$150,000,000

 

CREDIT AGREEMENT

 

Between

 

VOYAGER OIL & GAS, INC.,

a Montana corporation,

 

as Borrower,

 

and

 

MACQUARIE BANK LIMITED,

a bank incorporated under the laws of Australia,

in its individual capacity and as Administrative Agent,

 

And

 

the Lenders Party Hereto

 

 

 

_________________________________

 

 

 

Dated as of February 10, 2012

 

TABLE OF CONTENTS

 

 

 

Page

 

 

ARTICLE I THE LOAN FACILITY 1 Section 1.1 Maximum Note Amount 1 Section 1.2 The
Revolving Loan 1 Section 1.3 The Term Loan 5 Section 1.4 Development Plan 5
Section 1.5 Advance Procedure. 6 Section 1.6 Promissory Note 7 Section 1.7
Interest. 7 Section 1.8 Repayment of the Loan. 9 Section 1.9 Time and Place of
Payments. 9 Section 1.10 Optional Prepayment of the Loan 10 Section 1.11
Mandatory Prepayment of the Loan 10 Section 1.12 Application of Insurance
Proceeds 11 Section 1.13 Fees. 11 Section 1.14 Taxes. 12 ARTICLE II SECURITY;
ETC. 14 Section 2.1 Grant of Liens and Security Interests 15 Section 2.2 Notice
of Assignment of Proceeds 15 Section 2.3 Further Assurances 15 Section 2.4
Release of Liens; Financing Statements; Release 15 Section 2.5 Subordination
Agreements 15 Section 2.6 All Obligations are Pari Passu 15 Section 2.7 Swap
Obligations Beyond Maturity 16 ARTICLE III REPRESENTATIONS AND WARRANTIES 16  
Section 3.1 Formation and Existence 16 Section 3.2 Name; Executive Offices 16
Section 3.3 Ownership; Subsidiaries 16 Section 3.4 Authorization;
Non-Contravention 16 Section 3.5 Solvency 17 Section 3.6 Omissions and
Misstatements 17 Section 3.7 Joint Venture 17 Section 3.8 Commissions; Expenses
17 Section 3.9 Tax Returns; Taxes 17 Section 3.10 Litigation; Governmental
Proceedings 18 Section 3.11 Ownership of Collateral; Interests. 18 Section 3.12
Debt 19 Section 3.13 Intellectual Property 19 Section 3.14 No Other Leases 19
Section 3.15 Investments 19

 

 

 

 

 

Section 3.16 No Unusual Restrictions 19 Section 3.17 No Take or Pay Agreements
19 Section 3.18 Gas Imbalances 19 Section 3.19 Environmental Matters 19 Section
3.20 Permits and Licenses 20 Section 3.21 Operation of the Properties 21 Section
3.22 USA PATRIOT Act Representation 21 Section 3.23 Contingent Liabilities 22
Section 3.24 Equipment 22 Section 3.25 Unpaid Bills 22 Section 3.26 Taxpayer
Identification 22 Section 3.27 Investment Company 22 Section 3.28 No Margin
Trading 22 Section 3.29 No Pending Sale or Financing 22 Section 3.30 No Calls on
Production 22 Section 3.31 Basic Documents 23 Section 3.32 Farmout Agreements
and Subject Contracts, Etc 23 Section 3.33 Operating Agreements 23 Section 3.34
No Unusual Agreements 24 Section 3.35 Suspense of Proceeds 24 Section 3.36
Employee Plans 24 Section 3.37 Insurance 24 Section 3.38 No Material Adverse
Effect 24 Section 3.39 Restriction on Liens 25 Section 3.40 Hedging Agreements
25 Section 3.41 Marketing of Production 25 Section 3.42 Deposit Accounts 25
Section 3.43 Labor Matters 25 Section 3.44 Eligible Contract Participant 25
Section 3.45 No Default 25 Section 3.46 Choice of Law 25 Section 3.47 Financial
Statements 26 Section 3.48 Priority 26 Section 3.49 Affiliate Interests in
Properties 26 ARTICLE IV FINANCIAL STATEMENTS AND INFORMATION; CERTAIN NOTICES
TO ADMINISTRATIVE AGENT  26 Section 4.1 Monthly Reporting Package 26 Section 4.2
Financial Reporting 26 Section 4.3 Compliance Certificate 27 Section 4.4 Notices
of Default and Other Significant Events 27 Section 4.5 Reserve Reports 28
Section 4.6 Additional Information 29 Section 4.7 Monthly Field Activity Reports
29 Section 4.8 Test Results; Core Analyses; Surveys and Logs 30 Section 4.9
Reports Made to a Governmental Authority 30 Section 4.10 Charter Documents 30

 

 

 

 

 

Section 4.11 Certificate of Authorized Officer—Hedging Agreements 30 Section
4.12 Certificate of Insurer—Insurance Coverage 30 Section 4.13 Anticipated Cost
Overruns 30 Section 4.14 Updated Development Plan 31 ARTICLE V AFFIRMATIVE
COVENANTS 31 Section 5.1 Preservation of Existence 31 Section 5.2 Compliance
with Law 31 Section 5.3 Environmental Matters 32 Section 5.4 Records 33 Section
5.5 Litigation 33 Section 5.6 Damage to Collateral 33 Section 5.7 Solvency 33
Section 5.8 Insurance 33 Section 5.9 Delivery of Invoices, Receipts, Etc 34
Section 5.10 Access to Books and Records; Inspections; Consultants 35 Section
5.11 Creditors 35 Section 5.12 Operators 36 Section 5.13 Purchasers of
Hydrocarbons 36 Section 5.14 Use of Proceeds 37 Section 5.15 Bonds 37 Section
5.16 Hydrocarbon Price Risk Management Program 37 Section 5.17 Evidence of Title
37 Section 5.18 Continuing Enterprise 38 Section 5.19 Access to Technical Data
38 Section 5.20 Financial Ratios. 38 Section 5.21 Maintenance of Liens 40
Section 5.22 Payment of Taxes, Etc 40 Section 5.23 Equipment. 40 Section 5.24
Maintenance of Leases 40 Section 5.25 Operator 40 ARTICLE VI NEGATIVE COVENANTS
41 Section 6.1 Debt 41 Section 6.2 Accounts 41 Section 6.3 Guaranties 42 Section
6.4 Ownership and Business Operations. 42 Section 6.5 Liens and Encumbrances 43
Section 6.6 Affiliate Transactions 44 Section 6.7 Investments 44 Section 6.8
Subsidiaries; Structure 44 Section 6.9 Joint Ventures 44 Section 6.10 Dividends
and Distributions 44 Section 6.11 Modifications to Documents 44 Section 6.12
Other. 44 Section 6.13 Use of Loan Proceeds 45 Section 6.14 Limitation on Leases
45 Section 6.15 Nature of Business 45

 

 

 

 

 

Section 6.16 Deposit Accounts 45 Section 6.17 No Severance Agreements 45 Section
6.18 Commodity Deliveries 46 Section 6.19 G&A Expenses 46 ARTICLE VII FURTHER
RIGHTS OF LENDERS 46 Section 7.1 Further Assurances; Delivery of Additional
Documents 46 Section 7.2 Payments by Lenders 46 Section 7.3 Possession and
Preservation of Collateral 47 Section 7.4 Indemnification. 47 ARTICLE VIII
CLOSING; CONDITIONS PRECEDENT 48 Section 8.1 Closing 48 Section 8.2 Conditions
to Closing 48 Section 8.3 Conditions to the Making of Each Advance 50 ARTICLE IX
EVENTS OF DEFAULT 53 Section 9.1 Events of Default 53 ARTICLE X REMEDIES OF
LENDERS 55 Section 10.1 Remedies Generally. 55 Section 10.2 No Marshalling; Use
of Collateral Pending Foreclosure; Etc 56 Section 10.3 Set-Off Rights 56 Section
10.4 Rights Under Operating Agreements 56 Section 10.5 Netting of Claims 56
Section 10.6 All Rights and Remedies are Cumulative 57 ARTICLE XI ADMINISTRATIVE
AGENT 57 Section 11.1 Appointment and Authorization of Administrative Agent 57
Section 11.2 Delegation of Duties 57 Section 11.3 Liability of Administrative
Agent 57 Section 11.4 Reliance by Administrative Agent. 58 Section 11.5 Notice
of Default 58 Section 11.6 Credit Decision; Disclosure of Information by
Administrative Agent 58 Section 11.7 Indemnification of Administrative Agent 59
Section 11.8 Administrative Agent in its Individual Capacity 59 Section 11.9
Successor Administrative Agent 60 Section 11.10 Administrative Agent May File
Proofs of Claim 60 Section 11.11 Collateral Matters. 61 Section 11.12 Advance
Procedure 62 Section 11.13 Payments 63 Section 11.14 Application of Payments 63
Section 11.15 Liens 63 Section 11.16 Payment Priority 63 Section 11.17 Sharing
of Payments by Lenders 64 Section 11.18 Relationship of Lenders 64 Section 11.19
Actions by Administrative Agent 64 Section 11.20 Replacement of Lenders 65
ARTICLE XII MISCELLANEOUS 66 Section 12.1 Assignment. 66 Section 12.2 Notices.
66

 

 

 

 

 

Section 12.3 Waivers; Amendments; Schedules. 68 Section 12.4 Confidentiality;
Permitted Disclosures. 69 Section 12.5 Form of Documents 70 Section 12.6
Third-Party Beneficiaries 70 Section 12.7 Governing Law; Venue. 70 Section 12.8
Waiver of Jury Trial, Punitive Damages, Etc 71 Section 12.9 Fees, Costs and
Expenses 71 Section 12.10 Compliance with Usury Laws. 72 Section 12.11 Limited
Power of Attorney 72 Section 12.12 Severability 73 Section 12.13 Defined Terms;
Interpretation, Etc 73 Section 12.14 This Agreement Controls if Terms Conflict
74 Section 12.15 Counterpart Execution 74 Section 12.16 Acknowledgment of
Exculpatory Provisions 74 Section 12.17 Final Agreement 74

 

 

 

 

 

 

EXHIBITS, APPENDICES AND SCHEDULES

 

Exhibits:

 

Exhibit A Description of Properties; Interests Exhibit B Form of Promissory Note
Exhibit C Form of Advance Request Exhibit D Existing and Approved Purchasers
Exhibit E Form of Security Agreement Exhibit F Form of Subordination Agreement
Exhibit G Form of Notice of Assignment of Proceeds Exhibit H Form of Mortgage
Exhibit I Form of Compliance Certificate    

 

Appendices:

 

Appendix A Definitions Appendix B Lenders

 

Schedules:

 

Schedule 1.2(a) Debt to be Repaid at Close Schedule 1.5(c) Authorized
Signatories on Advance Requests Schedule 3.4(d) Consents Schedule 3.7 Joint
Ventures Schedule 3.10 Litigation Schedule 3.19 Environmental Matters Schedule
3.23 Contingent Liabilities Schedule 3.25 Unpaid Bills/Vendor List Schedule 3.32
Farmout Agreements and Subject Contracts Schedule 3.33 Operators/Operating
Agreements Schedule 3.35 Suspense of Proceeds Schedule 3.36 Employee Plans
Schedule 3.39 Restrictions on Liens Schedule 3.40 Hedging Agreements Schedule
3.41 Marketing Contracts Schedule 3.42 Deposit Accounts Schedule 3.49 Affiliate
Interests in Properties Schedule 5.15 Bonds and Qualifications Schedule 6.1(b)
Existing Debt Schedule 6.5 Liens and Encumbrances Schedule 6.7 Permitted
Investments        

 

 

 

 

 

CREDIT AGREEMENT

 

This $150,000,000 Credit Agreement is dated February 10, 2012 between VOYAGER
OIL & GAS, INC., a Montana corporation, (“Borrower”) and MACQUARIE BANK LIMITED,
a bank incorporated under the laws of Australia, (in its individual capacity,
“MBL”) as administrative agent for the Lenders (in such capacity, together with
its successors in such capacity, “Administrative Agent”) and the other Lenders
party to this Agreement.

 

Background

 

A.           Borrower has requested that Lenders make available to Borrower a
revolving and a term loan facility, and Lenders are willing to make that
revolving and term loan facility available to Borrower pursuant to the terms and
conditions of this Agreement and the other Loan Documents.

 

B.           To secure all of Borrower’s obligations to Lenders under the Loan
Documents, Borrower will grant to Administrative Agent, for the ratable benefit
of each of the Lenders and Swap Counterparty as swap provider under the Swap
Agreement, a first-priority mortgage lien and security interest in all of the
real and personal property of Borrower.

 

Agreements

 

For good and valuable consideration, the receipt and sufficiency of which are
acknowledged by each of the parties, Borrower, Administrative Agent and Lenders
agree as follows:

 

ARTICLE I

THE LOAN FACILITY

 

Section 1.1            Maximum Note Amount.

 

(a)           Maximum Note Amount.  Each Lender severally agrees to make
available to Borrower, at any time prior to the Availability Termination Date,
such Lender’s Percentage Share of (i) a senior secured revolving loan (the
“Revolving Loan”) not to exceed $100,000,000 (the “Revolving Loan Note Amount”)
and (ii) a senior secured term loan (the “Term Loan”) not to exceed $50,000,000
(the “Term Loan Note Amount”), subject to the terms and conditions of this
Agreement.  Lenders do not intend to advance Borrower any amount in excess of
the Note Amount.  If, however, the obligations of Borrower under the Loan at any
time exceed the Note Amount, all amounts owing by Borrower to Lenders under this
Agreement will nevertheless constitute Obligations and will be entitled to the
benefit of Administrative Agent’s Liens on the Collateral.

 

(b)           All Amounts Due at Maturity.  All monetary Obligations (other than
Obligations under the Swap Agreement that are intended to continue past the
Maturity Date) will be fully due and payable on the Maturity Date.

 

Section 1.2     The Revolving Loan.

1

 

 

(a)           Availability and Purpose of Revolving Loan Advances.  Borrower
must use Advances under the Revolving Loan exclusively to:

 

(i)     pay Related Costs;

 

(ii)    pay the principal amount of certain Debt existing on the Closing Date
and set forth on Schedule 1.2(a);

 

(iii)    pay other expenses Approved by Administrative Agent in its reasonable
discretion;

 

(iv)    repay the Term Loan; and

 

(v)    any increases in the Borrowing Base made after Closing may also be used
for Borrower’s general corporate purposes.

 

(b)           Borrowing Base.

 

(i)            The initial Borrowing Base available under the Revolving Loan is
$15,000,000.  Thereafter, Administrative Agent will re-determine the Borrowing
Base pursuant to this Section 1.2(b).

 

(ii)           Commencing with the Reserve Report due on August 15, 2012, and
subject to Section 1.2(e) below, the Administrative Agent will re-determine the
Borrowing Base pursuant to this Section 1.2(b) not less than every six months
based upon the most recent Reserve Report.  However, if Borrower changes its
fiscal year, then the next re-determination date shall be no later than 75 days
following Borrower’s new fiscal year end date.  On or before each, February 15
and August 15 until the Maturity Date, Borrower shall furnish to Administrative
Agent a Reserve Report (with “effective dates” of December 31, and June 30,
respectively), which shall set forth, as of the applicable effective date, the
Proved Reserves attributable to the Properties.  Each Reserve Report delivered
each calendar year shall be a complete report prepared by Engineers.  Each
Reserve Report shall relate to the Proved Reserves attributable to the
Properties in accordance with Section 4.5.  For the avoidance of doubt,
commencing with the delivery of the Reserve Report due on August 15, 2012,
within 30 days following receipt of each such Reserve Report, Administrative
Agent shall, in its sole discretion, make a determination of the Borrowing Base
which shall become effective upon written notification from Administrative Agent
to Borrower until the effective date of the next redetermination as set forth in
this Section 1.2(b).

 

(iii)           Administrative Agent is not required to consider any Proved
Reserves attributable to the Properties for inclusion in the Borrowing Base if,
in Administrative Agent’s reasonable opinion, Administrative Agent does not have
a first priority security interest or mortgage Lien on such Properties.  In no
event will the Borrowing Base exceed the Revolving Loan Note Amount.

2

 

 

(iv)        Subject to Section 1.2(e) below, Administrative Agent shall
determine the Borrowing Base in accordance with its customary lending practices
based on the maximum Revolving Loan amount that may be supported by the
Properties and Borrower acknowledges, for purposes of this Agreement, such
determination by Administrative Agent as being the maximum Revolving Loan amount
that may be supported by the Properties as of such date of determination.  In
making any redetermination of the Borrowing Base, Administrative Agent shall
apply consistently the parameters and other credit factors then generally being
utilized by Administrative Agent for Borrowing Base redeterminations for
Administrative Agent’s similarly situated borrowers.  Borrower and
Administrative Agent acknowledge that (a) due to the uncertainties of the
Hydrocarbon extraction process, the Properties are not subject to evaluation
with a high degree of accuracy and are subject to potential rapid deterioration
in value, and (b) for this reason and the difficulties and expenses involved in
liquidating and collecting against the Properties, Administrative Agent’s
determination of the maximum Revolving Loan amount that may be supported by the
Properties contains an equity cushion, which equity cushion is acknowledged by
Borrower as essential for the adequate protection of Lenders.

 

(c)       Unscheduled Re-determinations.  In addition to the redetermination of
the Borrowing Base described in Section 1.2(b)(ii),

 

(i)        Borrower may initiate a redetermination of the Borrowing Base at any
other time by specifying in writing to Administrative Agent the date by which
Borrower will furnish to Administrative Agent an updated Reserve Report in
accordance with Section 4.5 and the date by which such redetermination is
requested to occur (but not less than 30 days after Administrative Agent
receives the updated Reserve Report);

 

(ii)      Administrative Agent may initiate such a redetermination in its sole
discretion;

 

but, Borrower and Administrative Agent may each initiate only two such
unscheduled redetermination each between scheduled redetermination
dates.  Borrower shall pay a $15,000 engineering fee to Administrative Agent for
each unscheduled redetermination requested by Borrower.

 

(d)    Reduction of Commitment.

 

(i)           Upon at least five Business Days prior written notice to
Administrative Agent, Borrower may at any time permanently reduce the Revolving
Loan Note Amount, but:

 

(A)      each reduction must be in an amount equal to an integral multiple of
One Hundred Thousand Dollars ($100,000);

 

(B)      if, after giving effect to the reduction, the Obligations outstanding
under the Revolving Loan would exceed the Revolving Loan Note Amount, Borrower
must, as a condition to the effectiveness of the reduction, prepay the
Obligations outstanding under the Revolving Loan by an amount equal to that
excess;

3

 

 

(C)       as a condition to the effectiveness of the reduction, Borrower must
pay to Administrative Agent, for the ratable benefit of Lenders, any fee accrued
to the date of such reduction and unpaid under Section 1.13(a); and

 

(D)       once it has become effective, no reduction in the Revolving Loan Note
Amount can be withdrawn or restored.

 

(ii)           In the event of a Defaulting Lender, and as long as no Event of
Default exists, Borrower, at its election may terminate such Defaulting Lender’s
Percentage Share of the Borrowing Base hereunder; provided that (A) such
termination must be of the Defaulting Lender’s entire Percentage Share of the
Borrowing Base, (B) Borrower shall pay all amounts owed by Borrower to such
Defaulting Lender under this Agreement and under the other Loan Documents
(including principal of and interest on the Advances owed to such Defaulting
Lender and accrued Commitment Fees but specifically excluding any Breakage Costs
as result of such payment of Advances), and (C) unless otherwise consented to by
Administrative Agent, a Defaulting Lender’s Percentage Share of the Borrowing
Base may be terminated by Borrower under this Section 1.2(d)(ii) if and only if
at such time, Borrower has elected, or is then electing, to terminate the
Percentage Share of the Borrowing Base of all then existing Defaulting
Lenders.  Upon written notice to the Defaulting Lender and Administrative Agent
of Borrower’s election to terminate a Defaulting Lender’s Percentage Share of
the Borrowing Base pursuant to this Section 1.2(d)(ii) and the payment of
amounts required to be made by Borrower under clause (B) above, (x) such
Defaulting Lender shall cease to be a “Lender” hereunder for all purposes except
that such Lender’s rights under Sections 1.14 and 7.4 shall continue with
respect to events and occurrences occurring before or concurrently with its
ceasing to be a “Lender” hereunder, (y) such Defaulting Lender’s Percentage
Share of the Borrowing Base shall be deemed terminated, and (z) such Defaulting
Lender shall be relieved of its obligations hereunder other than its obligations
under Section 7.4 with respect to events and occurrences occurring before or
concurrently with its ceasing to be a “Lender” hereunder; provided that, any
such termination will not be deemed to be a waiver or release of any claim by
Borrower, Administrative Agent or any Lender may have against such Defaulting
Lender.  Notwithstanding anything herein to the contrary, an election by
Borrower to terminate a Defaulting Lender’s Percentage Share of the Borrowing
Base pursuant to this Section 1.2(d)(ii) shall permanently decrease the
Borrowing Base unless and until an increase is made pursuant to this Section
1.2(b).

