due and payable, and
such failure shall continue unremedied for a period of three Business Days.

 

(c) any representation or warranty made or deemed made by or on behalf of the
Borrower or any Restricted Subsidiary in or in connection with any Loan Document
or any amendment or modification of any Loan Document or waiver under such Loan
Document, or in any report, certificate, financial statement or other document
furnished pursuant to the provisions hereof or any Loan Document or any
amendment or modification thereof or waiver thereunder, shall prove to have been
incorrect when made or deemed made.

 

(d) the Borrower or any Restricted Subsidiary shall fail to observe or perform
any covenant, condition or agreement contained in Section 8.01(m), Section 8.02,
Section 8.14, Section 8.15 or in ARTICLE IX.

 

(e) the Borrower or any Restricted Subsidiary shall fail to observe or perform
any covenant, condition or agreement contained in this Agreement (other than
those specified in Section 10.01(a), Section 10.01(b) or Section 10.01(d)) or
any other Loan Document, and such failure shall continue unremedied for a period
of 30 days after the earlier to occur of (A) notice thereof from the
Administrative Agent to the Borrower (which notice will be given at the request
of any Lender) or (B) a Responsible Officer of the Borrower or such Restricted
Subsidiary otherwise becoming aware of such default.

 

(f) the Borrower or any Restricted Subsidiary shall fail to make any payment
(whether of principal or interest and regardless of amount) in respect of any
Material Indebtedness, when and as the same shall become due and payable.

 

(g) any event or condition occurs that results in any Material Indebtedness
becoming due prior to its scheduled maturity or that enables or permits (with or
without the giving of notice, the lapse of time or both) the holder or holders
of any Material Indebtedness or any trustee or agent on its or their behalf to
cause any Material Indebtedness to become due, or to require the Redemption
thereof or any offer to Redeem to be made in respect thereof, prior to its
scheduled maturity or require the Borrower or any Restricted Subsidiary to make
an offer in respect thereof.

 

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(h) an involuntary proceeding shall be commenced or an involuntary petition
shall be filed seeking (i) liquidation, reorganization or other relief in
respect of the Borrower or any Restricted Subsidiary or its debts, or of a
substantial part of its assets, under any Federal, state or foreign bankruptcy,
insolvency, receivership or similar law now or hereafter in effect or (ii) the
appointment of a receiver, trustee, custodian, sequestrator, conservator or
similar official for the Borrower or any Restricted Subsidiary or for a
substantial part of its assets, and, in any such case, such proceeding or
petition shall continue undismissed for 30 days or an order or decree approving
or ordering any of the foregoing shall be entered.

 

(i) the Borrower or, except as permitted by Section 9.12(c), any Restricted
Subsidiary shall (i) voluntarily commence any proceeding or file any petition
seeking liquidation, reorganization or other relief under any Federal, state or
foreign bankruptcy, insolvency, receivership or similar law now or hereafter in
effect, (ii) consent to the institution of, or fail to contest in a timely and
appropriate manner, any proceeding or petition described in Section 10.01(h),
(iii) apply for or consent to the appointment of a receiver, trustee, custodian,
sequestrator, conservator or similar official for the Borrower or any Restricted
Subsidiary or for a substantial part of its assets, (iv) file an answer
admitting the material allegations of a petition filed against it in any such
proceeding, (v) make a general assignment for the benefit of creditors or (vi)
take any action for the purpose of effecting any of the foregoing.

 

(j) the Borrower or any Restricted Subsidiary shall become unable, admit in
writing its inability or fail generally to pay its debts as they become due.

 

(k) one or more judgments for the payment of money in an aggregate amount in
excess of $20,000,000 (to the extent not covered by independent third party
insurance provided by insurers of the highest claims paying rating or financial
strength as to which the insurer does not dispute coverage and is not subject to
an insolvency proceeding) shall be rendered against the Borrower, any Restricted
Subsidiary or any combination thereof and the same shall remain undischarged for
a period of 30 consecutive days during which execution shall not be effectively
stayed, or any action shall be legally taken by a judgment creditor to attach or
levy upon any assets of the Borrower or any Restricted Subsidiary to enforce any
such judgment.

 

(l) the Loan Documents after delivery thereof shall for any reason, except to
the extent permitted by the terms thereof, cease to be in full force and effect
and generally valid, binding and enforceable in accordance with their terms
against the Borrower or a Guarantor party thereto or shall be repudiated by any
of them, or cease to create a valid and perfected Lien of the priority required
thereby on any of the collateral purported to be covered thereby, except to the
extent permitted by the terms of this Agreement, or the Borrower or any
Restricted Subsidiary or any of their Affiliates shall so state in writing.

 

(m) an ERISA Event shall have occurred that, in the opinion of the Majority
Lenders, when taken together with all other ERISA Events that have occurred,
could reasonably be expected to result in liability of the Borrower and its
Subsidiaries in an aggregate amount exceeding $20,000,000.

 

(n) a Change in Control shall occur.

 

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Section 10.02 Remedies.

 

(a) In the case of an Event of Default other than one described in Section
10.01(h), Section 10.01(i) or Section 10.01(j), at any time thereafter during
the continuance of such Event of Default, the Administrative Agent may, and at
the request of the Majority Lenders, shall, by notice to the Borrower, take
either or both of the following actions, at the same or different times: (i)
terminate the Commitments, and thereupon the Commitments shall terminate
immediately, and (ii) declare the Notes and the Loans then outstanding to be due
and payable in whole (or in part, in which case any principal not so declared to
be due and payable may thereafter be declared to be due and payable), and
thereupon the principal of the Loans so declared to be due and payable, together
with accrued interest thereon and all fees and other obligations of the Borrower
and the Guarantors accrued hereunder and under the Notes and the other Loan
Documents (including, without limitation, the payment of cash collateral to
secure the LC Exposure as provided in Section 2.08(j)), shall become due and
payable immediately, without presentment, demand, protest, notice of intent to
accelerate, notice of acceleration or other notice of any kind, all of which are
hereby waived by the Borrower and each Guarantor; and in case of an Event of
Default described in Section 10.01(h), Section 10.01(i) or Section 10.01(j), the
Commitments shall automatically terminate and the Notes and the principal of the
Loans then outstanding, together with accrued interest thereon and all fees and
the other obligations of the Borrower and the Guarantors accrued hereunder and
under the Notes and the other Loan Documents (including, without limitation, the
payment of cash collateral to secure the LC Exposure as provided in Section
2.08(j)), shall automatically become due and payable, without presentment,
demand, protest or other notice of any kind, all of which are hereby waived by
the Borrower and each Guarantor.

 

(b) In the case of the occurrence of an Event of Default, the Administrative
Agent and the Lenders will have all other rights and remedies available at law
and equity.

 

(c) All proceeds realized from the liquidation or other disposition of
collateral or otherwise received after maturity of the Notes, whether by
acceleration or otherwise, shall be applied:

 

(i) first, pro rata to payment or reimbursement of that portion of the
Indebtedness constituting fees, expenses and indemnities payable to the
Administrative Agent, Arranger, other Agents and the Lenders;

 

(ii) second, pro rata to payment of accrued interest on the Loans;

 

(iii) third, pro rata to payment of principal outstanding on the Loans and
Indebtedness referred to in Clause (b) of the definition of Indebtedness owing
to a Lender or an Affiliate of a Lender;

 

(iv) fourth, pro rata to any other Indebtedness;

 

(v) fifth, to serve as cash collateral to be held by the Administrative Agent to
secure the LC Exposure; and

 

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(vi) sixth, any excess, after all of the Indebtedness shall have been
indefeasibly paid in full in cash, shall be paid to the Borrower or as otherwise
required by any Governmental Requirement.

 

ARTICLE XI

The Agents

 

Section 11.01 Appointment; Powers. Each of the Lenders and each Issuing Bank
hereby irrevocably appoints the Administrative Agent as its agent and authorizes
the Administrative Agent to take such actions on its behalf and to exercise such
powers as are delegated to the Administrative Agent by the terms hereof and the
other Loan Documents, together with such actions and powers as are reasonably
incidental thereto.

