Exhibit 10.2

EXECUTION COPY

 

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SECOND LIEN CREDIT AGREEMENT

dated as of November 22, 2006,

among

ATP OIL & GAS CORPORATION,

THE LENDERS NAMED HEREIN,

and

CREDIT SUISSE,

as Administrative Agent and Collateral Agent

 

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CREDIT SUISSE SECURITIES (USA) LLC,

as Sole Bookrunner, Sole Lead Arranger, Syndication Agent and Documentation
Agent

 

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TABLE OF CONTENTS

ARTICLE I

DEFINITIONS

 

SECTION 1.01.

   Defined Terms    1

SECTION 1.02.

   Terms Generally    25

SECTION 1.03.

   Pro Forma Calculations    26 ARTICLE II THE CREDITS

SECTION 2.01.

   Commitments    26

SECTION 2.02.

   Loans    26

SECTION 2.03.

   Borrowing Procedure    27

SECTION 2.04.

   Evidence of Debt; Repayment of Loans    28

SECTION 2.05.

   Fees    29

SECTION 2.06.

   Interest on Loans    29

SECTION 2.07.

   Default Interest    29

SECTION 2.08.

   Alternate Rate of Interest    29

SECTION 2.09.

   Termination of Commitments    30

SECTION 2.10.

   Conversion and Continuation of Borrowings    30

SECTION 2.11.

   Repayment of Borrowings    31

SECTION 2.12.

   Optional Prepayment    31

SECTION 2.13.

   Mandatory Prepayments    32

SECTION 2.14.

   Reserve Requirements; Change in Circumstances    33

SECTION 2.15.

   Change in Legality    34

SECTION 2.16.

   Indemnity    35

SECTION 2.17.

   Pro Rata Treatment    35

SECTION 2.18.

   Sharing of Setoffs    35

SECTION 2.19.

   Payments    36

SECTION 2.20.

   Taxes    36

SECTION 2.21.

   Assignment of Commitments or Loans Under Certain Circumstances; Duty to
Mitigate    37

SECTION 2.22.

   Incremental Term Loans    38 ARTICLE III REPRESENTATIONS AND WARRANTIES

SECTION 3.01.

   Organization; Powers    40

SECTION 3.02.

   Authorization    40

SECTION 3.03.

   Enforceability    40

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SECTION 3.04.

   Governmental Approvals    40

SECTION 3.05.

   Financial Statements    41

SECTION 3.06.

   No Material Adverse Change    41

SECTION 3.07.

   Title to Properties; Possession Under Leases    41

SECTION 3.08.

   Subsidiaries    42

SECTION 3.09.

   Litigation; Compliance with Laws    42

SECTION 3.10.

   Agreements    43

SECTION 3.11.

   Federal Reserve Regulations    43

SECTION 3.12.

   Investment Company Act    43

SECTION 3.13.

   Use of Proceeds    43

SECTION 3.14.

   Tax Returns    43

SECTION 3.15.

   No Material Misstatements    43

SECTION 3.16.

   Employee Benefit Plans    43

SECTION 3.17.

   Environmental Matters    44

SECTION 3.18.

   Insurance    44

SECTION 3.19.

   Security Documents    44

SECTION 3.20.

   Location of Oil and Gas Properties, Real Property and Leased Premises    45

SECTION 3.21.

   Future Commitments    46

SECTION 3.22.

   Labor Matters    46

SECTION 3.23.

   Solvency    46 ARTICLE IV CONDITIONS OF LENDING ARTICLE V
AFFIRMATIVE COVENANTS

SECTION 5.01.

   Existence; Businesses; Oil and Gas Properties    50

SECTION 5.02.

   Insurance    50

SECTION 5.03.

   Obligations and Taxes    51

SECTION 5.04.

   Financial Statements, Reserve Reports, etc    51

SECTION 5.05.

   Litigation and Other Notices    53

SECTION 5.06.

   Information Regarding Collateral    54

SECTION 5.07.

   Maintaining Records; Access to Properties and Inspections    54

SECTION 5.08.

   Use of Proceeds    54

SECTION 5.09.

   Further Assurances    54

SECTION 5.10.

   Commodity Hedging Agreements    55 ARTICLE VI NEGATIVE COVENANTS

SECTION 6.01.

   Indebtedness    56

SECTION 6.02.

   Liens    57

SECTION 6.03.

   Sale and Lease-Back Transactions    59

 

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SECTION 6.04.

   Investments, Loans, Advances and Oil and Gas Property Acquisitions    59

SECTION 6.05.

   Mergers, Consolidations, Sales of Assets and Acquisitions    60

SECTION 6.06.

   Restricted Payments; Restrictive Agreements    61

SECTION 6.07.

   Transactions with Affiliates    62

SECTION 6.08.

   Business of the Borrower and Subsidiaries    62

SECTION 6.09.

   Other Indebtedness and Agreements    62

SECTION 6.10.

   Forward Sales    62

SECTION 6.11.

   Limitation on Commodity Hedging    63

SECTION 6.12.

   Interest Coverage Ratio    63

SECTION 6.13.

   Maximum Leverage Ratio    63

SECTION 6.14.

   Minimum Current Ratio    63

SECTION 6.15.

   Minimum Asset Coverage Ratios    63

SECTION 6.16.

   Designated Senior Debt    63

SECTION 6.17.

   Fiscal Year    63 ARTICLE VII EVENTS OF DEFAULT ARTICLE VIII THE
ADMINISTRATIVE AGENT AND THE COLLATERAL AGENT ARTICLE IX MISCELLANEOUS

SECTION 9.01.

   Notices    68

SECTION 9.02.

   Survival of Agreement    69

SECTION 9.03.

   Binding Effect    69

SECTION 9.04.

   Successors and Assigns    69

SECTION 9.05.

   Expenses; Indemnity    72

SECTION 9.06.

   Right of Setoff    73

SECTION 9.07.

   Applicable Law    74

SECTION 9.08.

   Waivers; Amendment    74

SECTION 9.09.

   Interest Rate Limitation    75

SECTION 9.10.

   Entire Agreement    75

SECTION 9.11.

   WAIVER OF JURY TRIAL    75

SECTION 9.12.

   Severability    75

SECTION 9.13.

   Counterparts    76

SECTION 9.14.

   Headings    76

SECTION 9.15.

   Jurisdiction; Consent to Service of Process    76

SECTION 9.16.

   Confidentiality    76

SECTION 9.17.

   USA PATRIOT Act Notice    77

SECTION 9.18.

   Parallel Debt    77

SECTION 9.19.

   INTERCREDITOR AGREEMENT    78

 

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Schedules

 

Schedule 1.01(a)      Approved Counterparties Schedule 1.01(b)      Mortgaged
Properties Schedule 1.01(c)      Subsidiary Guarantors Schedule 2.01     
Lenders and Commitments Schedule 3.08      Subsidiaries Schedule 3.09     
Litigation Schedule 3.17      Environmental Matters Schedule 3.18      Insurance
Schedule 3.19(a)      Domestic Filing Offices Schedule 3.19(c)      Mortgage
Filing Offices Schedule 3.19(d)      Foreign Filing Offices Schedule 3.20(a)
     Oil and Gas Properties Schedule 3.20(b)      Owned Property
Schedule 3.20(c)      Other Leased Property Schedule 4(d)      Local Counsel
Schedule 6.01      Outstanding Indebtedness on Closing Date Schedule 6.02     
Liens Existing on Closing Date Exhibits      EXHIBIT A      Form of
Administrative Questionnaire EXHIBIT B      Form of Assignment and Acceptance
EXHIBIT C      Form of Borrowing Request EXHIBIT D      Form of UK Pledge
Agreement EXHIBIT E      Form of Dutch Pledge Agreement EXHIBIT F      Form of
Guarantee and Collateral Agreement EXHIBIT G      Form of Intercreditor
Agreement EXHIBIT H      Form of Mortgage EXHIBIT I-1      Form of Opinion of
Jackson Walker L.L.P. EXHIBIT I-2      Form of Local Counsel Opinions

 

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SECOND LIEN CREDIT AGREEMENT dated as of November 22, 2006, among ATP OIL & GAS
CORPORATION, a Texas corporation (the “Borrower”), the Lenders (as defined in
Article I), and CREDIT SUISSE, as administrative agent (in such capacity, the
“Administrative Agent”) and as collateral agent (in such capacity, the
“Collateral Agent”) for the Lenders.

The Borrower has requested the Lenders to make Term Loans (such term and each
other capitalized term used but not defined in this introductory statement
having the meaning given it in Article I) in an aggregate principal amount of
$175,000,000. The proceeds of the Term Loans are to be used solely (a) to
repurchase, redeem or otherwise refinance the Existing Preferred Stock and
(b) to pay fees and expenses incurred in connection with the Transactions.

The Lenders are willing to extend such credit to the Borrower on the terms and
subject to the conditions set forth herein. Accordingly, the parties hereto
agree as follows:

ARTICLE I

Definitions

SECTION 1.01. Defined Terms. As used in this Agreement, the following terms
shall 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” shall mean, with respect to any Eurodollar Borrowing for
any Interest Period, an interest rate per annum equal to the product of (a) the
LIBO Rate in effect for such Interest Period and (b) Statutory Reserves.

“Administrative Agent” shall have the meaning assigned to such term in the
preamble to this Agreement.

“Administrative Questionnaire” shall mean an Administrative Questionnaire in the
form of Exhibit A, or such other form as may be supplied from time to time by
the Administrative Agent.

“Affiliate” shall mean, when used 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;
provided, however, that, for purposes of Section 6.07, the term “Affiliate”
shall also include any person that directly or indirectly owns 5% or more of any
class of Equity Interests of the person specified or that is an officer or
director of the person specified.

“Agents” shall have the meaning assigned to such term in Article VIII.

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“Alternate Base Rate” shall mean, for any day, a rate per annum equal to the
greater of (a) the Prime Rate in effect on such day and (b) the Federal Funds
Effective Rate in effect on such day plus  1/2 of 1.00%. If the Administrative
Agent shall have determined (which determination shall be conclusive absent
manifest error) that it is unable to ascertain the Federal Funds Effective Rate
for any reason, including the inability or failure of the Administrative Agent
to obtain sufficient quotations in accordance with the terms of the definition
thereof, the Alternate Base Rate shall be determined without regard to clause
(b) of the preceding sentence until the circumstances giving rise to such
inability no longer exist. Any change in the Alternate Base Rate due to a change
in the Prime Rate or the Federal Funds Effective Rate shall be effective on the
effective date of such change in the Prime Rate or the Federal Funds Effective
Rate, as the case may be.

“Amendment Agreement” shall mean the Amendment No. 1 and Agreement dated as of
November 22, 2006, effecting, among other things, the amendment of the First
Lien Credit Agreement to provide for the making of an additional $375,000,000
aggregate principal amount of term loans thereunder.

“Applicable Percentage” shall mean, for any day (a) with respect to any
Eurodollar Term Loan, 4.75%, or (b) with respect to any ABR Term Loan, 3.75%.

“Approved Counterparty” shall mean, with respect to any Hedging Agreement, a
counterparty that, at the time such Hedging Agreement is entered into, is
(a) the Administrative Agent or any Lender or any Affiliate of the
Administrative Agent or a Lender, (b) any person whose senior unsecured
long-term debt is rated as Investment Grade, (c) those persons listed on
Schedule 1.01(a) or (d) any other person that is reasonably acceptable to the
Administrative Agent.

“Asset Coverage Ratios” shall mean the Reserve Coverage Ratio and the PDP
Coverage Ratio.

“Asset Sale” shall mean the sale, transfer or other disposition (by way of
merger, casualty, condemnation or otherwise) by the Borrower or any of the
Subsidiaries to any person other than the Borrower or any Subsidiary Guarantor
of (a) any Equity Interests of any of the Subsidiaries (other than directors’
qualifying shares) or (b) any other assets of the Borrower or any of the
Subsidiaries (other than (i) Hydrocarbons and other inventory, damaged, obsolete
or worn out assets, scrap and Permitted Investments, in each case disposed of or
made in the ordinary course of business, or (ii) dispositions between or among
Foreign Subsidiaries), provided that (x) any asset sale or series of related
asset sales described in clause (b) above having a value not in excess of
$500,000 and (y) any asset sale entered into by the Borrower or any Subsidiary
in the good faith exercise of its business judgment, involving the sale,
transfer or other disposition by the Borrower or such Subsidiary of Hydrocarbon
Interests in exchange for a commitment of the transferee to bear a
disproportionate share of the costs attributable to the Oil and Gas Properties
to which such Hydrocarbon Interests relate, shall be deemed not to be an “Asset
Sale” for purposes of this Agreement.

 

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“Assignment and Acceptance” shall mean an assignment and acceptance entered into
by a Lender and an assignee, and accepted by the Administrative Agent, in the
form of Exhibit B or such other form as shall be approved by the Administrative
Agent.

“Bcfe” shall mean billion cubic feet equivalent, determined by using the ratio
of six thousand cubic feet of natural gas to one stock tank barrel (or 42 U.S.
gallons liquid volume) of crude oil, condensate or natural gas liquids.

“Board” shall mean the Board of Governors of the Federal Reserve System of the
United States of America.

“Borrower” shall have the meaning assigned to such term in the preamble to this
Agreement.

“Borrowing” shall mean 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 Request” shall mean a request by the Borrower in accordance with the
terms of Section 2.03 and substantially in the form of Exhibit C, or such other
form as shall be approved by the Administrative Agent.

“Breakage Event” shall have the meaning assigned to such term in Section 2.16.

“Business Day” shall mean any day other than a Saturday, Sunday or day on which
banks in New York City are authorized or required by law to close; provided,
however, that when used in connection with a Eurodollar Loan, the term “Business
Day” shall also exclude any day on which banks are not open for dealings in
dollar deposits in the London interbank market.

“Capital Expenditures” shall mean, for any period, (a) the additions to
property, plant and equipment and other capital expenditures of the Borrower and
its consolidated Subsidiaries that are (or should be) set forth in a
consolidated statement of cash flows of the Borrower for such period prepared in
accordance with GAAP and (b) Capital Lease Obligations or Synthetic Lease
Obligations incurred by the Borrower and its consolidated Subsidiaries during
such period, but excluding in each case any such expenditure made to restore,
replace or rebuild property to the condition of such property immediately prior
to any damage, loss, destruction or condemnation of such property, to the extent
such expenditure is made with insurance proceeds, condemnation awards or damage
recovery proceeds relating to any such damage, loss, destruction or
condemnation.

“Capital Lease Obligations” of any person shall mean the obligations of such
person to pay rent or other amounts under any lease of (or other arrangement
conveying the right to use) real or personal property, or a combination thereof,
which obligations are required to be classified and accounted for as capital
leases on a balance sheet of such person under GAAP, and the amount of such
obligations shall be the capitalized amount thereof determined in accordance
with GAAP.

A “Change in Control” shall be deemed to have occurred if (a) any “person” or
“group” (within the meaning of Rule 13d-5 promulgated under the Securities
Exchange Act of 1934, as

 

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amended, as such Rule is in effect on the date hereof) other than the Management
Investors shall own, directly or indirectly, beneficially or of record, shares
representing more than 40% of the aggregate ordinary voting power represented by
the issued and outstanding capital stock of the Borrower, and the percentage of
the aggregate ordinary voting power represented by the shares of capital stock
of the Borrower owned by such person or group exceeds the percentage of the
aggregate ordinary voting power represented by the shares of capital stock of
the Borrower owned by the Management Investors; (b) a majority of the seats
(other than vacant seats) on the board of directors of the Borrower shall at any
time be occupied by persons who were neither (i) nominated by the board of
directors of the Borrower nor (ii) appointed by directors so nominated; or
(c) any change in control (or similar event, however denominated) with respect
to the Borrower or any Subsidiary shall occur under and as defined in any Junior
Financing Documentation or any other indenture or agreement in respect of
Material Indebtedness to which the Borrower or a Subsidiary is a party.

“Change in Law” shall mean (a) the adoption of any law, rule or regulation after
the Closing Date, (b) any change in any law, rule or regulation or in the
interpretation or application thereof by any Governmental Authority after the
Closing Date or (c) compliance by any Lender (or, for purposes of Section 2.14,
by any lending office of such Lender or by such Lender’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 Closing Date.

“Charges” shall have the meaning assigned to such term in Section 9.09.

“Closing Date” shall mean November 22, 2006.

“CNI Growth Amount” shall mean, on any date of determination, (a) 50% of
Cumulative Consolidated Net Income (or, in the case Cumulative Consolidated Net
Income at the time of determination is a deficit, minus 100% of such deficit)
minus (b) the aggregate amount at the time of determination of Restricted
Payments made since the Closing Date pursuant to Section 6.06(a)(ii)(C)(y).

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

“Collateral” shall mean all the “Collateral” as defined in any Security
Document, and shall also include the Mortgaged Properties and the Foreign
Pledged Collateral.

“Collateral Agent” shall have the meaning assigned to such term in the preamble
to this Agreement.

“Commitment” shall mean, with respect to any Lender, such Lender’s Term Loan
Commitment and Incremental Term Loan Commitment.

“Commodity Hedging Agreement” shall mean a commodity price risk management or
purchase agreement or similar arrangement (including commodity price swap
agreements, forward agreements or contracts of sale which provide for prepayment
for deferred shipment or delivery of oil, gas or other commodities).

 

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“Confidential Information Memorandum” shall mean the Confidential Information
Memorandum of the Borrower dated November 2006.

“Consolidated EBITDAX” shall mean, for any period, Consolidated Net Income for
such period plus (a) without duplication and to the extent deducted in
determining such Consolidated Net Income, the sum of (i) Consolidated Interest
Expense for such period, (ii) consolidated income tax expense for such period,
(iii) all amounts attributable to depreciation, depletion and amortization for
such period, (iv) geological and geophysical expense for such period, (v) all
amounts attributable to impairment of oil and gas properties for such period,
(vi) any non-cash compensation charges, including any arising from employee
stock options, taken during such period, (vii) any extraordinary losses for such
period and (viii) any other non-cash charges (other than the write-down of
current assets) for such period, and minus (b) without duplication (i) all cash
payments made during such period on account of non-cash charges added to
Consolidated Net Income pursuant to clauses (a)(vi) or (viii) above in a
previous period and (ii) to the extent included in determining such Consolidated
Net Income, any extraordinary gains and all non-cash items of income for such
period, all determined on a consolidated basis in accordance with GAAP.

“Consolidated Interest Expense” shall mean, for any period, the sum of (a) the
interest expense (including imputed interest expense in respect of Capital Lease
Obligations and Synthetic Lease Obligations) of the Borrower and the
Subsidiaries for such period, determined on a consolidated basis in accordance
with GAAP, (b) any interest accrued during such period in respect of
Indebtedness of the Borrower or any Subsidiary that is required to be
capitalized rather than included in consolidated interest expense for such
period in accordance with GAAP and (c) the aggregate amount of all dividends in
respect of Preferred Equity Interests paid in cash by the Borrower and the
Subsidiaries during such period. For purposes of the foregoing, interest expense
shall be determined after giving effect to any net payments made or received by
the Borrower or any Subsidiary with respect to Interest Rate Hedging Agreements.

“Consolidated Net Income” shall mean, for any period, the net income or loss of
the Borrower and the Subsidiaries for such period determined on a consolidated
basis in accordance with GAAP; provided that there shall be excluded (a) the
income of any Subsidiary to the extent that the declaration or payment of
dividends or similar distributions by the Subsidiary of that income is not at
the time permitted by operation of the terms of its charter or any agreement,
instrument, judgment, decree, statute, rule or governmental regulation
applicable to such Subsidiary, (b) the income or loss of any person accrued
prior to the date it becomes a Subsidiary or is merged into or consolidated with
the Borrower or any Subsidiary or the date that such person’s assets are
acquired by the Borrower or any Subsidiary, (c) the income of any person in
which any other person (other than the Borrower or a wholly owned Subsidiary or
any director holding qualifying shares in accordance with applicable law) has a
joint interest, except to the extent of the amount of dividends or other
distributions actually paid to the Borrower or a wholly owned Subsidiary by such
person during such period and (d) any gains attributable to sales of assets out
of the ordinary course of business.

“Control” shall mean 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 ownership of voting securities, by contract or otherwise, and the
terms “Controlling” and “Controlled” shall have meanings correlative thereto.

 

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“Cumulative Consolidated Net Income” shall mean, as of any date of
determination, Consolidated Net Income of the Borrower and the Subsidiaries,
less the aggregate amount of dividends on, or accretion of, Preferred Equity
Interests, for the period (taken as one accounting period) commencing on
January 1, 2006 and ending on the last day of the most recent fiscal quarter or
fiscal year, as applicable, for which financial statements required to be
delivered pursuant to Section 5.04(a) or (b), and the related certificate
required to be delivered pursuant to Section 5.04(c), have been received by the
Administrative Agent.

“Current Assets” shall mean, at any time, the consolidated current assets of the
Borrower and the Subsidiaries.

“Current Liabilities” shall mean, at any time, the consolidated current
liabilities of the Borrower and the Subsidiaries at such time, but excluding the
current portion of any long-term Indebtedness.

“Current Ratio” shall mean, at any time, the ratio of Current Assets at such
time to Current Liabilities at such time. For purposes of calculating the
Current Ratio, each of Current Assets and Current Liabilities shall exclude
(a) gains and losses resulting from the mark-to-market of commodity price risk
management transactions in accordance with FASB 133 and (b) non-cash allocations
to expense and other non-cash adjustments in accordance with FASB 143.

“Declined Proceeds” shall have the meaning assigned to such term in
Section 2.12(g).

“Default” shall mean any event or condition which upon notice, lapse of time or
both would constitute an Event of Default.

“Disqualified Capital Stock” shall mean any Equity Interest which, 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, (a) matures (excluding any
maturity as the result of an optional redemption by the issuer thereof) or is
mandatorily redeemable, pursuant to a sinking fund obligation or otherwise, or
is redeemable at the option of the holder thereof, in whole or in part, or
requires the payment of any cash dividend or any other scheduled payment
constituting a return of capital, in each case at any time on or prior to the
first anniversary of the Maturity Date, or (b) is convertible into or
exchangeable (unless at the sole option of the issuer thereof) for (i) debt
securities or (ii) any Equity Interest referred to in clause (a) above, in each
case prior to the first anniversary of the Maturity Date.

“dollars” or “$” shall mean lawful money of the United States of America.

“Domestic Oil and Gas Properties” shall mean the Oil and Gas Properties of the
Borrower and the Domestic Subsidiaries.

“Domestic Subsidiaries” shall mean all Subsidiaries incorporated or organized
under the laws of the United States of America, any State thereof or the
District of Columbia.

 

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“Dutch Parallel Debt” shall mean, with respect to any Loan Party and in any
given currency at any given time, an amount equal to the aggregate amount of
such Loan Party’s Underlying Debt Obligations at such time expressed in the
currency thereof.

“Dutch Sector” shall mean the jurisdiction of The Netherlands commonly referred
to as the Dutch Sector—North Sea.

“Dutch Security Agreements” shall have the meaning assigned to such term in
Section 9.18.

“Environmental Laws” shall mean all former, current and future Federal, state,
local and foreign laws (including common law), treaties, regulations, rules,
ordinances, codes, decrees, judgments, directives, orders (including consent
orders), and agreements in each case, relating to protection of the environment,
natural resources, human health and safety or the presence, Release of, or
exposure to, Hazardous Materials, or the generation, manufacture, processing,
distribution, use, treatment, storage, transport, recycling or handling of, or
the arrangement for such activities with respect to, Hazardous Materials.

“Environmental Liability” shall mean all liabilities, obligations, damages,
losses, claims, actions, suits, judgments, orders, fines, penalties, fees,
expenses and costs (including administrative oversight costs, natural resource
damages and remediation costs), whether contingent or otherwise, arising out of
or relating to (a) compliance or non-compliance with any Environmental Law,
(b) the generation, use, handling, transportation, storage, treatment or
disposal of any Hazardous Materials, (c) exposure to any Hazardous Materials,
(d) the Release of any Hazardous Materials or (e) any contract, agreement or
other consensual arrangement pursuant to which liability is assumed or imposed
with respect to any of the foregoing.

“Equity Interests” shall mean shares of capital stock, partnership interests,
membership interests in a limited liability company, beneficial interests in a
trust or other equity interests in any person.

“Equity Issuance” shall mean any issuance or sale by the Borrower or any
Subsidiary of any Equity Interests of the Borrower or any such Subsidiary, as
applicable, except in each case for (a) any issuance or sale to the Borrower or
any Subsidiary, (b) any issuance of Disqualified Capital Stock, (c) any issuance
of directors’ qualifying shares, (d) sales or issuances of common stock of the
Borrower to management or employees of the Borrower or any Subsidiary under any
employee stock option or stock purchase plan or employee benefit plan in
existence from time to time and (e) issuances of common stock of the Borrower
pursuant to the exercise from time to time of any warrants issued and
outstanding on the Closing Date.

“ERISA” shall mean the Employee Retirement Income Security Act of 1974, as the
same may be amended from time to time.

“ERISA Affiliate” shall mean any trade or business (whether or not incorporated)
that, together with the Borrower, is treated as a single employer under
Section 414(b) or (c) of the Code, or solely for purposes of Section 302 of
ERISA and Section 412 of the Code, is treated as a single employer under
Section 414 of the Code.

 

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“ERISA Event” shall mean (a) any “reportable event”, as defined in Section 4043
of ERISA or the regulations issued thereunder, with respect to a Plan (other
than an event for which the 30-day notice period is waived); (b) the existence
with respect to any Plan of an “accumulated funding deficiency” (as defined in
Section 412 of the Code or Section 302 of ERISA), whether or not waived; (c) the
filing pursuant to Section 412(d) of the Code or Section 303(d) of ERISA of an
application for a waiver of the minimum funding standard with respect to any
Plan; (d) the incurrence by the Borrower or any of its ERISA Affiliates of any
liability under Title IV of ERISA with respect to the termination of any Plan or
the withdrawal or partial withdrawal of the Borrower or any of its ERISA
Affiliates from any Plan or Multiemployer Plan; (e) the receipt by the Borrower
or any of its ERISA Affiliates from the PBGC or a plan administrator of any
notice relating to the intention to terminate any Plan or Plans or to appoint a
trustee to administer any Plan; (f) the adoption of any amendment to a Plan that
would require the provision of security pursuant to Section 401(a)(29) of the
Code or Section 307 of ERISA; (g) the receipt by the Borrower or any of its
ERISA Affiliates of any notice, or the receipt by any Multiemployer Plan from
the Borrower or any of its ERISA Affiliates of any notice, concerning the
imposition of Withdrawal Liability or a determination that a Multiemployer Plan
is, or is expected to be, insolvent or in reorganization, within the meaning of
Title IV of ERISA; (h) the occurrence of a “prohibited transaction” with respect
to which the Borrower or any of the Subsidiaries is a “disqualified person”
(within the meaning of Section 4975 of the Code) or with respect to which the
Borrower or any such Subsidiary could otherwise be liable; (i) any Foreign
Benefit Event; or (j) any other event or condition with respect to a Plan or
Multiemployer Plan that could result in liability of the Borrower or any
Subsidiary.

“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” shall have the meaning assigned to such term in Article VII.