 

(e)           Borrowing Base Increases are Discretionary.  Notwithstanding
anything in this Section 1.2 or elsewhere in this Agreement to the contrary, the
Borrowing Base will be increased to an amount in excess of the initial Borrowing
Base set forth in Section 1.2(a) above only in the sole and absolute discretion
of Administrative Agent.

4

 

 

(f)           Revolving Credit.  Subject to the satisfaction of the conditions
in Section 8.3, amounts repaid in respect of the Revolving Loan may be
re-borrowed up to the Borrowing Base on a revolving basis until the Availability
Termination Date.

 

Section 1.3      The Term Loan.

 

(a)     Term Loan Availability.  At Closing the Term Loan is uncommitted and
subject to the Approval by Administrative Agent of the initial Development Plan
and the satisfaction of the conditions in Section 8.3.  The Term Loan shall be
used for the purposes set forth in Section 1.3(b) below.  Subject to the
foregoing, the Administrative Agent will notify Borrower in writing of the
amount of the committed portion of the Term Loan.

 

(b)     Purpose of Term Loan Advances.  Borrower must use Advances under the
Term Loan exclusively to:

 

(i)      pay the principal amount of certain Debt existing on the Closing Date
and set forth on Schedule 1.2(a);

 

(ii)     fund development activities set forth in the Development Plan and
included in an AFE or Reimbursement Request Approved by Administrative Agent;

 

(iii)    fund, with the Approval (not to be unreasonably withheld or delayed) of
Administrative Agent, the acquisition of additional Properties;

 

(iv)    pay Related Costs; and

 

(v)     with the Approval (not to be unreasonably withheld or delayed) of
Administrative Agent, eliminate a Borrowing Base Deficiency in accordance with
Section 1.11(b)(iii)

 

(c)   No Revolving Credit.  Amounts repaid in respect of the Term Loan cannot be
reborrowed.

 

Section 1.4    Development Plan.

 

(a)       Borrower will prepare and submit to Administrative Agent for Approval
the initial Development Plan (together with AFEs and all Supporting
Documentation and Reimbursement Requests) at least 30 days before requesting an
Advance under the Term Loan to fund development activities in accordance with
Section 1.3(b)(ii).   Borrower can propose modifications to the Development Plan
from time to time, and those modifications will become effective when Approved
(not to be unreasonably withheld or delayed) by Administrative Agent.

5

 

 

(b)        Administrative Agent’s Approval of a modification to the Development
Plan proposed by Borrower shall be granted in Administrative Agent’s reasonable
discretion.

 

(c)     In support of each Development Plan, Borrower will prepare and submit to
Administrative Agent for Approval(not to be unreasonably withheld or delayed):
(i) in the case of costs not yet expended, an AFE (including all Supporting
Documentation) at least 15 days before Borrower incurs any costs that it intends
to fund out of an Advance or (ii) in the case of costs already expended and to
be reimbursed through an Advance, reasonable evidence of a request for payment
by the applicable Operator and reasonable evidence of payment by Borrower
(collectively, “Reimbursement Request”) at least 5 days before Borrower requests
such an Advance.

 

(d)    Notwithstanding the Administrative Agent’s Approval of a Development
Plan:

 

(i)     Borrower must nevertheless satisfy the conditions described in this
Article I and Section 8.3 prior to the making of each Advance; and

 

(ii)   Lenders will have no obligation to make an Advance to fund projects
included on the Development Plan:

 

(A)   unless the requested Advance relates to an AFE or Reimbursement Request
Approved by Administrative Agent; or

 

(B)   if the requested Advance (together with all amounts previously Advanced in
respect of the applicable AFE or Reimbursement Request) exceeds (1) the cost set
forth in the Development Plan for that project, or (2) the Loan availability
remaining under the Term Loan.

 

Section 1.5    Advance Procedure.

 

(a)       Advance Requests.  Subject to the satisfaction of the conditions in
Section 8.3, Borrower can request Advances through the Availability Termination
Date.  To request an Advance, Borrower will deliver an Advance Request to
Administrative Agent by 12:00 p.m. Houston, Texas time, at least three Business
Days prior to the date on which the Advance, if Approved, is to be made.  Each
Advance Request will include invoices or other Supporting Documentation
reasonably requested by Administrative Agent to support the amounts to be paid
out of the requested Advance.  Unless Administrative Agent notifies Borrower in
writing within that three Business Day period that it objects or requires
additional information with respect to the requested Advance (in which case,
Administrative Agent will describe the objection or requested information in
reasonable detail), then Administrative Agent will process the Advance Request
on or before the end of the third Business Day of such three Business Day
period.  All Advances to Borrower will be made to an account or accounts
specified in Schedule 3.42.

6

 

 

(b)     Minimum Advance.  The minimum amount of any Advance will be $100,000
unless a lesser amount remains available under the Term Loan or Revolving Loan,
as applicable.

 

(c)      Authorized Signatories.  Schedule 1.5(c) identifies and contains a
specimen signature of each Person authorized to request an Advance on behalf of
Borrower, which schedule may be updated by Borrower upon written notice to
Administrative Agent delivered in accordance with Section 12.2.  Unless
otherwise noted on Schedule 1.5(c), only a single signatory is required on an
Advance Request.

 

(d)    Unavailability of USD.  If any non-U.S. Lender notifies Administrative
Agent that deposits in USD will not be readily available to such Lender in the
relevant interbank market to enable such Lender to fund a requested Advance,
then (i) Administrative Agent will give prompt notice of that fact to Borrower,
and (ii) the Advance Request will be deemed to have been reduced by an amount
equal to such Lender’s Percentage Share of the requested Advance and such Lender
will have no obligation to make its Percentage Share of the requested Advance;
but each other Lender shall remain obligated to fund its pro rata share of such
Advance (calculated as if all Lenders were participating in the funding of the
Advance).  At such time as the non-funding Lender determines that deposits in
USD are readily available in the interbank market to enable such Lender to fund
the Advance, then the Lender will notify the Administrative Agent and
Administrative Agent will give prompt notice of that fact to Borrower, and (iii)
such Lender shall then fund its Percentage Share of such Advance so that each
Lender will have Advances outstanding in an amount equal to its pro rata share
of the aggregate Advances outstanding.

 

Section 1.6       Promissory Note.  Borrower’s obligation to repay the Loan will
be evidenced by Promissory Notes in favor of each Lender.  The Advances made by
each Lender shall be evidenced by a single Promissory Note, dated, in the case
of (i) any Lender party hereto as of the Closing Date, or (ii) any Lender that
becomes a party hereto pursuant to an assignment, as of the effective date of
the assignment, payable to the order of such Lender in a principal amount equal
to its commitment as in effect on such date, and otherwise duly completed.  In
the event that any Lender’s commitment increases or decreases for any reason,
Borrower shall deliver on the effective date of such increase or decrease (and
upon the surrender of any then existing Promissory Note evidencing the same
obligation), a new Promissory Note payable to the order of such Lender in a
principal amount equal to its commitment after giving effect to such increase or
decrease, and otherwise duly completed.  Each Lender will record on its books
the date, amount and interest rate of each Advance made by such Lender, as well
as a record of all principal payments made by Borrower in respect of such
Promissory Note.  If such Promissory Note is transferred to another holder, the
applicable Lender may prepare a schedule of that information and attach it to
such Promissory Note.  However, neither an error in the recordation of that
information on such Lender’s books nor the failure to prepare and attach a
schedule of that information to such Promissory Note when it is transferred to
another holder will affect such Lender’s or Borrower’s rights and obligations in
respect of such Promissory Note or the validity of any transfer of such
Promissory Note to another holder.

7

 

 

Section 1.7        Interest.

 

(a)          Each Advance under the Loan will bear interest at the applicable
Contract Rate beginning on the date of such Advance and continuing until such
Advance is paid in full in accordance with this Agreement.  If an Event of
Default exists, all amounts outstanding under the Loan will bear interest at a
rate per annum (the “Default Rate”) equal to the lesser of (i) the Highest
Lawful Rate and (ii) the Contract Rate plus 2%.  In addition, any amount owing
by Borrower or another Obligor under this Agreement or the other Loan Documents
that is not paid when due, whether at stated maturity, upon acceleration or
otherwise, will bear interest (both before and after judgment) at the Default
Rate.

 

(b)          All interest will be computed on the actual number of days elapsed
over a year composed of 360 days with respect to LIBOR Loans and 365/366 days
with respect to Base Rate Loans.  Interest is due and payable under this
Agreement in arrears and in immediately available funds (i) on the last Business
Day of each month prior to the Facility Termination Date, (ii) on the last
Business Day of any Interest Period, and (ii) in full on the Facility
Termination Date.

 

(c)       Borrower must indicate the Contract Rate for each Advance by
delivering a selection notice substantially in accordance with this Section
1.7(c) (the “Selection Notice”) to the Administrative Agent at least three
Business Days prior to the end of the current Interest Period.  Any Advance
under the Term Loan will be a LIBOR Loan.  Borrower shall select the Contract
Rate for any Advance under the Revolving Loan.  If Borrower elects the Prime
Rate for an Advance under the Revolving Loan, then such Advance will be a “Base
Rate Loan,” and if Borrower elects the LIBOR Rate then such Advance will be a
“LIBOR Loan.”  If Borrower fails to timely deliver a Selection Notice, then such
Advance under the Revolving Loan will bear interest at the Prime Rate and will
be a Base Rate Loan.

 

(d)    There can be no more than six LIBOR Loans outstanding at any one time.

 

(e)     Subject to the provisions of this Section 1.7(e), Borrower can elect to
continue all or any part of any LIBOR Loan beyond the expiration of the then
current Interest Period relating to that LIBOR Loan by giving at least three
Business Days notice (the “Continuation Notice”) to Administrative Agent prior
to the end of the Interest Period. The Continuation Notice must specify the
amount of the LIBOR Loan to be continued (in integer multiples of $100,000) and
the length of the continuation Interest Period. If Borrower fails to timely
deliver a Continuation Notice, then the expiring LIBOR Loan will be converted to
a Base Rate Loan.

 

(f)       Administrative Agent’s determination of the LIBOR Rate as provided in
this Agreement will, absent manifest error, be conclusive and binding on all
parties.

 

(g)      If, on or before any date on which Administrative Agent is to determine
the LIBOR Rate:

 

(i)           Administrative Agent determines that adequate and fair means do
not or will not exist for determining the LIBOR Rate applicable to an Interest
Period or, for any reason, Administrative Agent will not be able to determine
the LIBOR Rate for the applicable Interest Period; or

8

 

 

(ii)         Administrative Agent determines that the LIBOR Rate determined in
accordance with this Agreement does not accurately reflect any Lender’s cost of
funding, making or maintaining that Advance for the applicable Interest Period;

 

then Administrative Agent can give notice of that circumstance to Borrower (a
“Market Disruption Notice”), whereupon Lenders’ obligations to make the
requested Advance on the basis of the LIBOR Rate will be suspended until such
time as Administrative Agent notifies Borrower that the circumstances described
in the Market Disruption Notice no longer exist.  If Administrative Agent has
issued a Market Disruption Notice, all subsequent Advances will bear interest at
the Prime Rate plus (x) the Applicable Margin then in effect and (y) if an Event
of Default exists, 2%, but in no event shall the interest rate ever exceed the
Highest Lawful Rate.

 

Section 1.8      Repayment of the Loan.

 

(a)         Repayment of the Loan.  Principal on the Loan shall be due and
payable on the Maturity Date.  On the Maturity Date, Borrower will pay to
Administrative Agent, for the ratable benefit of each Lender, all of the
monetary Obligations outstanding on that date (other than Obligations that may
continue past the Maturity Date under the terms of the Swap Agreement) and
perform or otherwise satisfy all other Obligations (other than Obligations that
may continue past the Maturity Date under the terms of the Swap Agreement) then
outstanding.

 

(b)        Application of Funds.  All payments under the Loan will be applied
(i) first to unpaid fees, LIBOR Breakage Costs and Related Costs which Borrower
is obligated to pay under the Loan Documents, (ii) second to accrued interest on
the Revolving Loan, (iii) third to accrued interest on the Term Loan, (iv)
fourth to principal on the Revolving Loan, and (v) fifth to principal on the
Term Loan until the amount outstanding under the Term Loan is reduced to zero .

 

Section 1.9     Time and Place of Payments.

 

(a)       Project Account.  All payments to be made by Borrower to
Administrative Agent under this Agreement will be made to the following account
(the “Project Account”) by wire transfer in immediately available funds not
later than 11:00 a.m., Houston, Texas, time on the date due:

 

  Account: The Bank of New York Mellon     New York, New York 10004     ABA #
021000018

 

9

 

 

 

        Favour: Macquarie Bank Limited     Sydney     A/C No.:  8900055375    
Chips UID:  236386     Reference:  Voyager Oil & Gas, Inc.

 

 

or to any other account in the same federal tax jurisdiction that Administrative
Agent may designate in writing to Borrower from time to time.

 

(b)           Business Days.  If any payment to be made under this Agreement
falls due on a day that is not a Business Day, the payment will be payable on
the next succeeding Business Day.

 

Section 1.10      Optional Prepayment of the Loan.  Borrower can prepay the Loan
in whole or in part at any time without penalty or premium, except for Breakage
Costs resulting from such prepayment. All prepayments received by Administrative
Agent under this Section 1.10 will be immediately applied as a prepayment of the
Loan pursuant to Section 1.8(b).

 

Section 1.11        Mandatory Prepayment of the Loan.

 

(a)        Borrower will promptly pay to Administrative Agent, for the ratable
benefit of each Lender, 100% of all net proceeds from the sale of any Collateral
to which Proved Reserves are attributed (excluding sales of Hydrocarbons in the
ordinary course of business and sale of Equipment authorized by the Security
Agreement).  The preceding sentence will not, however, be deemed to be a consent
by Administrative Agent to any sale.  All prepayments received by Administrative
Agent under this Section 1.11 will be immediately applied as a prepayment of the
Loan pursuant to Section 1.8(b).

 

(b)           Within ten Business Days after Borrower receives written notice
from Administrative Agent that a Borrowing Base Deficiency exists, Borrower must
deliver to Administrative Agent a written response indicating which of the
following actions Borrower will take to remedy the Borrowing Base Deficiency
(and the failure of Borrower to timely deliver such election notice or to timely
perform the actions chosen to remedy such Borrowing Base Deficiency will
constitute an Event of Default):

 

(i)           within 30 days of receipt by Borrower of written notice of the
Borrowing Base Deficiency, prepay the Loan in cash in an aggregate principal
amount sufficient to eliminate such Borrowing Base Deficiency;

 

(ii)           prepay the Loan in four equal monthly installments in an
aggregate principal amount sufficient to eliminate the Borrowing Base
Deficiency, with the first such installment due 30 days after the date such
Borrowing Base Deficiency notice is received by Borrowers and the remaining
installments due on the same date in the three successive months;

 

(iii)           with the Approval of Administrative Agent, prepay Advances from
an Advance under the Term Loan in an aggregate principal amount sufficient to
eliminate such Borrowing Base Deficiency;

10

 

 

(iv)       grant to Administrative Agent a first priority Lien in additional
collateral which, in Administrative Agent’s reasonable determination, has
sufficient loan value to eliminate such Borrowing Base Deficiency, or

 

(v)      eliminate the Borrowing Base Deficiency through a combination of the
actions described in subclauses (i), (ii), (iii) and (iv) above.

 

Section 1.12      Application of Insurance Proceeds.  Borrower will promptly pay
to Administrative Agent, for the ratable benefit of each Lender, 100% of all
cash amounts received as insurance proceeds under any property or casualty
insurance related to the Collateral unless Administrative Agent Consents to
Borrower’s expenditure of those insurance proceeds to repair or replace the
affected Collateral; but, if no Event of Default exists, Borrower may apply the
first $250,000 in insurance proceeds received during any calendar year to repair
or replace the affected Collateral without having to first obtain Administrative
Agent’s Consent.  All prepayments received by Administrative Agent under this
Section 1.12 will be immediately applied as a prepayment of the Loan pursuant to
Section 1.8(b).

 

Section 1.13      Fees.

 

(a)       Commitment Fees.  Borrower agrees to pay to Administrative Agent, for
the ratable benefit of each Lender, a commitment fee at a per annum rate equal
to one-half of one percent (.50%) of the daily unused Borrowing Base (the
Borrowing Base then in effect less the aggregate principal amount of the
Revolving Loan then outstanding) from the date of this Agreement until the
Commitment Termination Date, but if any Lender is unable to fund an Advance
pursuant to Section 1.5(d) then such Lender shall not be entitled to receive a
Commitment Fee unless and until such Lender is once again able to fund the
Advance and the per annum rate of any Commitment Fee applicable to such Lender
shall be adjusted on a pro rata basis to exclude those days for which such
Lender was unable to fund the requested Advance.  Further, no Commitment Fee
shall accrue to a Defaulting Lender during the period such Lender remains a
Defaulting Lender.  The commitment fees shall be due and payable quarterly in
arrears on the last day of each March, June, September and December commencing
on March  31, 2012 and continuing thereafter through and including the
Commitment Termination Date.

 

(b)      Advance Fee.  Contemporaneously with the making of any Advance,
Borrower will pay to Administrative Agent, for the ratable benefit of each
Lender, a non-refundable fee (the “Advance Fee”) equal to

 

(i)           with respect to Advances under the Revolving Loan, one percent
(1.0%) of the amount of any incremental increase above the highest principal
amount previously outstanding under the Revolving Loan; and

 

(ii)     with respect to Advances under the Term Loan, one percent (1.0%) of the
Advance.

 

Borrower will not, however, be required to pay Lender an Advance Fee on Advances
(or portions of Advances) made to pay an Advance Fee or for an Advance under the
Revolving Loan used to repay the Term Loan.

11

 

 

(c)          All fees will be computed on the actual number of days elapsed over
a year composed of 360 days.

 

Section 1.14       Taxes.

 

(a)         Taxes Not Deducted from Payments to Lender.  All payments made by
Borrower under this Agreement will be made free and clear of and without
deduction for Taxes (other than Excluded Taxes).  If Borrower is required by law
to deduct any Taxes (other than Excluded Taxes) from any sum payable to any
Lender, (i) the sum payable will be increased by an amount that would be
required to be paid so that, after making all required deductions (including
deductions applicable to additional sums payable under this Section 1.14(a))
such Lender will receive an amount equal to the sum it would have received had
no deductions been made, (ii) Borrower will deduct from the sum payable to such
Lender an amount sufficient to pay such Taxes and pay the balance to such
Lender, and (iii) Borrower will promptly pay the full amount deducted to the
relevant Taxing Authority or other Governmental Authority in accordance with
Law, provided, however, that Borrower shall not be required to increase any such
amounts payable to any Lender with respect to such Taxes:  (i) that are
attributable to such Lender’s failure to comply with the requirements of Section
1.14(d), (ii) that are United States withholding Taxes imposed on amounts
payable to such Lender at the time such Lender becomes a party to this
Agreement, except to the extent that such Lender’s assignor (if any) was
entitled, at the time of assignment, to receive additional amounts from Borrower
with respect to such Taxes pursuant to this Section 1.14(a), or (iii) any
amounts paid under FATCA.