 

Section 11.02 Duties and Obligations of Administrative Agent. The Administrative
Agent shall not have any duties or obligations except those expressly set forth
in the Loan Documents. Without limiting the generality of the foregoing, (a) the
Administrative Agent shall not be subject to any fiduciary or other implied
duties, regardless of whether a Default has occurred and is continuing (the use
of the term “agent” herein and in the other Loan Documents with reference to the
Administrative Agent is not intended to connote any fiduciary or other implied
(or express) obligations arising under agency doctrine of any applicable law;
rather, such term is used merely as a matter of market custom, and is intended
to create or reflect only an administrative relationship between independent
contracting parties), (b) the Administrative Agent shall not have any duty to
take any discretionary action or exercise any discretionary powers, except as
provided in Section 11.03, and (c) except as expressly set forth herein, the
Administrative Agent shall not have any duty to disclose, and shall not be
liable for the failure to disclose, any information relating to the Borrower or
any of its Subsidiaries that is communicated to or obtained by the bank serving
as Administrative Agent or any of its Affiliates in any capacity. The
Administrative Agent shall be deemed not to have knowledge of any Default unless
and until written notice thereof is given to the Administrative Agent by the
Borrower or a Lender, and shall not be responsible for or have any duty to
ascertain or inquire into (i) any statement, warranty or representation made in
or in connection with this Agreement or any other Loan Document, (ii) the
contents of any certificate, report or other document delivered hereunder or
under any other Loan Document or in connection herewith or therewith, (iii) the
performance or observance of any of the covenants, agreements or other terms or
conditions set forth herein or in any other Loan Document, (iv) the validity,
enforceability, effectiveness or genuineness of this Agreement, any other Loan
Document or any other agreement, instrument or document, (v) the satisfaction of
any condition set forth in ARTICLE VI or elsewhere herein, other than to confirm
receipt of items expressly required to be delivered to the Administrative Agent,
(vi) the existence, value, perfection or priority of any collateral security or
the financial or other condition of the Borrower and its Subsidiaries or any
other obligor or guarantor, or (vii) any failure by the Borrower or any other
Person (other than itself) to perform any of its obligations hereunder or under
any other Loan Document or the performance or observance of any covenants,
agreements or other terms or conditions set forth herein or therein. For
purposes of determining compliance with the conditions specified in ARTICLE VI,
each Lender shall be deemed to have consented to, approved or accepted or to be
satisfied with, each document or other matter required thereunder to be
consented to or approved by or acceptable or satisfactory to a Lender unless the
Administrative Agent shall have received written notice from such Lender prior
to the proposed closing date specifying its objection thereto.

 

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Section 11.03 Action by Administrative Agent. The Administrative Agent shall
have no duty to take any discretionary action or exercise any discretionary
powers, except discretionary rights and powers expressly contemplated hereby or
by the other Loan Documents that the Administrative Agent is required to
exercise in writing as directed by the Majority Lenders (or such other number or
percentage of the Lenders as shall be necessary under the circumstances as
provided in Section 12.02) and in all cases the Administrative Agent shall be
fully justified in failing or refusing to act hereunder or under any other Loan
Documents unless it shall (a) receive written instructions from the Majority
Lenders or the Lenders, as applicable, (or such other number or percentage of
the Lenders as shall be necessary under the circumstances as provided in Section
12.02) specifying the action to be taken and (b) be indemnified to its
satisfaction by the Lenders against any and all liability and expenses which may
be incurred by it by reason of taking or continuing to take any such action. The
instructions as aforesaid and any action taken or failure to act pursuant
thereto by the Administrative Agent shall be binding on all of the Lenders. If a
Default has occurred and is continuing, then the Administrative Agent shall take
such action with respect to such Default as shall be directed by the requisite
Lenders in the written instructions (with indemnities) described in this Section
11.03, provided that, unless and until the Administrative Agent shall have
received such directions, the Administrative Agent may (but shall not be
obligated to) take such action, or refrain from taking such action, with respect
to such Default as it shall deem advisable in the best interests of the Lenders.
In no event, however, shall the Administrative Agent be required to take any
action which exposes the Administrative Agent to personal liability or which is
contrary to this Agreement, the Loan Documents or applicable law. If a Default
has occurred and is continuing, neither the Syndication Agents nor the
Documentation Agents shall have any obligation to perform any act in respect
thereof. The Administrative Agent shall not be liable for any action taken or
not taken by it with the consent or at the request of the Majority Lenders or
the Lenders (or such other number or percentage of the Lenders as shall be
necessary under the circumstances as provided in Section 12.02), and otherwise
the Administrative Agent shall not be liable for any action taken or not taken
by it hereunder or under any other Loan Document or under any other document or
instrument referred to or provided for herein or therein or in connection
herewith or therewith INCLUDING ITS OWN ORDINARY NEGLIGENCE, except for its own
gross negligence or willful misconduct.

 

Section 11.04 Reliance by Administrative Agent. The Administrative Agent shall
be entitled to rely upon, and shall not incur any liability for relying upon,
any notice, request, certificate, consent, statement, instrument, document or
other writing believed by it to be genuine and to have been signed or sent by
the proper Person. The Administrative Agent also may rely upon any statement
made to it orally or by telephone and believed by it to be made by the proper
Person, and shall not incur any liability for relying thereon and each of the
Borrower, the Lenders and each Issuing Bank hereby waives the right to dispute
the Administrative Agent’s record of such statement, except in the case of gross
negligence or willful misconduct by the Administrative Agent. The Administrative
Agent may consult with legal counsel (who may be counsel for the Borrower),
independent accountants and other experts selected by it, and shall not be
liable for any action taken or not taken by it in accordance with the advice of
any such counsel, accountants or experts. The Administrative Agent may deem and
treat the payee of any

 

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Note as the holder thereof for all purposes hereof unless and until a written
notice of the assignment or transfer thereof permitted hereunder shall have been
filed with the Administrative Agent.

 

Section 11.05 Subagents. The Administrative Agent may perform any and all its
duties and exercise its rights and powers by or through any one or more
sub-agents appointed by the Administrative Agent. The Administrative Agent and
any such sub-agent may perform any and all its duties and exercise its rights
and powers through their respective Related Parties. The exculpatory provisions
of the preceding Sections of this ARTICLE XI shall apply to any such sub-agent
and to the Related Parties of the Administrative Agent and any such sub-agent,
and shall apply to their respective activities in connection with the
syndication of the credit facilities provided for herein as well as activities
as Administrative Agent.

 

Section 11.06 Resignation or Removal of Agents. Subject to the appointment and
acceptance of a successor Administrative Agent as provided in this Section
11.06, the Administrative Agent may resign at any time by notifying the Lenders,
each Issuing Bank and the Borrower, and the Administrative Agent may be removed
at any time with or without cause by the Majority Lenders. Upon any such
resignation or removal, the Majority Lenders shall have the right, in
consultation with the Borrower, to appoint a successor. If no successor shall
have been so appointed by the Majority Lenders and shall have accepted such
appointment within 30 days after the retiring Agent gives notice of its
resignation or removal of the retiring Agent, then the retiring Agent may, on
behalf of the Lenders and each Issuing Bank, appoint a successor Agent which
shall be a bank with an office in New York, New York, or an Affiliate of any
such bank. Upon the acceptance of its appointment as Agent hereunder by a
successor, such successor shall succeed to and become vested with all the
rights, powers, privileges and duties of the retiring Agent, and the retiring
Agent shall be discharged from its duties and obligations hereunder. The fees
payable by the Borrower to a successor Agent shall be the same as those payable
to its predecessor unless otherwise agreed between the Borrower and such
successor. After the Agent’s resignation hereunder, the provisions of this
ARTICLE XI and Section 12.03 shall continue in effect for the benefit of such
retiring Agent, its sub-agents and their respective Related Parties in respect
of any actions taken or omitted to be taken by any of them while it was acting
as Agent.

 

Section 11.07 Agents as Lenders. Each bank serving as an Agent hereunder shall
have the same rights and powers in its capacity as a Lender as any other Lender
and may exercise the same as though it were not an Agent, and such bank and its
Affiliates may accept deposits from, lend money to and generally engage in any
kind of business with the Borrower or any Subsidiary or other Affiliate thereof
as if it were not an Agent hereunder.

 

Section 11.08 No Reliance. Each Lender acknowledges that it has, independently
and without reliance upon the Administrative Agent, any other Agent or any other
Lender and based on such documents and information as it has deemed appropriate,
made its own credit analysis and decision to enter into this Agreement and each
other Loan Document to which it is a party. Each Lender also acknowledges that
it will, independently and without reliance upon the Administrative Agent, any
other Agent or any other Lender and based on such documents and information as
it shall from time to time deem appropriate, continue to make its own decisions
in taking or not taking action under or based upon this Agreement, any other
Loan Document, any

 

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related agreement or any document furnished hereunder or thereunder. The Agents
shall not be required to keep themselves informed as to the performance or
observance by the Borrower or any of its Subsidiaries of this Agreement, the
Loan Documents or any other document referred to or provided for herein or to
inspect the Properties or books of the Borrower or its Subsidiaries. Except for
notices, reports and other documents and information expressly required to be
furnished to the Lenders by the Administrative Agent hereunder, no Agent or
Arranger shall have any duty or responsibility to provide any Lender with any
credit or other information concerning the affairs, financial condition or
business of the Borrower (or any of its Affiliates) which may come into the
possession of such Agent or any of its Affiliates. In this regard, each Lender
acknowledges that Vinson & Elkins L.L.P. is acting in this transaction as
special counsel to the Administrative Agent only, except to the extent otherwise
expressly stated in any legal opinion or any Loan Document. Each other party
hereto will consult with its own legal counsel to the extent that it deems
necessary in connection with the Loan Documents and the matters contemplated
therein.