“Excess Cash Flow” shall mean, for any fiscal year of the Borrower, the excess
of (a) the sum, without duplication, of (i) Consolidated EBITDAX for such fiscal
year and (ii) reductions to noncash working capital of the Borrower and the
Subsidiaries for such fiscal year (i.e., the decrease, if any, in Current Assets
(other than cash and Permitted Investments) minus Current Liabilities from the
beginning to the end of such fiscal year) over (b) the sum, without duplication,
of (i) the amount of any Taxes payable in cash by the Borrower and the
Subsidiaries with respect to such fiscal year, (ii) Consolidated Interest
Expense for such fiscal year payable in cash, (iii) Capital Expenditures made in
cash during such fiscal year, except to the extent financed with the proceeds of
Indebtedness, equity issuances, casualty proceeds, condemnation proceeds or
other proceeds that would not be included in Consolidated EBITDAX,
(iv) permanent repayments of Indebtedness (other than mandatory prepayments of
Loans under Section 2.13 or mandatory prepayments of term loans under the First
Lien Credit Agreement pursuant to the mandatory prepayment provisions thereof)
made by the Borrower and the Subsidiaries during such fiscal year, but only to
the extent that such prepayments by their terms cannot be reborrowed or redrawn
and do not occur in connection with a refinancing of all or any portion of such
Indebtedness and (v) additions to noncash working capital for such fiscal year
(i.e., the increase, if any, in Current Assets (other than cash and Permitted
Investments) minus Current Liabilities from the beginning to the end of such
fiscal year).

 

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“Exchange Rate” shall mean, on any day, with respect to any foreign currency,
the noon buying rate in New York City for such foreign currency on such date for
cable transfers as certified for customs purposes by the Federal Reserve Bank of
New York.

“Excluded Taxes” shall mean, with respect to the Administrative Agent, any
Lender or any other recipient of any payment to be made by or on account of any
obligation of the Borrower hereunder, (a) income or franchise taxes imposed on
(or measured by) its net income by the United States of America, or by the
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 described in clause (a) above and (c) in the case of a Foreign
Lender (other than an assignee pursuant to a request by the Borrower under
Section 2.21(a)), 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 2.20(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 from the
Borrower with respect to such withholding tax pursuant to Section 2.20(a).

“Existing Preferred Stock” shall mean the Series A Preferred Stock and the
Series B Preferred Stock.

“FASB 133” means Statement No. 133 of the Financial Accounting Standards Board,
“Accounting for Derivative Instruments and Hedging Activities”, as amended or
supplemented from time to time.

“FASB 143” means Statement No. 143 of the Financial Accounting Standards Board,
“Accounting for Asset Retirement Obligations”, as amended or supplemented from
time to time.

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

“Fee Letter” shall mean the Fee Letter dated March 23, 2004, between the
Borrower and the Administrative Agent (it being acknowledged and agreed between
the Borrower and the Administrative Agent that the “Facilities” referred to
therein shall be deemed to refer to the term loan facilities provided for by
this Agreement).

“Financial Officer” of any person shall mean the chief financial officer,
principal accounting officer, treasurer or controller of such person.

 

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“First Lien Credit Agreement” shall mean the Second Amended and Restated Credit
Agreement dated as of June 22, 2006, as amended by the Amendment Agreement and
otherwise from time to time, among the Borrower, the lenders from time to time
party thereto and Credit Suisse, as administrative agent and collateral agent.

“First Lien Facilities” shall mean the senior secured first lien term loan
facility and any senior secured first lien revolving credit facility provided to
the Borrower pursuant to the First Lien Credit Agreement.

“First Lien Facility Documents” shall have the meaning assigned to the term
“Loan Documents” in the First Lien Credit Agreement.

“First Priority Liens” shall have the meaning assigned to such term in the
Intercreditor Agreement.

“Foreign Benefit Event” shall mean, with respect to any Foreign Pension Plan,
(a) the existence of unfunded liabilities in excess of the amount permitted
under any applicable law, or in excess of the amount that would be permitted
absent a waiver from a Governmental Authority, (b) the failure to make the
required contributions or payments under any applicable law on or before the due
date for such contributions or payments, (c) the receipt of a notice by a
Governmental Authority relating to the intention to terminate any such Foreign
Pension Plan or to appoint a trustee or similar official to administer any such
Foreign Pension Plan, or alleging the insolvency of any such Foreign Pension
Plan, (d) the incurrence of any liability in excess of $2,500,000 by the
Borrower or any of the Subsidiaries under applicable law on account of the
complete or partial termination of such Foreign Pension Plan or the complete or
partial withdrawal of any participating employer therein or (e) the occurrence
of any transaction that is prohibited under any applicable law and could
reasonably be expected to result in the incurrence of any liability by the
Borrower or any of the Subsidiaries, or the imposition on the Borrower or any of
the Subsidiaries of any fine, excise tax or penalty resulting from any
noncompliance with any applicable law, in each case in excess of $2,500,000.

“Foreign Lender” shall mean 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.

“Foreign Pension Plan” shall mean any benefit plan that under applicable law is
required to be funded through a trust or other funding vehicle other than a
trust or funding vehicle maintained exclusively by a Governmental Authority.

“Foreign Pledge Agreements” shall mean the collective reference to (a) the
Charge of Shares in ATP Oil & Gas (UK) Limited, substantially in the form of
Exhibit D, between the Borrower and the Collateral Agent and (b) the Second Lien
Pledge of Shares in the capital of ATP Oil & Gas (Netherlands) B.V.,
substantially in the form of Exhibit E, among the Borrower, ATP Oil & Gas
(Netherlands) B.V. and the Collateral Agent, each for the ratable benefit of the
Secured Parties.

 

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“Foreign Pledged Collateral” shall mean the Equity Interests pledged by the
Borrower or any Subsidiary under the Foreign Pledge Agreements, for the ratable
benefit of the Secured Parties, to secure the Obligations.

“Foreign Subsidiary” shall mean any Subsidiary that is not a Domestic
Subsidiary.

“GAAP” shall mean United States generally accepted accounting principles applied
on a consistent basis.

“Governmental Authority” shall mean any Federal, state, local or foreign court
or governmental agency, authority, instrumentality or regulatory body.

“Granting Lender” shall have the meaning assigned to such term in
Section 9.04(i).

“Guarantee” of or by any person shall mean any obligation, contingent or
otherwise, of such person guaranteeing or having the economic effect of
guaranteeing any Indebtedness or other obligation of any other person (the
“primary obligor”) in any manner, whether directly or indirectly, and including
any obligation of such person, direct or indirect, (a) to purchase or pay (or
advance or supply funds for the purchase or payment of) such Indebtedness or
other obligation or to purchase (or to advance or supply funds for the purchase
of) any security for the payment of such Indebtedness or other obligation,
(b) to purchase or lease property, securities or services for the purpose of
assuring the owner of such Indebtedness or other obligation of the payment of
such Indebtedness or other obligation or (c) to maintain working capital, equity
capital or any other financial statement condition or liquidity of the primary
obligor so as to enable the primary obligor to pay such Indebtedness or other
obligation; provided, however, that the term “Guarantee” shall not include
endorsements for collection or deposit in the ordinary course of business.

“Guarantee and Collateral Agreement” shall mean the Second Lien Guarantee and
Collateral Agreement, substantially in the form of Exhibit F, among the
Borrower, the Subsidiaries party thereto and the Collateral Agent for the
ratable benefit of the Secured Parties.

“Hazardous Materials” shall mean (a) any petroleum products or byproducts and
all other hydrocarbons, coal ash, radon gas, asbestos, urea formaldehyde foam
insulation, polychlorinated biphenyls, chlorofluorocarbons and all other
ozone-depleting substances and (b) any chemical, material, substance or waste
that is prohibited, limited or regulated by or pursuant to any Environmental
Law.

“Hedging Agreement” shall mean any Commodity Hedging Agreement, Interest Rate
Hedging Agreement or foreign currency exchange agreement or other currency
exchange rate hedging arrangement.

“Hydrocarbons” shall mean oil, gas, casinghead gas, condensate, distillate,
liquid hydrocarbons, gaseous hydrocarbons, all products directly or indirectly
refined, separated, settled and dehydrated therefrom, including kerosene,
liquefied petroleum gas, refined lubricating oils, diesel fuel, drip gasoline,
natural gasoline, helium, sulfur and all other minerals.

 

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“Hydrocarbon Interests” shall mean all rights, titles, interests and estates now
owned or hereafter acquired in and to oil and gas leases, leasehold interests
and licenses, oil, gas and mineral leases, leasehold interests and licenses, or
other liquid or gaseous hydrocarbon licenses, leases, fee mineral interests,
term mineral interests, subleases, farm-outs, royalties, overriding royalty and
royalty interests, non-consent interests arising out of or pursuant to Oil and
Gas Contracts, net profit interests, net revenue interests, oil payments,
production payments, production payment interests and similar interests and
estates, including all reserved or residual interest of whatever nature and all
reversionary or carried interests relating to any of the foregoing.

“Incremental Term Loan Borrowing” shall mean a Borrowing comprised of
Incremental Term Loans.

“Incremental Term Loan Lender” shall mean a Lender with an Incremental Term Loan
Commitment or an outstanding Incremental Term Loan.

“Incremental Term Loan Amount” shall mean, at any time, the excess, if any, of
(a) $100,000,000 over (b) the aggregate amount of all Incremental Term Loan
Commitments established prior to such time pursuant to Section 2.22.

“Incremental Term Loan Assumption Agreement” shall mean an Incremental Term Loan
Assumption Agreement among, and in form and substance reasonably satisfactory
to, the Borrower, the Administrative Agent and one or more Incremental Term Loan
Lenders.

“Incremental Term Loan Commitment” shall mean the commitment of any Lender,
established pursuant to Section 2.22, to make Incremental Term Loans to the
Borrower.

“Incremental Term Loan Maturity Date” shall mean the final maturity date of any
Incremental Term Loan, as set forth in the applicable Incremental Term Loan
Assumption Agreement.

“Incremental Term Loans” shall mean Term Loans made by one or more Lenders to
the Borrower pursuant to Section 2.01(b). Incremental Term Loans may be made in
the form of additional Term Loans or, to the extent permitted by Section 2.22
and provided for in the relevant Incremental Term Loan Assumption Agreement,
Other Term Loans.

“Indebtedness” of any person shall mean, without duplication, (a) all
obligations of such person for borrowed money or with respect to deposits or
advances of any kind, (b) all obligations of such person evidenced by bonds,
debentures, notes or similar instruments, (c) all obligations of such person
upon which interest charges are customarily paid, (d) all obligations of such
person under conditional sale or other title retention agreements relating to
property or assets purchased by such person, (e) all obligations of such person
issued or assumed as the deferred purchase price of property or services
(excluding trade accounts payable and accrued obligations incurred in the
ordinary course of business), (f) all Indebtedness of others secured by (or for
which the holder of such Indebtedness has an existing right, contingent or
otherwise, to be secured by) any Lien on property owned or acquired by such
person, whether or not the obligations secured thereby have been assumed,
(g) all Guarantees by such person of Indebtedness of others, (h) all Capital
Lease Obligations and Synthetic Lease Obligations of such

 

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person, (i) all obligations of such person as an account party in respect of
letters of credit, (j) all obligations of such person in respect of bankers’
acceptances and (k) the liquidation preference of, and all other obligations of
such person in respect of, Disqualified Capital Stock of such person. The
Indebtedness of any person shall include the Indebtedness of any partnership in
which such person is a general partner.

“Indemnified Taxes” shall mean Taxes other than Excluded Taxes.

“Indemnitee” shall have the meaning assigned to such term in Section 9.05.

“Independent Engineering Firm” shall mean Ryder Scott Company L.P., RPS Energy,
DeGolyer and MacNaughton, Collarini Associates and/or one or more other
independent engineering firms selected by the Borrower and reasonably acceptable
to the Administrative Agent.

“Information” shall have the meaning assigned to such term in Section 9.16.

“Intercreditor Agreement” shall mean the Intercreditor Agreement, substantially
in the form of Exhibit G, among the Borrower, the Subsidiaries party thereto,
the First Lien Collateral Agent (as defined therein) and the Second Lien
Collateral Agent (as defined therein).

“Interest Coverage Ratio” shall mean, for any period, the ratio of
(a) Consolidated EBITDAX for such period to (b) Consolidated Interest Expense
for such period. For purposes of determining the Interest Coverage Ratio for the
period of four consecutive quarters ended December 31, 2006 and March 31, 2007,
Consolidated EBITDAX shall be deemed to be equal to (a) Consolidated EBITDAX for
the two consecutive fiscal quarters ended December 31, 2006, multiplied by 2 and
(b) Consolidated EBITDAX for the three consecutive fiscal quarters ended
March 31, 2007, multiplied by 4/3, respectively.

“Interest Payment Date” shall mean (a) with respect to any ABR Loan, the last
Business 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
that would have been an Interest Payment Date had successive Interest Periods of
three months’ duration been applicable to such Borrowing.

“Interest Period” shall mean, with respect to any Eurodollar Borrowing, the
period commencing on the date of such Borrowing and ending on the numerically
corresponding day (or, if there is no numerically corresponding day, on the last
day) in the calendar month that is 1, 2, 3 or 6 months thereafter, as the
Borrower may elect; provided, however, that 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. Interest shall accrue from and including the first
day of an Interest Period to but excluding the last day 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.

 

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“Interest Rate Hedging Agreement” shall mean any interest rate swap, cap or
collar agreement or other interest rate protection agreement or interest rate
hedging arrangement.

“Investment Grade” shall mean a rating of BBB- or higher by S&P or Baa3 or
higher by Moody’s.

“Junior Financing Documentation” shall mean any indenture or other documentation
governing any Permitted Subordinated Indebtedness.

“Lenders” shall mean (a) the persons listed on Schedule 2.01 (other than any
such person that has ceased to be a party hereto pursuant to an Assignment and
Acceptance) and (b) any person that has become a party hereto pursuant to an
Assignment and Acceptance.

“Leverage Ratio” shall mean, on any date, the ratio of Total Net Debt on such
date to Consolidated EBITDAX for the period of four consecutive fiscal quarters
most recently ended on or prior to such date. For purposes of determining the
Leverage Ratio at December 31, 2006 and March 31, 2007, Consolidated EBITDAX for
the period of four consecutive fiscal quarters most recently ended on or prior
to such dates, shall be deemed to be equal to (a) Consolidated EBITDAX for the
two consecutive fiscal quarters ended December 31, 2006, multiplied by 2 and
(b) Consolidated EBITDAX for the three consecutive fiscal quarters ended
March 31, 2007, multiplied by 4/3, respectively.

“LIBO Rate” shall mean, with respect to any Eurodollar Borrowing for any
Interest Period, the rate per annum determined by the Administrative Agent at
approximately 11:00 a.m., London time, on the date that is two Business Days
prior to the commencement of such Interest Period by reference to the British
Bankers’ Association Interest Settlement Rates for deposits in dollars (as set
forth by any service selected by the Administrative Agent that has been
nominated by the British Bankers’ Association as an authorized information
vendor for the purpose of displaying such rates) for a period equal to such
Interest Period; provided that, to the extent that an interest rate is not
ascertainable pursuant to the foregoing provisions of this definition, the “LIBO
Rate” shall be the interest rate per annum determined by the Administrative
Agent to be the average of the rates per annum at which deposits in dollars are
offered for such relevant Interest Period to major banks in the London interbank
market in London, England by the Administrative Agent at approximately 11:00
a.m., London time, on the date that is two Business Days prior to the beginning
of such Interest Period.

“Lien” shall mean, with respect to any asset, (a) any mortgage, deed of trust,
lien, pledge, encumbrance, charge or security interest in or on such asset,
(b) the interest of a vendor or a lessor under any conditional sale agreement,
capital lease or title retention agreement (or any financing lease having
substantially the same economic effect as any of the foregoing) relating to such
asset and (c) in the case of securities, any purchase option, call or similar
right of a third party with respect to such securities.

“Loan Documents” shall mean this Agreement, the Security Documents and each
Incremental Term Loan Assumption Agreement.

“Loan Parties” shall mean the Borrower and the Subsidiary Guarantors.

 

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“Loans” shall mean the Term Loans.

“Management Investors” shall mean the directors, executive officers and other
management employees of the Borrower on the Closing Date.

“Margin Stock” shall have the meaning assigned to such term in Regulation U.

“Material Adverse Effect” shall mean (a) a materially adverse effect on the
business, assets, operations, condition (financial or otherwise) or prospects of
the Borrower and the Subsidiaries, taken as a whole, (b) a material impairment
of the ability of the Borrower or any other Loan Party to perform any of its
obligations under any Loan Document to which it is or will be a party or (c) a
material impairment of the rights of or benefits available to the Lenders under
any Loan Document.

“Material Indebtedness” shall mean Indebtedness (other than the Loans), or
obligations in respect of one or more Hedging Agreements, of any one or more of
the Borrower and the Subsidiaries in an aggregate principal amount exceeding
$10,000,000. For purposes of determining Material Indebtedness, the “principal
amount” of the obligations of the Borrower or any Subsidiary in respect of any
Hedging 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 Hedging Agreement were terminated at such time.

“Maturity Date” shall mean October 14, 2010.

“Maximum Rate” shall have the meaning assigned to such term in Section 9.09.

“Moody’s” shall mean Moody’s Investors Service, Inc., or any successor thereto.

“Mortgaged Properties” shall mean, initially, the Domestic Oil and Gas
Properties and other owned real properties and leasehold and subleasehold
interests of the Loan Parties specified on Schedule 1.01(b), and shall include
each Domestic Oil and Gas Property and each other parcel of real property and
improvements thereto with respect to which a Mortgage is granted pursuant to
Section 5.09.

“Mortgages” shall mean the mortgages, deeds of trust, leasehold mortgages,
assignments of leases and rents, assignments of production, modifications and
other security documents delivered pursuant to clause (i) of paragraph (n) of
Article IV or pursuant to Section 5.09, each substantially in the form of
Exhibit H.

“Multiemployer Plan” shall mean a multiemployer plan as defined in
Section 4001(a)(3) of ERISA.

“Net Cash Proceeds” shall mean (a) with respect to any Asset Sale, the cash
proceeds (including cash proceeds subsequently received (as and when received)
in respect of noncash consideration initially received), net of (i) selling
expenses (including reasonable broker’s fees or commissions, legal fees,
transfer and similar taxes and the Borrower’s good faith estimate of income
taxes paid or payable in connection with such sale), (ii) amounts provided as a
reserve, in accordance with GAAP, against any liabilities under any
indemnification obligations or purchase

 

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price adjustment associated with such Asset Sale (provided that, to the extent
and at the time any such amounts are released from such reserve, such amounts
shall constitute Net Cash Proceeds) and (iii) the principal amount, premium or
penalty, if any, interest and other amounts on any Indebtedness for borrowed
money which is secured by the asset sold in such Asset Sale and which is
required to be repaid with such proceeds (other than any such Indebtedness
assumed by the purchaser of such asset); provided, however, that, if no Default
or Event of Default shall have occurred and shall be continuing at the time of
the receipt of such proceeds or at the proposed time of the application thereof,
such proceeds shall not constitute Net Cash Proceeds to the extent reinvested or
contractually committed to be reinvested in productive assets of a kind then
used or usable in the business of the Borrower and the Subsidiaries within 180
days of such receipt; and (b) with respect to any issuance or incurrence of
Indebtedness or any Equity Issuance, the cash proceeds thereof, net of all taxes
and customary fees, commissions, costs and other expenses incurred in connection
therewith.

“North Sea” shall mean, collectively, the Dutch Sector and the UK Sector, and
surrounding areas of the North Sea.

“Obligations” shall mean all obligations defined as “Obligations” in the
Guarantee and Collateral Agreement and the other Security Documents.

“Oil and Gas Business” shall mean (a) the acquisition, exploration,
exploitation, development, operation and disposition of interests in Oil and Gas
Properties and Hydrocarbons; (b) the gathering, treating, processing, storage
and selling of any production from such interests or properties; and (c) any
business directly relating to or arising directly from exploration for, or
development, production, treatment, processing, storage or selling of,
Hydrocarbons, or that is or necessary or desirable to facilitate the activities
described in this definition.

“Oil and Gas Contracts” shall mean all contracts, agreements, operating
agreements, farm-out or farm-in agreements, sharing agreements, mineral purchase
agreements, contracts for the purchase, exchange, transportation, processing or
sale of Hydrocarbons, rights-of-way, easements, surface leases, equipment
leases, permits, franchises, licenses, pooling or unitization agreements, and
unit or pooling designations and orders now or hereafter affecting any of the
Oil and Gas Properties (or related oil and gas gathering assets) or Hydrocarbon
Interests of the Borrower and the Subsidiaries, or which are useful or
appropriate in drilling for, producing, treating, handling, storing,
transporting or marketing oil, gas or other minerals produced from any of the
Oil and Gas Properties of the Borrower and the Subsidiaries, as any such
contracts and agreements as they may be amended, restated, modified, substituted
or supplemented from time to time.

“Oil and Gas Properties” shall mean (a) Hydrocarbon Interests; (b) the
properties now or hereafter pooled or unitized with Hydrocarbon Interests;
(c) all currently existing or future rights arising under (i) unitization
agreements, orders or other arrangements, (ii) pooling orders, agreements or
other arrangements and (iii) declarations of pooled units and the units created
thereby (including all units created under orders, regulations and rules of any
Governmental Authority having jurisdiction) which may affect all or any portion
of the Hydrocarbon Interests; (d) all pipelines, gathering lines, compression
facilities, tanks and processing plants; (e) all interests held in royalty
trusts whether currently existing or hereafter created; (f) all

 

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Hydrocarbons in and under and which may be produced, saved, processed or
attributable to the Hydrocarbon Interests, the lands covered thereby and all
Hydrocarbons in pipelines, gathering lines, tanks and processing plants and all
rents, issues, profits, proceeds, products, revenues and other incomes from or
attributable to the Hydrocarbon Interests; (g) all tenements, hereditaments,
appurtenances, interests and properties in any way appertaining, belonging,
affixed or incidental to the Hydrocarbon Interests, and all rights, titles,
interests and estates described or referred to above (including (i) any and all
real property, now owned or hereafter acquired, used or held for use in
connection with the operating, working or development of any of such Hydrocarbon
Interests or property and (ii) any and all surface leases, rights-of-way,
easements and servitudes together with all additions, substitutions,
replacements, accessions and attachments to any and all of the foregoing); and
(h) all production units, and drilling and spacing units (and the properties
covered thereby) which may affect all or any portion of the other Oil and Gas
Properties and any units created by agreement or designation or under orders,
regulations, rules or other official acts of any Governmental Authority having
jurisdiction.

“Other Taxes” shall mean 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 under any Loan Document or from the execution, delivery or
enforcement of, or otherwise with respect to, any Loan Document.

“Other Term Loans” shall have the meaning assigned to such term in
Section 2.22(a).

“PBGC” shall mean the Pension Benefit Guaranty Corporation referred to and
defined in ERISA.

“PDP” shall mean Proved Developed Reserves that are categorized as producing in
accordance with the petroleum reserves definitions promulgated by the Society of
Petroleum Engineers (SPE) Inc. from time to time.

“PDP Coverage Ratio” shall mean, on any date of determination, the ratio of
PV-10 Value (determined by substituting the phrase “from PDP production on the
Borrower’s and the Subsidiaries’ Oil and Gas Properties” for the phrase “from
Proved Reserves on the Borrower’s and the Subsidiaries’ Oil and Gas Properties”
appearing in the second line of the definition thereof) on such date to Total
Net Debt on such date; provided that Total Net Debt for this purpose shall
exclude any Permitted Subordinated Indebtedness incurred pursuant to
Section 6.01(i).

“Perfection Certificate” shall mean the Perfection Certificate substantially in
the form of Exhibit B to the Guarantee and Collateral Agreement.

“Permitted Business Investments” shall mean investments made in the ordinary
course of, and of a nature that is or shall have become customary in, the Oil
and Gas Business as a means of actively exploiting, exploring for, acquiring,
developing, processing, gathering, marketing, storing, treating, selling or
transporting oil and gas through agreements, transactions, interests or
arrangements (including those that permit a person to share risks or costs,
comply with regulatory requirements regarding local ownership or satisfy other
objectives customarily achieved through the conduct of Oil and Gas Business
jointly with third parties), including the

 

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entry into or acquisition of operating agreements, working interests, royalty
interests, mineral leases, processing agreements, farm-out and farm-in
agreements, division orders, contracts for the sale, transportation or exchange
of oil or natural gas, unitization and pooling declarations and agreements and
area of mutual interest agreements, production sharing agreements or other
similar or customary agreements, transactions, properties, interests, and
investments and expenditures in connection therewith (with the amount thereof
measured at the time initially made); provided that an investment in Equity
Interests in a person shall not constitute a Permitted Business Investment.

“Permitted Investments” shall mean:

(a) direct obligations of, or obligations the principal of and interest on which
are unconditionally guaranteed by, the United States of America (or by any
agency thereof to the extent such obligations are backed by the full faith and
credit of the United States of America), in each case maturing within one year
from the date of acquisition thereof;

(b) investments in commercial paper maturing within 270 days from the date of
acquisition thereof and having, at such date of acquisition, the highest credit
rating obtainable from S&P or from Moody’s;

(c) investments in certificates of deposit, banker’s acceptances and time
deposits maturing within one year from the date of acquisition thereof issued or
guaranteed by or placed with, and money market deposit accounts issued or
offered by, the Administrative Agent or any domestic office of any commercial
bank organized under the laws of the United States of America or any State
thereof that has a combined capital and surplus and undivided profits of not
less than $500,000,000;

(d) fully collateralized repurchase agreements with a term of not more than 30
days for securities described in clause (a) above and entered into with a
financial institution satisfying the criteria of clause (c) above;

(e) investments in “money market funds” within the meaning of Rule 2a-7 of the
Investment Company Act of 1940, as amended, substantially all of whose assets
are invested in investments of the type described in clauses (a) through
(d) above;

(f) investments in so-called “auction rate” securities rated AA or higher by S&P
or Aa or higher by Moody’s and which have a reset date not more than 90 days
from the date of acquisition thereof; and

(g) other short-term investments utilized by Foreign Subsidiaries in accordance
with normal investment practices for cash management in investments of a type
analogous to the foregoing.

“Permitted Refinancing Indebtedness” shall mean any Indebtedness issued in
exchange for, or the Net Cash Proceeds of which are used to extend, refinance,
renew, replace, defease or refund (collectively, to “Refinance”), the
Indebtedness being Refinanced (or previous refinancings thereof constituting
Permitted Refinancing Indebtedness); provided that (a) other than in the case of
Indebtedness under the First Lien Credit Agreement (with respect to which the

 

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applicable provisions of the Intercreditor Agreement shall govern), the
principal amount (or accreted value, if applicable) of such Permitted
Refinancing Indebtedness does not exceed the principal amount (or accreted
value, if applicable) of the Indebtedness so Refinanced (plus unpaid accrued
interest and premium thereon and underwriting discounts or commissions and other
fees and expenses in connection therewith), (b) other than in the case of
Indebtedness under the First Lien Credit Agreement (with respect to which the
applicable provisions of the Intercreditor Agreement shall govern), the maturity
date of such Permitted Refinancing Indebtedness is no earlier than the first
anniversary of the Maturity Date, (c) the average life to maturity of such
Permitted Refinancing Indebtedness is greater than or equal to that of the
Indebtedness being Refinanced, (d) if the Indebtedness being Refinanced is
subordinated in right of payment to the Obligations, such Permitted Refinancing
Indebtedness shall be subordinated in right of payment to the Obligations on
terms at least as favorable to the Lenders as those contained in the
documentation governing the Indebtedness being Refinanced, (e) no Permitted
Refinancing Indebtedness shall have obligors that are not Loan Parties
hereunder, or greater guarantees or security, than the Indebtedness being
Refinanced and (f) in the case of any Permitted Subordinated Indebtedness, such
Permitted Refinancing Indebtedness shall have no scheduled amortization,
payments of principal, sinking fund payments or similar scheduled payments
(other than regularly scheduled payments of interest), and shall have provisions
relating to mandatory prepayment, repurchase, redemption and offers to purchase
that are consistent with the Indebtedness so Refinanced.