 

(b)        Other Taxes.  In addition, and to the fullest extent permitted by
Law, Borrower agrees to pay any present or future stamp, documentary, mortgage
registration or similar Taxes or any other excise or property Taxes, charges or
similar levies that arise from any payment made or from the execution, delivery
or registration of, or otherwise with respect to, any Loan Document
(collectively, the “Other Taxes”).

 

(c)    Indemnification.  To the fullest extent permitted by Law, except as
specifically provided in Section 1.14(a), and unless there exists a material
breach of Administrative Agent’s or Lenders’ representations in this Agreement,
Borrower will forever indemnify Administrative Agent and Lenders from and
against (i) all Taxes (other than Excluded Taxes) and Other Taxes imposed by any
Taxing Authority on amounts payable under this Section 1.14(c) and paid by
Administrative Agent or Lenders on behalf of Borrower and (ii) all liabilities
(including penalties, interest and reasonable attorneys fees, expenses and
disbursements) arising from or related to those Taxes (other than Excluded
Taxes)  and Other Taxes.  Borrower will make any payments required under this
Section 1.14(c) within 30 days after Administrative Agent or Lenders delivers a
written notice to Borrower that (x) identifies the relevant Taxing Authority and
the amount of the Tax (other than an Excluded Tax) or Other Tax imposed, (y)
states with reasonable specificity the basis for that Tax (other than an
Excluded Tax) or Other Tax, and (z) certifies that Administrative Agent or
Lenders have paid the Tax (other than an Excluded Tax) or Other Tax
imposed.  The indemnification obligations of Borrower under this Section 1.14(c)
will survive the repayment of the Obligations and the termination of this
Agreement.

12

 

 

(d)          Certification of Tax Status By Lender.

 

(i)           Each Lender will promptly and prior to the time any payments are
made:  (A) execute and deliver to Borrower a duly completed copy of United
States Internal Revenue Service Form W-8BEN, W-8IMY or W-8ECI (as applicable),
claiming complete exemption from, or a reduced rate of, United States federal
withholding Tax on all payments by Borrower under this Agreement and the other
Loan Documents, and (B) deliver to Borrower a United States Internal Revenue
Service Form W-8 or W-9 (as applicable) and certify that such Lender is entitled
to an exemption from United States backup withholding Tax.  Each Lender further
agrees to deliver to Borrower (x) renewals or additional copies of such forms
(or any successor forms) on or before the date that such forms expire or become
obsolete, (y) after the occurrence of any event requiring a change in the most
recent forms delivered by it, additional forms or amendments to those forms as
may be reasonably requested by Borrower, and (z) from time to time as reasonably
requested by Borrower.  All forms or amendments described in the preceding
sentence will include a certification by such Lender that it is entitled to
receive payments under this Agreement without deduction or withholding of any
United States federal income Taxes, unless an event (including a change in Law)
has occurred prior to the date on which any such delivery would otherwise be
required which renders all such forms inapplicable or which would prevent such
Lender from duly completing and delivering any such form or amendment with
respect to it and such Lender advises Borrower in writing that such Lender is
not capable of receiving payments without any deduction or withholding of United
States federal income Tax.  Notwithstanding any other provision of this
paragraph, a non-U.S. Lender shall not be required to deliver any form pursuant
to this paragraph that such non-U.S. Lender is not legally able to deliver.

 

(ii)     If a payment made to any Lender or Administrative Agent under any Loan
Document would be subject to U.S. federal withholding Tax imposed by FATCA if
such Lender or Administrative Agent were to fail to comply with the applicable
reporting requirements of FATCA (including those contained in Section 1471(b) or
1472(b) of the Internal Revenue Code of 1986, as amended, as applicable), such
Lender or Administrative Agent shall deliver to Borrower, at the time or times
prescribed by Law and at such time or times reasonably requested by Borrower,
such documentation prescribed by applicable law (including as prescribed by
Section 1471(b)(3)(C)(i) of the Internal Revenue Code of 1986, as amended) and
such additional documentation reasonably requested by Borrower as may be
necessary for Borrower to comply with its obligations under FATCA, to determine
that such Lender or Administrative Agent has or has not complied with its
obligations under FATCA and, as necessary, to determine the amount to deduct and
withhold from such payment.  Solely for purposes of this Section 1.14(d),
“FATCA” shall include any amendments made to FATCA after the date of this
Agreement.

13

 

 

(e)    Certain Recoveries.  If a Lender becomes subject to Taxes because of its
failure to deliver a form required under Section 1.14(d), Borrower shall take
such steps as such Lender may reasonably request to assist such Lender in
recovering those Taxes.

 

(f)   Documentation of Exemptions.  If any Lender is entitled to an exemption
from or reduction of withholding Tax with respect to payments under any Loan
Document pursuant to the Law of any relevant jurisdiction, such Lender will
deliver to Borrower, at the time or times prescribed by Law, properly completed
and executed documentation required by Law so as to permit those payments to be
made without withholding or at a reduced rate of withholding.

 

(g)     Designation of Substitute Lending Office.  Each Lender will, at
Borrower’s request following the occurrence of any event giving rise to the
operation of this Section 1.14, use commercially reasonable efforts (subject to
overall policy considerations of such Lender) to designate a substitute lending
office, but provided that such designation is made on such terms that such
Lender and its lending office suffer no economic, legal or regulatory
disadvantage, with the object of avoiding the consequence of the event giving
rise to the operation of this Section 1.14  Nothing in this Section 1.14(g) will
affect or postpone any of the obligations of Borrower or the rights of such
Lender provided in this section.

 

(h)  Effect of Tax Refund.  Each Lender will use its commercially reasonable
efforts to obtain in a timely fashion any refund, deduction or credit of any
Taxes or Other Taxes paid or reimbursed by Borrower pursuant to this Section
1.14.  If any Lender determines in its sole discretion, exercised in good faith,
that it has received a benefit in the nature of a refund, deduction or credit
(including a refund in the form of a deduction from, or credit against Taxes or
Other Taxes that are otherwise payable by such Lender) of any Taxes or Other
Taxes with respect to which Borrower has made a payment under this Section 1.14,
such Lender will notify and reimburse Borrower (promptly after such Lender
reasonably determines that such refund, deduction or credit has become final) to
the extent of the benefit of such refund, deduction or credit, including any
interest paid by the relevant Taxing Authority, net of all out-of-pocket
expenses of such Lender; provided, that Borrower, upon the request of such
Lender, agrees to repay the amount paid over to Borrower (plus any penalties,
interest or other charges imposed by the relevant Governmental Authority) to
such Lender in the event such Lender is required to repay such refund to such
Governmental Authority.  Nothing in this Section 1.14 will, however, require
such Lender to make available its Tax returns (or any other information relating
to its Taxes which it deems to be confidential) or to attempt to obtain any
refund, deduction or credit (including any interest paid by the relevant Taxing
Authority and received by such Lender), if such Lender determines that doing so
could be inconsistent with any reporting position otherwise taken by such Lender
on its Tax returns.

14

 

 

ARTICLE II

SECURITY; ETC.

 

Section 2.1                      Grant of Liens and Security Interests.  As
security for all of the Obligations owed to Administrative Agent, Lenders and
any Swap Counterparty under this Agreement, the Swap Agreement and the other
Loan Documents, Borrower grants, assigns, transfers and conveys to
Administrative Agent, for the ratable benefit of each Lender and any Swap
Counterparty, a first priority mortgage Lien on and first priority and perfected
security interest in the Collateral owned by Borrower subject only to the
Permitted Encumbrances.

 

Section 2.2                      Notice of Assignment of Proceeds.  So long as
no Event of Default has occurred, Borrower may collect for its own use and
enjoyment all amounts and all monies owing to Borrower by any account debtor to
Borrower or all proceeds from the sale of Hydrocarbons from or allocable to
Borrower’s Net Revenue Interest in the Properties.  Following an Event of
Default, Borrower shall cooperate with Administrative Agent to deliver to each
Operator, Purchaser and other Person that is an account debtor to Borrower,
written notice (substantially in the form of Exhibit G) from Administrative
Agent (as assignee) and Borrower that all amounts owing to Borrower by that
Person—including all proceeds from the sale of Hydrocarbons from or allocable to
Borrower’s Net Revenue Interest in the Properties—have been assigned to
Administrative Agent and are to be paid into the Project Account.  Borrower
shall Cause all recipients of the notices to remit all amounts owing to Borrower
directly to the Project Account.  Subject to any then existing contractual
obligations that are not cancelable without penalty and subject to Borrower’s
legal right to direct to whom its Hydrocarbons are sold, Borrower shall not sell
Hydrocarbons to any Purchaser or through an Operator that refuses to timely
acknowledge the notice of assignment of proceeds and pay amounts directly into
the Project Account as required by this Section 2.2.

 

Section 2.3                      Further Assurances.  Borrower shall, at the
request of Administrative Agent, execute and deliver to Administrative Agent,
for the benefit of Lenders and any Swap Counterparty, any additional documents
necessary, in the reasonable opinion of Administrative Agent, to create, perfect
and maintain Administrative Agent’s Liens on the Collateral in a first-priority
position subject only to the Permitted Encumbrances.  Borrower irrevocably
authorizes Administrative Agent to prepare and file, at any time and in any
filing office, all financings statements and amendments to them necessary to the
perfection or continuation of the security interests granted to Administrative
Agent by Borrower.

 

Section 2.4                      Release of Liens; Financing Statements;
Release.  Following the Indefeasible repayment of all monetary Obligations in
full and in cash and the complete performance of all other Obligations (other
than inchoate indemnity obligations and similar obligations that survive the
termination of this Agreement), (a) Administrative Agent will deliver to
Borrower, at Borrower’s expense, releases of all Liens arising under the
Security Documents with an acknowledgment that the same have been terminated,
and (b) Borrower shall deliver to Administrative Agent, Lenders and any Swap
Counterparty a general release of all liabilities and obligations of each of
them under this Agreement and the other Loan Documents.

 

Section 2.5                      Subordination Agreements.  Borrower shall Cause
all of its Affiliates and any other Person designated by Administrative Agent to
execute a Subordination Agreement.

 

Section 2.6                      All Obligations are Pari Passu.  All
Obligations owed to Administrative Agent and Lenders under the Loan Documents
shall be pari passu with all Obligations owed to any Swap Counterparty under a
Swap Agreement, and all Obligations shall be secured ratably, for the benefit of
Administrative Agent, each of the Lenders and any Swap Counterparty, by the
Liens granted pursuant to the Security Documents.

15

 

 

Section 2.7                      Swap Obligations Beyond Maturity.  To the
extent Borrower enters into any transactions under the Swap Agreement that
extend beyond the Maturity Date, the Obligations under the Swap Agreement will
continue to be secured by the Security Documents even if Borrower has fully
repaid the Loan unless, after the full payment and performance of all
Obligations other than Obligations under the Swap Agreement, Borrower posts cash
margin, a letter of credit or other collateral approved in writing by the Swap
Counterparty under a standard ISDA credit support annex.

 

ARTICLE III

REPRESENTATIONS AND WARRANTIES

 

To induce each Lender to make the Loan, Borrower makes the following
representations and warranties, each and all of which will survive the execution
and delivery of this Agreement and continue until all Obligations have been
satisfied and no Lender has any further commitment to make any Advance under
this Agreement.

 

Section 3.1            Formation and Existence.  Borrower is a corporation duly
organized, validly existing and in good standing under the laws of the State of
Montana.  Borrower is qualified to do business in every other jurisdiction where
the nature of its business or the ownership of its property requires it to be so
qualified and where failure to so qualify could reasonably be expected to have a
Material Adverse Effect.

 

Section 3.2      Name; Executive Offices.  The name of Borrower, as listed in
its Charter Documents on file in the public records of its jurisdiction of
organization, is Voyager Oil & Gas, Inc.  Borrower’s principal place of business
and chief executive offices are located at the address specified in Section 12.2
(or as set forth in a notice delivered pursuant to Section 12.2).

 

Section 3.3       Ownership; Subsidiaries.  There are no agreements in force
which provide for the issue or allotment of, or grant any Person the right to
call for the issue or allotment of, any Equity Interest in Borrower (including
any option or right of pre-emption or conversion).  Borrower has no
Subsidiaries.

 

Section 3.4       Authorization; Non-Contravention.  Borrower’s execution,
delivery and performance under the Loan Documents and the creation of all Liens
provided for in the Security Agreements:

 

(a)      are within the corporate power and authority of Borrower;

 

(b)      have been duly authorized by all necessary corporate action of
Borrower;

 

(c)           are not in contravention of (i) any agreement to which Borrower is
a party or by which it or its property is bound, (ii) the Charter Documents of
Borrower, or (iii) any provision of law applicable to Borrower or its
properties, and in the case of each of clauses (i) and (iii), where its
contravention could reasonably be expected to have a Material Adverse Effect;

16

 

 

(d)       do not require the consent or approval of any Governmental Authority
or any other Person except for (i) those previously delivered to Administrative
Agent, (ii) those third party approvals or consents which, if not made or
obtained, could not reasonably be expected to have a Material Adverse Effect or
(iii) those that are both (A) identified on Schedule 3.4(d), and (B) routinely
granted by the relevant Governmental Authority and expected to be obtained in
the ordinary course (the consents and approvals described in the preceding
clause (ii) being the “Post-Closing Governmental Consents”); and

 

(e)           are legal, valid and binding obligations of Borrower, enforceable
against it in accordance with their respective terms, except as enforceability
may be limited by applicable Debtor Relief Laws and by general equitable
principles.

 

Section 3.5         Solvency.  Borrower is Solvent and will continue to be
Solvent after giving effect to the transactions contemplated by this Agreement.

 

Section 3.6      Omissions and Misstatements.  Borrower has disclosed to
Administrative Agent all agreements, and all other matters known to Borrower,
that could, individually or in the aggregate, reasonably be expected to have a
Material Adverse Effect.  All financial and other information furnished in
writing by or on behalf of Borrower to Administrative Agent in connection with
the negotiation or performance of this Agreement or any other Loan Document,
when taken as a whole, do not contain any material misstatement of fact or omit
to state any material fact necessary to make the statements therein, in the
light of the circumstances under which they were made, not misleading; but, with
respect to financial projections, Borrower represents only that such information
was prepared in good faith based upon assumptions believed to be reasonable at
the time.  To Borrower’s knowledge, after due inquiry, there is no fact peculiar
to Borrower which could reasonably be expected to have a Material Adverse Effect
or in the future is reasonably likely to have a Material Adverse Effect and
which has not been set forth in this Agreement or the Loan Documents or
disclosed in writing to Administrative Agent by Borrower on or before the date
of this Agreement. To Borrower’s knowledge, after due inquiry, there are no
statements or conclusions in any Reserve Report which are based upon or include
misleading information or fail to take into account material information
regarding the matters reported therein.

 

Section 3.7            Joint Venture.  Except as set forth on Schedule 3.7,
Borrower is not engaged in any joint venture or partnership with any other
Person.

 

Section 3.8         Commissions; Expenses.  No broker’s or finder’s fees or
commissions have been paid or will be payable by Borrower or any of its
Affiliates to any Person in connection with the transactions contemplated by
this Agreement.

17

 

 

Section 3.9     Tax Returns; Taxes.  Borrower has timely filed (after giving
effect to any applicable extensions) all material Tax returns (foreign, federal,
state and local) required to be filed and has paid all Taxes due (including
interest and penalties) except for (a) amounts contested in good faith by
Borrower through appropriate proceedings timely filed and against which Borrower
maintains adequate reserves in accordance with GAAP and (b) to the extent the
failure to do so could not reasonably be expected to result in a Material
Adverse Effect.   No assessments have been made by any Governmental Authority
against Borrower or any of the Collateral that have not been paid (except for
assessments protested in good faith by Borrower through appropriate proceedings
timely filed and against which Borrower maintains adequate reserves in
accordance with GAAP) nor has any penalty or deficiency been assessed by any
Governmental Authority.  No Governmental Authority has notified Borrower that
any material Tax return is under examination, nor is the result of any prior
examination being contested by Borrower.  Except with respect to taxes being
contested in good faith by Borrower through appropriate proceedings timely filed
and against which Borrower maintains adequate reserves in accordance with GAAP,
no material Tax Liens have been filed against Borrower or any of the Collateral.

 

Section 3.10       Litigation; Governmental Proceedings.  Except as set forth on
Schedule 3.10, no claim, action, suit or other proceeding (collectively, an
“Action”) by any Governmental Authority or any other Person is pending or, to
Borrower’s knowledge, threatened against Borrower or that relates to any of the
Collateral.  With respect to the Actions set forth on Schedule 3.10, Borrower
has not accepted liability in connection with any Action except in the specific
instances described on Schedule 3.10, none of which could reasonably be expected
to have a Material Adverse Effect.

 

Section 3.11     Ownership of Collateral; Interests.

 

(a)           All Collateral is owned of record by Borrower, free and clear of
any Lien other than the Permitted Encumbrances.  Except for the Permitted
Encumbrances, Borrower has Defensible Title to each of the Properties.  Except
for Permitted Encumbrances or as Approved by Administrative Agent, Borrower’s
interest in the Properties is not subject to any mineral reservations or top
leases of record.  Borrower has the exclusive right to sell and grant Liens over
the Collateral.  There are no unrecorded documents or agreements that could
limit or impair (i) Borrower’s ability to grant the Liens contemplated by the
Security Documents or (ii) Administrative Agent’s ability to enforce those Liens
pursuant to the Security Documents.  Subject to the Permitted Encumbrances,
Borrower has all beneficial right, title and interest in and to the Net Revenue
Interest in all production from or allocable to Borrower’s interest in the
Properties (including each Lease).

 

(b)           All Basic Documents to which Borrower is a party and, to
Borrower’s knowledge, all Leases and material agreements comprising the
Properties and referenced in the title opinions and/or reports or other title
materials delivered to Administrative Agent are valid, existing and in full
force and effect.  No material default by Borrower or, to the knowledge of
Borrower, any other party to any Basic Document (or event or circumstance which
with the giving of notice or the passage of time or both would give rise to a
material default) exists under any such Basic Document.

 

(c)           To Borrower’s knowledge, all of the assets of Borrower that are
reasonably necessary for the conduct of its current business are in good working
condition (ordinary wear and tear excepted) and are regularly maintained in
accordance with customary industry standards.

18

 

 

(d)           Except for the Properties identified on Exhibit A, (i) Borrower
does not own any other direct or indirect interest of any kind in Hydrocarbons,
including any Equity Interests, Equity Equivalents, or calls or options to
purchase, and (ii) Borrower does not have any right to acquire any interest of
the type described in the preceding clause (i).

 

(e)           Borrower’s Working Interest is not more than, and its Net Revenue
Interest is not less than, the percentages set forth on Exhibit A for each of
the Properties.

 

Section 3.12            Debt.  On the Closing Date, Borrower will not have any
Debt outstanding other than as permitted under Section 6.1.

 

Section 3.13              Intellectual Property.  Borrower possesses all
trademarks, trade names, trade styles, copyrights, patents and other
intellectual property necessary to conduct its current business without any
infringement or conflict with the rights of any other Person, except as
otherwise could not reasonably be expected to result in a Material Adverse
Effect.

 

Section 3.14            No Other Leases.  Borrower is neither the lessor or
lessee under any material leases (including real property leases, equipment
leases, capital leases, etc.) other than the Leases included in the Properties
and leases entered into in the ordinary course of business which are not
considered Leases as defined herein.

 

Section 3.15        Investments. Other than deposits made from time to time in
connection with the purchase of Properties consistent with the terms and
conditions of this Agreement, Borrower has not made or committed to make any
Investment in excess of $100,000.

 

Section 3.16        No Unusual Restrictions.  Borrower is not a party to, bound
by or subject to any indenture, agreement, contract, instrument, lease, Charter
Document, injunction, order, restriction or decree, which could reasonably be
expected to have a Material Adverse Effect.