 

Section 11.09 Authority of Administrative Agent to Release Collateral and Liens.
Each Lender and each Issuing Bank hereby authorizes the Administrative Agent to
release any collateral that is permitted to be sold or released pursuant to the
terms of the Loan Documents. Each Lender and each Issuing Bank hereby authorizes
the Administrative Agent to execute and deliver to the Borrower, at the
Borrower’s sole cost and expense, any and all releases of Liens, termination
statements, assignments or other documents reasonably requested by the Borrower
in connection with any sale or other disposition of Property to the extent such
sale or other disposition is permitted by the terms of Section 9.13 or is
otherwise authorized by the terms of the Loan Documents.

 

Section 11.10 Administrative Agent May File Proofs of Claim. In case of the
pendency of any receivership, insolvency, liquidation, bankruptcy,
reorganization, arrangement, adjustment, composition or other judicial
proceeding relative to the Borrower or any of its Subsidiaries, the
Administrative Agent (irrespective of whether the principal of any Loan shall
then be due and payable as herein expressed or by declaration or otherwise and
irrespective of whether the Administrative Agent shall have made any demand on
the Borrower) shall be entitled and empowered, by intervention in such
proceeding or otherwise:

 

(a) to file and prove a claim for the whole amount of the principal and interest
owing and unpaid in respect of the Loans and all other Indebtedness that are
owing and unpaid and to file such other documents as may be necessary or
advisable in order to have the claims of the Lenders and the Administrative
Agent (including any claim for the reasonable compensation, expenses,
disbursements and advances of the Lenders and the Administrative Agent and their
respective agents and counsel and all other amounts due the Lenders and the
Administrative Agent under Section 12.03) allowed in such judicial proceeding;
and

 

(b) to collect and receive any monies or other property payable or deliverable
on any such claims and to distribute the same;

 

and any custodian, receiver, assignee, trustee, liquidator, sequestrator or
other similar official in any such judicial proceeding is hereby authorized by
each Lender to make such payments to the Administrative Agent and, in the event
that the Administrative Agent shall consent to the making

 

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of such payments directly to the Lenders, to pay to the Administrative Agent any
amount due for the reasonable compensation, expenses, disbursements and advances
of the Administrative Agent and its agents and counsel, and any other amounts
due the Administrative Agent under Section 12.03.

 

Nothing contained herein shall be deemed to authorize the Administrative Agent
to authorize or consent to or accept or adopt on behalf of any Lender any plan
of reorganization, arrangement, adjustment or composition affecting the
Indebtedness or the rights of any Lender or to authorize the Administrative
Agent to vote in respect of the claim of any Lender in any such proceeding.

 

Section 11.11 The Syndication Agents, Documentation Agents and Arranger. The
Syndication Agents, the Documentation Agents and the Arranger shall have no
duties, responsibilities or liabilities under this Agreement and the other Loan
Documents other than their duties, responsibilities and liabilities in their
capacity as Lenders hereunder.

 

ARTICLE XII

Miscellaneous

 

Section 12.01 Notices.

 

(a) Except in the case of notices and other communications expressly permitted
to be given by telephone (and subject to Section 12.01(b)), all notices and
other communications provided for herein shall be in writing and shall be
delivered by hand or overnight courier service, mailed by certified or
registered mail or sent by telecopy, as follows:

 

(i) if to the Borrower, to it at 700 Milam Street, Suite 3100, Houston, Texas
77002-4804, Attention of Stephen A. Thorington (Telecopy No. (713) 759-6200);

 

(ii) if to the Administrative Agent, to it at One Chase Manhattan Plaza, 8th
Floor, New York, New York 10081, Attention of Loan and Agency Services, Muniram
Appanna (Telecopy No. (212) 552-2261), with a copy to 600 Travis, 20th Floor,
Houston, Texas 77002, Attention of June Brand (Telecopy No. (713) 216-4117, and
for all other correspondence other than borrowings, continuation, conversion and
Letter of Credit requests 600 Travis, 20th Floor, Houston, Texas 77002,
Attention of Robert C. Mertensotto (Telecopy No. (713) 216-4117); and

 

(iii) if to any other Lender, in its capacity as such, or any other Lender in
its capacity as an Issuing Bank, to it at its address (or telecopy number) set
forth in its Administrative Questionnaire.

 

(b) Notices and other communications to the Lenders hereunder may be delivered
or furnished by electronic communications pursuant to procedures approved by the
Administrative Agent; provided that the foregoing shall not apply to notices
pursuant to ARTICLE II, ARTICLE III, ARTICLE IV and ARTICLE V unless otherwise
agreed by the Administrative Agent and the applicable Lender. The Administrative
Agent or the Borrower may, in its discretion, agree to accept notices and other
communications to it hereunder by electronic communications pursuant to
procedures approved by it; provided that approval of such procedures may be
limited to particular notices or communications.

 

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(c) Any party hereto may change its address or telecopy number for notices and
other communications hereunder by notice to the other parties hereto. All
notices and other communications given to any party hereto in accordance with
the provisions of this Agreement shall be deemed to have been given on the date
of receipt.

 

Section 12.02 Waivers; Amendments.

 

(a) No failure on the part of the Administrative Agent, any Issuing Bank or any
Lender to exercise and no delay in exercising, and no course of dealing with
respect to, any right, power or privilege, or any abandonment or discontinuance
of steps to enforce such right, power or privilege, under any of the Loan
Documents shall operate as a waiver thereof, nor shall any single or partial
exercise of any right, power or privilege under any of the Loan Documents
preclude any other or further exercise thereof or the exercise of any other
right, power or privilege. The rights and remedies of the Administrative Agent,
each Issuing Bank and the Lenders hereunder and under the other Loan Documents
are cumulative and are not exclusive of any rights or remedies that they would
otherwise have. No waiver of any provision of this Agreement or any other Loan
Document or consent to any departure by the Borrower therefrom shall in any
event be effective unless the same shall be permitted by Section 12.02(b), and
then such waiver or consent shall be effective only in the specific instance and
for the purpose for which given. Without limiting the generality of the
foregoing, the making of a Loan or issuance of a Letter of Credit shall not be
construed as a waiver of any Default, regardless of whether the Administrative
Agent, any Lender or any Issuing Bank may have had notice or knowledge of such
Default at the time.

 

(b) Neither this Agreement nor any provision hereof nor any Security Instrument
nor any provision thereof may be waived, amended or modified except pursuant to
an agreement or agreements in writing entered into by the Borrower and the
Majority Lenders or by the Borrower and the Administrative Agent with the
consent of the Majority Lenders; provided that no such agreement shall (i)
increase the Commitment or the Maximum Credit Amount of any Lender without the
written consent of such Lender, (ii) increase the Borrowing Base without the
written consent of all of the Lenders, decrease or maintain the Borrowing Base
without the consent of Super-majority Lenders or modify Section 2.07 without the
written consent of all of the Lenders, (iii) reduce the principal amount of any
Loan or LC Disbursement or reduce the rate of interest thereon, or reduce any
fees payable hereunder, or reduce any other Indebtedness hereunder or under any
other Loan Document, without the written consent of each Lender affected
thereby, (iv) postpone the scheduled date of payment or prepayment of the
principal amount of any Loan or LC Disbursement, or any interest thereon, or any
fees payable hereunder, or any other Indebtedness hereunder or under any other
Loan Document, or reduce the amount of, waive or excuse any such payment, or
postpone or extend the Termination Date without the written consent of each
Lender affected thereby, (v) change Section 4.01(b) or Section 4.01(c) in a
manner that would alter the pro rata sharing of payments required thereby,
without the written consent of each Lender, (vi) waive or amend Section 3.04(c),
Section 6.01, Section 8.14, Section 9.02(k), Section 10.02(c) or Section 12.15
or change the definition of the terms “Domestic Subsidiary”, “Foreign
Subsidiary”, “Material Domestic Subsidiary” or “Subsidiary”, without the written
consent of each Lender, (vii) release any Guarantor (except as set forth in the
Guaranty Agreement, Section 8.14(d) or Section 9.12) or release all or
substantially all of the collateral (other than as provided in Section 11.09),
without the written consent of each Lender, or (viii)

 

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change any of the provisions of this Section 12.02(b) or the definitions of
“Super-majority Lenders” or “Majority Lenders” or any other provision hereof
specifying the number or percentage of Lenders required to waive, amend or
modify any rights hereunder or under any other Loan Documents or make any
determination or grant any consent hereunder or any other Loan Documents,
without the written consent of each Lender; provided further that no such
agreement shall amend, modify or otherwise affect the rights or duties of the
Administrative Agent, any other Agent or any Issuing Bank hereunder or under any
other Loan Document without the prior written consent of the Administrative
Agent, such other Agent or such Issuing Bank, as the case may be.
Notwithstanding the foregoing, any supplement to Schedule 7.15 (Subsidiaries)
shall be effective simply by delivering to the Administrative Agent a
supplemental schedule clearly marked as such and, upon receipt, the
Administrative Agent will promptly deliver a copy thereof to the Lenders.

 

Section 12.03 Expenses, Indemnity; Damage Waiver.