“Permitted Subordinated Indebtedness” means any unsecured Indebtedness that
(a) is expressly subordinated to the prior payment in full in cash of the
Obligations on terms and conditions no less favorable to the Lenders than those
customarily found in senior subordinated notes issued under Rule 144A of the
Securities Act or in a public offering, as reasonably determined by the
Administrative Agent, (b) will not mature prior to the first anniversary of the
Maturity Date, (c) has no scheduled amortization, payments of principal, sinking
fund payments or similar scheduled payments (other than regularly scheduled
payments of interest), (d) has covenant, default and remedy provisions no more
restrictive or expansive in scope than those customarily found in senior
subordinated notes issued under Rule 144A of the Securities Act or in a public
offering, as reasonably determined by the Administrative Agent and (e) has
provisions relating to mandatory prepayment, repurchase, redemption and offers
to purchase that are consistent with those customarily found in senior
subordinated notes issued under Rule 144A of the Securities Act or in a public
offering, as reasonably determined by the Administrative Agent.

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

“Plan” shall mean any employee pension benefit plan (other than a Multiemployer
Plan) subject to the provisions of Title IV of ERISA or Section 412 of the Code
or Section 307 of ERISA, and in respect of which the Borrower or any ERISA
Affiliate is (or, if such plan were terminated, would under Section 4069 of
ERISA be deemed to be) an “employer” as defined in Section 3(5) of ERISA.

 

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“Preferred Equity Interests” shall mean any class or series of Equity Interest
the terms of which provide that dividends in respect thereof are payable at a
specified rate or that has preference in the payment of dividends or in the
liquidation of assets over any other class or series of Equity Interests of the
issuer thereof.

“Prime Rate” shall mean the rate of interest per annum determined from time to
time by Credit Suisse as its prime rate in effect at its principal office in New
York City and notified to the Borrower.

“Probable Reserve Value” shall mean, as of any date of determination, 50% of the
present value of future cash flows from probable reserves on the Borrower’s and
the Subsidiaries’ Oil and Gas Properties as set forth in the most recent Reserve
Report delivered pursuant to Section 5.04(d), utilizing (i) in the case of any
Oil and Gas Properties located in the United States or any of its territories or
possessions (including U.S. Federal waters in the Gulf of Mexico), the average
of the Three-Year Strip Price for crude oil (WTI Cushing) and natural gas (Henry
Hub), quoted on the New York Mercantile Exchange (or its successor), (ii) in the
case of any Oil and Gas Properties located in the North Sea, the average of the
Three-Year Strip Price for crude oil (North Sea Brent) and natural gas (UK
National Balancing Point), in each case quoted on the International Petroleum
Exchange (or its successor) and (iii) in the case of any Oil and Gas Properties
located in any other jurisdiction, the average of the Three-Year Strip Price for
crude oil and natural gas, in each case quoted on any commodities exchange or
other price quotation source generally recognized in the oil and gas industry in
such jurisdiction and reasonably acceptable to the Administrative Agent, in the
case of each of clauses (i), (ii) and (iii), as of the date as of which the
information set forth in such Reserve Report is provided (as adjusted for basis
differentials) and utilizing a 10% discount rate. For purposes of calculating
the Probable Reserve Value, any future cash flow calculations set forth in any
Reserve Report and made in any currency other than dollars shall be converted
into dollars based on the Exchange Rate on the date as of which the information
set forth in such Reserve Report is provided.

“Pro Forma Basis” shall mean, with respect to compliance with any test or
covenant hereunder, compliance with such covenant or test after giving effect to
(a) any Permitted Business Investment in discrete Oil and Gas Properties or
(b) any Asset Sale of a Subsidiary, operating entity or discrete Oil and Gas
Properties, in the case of each of clauses (a) and (b) for which historical
financial statements for the relevant period are available (including pro forma
adjustments arising out of events which are directly attributable to the
Permitted Business Investment or Asset Sale, are factually supportable and are
expected to have a continuing impact, in each case as determined on a basis
consistent with Article 11 of Regulation S-X of the Securities Act of 1933, as
amended, as interpreted by the Staff of the Securities and Exchange Commission,
and as certified by a Financial Officer of the Borrower) using, for purposes of
determining such compliance, the historical financial statements of all entities
or assets so acquired or sold and the consolidated financial statements of the
Borrower and its Subsidiaries which shall be reformulated as if such Permitted
Business Investment or Asset Sale, and all such other Permitted Business
Investments or Asset Sales that have been consummated during the period, and any
Indebtedness or other liabilities incurred in connection with any such Permitted
Business Investments had been consummated and incurred at the beginning of such
period.

 

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“Pro Forma Financial Covenant Compliance” shall mean, with respect to the
incurrence of any Indebtedness pursuant to Section 6.01(i), that the Borrower
shall be in pro forma compliance with each of the covenants set forth in
Sections 6.12, 6.13, 6.14 and 6.15 (calculated as if such Indebtedness had been
incurred at the beginning of the relevant four consecutive fiscal quarter period
and, if such Indebtedness has a floating rate, calculated based on an implied
rate of interest for the applicable period for purposes of this definition
determined by utilizing the rate that is or would be in effect with respect to
such Indebtedness as at the relevant date of determination).

“Proved Developed Reserves” shall mean oil and gas reserves that can be expected
to be recovered through existing wells with existing equipment and operating
methods.

“Proved Reserves” shall mean the estimated quantities of crude oil, condensate,
natural gas and natural gas liquids that geological and engineering data
demonstrate with reasonable certainty to be recoverable in future years from
known reservoirs under existing economic and operating conditions (i.e., prices
and costs as of the date the estimate is made).

“PV-10 Value” shall mean, as of any date of determination, the present value of
future cash flows from Proved Reserves on the Borrower’s and the Subsidiaries’
Oil and Gas Properties as set forth in the most recent Reserve Report delivered
pursuant to Section 5.04(d), utilizing (i) in the case of any Oil and Gas
Properties located in the United States or any of its territories or possessions
(including U.S. Federal waters in the Gulf of Mexico), the average of the
Three-Year Strip Price for crude oil (WTI Cushing) and natural gas (Henry Hub),
quoted on the New York Mercantile Exchange (or its successor), (ii) in the case
of any Oil and Gas Properties located in the North Sea, the average of the
Three-Year Strip Price for crude oil (North Sea Brent) and natural gas (UK
National Balancing Point), in each case quoted on the International Petroleum
Exchange (or its successor) and (iii) in the case of any Oil and Gas Properties
located in any other jurisdiction, the average of the Three-Year Strip Price for
crude oil and natural gas, in each case quoted on any commodities exchange or
other price quotation source generally recognized in the oil and gas industry in
such jurisdiction and reasonably acceptable to the Administrative Agent, in the
case of each of clauses (i), (ii) and (iii), as of the date as of which the
information set forth in such Reserve Report is provided (as adjusted for basis
differentials) and utilizing a 10% discount rate. PV-10 Value shall be adjusted
to give effect to the Commodity Hedging Agreements of the Borrower and the
Subsidiaries then in effect. For purposes of calculating PV-10 Value, any future
cash flow calculations set forth in any Reserve Report and made in any currency
other than dollars shall be converted into dollars based on the Exchange Rate on
the date as of which the information set forth in such Reserve Report is
provided.

“Register” shall have the meaning assigned to such term in Section 9.04(d).

“Regulation T” shall mean Regulation T of the Board as from time to time in
effect and all official rulings and interpretations thereunder or thereof.

“Regulation U” shall mean Regulation U of the Board as from time to time in
effect and all official rulings and interpretations thereunder or thereof.

 

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“Regulation X” shall mean Regulation X of the Board as from time to time in
effect and all official rulings and interpretations thereunder or thereof.

“Related Fund” shall mean, with respect to any Lender that is a fund that
invests in bank loans, any other fund that invests in bank loans and is advised
or managed by the same investment advisor as such Lender or by an Affiliate of
such investment advisor.

“Related Parties” shall mean, with respect to any specified person, such
person’s Affiliates and the respective directors, officers, employees, agents
and advisors of such person and such person’s Affiliates.

“Release” shall mean any release, spill, emission, leaking, dumping, injection,
pouring, deposit, disposal, discharge, dispersal, leaching or migration into or
through the environment or within or upon any building, structure, facility or
fixture.

“Required Lenders” shall mean, at any time, Lenders having Loans and Commitments
representing more than 50% of the sum of all Loans outstanding and Commitments
at such time.

“Reserve Coverage Ratio” shall mean, on any date of determination, the ratio of
(a) the sum of (i) PV-10 Value on such date and (ii) Probable Reserve Value on
such date to (b) Total Net Debt on such date; provided that Total Net Debt for
this purpose shall exclude any Permitted Subordinated Indebtedness incurred
pursuant to Section 6.01(i).

“Reserve Report” shall mean (a) each annual reserve report prepared by an
Independent Engineering Firm, in form and detail reasonably acceptable to the
Administrative Agent and (b) each semi-annual reserve report prepared by an
Independent Engineering Firm (prepared on a “mechanical roll-forward” basis
based on the most recent annual reserve report prepared by such firm), in each
case with respect to the Oil and Gas Properties of the Borrower and the
Subsidiaries as of (x) December 31 of the year immediately preceding the year in
which such report is delivered pursuant to Section 5.04(d), in the case of an
annual reserve report, (y) June 30 of the year in which such report is delivered
pursuant to Section 5.04(d), in the case of a semi-annual reserve report or
(z) March 31 or September 30 (as applicable) of such year, in the case of a
quarterly reserve report. Each Reserve Report prepared by the Borrower shall be
certified by the chief engineering officer of the Borrower as being accurate in
all material respects.

“Responsible Officer” of any person shall mean any executive officer or
Financial Officer of such person and any other officer or similar official
thereof responsible for the administration of the obligations of such person in
respect of this Agreement.

“Restricted Indebtedness” shall mean Indebtedness of the Borrower or any
Subsidiary, the payment, prepayment, repurchase or defeasance of which is
restricted under Section 6.09(b).

“Restricted Payment” shall mean any dividend or other distribution (whether in
cash, securities or other property) with respect to any Equity Interests in the
Borrower or any Subsidiary, 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 Equity Interests in the Borrower or any Subsidiary or any option, warrant or
other right to acquire any such Equity Interests in the Borrower or any
Subsidiary.

 

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“S&P” shall mean Standard & Poor’s Ratings Service, or any successor thereto.

“Secured Parties” shall have the meaning assigned to such term in the Guarantee
and Collateral Agreement.

“Security Documents” shall mean the Mortgages, the Guarantee and Collateral
Agreement, the Foreign Pledge Agreements, the Intercreditor Agreement and each
of the security agreements, mortgages and other instruments and documents
executed and delivered pursuant to any of the foregoing or pursuant to
Section 5.09.

“Series A Preferred Stock” shall mean the 13 1/2% Series A Cumulative Perpetual
Preferred Stock issued by the Borrower on August 3, 2005.

“Series B Preferred Stock” shall mean the 12 1/2% Series B Cumulative Perpetual
Preferred Stock issued by the Borrower on March 20, 2006.

“SPC” shall have the meaning assigned to such term in Section 9.04(i).

“Statutory Reserves” shall mean 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 and any other banking authority, domestic or foreign,
to which the Administrative Agent or any Lender (including any branch, Affiliate
or other fronting office making or holding a Loan) is subject for Eurocurrency
Liabilities (as defined in Regulation D of the Board). Eurodollar Loans shall be
deemed to constitute Eurocurrency Liabilities (as defined in Regulation D of the
Board) 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. Statutory Reserves shall be adjusted
automatically on and as of the effective date of any change in any reserve
percentage.

“subsidiary” shall mean, with respect to any person (herein referred to as the
“parent”), any corporation, partnership, limited liability company, association
or other business entity (a) of which securities or other ownership interests
representing more than 50% of the equity or more than 50% of the ordinary voting
power or more than 50% of the general partnership interests are, at the time any
determination is being made, owned, Controlled or held, or (b) that is, at the
time any determination is made, otherwise Controlled, by the parent or one or
more subsidiaries of the parent or by the parent and one or more subsidiaries of
the parent.

“Subsidiary” shall mean any subsidiary of the Borrower.

“Subsidiary Guarantor” shall mean each Subsidiary listed on Schedule 1.01(c),
and each other Subsidiary that is or becomes a party to the Guarantee and
Collateral Agreement.

 

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“Synthetic Lease” shall mean, as to any person, any lease (including leases that
may be terminated by the lessee at any time) of any property (whether real,
personal or mixed) (a) that is accounted for as an operating lease under GAAP
and (b) in respect of which the lessee retains or obtains ownership of the
property so leased for U.S. federal income tax purposes, other than any such
lease under which such person is the lessor.

“Synthetic Lease Obligations” shall mean, as to any person, an amount equal to
the capitalized amount of the remaining lease payments under any Synthetic Lease
that would appear on a balance sheet of such person in accordance with GAAP if
such obligations were accounted for as Capital Lease Obligations.

“Synthetic Purchase Agreement” shall mean any swap, derivative or other
agreement or combination of agreements pursuant to which the Borrower or any
Subsidiary is or may become obligated to make (a) any payment in connection with
a purchase by any third party from a person other than the Borrower or any
Subsidiary of any Equity Interest or Restricted Indebtedness or (b) any payment
(other than on account of a permitted purchase by it of any Equity Interest or
Restricted Indebtedness) the amount of which is determined by reference to the
price or value at any time of any Equity Interest or Restricted Indebtedness;
provided that no phantom stock or similar plan providing for payments only to
current or former directors, officers or employees of the Borrower or the
Subsidiaries (or to their heirs or estates) shall be deemed to be a Synthetic
Purchase Agreement.

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

“Term Loan Commitment” shall mean, with respect to each Lender, the commitment
of such Lender to make Term Loans hereunder as set forth on Schedule 2.01, or in
the Assignment and Acceptance pursuant to which such Lender assumed its Term
Loan Commitment, as applicable, as the same may be (a) reduced from time to time
pursuant to Section 2.09 and (b) reduced or increased from time to time pursuant
to assignments by or to such Lender pursuant to Section 9.04. Unless the context
shall otherwise require, the term “Term Loan Commitments” shall include the
Incremental Term Loan Commitments.

“Term Loans” shall mean the term loans made by the Lenders to the Borrower
pursuant to Section 2.01. Unless the context shall otherwise require, the term
“Term Loans” shall include any Incremental Term Loans.

“Three-Year Strip Price” shall mean, as of any date of determination, (a) for
the 36-month period commencing with the month immediately following the month in
which the date of determination occurs, the monthly futures contract prices for
crude oil and natural gas for the 36 succeeding months as quoted on the
applicable commodities exchange or other price quotation source as contemplated
in the definitions of “PV-10 Value” and “Probable Reserve Value” and (b) for
periods after such 36-month period, the average of such quoted prices for the
period from and including the 25th month in such 36-month period through the
36th month in such period.

“Total Net Debt” shall mean, at any time, (a) the total Indebtedness of the
Borrower and the Subsidiaries at such time (excluding Indebtedness of the type
described in clause (i) of the

 

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definition of such term, except to the extent of any unreimbursed drawings
thereunder), less (b) the amount of unrestricted cash on hand at the Borrower
and the Subsidiary Guarantors. The fact that the Collateral Agent holds a Lien
against funds on deposit in accounts will not cause such funds to be considered
restricted for purposes of this definition.

“Transactions” shall mean, collectively, (a) the execution, delivery and
performance by the Loan Parties of this Agreement and the other Loan Documents
to which they are a party and, in the case of the Borrower, the execution,
delivery and performance of the Amendment Agreement to the First Lien Credit
Agreement and the making of the Borrowings hereunder and the borrowings
thereunder, (b) the repurchase, redemption or other refinancing of the Existing
Preferred Stock and (c) the payment of related fees and expenses.

“Type”, when used in respect of any Loan or Borrowing, shall refer to the Rate
by reference to which interest on such Loan or on the Loans comprising such
Borrowing is determined. For purposes hereof, the term “Rate” shall include the
Adjusted LIBO Rate and the Alternate Base Rate.

“UK Sector” shall mean the jurisdiction of the United Kingdom commonly referred
to as the UK Sector—North Sea.

“Underlying Debt Obligations” shall mean, with respect to any Loan Party at any
given time, the aggregate amount (whether matured or not) owing by such Loan
Party at such time under the Loan Documents (other than the amount of such Loan
Party’s Dutch Parallel Debt).

“USA Patriot Act” shall mean The Uniting and Strengthening America by Providing
Appropriate Tools Required to Intercept and Obstruct Terrorism Act of 2001
(Title III of Pub. L. No. 107-56 (signed into law October 26, 2001)), as amended
from time to time.

“wholly owned Subsidiary” of any person shall mean a subsidiary of such person
of which securities (except for directors’ qualifying shares) or other ownership
interests representing 100% of the Equity Interests are, at the time any
determination is being made, owned, Controlled or held by such person or one or
more wholly owned Subsidiaries of such person or by such person and one or more
wholly owned Subsidiaries of such person.

“Withdrawal Liability” shall mean liability to a Multiemployer Plan as a result
of a complete or partial withdrawal from such Multiemployer Plan, as such terms
are defined in Part I of Subtitle E of Title IV of ERISA.

SECTION 1.02. Terms Generally. The definitions in Section 1.01 shall apply
equally to both 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”; and
the words “asset” and “property” shall be construed as having the same meaning
and effect and to refer to any and all tangible and intangible assets and
properties, including cash, securities, accounts and contract rights. All
references herein to Articles, Sections, Exhibits and Schedules shall be deemed
references to Articles and Sections of, and Exhibits and Schedules to,

 

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this Agreement unless the context shall otherwise require. Except as otherwise
expressly provided herein, (a) any reference in this Agreement to any Loan
Document shall mean such document as amended, restated, supplemented or
otherwise modified from time to time and (b) all terms of an accounting or
financial nature shall be construed in accordance with GAAP, as in effect from
time to time; provided, however, that if the Borrower notifies the
Administrative Agent that the Borrower wishes to amend any covenant in Article
VI or any related definition to eliminate the effect of any change in GAAP
occurring after the date of this Agreement on the operation of such covenant (or
if the Administrative Agent notifies the Borrower that the Required Lenders wish
to amend Article VI or any related definition for such purpose), then the
Borrower’s compliance with such covenant shall be determined on the basis of
GAAP in effect immediately before the relevant change in GAAP became effective,
until either such notice is withdrawn or such covenant is amended in a manner
satisfactory to the Borrower and the Required Lenders.

SECTION 1.03. Pro Forma Calculations. With respect to any period during which
any Permitted Business Investment of the type described in clause (a) of the
definition of the term “Pro Forma Basis” or Asset Sale of the type described in
clause (b) of such definition occurs as permitted pursuant to the terms hereof,
the Leverage Ratio, the Interest Coverage Ratio, the Current Ratio and each of
the Asset Coverage Ratios shall be calculated with respect to such period and
such Permitted Business Investment or Asset Sale on a Pro Forma Basis.

ARTICLE II

The Credits

SECTION 2.01. Commitments. (a) Subject to the terms and conditions and relying
upon the representations and warranties set forth herein and in the other Loan
Documents, each Lender agrees, severally and not jointly, to make a Term Loan to
the Borrower on the Closing Date in a principal amount not to exceed its Term
Loan Commitment. Amounts paid or prepaid in respect of Term Loans may not be
reborrowed.

(b) Each Lender having an Incremental Term Loan Commitment, severally and not
jointly, hereby agrees, subject to the terms and conditions and relying upon the
representations and warranties set forth herein and in the applicable
Incremental Term Loan Assumption Agreement, to make Incremental Term Loans to
the Borrower, in an aggregate principal amount not to exceed its Incremental
Term Loan Commitment. Amounts paid or prepaid in respect of Incremental Term
Loans may not be reborrowed.

SECTION 2.02. Loans. (a) Each Loan shall be made as part of a Borrowing
consisting of Loans made by the Lenders ratably in accordance with their
applicable Commitments; provided, however, that the failure of any Lender to
make any Loan shall not in itself relieve any other Lender of its obligation to
lend hereunder (it being understood, however, that no Lender shall be
responsible for the failure of any other Lender to make any Loan required to be
made by such other Lender). The Loans comprising any Borrowing shall be in an
aggregate principal amount that is (i) an integral multiple of $1,000,000 and
not less than $5,000,000 (except, with respect to any Incremental Term Loan
Borrowing, to the extent otherwise provided in the related Incremental Term Loan
Assumption Agreement) or (ii) equal to the remaining available balance of the
applicable Commitments.

 

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(b) Subject to Sections 2.08 and 2.15, each Borrowing shall be comprised
entirely of ABR Loans or Eurodollar Loans as the Borrower may request pursuant
to Section 2.03. Each Lender may at its option 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. Borrowings of more than one Type may be outstanding at the same time;
provided, however, that the Borrower shall not be entitled to request any
Borrowing that, if made, would result in more than six Eurodollar Borrowings
outstanding hereunder at any time. For purposes of the foregoing, Borrowings
having different Interest Periods, regardless of whether they commence on the
same date, shall be considered separate Borrowings.

(c) Each Lender shall make each Loan to be made by it hereunder on the proposed
date thereof by wire transfer of immediately available funds to such account in
New York City as the Administrative Agent may designate not later than
1:00 p.m., New York City time, on such date, and the Administrative Agent shall
promptly credit the amounts so received to an account designated by the Borrower
in the applicable Borrowing Request or, if a Borrowing shall not occur on such
date because any condition precedent herein specified shall not have been met,
return the amounts so received to the respective Lenders.

(d) Unless the Administrative Agent shall have received notice from a Lender
prior to the date of any Borrowing that such Lender will not make available to
the Administrative Agent such Lender’s portion of such Borrowing, the
Administrative Agent may assume that such Lender has made such portion available
to the Administrative Agent on the date of such Borrowing in accordance with
paragraph (c) above and the Administrative Agent may, in reliance upon such
assumption, make available to the Borrower on such date a corresponding amount.
If the Administrative Agent shall have so made funds available then, to the
extent that such Lender shall not have made such portion available to the
Administrative Agent, such Lender and the Borrower severally agree to repay to
the Administrative Agent forthwith on demand such corresponding amount together
with interest thereon, for each day from the date such amount is made available
to the Borrower until the date such amount is repaid to the Administrative Agent
at (i) in the case of the Borrower, the interest rate applicable at the time to
the Loans comprising such Borrowing and (ii) in the case of such Lender, (A) for
the first two days following the date such amount is made available to the
Borrower, a rate determined by the Administrative Agent to represent its cost of
overnight or short-term funds (which determination shall be conclusive absent
manifest error) and (B) thereafter, at the Alternate Base Rate. If such Lender
shall repay to the Administrative Agent such corresponding amount, such amount
shall constitute such Lender’s Loan as part of such Borrowing for purposes of
this Agreement.

SECTION 2.03. Borrowing Procedure. In order to request a Borrowing, the Borrower
shall hand deliver or fax (or telephone notice promptly confirmed by written or
fax notice) to the Administrative Agent a duly completed Borrowing Request not
later than (a) in the case of the Borrowing to be made on the Closing Date,
12:00 (noon), New York City time, one Business Day before the proposed Borrowing
and (b) in the case of any Incremental Term Loan Borrowing, (i) in the case of
Eurodollar Borrowing, not later than 11:00 a.m., New York City

 

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time, three Business Days before a proposed Borrowing, and (ii) in the case of
an ABR Borrowing, not later than 12:00 (noon), New York City time, one Business
Day before the proposed Borrowing. Such Borrowing Request shall be irrevocable,
shall be signed by or on behalf of the Borrower and shall specify the following
information: (i) whether such Borrowing is to be a Eurodollar Borrowing or an
ABR Borrowing; (ii) the date of such Borrowing (which shall be a Business Day);
(iii) the number and location of the account to which funds are to be disbursed;
(iv) the amount of such Borrowing; and (v) if such Borrowing is to be a
Eurodollar Borrowing, the Interest Period with respect thereto; provided,
however, that, notwithstanding any contrary specification in any Borrowing
Request, each requested Borrowing shall comply with the requirements set forth
in Section 2.02. If no election as to the Type of Borrowing is specified in any
such notice, then the requested Borrowing shall be an ABR Borrowing. If no
Interest Period with respect to any Eurodollar Borrowing is specified in any
such notice, then the Borrower shall be deemed to have selected an Interest
Period of one month’s duration. The Administrative Agent shall promptly advise
the applicable Lenders of any notice given pursuant to this Section 2.03 (and
the contents thereof), and of each Lender’s portion of the requested Borrowing.

SECTION 2.04. Evidence of Debt; Repayment of Loans. (a) The Borrower hereby
unconditionally promises to pay to the Administrative Agent for the account of
each Lender the principal amount of each Loan of such Lender as provided in
Section 2.11.

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

(c) The Administrative Agent shall maintain accounts in which it will record
(i) the amount of each Loan made hereunder, the Type thereof and, if applicable,
the Interest Period applicable thereto, (ii) the amount of any principal or
interest due and payable or to become due and payable from the Borrower to each
Lender hereunder and (iii) the amount of any sum received by the Administrative
Agent hereunder from the Borrower or any Subsidiary Guarantor and each Lender’s
share thereof.

(d) The entries made in the accounts maintained pursuant to paragraphs (b) and
(c) above shall be prima facie evidence of the existence and amounts of the
obligations therein recorded; provided, however, that the failure of any Lender
or the Administrative Agent to maintain such accounts or any error therein shall
not in any manner affect the obligations of the Borrower to repay the Loans in
accordance with their terms.

(e) Any Lender may request that Loans made by it hereunder be evidenced by a
promissory note. In such event, the Borrower shall execute and deliver to such
Lender a promissory note payable to such Lender and its registered assigns and
in a form and substance reasonably acceptable to the Administrative Agent and
the Borrower. Notwithstanding any other provision of this Agreement, in the
event any Lender shall request and receive such a promissory note, the interests
represented by such note shall at all times (including after any assignment of
all or part of such interests pursuant to Section 9.04) be represented by one or
more promissory notes payable to the payee named therein or its registered
assigns.

 

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SECTION 2.05. Fees. The Borrower agrees to pay to the Administrative Agent, for
its own account, the non-refundable administration fees set forth in the Fee
Letter at the times and in the amounts specified therein.

SECTION 2.06. Interest on Loans. (a) Subject to the provisions of Section 2.07,
the Loans comprising each ABR Borrowing shall bear interest (computed on the
basis of the actual number of days elapsed over a year of 365 or 366 days, as
the case may be, when the Alternate Base Rate is determined by reference to the
Prime Rate and over a year of 360 days at all other times and calculated from
and including the date of such Borrowing to but excluding the date of repayment
thereof) at a rate per annum equal to the Alternate Base Rate plus the
Applicable Percentage.

(b) Subject to the provisions of Section 2.07, the Loans comprising each
Eurodollar Borrowing shall bear interest (computed on the basis of the actual
number of days elapsed over a year of 360 days) at a rate per annum equal to the
Adjusted LIBO Rate for the Interest Period in effect for such Borrowing plus the
Applicable Percentage.

(c) Interest on each Loan shall be payable on the Interest Payment Dates
applicable to such Loan except as otherwise provided in this Agreement. The
applicable Alternate Base Rate or Adjusted LIBO Rate for each Interest Period or
day within an Interest Period, as the case may be, shall be determined by the
Administrative Agent, and such determination shall be conclusive absent manifest
error.