 

Section 3.17      No Take or Pay Agreements.  Borrower is not a party to or
bound by, and neither Borrower nor, to Borrower’s knowledge, any of the
Properties are subject to, any “take or pay” contract or settlement or any other
agreement or arrangement that (a) allows any Natural Gas purchasers to take
Natural Gas previously paid for out of future Natural Gas production, or (b)
provides for a cash refund or rebate to any Natural Gas purchaser if
reimbursement of take or pay monies is not made through Natural Gas production.

 

Section 3.18       Gas Imbalances.  To Borrower’s knowledge, Borrower has not
produced Hydrocarbons from the Properties in excess of the percentage to which
its ownership interest in the applicable Property would entitle it, pursuant to
balancing rights of third parties or pursuant to balancing duties under Laws.

 

Section 3.19      Environmental Matters.  Except as disclosed on Schedule 3.19
and as could not reasonably be expected to have a Material Adverse Effect:

19

 

 

(a)      To Borrower’s knowledge, no Property, no operations currently conducted
on any Property, and, to Borrower’s knowledge, no operations conducted on any
Property by any other prior owner or operator of any Property are (i) in
violation of any Environmental Law or any order or requirement of any
Governmental Authority in respect of any Environmental Law, (ii) the subject of
any existing, pending or threatened action, suit, investigation, inquiry or
proceeding by or before any Governmental Authority, or (iii) currently subject
to any unsatisfied remedial obligations under any Environmental Law;

 

(b)    Borrower has duly filed and maintained all Permits and notices, if any,
required by any Environmental Law to be maintained or filed in connection with
the operation or use of any Property by Borrower or, if Borrower is not the
Operator, to Borrower’s knowledge the Operator has duly filed and maintained all
such Permits and notices, and Borrower and, to Borrower’s knowledge, Operator
are in compliance with the terms and conditions of those Permits and notices;

 

(c)           To Borrower’s knowledge, (i) all Hazardous Materials, solid waste,
and Hydrocarbon exploration and production wastes, if any, previously generated
at any Property have been transported or treated or disposed of in accordance
with Environmental Laws, (ii) all transport carriers and treatment and disposal
facilities have been and are operating in compliance with Environmental Laws,
and (iii) no such transport carriers or treatment or disposal facilities are the
subject of any existing, pending or threatened action, investigation or inquiry
by any Governmental Authority in connection with any Environmental Laws; and

 

(d)     Neither Borrower nor any of its Affiliates nor, to Borrower’s knowledge,
Operator has any unsatisfied or known contingent liabilities in connection with
any Release or threatened Release of any Hazardous Materials, solid waste, and
Hydrocarbon exploration and production wastes on or from any Property, except as
in compliance with Environmental Laws and so as not to pose an imminent and
substantial endangerment to public health or welfare or the environment.

 

Section 3.20      Permits and Licenses.

 

(a)        Borrower, if Borrower is the Operator, or to Borrower’s knowledge,
Operator, if Borrower is not the Operator, as applicable, (i) maintains all
Permits necessary to conduct Hydrocarbon exploration and production operations
on the Properties, and (ii) maintains all other Permits necessary to conduct its
business, except, in either case, where the failure to maintain a Permit could
not reasonably be expected to have Material Adverse Effect.

 

(b)       Borrower, if Borrower is the Operator, or to Borrower’s knowledge,
Operator, if Borrower is not the Operator, as applicable, is not liable for any
material pending fees, assessments or penalties relating to any Permit other
than those payable in the ordinary course of business and not yet delinquent.

20

 

 

(c)           The continuation, validity and effectiveness of each Permit
maintained by Borrower (or, if Borrower is not the Operator, to Borrower’s
knowledge the Permits maintained by Operator) are not and will in no way be
materially adversely affected by the transactions contemplated by this Agreement
or the Security Documents.

 

(d)           Neither Borrower nor, to Borrower’s knowledge, Operator, is in
breach of or in default under the terms of any Permit, nor has Borrower or, to
Borrower’s knowledge, Operator, engaged in any activity which could result in
the revocation or suspension of any Permit and reasonably be expected to result
in a Material Adverse Effect.  No action or proceeding is pending or, to
Borrower’s knowledge, threatened by the issuer of any Permit that could result
in the revocation or suspension of any Permit and reasonably be expected to
result in a Material Adverse Effect.  No suspension of production on the
Properties is in effect and reasonably be expected to result in a Material
Adverse Effect.

 

Section 3.21   Operation of the Properties.

 

(a)           Except where the failure to do so could not reasonably be expected
to have a Material Adverse Effect, the Properties (together with any other
properties unitized with any of the Properties) have, since the acquisition of
the Properties, been maintained, operated and developed (i) in conformity with
all Laws, (ii) in conformity with the terms and conditions of all Basic
Documents, and (iii) in a manner consistent with the conduct of a Prudent
Operator, but with respect to any Properties for which Borrower is not the
Operator, then the foregoing representation shall be based upon Borrower’s
knowledge;

 

(b)       To Borrower’s knowledge and except where its occurrence could not
reasonably be expected to have a Material Adverse Effect: (i) no Property is
subject to having allowable production reduced below the full and regular
allowable (including the maximum permissible tolerance) because of any
overproduction (whether or not that overproduction was permissible at the time),
(ii) none of the vertical Wells comprising the Properties (or properties
unitized with any of the Properties) deviates from the vertical more than the
maximum permitted by Laws, (iii)  each of the Wells comprising the Properties
(or properties unitized with any of the Properties) are bottomed under and are
producing from, and the well bores are situated wholly within, the Properties or
unitized properties, as applicable.

 

(c)       Neither Borrower nor, to Borrower’s knowledge, Operator or any other
Person is in breach of or in default under the terms of any Basic Document to
which any of them are bound or to which any of the Properties are subject,
except to the extent such breach or default could not reasonably be expected to
have a Material Adverse Effect.

 

Section 3.22      USA PATRIOT Act Representation.  Neither Borrower nor any
Obligor is a country, individual or entity named on the Specifically Designated
National and Blocked Persons list issued by the Office of Foreign Asset Control
of the Department of the Treasury of the United States of America.

21

 

 

Section 3.23     Contingent Liabilities.  Except for (a) obligations arising
under bonds required by Law and identified on Schedule 3.23, (b) indemnity,
cleanup and other obligations of a customary nature assumed or incurred
(excluding Debt for borrowed money) in favor of any Person from whom Borrower
acquired any of the Collateral, and (c) Debt permitted by Section 6.1, Borrower
has not assumed, guaranteed, endorsed or otherwise become directly, indirectly
or contingently liable for any liability of any other Person, except for the
endorsement of checks and other negotiable instruments for collection in the
ordinary course of business.

 

Section 3.24     Equipment.  Except for the Permitted Encumbrances, there is no
restriction or other limitation on Administrative Agent’s ability to obtain or
exercise its Lien over the Equipment, including the right to foreclose on and
sell the Equipment or to exercise, subject to Debtor Relief Laws, all other
rights and remedies of a secured party under the Laws of each jurisdiction
applicable to the Equipment.

 

Section 3.25     Unpaid Bills.

 

(a)       Schedule 3.25 identifies all vendors that have provided goods or
services to Borrower in connection with the development of the Properties during
the six calendar months preceding this Agreement.

 

(b)           Borrower does not have any past due bills for improvements to the
Collateral that could give rise to mechanics’ or materialmen’s Liens or other
similar Liens arising by operation of law that could rank in priority ahead of
any of the Liens arising under the Security Documents, except for bills being
diligently contested in good faith by Borrower and against which Borrower
maintains adequate reserves in accordance with GAAP.

 

Section 3.26         Taxpayer Identification.  Borrower’s federal taxpayer
identification number is 77-0639000.

 

Section 3.27      Investment Company.  Borrower is not an “investment company”
within the meaning of the Investment Company Act of 1940, as amended.

 

Section 3.28    No Margin Trading.  Borrower is not engaged principally, or as
one of its important activities, in the business of extending credit for the
purpose, whether immediate, incidental or ultimate, of buying or carrying margin
stock (within the meaning of Regulation T, U or X of the Board of Governors of
the Federal Reserve System (the “Board”)).  No part of the proceeds of any
Advance will be used for any purpose that violates Regulations T, U or X of the
Board.

 

Section 3.29        No Pending Sale or Financing.  No agreement, whether written
or oral, exists between Borrower and any other Person regarding the purchase,
sale or financing of any of the Collateral.

 

Section 3.30      No Calls on Production.  No agreement, whether written or
oral, exists pursuant to which any Person has a call upon, option to purchase or
similar right with respect to Borrower’s rights to future production from or
allocable to the Properties other than pursuant to Approved Marketing Contracts.

22

 

 

Section 3.31   Basic Documents.

 

(a)      Each of the Basic Documents is in full force and effect in accordance
with its terms and constitutes the valid and binding obligations of Borrower,
and to Borrower’s knowledge, of each of the parties to them, except as limited
by Debtor Relief Laws and by general equitable principles.

 

(b)      Neither Borrower nor, to Borrower’s knowledge, any other party to any
Basic Document is in breach of or in default under the terms and conditions of
the applicable Basic Document(s) where that breach or default could reasonably
be expected to have a Material Adverse Effect.

 

(c)      To Borrower’s knowledge, no party to any Basic Document has given or
threatened to give notice of any action to terminate, cancel, rescind or procure
a judicial reformation of any Basic Document where an action of that type could
reasonably be expected to have a Material Adverse Effect.

 

(d)      Neither the execution and delivery of the Loan Documents by Borrower,
nor the performance of any of its obligations under the Loan Documents—including
Borrower granting Liens to Administrative Agent in accordance with the Security
Documents—will result in a breach of or a default by Borrower under any Basic
Document.

 

Section 3.32       Farmout Agreements and Subject Contracts, Etc.  With respect
to the Properties and the Basic Documents creating the interests that comprise
Properties, and except as set forth on Schedule 3.32, Borrower has not created
and, to Borrower’s knowledge, there exist no:

 

(a)      farmout agreements under which (i) Borrower has any remaining
obligations or (ii) any other Person has any remaining rights to acquire an
interest of any kind in the Properties;

 

(b)      outstanding obligations to drill Wells or engage in other development
operations, except for (i) obligations under a Lease to drill an offset Well and
(ii) obligations under an Operating Agreement to participate in development
activities to which Borrower has consented and that are, in either case,
included in the Development Plan;

 

(c)      no limitations as to the depths covered or substances to which such
interests relate other than as specified in the Leases and other Basic
Documents; and

 

(d)      royalty provisions requiring the payment of royalties on any basis
other than as specified in the Leases and other Basic Documents.

 

Section 3.33      Operating Agreements.  With respect to the Operating
Agreements relating to Borrower’s Working Interest and Net Revenue Interest in
the Properties:

23

 

 

(a)      Schedule 3.33 identifies all Operating Agreements to which the
Properties are subject;

 

(b)      Schedule 3.33 identifies all outstanding calls for payment by Borrower,
all of which are, unless otherwise noted on Schedule 3.33, being paid within the
term required;

 

(c)      neither Borrower nor, to Borrower’s knowledge, any of its predecessors
in title has consented to any operation that is not included in the Development
Plan; and

 

(d)      there are no operations with respect to which Borrower or, to
Borrower’s knowledge, any predecessor in title has become a non-consenting party
nor are there any non-consent penalties binding or, to Borrower’s knowledge,
that will become binding upon Borrower that are not reflected in the Net Revenue
Interest or Working Interest as set forth on Exhibit A.

 

Section 3.34      No Unusual Agreements.  To Borrower’s knowledge, all
agreements applicable to Borrower’s Working Interest and Net Revenue Interest in
the Properties are of the type generally found in the oil and gas industry and
the gathering and transmission industry, as applicable, and do not (individually
or in the aggregate) contain any unusual provisions which could reasonably be
expected to have a Material Adverse Effect.

 

Section 3.35      Suspense of Proceeds.  No proceeds from the sale of
Hydrocarbons attributable to Borrower’s interests in the Properties are being
held in suspense for any reason except which could not reasonably be expected to
have a Material Adverse Effect.

 

Section 3.36      Employee Plans.  Except as set forth on Schedule 3.36, or as
may be adopted from time to time upon approval of to Administrative Agent,
Borrower has no Employee Plans.

 

Section 3.37     Insurance.  Commencing on or before the thirtieth day after
Closing, the insurance policies that Borrower is required to maintain under
Section 5.8 provide insurance coverage, in both type and amount, that is (a)
sufficient to allow Borrower to comply with all Laws and to satisfy the
requirements of the Basic Documents and any other material agreement by which
Borrower is bound or which the Properties are subject, and (b) with respect to
the Properties for which Borrower is the Operator, are consistent with the
insurance coverage, in both type and amount, that would be maintained by a
Prudent Operator.  With respect to those Properties for which Borrower is not
the Operator, to Borrower’s knowledge, the Operator maintains insurance coverage
of a type and in an amount that would be maintained by a Prudent Operator and is
consistent with the requirements of the relevant Operating
Agreement.  Administrative Agent, for the ratable benefit of Lenders and Swap
Counterparties, has been named as an additional insured under all liability
insurance policies maintained by Borrower and has been named as a loss payee
under all property casualty insurance maintained with respect to the Collateral.

 

Section 3.38    No Material Adverse Effect.  Since the date of the most recent
audited financial statements delivered to Administrative Agent, no Material
Adverse Effect has occurred.

24

 

 

Section 3.39      Restriction on Liens.  Except for (a) the Post-Closing
Governmental Consents, and (b) restrictions, if any, arising under the Basic
Documents and identified on Schedule 3.39, no restriction or limitation exists
with respect to Borrower’s ability to grant to Administrative Agent the Liens
arising under the Security Documents.

 

Section 3.40      Hedging Agreements.  Schedule 3.40 identifies all Hedging
Agreements that are not Swap Agreements and includes the name of the
counterparty to and the material terms of all transactions under those Hedging
Agreements (including the type, term, effective date, termination date and
notional amounts or volumes), and all credit support agreements relating to
those Hedging Agreements (including any margin required or supplied and the name
of any Person providing credit support).

 

Section 3.41      Marketing of Production.  Borrower does not sell or otherwise
dispose of any material portion of the Hydrocarbon production allocable to the
Properties except pursuant to Hydrocarbon marketing and sale contracts that are
(a) identified on Schedule 3.41 and in effect on the date of this Agreement, (b)
Approved by Administrative Agent in its reasonable discretion, (c) between
Borrower and any Person that is not an Affiliate (whether or not in writing)
that are cancelable, without penalty, on 30 days notice or less, or (d)
marketing arrangements over which Borrower exercises no direct control and to
which it is subject pursuant to an Operating Agreement (each an “Approved
Marketing Contract”).  Borrower is receiving a price for all Hydrocarbon
production sold that is computed substantially in accordance with the terms of
the relevant contract, and, to Borrower’s knowledge, deliveries are not being
curtailed substantially below the subject Property’s delivery capacity.

 

Section 3.42      Deposit Accounts.  Except as set forth on Schedule 3.42,
Borrower does not maintain any deposit accounts (as defined in the UCC).

 

Section 3.43      Labor Matters.  Neither Borrower nor any of its Subsidiaries
are in violation of any Law relating to labor matters, and all payments due from
Borrower or any Subsidiary of Borrower for employee health and welfare insurance
have been paid or accrued as a liability on its books, except where the failure
to do so could not reasonably be expected to have a Material Adverse Effect.

 

Section 3.44     Eligible Contract Participant.  Borrower is an “eligible
participant” as defined in the Commodities Futures Modernization Act of 2000 17
C.F.R. § 35.1(b)(2)(2006), as amended, and the rules and regulations promulgated
under that act.

 

Section 3.45     No Default.  No Default exists or is reasonably likely to
result from Borrower’s entry into or performance under any Loan Document or the
making of any Advance under this Agreement.  No event or circumstance exists
which, with the expiry of a grace period, the giving of notice or the making of
any determination by any other Person would constitute a default under any other
agreement, whether written or oral, by which Borrower is bound or to which any
of the Collateral is subject, except where such default could not reasonably be
expected to have a Material Adverse Effect.

 

Section 3.46     Choice of Law.  The Borrower knows of no reason why the
parties’ choice of governing law in the Loan Documents to which Borrower is a
party would not be recognized and enforced by the courts as a valid choice of
law; nor does Borrower know of any reason why a judgment obtained in relation to
a Loan Document to which Borrower is a party in the jurisdiction of the
governing law of that Loan Document would not be recognized and enforced in
Borrower’s jurisdiction of formation.

25

 

 

Section 3.47      Financial Statements.  The most recent financial statements of
Borrower delivered to Administrative Agent (a) have been prepared in accordance
with GAAP, and (b) give a true and fair view (if audited) or fairly present (if
unaudited) of its consolidated financial condition as at the end of, and
consolidated results of operations for, the period to which they relate.

 

Section 3.48      Priority.  Subject to Permitted Encumbrances, the Security
Documents have or will have first ranking priority and none is subject to any
prior ranking or pari passu ranking Lien.

 

Section 3.49     Affiliate Interests in Properties.  Except as set forth on
Schedule 3.49, no Affiliate of Borrower holds, either directly or indirectly, an
ownership or economic interest in the Properties, other than through their
ownership of Equity Interests in Borrower.

 

ARTICLE IV

FINANCIAL STATEMENTS AND INFORMATION;

CERTAIN NOTICES TO ADMINISTRATIVE AGENT

 

For as long as this Agreement remains in effect, Borrower shall deliver the
following to Administrative Agent:

 

Section 4.1                      Monthly Reporting Package.  Within 15 days
after the end of each calendar month (such month being the “Reported Month”), an
operations report summarizing the Reported Month’s workover and drilling
activity and for each Lease or Well (i) gross and net Crude Oil and Natural Gas
products production and sales, (ii) lease operating expenses, (iii) production
Taxes, and (iv) any other relevant operations data Administrative Agent may
request (the “Monthly Reporting Package”).  But, if there are no Obligations
outstanding under the Term Loan, Borrower shall not be required to provide the
Monthly Reporting Package.

 

Section 4.2    Financial Reporting.

 

(a)     Quarterly Financial Reports.  Within 45 days after the end of calendar
quarter (other than the calendar quarter ending December 31)(such quarter being
the “Reported Quarter”) beginning with the Reported Quarter ending March 31,
2012, a balance sheet, income statement and statement of cash flows of Borrower
and its consolidated Subsidiaries (including any notes), prepared by Borrower
for (i) the Reported Quarter and (ii) cumulatively, all Reported Quarters since
the end of the prior fiscal year.

 

(b)     Annual Financial Statements.  Within 120 days after the end of each
fiscal year beginning with the fiscal year ending December 31, 2011, a copy of
the annual consolidated financial statements (including all notes) of Borrower
and its consolidated Subsidiaries, consisting of a balance sheet, income
statement and statement of cash flows, all audited by independent certified
public accountants retained by Borrower.

26

 

 

Section 4.3     Compliance Certificate.  With the delivery of each set of
financial statements under Section 4.2, a certificate executed by the Chief
Executive Officer, the President, the Chief Financial Officer, the treasurer or
any vice president of Borrower (an “Authorized Officer”) and in the form of
Exhibit I (a) certifying whether, to the Authorized Officer’s knowledge, a
Default has occurred and, if so, describing in reasonable detail the
circumstances of the Default and any actions taken or proposed to be taken to
cure the Default, (b) setting forth in reasonable detail calculations
demonstrating Borrower’s compliance with Section 5.20, (c) stating whether any
material change in GAAP or its application to Borrower has occurred since the
date of the last audited financial statements received by Administrative Agent
and, if so, specifying the effect of that change on the financial statements
accompanying the certificate, and (d) in connection with financial statements
delivered under Section 4.2(a), certifying that the financial statements present
fairly in all material respects, subject only to normal year-end adjustments,
the financial position and results of operations of Borrower in accordance with
GAAP and absent any footnotes (other than those required to explain financial
data).