 

(a) The Borrower shall pay (i) all reasonable out-of-pocket expenses incurred by
the Administrative Agent and its Affiliates, including, without limitation, the
reasonable fees, charges and disbursements of counsel and other outside
consultants for the Administrative Agent, the reasonable travel, photocopy,
mailing, courier, telephone and other similar expenses, and the cost of
environmental audits and surveys and appraisals, in connection with the
syndication of the credit facilities provided for herein, the preparation,
negotiation, execution, delivery and administration (both before and after the
execution hereof and including advice of counsel to the Administrative Agent as
to the rights and duties of the Administrative Agent and the Lenders with
respect thereto) of this Agreement and the other Loan Documents and any
amendments, modifications or waivers of or consents related to the provisions
hereof or thereof (whether or not the transactions contemplated hereby or
thereby shall be consummated), (ii) all costs, expenses, Taxes, assessments and
other charges incurred by any Agent or any Lender in connection with any filing,
registration, recording or perfection of any security interest contemplated by
this Agreement or any Security Instrument or any other document referred to
therein, (iii) all reasonable out-of-pocket expenses incurred by each Issuing
Bank in connection with the issuance, amendment, renewal or extension of any
Letter of Credit issued by such Issuing Bank or any demand for payment
thereunder, (iv) all out-of-pocket expenses incurred by any Agent, any Issuing
Bank or any Lender, including the fees, charges and disbursements of any counsel
for any Agent, any Issuing Bank or any Lender, in connection with the
enforcement or protection of its rights in connection with this Agreement or any
other Loan Document, including its rights under this Section 12.03, or in
connection with the Loans made or Letters of Credit issued hereunder, including,
without limitation, all such out-of-pocket expenses incurred during any workout,
restructuring or negotiations in respect of such Loans or Letters of Credit.

 

(b) THE BORROWER SHALL INDEMNIFY EACH AGENT, THE ARRANGER, EACH ISSUING BANK AND
EACH LENDER, AND EACH RELATED PARTY OF ANY OF THE FOREGOING PERSONS (EACH SUCH
PERSON BEING CALLED AN “INDEMNITEE”) AGAINST, AND HOLD EACH INDEMNITEE HARMLESS
FROM, ANY AND ALL LOSSES, CLAIMS, DAMAGES, LIABILITIES AND RELATED EXPENSES,
INCLUDING THE FEES, CHARGES AND DISBURSEMENTS OF ANY COUNSEL FOR ANY INDEMNITEE,
INCURRED BY OR ASSERTED AGAINST ANY INDEMNITEE ARISING OUT OF, IN CONNECTION
WITH, OR AS A RESULT OF (i) THE

 

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EXECUTION OR DELIVERY OF THIS AGREEMENT OR ANY OTHER LOAN DOCUMENT OR ANY
AGREEMENT OR INSTRUMENT CONTEMPLATED HEREBY OR THEREBY, THE PERFORMANCE BY THE
PARTIES HERETO OR THE PARTIES TO ANY OTHER LOAN DOCUMENT OF THEIR RESPECTIVE
OBLIGATIONS HEREUNDER OR THEREUNDER OR THE CONSUMMATION OF THE TRANSACTIONS
CONTEMPLATED HEREBY OR BY ANY OTHER LOAN DOCUMENT, (ii) THE FAILURE OF THE
BORROWER OR ANY RESTRICTED SUBSIDIARY TO COMPLY WITH THE TERMS OF ANY LOAN
DOCUMENT, INCLUDING THIS AGREEMENT, OR WITH ANY GOVERNMENTAL REQUIREMENT, (iii)
ANY INACCURACY OF ANY REPRESENTATION OR ANY BREACH OF ANY WARRANTY OR COVENANT
OF THE BORROWER OR ANY GUARANTOR SET FORTH IN ANY OF THE LOAN DOCUMENTS OR ANY
INSTRUMENTS, DOCUMENTS OR CERTIFICATIONS DELIVERED IN CONNECTION THEREWITH, (iv)
ANY LOAN OR LETTER OF CREDIT OR THE USE OF THE PROCEEDS THEREFROM, INCLUDING,
WITHOUT LIMITATION, (A) ANY REFUSAL BY ANY ISSUING BANK TO HONOR A DEMAND FOR
PAYMENT UNDER A LETTER OF CREDIT ISSUED BY SUCH ISSUING BANK IF THE DOCUMENTS
PRESENTED IN CONNECTION WITH SUCH DEMAND DO NOT STRICTLY COMPLY WITH THE TERMS
OF SUCH LETTER OF CREDIT, OR (B) THE PAYMENT OF A DRAWING UNDER ANY LETTER OF
CREDIT NOTWITHSTANDING THE NON-COMPLIANCE, NON-DELIVERY OR OTHER IMPROPER
PRESENTATION OF THE DOCUMENTS PRESENTED IN CONNECTION THEREWITH, (v) ANY OTHER
ASPECT OF THE LOAN DOCUMENTS, (vi) THE OPERATIONS OF THE BUSINESS OF THE
BORROWER AND ITS SUBSIDIARIES BY THE BORROWER AND ITS SUBSIDIARIES, (vii) ANY
ASSERTION THAT THE LENDERS WERE NOT ENTITLED TO RECEIVE THE PROCEEDS RECEIVED
PURSUANT TO THE SECURITY INSTRUMENTS, (viii) ANY ENVIRONMENTAL LAW APPLICABLE TO
THE BORROWER OR ANY SUBSIDIARY OR ANY OF THEIR PROPERTIES, INCLUDING WITHOUT
LIMITATION, THE PRESENCE, GENERATION, STORAGE, RELEASE, THREATENED RELEASE, USE,
TRANSPORT, DISPOSAL, ARRANGEMENT OF DISPOSAL OR TREATMENT OF OIL, OIL AND GAS
WASTES, SOLID WASTES OR HAZARDOUS SUBSTANCES ON ANY OF THEIR PROPERTIES, (ix)
THE BREACH OR NON-COMPLIANCE BY THE BORROWER OR ANY SUBSIDIARY WITH ANY
ENVIRONMENTAL LAW APPLICABLE TO THE BORROWER OR ANY SUBSIDIARY, (x) THE PAST
OWNERSHIP BY THE BORROWER OR ANY SUBSIDIARY OF ANY OF THEIR PROPERTIES OR PAST
ACTIVITY ON ANY OF THEIR PROPERTIES WHICH, THOUGH LAWFUL AND FULLY PERMISSIBLE
AT THE TIME, COULD RESULT IN PRESENT LIABILITY, (xi) THE PRESENCE, USE, RELEASE,
STORAGE, TREATMENT, DISPOSAL, GENERATION, THREATENED RELEASE, TRANSPORT,
ARRANGEMENT FOR TRANSPORT OR ARRANGEMENT FOR DISPOSAL OF OIL, OIL AND GAS
WASTES, SOLID WASTES OR HAZARDOUS SUBSTANCES ON OR AT ANY OF THE PROPERTIES
OWNED OR OPERATED BY THE BORROWER OR ANY SUBSIDIARY OR ANY ACTUAL OR ALLEGED
PRESENCE OR RELEASE OF HAZARDOUS MATERIALS ON OR FROM ANY PROPERTY OWNED OR
OPERATED BY THE BORROWER OR ANY OF ITS SUBSIDIARIES, (xii) ANY ENVIRONMENTAL
LIABILITY RELATED IN ANY WAY TO THE BORROWER OR ANY OF ITS SUBSIDIARIES, OR
(xiii) ANY OTHER ENVIRONMENTAL, HEALTH OR SAFETY CONDITION IN CONNECTION WITH
THE LOAN DOCUMENTS, OR (xiv) ANY

 

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ACTUAL OR PROSPECTIVE CLAIM, LITIGATION, INVESTIGATION OR PROCEEDING RELATING TO
ANY OF THE FOREGOING, WHETHER BASED ON CONTRACT, TORT OR ANY OTHER THEORY AND
REGARDLESS OF WHETHER ANY INDEMNITEE IS A PARTY THERETO, AND SUCH INDEMNITY
SHALL EXTEND TO EACH INDEMNITEE NOTWITHSTANDING THE SOLE OR CONCURRENT
NEGLIGENCE OF EVERY KIND OR CHARACTER WHATSOEVER, WHETHER ACTIVE OR PASSIVE,
WHETHER AN AFFIRMATIVE ACT OR AN OMISSION, INCLUDING WITHOUT LIMITATION, ALL
TYPES OF NEGLIGENT CONDUCT IDENTIFIED IN THE RESTATEMENT (SECOND) OF TORTS OF
ONE OR MORE OF THE INDEMNITEES OR BY REASON OF STRICT LIABILITY IMPOSED WITHOUT
FAULT ON ANY ONE OR MORE OF THE INDEMNITEES; PROVIDED THAT SUCH INDEMNITY SHALL
NOT, AS TO ANY INDEMNITEE, BE AVAILABLE TO THE EXTENT THAT SUCH LOSSES, CLAIMS,
DAMAGES, LIABILITIES OR RELATED EXPENSES ARE DETERMINED BY A COURT OF COMPETENT
JURISDICTION BY FINAL AND NONAPPEALABLE JUDGMENT TO HAVE RESULTED FROM THE GROSS
NEGLIGENCE OR WILFUL MISCONDUCT OF SUCH INDEMNITEE.