SECTION 2.07. Default Interest. If the Borrower shall default in the payment of
any principal of or interest on any Loan or any other amount due hereunder, by
acceleration or otherwise, or under any other Loan Document, then, until such
defaulted amount shall have been paid in full, to the extent permitted by law,
all amounts outstanding under this Agreement and the other Loan Documents shall
bear interest (after as well as before judgment), payable on demand, (a) in the
case of principal, at the rate otherwise applicable to such Loan pursuant to
Section 2.06 plus 2.00% per annum and (b) in all other cases, at a rate per
annum (computed on the basis of the actual number of days elapsed over a year of
365 or 366 days, as the case may be, when determined by reference to the Prime
Rate and over a year of 360 days at all other times) equal to the rate that
would be applicable to an ABR Loan plus 2.00% per annum.

SECTION 2.08. Alternate Rate of Interest. In the event, and on each occasion,
that on the day two Business Days prior to the commencement of any Interest
Period for a Eurodollar Borrowing the Administrative Agent shall have determined
that dollar deposits in the principal amounts of the Loans comprising such
Borrowing are not generally available in the London interbank market, or that
the rates at which such dollar deposits are being offered will not adequately
and fairly reflect the cost to any Lender of making or maintaining its
Eurodollar Loan during such Interest Period, or that reasonable means do not
exist for ascertaining the Adjusted LIBO Rate, the Administrative Agent shall,
as soon as practicable thereafter, give written or fax notice of such
determination to the Borrower and the Lenders. In the event of any such
determination, until the Administrative Agent shall have advised the Borrower
and the Lenders that the circumstances giving rise to such notice no longer
exist, any request by the Borrower for a Eurodollar Borrowing pursuant to
Section 2.03 or 2.10 shall be deemed to be a request for an ABR Borrowing. Each
determination by the Administrative Agent under this Section 2.08 shall be
conclusive absent manifest error.

 

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SECTION 2.09. Termination of Commitments. The Term Loan Commitments (other than
any Incremental Term Loan Commitments, which shall terminate as provided in the
related Incremental Term Loan Assumption Agreement) shall automatically
terminate upon the earlier to occur of (a) the making of the Term Loans on the
Closing Date and (b) 5:00 p.m., New York City time, on December 1, 2006.

SECTION 2.10. Conversion and Continuation of Borrowings. The Borrower shall have
the right at any time upon prior irrevocable notice to the Administrative Agent
not later than 12:00 (noon), New York City time, (a) one Business Day prior
thereto, to convert any Eurodollar Borrowing into an ABR Borrowing, (b) three
Business Days prior thereto, to convert any ABR Borrowing into a Eurodollar
Borrowing or to continue any Eurodollar Borrowing as a Eurodollar Borrowing for
an additional Interest Period, and (c) three Business Days prior thereto, to
convert the Interest Period with respect to any Eurodollar Borrowing to another
permissible Interest Period, subject in each case to the following:

(i) each conversion or continuation shall be made pro rata among the Lenders in
accordance with the respective principal amounts of the Loans comprising the
converted or continued Borrowing;

(ii) if less than all the outstanding principal amount of any Borrowing shall be
converted or continued, then each resulting Borrowing shall satisfy the
limitations specified in Sections 2.02(a) and 2.02(b) regarding the principal
amount and maximum number of Borrowings of the relevant Type;

(iii) each conversion shall be effected by each Lender and the Administrative
Agent by recording for the account of such Lender the new Loan of such Lender
resulting from such conversion and reducing the Loan (or portion thereof) of
such Lender being converted by an equivalent principal amount; accrued interest
on any Eurodollar Loan (or portion thereof) being converted shall be paid by the
Borrower at the time of conversion;

(iv) if any Eurodollar Borrowing is converted at a time other than the end of
the Interest Period applicable thereto, the Borrower shall pay, upon demand, any
amounts due to the Lenders pursuant to Section 2.16;

(v) any portion of a Borrowing maturing or required to be repaid in less than
one month may not be converted into or continued as a Eurodollar Borrowing;

(vi) any portion of a Eurodollar Borrowing that cannot be converted into or
continued as a Eurodollar Borrowing by reason of the immediately preceding
clause shall be automatically converted at the end of the Interest Period in
effect for such Borrowing into an ABR Borrowing; and

(vii) upon notice to the Borrower from the Administrative Agent given at the
request of the Required Lenders, after the occurrence and during the continuance
of a Default or Event of Default, no outstanding Loan may be converted into, or
continued as, a Eurodollar Loan.

 

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Each notice pursuant to this Section 2.10 shall be irrevocable and shall refer
to this Agreement and specify (i) the identity and amount of the Borrowing that
the Borrower requests be converted or continued, (ii) whether such Borrowing is
to be converted to or continued as a Eurodollar Borrowing or an ABR Borrowing,
(iii) if such notice requests a conversion, the date of such conversion (which
shall be a Business Day) and (iv) if such Borrowing is to be converted to or
continued as a Eurodollar Borrowing, the Interest Period with respect thereto.
If no Interest Period is specified in any such notice with respect to any
conversion to or continuation as a Eurodollar Borrowing, the Borrower shall be
deemed to have selected an Interest Period of one month’s duration. The
Administrative Agent shall advise the Lenders of any notice given pursuant to
this Section 2.10 and of each Lender’s portion of any converted or continued
Borrowing. If the Borrower shall not have given notice in accordance with this
Section 2.10 to continue any Borrowing into a subsequent Interest Period (and
shall not otherwise have given notice in accordance with this Section 2.10 to
convert such Borrowing), such Borrowing shall, at the end of the Interest Period
applicable thereto (unless repaid pursuant to the terms hereof), automatically
be continued into an ABR Borrowing.

SECTION 2.11. Repayment of Borrowings. (a) To the extent not previously paid,
all Term Loans and Other Term Loans shall be due and payable on the Maturity
Date and the Incremental Term Loan Maturity Date, respectively, together with
accrued and unpaid interest on the principal amount to be paid to but excluding
the date of payment.

(b) All repayments pursuant to this Section 2.11 shall be subject to
Section 2.16, but shall otherwise be without premium or penalty.

SECTION 2.12. Optional Prepayment. (a) The Borrower shall have the right at any
time and from time to time to prepay any Borrowing, in whole or in part, upon
written or fax notice (or telephone notice promptly confirmed by written or fax
notice) at least one Business Day prior to the date of prepayment to the
Administrative Agent before 12:00 (noon), New York City time; provided, however,
that each partial prepayment shall be in an amount that is an integral multiple
of $1,000,000 and not less than $5,000,000.

(b) Optional prepayments of Loans at any time during the applicable periods set
forth in this Section 2.12(b) shall be accompanied by a payment of a prepayment
fee in an amount (expressed as a percentage of the principal amount of the Loans
to be repaid) equal to the applicable amount set forth in the table below:

 

Period

   Prepayment Fee  

From the Closing Date to May 22, 2007

   2.00 %

From May 23, 2007 to November 22, 2007

   1.50 %

From November 23, 2007 to May 22, 2008

   1.00 %

From May 23, 2008 to November 22, 2008

   0.50 %

Thereafter

   0.00 %

 

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(c) Each notice of prepayment shall specify the prepayment date and the
principal amount of each Borrowing (or portion thereof) to be prepaid, shall be
irrevocable and shall commit the Borrower to prepay such Borrowing by the amount
stated therein on the date stated therein. All prepayments under this
Section 2.12 shall be subject to Section 2.16 but otherwise without premium or
penalty, except as provided in Section 2.12(b). All prepayments under this
Section 2.12 shall be accompanied by accrued and unpaid interest on the
principal amount to be prepaid to but excluding the date of payment.

SECTION 2.13. Mandatory Prepayments. (a) Not later than the third Business Day
following the receipt of Net Cash Proceeds in respect of any Asset Sale, the
Borrower shall apply 100% of the Net Cash Proceeds received with respect thereto
to prepay outstanding Loans in accordance with Section 2.13(e).

(b) In the event and on each occasion that an Equity Issuance occurs, the
Borrower shall, substantially simultaneously with (and in any event not later
than the third Business Day next following) the occurrence of such Equity
Issuance, apply 50% of the Net Cash Proceeds therefrom to prepay outstanding
Loans in accordance with Section 2.13(e); provided, however, that if at the time
of such Equity Issuance the Leverage Ratio (after giving effect to such Equity
Issuance and the proposed use of the proceeds thereof) would be less than 2.5 to
1.0, then the amount required to be so applied shall be reduced to 25% of such
Net Cash Proceeds.

(c) No later than the earlier of (i) 90 days after the end of each fiscal year
of the Borrower, commencing with the fiscal year ending on December 31, 2006,
and (ii) the date on which the financial statements with respect to such period
are delivered pursuant to Section 5.04(a), the Borrower shall prepay outstanding
Loans in accordance with Section 2.13(e) in an aggregate principal amount equal
to 75% of Excess Cash Flow in excess of $5,000,000 for the fiscal year then
ended; provided, however, that in the event the Leverage Ratio at the end of
such fiscal year was less than 2.5 to 1.0, then such amount shall be reduced to
50% of such Excess Cash Flow in excess of $5,000,000.

(d) In the event that any Loan Party or any subsidiary of a Loan Party shall
receive Net Cash Proceeds from the issuance of Indebtedness for money borrowed
or consisting of Disqualified Capital Stock of any Loan Party or any subsidiary
of a Loan Party (other than Indebtedness for money borrowed or consisting of
Disqualified Capital Stock permitted pursuant to Section 6.01), the Borrower
shall, substantially simultaneously with (and in any event not later than the
third Business Day next following) the receipt of such Net Cash Proceeds by such
Loan Party or such subsidiary, apply an amount equal to 100% of such Net Cash
Proceeds to prepay outstanding Term Loans in accordance with Section 2.13(e).

(e) Mandatory prepayments of outstanding Loans under this Agreement shall be
allocated pro rata between the Term Loans and the Other Term Loans.

(f) The Borrower shall deliver to the Administrative Agent, at the time of each
prepayment required under this Section 2.13, (i) a certificate signed by a
Financial Officer of the Borrower setting forth in reasonable detail the
calculation of the amount of such prepayment and (ii) to the extent practicable,
at least three days prior written notice of such prepayment. Each notice of
prepayment shall specify the prepayment date, the Type of each Loan being
prepaid

 

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and the principal amount of each Loan (or portion thereof) to be prepaid. All
prepayments of Borrowings under this Section 2.13 shall be subject to
Section 2.16, but shall otherwise be without premium or penalty.

(g) Notwithstanding the foregoing, (i) no mandatory prepayments of outstanding
Loans that would otherwise be required under this Section 2.13 shall be required
to be made at any time when any loans remain outstanding under the First Lien
Credit Agreement or any Permitted Refinancing Indebtedness incurred to Refinance
such Indebtedness remains outstanding, except with respect to the portion (if
any) of the proceeds of the event giving rise to such mandatory prepayment as
shall have been rejected by the lenders under the First Lien Credit Agreement,
in accordance with and as required by Section 2.13(g) of the First Lien Credit
Agreement (or in accordance with the analogous provisions in any agreement
governing any Permitted Refinancing Indebtedness) and (ii) any Lender may elect,
by written notice to the Administrative Agent at least two Business Days prior
to the applicable prepayment date (or such shorter period as may be acceptable
to the Administrative Agent), to decline all (but not less than all) of any
mandatory prepayment of its Loans pursuant to this Section 2.13 (such declined
amounts, the “Declined Proceeds”). Any Declined Proceeds shall be offered to the
Lenders not so declining such prepayment (with such Lenders having the right to
decline any prepayment with Declined Proceeds in the same manner provided for in
the previous sentence). To the extent such Lenders elect to decline their pro
rata shares of such Declined Proceeds, any Declined Proceeds remaining
thereafter may be retained by the Borrower. If at the time of any prepayment
pursuant to this Section 2.13 there shall be outstanding Borrowings of different
Types or Eurodollar Borrowings with different Interest Periods, and if some but
not all Lenders shall have accepted such mandatory prepayment, then the
aggregate amount of such mandatory prepayment shall be allocated ratably to each
outstanding Borrowing of the accepting Lenders.

SECTION 2.14. Reserve Requirements; Change in Circumstances. (a) Notwithstanding
any other provision of this Agreement, if any Change in Law shall 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 which is reflected in the Adjusted LIBO
Rate) or shall impose on such 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 to reduce the amount of any sum
received or receivable by such Lender hereunder (whether of principal, interest
or otherwise), in each case, by an amount deemed by such Lender to be material,
then the Borrower will pay to such Lender upon demand such additional amount or
amounts as will compensate such Lender for such additional costs incurred or
reduction suffered.

(b) If any Lender shall have determined that any Change in Law regarding capital
adequacy has or would have the effect of reducing the rate of return on such
Lender’s capital or on the capital of such Lender’s holding company, if any, as
a consequence of this Agreement or the Loans made by such Lender pursuant hereto
to a level below that which such Lender or such Lender’s holding company could
have achieved but for such Change in Law (taking into consideration such
Lender’s policies and the policies of such Lender’s holding company with respect
to capital adequacy) by an amount deemed by such Lender to be material, then
from time to time the Borrower shall pay to such Lender such additional amount
or amounts as will compensate such Lender or such Lender’s holding company for
any such reduction suffered.

 

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(c) A certificate of a Lender setting forth the amount or amounts necessary to
compensate such Lender or its holding company, as applicable, as specified in
paragraph (a) or (b) above 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 delivered by it within 10 days after its
receipt of the same.

(d) Failure or delay on the part of any Lender to demand compensation for any
increased costs or reduction in amounts received or receivable or reduction in
return on capital shall not constitute a waiver of such Lender’s right to demand
such compensation; provided that the Borrower shall not be under any obligation
to compensate any Lender under paragraph (a) or (b) above with respect to
increased costs or reductions with respect to any period prior to the date that
is 120 days prior to such request if such Lender knew or could reasonably have
been expected to know of the circumstances giving rise to such increased costs
or reductions and of the fact that such circumstances would result in a claim
for increased compensation by reason of such increased costs or reductions;
provided further that the foregoing limitation shall not apply to any increased
costs or reductions arising out of the retroactive application of any Change in
Law within such 120-day period. The protection of this Section shall be
available to each Lender regardless of any possible contention of the invalidity
or inapplicability of the Change in Law that shall have occurred or been
imposed.

SECTION 2.15. Change in Legality. (a) Notwithstanding any other provision of
this Agreement, if any Change in Law shall make it unlawful for any Lender to
make or maintain any Eurodollar Loan or to give effect to its obligations as
contemplated hereby with respect to any Eurodollar Loan, then, by written notice
to the Borrower and to the Administrative Agent:

(i) such Lender may declare that Eurodollar Loans will not thereafter (for the
duration of such unlawfulness) be made by such Lender hereunder (or be continued
for additional Interest Periods and ABR Loans will not thereafter (for such
duration) be converted into Eurodollar Loans), whereupon any request for a
Eurodollar Borrowing (or to convert an ABR Borrowing to a Eurodollar Borrowing
or to continue a Eurodollar Borrowing for an additional Interest Period) shall,
as to such Lender only, be deemed a request for an ABR Loan (or a request to
continue an ABR Loan as such for an additional Interest Period or to convert a
Eurodollar Loan into an ABR Loan, as the case may be), unless such declaration
shall be subsequently withdrawn; and

(ii) such Lender may require that all outstanding Eurodollar Loans made by it be
converted to ABR Loans, in which event all such Eurodollar Loans shall be
automatically converted to ABR Loans as of the effective date of such notice as
provided in paragraph (b) below.

In the event any Lender shall exercise its rights under (i) or (ii) above, all
payments and prepayments of principal that would otherwise have been applied to
repay the Eurodollar Loans that would have been made by such Lender or the
converted Eurodollar Loans of such Lender shall instead be applied to repay the
ABR Loans made by such Lender in lieu of, or resulting from the conversion of,
such Eurodollar Loans.

 

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(b) For purposes of this Section 2.15, a notice to the Borrower by any Lender
shall be effective as to each Eurodollar Loan made by such Lender, if lawful, on
the last day of the Interest Period then applicable to such Eurodollar Loan; in
all other cases such notice shall be effective on the date of receipt by the
Borrower.

SECTION 2.16. Indemnity. The Borrower shall indemnify each Lender against any
loss or expense that such Lender sustains or incurs as a consequence of (a) any
event, other than a default by such Lender in the performance of its obligations
hereunder, which results in (i) such Lender receiving or being deemed to receive
any amount on account of the principal of any Eurodollar Loan prior to the end
of the Interest Period in effect therefor, (ii) the conversion of any Eurodollar
Loan to an ABR Loan, or the conversion of the Interest Period with respect to
any Eurodollar Loan, in each case other than on the last day of the Interest
Period in effect therefor, or (iii) any Eurodollar Loan to be made by such
Lender (including any Eurodollar Loan to be made pursuant to a conversion or
continuation under Section 2.10) not being made after notice of such Loan shall
have been given by the Borrower hereunder (any of the events referred to in this
clause (a) being called a “Breakage Event”) or (b) any default in the making of
any payment or prepayment required to be made hereunder. In the case of any
Breakage Event, such loss shall include an amount equal to the excess, as
reasonably determined by such Lender, of (i) its cost of obtaining funds for the
Eurodollar Loan that is the subject of such Breakage Event for the period from
the date of such Breakage Event to the last day of the Interest Period in effect
(or that would have been in effect) for such Loan over (ii) the amount of
interest likely to be realized by such Lender in redeploying the funds released
or not utilized by reason of such Breakage Event for such period. A certificate
of any Lender setting forth any amount or amounts which such Lender is entitled
to receive pursuant to this Section 2.16 shall be delivered to the Borrower and
shall be conclusive absent manifest error.

SECTION 2.17. Pro Rata Treatment. Except as required under Section 2.15 and in
respect of any election made pursuant to Section 2.13(g), each Borrowing, each
payment or prepayment of principal of any Borrowing, each payment of interest on
the Loans, each payment of any prepayment fee, each reduction of the Commitments
and each conversion of any Borrowing to or continuation of any Borrowing as a
Borrowing of any Type shall be allocated pro rata among the Lenders in
accordance with their respective Commitments (or, if such Commitments shall have
expired or been terminated, in accordance with the respective principal amounts
of their outstanding Loans). Each Lender agrees that in computing such Lender’s
portion of any Borrowing to be made hereunder, the Administrative Agent may, in
its discretion, round each Lender’s percentage of such Borrowing to the next
higher or lower whole dollar amount.

SECTION 2.18. Sharing of Setoffs. Each Lender agrees that if it shall, through
the exercise of a right of banker’s lien, setoff or counterclaim against the
Borrower or any other Loan Party, or pursuant to a secured claim under
Section 506 of Title 11 of the United States Code or other security or interest
arising from, or in lieu of, such secured claim, received by such Lender under
any applicable bankruptcy, insolvency or other similar law or otherwise, or by
any other means, obtain payment (voluntary or involuntary) in respect of any
Loan or Loans as a

 

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result of which the unpaid principal portion of its Loans shall be
proportionately less than the unpaid principal portion of the Loans of any other
Lender, it shall be deemed simultaneously to have purchased from such other
Lender at face value, and shall promptly pay to such other Lender the purchase
price for, a participation in the Loans of such other Lender, so that the
aggregate unpaid principal amount of the Loans and participations in Loans held
by each Lender shall be in the same proportion to the aggregate unpaid principal
amount of all Loans then outstanding as the principal amount of its Loans prior
to such exercise of banker’s lien, setoff or counterclaim or other event was to
the principal amount of all Loans outstanding prior to such exercise of banker’s
lien, setoff or counterclaim or other event; provided, however, that if any such
purchase or purchases or adjustments shall be made pursuant to this Section 2.18
and the payment giving rise thereto shall thereafter be recovered, such purchase
or purchases or adjustments shall be rescinded to the extent of such recovery
and the purchase price or prices or adjustment restored without interest. The
Borrower expressly consents to the foregoing arrangements and agrees that any
Lender holding a participation in a Loan deemed to have been so purchased may
exercise any and all rights of banker’s lien, setoff or counterclaim with
respect to any and all moneys owing by the Borrower to such Lender by reason
thereof as fully as if such Lender had made a Loan directly to the Borrower in
the amount of such participation.

SECTION 2.19. Payments. (a) The Borrower shall make each payment (including
principal of or interest on any Borrowing or any fees or other amounts)
hereunder and under any other Loan Document not later than 12:00 (noon), New
York City time, on the date when due in immediately available dollars, without
setoff, defense or counterclaim. Each such payment shall be made to the
Administrative Agent at its offices at Eleven Madison Avenue, New York, NY
10010.

(b) Except as otherwise expressly provided herein, whenever any payment
(including principal of or interest on any Borrowing or any fees or other
amounts) hereunder or under any other Loan Document shall become due, or
otherwise would occur, on a day that is not a Business Day, such payment may be
made on the next succeeding Business Day, and such extension of time shall in
such case be included in the computation of interest or fees, if applicable.

SECTION 2.20. Taxes. (a) Any and all payments by or on account of any obligation
of the Borrower or any other Loan Party hereunder or under any other Loan
Document shall be made free and clear of and without deduction for any
Indemnified Taxes or Other Taxes; provided that if the Borrower or any other
Loan Party 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) the Administrative Agent or such
Lender (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 or such Loan Party
shall make such deductions and (iii) the Borrower or such Loan Party shall pay
the full amount deducted to the relevant Governmental Authority in accordance
with applicable law.

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

 

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(c) The Borrower shall indemnify the Administrative Agent and each Lender,
within 10 days after written demand therefor, for the full amount of any
Indemnified Taxes or Other Taxes paid by the Administrative Agent or such
Lender, as the case may be, on or with respect to any payment by or on account
of any obligation of the Borrower or any other Loan Party hereunder or under any
other Loan Document (including Indemnified Taxes or Other Taxes imposed or
asserted on or attributable to amounts payable under this Section) 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. A
certificate as to the amount of such payment or liability delivered to the
Borrower by a Lender, or by the Administrative Agent on its behalf or on behalf
of a Lender, shall be conclusive absent manifest error.

(d) As soon as practicable after any payment of Indemnified Taxes or Other Taxes
by the Borrower or any other Loan Party 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) 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 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.

SECTION 2.21. Assignment of Commitments or Loans Under Certain Circumstances;
Duty to Mitigate. (a) In the event (i) any Lender delivers a certificate
requesting compensation pursuant to Section 2.14, (ii) any Lender delivers a
notice described in Section 2.15, (iii) the Borrower is required to pay any
additional amount to any Lender or any Governmental Authority on account of any
Lender pursuant to Section 2.20 or (iv) any Lender refuses to consent to any
amendment, waiver or other modification of any Loan Document requested by the
Borrower that requires the consent of a greater percentage of the Lenders than
the Required Lenders and such amendment, waiver or other modification is
consented to by the Required Lenders, the Borrower may, at its sole expense and
effort (including with respect to the processing and recordation fee referred to
in Section 9.04(b)), upon notice to such Lender and the Administrative Agent,
require such Lender to transfer and assign, without recourse (in accordance with
and subject to the restrictions contained in Section 9.04), all of its
interests, rights and obligations under this Agreement to an assignee that shall
assume such assigned obligations (which assignee may be another Lender, if a
Lender accepts such assignment); provided that (x) such assignment shall not
conflict with any law, rule or regulation or order of any court or other
Governmental Authority having jurisdiction, (y) the Borrower shall have received
the prior written consent of the Administrative Agent, which consent shall not
unreasonably be withheld, and (z) the Borrower or such assignee shall have paid
to the affected Lender in immediately available funds an amount equal to the sum
of the principal of and interest accrued to the date of such payment on the
outstanding Loans of such Lender plus all other amounts accrued for the account
of such Lender hereunder (including any amounts under Section 2.14 and
Section 2.16 and, if applicable,

 

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the prepayment fee pursuant to Section 2.12(b) (with such assignment being
deemed to be an optional prepayment for purposes of determining the
applicability of Section 2.12(b))); provided further that, if prior to any such
transfer and assignment the circumstances or event that resulted in such
Lender’s claim for compensation under Section 2.14 or notice under Section 2.15
or the amounts paid pursuant to Section 2.20, as the case may be, cease to cause
such Lender to suffer increased costs or reductions in amounts received or
receivable or reduction in return on capital, or cease to have the consequences
specified in Section 2.15, or cease to result in amounts being payable under
Section 2.20, as the case may be (including as a result of any action taken by
such Lender pursuant to paragraph (b) below), or if such Lender shall waive its
right to claim further compensation under Section 2.14 in respect of such
circumstances or event or shall withdraw its notice under Section 2.15 or shall
waive its right to further payments under Section 2.20 in respect of such
circumstances or event or shall consent to the proposed amendment, waiver,
consent or other modification, as the case may be, then such Lender shall not
thereafter be required to make any such transfer and assignment hereunder. Each
Lender hereby grants to the Administrative Agent an irrevocable power of
attorney (which power is coupled with an interest) to execute and deliver, on
behalf of such Lender as assignor, any Assignment and Acceptance necessary to
effectuate any assignment of such Lender’s interests hereunder in the
circumstances contemplated by this Section 2.21(a).

(b) If (i) any Lender shall request compensation under Section 2.14, (ii) any
Lender delivers a notice described in Section 2.15 or (iii) the Borrower is
required to pay any additional amount to any Lender or any Governmental
Authority on account of any Lender pursuant to Section 2.20, then such Lender
shall use reasonable efforts (which shall not require such Lender to incur an
unreimbursed loss or unreimbursed cost or expense or otherwise take any action
inconsistent with its internal policies or legal or regulatory restrictions or
suffer any disadvantage or burden deemed by it to be significant) (x) to file
any certificate or document reasonably requested in writing by the Borrower or
(y) to assign its rights and delegate and transfer its obligations hereunder to
another of its offices, branches or affiliates, if such filing or assignment
would reduce its claims for compensation under Section 2.14 or enable it to
withdraw its notice pursuant to Section 2.15 or would reduce amounts payable
pursuant to Section 2.20, as the case may be, in the future. The Borrower hereby
agrees to pay all reasonable costs and expenses incurred by any Lender in
connection with any such filing or assignment, delegation and transfer.

SECTION 2.22. Incremental Term Loans. (a) The Borrower may, by written notice to
the Administrative Agent from time to time, request Incremental Term Loan
Commitments in an amount not to exceed the Incremental Term Loan Amount from one
or more Incremental Term Loan Lenders, which may include any existing Lender;
provided that each Incremental Term Loan Lender, if not already a Lender
hereunder, shall be subject to the approval of the Administrative Agent (which
approval shall not be unreasonably withheld or delayed). Such notice shall set
forth (i) the amount of the Incremental Term Loan Commitments being requested
(which shall be in minimum increments of $1,000,000 and a minimum amount of
$5,000,000 or such lesser amount equal to the remaining Incremental Term Loan
Amount), (ii) the date on which such Incremental Term Loan Commitments are
requested to become effective (which shall not be less than 10 Business Days nor
more than 60 days after the date of such notice), and (iii) whether such
Incremental Term Loan Commitments are commitments to make additional Term Loans
or commitments to make term loans with terms different from the Term Loans
(“Other Term Loans”).