 

Section 4.4    Notices of Default and Other Significant Events.  Written notice
to Administrative Agent promptly (but, in any event, within five Business Days)
after Borrower becomes aware that a Default has occurred or that any event has
occurred or that any circumstance exists that could reasonably be expected have
a Material Adverse Effect, including:

 

(a)      any material dispute arises between Borrower and any Governmental
Authority;

 

(b)      the making of a demand or the commencement of any proceeding against
Borrower or related to the Properties with an amount in controversy in excess of
$100,000;

 

(c)      a proposal by any Governmental Authority to acquire any of the
Collateral by condemnation or eminent domain that could reasonably be expected
to have a Material Adverse Effect;

 

(d)      any change in (i) Borrower’s company name (including the creation or
change of any trade name); (ii) the location of Borrower’s principal office;
(iii) Borrower’s company structure or the jurisdiction in which Borrower is
organized; (iv) Borrower’s organizational identification number; or (v)
Borrower’s federal taxpayer identification number;

 

(e)      the revocation, suspension, forfeiture, expiration or material
modification of any Permit that could reasonably be expected to have a Material
Adverse Effect;

 

(f)       any material loss of or damage to any Collateral, or any material
change in Borrower’s business or operations;

27

 

 

(g)      the failure or refusal to make any payment when due in respect of any
Debt that could reasonably be expected to have a Material Adverse Effect; and

 

(h)      the occurrence of any event of circumstance that could, if it
continues, constitute a default by any Person under any of the Basic Documents.

 

Each notice will describe, in reasonable detail, the nature of the Default,
event or circumstance, it’s anticipated effect on Borrower and the Collateral,
and what responsive action(s) Borrower proposes to take.

 

Section 4.5       Reserve Reports.

 

(a)      Timing of Reports.  Borrower shall, at its sole expense, Cause an
engineering reserve report relating to the Properties (the “Reserve Report”) to
be prepared and delivered to Administrative Agent semi-annually beginning on the
First Reserve Report Date.  Each Reserve Report will evaluate the projected
recoverable reserves attributable to Borrower’s Working Interests and Net
Revenue Interests in the Properties.  The effective dates of the Reserve Reports
will be June 30 and December 31 of each year, and Borrower shall deliver each
Reserve Report to Administrative Agent as set forth in Section 1.2(b).  All
Reserve Reports shall be prepared by the Engineers.

 

(b)      Preparation of Reports.  The Reserve Report will separately report on
PDP Reserves, PDNP Reserves and PUD Reserves, and will be prepared in accordance
with the following requirements and assumptions:

 

(i)      reserves shall be adjusted for cumulative production and revisions to
reserve volume estimates since the effective date of the prior Reserve Report;

 

(ii)    Hydrocarbon pricing assumptions—

 

(A)   for all Natural Gas to be sold by Borrower other than Natural Gas
described in Section 4.5(b)(ii)(B), the purchase price for each calendar year
will be the average of the monthly prices provided to Borrower by Administrative
Agent for that year for Natural Gas as reflected in NYMEX as of the settlement
of the last trading day for the contract month ending immediately prior to the
effective date of the Reserve Report, using price escalators or de-escalators
existing in the market as reasonably determined by Administrative Agent and
notified to Borrower at the time the Reserve Report is being prepared, for the
remaining life of the Properties;

 

(B)    for all Natural Gas to be sold by Borrower on a fixed price basis
pursuant to any Approved Marketing Contract or with respect to which the price
has been hedged pursuant to any NYMEX contract or a Hedging Agreement, the
purchase price will be the fixed price for the volumes indicated in the
contract, agreement or arrangement;

28

 

 

(C)     for Crude Oil to be sold by Borrower other than Crude Oil described in
Section 4.5(b)(ii)(D), the purchase price for each calendar year will be the
average of the monthly prices provided to Borrower by Administrative Agent for
that year for Crude Oil as reflected in the NYMEX as of the settlement on the
last trading day for the contract month ending immediately prior to the
effective date of the Reserve Report, using price escalators or de-escalators
existing in the market as reasonably determined by Administrative Agent and
notified to Borrower at the time the Reserve Report is being prepared, for the
remaining life of the Properties;

 

(D)     for Crude Oil to be sold by Borrower on a fixed price basis pursuant to
any Approved Marketing Contract or with respect to which the price has been
hedged pursuant to any NYMEX contract or a Hedging Agreement, the purchase price
will be the fixed price for the volumes indicated in the contract, agreement or
arrangement; and

 

(E)      all Hydrocarbon pricing assumptions will be further adjusted by
appropriate quality, transportation and location differentials Approved by
Administrative Agent in its reasonable discretion.

 

(iii)      projected operating expenses and capital expenditures will be
adjusted to reflect (A) actual expense levels incurred since the effective date
of the prior Reserve Report and (B) reasonable projections as to anticipated
increases or decreases in operating expenses and capital expenditure levels;

 

(iv)     the Reserve Report will utilize any other assumptions that
Administrative Agent may reasonably request from time to time; and

 

(v)      each Reserve Report will, if necessary, be accompanied by a proposed
revision to the Development Plan that includes all development projects included
in the Reserve Report.

 

Section 4.6       Additional Information.  Borrower shall deliver to
Administrative Agent (a) true, complete and contemporaneous copies of any
financial statement, report or notice prepared for or furnished to any Person
pursuant to the terms of any preferred stock designation, indenture, loan or
credit or other similar agreement that Borrower is not otherwise required to
deliver to Administrative Agent pursuant to this Agreement, (b) true, complete
and contemporaneous copies of all periodic and other reports, proxy statements
and other materials distributed by Borrower to its member(s) generally, and (c)
additional information as Administrative Agent may reasonably request concerning
Borrower, its financial condition or the ownership or operation of any of the
Collateral.

29

 

 

Section 4.7    Monthly Field Activity Reports.  Borrower shall compile a
comprehensive listing of operations occurring on the Properties during the
relevant Reported Quarter including: (a) a reconciliation of actual capital
costs incurred to corresponding AFEs, and (b) an updated Well status list
showing zones completed and fracked in each active Well.  Borrower shall also
compile and maintain a record, for each Reported Quarter, of the monthly Natural
Gas production and sales and Crude Oil Production Volumes for all Well
completions included in the Properties during the relevant Reported
Quarter.  Borrower shall report such monthly sales and production data within 21
days following the end of each Reported Quarter in a form acceptable to Lender
and deliver reports by e-mail to recipients designated by Lender.  In the case
of Natural Gas, the sales volumes will be based on the integration of the charts
recorded by the lease “check” meter located downstream of the processing
equipment and immediately upstream of the sales delivery point.  Where
production from multiple completions is combined upstream of measurement
equipment, Borrower will estimate sales volumes for the individual completions
using an appropriate allocation methodology.

 

Section 4.8       Test Results; Core Analyses; Surveys and Logs.  Borrower shall
deliver to Administrative Agent, to the extent that they are available from the
Operator, true and complete copies of (a) all test results, fluid analyses,
pressure surveys and core analyses related to the Properties as reasonably
requested by Administrative Agent, (b) each electrical survey, radioactivity
log, temperature survey, deviation or directional survey, caliper log and other
log or survey obtained during the drilling of any Well upon Administrative
Agent’s reasonable request, and (c) a composite of all electrical-type logs, to
the extent reasonable and customary, promptly following the completion of each
Well.

 

Section 4.9     Reports Made to a Governmental Authority.  Concurrently with the
delivery of any such report or application to the applicable Governmental
Authority, Borrower shall deliver to Administrative Agent a true and complete
copy of each material report made and application submitted to a Governmental
Authority having jurisdiction over any of the Leases or Wells.

 

Section 4.10       Charter Documents.  Borrower shall deliver to Administrative
Agent true and complete copies of all amendments to any of its Charter
Documents; but this Section 4.10 does not constitute Administrative Agent’s
Consent to any such amendment.

 

Section 4.11      Certificate of Authorized Officer—Hedging
Agreements.  Concurrently with the delivery of each Reserve Report, a
certificate of an Authorized Officer setting forth, as of the effective date of
the Reserve Report, a true and complete list of all Hedging Agreements (other
than the Swap Agreements), their material terms (including the counterparty,
type, term, effective date, termination date and notional amounts or volumes),
credit support agreements not previously disclosed to Administrative Agent in
writing, and any margin required or supplied under any credit support agreement.

 

Section 4.12   Certificate of Insurer—Insurance Coverage.  Concurrently with
Borrower’s delivery of any financial statements under Section 4.2(a) (and to the
extent not previously delivered to Administrative Agent) (a) a certificate of
insurance coverage from each insurer (or from Borrower’s insurance broker) with
respect to the insurance required by Administrative Agent, and (b) true and
complete copies of the applicable insurance policies.

30

 

 

Section 4.13       Anticipated Cost Overruns.  Whenever Borrower anticipates
that the actual cost of any project that is the subject of an Approved AFE or
Reimbursement Request will likely exceed the AFE or Reimbursement Request amount
Approved by Administrative Agent, Borrower will promptly notify Administrative
Agent in writing and (a) describe in reasonable detail the cause(s) of the
anticipated cost overrun as explained by the Operator and (b) identify to
Administrative Agent the source of funds that Borrower proposes to use to pay
those excess costs.  So long as the cost overruns are the result of normal and
customary issues experienced in the oil and gas industry as determined by
Administrative Agent in its sole discretion, Borrower may use Advances to fund
such additional costs.

 

Section 4.14       Updated Development Plan.  Contemporaneous with the delivery
of each Reserve Report bearing an effective date as of December 31st of any
year, Borrower will prepare and deliver to Administrative Agent a revised,
proposed Development Plan covering at least the next 6 months and setting forth
all capital expenditure development projects proposed for that period, the
anticipated timing of those projects, the net cost of each of those projects to
Borrower and any other information that Administrative Agent may reasonably
request.  But, if there are no Obligations outstanding under the Term Loan,
Borrower will not be required to provide a Development Plan.  Each proposed
modification to the Development Plan will be subject to the Approval of
Administrative Agent, which Approval shall not be unreasonably withheld or
delayed.  Until Administrative Agent has Approved a revised Development Plan or
until there are no Obligations outstanding under the Term Loan, the most recent
Approved Development Plan (and all AFEs or Reimbursement Requests Approved in
connection with that most recently Approved Development Plan) will remain in
effect.

 

ARTICLE V

AFFIRMATIVE COVENANTS

 

For as long as this Agreement remains in effect, Borrower shall, unless
Administrative Agent otherwise Consents:

 

Section 5.1      Preservation of Existence.  Maintain its existence and current
form of organization under the laws of the State of Montana and all related
rights, privileges and franchises.

 

Section 5.2      Compliance with Law.

 

(a)      Comply (and Cause it Affiliates to comply) with all Laws regarding the
collection, payment and deposit of employees’ income, unemployment and Social
Security Taxes except to the extent that its noncompliance could not reasonably
be expected to have a Material Adverse Effect.

 

(b)    Where Borrower is the Operator, make (and, where Borrower is not the
Operator, Cause the Operators to make) properly and timely, all royalty or
overriding royalty payments and payments to all other interest owners in the
Properties.

 

(c)     Where Borrower is the Operator, comply (and, where Borrower is not the
Operator, Cause the Operators to comply) with all Laws affecting the ownership
and operation of any of the Properties, including, all EHS Regulations except to
the extent that its noncompliance could not reasonably be expected to have a
Material Adverse Effect.

31

 

 

(d)      Where Borrower is the Operator, operate (and, where Borrower is not the
Operator, Cause the Operators to operate) all Properties except where the
failure to do so could not reasonably be expected to have a Material Adverse
Effect (whether or not such Property constitutes a “facility” under CERCLA) so
that no cleanup or other obligation is imposed under CERCLA or any other Law
(including Hazardous Substance Laws) intended to protect the environment or
relating to the generation, transportation or disposal of hazardous waste which
could allow any Person to assert a Lien to secure that obligation that is senior
in priority to Administrative Agent’s Liens on the Collateral, but excluding
Liens being protested in good faith by Borrower through appropriate proceedings
timely filed and against which Borrower maintains adequate reserves in
accordance with GAAP.

 

(e)       Where Borrower is the Operator, comply (and, where Borrower is not the
Operator, Cause the Operators and all agent and invitees to comply), in all
material respects, with all EHS Regulations and other Laws with respect to
Hazardous Materials, and keep all of the Properties free and clear of any Liens
imposed by those Laws.  If Borrower receives any notice from any Person relating
to an alleged Release of Hazardous Materials on or from the Properties, Borrower
shall immediately (and, in any event, prior to the expiration of any period
specified in the notice during which Borrower is to respond) deliver a true and
complete a copy of the notice to Administrative Agent along with a description,
in reasonable detail, of the proposed response to the notice by Borrower or
Operator, as applicable.

 

Section 5.3    Environmental Matters.

 

(a)    Where Borrower is the Operator, comply (and, where Borrower is not the
Operator, Cause the Operators to comply) with all Environmental Laws except
where the failure to comply could not reasonably be expected to have a Material
Adverse Effect, including with respect to (i) disposing of or releasing
Hazardous Materials, solid wastes or Hydrocarbons on, under, about or from the
Properties, (ii) timely obtaining all Permits and filing all notices required to
be obtained or filed in connection with the ownership and operation of the
Properties, (iii) promptly commencing and diligently prosecuting to completion
any assessment, investigation, monitoring, containment, cleanup, restoration or
other remedial obligation (collectively, the “Remedial Work”) required in
connection with any actual or suspected past, present or future disposal or
other Release of any Hazardous Materials, solid wastes or Hydrocarbons on,
under, about or from the Properties, and (iv) implementing and maintaining
procedures as necessary to continuously determine and ensure Borrower’s
compliance with all Environmental Laws.

 

(b)    Notify Administrative Agent in writing within seven Business Days after
receiving written notice of (i) the commencement of any action, investigation or
inquiry by any Governmental Authority, or (ii) any threatened demand or action
by any landowner or other Person against Borrower or affecting the Properties in
connection with an alleged violation of any Environmental Law (but excluding
routine testing and routine corrective action) in which the amount in
controversy exceeds $100,000 and is not fully covered by insurance, subject to
normal deductibles.

32

 

 

(c)           Borrower (if it is the Operator) will provide (and, where Borrower
is not the Operator, will Cause the Operator to provide) environmental audits
and tests in accordance with American Society of Testing Materials standards as
reasonably requested by Administrative Agent.  Borrower (if it is the Operator)
will provide (and where Borrower is not the Operator, will Cause the Operator to
provide) any requested audit or test not more than once each year at its
expense; the cost of any updated audits or tests reasonably requested by
Administrative Agent within the same year will be borne by Administrative Agent
unless an Event of Default exists at the time of Administrative Agent’s request,
in which case the cost will be borne by Borrower.

 

Section 5.4      Records.  Keep adequate records and books of account in
accordance with GAAP to reflect all transactions conducted with respect to its
business and the Properties.  Borrower shall conduct its business and keep its
books and records separate from those of its Affiliates.

 

Section 5.5      Litigation.  Notify Administrative Agent in writing within
seven Business Days after (i) the commencement of any action, investigation or
inquiry by any Governmental Authority, or (ii) receiving written notice of any
threatened demand or action by any other Person that seeks to:

 

(a)           prohibit or impose any material restriction on Borrower’s business
as it presently conducts it or the Properties; or

 

(b)     declare any substance used, sold or distributed by Borrower to be a
Hazardous Material in violation of any Hazardous Substance Law.

 

Section 5.6       Damage to Collateral.  Notify Administrative Agent in writing
promptly upon Borrower becoming aware of:

 

(a)           damage to any of the Collateral causing a loss in excess of
$250,000 that is not fully covered by insurance, subject to normal deductibles;
and

 

(b)           the occurrence or existence of any condition or event that could
reasonably be expected to cause a loss or depreciation of any Collateral in
excess of $250,000, excluding changes in the economy generally, e.g.,
fluctuations in the market price of Hydrocarbons.

 

Section 5.7     Solvency.  Conduct its business in a manner as is necessary to
remain Solvent.

 

Section 5.8   Insurance.  On or before the thirtieth day after Closing,

 

(a)     Continuously keep all Personal Property insured for replacement value of
like kind and quality (i) with insurance companies licensed to do business in
the jurisdiction(s) in which the property is located and having a Best’s rating
of A or better, and (ii) against loss or damage by theft, burglary, pilferage,
fire and other risks customarily insured against by other prudent owners and
operators similarly situated.

33

 

 

(b)      Continuously maintain (or Cause Operator(s) to maintain), with
insurance companies licensed to do business in the applicable jurisdiction(s)
and having a Best’s rating of A or better, liability insurance coverage against
risks incident to the ownership and operation of the Properties of a type and in
an amount as is customarily maintained by other prudent owners and operators
similarly situated.

 

(c)      Cause all insurance policies to contain endorsements in form
satisfactory to Administrative Agent showing Administrative Agent as loss payee
or additional insured, as applicable, and containing waivers of subrogation by
the respective insurers and non-contributory standard mortgagee clauses or their
equivalent or a satisfactory mortgagee loss payable endorsement in favor of
Administrative Agent.  Borrower shall notify Administrative Agent in writing
promptly after becoming aware of the occurrence or existence of any event or
circumstance that could be the subject of a claim in excess of $250,000 under
any insurance coverage maintained by or for the benefit of Borrower.  Borrower
shall Cause all casualty insurance proceeds to be deposited directly into the
Project Account by the insurer and, Borrower authorizes and directs
Administrative Agent to (i) retain and, subject to Section 1.11, apply all
insurance proceeds as a prepayment of the Obligations or, (ii) if no Event of
Default then exists,  disburse any or all of those insurance proceeds to
Borrower (subject to such terms and conditions as Administrative Agent may
reasonably deem appropriate) to pay the cost of repairing, replacing or
restoring the Collateral or purchasing replacement Collateral.

 

(d)     Deliver to Administrative Agent all certificates of insurance and, if
requested by Administrative Agent, true and complete copies of all insurance
policies and endorsements, that Borrower is required to maintain under this
Agreement.  Borrower shall Cause all certificates to show that (i) the relevant
insurance is in full force and effect, and (ii) the insurer has agreed to give
Administrative Agent at least 15 days prior written notice of the cancellation
or non-renewal any of the insurance coverages identified on the certificate.

 

(e)    Deliver to Administrative Agent, at least 15 days prior to the expiration
date of each policy maintained under this Section 5.8, an acceptable certificate
of insurance with respect to the renewal or replacement policy.

 

(f)      Notwithstanding the specific requirements of this Section 5.8, employ
(or Cause Operator(s) to employ) industry standard practices at all times with
respect to its insurance coverages to include, but not limited to, drilling,
workovers, flowline repairs, rig work and facilities work, and Borrower shall
exercise commercially reasonable efforts to ensure that all Operators also carry
such insurance coverages.  If Administrative Agent notifies Borrower that its
insurance program is, in the reasonable opinion of Administrative Agent, not in
material compliance with this Section 5.8, then Borrower shall promptly act to
bring its insurance program into compliance to the extent such insurance is
available on commercially reasonable terms.

 

Section 5.9    Delivery of Invoices, Receipts, Etc.  Deliver to Administrative
Agent promptly upon request (a) true and complete copies of all contracts,
statements, invoices, notices, receipts and vouchers under which Borrower has
incurred or will incur costs in excess of $250,000, and (b) such other
supporting documentation as Administrative Agent may reasonably request.

34

 

 

Section 5.10  Access to Books and Records; Inspections; Consultants.

 

(a)    Provide Administrative Agent with all reasonable access to appropriate
officers, employees and agents of Borrower to discuss the business and accounts
of Borrower during normal business hours and upon reasonable prior notice from
Administrative Agent.

 

(b)   Provide Administrative Agent with all reasonable access (at Administrative
Agent’s risk and subject to Borrower’s reasonable safety policies) to the books
and records maintained by Borrower in connection with the conduct of its
business.  So as to not unreasonably disrupt the business of Borrower, Borrower
shall arrange access during its normal business hours on at least two Business
Days notice from Administrative Agent.