 

(c) To the extent that the Borrower fails to pay any amount required to be paid
by it to any Agent, the Arranger or any Issuing Bank under Section 12.03(a) or
(b), each Lender severally agrees to pay to such Agent, the Arranger or such
Issuing Bank, as the case may be, such Lender’s Applicable Percentage
(determined as of the time that the applicable unreimbursed expense or indemnity
payment is sought) of such unpaid amount; provided that the unreimbursed expense
or indemnified loss, claim, damage, liability or related expense, as the case
may be, was incurred by or asserted against such Agent, the Arranger or such
Issuing Bank in its capacity as such.

 

(d) To the extent permitted by applicable law, the Borrower shall not assert,
and hereby waives, any claim against any Indemnitee, on any theory of liability,
for special, indirect, consequential or punitive damages (as opposed to direct
or actual damages) arising out of, in connection with, or as a result of, this
Agreement, any other Loan Document or any agreement or instrument contemplated
hereby or thereby, the Transactions, any Loan or Letter of Credit or the use of
the proceeds thereof.

 

(e) All amounts due under this Section 12.03 shall be payable not later than 10
days after written demand therefor.

 

(f) Notwithstanding any other provisions of this Section 12.03, no transfer or
assignment of the interests or obligations of any Lender or any grant of
participations therein shall be permitted if such transfer, assignment or grant
would require the Borrower and the Guarantors to file a registration statement
with the SEC or to qualify the Loans under the “Blue Sky” laws of any state.

 

Section 12.04 Successors and Assigns.

 

(a) The provisions of this Agreement shall be binding upon and inure to the
benefit of the parties hereto and their respective successors and assigns
permitted hereby (including any Affiliate of any Issuing Bank that issues any
Letter of Credit), except that (i) the

 

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Borrower may not assign or otherwise transfer any of its rights or obligations
hereunder without the prior written consent of each Lender (and any attempted
assignment or transfer by the Borrower without such consent shall be null and
void) and (ii) no Lender may assign or otherwise transfer its rights or
obligations hereunder except in accordance with this Section 12.04. Nothing in
this Agreement, expressed or implied, shall be construed to confer upon any
Person (other than the parties hereto, their respective successors and assigns
permitted hereby (including any Affiliate of any Issuing Bank that issues any
Letter of Credit), Participants (to the extent provided in Section 12.04(c))
and, to the extent expressly contemplated hereby, the Related Parties of each of
the Administrative Agent, each Issuing Bank and the Lenders) any legal or
equitable right, remedy or claim under or by reason of this Agreement.

 

(b) (i) Subject to the conditions set forth in Section 12.04(b)(ii), any Lender
may assign to one or more assignees all or a portion of its rights and
obligations under this Agreement (including all or a portion of its Commitment
and the Loans at the time owing to it) with the prior written consent (such
consent not to be unreasonably withheld) of:

 

(A) the Borrower, provided that no consent of the Borrower shall be required for
an assignment to a Lender, an Affiliate of a Lender, an Approved Fund or, if an
Event of Default has occurred and is continuing, any other assignee; and

 

(B) the Administrative Agent, provided that no consent of the Administrative
Agent shall be required for an assignment to an assignee that is a Lender
immediately prior to giving effect to such assignment.

 

(ii) Assignments shall be subject to the following additional conditions:

 

(A) except in the case of an assignment to a Lender or an Affiliate of a Lender
or an assignment of the entire remaining amount of the assigning Lender’s
Commitment or Loans, the amount of the Commitment or Loans of the assigning
Lender subject to each such assignment (determined as of the date the Assignment
and Assumption with respect to such assignment is delivered to the
Administrative Agent) shall not be less than $5,000,000 unless each of the
Borrower and the Administrative Agent otherwise consent, provided that no such
consent of the Borrower shall be required if an Event of Default has occurred
and is continuing;

 

(B) each partial assignment shall be made as an assignment of a proportionate
part of all the assigning Lender’s rights and obligations under this Agreement;

 

(C) the parties to each assignment shall execute and deliver to the
Administrative Agent an Assignment and Assumption, together with a processing
and recordation fee of $3,500; and

 

(D) the assignee, if it shall not be a Lender, shall deliver to the
Administrative Agent an Administrative Questionnaire.

 

(iii) Subject to Section 12.04(b)(iv) and the acceptance and recording thereof,
from and after the effective date specified in each Assignment and Assumption
the

 

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assignee thereunder shall be a party hereto and, to the extent of the interest
assigned by such Assignment and Assumption, have the rights and obligations of a
Lender under this Agreement, and the assigning Lender thereunder shall, to the
extent of the interest assigned by such Assignment and Assumption, be released
from its obligations under this Agreement (and, in the case of an Assignment and
Assumption covering all of the assigning Lender’s rights and obligations under
this Agreement, such Lender shall cease to be a party hereto but shall continue
to be entitled to the benefits of Section 5.01, Section 5.02, Section 5.03 and
Section 12.03). Any assignment or transfer by a Lender of rights or obligations
under this Agreement that does not comply with this Section 12.04 shall be
treated for purposes of this Agreement as a sale by such Lender of a
participation in such rights and obligations in accordance with Section
12.04(c).

 

(iv) The Administrative Agent, acting for this purpose as an agent of the
Borrower, shall maintain at one of its offices a copy of each Assignment and
Assumption delivered to it and a register for the recordation of the names and
addresses of the Lenders, and the Maximum Credit Amount of, and principal amount
of the Loans and LC Disbursements owing to, each Lender pursuant to the terms
hereof from time to time (the “Register”). The entries in the Register shall be
conclusive, and the Borrower, the Administrative Agent, each Issuing Bank and
the Lenders may treat each Person whose name is recorded in the Register
pursuant to the terms hereof as a Lender hereunder for all purposes of this
Agreement, notwithstanding notice to the contrary. The Register shall be
available for inspection by the Borrower, any Issuing Bank and any Lender, at
any reasonable time and from time to time upon reasonable prior notice. In
connection with any changes to the Register, if necessary, the Administrative
Agent will reflect the revisions on Annex I and forward a copy of such revised
Annex I to the Borrower, each Issuing Bank and each Lender.

 

(v) Upon its receipt of a duly completed Assignment and Assumption executed by
an assigning Lender and an assignee, the assignee’s completed Administrative
Questionnaire (unless the assignee shall already be a Lender hereunder), the
processing and recordation fee referred to in Section 12.04(b) and any written
consent to such assignment required by Section 12.04(b), the Administrative
Agent shall accept such Assignment and Assumption and record the information
contained therein in the Register. No assignment shall be effective for purposes
of this Agreement unless it has been recorded in the Register as provided in
this Section 12.04(b).

 

(c) (i) Any Lender may, without the consent of the Borrower, the Administrative
Agent or any Issuing Bank, sell participations to one or more banks or other
entities (a “Participant”) in all or a portion of such Lender’s rights and
obligations under this Agreement (including all or a portion of its Commitment
and the Loans owing to it); provided that (A) such Lender’s obligations under
this Agreement shall remain unchanged, (B) such Lender shall remain solely
responsible to the other parties hereto for the performance of such obligations
and (C) the Borrower, the Administrative Agent, each Issuing Bank and the other
Lenders shall continue to deal solely and directly with such Lender in
connection with such Lender’s rights and obligations under this Agreement. Any
agreement or instrument pursuant to which a Lender sells such a participation
shall provide that such Lender shall retain the sole right to enforce this
Agreement and to approve any amendment, modification or waiver of any provision
of this Agreement; provided that such agreement or instrument may provide that
such Lender will not, without the consent of the Participant, agree to any
amendment, modification or

 

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waiver described in the proviso to Section 12.02 that affects such Participant.
In addition such agreement must provide that the Participant be bound by the
provisions of Section 12.03. Subject to Section 12.04(c)(ii), the Borrower
agrees that each Participant shall be entitled to the benefits of Section 5.01,
Section 5.02 and Section 5.03 to the same extent as if it were a Lender and had
acquired its interest by assignment pursuant to Section 12.04(b). To the extent
permitted by law, each Participant also shall be entitled to the benefits of
Section 12.08 as though it were a Lender, provided such Participant agrees to be
subject to Section 4.01(c) as though it were a Lender.

 

(ii) A Participant shall not be entitled to receive any greater payment under
Section 5.01 or Section 5.03 than the applicable Lender would have been entitled
to receive with respect to the participation sold to such Participant, unless
the sale of the participation to such Participant is made with the Borrower’s
prior written consent. A Participant that would be a Foreign Lender if it were a
Lender shall not be entitled to the benefits of Section 5.03 unless the Borrower
is notified of the participation sold to such Participant and such Participant
agrees, for the benefit of the Borrower, to comply with Section 5.03(e) as
though it were a Lender.