 

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(b) The Borrower and each Incremental Term Loan Lender shall execute and deliver
to the Administrative Agent an Incremental Term Loan Assumption Agreement and
such other documentation as the Administrative Agent shall reasonably specify to
evidence the Incremental Term Loan Commitment of each Incremental Term Loan
Lender. Each Incremental Term Loan Assumption Agreement shall specify the terms
of the Incremental Term Loans to be made thereunder; provided that, without the
prior written consent of the Required Lenders, (i) the final maturity date of
any Other Term Loans shall be no earlier than the Term Loan Maturity Date,
(ii) the average life to maturity of the Other Term Loans shall be no shorter
than the average life to maturity of the Term Loans and (iii) if the initial
yield on such Other Term Loans (as determined by the Administrative Agent to be
equal to the sum of (x) the margin above the Adjusted LIBO Rate on such Other
Term Loans and (y) if such Other Term Loans are initially made at a discount or
the Lenders making the same receive a fee directly or indirectly from Holdings,
the Borrower or any Subsidiary for doing so (the amount of such discount or fee,
expressed as a percentage of the Other Term Loans, being referred to herein as
“OID”), the amount of such OID divided by the lesser of (A) the average life to
maturity of such Other Term Loans and (B) four) exceeds by more than 50 basis
points (the amount of such excess above 50 basis points being referred to herein
as the “Yield Differential”) the Applicable Percentage then in effect for
Eurodollar Term Loans, then the Applicable Percentage then in effect for Term
Loans shall automatically be increased by the Yield Differential, effective upon
the making of the Other Term Loans. The Administrative Agent shall promptly
notify each Lender as to the effectiveness of each Incremental Term Loan
Assumption Agreement. Each of the parties hereto hereby agrees that, upon the
effectiveness of any Incremental Term Loan Assumption Agreement, this Agreement
shall be deemed amended to the extent (but only to the extent) necessary to
reflect the existence and terms of the Incremental Term Loan Commitment and the
Incremental Term Loans evidenced thereby.

(c) Notwithstanding the foregoing, no Incremental Term Loan Commitment shall
become effective under this Section 2.22 unless (i) on the date of such
effectiveness, the conditions set forth in paragraphs (b) and (c) of Article IV
shall be satisfied and the Administrative Agent shall have received a
certificate to that effect dated such date and executed by a Financial Officer
of the Borrower, and (ii) except as otherwise specified in the applicable
Incremental Term Loan Assumption Agreement, the Administrative Agent shall have
received (with sufficient copies for each of the Incremental Term Loan Lenders)
legal opinions, board resolutions and other closing certificates reasonably
requested by the Administrative Agent and consistent with those delivered on the
Closing Date under Article IV.

(d) Each of the parties hereto hereby agrees that the Administrative Agent may,
in consultation with the Borrower, take any and all action as may be reasonably
necessary to ensure that all Incremental Term Loans (other than Other Term
Loans), when originally made, are included in each Borrowing of outstanding Term
Loans on a pro rata basis. This may be accomplished by requiring each
outstanding Eurodollar Borrowing to be converted into an ABR Borrowing on the
date of each Incremental Term Loan, or by allocating a portion of each
Incremental Term Loan to each outstanding Eurodollar Term Borrowing on a pro
rata basis. Any conversion of Eurodollar Term Loans to ABR Term Loans required
by the preceding sentence shall be subject to Section 2.16. If any Incremental
Term Loan is to be allocated to an existing Interest Period for a Eurodollar
Borrowing, then the interest rate thereon for such Interest Period and the other
economic consequences thereof shall be as set forth in the applicable
Incremental Term Loan Assumption Agreement.

 

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ARTICLE III

Representations and Warranties

The Borrower represents and warrants to the Administrative Agent, the Collateral
Agent and each of the Lenders that:

SECTION 3.01. Organization; Powers. The Borrower and each of the Subsidiaries
(a) is duly organized, validly existing and in good standing under the laws of
the jurisdiction of its organization, (b) has all requisite power and authority
to own its property and assets and to carry on its business as now conducted and
as proposed to be conducted, (c) is qualified to do business in, and is in good
standing in, every jurisdiction where such qualification is required, except
where the failure so to qualify could not reasonably be expected to result in a
Material Adverse Effect, and (d) has the power and authority to execute, deliver
and perform its obligations under each of the Loan Documents and each other
agreement or instrument contemplated hereby or thereby to which it is or will be
a party and, in the case of the Borrower, to borrow hereunder.

SECTION 3.02. Authorization. The Transactions (a) have been duly authorized by
all requisite corporate and, if required, stockholder action and (b) will not
(i) violate (A) any provision of law, statute, rule or regulation, or of the
certificate or articles of incorporation or other constitutive documents or
by-laws of the Borrower or any Subsidiary, (B) any order of any Governmental
Authority or (C) any provision of any indenture, agreement or other instrument
to which the Borrower or any Subsidiary is a party or by which any of them or
any of their property is or may be bound, (ii) be in conflict with, result in a
breach of or constitute (alone or with notice or lapse of time or both) a
default under, or give rise to any right to accelerate or to require the
prepayment, repurchase or redemption of any obligation under any such indenture,
agreement or other instrument or (iii) result in the creation or imposition of
any Lien upon or with respect to any property or assets now owned or hereafter
acquired by the Borrower or any Subsidiary (other than any Lien created
hereunder or under the Security Documents).

SECTION 3.03. Enforceability. This Agreement has been duly executed and
delivered by the Borrower and constitutes, and each other Loan Document when
executed and delivered by each Loan Party party thereto will constitute, a
legal, valid and binding obligation of such Loan Party enforceable against such
Loan Party in accordance with its terms.

SECTION 3.04. Governmental Approvals. No action, consent or approval of,
registration or filing with or any other action by any Governmental Authority is
or will be required in connection with the Transactions, except for (a) the
filing of Uniform Commercial Code financing statements and filings with the
United States Patent and Trademark Office and the United States Copyright
Office, (b) the recordation of the Mortgages, (c) such as have been made or
obtained and are in full force and effect and (d) filings required by the
Securities Exchange Act of 1934, as amended.

 

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SECTION 3.05. Financial Statements. The Borrower has heretofore furnished to the
Lenders its consolidated balance sheets and related statements of income,
shareholders’ equity and cash flows (i) as of and for the fiscal year ended
December 31, 2005, audited by and accompanied by the unqualified opinion of
Deloitte & Touche LLP, independent public accountants, and (ii) as of and for
the fiscal quarter and the portion of the fiscal year ended September 30, 2006,
certified by its chief financial officer. Such financial statements present
fairly the financial condition and results of operations and cash flows of the
Borrower and its consolidated Subsidiaries as of such dates and for such
periods. Such balance sheets and the notes thereto disclose all material
liabilities, direct or contingent, of the Borrower and its consolidated
Subsidiaries as of the dates thereof. Such financial statements were prepared in
accordance with GAAP applied on a consistent basis, subject, in the case of
unaudited financial statements, to year end audit adjustments and the absence of
footnotes.

SECTION 3.06. No Material Adverse Change. No event, change or condition has
occurred that has had, or could reasonably be expected to have, a material
adverse effect on the business, assets, operations or condition (financial or
otherwise) of the Borrower and the Subsidiaries, taken as a whole, since
December 31, 2005.

SECTION 3.07. Title to Properties; Possession Under Leases. (a) Other than the
Oil and Gas Properties (which are the subject of paragraph (b) below), the
Borrower and each of the Subsidiaries has good and marketable title to, or valid
leasehold interests in, all its material properties and assets, except for minor
defects in title that do not interfere with its ability to conduct its business
as currently conducted or to utilize such properties and assets for their
intended purposes. All such material properties and assets are free and clear of
Liens, other than Liens expressly permitted by Section 6.02.

(b) The Borrower and each of the Subsidiaries has good and marketable title to
all of the Oil and Gas Properties included in the most recent Reserve Report
delivered pursuant to 5.04(d) free from all Liens, claims and title
imperfections, except for (i) such imperfections of title as do not in the
aggregate detract from the value thereof to, or the use thereof in, the business
of the Borrower or any of its Subsidiaries in any material respect, (ii) Oil and
Gas Properties disposed of since the date of the most recent Reserve Report as
permitted by Section 6.05, and (iii) Liens expressly permitted by Section 6.02.
The quantum and nature of the interest of the Borrower and the Subsidiaries in
and to the Oil and Gas Properties as set forth in each Reserve Report includes
or will include the entire interest of the Borrower and the Subsidiaries in such
Oil and Gas Properties as of the date of such Reserve Report and are or will be
complete and accurate in all material respects as of the date of such Reserve
Report; and there are no “back-in” or “reversionary” interests held by third
parties which could reduce the interest of the Borrower and the Subsidiaries in
such Oil and Gas Properties in any material respect, except as expressly set
forth or given effect to in such Reserve Report.

(c) Each of the Borrower and each of the Subsidiaries has complied with all
obligations under all licenses, leases and term mineral interests in the Oil and
Gas Properties and all such licenses, leases and term mineral interests are
valid, subsisting and in full force and effect, and neither the Borrower nor any
of the Subsidiaries has knowledge that a default exists under any of the terms
or provisions, express or implied, of any of such licenses, leases or interests
or under any agreement to which the same are subject, except to the extent any
inaccuracy in the

 

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foregoing could not reasonably be expected to result in a Material Adverse
Effect. All of the Oil and Gas Contracts and obligations of the Borrower and the
Subsidiaries that relate to the Oil and Gas Properties are in full force and
effect and constitute legal, valid and binding obligations of the Borrower and
the Subsidiaries party thereto, except to the extent any inaccuracy in the
foregoing could not reasonably be expected to result in a Material Adverse
Effect. None of the Borrower or any of the Subsidiaries or, to the knowledge of
the Borrower and the Subsidiaries, any other party to any licenses, leases or
term mineral interests in the Oil and Gas Properties or any Oil and Gas Contract
(i) is in breach of or default, or with the lapse of time or the giving of
notice, or both, would be in breach or default, with respect to any obligations
thereunder, whether express or implied, except such that could not reasonably be
expected to result in a Material Adverse Effect or (ii) has given or threatened
to give notice of any default under or inquiry into any possible default under,
or action to alter, terminate, rescind or procure a judicial reformation of, any
licenses or lease in the Oil and Gas Properties or any Oil and Gas Contract.
Each of the Borrower and each of the Subsidiaries enjoys peaceful and
undisturbed possession under all such licenses, leases and term mineral
interests.

(d) The Borrower has not received any notice of, nor has any knowledge of, any
pending or contemplated condemnation proceeding affecting the Mortgaged
Properties or any sale or disposition thereof in lieu of condemnation.

(e) Neither the Borrower nor any of the Subsidiaries is obligated under any
right of first refusal, option or other contractual right to sell, assign or
otherwise dispose of any Mortgaged Property or any interest therein.

SECTION 3.08. Subsidiaries. Schedule 3.08 sets forth as of the Closing Date a
list of all Subsidiaries and the percentage ownership interest of the Borrower
therein. The shares of capital stock or other ownership interests so indicated
on Schedule 3.08 are fully paid and non-assessable and are owned by the
Borrower, directly or indirectly, free and clear of all Liens (other than Liens
created under the Security Documents).

SECTION 3.09. Litigation; Compliance with Laws. (a) Except as set forth on
Schedule 3.09, there are not any actions, suits or proceedings at law or in
equity or by or before any Governmental Authority now pending or, to the
knowledge of the Borrower, threatened against or affecting the Borrower, any
Subsidiary or any business, property or rights of any such person (i) that
involve any Loan Document or the Transactions or (ii) as to which there is a
reasonable possibility of an adverse determination and that, if adversely
determined, could reasonably be expected, individually or in the aggregate, to
result in a Material Adverse Effect.

(b) Neither of the Borrower nor any of the Subsidiaries or any of their
respective material properties or assets is in violation of, nor will the
continued operation of their material properties and assets as currently
conducted violate, any law, rule or regulation applicable to the Oil and Gas
Business or any other applicable law, rule or regulation (including any zoning,
building, Environmental Law, ordinance, code or approval or any building
permits) or any restrictions of record or agreements affecting any Mortgaged
Property, or is in default with respect to any judgment, writ, injunction,
decree or order of any Governmental Authority, where such violation or default
could reasonably be expected to result in a Material Adverse Effect.

 

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SECTION 3.10. Agreements. (a) None of the Borrower or any of the Subsidiaries is
a party to any agreement or instrument or subject to any corporate restriction
that has resulted or could reasonably be expected to result in a Material
Adverse Effect.

(b) None of the Borrower or any of the Subsidiaries is in default in any manner
under any provision of any indenture or other agreement or instrument evidencing
Indebtedness, or any other material agreement or instrument to which it is a
party or by which it or any of its properties or assets are or may be bound,
where such default could reasonably be expected to result in a Material Adverse
Effect.

SECTION 3.11. Federal Reserve Regulations. (a) None of the Borrower or any of
the Subsidiaries is engaged principally, or as one of its important activities,
in the business of extending credit for the purpose of buying or carrying Margin
Stock.

(b) No part of the proceeds of any Loan will be used, whether directly or
indirectly, and whether immediately, incidentally or ultimately, for any purpose
that entails a violation of, or that is inconsistent with, the provisions of the
Regulations of the Board, including Regulation T, U or X.

SECTION 3.12. Investment Company Act. None of the Borrower or any Subsidiary is
an “investment company” as defined in, or subject to regulation under, the
Investment Company Act of 1940.

SECTION 3.13. Use of Proceeds. The Borrower will use the proceeds of the Loans
only for the purposes specified in the preliminary statement to this Agreement
and for the purposes specified in the applicable Incremental Term Loan
Assumption Agreement.

SECTION 3.14. Tax Returns. Each of the Borrower and each of the Subsidiaries has
filed or caused to be filed all Federal, state, local and foreign tax returns or
materials required to have been filed by it and has paid or caused to be paid
all taxes due and payable by it and all assessments received by it, except taxes
that are being contested in good faith by appropriate proceedings and for which
the Borrower or such Subsidiary, as applicable, shall have set aside on its
books adequate reserves.

SECTION 3.15. No Material Misstatements. None of (a) the Confidential
Information Memorandum or (b) any other information, report, financial
statement, exhibit or schedule furnished by or on behalf of the Borrower to the
Administrative Agent or any Lender in connection with the negotiation of any
Loan Document or included therein or delivered pursuant thereto contained,
contains or will contain any material misstatement of fact or omitted, omits or
will omit to state any material fact necessary to make the statements therein,
in the light of the circumstances under which they were, are or will be made,
not misleading; provided that to the extent any such information, report,
financial statement, exhibit or schedule was based upon or constitutes a
forecast or projection, the Borrower represents only that it acted in good faith
and utilized reasonable assumptions and due care in the preparation of such
information, report, financial statement, exhibit or schedule.

SECTION 3.16. Employee Benefit Plans. Each of the Borrower and each of its ERISA
Affiliates is in compliance in all material respects with the applicable
provisions of ERISA and

 

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the Code and the regulations and published interpretations thereunder. No ERISA
Event has occurred or is reasonably expected to occur that, when taken together
with all other such ERISA Events, could reasonably be expected to result in
material liability of the Borrower or any of its ERISA Affiliates. The present
value of all benefit liabilities under each Plan (based on the assumptions used
for purposes of Statement of Financial Accounting Standards No. 87) did not, as
of the last annual valuation date applicable thereto, exceed the fair market
value of the assets of such Plan by an amount that is material, and the present
value of all benefit liabilities of all underfunded Plans (based on the
assumptions used to fund such plan) did not, as of the last annual valuation
dates applicable thereto, exceed the fair market value of the assets of all such
underfunded Plans by an amount that is material.

SECTION 3.17. Environmental Matters. Except as set forth in Schedule 3.17 and
except with respect to any other matters that, individually or in the aggregate,
could not reasonably be expected to result in a Material Adverse Effect, none of
the Borrower or any of the Subsidiaries (i) has failed to comply with any
Environmental Law or to obtain, maintain or comply with any permit, license or
other approval required under any Environmental Law, (ii) has become subject to
any Environmental Liability, (iii) has received notice of any claim with respect
to any Environmental Liability or (iv) knows of any basis for any Environmental
Liability on its part.

SECTION 3.18. Insurance. Schedule 3.18 sets forth a true, complete and correct
description of all insurance maintained by the Borrower or by the Borrower for
its Subsidiaries as of the Closing Date. As of such date, such insurance is in
full force and effect and all premiums have been duly paid. The Borrower and its
Subsidiaries have insurance in such amounts and covering such risks and
liabilities as are in accordance with normal industry practice.

SECTION 3.19. Security Documents. (a) The Guarantee and Collateral Agreement,
upon execution and delivery thereof by the parties thereto, will create in favor
of the Collateral Agent, for the ratable benefit of the Secured Parties, a
legal, valid and enforceable security interest in the Collateral (as defined in
the Guarantee and Collateral Agreement) and the proceeds thereof and (i) with
the Pledged Collateral (as defined in the Guarantee and Collateral Agreement)
having been previously delivered to the collateral agent under the First Lien
Facilities (who will hold such Pledged Collateral as bailee for perfection for
the Collateral Agent), the Guarantee and Collateral Agreement constitutes, or in
the case of Pledged Collateral to be delivered to the Collateral Agent in the
future, the Guarantee and Collateral Agreement will constitute, a fully
perfected first priority Lien on, and security interest in, all right, title and
interest of the Loan Parties in such Pledged Collateral, in each case prior and
superior in right to any other person (such Lien to secure the obligations under
the First Lien Facilities on a first priority basis and the Obligations on a
second priority basis), and (ii) when financing statements in appropriate form
are filed in the offices specified on Schedule 3.19(a), the Lien created under
the Guarantee and Collateral Agreement will constitute a fully perfected Lien
on, and security interest in, all right, title and interest of the Loan Parties
in such Collateral (other than Intellectual Property, as defined in the
Guarantee and Collateral Agreement), in each case prior and superior in right to
any other person, other than with respect to Liens expressly permitted by
Section 6.02.

 

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(b) Upon the recordation of the Guarantee and Collateral Agreement (or a short
form security agreement in form and substance reasonably satisfactory to the
Borrower and the Collateral Agent) with the United States Patent and Trademark
Office and the United States Copyright Office, together with the financing
statements in appropriate form filed in the offices specified on Schedule
3.19(a), the Guarantee and Collateral Agreement shall constitute a fully
perfected Lien on, and security interest in, all right, title and interest of
the Loan Parties in the Intellectual Property (as defined in the Guarantee and
Collateral Agreement) in which a security interest may be perfected by filing in
the United States and its territories and possessions, in each case prior and
superior in right to any other person (it being understood that subsequent
recordings in the United States Patent and Trademark Office and the United
States Copyright Office may be necessary to perfect a Lien on registered
trademarks, trademark applications, patents and copyrights acquired by the Loan
Parties after the date hereof, and that such Lien will secure the obligations
under the First Lien Facilities on a first priority basis and the Obligations on
a second priority basis).

(c) The Mortgages are effective to create in favor of the Collateral Agent, for
the ratable benefit of the Secured Parties (subject to the Lien priorities set
forth in the Intercreditor Agreement), a legal, valid and enforceable Lien on
all of the Loan Parties’ right, title and interest in and to the Mortgaged
Property thereunder and the proceeds thereof, and when the Mortgages are filed
in the offices specified on Schedule 3.19(c), the Mortgages shall constitute a
fully perfected Lien on, and security interest in, all right, title and interest
of the Loan Parties in such Mortgaged Property and the proceeds thereof, in each
case prior and superior in right to any other person, other than with respect to
the rights of persons pursuant to Liens expressly permitted by Section 6.02.

(d) The Foreign Pledge Agreements, upon execution and, where relevant as a legal
concept, delivery thereof by the parties thereto, will create in favor of the
Collateral Agent, for the ratable benefit of the Secured Parties, a legal, valid
and enforceable security interest in the Foreign Pledged Collateral described
therein and the proceeds thereof and with the Foreign Pledged Collateral having
been previously delivered to the collateral agent under the First Lien
Facilities (who will hold such Pledged Collateral as bailee for perfection for
the Collateral Agent) and when the Foreign Pledge Agreements are filed in the
offices specified on Schedule 3.19(d), or other appropriate instruments are
filed or other actions are taken, all as described on Schedule 3.19(d), the
Foreign Pledge Agreements shall provide for a fully perfected first priority
Lien on, and security interest in, all right, title and interest of the Loan
Parties in the Foreign Pledged Collateral, in each case prior and superior in
right to any other person (such Lien to secure the obligations under the First
Lien Facilities on a first priority basis and the Obligations on a second
priority basis), other than with respect to Liens expressly permitted by
Section 6.02.

SECTION 3.20. Location of Oil and Gas Properties, Real Property and Leased
Premises. (a) Schedule 3.20(a) lists completely and correctly as of the Closing
Date all Oil and Gas Properties of the Borrower and the Subsidiaries and the
location and a property description thereof.

(b) Schedule 3.20(b) lists completely and correctly as of the Closing Date all
real property (other than Oil and Gas Properties) owned by the Borrower and the
Subsidiaries and the addresses thereof. The Borrower and the Subsidiaries own in
fee all the real property set forth on Schedule 3.20(b).

 

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(c) Schedule 3.20(c) lists completely and correctly as of the Closing Date all
real property (other than Oil and Gas Properties) leased by the Borrower and the
Subsidiaries and the addresses thereof. The Borrower and the Subsidiaries have
valid leasehold interests in all the real property set forth on
Schedule 3.20(c).

SECTION 3.21. Future Commitments. As of the Closing Date, on a net basis there
are no material gas imbalances, take-or-pay or other prepayments with respect to
any Oil and Gas Property of the Borrower or any Subsidiary that would require
the Borrower or any Subsidiary to deliver Hydrocarbons produced from Oil and Gas
Properties at some future time without then or thereafter receiving full payment
therefor.

SECTION 3.22. Labor Matters. As of the Closing Date, there are no strikes,
lockouts or slowdowns against the Borrower or any Subsidiary pending or, to the
knowledge of the Borrower, threatened. The hours worked by and payments made to
employees of the Borrower and the Subsidiaries have not been in violation in any
material respect of the Fair Labor Standards Act or any other applicable
Federal, state, local or foreign law dealing with such matters. All payments due
from the Borrower or any Subsidiary, or for which any claim may be made against
the Borrower or any Subsidiary, on account of wages and employee health and
welfare insurance and other benefits, have been paid or accrued as a liability
on the books of the Borrower or such Subsidiary. The consummation of the
Transactions will not give rise to any right of termination or right of
renegotiation on the part of any union under any collective bargaining agreement
to which the Borrower or any Subsidiary is bound.

SECTION 3.23. Solvency. Immediately after the consummation of the Transactions
to occur on the Closing Date and immediately following the making of each Loan
and after giving effect to the application of the proceeds of each Loan, (a) the
fair value of the assets of the Loan Parties, taken as a whole, at a fair
valuation, will exceed their debts and liabilities, subordinated, contingent or
otherwise, taken as a whole; (b) the present fair saleable value of the property
of the Loan Parties will be greater than the amount that will be required to pay
the probable liability of their debts and other liabilities, subordinated,
contingent or otherwise, as such debts and other liabilities become absolute and
matured; (c) the Loan Parties taken as a whole will be able to pay their debts
and liabilities, subordinated, contingent or otherwise, as such debts and
liabilities become absolute and matured; and (d) the Loan Parties will not have
unreasonably small capital with which to conduct the business in which they are
engaged as such businesses are now conducted and are proposed to be conducted
following the Closing Date.

ARTICLE IV

Conditions of Lending

The obligations of the Lenders to make Loans hereunder are subject to the
satisfaction of the following conditions:

(a) The Administrative Agent shall have received a notice of the Borrowing as
required by Section 2.03.

 

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(b) The representations and warranties set forth in Article III hereof and in
each other Loan Document shall be true and correct in all material respects on
and as of the date of such Borrowing with the same effect as though made on and
as of such date, except to the extent such representations and warranties
expressly relate to an earlier date.

(c) The Borrower and each other Loan Party shall be in compliance with all the
terms and provisions set forth herein and in each other Loan Document on its
part to be observed or performed at or prior to the time of such Borrowing, and
at the time of and immediately after such Borrowing, no Event of Default or
Default shall have occurred and be continuing.

(d) The Administrative Agent shall have received, on behalf of itself and the
Lenders, a favorable written opinion of (i) Jackson Walker L.L.P., counsel for
the Borrower, substantially to the effect set forth in Exhibit I-1, and
(ii) each local counsel listed on Schedule 4(d), substantially to the effect set
forth in Exhibit I-2, in each case (A) dated the Closing Date, (B) addressed to
the Administrative Agent and the Lenders and (C) covering such other matters
relating to the Loan Documents and the Transactions as the Administrative Agent
shall reasonably request, and the Borrower hereby requests such counsel to
deliver such opinions.

(e) All legal matters incident to this Agreement, the Borrowings and extensions
of credit hereunder and the other Loan Documents shall be satisfactory to the
Lenders and to the Administrative Agent.

(f) The Administrative Agent shall have received (i) a certificate of the
Secretary or Assistant Secretary of each Loan Party dated the Closing Date and
certifying (A) that attached thereto is a true and complete copy of the
certificate or articles of incorporation, including all amendments thereto, of
each Loan Party, certified as of a recent date by the Secretary of State (or
other similar official) of the jurisdiction of its organization, (B) that the
certificate or articles of incorporation of such Loan Party have not been
amended since the date of the last amendment thereto shown on the certificate of
good standing furnished pursuant to clause (C) below, (C) that attached thereto
is a true and complete copy of a certificate as to the good standing of each
Loan Party as of a recent date, from such Secretary of State (or other similar
official), (D) that attached thereto is a true and complete copy of the by-laws
of such Loan Party as in effect on the Closing Date and at all times since a
date prior to the date of the resolutions described in clause (E) below,
(E) that attached thereto is a true and complete copy of resolutions duly
adopted by the Board of Directors of such Loan Party authorizing the execution,
delivery and performance of this Agreement and the other Loan Documents to which
such person is a party and, in the case of the Borrower, the borrowings
hereunder, and that such resolutions have not been modified, rescinded or
amended and are in full force and effect and (F) as to the incumbency and
specimen signature of each officer executing this Agreement and any other Loan
Document or any other document delivered in connection herewith on behalf of
such Loan Party; (ii) a certificate of another officer as to the incumbency and
specimen signature of the Secretary or Assistant Secretary executing the
certificate pursuant to clause (i) above; and (iii) such other documents as the
Lenders or the Administrative Agent may reasonably request.

 

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(g) The Administrative Agent shall have received a certificate, dated the
Closing Date and signed by a Financial Officer of the Borrower, confirming
compliance with the conditions precedent set forth in paragraphs (b) and (c) of
this Article IV.

(h) The Lenders shall have received the financial statements and opinion
referred to in Section 3.05, none of which shall demonstrate a material adverse
change in the financial condition of the Borrower from (and shall not otherwise
be materially inconsistent with) the financial statements or forecasts
previously provided to the Lenders.

(i) The Administrative Agent shall have received (i) an annual Reserve Report
(as described in the definition of such term) for the fiscal year ended
December 31, 2005 and (ii) a semi-annual Reserve Report (as so described) for
the fiscal period ended June 30, 2006, setting forth, among other things, the
information required under Section 5.04(d).

(j) The Administrative Agent shall have received all fees and other amounts due
and payable on or prior to the Closing Date, including, to the extent invoiced,
reimbursement or payment of all reasonable out-of-pocket expenses required to be
reimbursed or paid by the Borrower hereunder or under any other Loan Document.

(k) The Security Documents shall have been duly executed by each Loan Party that
is to be a party thereto and shall be in full force and effect on the Closing
Date. The Collateral Agent on behalf of the Secured Parties shall have a
security interest in the Collateral of the type and priority described in each
Security Document. Certificates representing such Pledged Collateral (as defined
in the Guarantee and Collateral Agreement) and Foreign Pledged Collateral (to
the extent certificated), in each case accompanied by instruments of transfer
and stock powers endorsed in blank, shall have been delivered to the collateral
agent under the First Lien Facilities (who will hold such Pledged Collateral as
bailee for perfection for the Collateral Agent) (or in the case of any
uncertificated Foreign Pledged Collateral, arrangements consistent with
applicable local law and reasonably satisfactory to the Collateral Agent in
respect thereof shall have been implemented).