 

(c)     Provide Administrative Agent with all reasonable access (at
Administrative Agent’s risk and subject to Borrower’s reasonable safety
policies) to the Properties and all other facilities owned, operated, used or
maintained by Borrower in connection with the conduct of its business to, among
other things, witness all drilling, workover and other field activities.  To
provide Administrative Agent with a reasonable opportunity to exercise its
rights under this Section 5.10(c), Borrower shall give Administrative Agent as
much notice as practical of all field activities.  The access granted to
Administrative Agent under this Section 5.10(c) will not unreasonably disrupt
the operation of the Properties or the conduct of field activities.

 

(d)    Provide Administrative Agent’s consulting engineers, geologists,
accountants and other professionals with all reasonable access (at such
consultant’s risk and subject to Borrower’s reasonable safety policies) to the
Properties and all other facilities, books and records owned, operated, used or
maintained by Borrower in connection with the conduct of its business.  So as to
not unreasonably disrupt the business of Borrower, Borrower shall arrange access
during its normal business hours on at least two Business Days notice from
Administrative Agent.  Administrative Agent may from time to time, upon prior
written notice to Borrower (except if an Event of Default exists, in which case
Administrative Agent is not require to provide such notice), select and retain
such consultants as Administrative Agent reasonably determines are necessary to
advise it with respect to technical and financial matters related to each of
Borrower’s business and its ownership and operation of the Properties.  Borrower
shall promptly pay all reasonable fees and out-of-pocket expenses related to
Administrative Agent’s consultants retained under this Section 5.10(c) upon
receipt of an invoice from Administrative Agent.

35

 

 

Section 5.11        Creditors.  Provide Administrative Agent upon request a true
and complete schedule of Borrower’s material creditors, including the amount due
to each and the date each payment is due.  Borrower shall notify Administrative
Agent immediately if Borrower fails to make any payment (except for payments
contested in good faith by Borrower and against which Borrower maintains
adequate reserves in accordance with GAAP) to any Person in accordance with
required terms where such non-payment could result in the imposition of a Lien
on any of the Collateral or could reasonably be expected to have a Material
Adverse Effect.  If Administrative Agent receives notice that Borrower has
failed to make any required payment when due, Administrative Agent may, but will
have no obligation to, make payment directly to the creditor if necessary, in
the opinion of Administrative Agent, to protect Administrative Agent’s interest
in the Collateral.  If Administrative Agent makes payments to any creditor under
this Section 5.11, Borrower shall reimburse Administrative Agent upon demand
and, if not promptly reimbursed, those amounts will become part of the
Obligations and will be secured by Administrative Agent’s Liens on the
Collateral.

 

Section 5.12    Operators.  To the extent Borrower has the legal right to do so
(or the legal right to Cause or require any other Person to do so), and if
Borrower has knowledge that a material breach by the Operator occurred under any
Operating Agreement that is not timely cured:

 

(a)     At the request of Administrative Agent, vote to remove the Operator or
commence any proceedings necessary under the applicable Operating Agreement to
remove the Operator;

 

(b)  Promptly demand and diligently pursue indemnification or damages, as
applicable, from the Operator for any loss or liability incurred by Borrower;

 

(c)    Pay the owners of Royalty Interests directly;

 

(d)    Cause the Operator to deliver to any successor Operator all books and
records related to the outgoing Operator’s operation of the Properties,
including all royalty payment records, joint interest billings, severance tax
records, division orders, farm-in and farmout agreements and title opinions;

 

(e)    Use all commercially reasonable efforts to ensure that the value of the
Properties is not diminished by virtue of the Operator’s resignation or removal;
and

 

(f)    Use all commercially reasonable efforts to ensure an orderly transition
of operations to the successor Operator.

 

Section 5.13        Purchasers of Hydrocarbons.

 

(a)    If Administrative Agent notifies Borrower that any Purchaser of
Hydrocarbons is, in Administrative Agent’s reasonable judgment, not
creditworthy, Borrower shall, to the extent that Borrower is the Operator, or to
the extent Borrower is not the Operator Cause any Operator to, require the
Purchaser to secure, to the satisfaction of Administrative Agent, the
Purchaser’s obligations in respect of its purchase of Hydrocarbons attributable
to the Properties.  If the Purchaser refuses to secure its obligations, then
Borrower shall, subject to any existing marketing arrangement with that
Purchaser that is binding on Borrower and that is not terminable without
penalty, (i) immediately cease selling Hydrocarbons to that Purchaser, or (ii)
exercise its right to take the Hydrocarbons in kind and sell those Hydrocarbons
to Purchasers Approved by Administrative Agent unless Borrower owns less than a
10% Working Interest in the subject Property and the Operator has acknowledged a
notice of assignment of proceeds, then Borrower need not take the actions set
forth in this Section 5.13(a).

36

 

 

(b)    Borrower shall give Administrative Agent at least 30 days prior written
notice if Borrower proposes to sell, or, if Borrower is not the Operator, within
5 Business Days of receiving notice that the Operator proposes to sell or has
sold, any Hydrocarbons to any additional or replacement Purchaser.  The notice
must (i) contain the proposed Purchaser’s complete name, address, telephone
number, facsimile number and contact person, and (ii) identify the Properties to
which the purchases relate.

 

Section 5.14       Use of Proceeds.  Use the proceeds of each Advance
exclusively for the purpose for which it is made and consistent with Sections
1.2(a) and 1.3(b) the AFEs and other Supporting Documentation or Reimbursement
Requests provided to Administrative Agent as part of the Advance Request.

 

Section 5.15       Bonds.  Continuously maintain bonds required by any
Governmental Authority in connection with the ownership and operation of the
Properties, and deliver to Administrative Agent true and complete copies of all
bonds in place (including renewals).  Schedule 5.15 identifies (a) each bond
that Borrower is required by any Governmental Authority to maintain in
connection with the ownership and operation of the Properties, and (b) all
payment obligations of Borrower to any Person who has issued a bond on behalf of
Borrower.

 

Section 5.16     Hydrocarbon Price Risk Management Program.  At the request of
Administrative Agent, dedicate, under the one or more Hedging Agreements, a
percentage of the volume of PDP Reserves volumes (not to exceed 85% of those
volumes) projected to be produced prior to the earlier of (a) three years after
the Closing Date or (b) the Maturity Date to a Hydrocarbon price risk management
program Approved by Administrative Agent in its reasonable discretion.  Any gain
or loss for volume adjustments will be for Borrower’s account.  Administrative
Agent may review Borrower’s Hydrocarbon price risk management program from time
to time to determine if it is in compliance with this Section 5.16.  If
Administrative Agent notifies Borrower that its Hydrocarbon price risk
management program is, in the reasonable opinion of Administrative Agent, not in
compliance with this Section 5.16, then Borrower shall promptly act to bring its
program into compliance on commercially reasonable terms.  Each Reserve Report
delivered by Borrower pursuant to Section 4.5 will be deemed to supplement
Schedule 3.40 when delivered to Administrative Agent.

 

Section 5.17   Evidence of Title.

 

(a)   Within thirty (30) days after Closing, Borrower will deliver to
Administrative Agent updated title opinions and title information reasonably
satisfactory to Administrative Agent covering the Properties in accordance with
Section 5.17(b) below.  Notwithstanding the previous sentence, however, no
Advance will be made by Lenders with respect to any Well or proposed Well that
is not the subject of an updated title opinion reasonably satisfactory to
Administrative Agent.

37

 

 

(b)    The opinions to be delivered under this Section 5.17 will show Defensible
Title in the Properties vested in the Borrower subject only to (i) the Permitted
Encumbrances and (ii) the Mortgages in favor of Administrative Agent as first
and prior mortgage Liens subject only to the Permitted Encumbrances and will
otherwise be reasonable satisfactory to Administrative Agent and its counsel.

 

(c)    Deliver to Administrative Agent, within 30 days after Administrative
Agent’s request, updated run sheets or other documentation reasonably acceptable
to Administrative Agent reflecting (i) the recordation of Administrative Agent’s
Lien related to the Mortgage over all Properties for which Borrower has not
previously delivered a title opinion, and (ii) the absence of any Lien that is
not a Permitted Encumbrance.

 

Section 5.18      Continuing Enterprise.  Conduct its business at all times in a
manner necessary to (a) perform all of its obligations under the Basic Documents
and its Obligations under the Loan Documents, and (b) preserve its rights in and
to the Properties and under the Basic Documents unless a Prudent Operator would
not do so, except, in each case, as could not reasonably be expected to have a
Material Adverse Effect.

 

Section 5.19        Access to Technical Data.  Provide Administrative Agent and
its consultants with access to all engineering, geological, geophysical and (to
the maximum extent allowed under Borrower’s seismic licenses) seismic data,
studies and evaluations made or possessed by Borrower or to which it has
access.  So as to not unreasonably disrupt the business of Borrower, Borrower
shall arrange access during its normal business hours on at least two Business
Days notice from Administrative Agent.  If the seismic information to be
provided to Administrative Agent is subject to a confidentiality agreement
between Borrower and any other Person who is not an Affiliate, Borrower may
require Administrative Agent to execute a substantially similar confidentiality
agreement before receiving the confidential information.

 

Section 5.20  Financial Ratios.

 

(a)    Current Ratio.  Commencing March 31, 2012, Borrower will maintain a
Current Ratio of at least 1.00 to 1.00.

 

(b)    Debt Coverage Ratio.  Commencing on the last day of the fiscal quarter
following any fiscal quarter in which there are, on any day that fiscal quarter,
outstanding Advances under the Term Loan (such date, the “Debt Coverage Ratio
Commencement Date”), Borrower shall maintain a Debt Coverage Ratio of no more
than 3.50 to 1.00.

 

(c)     Interest Coverage Ratio.  Commencing March 31, 2012, and continuing on a
quarterly basis, Borrower will maintain an Interest Coverage Ratio of at least
2.50 to 1.00.

38

 

 

(d)      Borrower’s Right to Cure Certain Breaches with New Equity.  Borrower
may cure (and shall be deemed to have cured) an Event of Default arising out of
a breach of any financial covenant set forth in Section 5.20 (the “Specified
Financial Covenant”) if it receives the cash proceeds of an investment of
additional equity or other common equity contributions made in immediately
available funds (“Curative Equity”) within the applicable cure period under
Section 9.1.  Any Curative Equity shall be deemed to be additional EBITDA or, in
the case of the Current Ratio, additional Current Assets, for the fiscal quarter
in which the Specified Financial Covenant is breached.  Borrower shall promptly
(but in any event no later than 14 days after the receipt thereof) notify
Administrative Agent of its receipt of any proceeds of Curative Equity and such
notification shall constitute a designation by Borrower that such proceeds
constitute Curative Equity.  In the compliance certificate delivered pursuant to
Section 4.3 in respect of the fiscal quarter end on which Curative Equity is
used to cure any breach of the Specified Financial Covenant, Borrower shall (i)
include evidence reasonably satisfactory to Administrative Agent of its receipt
of Curative Equity and (ii) set forth a calculation of the financial results and
balance sheet of Borrower as at such fiscal quarter end (including for such
purposes the proceeds of such Curative Equity (broken out separately) as deemed
EBITDA or as additional Current Assets, as applicable, as if received on such
date), which shall confirm, with respect to any fiscal quarter end on which
Curative Equity is used to cure any breach of the Specified Financial Covenant,
that on a pro forma basis after taking into account the receipt of the Curative
Equity, Borrower would have been in compliance with the Specified Financial
Covenant as of such date.  Upon delivery of a compliance certificate pursuant to
Section 4.3 conforming to the requirements of this Section 5.20(d) and
accurately reflecting Borrower’s compliance with the applicable financial
covenant as of the applicable measuring date, any Event of Default that is
continuing from a breach of any of the Specified Financial Covenant shall be
deemed cured with no further action required by Administrative Agent or any
Lender.  In the event Borrower does not cure the Specified Financial Covenant
violation as provided in this Section 5.20(d), the existing Event(s) of Default
shall continue unless waived in writing by Administrative Agent or the requisite
Lenders in accordance with this Agreement.  To the extent that Curative Equity
is received and included in the calculation of the Specified Financial Covenant
as deemed EBITDA or additional Current Assets, as applicable, for any fiscal
quarter pursuant to this Section 5.20(d), such Curative Equity shall be deemed
to be EBITDA or additional Current Assets, as applicable, for purposes of
determining compliance with the Specified Financial Covenant for subsequent
periods that include such fiscal quarter.

 

(e)   Calculating Financial Ratios.

 

(i)      Administrative Agent will reasonably determine Borrower’s compliance
with the required Current Ratio and Debt Coverage Ratio, as applicable, as of
the end of each Reported Quarter using the financial statements delivered to
Administrative Agent by Borrower under Section 4.2(a) and Section 4.2(b) for
that same Reported Quarter.

 

(ii)    Administrative Agent’s reasonable determination as to Borrower’s
compliance with this Section 5.20 will be conclusive absent manifest
error.  Except through the timely investment of new equity into Borrower as
contemplated by Section 5.20(d) to cure a breach of the required financial
covenant, a breach of this Section 5.20 is not otherwise capable of being cured
and, as such, no cure period under Section 9.1 will apply.

39

 

 

Section 5.21     Maintenance of Liens.  Cause all Collateral to be subject at
all times to a first-priority perfected Lien (subject only to Permitted
Encumbrances) in favor of Administrative Agent.  If Borrower acquires additional
Property after the Closing Date, Borrower shall promptly notify Administrative
Agent of the acquisition and execute and deliver amendments to the Security
Documents as reasonably requested by Administrative Agent to grant to
Administrative Agent a first-priority perfected Lien (subject only to the
Permitted Encumbrances) over that additional Property.

 

Section 5.22      Payment of Taxes, Etc.  Pay when due all material Taxes,
assessments and governmental charges levied, assessed, imposed or payable in
connection with any of the Collateral except for Taxes, assessments, charges or
encumbrances being protested in good faith by Borrower through appropriate
proceedings timely filed and diligently prosecuted and against which Borrower
maintains adequate reserves in accordance with GAAP.

 

Section 5.23  Equipment.

 

(a)      Maintenance of Equipment.  Continuously maintain (and to the effect it
has the legal right to do so, Cause Operators to maintain) all Equipment in good
working condition (ordinary wear and tear excepted) and in accordance with
customary industry standards, except as could not reasonably be expected to have
a Material Adverse Effect.

 

(b)    Location of Equipment.  Keep all Equipment at the location(s) within the
States of Colorado, Montana, North Dakota and Wyoming where it is used by
Borrower in the conduct of its business.

 

(c)    Equipment Records.  Maintain (and Cause the Operator to maintain)
accurate and complete records of the Equipment (including its description,
location, age, condition, cost and accumulated depreciation) used in connection
with the conduct of Borrower’s business or the operation of the Properties.

 

(d)     Sale or Disposal of Equipment.  When Borrower is permitted to dispose of
any Equipment under the Security Documents, it shall do so in good faith, in an
arm’s length transaction with a non-Affiliate and obtain an amount of recovery
consistent with the conduct of a Prudent Operator and customary industry
standards.

 

Section 5.24     Maintenance of Leases.  Promptly perform, pay and discharge (or
Cause Operator to perform, pay and discharge) (a) all delay rentals, royalties,
expenses, severance Taxes and other Taxes and indebtedness accruing under the
Leases or the other Basic Documents, and (b) all other obligations imposed by
the Leases and the other Basic Documents, in each instance, unless the failure
to do so could not reasonably be expected to have a Material Adverse
Effect.  Borrower shall also act as a Prudent Operator in preventing the
expiration, forfeiture or abandonment of any of the Properties except for
Properties that are known to be incapable of producing in paying quantities.

 

Section 5.25      Operator.  Notwithstanding anything in any other document to
the contrary, Borrower will resign, or, to the effect it has the legal right to
do so, Cause the resignation or removal of Borrower or any Affiliate under any
applicable Operating Agreement as the Operator of any of the Properties upon the
written request of Administrative Agent if an Event of Default has occurred and
is continuing under the Credit Agreement or any other Loan Document.  Subject to
the terms of the applicable Operating Agreement, Administrative Agent will have
the right to Approve (not to be unreasonably withheld or delayed) any action
taken by Borrower to appoint or replace the Operator of any of the Properties.

40

 

 

ARTICLE VI

NEGATIVE COVENANTS

 

For as long as this Agreement remains in effect, Borrower shall not, unless
Administrative Agent otherwise Consents:

 

Section 6.1    Debt.  Incur, assume or allow to exist any Debt, except:

 

(a)    the Obligations;

 

(b)     Debt existing on the date hereof which is identified on Schedule 6.1(b);

 

(c)     Debt under the Basic Documents;

 

(d)     Capital Leases that do not exceed $250,000 in the aggregate

 

(e)     Debt secured by a Permitted Encumbrance;

 

(f)     Debt under a Hedging Agreement permitted under this Agreement;

 

(g)     accounts payable, accrued expenses, and obligations to pay the deferred
purchase price of property or services that (i) are incurred in the ordinary
course of business, (ii) are not more than 90 days past due or otherwise
delinquent, and (iii) do not exceed $250,000 in the aggregate (excluding amounts
being diligently contested in good faith and by appropriate action by Borrower
and against which Borrower maintains adequate reserves in accordance with GAAP);

 

(h)      letters of credit, worker’s compensation claims, surety bonds and
performance bonds incurred in the ordinary course of business, and, with respect
to each such instrument or claim that exceeds $250,000, Approved by
Administrative Agent in its reasonable discretion;

 

(i)     guaranties permitted to exist pursuant to Section 6.3;

 

(j)     endorsements of negotiable instruments for collection in the ordinary
course of business; and

 

(k)     Debt Approved by Administrative Agent in its reasonable discretion and
fully subordinated to the Obligations pursuant to a Subordination Agreement.

 

Section 6.2    Accounts.  Sell, discount or factor its accounts or its
negotiable instruments except for accounts settled or discounted in the ordinary
course of business while no Default exists.

41

 

 

Section 6.3      Guaranties.  Guaranty the payment of any other Person’s Debt or
the performance of any other Person’s obligation except for (a) Debt permitted
by Section 6.1, (b) indemnity obligations customarily assumed or incurred (but
excluding Debt for borrowed money) in favor of the seller of Wells or Leases
that become part of the Collateral following their acquisition by Borrower; but
this Section 6.3 will not prohibit Borrower’s endorsement of negotiable
instruments for deposit or collection in the ordinary course of business.  For
purposes of this Section 6.3, “guaranty” means any agreement (contingent,
conditional or otherwise) to (x) pay, perform, purchase, repurchase or otherwise
acquire any obligation or liability of any other Person, or (y) purchase, sell
or lease (as either lessee or lessor) any property or services, in either case
primarily for the purpose of (I) paying or enabling another Person to pay any
Debt, (II) performing or enabling another Person to perform any other
obligation.

 

Section 6.4    Ownership and Business Operations.

 

(a)     Merge with or into any other Person;

 

(b)     acquire or agree to acquire any material portion of the assets of or the
Equity Interests in another Person;

 

(c)      transfer (or grant any Person an option to acquire) any of its assets
(as that term is defined under GAAP) with a fair market value, individually or
in the aggregate, of more than $250,000 in any three month period except for (i)
the sale of Hydrocarbons under Approved Marketing Contracts and (ii) the sale of
worn, surplus or obsolete Equipment in accordance with this Agreement and the
Security Documents;

 

(d)     cancel or compromise any material Debt owed to Borrower except for
consideration and in the ordinary course of Borrower’s business;

 

(e)     prepay any materialDebt other than the Obligations, but, as long as no
Event of Default exists Borrower may prepay any Debt other than Debt for
borrowed money;

 

(f)      extend credit or agree to extend credit to any Person except in the
ordinary course of Borrower’s business and in accordance with the Basic
Documents;

 

(g)     move its executive offices, change its company name, change its
corporate form to another type of entity, or move its jurisdiction of
organization to a jurisdiction other than that in which Borrower is organized on
the date of this Agreement without 30 days prior written notice to
Administrative Agent;

 

(h)     change its fiscal year;

 

(i)      Cause or allow (to the extent Borrower has the ability to prevent such
action through the exercise of all commercially reasonable efforts) (i) the
release or abandonment of (A) any Well capable of commercial production, or (B)
any of Borrower’s Working Interest or Net Revenue Interest in any of the
Properties capable of commercial production, or (C) any of the Properties where
a Prudent Operator would not cause or allow the same to occur; (ii) the
Properties to be developed, maintained or operated in a manner less favorable
than the actions of a Prudent Operator; and (iii) waive or agree to make any
material alterations to the material terms of any Basic Documents to which
Borrower is a party to the extent such waiver or alteration could reasonably be
expected to have a Material Adverse Effect, except as made on behalf of Borrower
by an Operator who is not an Affiliate pursuant to the terms of an Operating
Agreement;

42

 

 

(j)      except in the ordinary course of business or as otherwise permitted
under this Agreement, enter into any new agreement relating to or affecting any
of the Properties that could reasonably be expected to have a Material Adverse
Effect;

 

(k)     enter into any new farmout agreement or a material amendment to any
existing farmout agreement relating to the Properties;

 

(l)      allow the purchase and sale of production from or allocable to the
Properties except pursuant to Approved Marketing Contracts;

 

(m)    cause or allow (to the extent Borrower has the ability to prevent such
action through the exercise of all commercially reasonable efforts) the
commencement of any operation that is not the subject of an AFE or Reimbursement
Request Approved by Administrative Agent excluding emergency operations,
operations required under contractual obligations that exist on the date of this
Agreement, operations necessary to ensure compliance with any EHS Regulation or
any other Law; or

 

(n)     cause or allow (to the extent Borrower has the ability to prevent such
action through the exercise of all commercially reasonable efforts), subject to
Section 5.12, the replacement of any Operator.