 

(d) Any Lender may at any time pledge or assign a security interest in all or
any portion of its rights under this Agreement to secure obligations of such
Lender, including any pledge or assignment to secure obligations to a Federal
Reserve Bank, and this Section 12.04(d) shall not apply to any such pledge or
assignment of a security interest; provided that no such pledge or assignment of
a security interest shall release a Lender from any of its obligations hereunder
or substitute any such pledgee or assignee for such Lender as a party hereto.

 

Section 12.05 Survival; Revival; Reinstatement.

 

(a) All covenants, agreements, representations and warranties made by the
Borrower herein and in the certificates or other instruments delivered in
connection with or pursuant to this Agreement or any other Loan Document shall
be considered to have been relied upon by the other parties hereto and shall
survive the execution and delivery of this Agreement and the making of any Loans
and issuance of any Letters of Credit, regardless of any investigation made by
any such other party or on its behalf and notwithstanding that the
Administrative Agent, any Issuing Bank or any Lender may have had notice or
knowledge of any Default or incorrect representation or warranty at the time any
credit is extended hereunder, and shall continue in full force and effect as
long as the principal of or any accrued interest on any Loan or any fee or any
other amount payable under this Agreement is outstanding and unpaid or any
Letter of Credit is outstanding and so long as the Commitments have not expired
or terminated. The provisions of Section 5.01, Section 5.02, Section 5.03 and
Section 12.03 and ARTICLE XI shall survive and remain in full force and effect
regardless of the consummation of the transactions contemplated hereby, the
repayment of the Loans, the expiration or termination of the Letters of Credit
and the Commitments or the termination of this Agreement, any other Loan
Document or any provision hereof or thereof.

 

(b) To the extent that any payments on the Indebtedness or proceeds of any
collateral are subsequently invalidated, declared to be fraudulent or
preferential, set aside or required to be repaid to a trustee, debtor in
possession, receiver or other Person under any

 

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bankruptcy law, common law or equitable cause, then to such extent, the
Indebtedness so satisfied shall be revived and continue as if such payment or
proceeds had not been received and the Administrative Agent’s and the Lenders’
Liens, security interests, rights, powers and remedies under this Agreement and
each Loan Document shall continue in full force and effect. In such event, each
Loan Document shall be automatically reinstated and the Borrower shall take such
action as may be reasonably requested by the Administrative Agent and the
Lenders to effect such reinstatement.

 

Section 12.06 Counterparts; Integration; Effectiveness.

 

(a) This Agreement may be executed in counterparts (and by different parties
hereto on different counterparts), each of which shall constitute an original,
but all of which when taken together shall constitute a single contract.

 

(b) This Agreement, the other Loan Documents and any separate letter agreements
with respect to fees payable to the Administrative Agent constitute the entire
contract among the parties relating to the subject matter hereof and thereof and
supersede any and all previous agreements and understandings, oral or written,
relating to the subject matter hereof and thereof. This Agreement and the other
Loan Documents (other than the Letters of Credit and the Letter of Credit
Agreements) represent the final agreement among the parties hereto and thereto
and may not be contradicted by evidence of prior, contemporaneous or subsequent
oral agreements of the parties. There are no unwritten oral agreements between
the parties.

 

(c) Except as provided in Section 6.01, this Agreement shall become effective
when it shall have been executed by the Administrative Agent and when the
Administrative Agent shall have received counterparts hereof which, when taken
together, bear the signatures of each of the other parties hereto, and
thereafter shall be binding upon and inure to the benefit of the parties hereto
and their respective successors and assigns. Delivery of an executed counterpart
of a signature page of this Agreement by telecopy shall be effective as delivery
of a manually executed counterpart of this Agreement.

 

Section 12.07 Severability. Any provision of this Agreement or any other Loan
Document held to be invalid, illegal or unenforceable in any jurisdiction shall,
as to such jurisdiction, be ineffective to the extent of such invalidity,
illegality or unenforceability without affecting the validity, legality and
enforceability of the remaining provisions hereof or thereof; and the invalidity
of a particular provision in a particular jurisdiction shall not invalidate such
provision in any other jurisdiction.

 

Section 12.08 Right of Setoff. If an Event of Default shall have occurred and be
continuing, each Lender and each of its Affiliates is hereby authorized at any
time and from time to time, to the fullest extent permitted by law, to set off
and apply any and all deposits (general or special, time or demand, provisional
or final) at any time held and other obligations (of whatsoever kind, including,
without limitations obligations under Swap Agreements) at any time owing by such
Lender or Affiliate to or for the credit or the account of the Borrower or any
Restricted Subsidiary against any of and all the obligations of the Borrower or
any Restricted Subsidiary owed to such Lender now or hereafter existing under
this Agreement or any other Loan Document, irrespective of whether or not such
Lender shall have made any demand under

 

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this Agreement or any other Loan Document and although such obligations may be
unmatured. The rights of each Lender under this Section 12.08 are in addition to
other rights and remedies (including other rights of setoff) which such Lender
or its Affiliates may have.

 

Section 12.09 GOVERNING LAW; JURISDICTION; CONSENT TO SERVICE OF PROCESS.

 

(a) THIS AGREEMENT AND THE NOTES SHALL BE GOVERNED BY, AND CONSTRUED IN
ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK.

 

(b) ANY LEGAL ACTION OR PROCEEDING WITH RESPECT TO THE LOAN DOCUMENTS SHALL BE
BROUGHT IN THE COURTS OF THE STATE OF NEW YORK OR OF THE UNITED STATES OF
AMERICA FOR THE SOUTHERN DISTRICT OF NEW YORK, AND, BY EXECUTION AND DELIVERY OF
THIS AGREEMENT, EACH PARTY HEREBY ACCEPTS FOR ITSELF AND (TO THE EXTENT
PERMITTED BY LAW) IN RESPECT OF ITS PROPERTY, GENERALLY AND UNCONDITIONALLY, THE
JURISDICTION OF THE AFORESAID COURTS. EACH PARTY HEREBY IRREVOCABLY WAIVES ANY
OBJECTION, INCLUDING, WITHOUT LIMITATION, ANY OBJECTION TO THE LAYING OF VENUE
OR BASED ON THE GROUNDS OF FORUM NON CONVENIENS, WHICH IT MAY NOW OR HEREAFTER
HAVE TO THE BRINGING OF ANY SUCH ACTION OR PROCEEDING IN SUCH RESPECTIVE
JURISDICTIONS. THIS SUBMISSION TO JURISDICTION IS NON-EXCLUSIVE AND DOES NOT
PRECLUDE A PARTY FROM OBTAINING JURISDICTION OVER ANOTHER PARTY IN ANY COURT
OTHERWISE HAVING JURISDICTION.

 

(c) THE BORROWER HEREBY IRREVOCABLY DESIGNATES, APPOINTS AND EMPOWERS AND HEREBY
CONFERS AN IRREVOCABLE SPECIAL POWER, AMPLE AND SUFFICIENT, TO CT CORPORATION
SYSTEM, WITH OFFICES ON THE DATE HEREOF AT 111 EIGHTH AVENUE, THIRTEENTH FLOOR,
NEW YORK, NEW YORK, 10011 AS ITS DESIGNEE, APPOINTEE AND AGENT WITH RESPECT TO
ANY SUCH ACTION OR PROCEEDING IN NEW YORK TO RECEIVE, ACCEPT AND ACKNOWLEDGE FOR
AND ON ITS BEHALF, AND IN RESPECT OF ITS PROPERTY, SERVICE OF ANY AND ALL LEGAL
PROCESS, SUMMONS, NOTICES AND DOCUMENTS WHICH MAY BE SERVED IN ANY SUCH
PROCEEDING AND AGREES THAT THE FAILURE OF SUCH AGENT TO GIVE ANY ADVICE OF ANY
SUCH SERVICE OF PROCESS TO THE BORROWER SHALL NOT IMPAIR OR AFFECT THE VALIDITY
OF SUCH SERVICE OR OF ANY CLAIM BASED THEREON. IF FOR ANY REASON SUCH DESIGNEE,
APPOINTEE AND AGENT SHALL CEASE TO BE AVAILABLE TO ACT AS SUCH, THE BORROWER
AGREES TO DESIGNATE A NEW DESIGNEE, APPOINTEE AND AGENT IN NEW YORK CITY
REASONABLY SATISFACTORY TO THE ADMINISTRATIVE AGENT ON THE TERMS AND FOR THE
PURPOSES OF THIS PROVISION. EACH PARTY IRREVOCABLY CONSENTS TO THE SERVICE OF
PROCESS OF ANY OF THE AFOREMENTIONED COURTS IN ANY SUCH ACTION OR PROCEEDING BY
THE MAILING OF COPIES THEREOF BY REGISTERED OR CERTIFIED MAIL, POSTAGE PREPAID,
TO IT AT THE ADDRESS SPECIFIED IN SECTION 12.01 OR SUCH OTHER ADDRESS AS IS
SPECIFIED PURSUANT TO

 

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SECTION 12.01 (OR ITS ASSIGNMENT AND ASSUMPTION), SUCH SERVICE TO BECOME
EFFECTIVE THIRTY (30) DAYS AFTER SUCH MAILING. NOTHING HEREIN SHALL AFFECT THE
RIGHT OF A PARTY OR ANY HOLDER OF A NOTE TO SERVE PROCESS IN ANY OTHER MANNER
PERMITTED BY LAW OR TO COMMENCE LEGAL PROCEEDINGS OR OTHERWISE PROCEED AGAINST
ANOTHER PARTY IN ANY OTHER JURISDICTION.