(l) The Collateral Agent shall have received a Perfection Certificate with
respect to the Borrower and the other Loan Parties dated the Closing Date and
duly executed by a Responsible Officer of the Borrower, and shall have received
the results of a search of the Uniform Commercial Code filings (or equivalent
filings) made with respect to the Borrower and the other Loan Parties in the
states (or other jurisdictions) of formation of such persons, in which the chief
executive office of each such person is located and in the other jurisdictions
in which such persons maintain property, in each case as indicated on such
Perfection Certificate, together with copies of the financing statements (or
similar documents) disclosed by such search, and accompanied by evidence
satisfactory to the Collateral Agent that the Liens indicated in any such
financing statement (or similar document) would be permitted under Section 6.02
or have been or will be contemporaneously released or terminated.

(m) (i) Each of the Security Documents, in form and substance satisfactory to
the Lenders, relating to each of the Mortgaged Properties shall have been duly
executed by the parties thereto and delivered to the Collateral Agent and shall
be in full force and effect on the Closing Date (or on such date as the Borrower
and Collateral Agent shall reasonably agree),

 

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(ii) each of such Mortgaged Properties shall not be subject to any Lien other
than those permitted under Section 6.02 and (iii) the Collateral Agent shall
have received on the Closing Date (or on such date as the Borrower and
Collateral Agent shall reasonably agree) such other documents, surveys,
abstracts, appraisals and legal opinions required to be furnished pursuant to
the terms of the Mortgages or as reasonably requested by the Collateral Agent or
the Lenders.

(n) The Administrative Agent shall have received a copy of, or a certificate as
to coverage under, the insurance policies required by Section 5.02 and the
applicable provisions of the Security Documents, each of which shall be endorsed
or otherwise amended to include a customary lender’s loss payable endorsement
and to name the Collateral Agent as additional insured, in form and substance
satisfactory to the Administrative Agent.

(o) The Amendment Agreement shall have become effective in accordance with its
terms, and the Administrative Agent shall have received reasonably satisfactory
evidence thereof. The Borrower shall have received gross cash proceeds of not
less than $375,000,000 from the borrowings under the First Lien Credit Agreement
pursuant to the Amendment Agreement. Immediately after giving effect to the
Transactions and the other transactions contemplated hereby, the Borrower and
the Subsidiaries shall have outstanding no Indebtedness or Preferred Equity
Interests other than (a) Indebtedness outstanding under this Agreement,
(b) Indebtedness under the First Lien Facilities, (c) Indebtedness set forth on
Schedule 6.01 and (d) Existing Preferred Stock pending the repurchase,
redemption or other refinancing thereof.

(p) The Administrative Agent shall have received a certificate, dated the
Closing Date and signed by the chief financial officer of the Borrower,
certifying that the Borrower and its Subsidiaries, on a consolidated basis after
giving effect to the Transactions, are solvent.

(q) All requisite Governmental Authorities and third parties shall have approved
or consented to the Transactions and the other transactions contemplated hereby
to the extent required, all applicable appeal periods shall have expired and
there shall not be any pending or threatened litigation, governmental,
administrative or judicial action that could reasonably be expected to restrain,
prevent or impose materially burdensome conditions on the Transactions or the
other transactions contemplated hereby.

(r) The Lenders shall have received, to the extent requested, all documentation
and other information required by regulatory authorities under applicable “know
your customer” and anti-money laundering rules and regulations, including the
USA Patriot Act.

ARTICLE V

Affirmative Covenants

The Borrower covenants and agrees with each Lender that so long as this
Agreement shall remain in effect and until the Commitments have been terminated
and the principal of and interest on each Loan and all fees and all other
expenses or amounts payable under any Loan Document shall have been paid in
full, unless the Required Lenders shall otherwise consent in writing, the
Borrower will, and will cause each of the Subsidiaries to:

 

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SECTION 5.01. Existence; Businesses; Oil and Gas Properties. (a) Do or cause to
be done all things necessary to preserve, renew and keep in full force and
effect its legal existence, except as otherwise expressly permitted under
Section 6.05.

(b) Do or cause to be done all things necessary to obtain, preserve, renew,
extend and keep in full force and effect the rights, licenses, permits,
franchises, authorizations, patents, copyrights, trademarks and trade names
material to the conduct of its business; maintain and operate such business in
substantially the manner in which it is currently conducted and operated; comply
in all material respects with all applicable laws, rules, regulations and
decrees and orders of any Governmental Authority, whether now in effect or
hereafter enacted; and at all times maintain and preserve all property material
to the conduct of such business and keep such property in good repair, working
order and condition and from time to time make, or cause to be made, all needful
and proper repairs, renewals, additions, improvements and replacements thereto
necessary in order that the business carried on in connection therewith may be
properly conducted at all times.

(c) Comply in all material respects with the terms and provisions of all oil and
gas leases and licenses relating to the Oil and Gas Properties of the Borrower
and the Subsidiaries and all contracts and agreements relating thereto or to the
production and sale of Hydrocarbons therefrom; and with respect to any such Oil
and Gas Properties or oil and gas gathering assets that are operated by
operators other than the Borrower or a Subsidiary, use all commercially
reasonable efforts to enforce in a manner consistent with industry practice the
operator’s contractual obligations to maintain, develop, and operate such Oil
and Gas Properties and oil and gas gathering assets in accordance with the
applicable operating agreements.

SECTION 5.02. Insurance. (a) Keep its insurable properties adequately insured at
all times by financially sound and reputable insurers; maintain such other
insurance, to such extent and against such risks, including fire and other risks
insured against by extended coverage, as is customary with companies in the same
or similar businesses operating in the same or similar locations, including
public liability insurance against claims for personal injury or death or
property damage occurring upon, in, about or in connection with the use of any
properties owned, occupied or controlled by it; and maintain such other
insurance as may be required by law.

(b) Cause all such policies covering any Collateral to be endorsed or otherwise
amended to include a customary lender’s loss payable endorsement, in form and
substance satisfactory to the Administrative Agent and the Collateral Agent,
which endorsement shall provide that, from and after the Closing Date, if the
insurance carrier shall have received written notice from the Administrative
Agent or the Collateral Agent of the occurrence of an Event of Default, the
insurance carrier shall pay all proceeds otherwise payable to the Borrower or
the Loan Parties under such policies directly to the Collateral Agent; cause all
such policies to provide that neither the Borrower, the Administrative Agent,
the Collateral Agent nor any other party shall be a coinsurer thereunder and to
contain a “Replacement Cost Endorsement”, without any deduction for
depreciation, and such other provisions as the Administrative Agent or the
Collateral Agent may reasonably require from time to time to protect their
interests; deliver original or certified copies of all such policies or
certificates evidencing such policies to the Collateral Agent; cause each such
policy to provide that it shall not be canceled, modified or not renewed (i) by
reason of

 

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nonpayment of premium upon not less than 10 days’ prior written notice thereof
by the insurer to the Administrative Agent and the Collateral Agent (giving the
Administrative Agent and the Collateral Agent the right to cure defaults in the
payment of premiums) or (ii) for any other reason upon not less than 30 days’
prior written notice thereof by the insurer to the Administrative Agent and the
Collateral Agent; deliver to the Administrative Agent and the Collateral Agent,
prior to the cancellation, modification or nonrenewal of any such policy of
insurance, a copy of a renewal or replacement policy (or other evidence of
renewal of a relevant policy) together with evidence satisfactory to the
Administrative Agent and the Collateral Agent of payment of the premium
therefor.

(c) With respect to any Mortgaged Property, carry and maintain comprehensive
general liability insurance including the “broad form” commercial general
liability endorsement and coverage on an occurrence basis against claims made
for personal injury (including bodily injury, death and property damage) and
umbrella liability insurance against any and all claims, in no event for a
combined single limit of less than $10,000,000, naming the Collateral Agent as
an additional insured, on forms satisfactory to the Collateral Agent.

(d) Notify the Administrative Agent and the Collateral Agent immediately
whenever any separate insurance concurrent in form or contributing in the event
of loss with that required to be maintained under this Section 5.02 is taken out
by the Borrower; and promptly deliver to the Administrative Agent and the
Collateral Agent a duplicate original copy of such policy or policies or
certificates evidencing such policy or policies.

SECTION 5.03. Obligations and Taxes. Pay its Indebtedness and other obligations
promptly and in accordance with their terms and pay and discharge promptly when
due all taxes, assessments and governmental charges or levies imposed upon it or
upon its income or profits or in respect of its property, before the same shall
become delinquent or in default, as well as all lawful claims for labor,
materials and supplies or otherwise that, if unpaid, might give rise to a Lien
upon such properties or any part thereof; provided, however, that such payment
and discharge shall not be required with respect to any such tax, assessment,
charge, levy or claim so long as the validity or amount thereof shall be
contested in good faith by appropriate proceedings and the Borrower shall have
set aside on its books adequate reserves with respect thereto in accordance with
GAAP and such contest operates to suspend collection of the contested
obligation, tax, assessment or charge and enforcement of a Lien (or, in the case
of an involuntary Lien of the type described in Section 6.02(f), such Lien
remains in effect and unreleased for no more than 30 days after the date it is
imposed) and, in the case of a Mortgaged Property, there is no risk of
forfeiture of such property.

SECTION 5.04. Financial Statements, Reserve Reports, etc. In the case of the
Borrower, furnish to the Administrative Agent:

(a) within 95 days after the end of each fiscal year, its consolidated balance
sheet and related statements of income, stockholders’ equity and cash flows
showing the financial condition of the Borrower and its consolidated
Subsidiaries as of the close of such fiscal year and the results of its
operations and the operations of such Subsidiaries during such year, together
with comparative figures for the immediately preceding fiscal year, all audited
by Deloitte & Touche LLP or other independent public accountants of

 

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recognized national standing and accompanied by an opinion of such accountants
(which opinion shall be 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 fairly present
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) within 50 days after the end of each of the first three fiscal quarters of
each fiscal year, its consolidated balance sheet and related statements of
income, stockholders’ equity and cash flows showing the financial condition of
the Borrower and its consolidated Subsidiaries as of the close of such fiscal
quarter and the results of its operations and the operations of such
Subsidiaries during such fiscal quarter and the then elapsed portion of the
fiscal year, and comparative figures for the same periods in the immediately
preceding fiscal year, all certified by one of its Financial Officers as fairly
presenting 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;

(c) concurrently with any delivery of financial statements under paragraph
(a) or (b) above, a certificate of the chief financial officer of the Borrower
(i) certifying that no Event of Default or Default has occurred or, if such an
Event of Default or Default has occurred, specifying the nature and extent
thereof and any corrective action taken or proposed to be taken with respect
thereto, (ii) describing the material terms of (x) any Asset Sales and (y) any
sales, transfers or other dispositions of the nature described in clause (y) to
the proviso in the definition of the term “Asset Sale”, in each case, that
occurred during the preceding quarter (including, as applicable, the nature of
the assets sold, the sale price and Net Cash Proceeds therefrom and the amount
of proceeds from all Asset Sales during such period that have been reinvested or
that are awaiting reinvestment in accordance with the definition of the term
“Net Cash Proceeds”) and (iii) setting forth computations in reasonable detail
satisfactory to the Administrative Agent demonstrating compliance with the
covenants contained in Sections 6.12, 6.13, 6.14 and 6.15 and, in the case of a
certificate delivered with the financial statements required by paragraph
(a) above, setting forth the Borrower’s calculation of Excess Cash Flow;

(d) prior to or concurrently with any delivery of such annual and semi-annual
financial statements as are required under paragraph (a) or (b) above, a Reserve
Report (which shall be (i) an annual Reserve Report (as described in the
definition of such term) in the case of a Reserve Report delivered in connection
with annual financial statements or (ii) a semi-annual Reserve Report (as so
described) in the case of a Reserve Report delivered in connection with
quarterly financial statements for the fiscal quarter ended June 30) setting
forth, among other things, (i) the Oil and Gas Properties owned by the Borrower
and the Subsidiaries and covered by such Reserve Report, (ii) the Proved
Reserves and probable reserves attributable to such Oil and Gas Properties and
(iii) a projection of the rate of production and net income of such Proved
Reserves and probable reserves as of the date as of which the information set
forth in such Reserve Report is provided, all in accordance with the guidelines
published by the Securities and Exchange Commission (but utilizing the pricing
parameters set forth in the definition of the term

 

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PV-10 Value (and, in the case of an annual Reserve Report, in addition to such
pricing parameters those specified in such Securities and Exchange Commission
guidelines)) and utilizing such operating cost and other assumptions as proposed
by the Company and agreed to by the Administrative Agent (or, if no such
agreement is reached, such cost and other assumptions as the Administrative
Agent shall from time to time specify);

(e) concurrently with the delivery of each Reserve Report under paragraph
(d) above, a certificate of a Responsible Officer showing any additions to or
deletions from the Oil and Gas Properties made by the Borrower and the
Subsidiaries since the date of the most recently delivered previous Reserve
Report;

(f) at least 30 days prior to the commencement of each fiscal year of the
Borrower, a detailed consolidated budget for such fiscal year (including a
projected consolidated balance sheet and related statements of projected
operations and cash flows as of the end of and for such fiscal year and setting
forth the assumptions used for purposes of preparing such budget) and, promptly
when available, any significant revisions of such budget;

(g) concurrently with any delivery of financial statements under paragraph
(a) or (b) above, copies of all periodic and other reports, proxy statements and
other materials filed by the Borrower or any Subsidiary with the Securities and
Exchange Commission, or any Governmental Authority succeeding to any or all of
the functions of said Commission, or with any national securities exchange, or
distributed to its shareholders, as the case may be (it being understood and
agreed that the Borrower shall notify the Administrative Agent of the filing of
any such periodic report on Form 8-K that the Borrower determines in good faith
relates to a matter that is or may be material to the interests of the Lenders
promptly after the same becomes publicly available);

(h) promptly after the receipt thereof by the Borrower or any Subsidiary, a copy
of any “management letter” (whether in final or draft form) received by any such
person from its certified public accountants and the management’s response
thereto;

(i) promptly after the request by any Lender, all documentation and other
information that such Lender reasonably requests in order to comply with its
ongoing obligations under applicable “know your customer” and anti-money
laundering rules and regulations, including the USA Patriot Act; and

(j) promptly, from time to time, such other information regarding the
operations, business affairs and financial condition of the Borrower or any
Subsidiary, or compliance with the terms of any Loan Document, as the
Administrative Agent or any Lender may reasonably request.

SECTION 5.05. Litigation and Other Notices. Furnish to the Administrative Agent
prompt written notice of the following:

(a) any Event of Default or Default, specifying the nature and extent thereof
and the corrective action (if any) taken or proposed to be taken with respect
thereto;

 

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(b) the filing or commencement of, or any threat or notice of intention of any
person to file or commence, any action, suit or proceeding, whether at law or in
equity or by or before any Governmental Authority, against the Borrower or any
Affiliate thereof that could reasonably be expected to result in a Material
Adverse Effect;

(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 the Subsidiaries in an aggregate amount exceeding
$2,500,000; and

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

SECTION 5.06. Information Regarding Collateral. (a) Furnish to the
Administrative Agent prompt written notice of any change (i) in any Loan Party’s
corporate name, (ii) in the jurisdiction of organization or formation of any
Loan Party, (iii) in any Loan Party’s identity or corporate structure or (iv) in
any Loan Party’s Federal Taxpayer Identification Number. The Borrower agrees not
to effect or permit any change referred to in the preceding sentence unless all
filings have been made under the Uniform Commercial Code or otherwise that are
required in order for the Collateral Agent to continue at all times following
such change to have a valid, legal and perfected security interest in all the
Collateral. The Borrower also agrees promptly to notify the Administrative Agent
if any material portion of the Collateral is damaged or destroyed.

(a) In the case of the Borrower, each year, at the time of delivery of the
annual financial statements with respect to the preceding fiscal year pursuant
to Section 5.04(a), deliver to the Administrative Agent a certificate of a
Financial Officer setting forth the information required pursuant to Section 2
of the Perfection Certificate or confirming that there has been no change in
such information since the date of the Perfection Certificate delivered on the
Closing Date or the date of the most recent certificate delivered pursuant to
this Section 5.06.

SECTION 5.07. Maintaining Records; Access to Properties and Inspections. Keep
proper books of record and account in which full, true and correct entries in
conformity with GAAP and all requirements of law are made of all dealings and
transactions in relation to its business and activities. The Borrower will, and
will cause each of the Subsidiaries to, permit any representatives designated by
the Administrative Agent or any Lender to visit and inspect the financial
records and the properties of any such person at reasonable times and as often
as reasonably requested and to make extracts from and copies of such financial
records, and permit any representatives designated by the Administrative Agent
or any Lender to discuss the affairs, finances and condition of any such person
with the officers thereof and independent accountants therefor.

SECTION 5.08. Use of Proceeds. Use the proceeds of the Loans only for the
purposes specified in the preliminary statement to this Agreement.

SECTION 5.09. Further Assurances. (a) Execute any and all further documents,
financing statements, agreements and instruments, and take all further action
(including filing Uniform Commercial Code and other financing statements,
mortgages and deeds of trust) that

 

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may be required under applicable law, or that the Required Lenders, the
Administrative Agent or the Collateral Agent may reasonably request, in order to
effectuate the transactions contemplated by the Loan Documents and in order to
grant, preserve, protect and perfect the validity and first priority (subject
only to Liens permitted by Section 6.02 and to the Lien priorities set forth in
the Intercreditor Agreement) of the Liens created or intended to be created by
the Security Documents. The Borrower will cause any subsequently acquired or
organized Domestic Subsidiary to become a Loan Party by executing the Guarantee
and Collateral Agreement and each other applicable Security Document in favor of
the Collateral Agent. In addition, from time to time, the Borrower will, at its
cost and expense, promptly secure the Obligations by pledging or creating, or
causing to be pledged or created, perfected Liens with respect to such of its
assets and properties as the Administrative Agent or the Required Lenders shall
designate (it being understood that it is the intent of the parties that the
Obligations shall be secured by substantially all the assets of the Borrower and
its Domestic Subsidiaries (including Oil and Gas Properties and other real and
other properties acquired subsequent to the Closing Date)). Such security
interests and Liens will be created under the Security Documents and other
security agreements, mortgages, deeds of trust and other instruments and
documents in form and substance satisfactory to the Collateral Agent, and the
Borrower shall deliver or cause to be delivered to the Collateral Agent all such
instruments and documents (including legal opinions, title insurance policies
and lien searches) as the Collateral Agent shall reasonably request to evidence
compliance with this Section 5.09. The Borrower agrees to provide such evidence
as the Collateral Agent shall reasonably request as to the perfection and
priority status of each such security interest and Lien. In furtherance of the
foregoing, the Borrower will give notice to the Administrative Agent
concurrently with any delivery of financial statements under Section 5.04(a) or
(b) of the acquisition by it or any of the Domestic Subsidiaries of any Oil and
Gas Property or real property (or any interest in any Oil and Gas Property or
real property) having a value in excess of $1,000,000. It is understood and
agreed that, notwithstanding anything to the contrary in the foregoing, the
Borrower and the Domestic Subsidiaries will not be required to grant a security
interest in or mortgage on any Oil and Gas Property under this paragraph
(a) that would not otherwise be required under paragraph (c) of this
Section 5.09.

(b) Within 60 days after the making of a request therefor by the Administrative
Agent, furnish such title opinions and/or title information as may be necessary
to achieve title opinion/title information coverage with respect to Oil and Gas
Properties representing in the aggregate not less than 90% of PV-10 Value as set
forth in the Reserve Report most recently delivered pursuant to Section 5.04(d)
prior to the making of such request.

(c) Regularly monitor engineering data covering all Oil and Gas Properties of
the Borrower and the Domestic Subsidiaries and mortgage or cause to be mortgaged
such of the same to the Collateral Agent on behalf of the Secured Parties
pursuant to a Mortgage to the extent necessary to ensure that the Obligations
shall at all times be secured by second priority perfected Liens and security
interests in each Domestic Oil and Gas Property having an individual value of
$25,000,000 or more (on a contribution to PV-10 Value basis) and Domestic Oil
and Gas Properties in the aggregate representing not less than 90% of the
aggregate PV-10 Value attributable to all Domestic Oil and Gas Properties.

SECTION 5.10. Commodity Hedging Agreements. Maintain in effect Commodity Hedging
Agreements with one or more Approved Counterparties that establish minimum
prices

 

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reasonably acceptable to the Administrative Agent on a volume of Hydrocarbons
equal to not less than 40% of the projected PDP production (measured as of each
date of delivery to the Administrative Agent of the financial statements and
certificates required by Section 5.04(a) or (b) and Section 5.04(c),
respectively) from the Oil and Gas Properties of the Borrower and the
Subsidiaries for the succeeding twelve calendar months on a rolling twelve
calendar month basis.

ARTICLE VI

Negative Covenants

The Borrower covenants and agrees with each Lender that, so long as this
Agreement shall remain in effect and until the Commitments have been terminated
and the principal of and interest on each Loan and all fees and all other
expenses or amounts payable under any Loan Document have been paid in full,
unless the Required Lenders shall otherwise consent in writing, the Borrower
will not, nor will it cause or permit any of the Subsidiaries to:

SECTION 6.01. Indebtedness. Incur, create, assume or permit to exist any
Indebtedness, except:

(a) Indebtedness existing on the Closing Date and set forth in Schedule 6.01;

(b) Indebtedness created hereunder and under the other Loan Documents;

(c) Indebtedness under the First Lien Credit Agreement and any Permitted
Refinancing Indebtedness incurred to Refinance such Indebtedness in an aggregate
principal amount at any time outstanding not to exceed the amount permitted
under the Intercreditor Agreement;

(d) intercompany Indebtedness of the Borrower and the Subsidiaries to the extent
permitted by Section 6.04(c);

(e) Indebtedness of the Borrower or any Subsidiary incurred to finance the
acquisition, construction or improvement of any fixed or capital assets, and
extensions, renewals and replacements of any such Indebtedness that do not
increase the outstanding principal amount thereof; provided that (i) such
Indebtedness is incurred prior to or within 90 days after such acquisition or
the completion of such construction or improvement and (ii) the aggregate
principal amount of Indebtedness permitted by this Section 6.01(e), when
combined with the aggregate principal amount of all Capital Lease Obligations
and Synthetic Lease Obligations incurred pursuant to Section 6.01(f), shall not
exceed $200,000,000 at any time outstanding;

(f) Capital Lease Obligations and Synthetic Lease Obligations in an aggregate
principal amount, when combined with the aggregate principal amount of all
Indebtedness incurred pursuant to Section 6.01(e), not in excess of $200,000,000
at any time outstanding;

(g) Indebtedness under performance bonds or with respect to workers’
compensation claims, in each case incurred in the ordinary course of business;

 

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(h) Indebtedness consisting of reimbursement obligations or other obligations as
an account party in respect of letters of credit issued for the account of the
Borrower or any Subsidiary (i) to ensure payment or performance of the
obligations referred to in Section 6.02(h), or (ii) in the ordinary course of
business in an amount not in excess of $10,000,000 at any time outstanding;

(i) (i) Permitted Subordinated Indebtedness incurred by the Borrower; provided
that (A) at the time of the incurrence of such Permitted Subordinated
Indebtedness and after giving pro forma effect thereto, no Default or Event of
Default shall have occurred and be continuing or would result therefrom and the
Borrower shall be in Pro Forma Financial Covenant Compliance, (B) a Financial
Officer of the Borrower shall have delivered an officer’s certificate
demonstrating the calculation of such Pro Forma Financial Covenant Compliance in
form and detail reasonably satisfactory to the Administrative Agent and (C) the
Borrower shall have notified the Administrative Agent reasonably prior to the
issuance of such Permitted Subordinated Indebtedness and of the principal terms
thereof and the Administrative Agent shall have approved of such terms to the
extent the Administrative Agent’s approval thereof is contemplated by the
definition of the term “Permitted Subordinated Indebtedness”; and (ii) Permitted
Refinancing Indebtedness in respect thereof; and

(j) other unsecured Indebtedness of the Borrower or the Subsidiaries in an
aggregate principal amount not exceeding $60,000,000 at any time outstanding
(provided that the aggregate principal amount of Indebtedness incurred pursuant
to this paragraph (j) by Subsidiaries that are not Subsidiary Guarantors shall
not exceed $10,000,000).

SECTION 6.02. Liens. Create, incur, assume or permit to exist any Lien on any
property or assets (including Equity Interests or other securities of any
person, including any Subsidiary) now owned or hereafter acquired by it or on
any income or revenues or rights in respect of any thereof, except:

(a) Liens on property or assets of the Borrower and its Subsidiaries existing on
the Closing Date and set forth in Schedule 6.02; provided that such Liens shall
secure only those obligations which they secure on the Closing Date;

(b) any Lien created under the Loan Documents;

(c) the First Priority Liens;

(d) any Lien existing on any property or asset prior to the acquisition thereof
by the Borrower or any Subsidiary; provided that (i) such Lien is not created in
contemplation of or in connection with such acquisition, (ii) such Lien does not
apply to any other property or assets of the Borrower or any Subsidiary and
(iii) such Lien does not (A) materially interfere with the use, occupancy and
operation of any Mortgaged Property, (B) materially reduce the fair market value
of such Mortgaged Property but for such Lien or (C) result in any material
increase in the cost of operating, occupying or owning or leasing such Mortgaged
Property;

 

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(e) Liens for taxes not yet due or which are being contested in compliance with
Section 5.03;

(f) carriers’, warehousemen’s, mechanics’, materialmen’s, repairmen’s or other
like Liens arising in the ordinary course of business and securing obligations
that are not due and payable or which are being contested in compliance with
Section 5.03;

(g) pledges and deposits made in the ordinary course of business in compliance
with workmen’s compensation, unemployment insurance and other social security
laws or regulations;

(h) deposits to secure the performance of bids, trade contracts (other than for
Indebtedness), leases (other than Capital Lease Obligations), statutory
obligations, surety and appeal bonds, performance bonds and other obligations of
a like nature incurred in the ordinary course of business, or to secure letters
of credit issued to ensure payment or performance of any of the foregoing;

(i) zoning restrictions, easements, rights-of-way, restrictions on use of real
property and other similar encumbrances incurred in the ordinary course of
business which, in the aggregate, are not substantial in amount and do not
materially detract from the value of the property subject thereto or interfere
with the ordinary conduct of the business of the Borrower or any of its
Subsidiaries;

(j) purchase money security interests or other Liens in real property,
improvements thereto or equipment hereafter acquired (or, in the case of
improvements, constructed) by the Borrower or any Subsidiary; provided that
(i) such security interests or other Liens secure Indebtedness permitted by
Section 6.01, (ii) such security interests or other Liens are incurred, and the
Indebtedness secured thereby is created, within 90 days after such acquisition
(or construction), (iii) the Indebtedness secured thereby does not exceed 90% of
the lesser of the cost or the fair market value of such real property,
improvements or equipment at the time of such acquisition (or construction) and
(iv) such security interests or other Liens do not apply to any other property
or assets of the Borrower or any Subsidiary;

(k) Liens arising out of judgments or awards in respect of which the Borrower or
any of the Subsidiaries shall in good faith be prosecuting an appeal or
proceedings for review in respect of which there shall be secured a subsisting
stay of execution pending such appeal or proceedings; provided that the
aggregate amount of all such judgments or awards (and any cash and the fair
market value of any property subject to such Liens) does not exceed $10,000,000
at any time outstanding;

(l) deposits of cash collateral required under the terms of Commodity Hedging
Agreements entered into in the ordinary course of business in compliance with
Section 5.11 in an amount not exceeding $20,000,000 at any time;

(m) Liens arising under operating agreements, joint venture agreements,
partnership agreements, oil and gas leases, farm-out and farm-in agreements,
division orders, contracts for the sale, transportation or exchange of oil or
natural gas, unitization

 

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and pooling declarations and agreements, area of mutual interest agreements and
other agreements that are customary in the Oil and Gas Business; provided that
the amount of any obligations secured thereby that are delinquent, that are not
diligently contested in good faith and for which adequate reserves are not
maintained by the Borrower or the applicable Subsidiary, as the case may be, do
not exceed, at any time outstanding, the amount owing by the Borrower or such
Subsidiary, as applicable, for two months’ billed operating expenses or other
expenditures attributable to such person’s interest in the property covered
thereby; and provided further that the obligations secured thereby do not
constitute obligations in respect of borrowed money;

(n) Liens reserved in oil and gas mineral leases for bonus or rental payments
and for compliance with the terms of such leases, provided that the amount of
any obligations secured thereby that are delinquent, that are not diligently
contested in good faith and for which adequate reserves are not maintained by
the Borrower or the applicable Subsidiary, as the case may be, do not exceed, at
any time outstanding, the amount owing by the Borrower or such Subsidiary, as
applicable, for two months’ payments as due thereunder; and

(o) Liens on pipeline or pipeline facilities that arise under operation of law.