 

Section 6.5     Liens and Encumbrances.  Except as set forth on Schedule 6.5:

 

(a)    allow any Lien to exist or consent to the filing of any financing
statement on any Collateral except:

 

(i)    Liens in favor of Administrative Agent;

(ii)     the Permitted Encumbrances;

(iii)    Liens being protested in good faith by Borrower through appropriate
proceedings timely filed and diligently prosecuted and against which Borrower
maintains adequate reserves in accordance with GAAP; and

(iv)    Liens securing Capital Leases permitted by Section 6.1(b) and identified
on Schedule 6.1(b) or permitted by Section 6.1(d).

(b)    sever from or reserve out of any Property a right or power to take any
action which affects the exploration or development of the Hydrocarbons related
to that Property.

43

 

 

Section 6.6     Affiliate Transactions.  Subject to compliance with the other
provisions of this Agreement, enter into a transaction with any Affiliate unless
(a) the Affiliate has executed a Subordination Agreement and (b) Borrower has
provided reasonably satisfactory evidence to the Administrative Agent that the
terms of the proposed transaction are at least as favorable as those that
Borrower could obtain in an arm’s length transaction with a Person that is not
an Affiliate.

 

Section 6.7   Investments.  Make any Investment except Investments in (a) Cash
Equivalents, (b) obligations of the United States government or any of its
agencies, (c) guaranties permitted under Section 6.3, and (d) Investments in
connection with the purchase of Properties Approved (not to be unreasonably
withheld or delayed) by Administrative Agent.

 

Section 6.8       Subsidiaries; Structure.  Create any direct or indirect
Subsidiary or make any other material change in the corporate or capital
structure of Borrower.  Borrower shall not enter into any arrangement by which
any Person other than Borrower has the authority to exercise management over
Borrower’s and its Subsidiaries’ business or the Properties.

 

Section 6.9     Joint Ventures.  Enter into, agree to enter into or commit any
of the Collateral in connection with the organization of any partnership, joint
venture or similar arrangement.

 

Section 6.10      Dividends and Distributions.  Do any of the following or take
an action that has substantially the same effect:

 

(a)    declare or pay any cash dividends or distributions;

 

(b)   declare or make any non-cash distribution;

 

(c)    purchase or redeem any of its Equity Interests or other securities; or

 

(d)    take any other action that has substantially the same effect as any of
the actions prohibited under items (a)–(c) above.

 

Section 6.11   Modifications to Documents.  Waive or modify (or agree to waive
or modify) the terms of any Operating Agreement, any Hedging Agreement or any
material Basic Document, if such waiver or amendment could reasonably be
expected to have a Material Adverse Effect.

 

Section 6.12    Other.

 

(a)   fail to observe all of the provisions of Articles IV and V after the
Closing, to the extent not already subsumed in this Article VI;

 

(b)   declare an “Early Termination Date” (as that term may be defined in the
Swap Agreement) or any similar action pursuant to any Hedging Agreement without
the Consent of Administrative Agent; but Borrower may declare an Early
Termination Date or any similar action under and in accordance with the terms of
any Hedging Agreement (i) in respect of any “Event of Default” (as defined in
such Hedging Agreement) by the counterparty to such Hedging Agreement or (ii) in
order to close out any transactions then outstanding under such Hedging
Agreement and pay all amounts due in connection with the close out of such
transactions coincident with the full and final repayment or prepayment of all
of the Obligations;

44

 

 

(c)     enter into any Hedging Agreement not Approved by Administrative Agent,
such approval not to be unreasonably withheld or delayed, but Borrower agrees
that it will not be unreasonable for Administrative Agent to withhold its
Approval of any Hedging Agreement if Borrower’s counterparty under the proposed
Hedging Agreement, is not a Swap Counterparty and could have the right to
require Borrower to post any margin or other security to secure amounts owing
under the Hedging Agreement;

 

(d)    enter into a unit operating agreement relating to the Properties outside
the ordinary course of business; or

 

(e)    adopt any Employee Plan without the Consent of Administrative Agent which
shall not be unreasonably withheld or delayed.

 

Section 6.13      Use of Loan Proceeds.  Permit the proceeds of any Advance to
be used for any purpose other than the purposes permitted by this Agreement and
in a manner consistent with the supporting documentation provided to
Administrative Agent in connection with each Advance Request.  Neither Borrower
nor any Person acting on behalf of Borrower has taken or will take any action
which would reasonably be expected to cause any of the Loan Documents to violate
Regulations T, U or X or any other regulation of the Board or to violate Section
7 of the Securities Exchange Act of 1934 or any rule or regulation thereunder,
in each case as now in effect or as the same may hereinafter be in effect.

 

Section 6.14      Limitation on Leases.  Create, incur, assume or suffer to
exist any obligation for the payment of rent or hire of property of any kind
whatsoever (real or personal but excluding Capital Leases and Leases), under
leases or lease agreements which would cause the aggregate amount of all
payments made by Borrower pursuant to all such leases or lease agreements,
including any residual payments at the end of any lease, to exceed $250,000 in
any period of twelve consecutive calendar months during the life of such leases.

 

Section 6.15      Nature of Business.  Allow any material change to be made in
the character of Borrower’s business as an independent Hydrocarbon exploration
and production company.  Borrower will not acquire or make any other expenditure
(whether such expenditure is capital, operating or otherwise) in or related to,
any oil and gas properties not located within the geographical boundaries of the
United States.

 

Section 6.16      Deposit Accounts.  Except for those identified on Schedule
3.42, maintain any additional deposit accounts (as defined in the UCC) unless
simultaneously therewith, Borrower, Administrative Agent and the related
depositary bank enter into a Deposit Account Control Agreement with respect to
such deposit account.

 

Section 6.17       No Severance Agreements.  Without the Approval of
Administrative Agent, enter into or become bound by or cause or allow any of the
Collateral to become subject to any agreement under which Borrower could become
obligated to pay any amounts or make the accommodations to any Person, in
connection with that Person’s resignation, termination or any similar
occurrence.

45

 

 

Section 6.18      Commodity Deliveries.  Enter into obligations to deliver
commodities, goods or services, including Hydrocarbons, in consideration of one
or more advance payments, other than gas balancing arrangements in the ordinary
course of business.

 

Section 6.19    G&A Expenses.  Allow the G&A Expenses to exceed an aggregate of
$500,000 per calendar quarter.

 

ARTICLE VII

FURTHER RIGHTS OF LENDERS

 

Section 7.1           Further Assurances; Delivery of Additional
Documents.  Until all Obligations are Indefeasibly repaid in full (other than
indemnity and reimbursement obligations that survive the termination of this
Agreement):

 

(a)           Borrower shall, at Borrower’s expense, take all actions and
execute all additional documents reasonably requested by Administrative Agent
and necessary to (i) effect the creation, perfection, maintenance or
continuation of a first-priority Lien in favor of Administrative Agent over all
of the Collateral, or (ii) assist Administrative Agent’s exercise of its rights
under this Agreement and the other Loan Documents (collectively, “Implementation
Documents”).

 

(b)           Borrower appoints Administrative Agent and each of its designees
as Borrower’s attorney in fact to whenever an Event of Default exists (i)
execute, on behalf of Borrower , any Implementation Documents requested by
Administrative Agent, and (ii) endorse for deposit into the Project Account any
checks or other negotiable instruments payable to Borrower and that come into
the possession of Administrative Agent.  This appointment is coupled with an
interest and is irrevocable.

 

(c)           In exercising the appointment described in Section 7.1(b), neither
Administrative Agent nor its designees will be liable to any Person for any act,
omission, error in judgment or mistake of law that is not intentional, willful,
grossly negligent or in bad faith.

 

Section 7.2        Payments by Lenders.  If Borrower fails to (a) continuously
maintain insurance as required by this Agreement or (b) pay any amount owed to
any Person when due if Borrower’s failure to pay could reasonably be expected to
have a Material Adverse Effect, Administrative Agent or Lenders can, but will
not have any obligation to, (x) obtain insurance on behalf of Borrower as
required by this Agreement if such coverage is available on commercially
reasonable terms or (y) pay the unpaid amount(s) on behalf of
Borrower.  Administrative Agent or any Lender will give Borrower at least three
Business Days notice prior to exercising its rights under the preceding sentence
unless an Event of Default exists, in which case no prior notice will be
necessary.  Borrower will reimburse Administrative Agent or such Lender upon
demand for all amounts (including reasonable attorneys fees) paid by
Administrative Agent or such Lender to any Person under this Section 7.2.  If
Borrower fails to reimburse those amounts upon demand, the unreimbursed amounts
will become part of the Obligations.

46

 

 

Section 7.3        Possession and Preservation of Collateral.  If any Event of
Default exists, Administrative Agent can, in addition to any of remedies
available to Administrative Agent, (a) exercise the rights of a secured creditor
under the UCC to enter Borrower’s premises, (b) take possession of the
Collateral to preserve and prepare the Collateral for sale, and (c) take
possession or place custodians in control of Borrower’s premises without charge,
rent or payment, remain on and use the premises to preserve and prepare the
Collateral for sale.

 

Section 7.4     Indemnification.

 

(a)      Borrower will, to the fullest extent permitted by Law, indemnify and
hold harmless Administrative Agent, Lenders and their respective Related Parties
(collectively, the “Indemnified Parties”) from and against all claims, injuries,
damages, judgments, liabilities, out-of-pocket costs and expenses (including the
reasonable fees and expenses of counsel), charges and encumbrances
(collectively, “Claims”) arising from or related to:

 

(i)         asserting, enforcing or defending the rights of any Indemnified
Party under this Agreement or any of the other Loan Documents;

 

(ii)        creating, perfecting, maintaining, or enforcing any Lien;

 

(iii)       taking possession of, protecting, preserving and preparing for sale
any of the Collateral when an Event of Default exists;

 

(iv)       the acquisition, ownership or operation of any of the Collateral by
Borrower or any other Person;

 

(v)        Borrower’s proposed acquisition of any real or personal property;

 

(vi)       the failure of Borrower or any other Person to comply with any Law
(including any Environmental Law) or with the terms and conditions of any Loan
Document;

 

(vii)      the inaccuracy of any representation or warranty made by Borrower or
any other Person (other than any Indemnified Party) in any Loan Document;

 

(viii)      the failure of Borrower or any Operator to comply with any EHS
Regulation or other Environmental Law, including with respect to the presence,
generation, storage, Release, threatened Release, use, transportation, disposal
or arranging for the disposal or treatment of any Hydrocarbons, Hydrocarbon
waste, solid waste or Hazardous Substance on, under or from any of the
Properties;

 

(ix)           any finder’s, brokerage, financing or similar fees arising in
connection with the transactions contemplated by this Agreement; and

47

 

 

(x)           any actual, threatened or prospective litigation, investigation or
other proceeding relating to any of the foregoing, whether based on contract,
tort or any other legal or equitable theory and regardless of whether an
Indemnified Party is a named party to the proceeding.

 

(b)           The indemnity obligation owing by Borrower to the Indemnified
Parties under this Section 7.4:

 

(i)           will be not be limited, modified or excused by (A) any sole or
concurrent negligence of any Indemnified Party, whether through act or omission,
or (B) any strict liability imposed on any Indemnified Party; but

 

(ii)           will not be available to an Indemnified Party to the extent that
the Claim is determined by the final and non-appealable judgment of a court of
competent jurisdiction to have resulted from the gross negligence, bad faith or
willful misconduct of that Indemnified Party.

 

(c)           Borrower shall pay any amounts owing to an Indemnified Party under
this Section 7.4 within 10 Business Days after Indemnified Party makes a written
demand for payment.  If Borrower fails to timely pay the amounts owning under
this Section 7.4:

 

(i)           if the unpaid amount is owed to an Indemnified Party other than
Administrative Agent or any Lender, Administrative Agent or such Lender may (but
will not be obligated to) remit the unpaid amount to that Indemnified Party on
behalf of Borrower, in which case Borrower shall reimburse Administrative Agent
or such Lender upon demand; and

 

(ii)           if Administrative Agent or any Lender is the Indemnified Party to
whom the unpaid amount is owed (or if Borrower has failed to reimburse
Administrative Agent or such Lender for amounts due under Section 7.4(c)(i)),
then Administrative Agent can, at its election, (A) debit and apply funds from
the Project Account (and Borrower authorizes and directs Administrative Agent to
do so) to pay the amount then owing to Administrative Agent or such Lender under
this Section 7.4, or (B) capitalize the amount then owing and add them to the
Obligations.

 

(d)           Notwithstanding anything to the contrary, any indemnified Taxes
shall be covered exclusively by Section 1.14(c).

 

ARTICLE VIII

CLOSING; CONDITIONS PRECEDENT

 

Section 8.1      Closing.  The “Closing” of this Agreement will occur when all
of the conditions set forth in Article II and in Section 8.2 are either
satisfied or waived in writing by Administrative Agent; and the “Closing Date”
will be the date on which the Closing occurs.

 

Section 8.2     Conditions to Closing.  As conditions to Closing:

48

 

 

(a)           Borrower will execute and deliver to Administrative Agent each of
the Loan Documents to which Borrower is a party;

 

(b)           Borrower will Cause each other party (other than Administrative
Agent and Lenders) to execute and deliver to Administrative Agent each of the
Loan Documents to which it is a party;

 

(c)           Borrower will execute and deliver to Administrative Agent the
first Advance Request;

 

(d)           Administrative Agent will be satisfied, in its sole and absolute
discretion, with the results of its business, financial, legal, title,
engineering and environmental due diligence of Borrower and the Properties;

 

(e)           Borrower will deliver to Administrative Agent true and complete
copies of each Permit required to be obtained by Borrower in connection with the
acquisition, ownership and operation of the Properties;

 

(f)           Borrower will deliver to Administrative Agent its pro forma
financial statements prepared in accordance with GAAP, except for the omission
of the notes required by GAAP, and subject to the assumptions stated and normal
“year end adjustments” and certified as of the Closing Date by Borrower’s
Authorized Officer as fairly presenting in all material respects the financial
position of Borrower after giving effect to this Agreement (including the
payment of all fees and expenses payable in connection with this Agreement and
the initial Advance to be requested by Borrower under the Loan, if such an
Advance is to be requested at Closing); in addition, Borrower will have no
contingent liabilities, liabilities for Taxes, unusual forward or long term
commitments or unrealized or unanticipated losses from any unfavorable
commitments that are not disclosed in the financial statements;

 

(g)           Borrower will deliver to Administrative Agent legal opinions
satisfactory to Administrative Agent and its counsel;

 

(h)           Borrower will deliver to Administrative Agent evidence of title
reasonably satisfactory to Administrative Agent confirming that Borrower holds
Defensible Title to the Properties pursuant to Section 5.17;

 

(i)           Borrower will deliver to Administrative Agent:

 

(i)           a true and complete copy of resolutions satisfactory to
Administrative Agent (A) authorizing Borrower’s execution and delivery of the
Loan Documents, the payment and performance of the Obligations, and the granting
of the Liens contemplated by the Security Documents, and (B) accompanied by the
certification of an Authorized Officer that the resolutions have not been
amended, repealed or revoked as of the Closing Date;

 

(ii)           the certification of an Authorized Officer as to the name, title
and signatures of Persons authorized to execute Loan Documents on behalf of
Borrower; and

49

 

 

(iii)           true and complete copies of Borrower’s Charter Documents and an
original certificate of existence and/or good standing issued by the Secretary
of State of the jurisdictions in which Borrower is organized and conducts
operations (in each instance, dated as of a date acceptable to Administrative
Agent), along with the certificate of an Authorized Officer that those Charter
Documents and certificates have not been amended, repealed or revoked and remain
in effect on the Closing Date.

 

(j)           Administrative Agent will be reasonably satisfied with its review
of Borrower’s management and its back-office, accounting, business and
administrative systems and functions;

 

(k)          Borrower will provide any information required by Section 326 of
the USA PATRIOT Act or deemed necessary in the reasonable opinion of
Administrative Agent to verify the identity of Borrower as required by Section
326 of the USA PATRIOT Act;

 

(l)           no Material Adverse Effect has occurred;

 

(m)         the representations of each party to the Loan Documents are true,
complete and correct;

 

(n)          no suit or other proceeding is pending or threatened seeking to
restrain, enjoin, declare illegal, recover damages from any Party or seek any
other relief in connection with the transactions contemplated in this Agreement;

 

(o)          Borrower shall have reimbursed Administrative Agent for all Related
Costs incurred by Administrative Agent for which invoices have been presented to
Borrower at least one Business Day prior to the Closing Date;

 

(p)          none of the transactions contemplated by this Agreement are
prohibited by Law;

 

(q)          an environmental consultant Approved (not to be unreasonably
withheld or delayed) by Administrative Agent will inspect the Properties and
deliver to Administrative Agent a reasonably satisfactory environmental site
assessment of the Properties; and

 

(r)           Administrative Agent will be satisfied with the terms of the
Operating Agreements.