 

(d) EACH PARTY HEREBY (i) IRREVOCABLY AND UNCONDITIONALLY WAIVES, TO THE FULLEST
EXTENT PERMITTED BY LAW, TRIAL BY JURY IN ANY LEGAL ACTION OR PROCEEDING
RELATING TO THIS AGREEMENT OR ANY OTHER LOAN DOCUMENT AND FOR ANY COUNTERCLAIM
THEREIN; (ii) IRREVOCABLY WAIVES, TO THE MAXIMUM EXTENT NOT PROHIBITED BY LAW,
ANY RIGHT IT MAY HAVE TO CLAIM OR RECOVER IN ANY SUCH LITIGATION ANY SPECIAL,
EXEMPLARY, PUNITIVE OR CONSEQUENTIAL DAMAGES, OR DAMAGES OTHER THAN, OR IN
ADDITION TO, ACTUAL DAMAGES; (iii) CERTIFIES THAT NO PARTY HERETO NOR ANY
REPRESENTATIVE OR AGENT OF COUNSEL FOR ANY PARTY HERETO HAS REPRESENTED,
EXPRESSLY OR OTHERWISE, OR IMPLIED THAT SUCH PARTY WOULD NOT, IN THE EVENT OF
LITIGATION, SEEK TO ENFORCE THE FOREGOING WAIVERS, AND (iv) ACKNOWLEDGES THAT IT
HAS BEEN INDUCED TO ENTER INTO THIS AGREEMENT, THE LOAN DOCUMENTS AND THE
TRANSACTIONS CONTEMPLATED HEREBY AND THEREBY BY, AMONG OTHER THINGS, THE MUTUAL
WAIVERS AND CERTIFICATIONS CONTAINED IN THIS SECTION 12.09.

 

Section 12.10 Headings. Article and Section headings and the Table of Contents
used herein are for convenience of reference only, are not part of this
Agreement and shall not affect the construction of, or be taken into
consideration in interpreting, this Agreement.

 

Section 12.11 Confidentiality. Each of the Administrative Agent, each Issuing
Bank and the Lenders agrees to maintain the confidentiality of the Information
(as defined below), except that Information may be disclosed (a) to its and its
Affiliates’ directors, officers, employees and agents, including accountants,
legal counsel and other advisors (it being understood that the Persons to whom
such disclosure is made will be informed of the confidential nature of such
Information and instructed to keep such Information confidential), (b) to the
extent requested by any regulatory authority, (c) to the extent required by
applicable laws or regulations or by any subpoena or similar legal process, (d)
to any other party to this Agreement or any other Loan Document, (e) in
connection with the exercise of any remedies hereunder or under any other Loan
Document or any suit, action or proceeding relating to this Agreement or any
other Loan Document or the enforcement of rights hereunder or thereunder, (f)
subject to an agreement containing provisions substantially the same as those of
this Section 12.11, to (i) any assignee of or Participant in, or any prospective
assignee of or Participant in, any of its rights or obligations under this
Agreement (provided that such Person agrees in writing to be bound by the
provisions of this Section 12.11) or (ii) any actual or prospective counterparty
(or its advisors) to any Swap Agreement relating to the Borrower and its
obligations (provided that such Person agrees in writing to be bound by the
provisions of this Section 12.11), (g) with the consent of the Borrower or (h)
to the extent such Information (i) becomes publicly available other than as a
result of a breach of this Section 12.11 or (ii) becomes available to the
Administrative Agent, any Issuing

 

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Bank or any Lender on a nonconfidential basis from a source other than the
Borrower. For the purposes of this Section 12.11, “Information” means all
information received from the Borrower or any Restricted Subsidiary relating to
the Borrower or any Restricted Subsidiary and their businesses, other than any
such information that is available to the Administrative Agent, any Issuing Bank
or any Lender on a nonconfidential basis prior to disclosure by the Borrower or
a Restricted Subsidiary; provided that, in the case of information received from
the Borrower or any Restricted Subsidiary after the date hereof, such
information is clearly identified at the time of delivery as confidential. Any
Person required to maintain the confidentiality of Information as provided in
this Section 12.11 shall be considered to have complied with its obligation to
do so if such Person has exercised the same degree of care to maintain the
confidentiality of such Information as such Person would accord to its own
confidential information.

 

Section 12.12 Interest Rate Limitation. It is the intention of the parties
hereto that each Lender shall conform strictly to usury laws applicable to it.
Accordingly, if the transactions contemplated hereby would be usurious as to any
Lender under laws applicable to it (including the laws of the United States of
America and the State of New York or any other jurisdiction whose laws may be
mandatorily applicable to such Lender notwithstanding the other provisions of
this Agreement), then, in that event, notwithstanding anything to the contrary
in any of the Loan Documents or any agreement entered into in connection with or
as security for the Notes, it is agreed as follows: (i) the aggregate of all
consideration which constitutes interest under law applicable to any Lender that
is contracted for, taken, reserved, charged or received by such Lender under any
of the Loan Documents or agreements or otherwise in connection with the Notes
shall under no circumstances exceed the maximum amount allowed by such
applicable law, and any excess shall be canceled automatically and if
theretofore paid shall be credited by such Lender on the principal amount of the
Indebtedness (or, to the extent that the principal amount of the Indebtedness
shall have been or would thereby be paid in full, refunded by such Lender to the
Borrower); and (ii) in the event that the maturity of the Notes is accelerated
by reason of an election of the holder thereof resulting from any Event of
Default under this Agreement or otherwise, or in the event of any required or
permitted prepayment, then such consideration that constitutes interest under
law applicable to any Lender may never include more than the maximum amount
allowed by such applicable law, and excess interest, if any, provided for in
this Agreement or otherwise shall be canceled automatically by such Lender as of
the date of such acceleration or prepayment and, if theretofore paid, shall be
credited by such Lender on the principal amount of the Indebtedness (or, to the
extent that the principal amount of the Indebtedness shall have been or would
thereby be paid in full, refunded by such Lender to the Borrower). All sums paid
or agreed to be paid to any Lender for the use, forbearance or detention of sums
due hereunder shall, to the extent permitted by law applicable to such Lender,
be amortized, prorated, allocated and spread throughout the actual full term of
the Loans evidenced by the Notes until payment in full so that the rate or
amount of interest on account of any Loans hereunder does not exceed the maximum
amount allowed by such applicable law. If at any time and from time to time (i)
the amount of interest payable to any Lender on any date shall be computed at
the Highest Lawful Rate applicable to such Lender pursuant to this Section 12.12
and (ii) in respect of any subsequent interest computation period the amount of
interest otherwise payable to such Lender would be less than the amount of
interest payable to such Lender computed at the Highest Lawful Rate applicable
to such Lender, then the amount of interest payable to such Lender in respect of
such subsequent interest computation period shall continue to be computed at the
Highest Lawful Rate applicable to such Lender until the total

 

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amount of interest payable to such Lender shall equal the total amount of
interest which would have been payable to such Lender if the total amount of
interest had been computed without giving effect to this Section 12.12.

 

Section 12.13 EXCULPATION PROVISIONS. EACH OF THE PARTIES HERETO SPECIFICALLY
AGREES THAT IT HAS A DUTY TO READ THIS AGREEMENT AND THE OTHER LOAN DOCUMENTS
AND AGREES THAT IT IS CHARGED WITH NOTICE AND KNOWLEDGE OF THE TERMS OF THIS
AGREEMENT AND THE OTHER LOAN DOCUMENTS; THAT IT HAS IN FACT READ THIS AGREEMENT
AND IS FULLY INFORMED AND HAS FULL NOTICE AND KNOWLEDGE OF THE TERMS, CONDITIONS
AND EFFECTS OF THIS AGREEMENT; THAT IT HAS BEEN REPRESENTED BY INDEPENDENT LEGAL
COUNSEL OF ITS CHOICE THROUGHOUT THE NEGOTIATIONS PRECEDING ITS EXECUTION OF
THIS AGREEMENT AND THE OTHER LOAN DOCUMENTS; AND HAS RECEIVED THE ADVICE OF ITS
ATTORNEY IN ENTERING INTO THIS AGREEMENT AND THE OTHER LOAN DOCUMENTS; AND THAT
IT RECOGNIZES THAT CERTAIN OF THE TERMS OF THIS AGREEMENT AND THE OTHER LOAN
DOCUMENTS RESULT IN ONE PARTY ASSUMING THE LIABILITY INHERENT IN SOME ASPECTS OF
THE TRANSACTION AND RELIEVING THE OTHER PARTY OF ITS RESPONSIBILITY FOR SUCH
LIABILITY. EACH PARTY HERETO AGREES AND COVENANTS THAT IT WILL NOT CONTEST THE
VALIDITY OR ENFORCEABILITY OF ANY EXCULPATORY PROVISION OF THIS AGREEMENT AND
THE OTHER LOAN DOCUMENTS ON THE BASIS THAT THE PARTY HAD NO NOTICE OR KNOWLEDGE
OF SUCH PROVISION OR THAT THE PROVISION IS NOT “CONSPICUOUS.”