SECTION 6.03. Sale and Lease-Back Transactions. Enter into any arrangement,
directly or indirectly, with any person whereby it shall sell or transfer any
property, real or personal, used or useful in its business, whether now owned or
hereafter acquired, and thereafter rent or lease such property or other property
which it intends to use for substantially the same purpose or purposes as the
property being sold or transferred unless (a) the sale of such property is
permitted by Section 6.05 and (b) any Capital Lease Obligations, Synthetic Lease
Obligations or Liens arising in connection therewith are permitted by Sections
6.01 and 6.02, as the case may be.

SECTION 6.04. Investments, Loans, Advances and Oil and Gas Property
Acquisitions. Purchase, hold or acquire any Equity Interests, evidences of
indebtedness or other securities of, make or permit to exist any loans or
advances to, or make or permit to exist any investment or any other interest in,
any other person, or make any other investment or acquisition of Oil and Gas
Properties, except:

(a) (i) investments by the Borrower and the Subsidiaries existing on the Closing
Date in the Equity Interests of the Borrower and the Subsidiaries and
(ii) additional investments by the Borrower and the Subsidiaries in the Equity
Interests of the Borrower and the Subsidiaries; provided that (A) any such
Equity Interests held by a Loan Party shall be pledged pursuant to the Guarantee
and Collateral Agreement or other applicable Security Document and (B) the
aggregate amount of investments by Loan Parties in, and loans and advances by
Loan Parties to, Subsidiaries that are not Loan Parties (determined without
regard to any write-downs or write-offs of such investments, loans and
advances), other than those permitted pursuant to paragraph (d) below, shall not
exceed $10,000,000 at any time outstanding;

(b) Permitted Investments;

 

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(c) loans or advances made by the Borrower to any Subsidiary and made by any
Subsidiary to the Borrower or any other Subsidiary; provided that (i) any such
loans and advances made by a Loan Party shall be evidenced by a promissory note
pledged to the Collateral Agent for the ratable benefit of the Secured Parties
pursuant to the Guarantee and Collateral Agreement or other applicable Security
Document and (ii) the amount of such loans and advances made by Loan Parties to
Subsidiaries that are not Loan Parties shall be subject to the limitations set
forth in paragraph (a) above and paragraph (d) below;

(d) investments by Loan Parties in, and loans and advances by Loan Parties to
any Foreign Subsidiary to fund Capital Expenditures and other development costs
in respect of Oil and Gas Properties located in the North Sea, the aggregate
amount of which following the Closing Date (determined without regard to any
write-downs or write-offs of such investments, loans and advances) shall not
exceed $300,000,000;

(e) investments received in connection with the bankruptcy or reorganization of,
or settlement of delinquent accounts and disputes with, customers and suppliers,
in each case in the ordinary course of business;

(f) the Borrower and the Subsidiaries may make loans and advances in the
ordinary course of business to their respective employees so long as the
aggregate principal amount thereof at any time outstanding (determined without
regard to any write-downs or write-offs of such loans and advances) shall not
exceed $1,000,000 at any time;

(g) the Borrower or any Subsidiary may enter into Hedging Agreements that
(i) are required by Section 5.10 or (ii) are not speculative in nature;

(h) Permitted Business Investments; provided that (i) the aggregate amount of
Permitted Business Investments in any fiscal year does not exceed the greater of
(A) $150,000,000 or (B) 7.5% of PV-10 Value and (ii) both before and after
giving effect thereto, no Event of Default or Default shall have occurred and be
continuing;

(i) in addition to investments permitted by paragraphs (a) through (h) above,
additional investments, loans and advances by the Borrower and the Subsidiaries
so long as the aggregate amount invested, loaned or advanced pursuant to this
paragraph (i) (determined without regard to any write-downs or write-offs of
such investments, loans and advances) does not exceed $10,000,000 in the
aggregate.

SECTION 6.05. Mergers, Consolidations, Sales of Assets and Acquisitions.
(a) Merge into or consolidate with any other person, or permit any other person
to merge into or consolidate with it, or sell, transfer, lease or otherwise
dispose of (in one transaction or in a series of transactions) all or
substantially all the assets (whether now owned or hereafter acquired) of the
Borrower or less than all the Equity Interests of any Subsidiary, or purchase,
lease or otherwise acquire (in one transaction or a series of transactions) all
or any substantial part of the assets of any other person, except that (i) the
Borrower and any Subsidiary may purchase and sell Hydrocarbons and other
inventory in the ordinary course of business and (ii) if at the time

 

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thereof and immediately after giving effect thereto no Event of Default or
Default shall have occurred and be continuing (x) any wholly owned Subsidiary
may merge into the Borrower in a transaction in which the Borrower is the
surviving corporation, (y) any wholly owned Subsidiary may merge into or
consolidate with any other wholly owned Subsidiary in a transaction in which the
surviving entity is a wholly owned Subsidiary and no person other than the
Borrower or a wholly owned Subsidiary receives any consideration (provided that
if any party to any such transaction is a Loan Party, the surviving entity of
such transaction shall be a Loan Party) and (z) the Borrower and the
Subsidiaries may make Permitted Business Investments in accordance with
Section 6.04.

(b) Engage in any Asset Sale otherwise permitted under paragraph (a) above
unless (i) such Asset Sale (x) involves the sale, transfer, lease or other
disposition of Hydrocarbon Interests for consideration that consists of
Hydrocarbon Interests or a combination of Hydrocarbon Interests and cash or
(y) is for consideration at least 75% of which is cash, (ii) such consideration
is at least equal to the fair market value of the assets being sold,
transferred, leased or disposed of and (iii) the fair market value of all assets
sold, transferred, leased or disposed of pursuant to this paragraph (b) shall
not exceed, in the aggregate, the greater of (A) $75,000,000 or (B) 7.5% of
PV-10 Value.

SECTION 6.06. Restricted Payments; Restrictive Agreements. (a) Declare or make,
or agree to declare or make, directly or indirectly, any Restricted Payment
(including pursuant to any Synthetic Purchase Agreement), or incur any
obligation (contingent or otherwise) to do so; provided, however, that (i) any
Subsidiary may declare and pay dividends or make other distributions ratably to
its equity holders, (ii) so long as no Event of Default or Default shall have
occurred and be continuing or would result therefrom, the Borrower may
(A) repurchase its Equity Interests owned by employees of the Borrower or the
Subsidiaries or make payments to employees of the Borrower or the Subsidiaries
upon termination of employment in connection with the exercise of stock options,
stock appreciation rights or similar equity incentives or equity based
incentives pursuant to management incentive plans or in connection with the
death or disability of such employees in an aggregate amount not to exceed
$5,000,000 in any fiscal year or (B) repurchase, redeem or otherwise refinance
any Existing Preferred Stock that remains outstanding as of the Closing Date or
(C) repurchase its common Equity Interests in the open market or otherwise in an
aggregate amount not to exceed the sum of (x) $10,000,000 and (y) the CNI Growth
Amount as in effect immediately prior to the time of the making of such
Restricted Payment; (iii) so long as no Default or Event of Default shall have
occurred and be continuing or would result therefrom, the Borrower may pay
regularly scheduled cash dividends on any Preferred Equity Interests issued
after the Closing Date to the extent the incurrence thereof is permitted
pursuant to Section 6.01, and (iv) so long as no Default or Event of Default
shall have occurred and be continuing or would result therefrom, the Borrower
may make other Restricted Payments under this clause (iv) in an amount not to
exceed $5,000,000 in any fiscal year.

(b) Enter into, incur or permit to exist any agreement or other arrangement that
prohibits, restricts or imposes any condition upon (i) the ability of the
Borrower or any Subsidiary to create, incur or permit to exist any Lien upon any
of its property or assets, or (ii) the ability of any Subsidiary to pay
dividends or other distributions with respect to any of its Equity Interests or
to make or repay loans or advances to the Borrower or any other Subsidiary or to
Guarantee Indebtedness of the Borrower or any other Subsidiary; provided that
(A) the foregoing shall not

 

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apply to restrictions and conditions imposed by law or by any Loan Document (or
any First Lien Facility Documents), (B) the foregoing shall not apply to
customary restrictions and conditions contained in agreements relating to the
sale of a Subsidiary pending such sale, provided such restrictions and
conditions apply only to the Subsidiary that is to be sold and such sale is
permitted hereunder, (C) clause (i) of the foregoing shall not apply to
restrictions or conditions imposed by any agreement relating to secured
Indebtedness permitted by this Agreement if such restrictions or conditions
apply only to the property or assets securing such Indebtedness and (D) clause
(i) of the foregoing shall not apply to customary provisions in leases and other
contracts restricting the assignment thereof.

SECTION 6.07. Transactions with Affiliates. Except for transactions between or
among Loan Parties, sell or transfer any property or assets to, or purchase or
acquire any property or assets from, or otherwise engage in any other
transactions with, any of its Affiliates, except that the Borrower or any
Subsidiary may engage in any of the foregoing transactions in the ordinary
course of business at prices and on terms and conditions not less favorable to
the Borrower or such Subsidiary than could be obtained on an arm’s-length basis
from unrelated third parties.

SECTION 6.08. Business of the Borrower and Subsidiaries. Engage at any time in
any business or business activity other than the Oil and Gas Business.

SECTION 6.09. Other Indebtedness and Agreements. (a) Permit (i) any waiver,
supplement, modification, amendment, termination or release of any Junior
Financing Documentation or any other indenture, instrument or agreement pursuant
to which any Material Indebtedness (other than Indebtedness under the First Lien
Credit Agreement and any Permitted Refinancing Indebtedness incurred to
Refinance such Indebtedness) of the Borrower or any of the Subsidiaries is
outstanding if the effect of such waiver, supplement, modification, amendment,
termination or release would materially increase the obligations of the obligor
or confer additional material rights on the holder of such Indebtedness in a
manner adverse to the Borrower, any of the Subsidiaries or the Lenders or
(ii) any amendment, restatement, supplement or modification of any First Lien
Facility Document, except in accordance with the Intercreditor Agreement.

(b) (i) Make any distribution, whether in cash, property, securities or a
combination thereof, other than regular scheduled payments of principal and
interest as and when due (to the extent not prohibited by applicable
subordination provisions), in respect of, or pay, or offer or commit to pay, or
directly or indirectly (including pursuant to any Synthetic Purchase Agreement)
redeem, repurchase, retire or otherwise acquire for consideration, or set apart
any sum for the aforesaid purposes, (A) any Permitted Subordinated Indebtedness
or other subordinated Indebtedness or (B) any Disqualified Capital Stock, or
(ii) pay in cash any amount in respect of any Indebtedness or Preferred Equity
Interests that may at the obligor’s option be paid in kind or in other
securities.

SECTION 6.10. Forward Sales. Except in accordance with usual and customary
practice in the Oil and Gas Business and except for Hydrocarbon imbalances not
in excess of the greater of (i) 10 Bcfe or (ii) 3% of projected PDP production
from time to time from the Oil and Gas Properties of the Borrower and the
Subsidiaries for the succeeding twelve calendar months, enter into or permit to
exist any advance payment agreement or other arrangement pursuant to

 

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which the Borrower or any of the Subsidiaries, having received full or
substantial payment of the purchase price for a specified quantity of
Hydrocarbons upon entering such agreement or arrangement, is required to
deliver, in one or more installments subsequent to the date of such agreement or
arrangement, such quantity of Hydrocarbons pursuant to and during the terms of
such agreement or arrangement.

SECTION 6.11. Limitation on Commodity Hedging. Enter into any Commodity Hedge
Agreement if, after giving effect thereto the total volume of Hydrocarbons to be
hedged under Commodity Hedging Agreements would exceed, at the time of entering
into any Commodity Hedge Agreement, 80% of the projected PDP production from the
Oil and Gas Properties of the Borrower and the Subsidiaries for the period
during which such Commodity Hedging Agreement is in effect.

SECTION 6.12. Interest Coverage Ratio. Permit the Interest Coverage Ratio for
any period of four consecutive fiscal quarters, in each case taken as one
accounting period, ending on the last day of any fiscal quarter to be less than
2.00 to 1.00.

SECTION 6.13. Maximum Leverage Ratio. Permit the Leverage Ratio at the end of
any fiscal quarter to be greater than 3.50 to 1.00.

SECTION 6.14. Minimum Current Ratio. Permit the Current Ratio at the end of any
fiscal quarter to be less than 1.00 to 1.00.

SECTION 6.15. Minimum Asset Coverage Ratios. Permit (i) the Reserve Coverage
Ratio at June 30 or December 31 of any fiscal year to be less than 2.50 to 1.00
or (ii) the PDP Coverage Ratio at June 30 or December 31 of any fiscal year to
be less than 0.40 to 1.00.

SECTION 6.16. Designated Senior Debt. Designate any Indebtedness (other than
under this Agreement and the other Loan Documents and under the First Lien
Facility Documents) of the Borrower or any of its Subsidiaries as “Senior
Indebtedness”, “Designated Senior Debt” or “Senior Secured Financing” (or any
comparable term) under, and as defined in, any Junior Financing Documentation
relating to any Permitted Subordinated Indebtedness.

SECTION 6.17. Fiscal Year. With respect to the Borrower, change its fiscal
year-end to a date other than December 31.

ARTICLE VII

Events of Default

In case of the happening of any of the following events (“Events of Default”):

(a) any representation or warranty made or deemed made in or in connection with
any Loan Document or the borrowings hereunder, or any representation, warranty,
statement or information contained in any report, certificate, financial
statement or other instrument furnished in connection with or pursuant to any
Loan Document, shall prove to have been false or misleading in any material
respect when so made, deemed made or furnished;

 

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(b) default shall be made in the payment of any principal of any Loan when and
as the same shall become due and payable, whether at the due date thereof or at
a date fixed for prepayment thereof or by acceleration thereof or otherwise;

(c) default shall be made in the payment of any interest on any Loan or any fee
or any other amount (other than an amount referred to in (b) above) due under
any Loan Document, when and as the same shall become due and payable, and such
default shall continue unremedied for a period of three Business Days;

(d) default shall be made in the due observance or performance by the Borrower
or any Subsidiary of any covenant, condition or agreement contained in
Section 5.01(a), 5.05 or 5.08 or in Article VI;

(e) default shall be made in the due observance or performance by the Borrower
or any Subsidiary of any covenant, condition or agreement contained in any Loan
Document (other than those specified in (b), (c) or (d) above) and such default
shall continue unremedied for a period of 20 days after notice thereof from the
Administrative Agent or any Lender to the Borrower;

(f) (i) the Borrower or any Subsidiary shall fail to pay any principal or
interest, regardless of amount, due in respect of any Material Indebtedness,
when and as the same shall become due and payable or (ii) any other 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 prepayment, repurchase,
redemption or defeasance thereof, prior to its scheduled maturity; provided that
this clause (ii) shall not apply to secured Indebtedness that becomes due as a
result of the voluntary sale or transfer of the property or assets securing such
Indebtedness; provided further that an Event of Default under and as defined in
the First Lien Credit Agreement (other than the Events of Default described in
paragraphs (b) or (c) of Section 7.01 of the First Lien Credit Agreement to
which this proviso shall not apply) (a “First Lien Event of Default”) shall not
in and of itself constitute an Event of Default under this paragraph until the
earlier to occur of (x) a period of 45 days has elapsed following notice of such
First Lien Event of Default from the administrative agent or any lender under
the First Lien Credit Agreement to the Borrower, or from the Borrower to such
administrative agent or any such lender, and (y) the acceleration of the
maturity of any of the loans or the termination of any of the commitments under
the First Lien Credit Agreement in connection with such First Lien Event of
Default or the exercise of any remedies by the lenders or the administrative
agent under the First Lien Credit Agreement in connection with such First Lien
Event of Default;

(g) an involuntary proceeding shall be commenced or an involuntary petition
shall be filed in a court of competent jurisdiction seeking (i) relief in
respect of the Borrower or any Subsidiary, or of a substantial part of the
property or assets of the Borrower or a Subsidiary, under Title 11 of the United
States Code, as now constituted or hereafter amended, or any other Federal,
state or foreign bankruptcy, insolvency, receivership or similar law, (ii) the
appointment of a receiver, trustee, custodian, sequestrator, conservator or
similar official for the Borrower or any Subsidiary or for a substantial part of
the property or assets of the Borrower or a Subsidiary or (iii) the winding-up
or liquidation of the Borrower or any Subsidiary; and such proceeding or
petition shall continue undismissed for 60 days or an order or decree approving
or ordering any of the foregoing shall be entered;

 

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(h) the Borrower or any Subsidiary shall (i) voluntarily commence any proceeding
or file any petition seeking relief under Title 11 of the United States Code, as
now constituted or hereafter amended, or any other Federal, state or foreign
bankruptcy, insolvency, receivership or similar law, (ii) consent to the
institution of, or fail to contest in a timely and appropriate manner, any
proceeding or the filing of any petition described in (g) above, (iii) apply for
or consent to the appointment of a receiver, trustee, custodian, sequestrator,
conservator or similar official for the Borrower or any Subsidiary or for a
substantial part of the property or assets of the Borrower or any Subsidiary,
(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, (vi) become unable, admit in writing its inability or fail
generally to pay its debts as they become due or (vii) take any action for the
purpose of effecting any of the foregoing;

(i) one or more judgments shall be rendered against the Borrower, any 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 levy upon assets
or properties of the Borrower or any Subsidiary to enforce any such judgment and
such judgment either (i) is for the payment of money in an aggregate amount in
excess of $10,000,000 or (ii) is for injunctive relief and could reasonably be
expected to result in a Material Adverse Effect;

(j) an ERISA Event shall have occurred that, in the opinion of the Required
Lenders, when taken together with all other such ERISA Events, could reasonably
be expected to result in liability of the Borrower and its ERISA Affiliates in
an aggregate amount exceeding $5,000,000;

(k) any Guarantee under the Guarantee and Collateral Agreement for any reason
shall cease to be in full force and effect (other than in accordance with its
terms), or any Guarantor shall deny in writing that it has any further liability
under the Guarantee and Collateral Agreement (other than as a result of the
discharge of such Guarantor in accordance with the terms of the Loan Documents);

(l) (i) any security interest purported to be created by any Security Document
shall cease to be, or shall be asserted by the Borrower or any other Loan Party
not to be, a valid, perfected, first priority (subject to the Lien priorities
set forth in the Intercreditor Agreement and except as otherwise expressly
provided in this Agreement or such Security Document) security interest in the
securities, assets or properties covered thereby, except to the extent that any
such loss of perfection or priority results from the failure of the collateral
agent under the First Lien Facilities to maintain possession of certificates
representing securities pledged under the Guarantee and Collateral Agreement or
other applicable Security Document or (ii) the Intercreditor Agreement is not or
ceases to be binding on or enforceable against any party thereto (or against any
person on whose behalf any such party makes any covenants or agreements
therein), or shall otherwise not be effective to create the rights and
obligations purported to be created thereunder;

(m) (i) any of the Obligations of the Loan Parties under the Loan Documents for
any reason shall cease to be “Senior Indebtedness”, “Designated Senior Debt” or
“Senior Secured

 

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Financing” (or any comparable term) under, and as defined in, any other Junior
Financing Documentation relating to any Permitted Subordinated Indebtedness or
(ii) the subordination provisions set forth in any Junior Financing
Documentation relating to any Permitted Subordinated Indebtedness shall, in
whole or in part, cease to be effective or cease to be legally valid, binding
and enforceable against the holders of such Permitted Subordinated Indebtedness;
or

(n) there shall have occurred a Change in Control;

then, and in every such event (other than an event with respect to the Borrower
described in paragraph (g) or (h) above), and at any time thereafter during the
continuance of such event, the Administrative Agent may, and at the request of
the Required Lenders shall, by notice to the Borrower, take either or both of
the following actions, at the same or different times: (i) terminate forthwith
the Commitments and (ii) declare the Loans then outstanding to be forthwith due
and payable in whole or in part, whereupon the principal of the Loans so
declared to be due and payable, together with accrued interest thereon and any
unpaid accrued fees and all other liabilities of the Borrower accrued hereunder
and under any other Loan Document, shall become forthwith due and payable,
without presentment, demand, protest or any other notice of any kind, all of
which are hereby expressly waived by the Borrower, anything contained herein or
in any other Loan Document to the contrary notwithstanding; and in any event
with respect to the Borrower described in paragraph (g) or (h) above, the
Commitments shall automatically terminate and the principal of the Loans then
outstanding, together with accrued interest thereon and any unpaid accrued fees
and all other liabilities of the Borrower accrued hereunder and under any other
Loan Document, shall automatically become due and payable, without presentment,
demand, protest or any other notice of any kind, all of which are hereby
expressly waived by the Borrower, anything contained herein or in any other Loan
Document to the contrary notwithstanding.

ARTICLE VIII

The Administrative Agent and the Collateral Agent

The Lenders hereby irrevocably appoint the Administrative Agent and the
Collateral Agent (for purposes of this Article VIII, the Administrative Agent
and the Collateral Agent are referred to collectively as the “Agents”) its agent
and authorizes the Agents to take such actions on its behalf and to exercise
such powers as are delegated to such Agent by the terms of the Loan Documents,
together with such actions and powers as are reasonably incidental thereto.
Without limiting the generality of the foregoing, the Agents are hereby
expressly authorized to execute any and all documents (including releases) with
respect to the Collateral and the rights of the Secured Parties with respect
thereto, as contemplated by and in accordance with the provisions of this
Agreement and the Security Documents. The Lenders acknowledge and agree that the
Collateral Agent shall also act, subject to and in accordance with the terms of
the Intercreditor Agreement, as the collateral agent for the lenders under the
First Lien Facilities.

The bank serving as the Administrative Agent and/or the Collateral 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.

 

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Neither Agent shall have any duties or obligations except those expressly set
forth in the Loan Documents. Without limiting the generality of the foregoing,
(a) neither Agent shall be subject to any fiduciary or other implied duties,
regardless of whether a Default has occurred and is continuing, (b) neither
Agent shall have any duty to take any discretionary action or exercise any
discretionary powers, except discretionary rights and powers expressly
contemplated hereby that such Agent is instructed in writing to exercise by the
Required Lenders (or such other number or percentage of the Lenders as shall be
necessary under the circumstances as provided in Section 9.08), and (c) except
as expressly set forth in the Loan Documents, neither Agent shall have any duty
to disclose, nor shall it be liable for the failure to disclose, any information
relating to the Borrower or any of the Subsidiaries that is communicated to or
obtained by the bank serving as Administrative Agent and/or Collateral Agent or
any of its Affiliates in any capacity. Neither Agent shall be liable for any
action taken or not taken by it with the consent or at the request of the
Required Lenders (or such other number or percentage of the Lenders as shall be
necessary under the circumstances as provided in Section 9.08) or in the absence
of its own gross negligence or wilful misconduct. Neither Agent shall be deemed
to have knowledge of any Default unless and until written notice thereof is
given to such Agent by the Borrower or a Lender, and neither Agent shall be
responsible for or have any duty to ascertain or inquire into (i) any statement,
warranty or representation made in or in connection with any Loan Document,
(ii) the contents of any certificate, report or other document delivered
thereunder or in connection therewith, (iii) the performance or observance of
any of the covenants, agreements or other terms or conditions set forth in any
Loan Document, (iv) the validity, enforceability, effectiveness or genuineness
of any Loan Document or any other agreement, instrument or document, or (v) the
satisfaction of any condition set forth in Article IV or elsewhere in any Loan
Document, other than to confirm receipt of items expressly required to be
delivered to such Agent.

Each 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. Each Agent may also rely upon any statement made
to it orally or by telephone and believed by it to have been made by the proper
person, and shall not incur any liability for relying thereon. Each 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.

Each 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 it. Each Agent and any
such sub-agent may perform any and all its duties and exercise its rights and
powers by or through their respective Related Parties. The exculpatory
provisions of the preceding paragraphs shall apply to any such sub-agent and to
the Related Parties of each Agent and any such sub-agent, and shall apply to
their respective activities in connection with the syndication of the credit
facility provided for herein as well as activities as Agent.

Subject to the appointment and acceptance of a successor Agent as provided
below, either Agent may resign at any time by notifying the Lenders and the
Borrower. Upon any such

 

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resignation, the Required Lenders shall have the right, in consultation with the
Borrower, to appoint a successor. If no successor shall have been so appointed
by the Required Lenders and shall have accepted such appointment within 30 days
after the retiring Agent gives notice of its resignation, then the retiring
Agent may, on behalf of the Lenders, 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 an Agent’s resignation hereunder, the provisions of this Article and
Section 9.05 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 acting as Agent.

Each Lender acknowledges that it has, independently and without reliance upon
the Agents 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. Each Lender also acknowledges that it will, independently and
without reliance upon the Agents 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 or any other Loan Document, any related agreement or any document
furnished hereunder or thereunder.

ARTICLE IX

Miscellaneous

SECTION 9.01. Notices. 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 fax, as follows:

(a) if to the Borrower, to it at 4600 Post Oak Place, Suite 200, Houston, TX
77027, Attention of Chief Financial Officer (Fax No. (713) 622-5101, with a copy
to Jackson Walker L.L.P. at 1401 McKinney, Suite 1900, Houston, Texas 77010,
Attention of David G. Dunlap (Fax No. (713) 308-4101);

(b) if to the Administrative Agent, to Credit Suisse, Eleven Madison Avenue, New
York, NY 10010, Attention of Agency Group (Fax No. (212) 325-8304); and

(c) if to a Lender, to it at its address (or fax number) set forth on Schedule
2.01 or in the Assignment and Acceptance pursuant to which such Lender shall
have become a party 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 if delivered by hand or overnight courier service or sent by fax
or on the date five Business Days after dispatch by certified or registered mail
if mailed, in each case delivered, sent or mailed

 

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(properly addressed) to such party as provided in this Section 9.01 or in
accordance with the latest unrevoked direction from such party given in
accordance with this Section 9.01. As agreed to among the Borrower, the
Administrative Agent and the applicable Lenders from time to time, notices and
other communications may also be delivered by e-mail to the e-mail address of a
representative of the applicable person provided from time to time by such
person.