 

Section 12.14 Specified Senior Indebtedness. The Parties acknowledge and agree
that the Indebtedness hereunder is specifically designated “Designated Senior
Indebtedness” as required by the Senior Subordinated Indenture pursuant to which
the Senior Subordinated Notes have been issued.

 

Section 12.15 Collateral Matters; Swap Agreements. The benefit of the Security
Instruments and of the provisions of this Agreement relating to any collateral
securing the Indebtedness shall also extend to and be available to any Lender or
any Affiliate of a Lender that is counterparty to any Swap Agreement with the
Borrower or any of its Subsidiaries (including any Swap Agreement between such
Persons in existence prior to the date hereof) on a pro rata basis in respect of
any obligations of the Borrower or any of its Subsidiaries which arise under any
such Swap Agreement; provided that such benefits shall cease to extend to and be
available to any such Lender or Affiliate in respect of obligations under such
Swap Agreements if such Person or its Affiliate, as the case may be, ceases to
be Lender. For the avoidance of doubt, a Person ceases to be a Lender hereunder
if (a) pursuant to an assignment, such Person ceases to have any Commitment,
Loans and LC Exposure hereunder or (b) the Commitments of all of the Lenders
hereunder have been terminated and all principal, interest and other amounts
outstanding under this Agreement have been paid in full in cash (whether as a
result of repayment at maturity, prepayment in connection with the refinancing
of this Agreement or otherwise). No Lender or any Affiliate of a Lender shall
have any voting rights under any Loan Document as a result of the existence of
obligations owed to it under any such Swap Agreements.

 

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Section 12.16 No Third Party Beneficiaries. This Agreement, the other Loan
Documents, and the agreement of the Lenders to make Loans and the Issuing Bank
to issue, amend, renew or extend Letters of Credit hereunder are solely for the
benefit of the Borrower, and no other Person (including, without limitation, any
Subsidiary of the Borrower, any obligor, contractor, subcontractor, supplier or
materialsman) shall have any rights, claims, remedies or privileges hereunder or
under any other Loan Document against the Administrative Agent, any other Agent,
the Issuing Bank or any Lender for any reason whatsoever. There are no third
party beneficiaries.

 

Section 12.17 USA Patriot Act Notice. Each Lender hereby notifies the Borrower
that pursuant to the requirements of the USA Patriot Act (Title III of Pub. L.
107-56 (signed into law October 26, 2001)) (the “Act”), it is required to
obtain, verify and record information that identifies the Borrower, which
information includes the name and address of the Borrower and other information
that will allow such Lender to identify the Borrower in accordance with the Act.

 

[SIGNATURES BEGIN NEXT PAGE]

 

 

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

 

BORROWER:   PLAINS EXPLORATION & PRODUCTION COMPANY     By:  

/s/ Stephen A. Thorington

--------------------------------------------------------------------------------

    Name:   Stephen A. Thorington     Title:   Executive Vice President and
Chief Financial Officer

 

 

--------------------------------------------------------------------------------

ADMINISTRATIVE AGENT:  

JPMORGAN CHASE BANK, N.A., as a Lender

and as Administrative Agent

    By:  

/s/ Robert C. Mertensotto

--------------------------------------------------------------------------------

    Name:   Robert C. Mertensotto     Title:   Managing Director

--------------------------------------------------------------------------------

LENDERS:  

BANK OF AMERICA, N.A., as a Lender and as a

Co-Syndication Agent

    By:  

/s/ Ronald E. McKaig

--------------------------------------------------------------------------------

    Name:   Ronald E. McKaig     Title:   Senior Vice President

--------------------------------------------------------------------------------

HARRIS NESBITT FINANCING, INC., as a

Lender and as a Co-Syndication Agent

By:  

/s/ James V. Ducote

--------------------------------------------------------------------------------

Name:   James V. Ducote Title:   Vice President

--------------------------------------------------------------------------------

THE BANK OF NOVA SCOTIA, as a

Lender and as a Co-Documentation Agent

By:  

/s/ V. Gibson

--------------------------------------------------------------------------------

Name:   V. Gibson Title:   Assistant Agent

--------------------------------------------------------------------------------

SCOTIABANC, INC., as a Lender and as a Co-

Documentation Agent

By:  

/s/ Richard Bartolo

--------------------------------------------------------------------------------

Name:   Richard Bartolo Title:   Director

--------------------------------------------------------------------------------

BNP PARIBAS, as a Lender and as a Co-

Documentation Agent

By:  

/s/ Brian M. Malone

--------------------------------------------------------------------------------

Name:   Brian M. Malone Title:   Managing Director By:  

/s/ Greg Smothers

--------------------------------------------------------------------------------

Name:   Greg Smothers Title:   Vice President

--------------------------------------------------------------------------------

BANK OF SCOTLAND, as a Lender By:  

/s/ Karen Weich

--------------------------------------------------------------------------------

Name:   Karen Weich Title:   Assistant Vice President

--------------------------------------------------------------------------------

CALYON NEW YORK BRANCH, as a Lender By:  

/s/ Oliver Audernaut

--------------------------------------------------------------------------------

Name:   Oliver Audernaut Title:   Managing Director By:  

/s/ Philipps Soustra

--------------------------------------------------------------------------------

Name:   Philipps Soustra Title:   Executive Vice President

--------------------------------------------------------------------------------

CITICORP NORTH AMERICA, INC., as a Lender By:  

/s/ John F. Miller

--------------------------------------------------------------------------------

Name:   John F. Miller Title:   Attorney-In-Fact

--------------------------------------------------------------------------------

DEUTSCHE BANK TRUST COMPANY AMERICAS, as a Lender By:  

/s/ Marcus M. Tarkington

--------------------------------------------------------------------------------

Name:   Marcus M. Tarkington Title:   Director By:  

/s/ Paul O’Leary

--------------------------------------------------------------------------------

Name:   Paul O’Leary Title:   Vice President

 

 

--------------------------------------------------------------------------------

FORTIS CAPITAL CORP., as a Lender By:  

/s/ Michele Jones

--------------------------------------------------------------------------------

Name:   Michele Jones Title:   Senior Vice President By:  

/s/ Darrell Holley

--------------------------------------------------------------------------------

Name:   Darrell Holley Title:   Managing Director

--------------------------------------------------------------------------------

THE ROYAL BANK OF SCOTLAND PLC, as a Lender By:  

/s/ P. R. Ballard

--------------------------------------------------------------------------------

Name:   P. R. Ballard Title:   Senior Vice President

--------------------------------------------------------------------------------

TORONTO DOMINION (TEXAS) LLC, as a Lender By:  

/s/ Neva Nesbitt

--------------------------------------------------------------------------------

Name:   Neva Nesbitt Title:   Authorized Agent

--------------------------------------------------------------------------------

WACHOVIA BANK, NATIONAL

ASSOCIATION, as a Lender

By:  

/s/ Jay Buckman

--------------------------------------------------------------------------------

Name:   Jay Buckman Title:   Vice President

--------------------------------------------------------------------------------

COMERICA BANK, as a Lender By:  

/s/ Juli Bieser

--------------------------------------------------------------------------------

Name:   Juli Bieser Title:   Vice President

--------------------------------------------------------------------------------

UBS LOAN FINANCE LLC, as a Lender By:  

/s/ Wilfred V. Saint

--------------------------------------------------------------------------------

Name:   Wilfred V. Saint Title:   Director By:  

/s/ Joselin Fernandes

--------------------------------------------------------------------------------

Name:   Joselin Fernandes Title:   Associate Director

 

 

--------------------------------------------------------------------------------

WELLS FARGO BANK, N.A., as a Lender By:  

/s/ Paul A. Squires

--------------------------------------------------------------------------------

Name:   Paul A. Squires Title:   Vice President

--------------------------------------------------------------------------------

MORGAN STANLEY BANK, as a Lender By:  

/s/ Daniel Twenge

--------------------------------------------------------------------------------

Name:   Daniel Twenge Title:   Vice President

--------------------------------------------------------------------------------

J. ARON & COMPANY, as a Lender By:  

/s/ Jeffrey A. Resnick

--------------------------------------------------------------------------------

Name:   Jeffrey A. Resnick Title:   Managing Director