SECTION 9.02. Survival of Agreement. All covenants, agreements, representations
and warranties made by the Borrower herein and in the certificates or other
instruments prepared or delivered in connection with or pursuant to this
Agreement or any other Loan Document shall be considered to have been relied
upon by the Lenders and shall survive the making by the Lenders of the Loans,
regardless of any investigation made by the Lenders or on their behalf, 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 or any other Loan Document is outstanding and unpaid and so long as
the Commitments have not been terminated. The provisions of Sections 2.14, 2.16,
2.20 and 9.05 shall remain operative and in full force and effect regardless of
the expiration of the term of this Agreement, the consummation of the
transactions contemplated hereby, the repayment of any of the Loans, the
expiration of the Commitments, the invalidity or unenforceability of any term or
provision of this Agreement or any other Loan Document, or any investigation
made by or on behalf of the Administrative Agent, the Collateral Agent or any
Lender.

SECTION 9.03. Binding Effect. This Agreement shall become effective when it
shall have been executed by the Borrower and 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.

SECTION 9.04. Successors and Assigns. (a) Whenever in this Agreement any of the
parties hereto is referred to, such reference shall be deemed to include the
permitted successors and assigns of such party; and all covenants, promises and
agreements by or on behalf of the Borrower, the Administrative Agent, the
Collateral Agent or the Lenders that are contained in this Agreement shall bind
and inure to the benefit of their respective successors and assigns.

(b) Each Lender may assign to one or more assignees all or a portion of its
interests, rights and obligations under this Agreement (including all or a
portion of its Commitments and the Loans at the time owing to it), with the
prior written consent of the Administrative Agent (not to be unreasonably
withheld or delayed); provided, however, that (i) the amount of the Commitment
or Loans of the assigning Lender subject to each such assignment (determined as
of the date the Assignment and Acceptance with respect to such assignment is
delivered to the Administrative Agent on an aggregate basis in the event of
concurrent assignments to Related Funds) shall not be less than $1,000,000 (or,
if less, the entire remaining amount of such Lender’s Commitment or Loans),
(ii) the parties to each such assignment shall execute and deliver to the
Administrative Agent an Assignment and Acceptance via an electronic settlement
system acceptable to the Administrative Agent (or, if previously agreed with the
Administrative Agent, manually), and shall pay to the Administrative Agent a
processing and recordation fee of $3,500 (which fee may be waived or reduced in
the sole discretion of the Administrative Agent); provided that only one such
fee shall be payable in the case of concurrent assignments to two or more
Related Funds, and (iii) the assignee, if it shall not be a Lender, shall
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Administrative Agent an Administrative Questionnaire and all applicable tax
forms. Upon acceptance and recording pursuant to paragraph (e) of this
Section 9.04, from and after the effective date specified in each Assignment and
Acceptance, (A) the assignee thereunder shall be a party hereto and, to the
extent of the interest assigned by such Assignment and Acceptance, have the
rights and obligations of a Lender under this Agreement and (B) the assigning
Lender thereunder shall, to the extent of the interest assigned by such
Assignment and Acceptance, be released from its obligations under this Agreement
(and, in the case of an Assignment and Acceptance covering all or the remaining
portion of an 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 Sections 2.14, 2.16, 2.20 and 9.05, as well as to any amounts
accrued for its account and not yet paid).

(c) By executing and delivering an Assignment and Acceptance, the assigning
Lender thereunder and the assignee thereunder shall be deemed to confirm to and
agree with each other and the other parties hereto as follows: (i) such
assigning Lender warrants that it is the legal and beneficial owner of the
interest being assigned thereby free and clear of any adverse claim and that its
Commitment and the outstanding balances of its Loans, in each case without
giving effect to assignments thereof which have not become effective, are as set
forth in such Assignment and Acceptance, (ii) except as set forth in (i) above,
such assigning Lender makes no representation or warranty and assumes no
responsibility with respect to any statements, warranties or representations
made in or in connection with this Agreement, or the execution, legality,
validity, enforceability, genuineness, sufficiency or value of this Agreement,
any other Loan Document or any other instrument or document furnished pursuant
hereto, or the financial condition of the Borrower or any Subsidiary or the
performance or observance by the Borrower or any Subsidiary of any of its
obligations under this Agreement, any other Loan Document or any other
instrument or document furnished pursuant hereto; (iii) such assignee represents
and warrants that it is legally authorized to enter into such Assignment and
Acceptance; (iv) such assignee confirms that it has received a copy of this
Agreement, together with copies of the most recent financial statements referred
to in Section 3.05 or delivered pursuant to Section 5.04, the Intercreditor
Agreement and such other documents and information as it has deemed appropriate
to make its own credit analysis and decision to enter into such Assignment and
Acceptance; (v) such assignee will independently and without reliance upon the
Administrative Agent, the Collateral Agent, such assigning Lender or any other
Lender and based on such documents and information as it shall deem appropriate
at the time, continue to make its own credit decisions in taking or not taking
action under this Agreement; (vi) such assignee agrees that it shall be bound by
the terms of the Intercreditor Agreement; (vii) such assignee appoints and
authorizes the Administrative Agent and the Collateral Agent to take such action
as agent on its behalf and to exercise such powers under this Agreement as are
delegated to the Administrative Agent and the Collateral Agent, respectively, by
the terms hereof, together with such powers as are reasonably incidental
thereto; and (viii) such assignee agrees that it will perform in accordance with
their terms all the obligations which by the terms of this Agreement are
required to be performed by it as a Lender.

(d) The Administrative Agent, acting for this purpose as an agent of the
Borrower, shall maintain at one of its offices in The City of New York a copy of
each Assignment and Acceptance delivered to it and a register for the
recordation of the names and addresses of the Lenders, and the Commitment of,
and principal amount of the Loans owing to, each Lender pursuant to the terms
hereof from time to time (the “Register”). The entries in the Register shall

 

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be conclusive absent manifest error and the Borrower, the Administrative Agent,
the Collateral Agent 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, the Collateral Agent
and any Lender, at any reasonable time and from time to time upon reasonable
prior notice.

(e) Upon its receipt of, and consent to, a duly completed Assignment and
Acceptance executed by an assigning Lender and an assignee, an Administrative
Questionnaire completed in respect of the assignee (unless the assignee shall
already be a Lender hereunder), the processing and recordation fee referred to
in paragraph (b) above, if applicable, and any applicable tax forms, the
Administrative Agent shall (i) accept such Assignment and Acceptance and
(ii) record the information contained therein in the Register. No assignment
shall be effective unless it has been recorded in the Register as provided in
this paragraph (e).

(f) Each Lender may without the consent of the Administrative Agent sell
participations to one or more banks or other entities in all or a portion of its
rights and obligations under this Agreement (including all or a portion of its
Commitment and the Loans owing to it); provided, however, that (i) such Lender’s
obligations under this Agreement shall remain unchanged, (ii) such Lender shall
remain solely responsible to the other parties hereto for the performance of
such obligations, (iii) the participating banks or other entities shall be
entitled to the benefit of the cost protection provisions contained in Sections
2.14, 2.16 and 2.20 to the same extent as if they were Lenders (but, with
respect to any particular participant, to no greater extent than the Lender that
sold the participation to such participant) and (iv) the Borrower, the
Administrative Agent and the Lenders shall continue to deal solely and directly
with such Lender in connection with such Lender’s rights and obligations under
this Agreement, and such Lender shall retain the sole right to enforce the
obligations of the Borrower relating to the Loans owing to it and to approve any
amendment, modification or waiver of any provision of this Agreement (other than
amendments, modifications or waivers decreasing any fees payable hereunder the
amount of principal of or the rate at which interest is payable on the Loans,
extending any scheduled principal payment date or date fixed for the payment of
interest on the Loans, increasing or extending the Commitments or releasing any
Guarantor (other than in connection with a transaction permitted hereunder) or
all or substantially all of the Collateral).

(g) Any Lender or participant may, in connection with any assignment or
participation or proposed assignment or participation pursuant to this
Section 9.04, disclose to the assignee or participant or proposed assignee or
participant any information relating to the Borrower furnished to such Lender by
or on behalf of the Borrower; provided that, prior to any such disclosure of
information designated by the Borrower as confidential, each such assignee or
participant or proposed assignee or participant shall execute an agreement
whereby such assignee or participant shall agree (subject to customary
exceptions) to preserve the confidentiality of such confidential information on
terms no less restrictive than those applicable to the Lenders pursuant to
Section 9.16.

(h) Any Lender may at any time assign all or any portion of its rights under
this Agreement to secure extensions of credit to such Lender or in support of
obligations owed by such Lender; provided that no such assignment shall release
a Lender from any of its obligations hereunder or substitute any such assignee
for such Lender as a party hereto.

 

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(i) Notwithstanding anything to the contrary contained herein, any Lender (a
“Granting Lender”) may grant to a special purpose funding vehicle (an “SPC”),
identified as such in writing from time to time by the Granting Lender to the
Administrative Agent and the Borrower, the option to provide to the Borrower all
or any part of any Loan that such Granting Lender would otherwise be obligated
to make to the Borrower pursuant to this Agreement; provided that (i) nothing
herein shall constitute a commitment by any SPC to make any Loan and (ii) if an
SPC elects not to exercise such option or otherwise fails to provide all or any
part of such Loan, the Granting Lender shall be obligated to make such Loan
pursuant to the terms hereof. The making of a Loan by an SPC hereunder shall
utilize the Commitment of the Granting Lender to the same extent, and as if,
such Loan were made by such Granting Lender. Each party hereto hereby agrees
that no SPC shall be liable for any indemnity or similar payment obligation
under this Agreement (all liability for which shall remain with the Granting
Lender). In furtherance of the foregoing, each party hereto hereby agrees (which
agreement shall survive the termination of this Agreement) that, prior to the
date that is one year and one day after the payment in full of all outstanding
commercial paper or other senior indebtedness of any SPC, it will not institute
against, or join any other person in instituting against, such SPC any
bankruptcy, reorganization, arrangement, insolvency or liquidation proceedings
under the laws of the United States or any State thereof. In addition,
notwithstanding anything to the contrary contained in this Section 9.04, any SPC
may (i) with notice to, but without the prior written consent of, the Borrower
and the Administrative Agent and without paying any processing fee therefor,
assign all or a portion of its interests in any Loans to the Granting Lender or
to any financial institutions (consented to by the Borrower and Administrative
Agent) providing liquidity and/or credit support to or for the account of such
SPC to support the funding or maintenance of Loans and (ii) disclose on a
confidential basis any non-public information relating to its Loans to any
rating agency, commercial paper dealer or provider of any surety, guarantee or
credit or liquidity enhancement to such SPC.

(j) The Borrower shall not assign or delegate any of its rights or duties
hereunder without the prior written consent of the Administrative Agent and each
Lender, and any attempted assignment without such consent shall be null and
void.

SECTION 9.05. Expenses; Indemnity. (a) The Borrower agrees to pay all reasonable
out-of-pocket expenses incurred by the Administrative Agent and the Collateral
Agent in connection with the syndication of the credit facilities provided for
herein and the preparation and administration of this Agreement and the other
Loan Documents or in connection with any amendments, modifications or waivers of
the provisions hereof or thereof (whether or not the transactions hereby or
thereby contemplated shall be consummated) or incurred by the Administrative
Agent, the Collateral Agent or any Lender in connection with the enforcement or
protection of its rights in connection with this Agreement and the other Loan
Documents or in connection with the Loans made hereunder, including the fees,
charges and disbursements of Cravath, Swaine & Moore LLP, counsel for the
Administrative Agent and the Collateral Agent, and, in connection with any such
enforcement or protection, the fees, charges and disbursements of any other
counsel for the Administrative Agent, the Collateral Agent or any Lender.

 

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(b) The Borrower agrees to indemnify the Administrative Agent, the Collateral
Agent, each Lender and each Related Party of any of the foregoing persons (each
such person being called an “Indemnitee”) against, and to hold each Indemnitee
harmless from, any and all losses, claims, damages, liabilities and related
expenses, including reasonable counsel fees, charges and disbursements, incurred
by or asserted against any Indemnitee arising out of, in any way connected with,
or as a result of (i) the execution or delivery of this Agreement or any other
Loan Document or any agreement or instrument contemplated thereby, the
performance by the parties thereto of their respective obligations thereunder or
the consummation of the Transactions and the other transactions contemplated
thereby (including the syndication of the credit facilities provided for
herein), (ii) the use of the proceeds of the Loans, (iii) any claim, litigation,
investigation or proceeding relating to any of the foregoing, whether or not any
Indemnitee is a party thereto (and regardless of whether such matter is
initiated by a third party or by the Borrower, any other Loan Party or any of
their respective Affiliates), or (iv) any actual or alleged presence or Release
of Hazardous Materials on any property currently or formerly owned or operated
by the Borrower or any of the Subsidiaries, or any Environmental Liability
related in any way to the Borrower or the Subsidiaries; 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 the Administrative Agent or the Collateral Agent under paragraph (a) or
(b) of this Section, each Lender severally agrees to pay to the Administrative
Agent or the Collateral Agent, as the case may be, such Lender’s pro rata share
(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 the Administrative Agent or the
Collateral Agent in its capacity as such. For purposes hereof, a Lender’s “pro
rata share” shall be determined based upon its share of the outstanding Loans
and unused Commitments at the time.

(d) To the extent permitted by applicable law, the Borrower shall not assert,
and it 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 or any agreement or instrument contemplated hereby, the
Transactions, any Loan or the use of the proceeds thereof.

(e) The provisions of this Section 9.05 shall remain operative and in full force
and effect regardless of the expiration of the term of this Agreement, the
consummation of the transactions contemplated hereby, the repayment of any of
the Loans, the expiration of the Commitments, the invalidity or unenforceability
of any term or provision of this Agreement or any other Loan Document, or any
investigation made by or on behalf of the Administrative Agent, the Collateral
Agent or any Lender. All amounts due under this Section 9.05 shall be payable on
written demand therefor.

SECTION 9.06. Right of Setoff. If an Event of Default shall have occurred and be
continuing, each Lender is hereby authorized at any time and from time to time,
except to the extent prohibited by law, to set off and apply any and all
deposits (general or special, time or

 

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demand, provisional or final) at any time held and other indebtedness at any
time owing by such Lender to or for the credit or the account of the Borrower
against any of and all the obligations of the Borrower now or hereafter existing
under this Agreement and the other Loan Documents held by such Lender,
irrespective of whether or not such Lender shall have made any demand under this
Agreement or such other Loan Document and although such obligations may be
unmatured. The rights of each Lender under this Section 9.06 are in addition to
other rights and remedies (including other rights of setoff) which such Lender
may have.

SECTION 9.07. Applicable Law. THIS AGREEMENT AND THE OTHER LOAN DOCUMENTS (OTHER
THAN AS EXPRESSLY SET FORTH IN OTHER LOAN DOCUMENTS OR TO EXTENT THE LAWS OF
ANOTHER JURISDICTION MANDATORILY GOVERN ANY LOAN DOCUMENT) SHALL BE CONSTRUED IN
ACCORDANCE WITH AND GOVERNED BY THE LAWS OF THE STATE OF NEW YORK.

SECTION 9.08. Waivers; Amendment. (a) No failure or delay of the Administrative
Agent, the Collateral Agent or any Lender in exercising any power or right
hereunder or under any other Loan Document shall operate as a waiver thereof,
nor shall any single or partial exercise of any such right or power, or any
abandonment or discontinuance of steps to enforce such a right or power,
preclude any other or further exercise thereof or the exercise of any other
right or power. The rights and remedies of the Administrative Agent, the
Collateral Agent 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 or any other Loan Party
therefrom shall in any event be effective unless the same shall be permitted by
paragraph (b) below, and then such waiver or consent shall be effective only in
the specific instance and for the purpose for which given. No notice or demand
on the Borrower in any case shall entitle the Borrower to any other or further
notice or demand in similar or other circumstances, except as expressly provided
in this Agreement or any other Loan Document.

(b) Neither this Agreement nor any provision hereof may be waived, amended or
modified except pursuant to an agreement or agreements in writing entered into
by the Borrower and the Required Lenders; provided, however, that no such
agreement shall (i) decrease the principal amount of, or extend the maturity of
or any scheduled principal payment date or date for the payment of any interest
on any Loan, or waive or excuse any such payment or any part thereof, or
decrease the rate of interest on any Loan, or waive or excuse the payment of (or
extend the date for payment of) any prepayment fee, or reduce the amount
thereof, without the prior written consent of each Lender affected thereby,
(ii) increase or extend the Commitment of any Lender without the prior written
consent of such Lender, (iii) amend or modify the pro rata requirements of
Section 2.17, the provisions of Section 9.04(j) or the provisions of this
Section, or release any Guarantor (other than in connection with a transaction
permitted hereunder) or all or substantially all of the Collateral, without the
prior written consent of each Lender, (iv) modify the protections afforded to an
SPC pursuant to the provisions of Section 9.04(i) without the written consent of
such SPC, or (v) reduce the percentage contained in the definition of the term
“Required Lenders” without the prior written consent of each Lender (it being
understood that with the consent of the Required Lenders, additional extensions
of credit pursuant to this Agreement may be included in the determination of the
Required Lenders on substantially the

 

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same basis as the Commitments on the date hereof); provided further that no such
agreement shall amend, modify or otherwise affect the rights or duties of the
Administrative Agent or the Collateral Agent hereunder or under any other Loan
Document without the prior written consent of the Administrative Agent or the
Collateral Agent.

SECTION 9.09. Interest Rate Limitation. Notwithstanding anything herein to the
contrary, if at any time the interest rate applicable to any Loan, together with
all fees, charges and other amounts which are treated as interest on such Loan
under applicable law (collectively the “Charges”), shall exceed the maximum
lawful rate (the “Maximum Rate”) which may be contracted for, charged, taken,
received or reserved by the Lender holding such Loan in accordance with
applicable law, the rate of interest payable in respect of such Loan hereunder,
together with all Charges payable in respect thereof, shall be limited to the
Maximum Rate and, to the extent lawful, the interest and Charges that would have
been payable in respect of such Loan but were not payable as a result of the
operation of this Section 9.09 shall be cumulated and the interest and Charges
payable to such Lender in respect of other Loans or periods shall be increased
(but not above the Maximum Rate therefor) until such cumulated amount, together
with interest thereon at the Federal Funds Effective Rate to the date of
repayment, shall have been received by such Lender.

SECTION 9.10. Entire Agreement. This Agreement, the Fee Letter and the other
Loan Documents constitute the entire contract between the parties relative to
the subject matter hereof. Any other previous agreement among the parties with
respect to the subject matter hereof is superseded by this Agreement, the Fee
Letter and the other Loan Documents. Nothing in this Agreement or in the other
Loan Documents, expressed or implied, is intended to confer upon any person
(other than the parties hereto and thereto, their respective successors and
assigns permitted hereunder and, to the extent expressly contemplated hereby,
the Related Parties of each of the Administrative Agent, the Collateral Agent
and the Lenders) any rights, remedies, obligations or liabilities under or by
reason of this Agreement or the other Loan Documents.

SECTION 9.11. WAIVER OF JURY TRIAL. EACH PARTY HERETO HEREBY WAIVES, TO THE
FULLEST EXTENT PERMITTED BY APPLICABLE LAW, ANY RIGHT IT MAY HAVE TO A TRIAL BY
JURY IN RESPECT OF ANY LITIGATION DIRECTLY OR INDIRECTLY ARISING OUT OF, UNDER
OR IN CONNECTION WITH THIS AGREEMENT OR ANY OF THE OTHER LOAN DOCUMENTS. EACH
PARTY HERETO (A) CERTIFIES THAT NO REPRESENTATIVE, AGENT OR ATTORNEY OF ANY
OTHER PARTY HAS REPRESENTED, EXPRESSLY OR OTHERWISE, THAT SUCH OTHER PARTY WOULD
NOT, IN THE EVENT OF LITIGATION, SEEK TO ENFORCE THE FOREGOING WAIVER AND
(B) ACKNOWLEDGES THAT IT AND THE OTHER PARTIES HERETO HAVE BEEN INDUCED TO ENTER
INTO THIS AGREEMENT AND THE OTHER LOAN DOCUMENTS, AS APPLICABLE, BY, AMONG OTHER
THINGS, THE MUTUAL WAIVERS AND CERTIFICATIONS IN THIS SECTION 9.11.

SECTION 9.12. Severability. In the event any one or more of the provisions
contained in this Agreement or in any other Loan Document should be held
invalid, illegal or unenforceable in any respect, the validity, legality and
enforceability of the remaining provisions contained herein and therein shall
not in any way be affected or impaired thereby (it being understood that the
invalidity of a particular provision in a particular jurisdiction shall not in
and

 

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of itself affect the validity of such provision in any other jurisdiction). The
parties shall endeavor in good-faith negotiations to replace the invalid,
illegal or unenforceable provisions with valid provisions the economic effect of
which comes as close as possible to that of the invalid, illegal or
unenforceable provisions.

SECTION 9.13. Counterparts. 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, and shall become effective as provided in Section 9.03.
Delivery of an executed signature page to this Agreement by facsimile
transmission shall be as effective as delivery of a manually signed counterpart
of this Agreement.

SECTION 9.14. 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 are not to affect the construction of, or to be taken into
consideration in interpreting, this Agreement.

SECTION 9.15. Jurisdiction; Consent to Service of Process. (a) The Borrower
hereby irrevocably and unconditionally submits, for itself and its property, to
the exclusive jurisdiction of any New York State court or Federal court of the
United States of America sitting in New York City, and any appellate court from
any thereof, in any action or proceeding arising out of or relating to this
Agreement or the other Loan Documents, or for recognition or enforcement of any
judgment, and each of the parties hereto hereby irrevocably and unconditionally
agrees that all claims in respect of any such action or proceeding may be heard
and determined in such New York State or, to the extent permitted by law, in
such Federal court. Each of the parties hereto agrees that a final judgment in
any such action or proceeding shall be conclusive and may be enforced in other
jurisdictions by suit on the judgment or in any other manner provided by law.
Nothing in this Agreement shall affect any right that the Administrative Agent,
the Collateral Agent or any Lender may otherwise have to bring any action or
proceeding relating to this Agreement or the other Loan Documents against the
Borrower or its properties in the courts of any jurisdiction.

(b) The Borrower hereby irrevocably and unconditionally waives, to the fullest
extent it may legally and effectively do so, any objection which it may now or
hereafter have to the laying of venue of any suit, action or proceeding arising
out of or relating to this Agreement or the other Loan Documents in any New York
State or Federal court. Each of the parties hereto hereby irrevocably waives, to
the fullest extent permitted by law, the defense of an inconvenient forum to the
maintenance of such action or proceeding in any such court.

(c) Each party to this Agreement irrevocably consents to service of process in
the manner provided for notices in Section 9.01. Nothing in this Agreement will
affect the right of any party to this Agreement to serve process in any other
manner permitted by law; provided that notice of the use of any such alternative
means of service shall be provided to each affected party in the manner provided
in Section 9.01.

SECTION 9.16. Confidentiality. Each of the Administrative Agent, the Collateral
Agent 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’ officers, directors, employees and agents, including accountants,
legal counsel and other advisors (it being

 

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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 or quasi-regulatory authority (such as the National Association of
Insurance Commissioners), (c) to the extent required by applicable laws or
regulations or by any subpoena or similar legal process, (d) in connection with
the exercise of any remedies hereunder or under the other Loan Documents or any
suit, action or proceeding relating to the enforcement of its rights hereunder
or thereunder, (e) subject to an agreement containing provisions substantially
the same as those of this Section 9.16, to (i) any actual or prospective
assignee of or participant in any of its rights or obligations under this
Agreement and the other Loan Documents or (ii) any actual or prospective
counterparty (or its advisors) to any swap or derivative transaction relating to
the Borrower or any Subsidiary or any of their respective obligations, (f) with
the consent of the Borrower or (g) to the extent such Information becomes
publicly available other than as a result of a breach of this Section 9.16. For
the purposes of this Section, “Information” shall mean all information received
from the Borrower and related to the Borrower or its business, other than any
such information that was available to the Administrative Agent, the Collateral
Agent or any Lender on a nonconfidential basis prior to its disclosure by the
Borrower; provided that, in the case of Information received from the Borrower
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 9.16 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 its own confidential information.

SECTION 9.17. USA Patriot Act Notice. Each Lender and the Administrative Agent
(for itself and not on behalf of any Lender) hereby notifies the Borrower that
pursuant to the requirements of the USA Patriot Act, it is required to obtain,
verify and record information that identifies the Borrower, which information
includes the name and address of the Borrower and other information that will
allow such Lender or the Administrative Agent, as applicable, to identify the
Borrower in accordance with the USA Patriot Act.

SECTION 9.18. Parallel Debt. (a) Notwithstanding anything to the contrary
contained in this Agreement and the other Loan Documents and solely for the
purpose of ensuring and preserving the validity and effect of the security
rights granted and to be granted under or pursuant to the Security Documents
governed by the laws of The Netherlands (the “Dutch Security Agreements”), each
of the Lenders and the other parties hereto hereby acknowledges and consents to
(i) each Loan Party that is party to the Dutch Security Agreements undertaking
herein to pay to the Collateral Agent, in its individual capacity and not as
agent, representative or trustee, as a separate independent obligation to the
Collateral Agent, the amount of its Dutch Parallel Debt (which each such Loan
Party hereby so undertakes to do), and (ii) the security rights contemplated by
the Dutch Security Agreements being granted in favor of the Collateral Agent in
its individual capacity as security for its claims under the Dutch Parallel
Debt.

(b) Each Loan Party acknowledges and agrees that it may not pay its Dutch
Parallel Debt other than at the instruction of, and in the manner instructed by,
the Collateral Agent; provided, however, that no Loan Party shall be obligated
to pay any amount of its Dutch Parallel Debt unless and until a corresponding
amount of its Underlying Debt Obligations shall have become due and payable.

 

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(c) To the extent any amount is paid to and received by the Collateral Agent in
payment of the Dutch Parallel Debt and the Collateral Agent has turned over any
amounts received by it in respect to the Dutch Parallel Debt to the Lenders as
their interests appeared with respect to the Underlying Debt Obligations, the
total amount due and payable in respect of the Underlying Debt Obligations shall
be decreased as if such amount were received by the Lenders or any of them in
payment of the corresponding Underlying Debt Obligations.

SECTION 9.19. INTERCREDITOR AGREEMENT. EACH LENDER HEREUNDER (A) ACKNOWLEDGES
THAT IT HAS RECEIVED A COPY OF THE INTERCREDITOR AGREEMENT, (B) CONSENTS TO THE
SUBORDINATION OF LIENS PROVIDED FOR IN THE INTERCREDITOR AGREEMENT, (C) AGREES
THAT IT WILL BE BOUND BY AND WILL TAKE NO ACTIONS CONTRARY TO THE PROVISIONS OF
THE INTERCREDITOR AGREEMENT AND (D) AUTHORIZES AND INSTRUCTS THE ADMINISTRATIVE
AGENT TO ENTER INTO THE INTERCREDITOR AGREEMENT AS SECOND LIEN COLLATERAL AGENT
AND ON BEHALF OF SUCH LENDER. THE FOREGOING PROVISIONS ARE INTENDED AS AN
INDUCEMENT TO THE LENDERS UNDER THE FIRST LIEN CREDIT AGREEMENT TO EXTEND (AND
AS FURTHER CONSIDERATION FOR HAVING EXTENDED) CREDIT TO THE BORROWER AND SUCH
LENDERS ARE INTENDED THIRD PARTY BENEFICIARIES OF SUCH PROVISIONS.

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

 

ATP OIL & GAS CORPORATION, by  

/s/ T. Paul Bulmahn

Name:   T. Paul Bulmahn Title:   President CREDIT SUISSE, CAYMAN ISLANDS BRANCH,
individually and as Administrative Agent and Collateral Agent, by  

/s/ James Moran

Name:   James Moran Title:   Managing Director by  

/s/ Nupur Kumar

Name:   Nupur Kumar Title:   Associate

[Second Lien Credit Agreement]