 

Section 8.3          Conditions to the Making of Each Advance.  The following
conditions must be either satisfied or waived in writing by Administrative Agent
prior to the making of each Advance:

50

 

 

(a)           The conditions described in Section 8.2 will continue to be
satisfied with respect to the Properties owned by Borrower at Closing or
acquired by Borrower with the proceeds of an Advance;

 

(b)           Borrower will prepare, execute and deliver an Advance Request to
Administrative Agent and satisfy the conditions set forth in Article I that
relate to the requested Advance;

 

(c)           With respect to any development activity to be funded with the
proceeds of the requested Advance, the development activity is included on the
Development Plan and is the subject of an AFE or Reimbursement Request Approved
by Administrative Agent;

 

(d)           With respect to any Properties acquired since the Closing Date or,
with respect to any other Properties, to the extent not previously delivered to
Administrative Agent, Borrower will deliver to Administrative Agent
documentation as Administrative Agent may reasonably request to satisfy the
conditions described in Section 8.2 with respect to those additional Properties
as if Borrower had owned them on the Closing Date (except that the
representations and warranties of Borrower with respect to those additional
Properties will be made as of the date of the requested Advance);

 

(e)           Borrower will obtain and deliver to Administrative Agent any
additional Implementation Documents that Administrative Agent may reasonably
request;

 

(f)           Borrower will deliver to Administrative Agent a true and complete
copy of the Operating Agreement(s) for each Well to which the Advance Request
relates to the extent not previously delivered to Administrative Agent, all of
which will be reasonably satisfactory to Administrative Agent;

 

(g)           No Default exists or would result from the making of the requested
Advance;

 

(h)           No Material Adverse Effect exists or would result from the making
of the requested Advance;

 

(i)           The representations of each party to the Loan Documents are true,
complete and correct on the date of which the requested Advance is to be made
except to the extent any of those representations and warranties were made as of
and limited to an earlier date, in which case those representations and
warranties continue to be true as of that earlier date;

 

(j)           The making of the requested Advance will not cause any Lender to
violate any Law;

 

(k)           No suit or other proceeding is pending or threatened seeking to
restrain, enjoin, declare illegal, recover damages from any Party or seek any
other relief in connection with the transactions contemplated in this Agreement;

51

 

 

(l)           Borrower maintains a commodity price risk management program as
required by Section 5.16;

 

(m)           Borrower will deliver to Administrative Agent all insurance
certificates required under this Agreement to the extent not previously
delivered pursuant to Section 5.8 and, if requested by Administrative Agent,
true and complete copies of any insurance policy maintained by Borrower;

 

(n)           There will exist no past due bills for improvements or services to
the Properties that could give rise to any Lien, including that of a mechanic or
materialman;

 

(o)           Administrative Agent is satisfied, in its sole and absolute
discretion, with the results of its due diligence examination of Borrower and
the Properties, including Borrower’s proposed development of the Properties,
satisfactory information regarding existing Crude Oil and Natural Gas sales, and
all aspects of Borrower’s existing and contemplated Crude Oil and Natural Gas
marketing activities;

 

(p)           Borrower will deliver to Administrative Agent satisfactory
releases of all Liens relating to the Properties that are not Permitted
Encumbrances;

 

(q)           Borrower will reimburse Administrative Agent for all Related Costs
incurred by Administrative Agent for which invoices have been presented pursuant
to Section 12.9;

 

(r)           Each depositary bank at which Borrower maintains a deposit account
will execute and deliver a Deposit Account Control Agreement to Administrative
Agent pursuant to Section 6.16 herein and Section 4.18 of the Security
Agreement;

 

(s)           Borrower will pay all fees due to Administrative Agent pursuant to
Section 1.13;

 

(t)           Borrower will deliver to Administrative Agent, no later than 15
days prior to Borrower’s submission of an Advance Request for the funding of
development activities related to a Well, a drill site title opinion or other
evidence of title acceptable to Administrative Agent covering such new Well and
showing Defensible Title to those Properties on which the such new Well is
located vested in Borrower subject only to the Permitted Encumbrances and the
Liens in favor of Administrative Agent pursuant to Section 5.17;

 

(u)           The mathematical average of the daily settlement prices for the
next six months after the date of the Advance Request for futures contracts for
Crude Oil as reflected in the NYMEX must be equal to or greater than $70.00 per
barrel; and

 

(v)           Borrower will provide documentary evidence satisfactory to
Administrative Agent that all seismic and other geological, geophysical,
engineering and well data, interpretations and analyses relating to the
Properties to which the Advance Request relates is owned by Borrower, free of
any encumbrance, subject only to the Permitted Encumbrances and the Liens in
favor of Administrative Agent.

52

 

 

ARTICLE IX

EVENTS OF DEFAULT

 

Section 9.1       Events of Default.  An “Event of Default” will exist under
this Agreement if:

 

(a)           Borrower fails to pay when due any amount payable by Borrower to
any Lender under the Promissory Note, this Agreement or any other Loan Document,
and that failure to pay continues for two Business Days after the date due;

 

(b)           Borrower fails to comply with any material term of any Loan
Document (except for a payment default described under Section 9.1(a)), and that
noncompliance continues for 20 days after the earlier of (i) the first date that
Borrower becomes aware of its noncompliance or (ii) the first date that
Administrative Agent notifies Borrower of its noncompliance;

 

(c)           a Termination Event, Additional Termination Event or Event of
Default occurs under (i) the Swap Agreement or (ii) any other Hedging Agreement,
if such event, in each case, could reasonably be expected to have a Material
Adverse Effect;

 

(d)           any Obligor (other than Borrower) fails to comply with any
material term of any Loan Document, and that noncompliance continues for 30 days
after the earlier of (i) the first date that the Obligor becomes aware of its
noncompliance or (ii) the first date that Administrative Agent notifies the
Obligor of its noncompliance;

 

(e)           Borrower (i) executes an assignment for the benefit of its
creditors, (ii) becomes or is adjudicated bankrupt or insolvent, (iii) admits in
writing its inability to pay its debts generally as they become due, (iv)
applies for or consents to the appointment of a conservator, receiver, trustee,
or liquidator of Borrower or of all or any substantial part of its assets, (v)
files a voluntary petition seeking reorganization or an arrangement with
creditors or to seek any other relief under any Debtor Relief Laws, (vi) files
an answer admitting the material allegations of or consenting to, or defaults
in, a petition filed against it in any proceeding under any Debtor Relief Laws,
or (vii) institutes or voluntarily becomes a party to any other judicial
proceedings intended to effect a discharge of its debts, in whole or in part, or
seeking to postpone the maturity or the collection of any of its debts or to
suspend any of the rights of Administrative Agent or any of its Affiliates under
any of the Loan Documents;

 

(f)           any Person files a petition seeking reorganization of Borrower or
appointing a conservator, receiver, trustee or liquidator of Borrower or of a
substantial part of its assets and the petition is not discharged within 90 days
after its filing;

 

(g)           a court of competent jurisdiction enters an order, judgment or
decree approving the reorganization of Borrower or appointing a conservator,
receiver, trustee or liquidator of Borrower, or of a substantial part of its
assets, and the order, judgment or decree is not permanently stayed or reversed
within 60 days after its entry;

53

 

 

(h)           any certification or representation of Borrower or any other party
(other than Administrative Agent, any Lender, any Affiliate of MBL or any
Affiliate of any Lender) in any Loan Document is determined by Administrative
Agent to have been materially false when made or deemed made;

 

(i)           any federal Tax Lien or any other Liens totaling $250,000 or more
arise of record against Borrower or the Properties, or if Borrower or one of its
Affiliates is the Operator, the Operator is not fully bonded or discharged
within 30 days after Borrower receives actual or constructive notice of their
filing unless (i) Borrower is contesting the Lien(s) in good faith through
appropriate proceedings timely filed and diligently prosecuted and against which
Borrower maintains adequate reserves in accordance with GAAP and (ii) all such
Liens are fully bonded or discharged within 60 days after Borrower receives
actual or constructive notice of their filing;

 

(j)           a judgment for more than $250,000 (or for any amount if the
execution and enforcement of that judgment could reasonably be expected to have
a Material Adverse Effect) is entered against Borrower, or if Borrower or one of
its Affiliates is the Operator, or the Operator and not appealed and bonded or
fully stayed, vacated, paid or discharged within 30 days of its entry unless the
judgment relates to a claim (i) that is fully covered by insurance (less any
deductible) and for which the insurance company has unconditionally accepted
liability or (ii) for which Borrower maintains adequate reserves in accordance
with GAAP;

 

(k)           Borrower fails to pay any Debt (other than the Obligations) in
excess of $250,000 when due (whether at scheduled maturity or by acceleration,
demand or otherwise) and the failure to pay continues past the expiration of any
applicable cure period unless (i) Borrower has previously documented to the
reasonable satisfaction of Administrative Agent the basis upon which Borrower
intends to dispute the Debt and (ii) Borrower maintains adequate reserves for
the Debt in accordance with GAAP;

 

(l)           Borrower, any other Obligor or any of their respective Affiliates,
officers, directors or members assert or allege that (i) any Loan Document is
void, voidable, unenforceable or has otherwise ceased to be in full force and
effect (except in accordance with its terms), (ii) Borrower or any other Obligor
is not bound by the Loan Documents in accordance with their terms, or (iii) any
Lien contemplated by any of the Security Documents is void,  voidable,
unenforceable or has ceased to be perfected and/or to have the priority required
by this Agreement;

 

(m)           Borrower fails to document to the reasonable satisfaction of
Administrative Agent, within seven Business Days of Closing, that any Lien on
the Collateral (other than Permitted Encumbrances and Liens in favor of
Administrative Agent) have been released or fully subordinated to Administrative
Agent;

 

(n)           if Borrower has the legal right to Cause any Operator to comply
with Laws applicable to the Properties, any Operator fails to comply with any
Laws applicable to the Properties and its noncompliance could reasonably be
expected to have a Material Adverse Effect;

54

 

 

(o)           if Borrower has the legal right to Cause or effect the choice of
replacement Operator, any Operator is removed or withdraws and the replacement
Operator is not Approved (such Approval not to be unreasonably withheld or
delayed) by Administrative Agent;

 

(p)           Borrower’s Working Interest is increased or Net Revenue Interest
is decreased from those set forth in Exhibit A except in connection with
Borrower’s acquisition of an additional Working Interest in the Properties in
connection with which Borrower contemporaneously realizes a proportionately
higher Net Revenue Interest in the Properties that is not subject to reduction
at any time following the closing of the acquisition;

 

(q)           a Change of Control occurs;

 

(r)           a Material Adverse Effect occurs; or

 

(s)           Borrower defaults under any of the Basic Documents and such
default could reasonably be expected to have a Material Adverse Effect;

 

but the events described in Sections 9.1(h), (k), (n) and (o)-(s) will
constitute an Event of Default only if the event described is not remedied by
Borrower within 30 days after the earlier of (i) the first date that Borrower or
any other Obligor, as applicable, becomes aware of the occurrence of the event
or (ii) Administrative Agent notifies Borrower or any other Obligor, as
applicable, of the occurrence of the event.

 

ARTICLE X

REMEDIES OF LENDERS

 

Section 10.1    Remedies Generally.

 

(a)           Upon an Insolvency.  If an Event of Default exists under any of
Sections 9.1(e)-(g), then (i) Lenders’ commitments to make any additional
Advances will automatically terminate and (ii) all amounts then outstanding
under the Promissory Note together with all other Obligations outstanding under
this Agreement and the other Loan Documents (excluding the Swap Agreements) will
automatically become immediately due and payable, without presentment, demand,
protest or other notice of any kind, all of which are waived by Borrower.

 

(b)           Following an Event of Default.  If an Event of Default exists
under Article IX other than under Sections 9.1(e)-(g), Administrative Agent may,
by notice to Borrower, take either or both of the following actions, at the same
or different times: (i) terminate Lenders’ commitments to make any additional
Advances and (ii) declare all amounts then outstanding under the Promissory Note
together with all other Obligations outstanding under this Agreement and the
other Loan Documents (excluding the Swap Agreement) immediately due and payable,
without presentment, demand, protest, notice of intent to accelerate, notice of
acceleration or other notice of any kind, all of which are waived by Borrower.

55

 

 

(c)        Rights of Administrative Agent.  Following a termination of Lenders’
commitments under Section 10.1(a) or (b), Administrative Agent may at any time
exercise any or all of its rights arising under any of the Loan Documents, by
operation of Law or otherwise (all of which will be cumulative), including the
right of a secured party under the UCC to peacefully enter upon any premises
where the Collateral is kept and take possession pending foreclosure.

 

Section 10.2       No Marshalling; Use of Collateral Pending Foreclosure;
Etc.  Administrative Agent will have no obligation to preserve the rights of any
other Person in or to any Collateral or to proceed against the Collateral in any
particular order or to marshal any Collateral of any kind for the benefit of any
other creditor of Borrower or any other Person.  Borrower grants to
Administrative Agent a royalty-free license or other right to use, at any time
that an Event of Default exists, Borrower’s labels, rights of use of any name,
trade secrets, trade names, trademarks and advertising matter, seismic data,
reserve reports, databases or any property of a similar nature related to the
Collateral and necessary in connection with Administrative Agent preparing the
Collateral for sale and advertising for and conducting one or more foreclosure
sales, and Borrower’s rights under all licenses and any franchise, sales or
distribution agreements will inure to Administrative Agent’s benefit.

 

Section 10.3        Set-Off Rights.  If an Event of Default exists, Lenders or
Administrative Agent, on behalf of Lenders, may, at any time and from time to
time, set off and apply against the Obligations any and all deposits (general or
special, time or demand, provisional or final) or other amounts at any time
credited by or owing from Lender or Administrative Agent, on behalf of Lenders,
or any depositary to Borrower, whether or not the Obligations are then due; but
this Section 10.3 will not apply to any amounts previously identified in writing
to Lender or Administrative Agent as belonging to third party Working Interest
and Royalty Interest owners.  Lender or Administrative Agent, as applicable,
will provide notice to Borrower within ten days following the application of any
funds under this Section 10.3.

 

Section 10.4      Rights Under Operating Agreements.  If an Event of Default
exists, Administrative Agent or its designee may, upon Administrative Agent’s
notice to Borrower, exercise any of Borrower’s rights under any Operating
Agreement or any other Basic Document.

 

Section 10.5      Netting of Claims.  If an Event of Default exists,
Administrative Agent, Lenders and Swap Counterparties, or any of them, may,
without further notice to Borrower, setoff (a) any amount then due and owing by
Borrower to Swap Counterparty under the Swap Agreement or to Administrative
Agent or Lenders under any other Loan Document, as applicable, against (b) any
amounts due and owing to Borrower or any other Obligor by Swap Counterparty
under or in respect of the Swap Agreement or by Administrative Agent or Lenders
under or in respect of any other Loan Document, as applicable, without regard
(in the case of the preceding clause (b)) to whether such amounts arise by set
off, offset, combination of accounts, deduction, retention, counterclaim or
withholding.  If an amount is unascertainable, Administrative Agent, Lenders and
Swap Counterparty, or any of them, may, acting in a commercially reasonable
matter, setoff an estimated amount and account to Borrower when the amount is
ascertained.

56

 

 

Section 10.6      All Rights and Remedies are Cumulative.  Each of the rights
and remedies of Administrative Agent and Lenders under this Agreement and the
other Loan Documents is cumulative and non-exclusive of any other rights or
remedies it may have under any other agreement, by operation of Law, at equity
or otherwise.

 

ARTICLE XI

ADMINISTRATIVE AGENT

 

Section 11.1       Appointment and Authorization of Administrative
Agent.  Subject to Section 11.19 below, each Lender hereby irrevocably appoints,
designates and authorizes the Administrative Agent to act as its agent under the
Loan Documents, and to take such action on its behalf under the provisions of
each Loan Document and to exercise such powers and perform such duties as are
expressly delegated to it by the terms of any Loan Document, together with such
powers as are reasonably incidental thereto.  Notwithstanding any provision to
the contrary contained in any Loan Document, Administrative Agent shall not have
any duties or responsibilities, except those expressly set out herein, nor shall
the Administrative Agent have or be deemed to have any fiduciary relationship
with any Lender or participant, and no implied covenants, functions,
responsibilities, duties, obligations or liabilities shall be read into any Loan
Document or otherwise exist against Administrative Agent.  Without limiting the
generality of the foregoing, the use of the term “Administrative Agent” in the
Loan Documents with reference to Administrative Agent is not intended to connote
any fiduciary or other implied (or express) obligations arising under agency
doctrine of any applicable law.  Instead, such term is used merely as a matter
of market custom, and is intended to create or reflect only an administrative
relationship between independent contracting parties.

 

Section 11.2      Delegation of Duties.  Administrative Agent may execute any of
its duties under any Loan Document by or through agents, employees or
attorneys-in-fact and shall be entitled to advice of counsel and other
consultants or experts concerning all matters pertaining to such duties.
Administrative Agent shall not be responsible for the negligence or misconduct
of any agent or attorney-in-fact that it selects in the absence of gross
negligence or willful misconduct on the part of Administrative Agent.

 

Section 11.3      Liability of Administrative Agent.  No Related Party of
Administrative Agent shall (a) be liable for any action taken or omitted to be
taken by any of them under or in connection with any Loan Document or the
transactions contemplated hereby and thereby (except for its own gross
negligence or willful misconduct in connection with its duties expressly set out
herein), or (b) be responsible in any manner to any Lender or participant for
any recital, statement, representation or warranty made by Borrower or any
officer thereof, contained in any Loan Document, or in any certificate, report,
statement or other document referred to or provided for in, or received by
Administrative Agent under or in connection with any Loan Document, or the
validity, effectiveness, genuineness, enforceability or sufficiency of any Loan
Document, or for any failure of Borrower or any other party to any Loan Document
to perform its obligations hereunder or thereunder.  No Related Party of
Administrative Agent shall be under any obligation to any Lender or participant
to ascertain or to inquire as to the performance of any of the agreements
contained in, or conditions of, any Loan Document, or to inspect the Properties,
books or records of Borrower or any Affiliate thereof.

57

 

 

Section 11.4    Reliance by Administrative Agent.

 

(a)     Administrative Agent shall be entitled to rely, and shall be fully
protected in relying, upon any writing, communication, signature, resolution,
representation, notice, consent, certificate, affidavit, letter, telegram,
facsimile, telex or telephone message, electronic mail message, statement or
other document or conversation believed by it to be genuine and correct and to
have been signed, sent or made by the proper Person or Persons, and upon advice
and statements of legal counsel (including counsel to Borrower), independent
accountants and other experts selected by the Administrative
Agent.  Administrative Agent shall be fully justified in failing or refusing to
take any action under any Loan Document unless it shall first receive such
advice or concurrence of the Required Lenders as it deems appropriate and, if it
so requests, it shall first be indemnified to its satisfaction by Lenders
against any and all liability and expense which may be incurred by it by reason
of taking or continuing to take any such action.  Administrative Agent shall in
all cases be fully protected in acting, or in refraining from acting, under any
Loan Document in accordance with a request or consent of the Required Lenders
(or such greater number of Lenders as may be expressly required hereby in any
instance) and such request and any action taken or failure to act pursuant
thereto shall be binding upon all Lenders.

 

(b)     For purposes of determining compliance with the conditions specified in
Article VIII, each Lender shall, where applicable, be deemed to have consented
to, approved or accepted or to be satisfied with, each document or other matter
required thereunder to be consented to or approved by or acceptable or
satisfactory to a Lender unless Administrative Agent shall have received notice
from such Lender prior to the Closing Date or Advance date, as applicable,
specifying its objection thereto.

 

Section 11.5       Notice of Default.  Administrative Agent shall not be deemed
to have knowledge or notice of the occurrence of any Default or Event of
Default, except with respect to defaults in the payment of principal, interest
and fees required to be paid to Administrative Agent for the account of Lenders,
unless Administrative Agent shall have received written notice from a Lender or
Borrower referring to the Agreement, describing such Default or Event of Default
and stating that such notice is a “notice of default.” Administrative Agent will
notify Lenders of its receipt of any such notice. Administrative Agent shall
take such action, or refrain from taking such action, with respect to such
Default or Event of Default as it shall deem advisable or in the best interest
of Lenders.

58

 

 

Section 11.6       Credit Decision; Disclosure of Information by Administrative
Agent.  Each Lender acknowledges that no Related Party of Administrative Agent
has made any representation or warranty to it, and that no act by Administrative
Agent hereafter taken, including any consent to and acceptance of any assignment
or review of the affairs of Borrower or any Affiliate thereof, shall be deemed
to constitute any representation or warranty by any Related Party of
Administrative Agent to any Lender as to any matter, including whether such
Related Party of Administrative Agent have disclosed material information in
their possession.  Each Lender represents to Administrative Agent that it has,
independently and without reliance upon any Related Party of Administrative
Agent and based on such documents and information as it has deemed appropriate,
made its own appraisal of and investigation into the business, prospects,
operations, property, financial and other condition and creditworthiness of
Borrower and its Affiliates, and all applicable bank or other regulatory laws
relating to the transactions contemplated hereby, and made its own decision to
enter into this Agreement and to extend credit to Borrower under this
Agreement.  Each Lender also represents that it will, independently and without
reliance upon any Related Party of Administrative Agent and based on such
documents and information as it shall deem appropriate at the time, continue to
make its own credit analysis, appraisals and decisions in taking or not taking
action under this Agreement and the other Loan Documents, and to make such
investigations as it deems necessary to inform itself as to the business,
prospects, operations, property, financial and other condition and
creditworthiness of Borrower.  Except for notices, reports and other documents
expressly required to be furnished to Lenders by Administrative Agent herein,
Administrative Agent shall not have any duty or responsibility to provide any
Lender with any credit or other information concerning the business, prospects,
operations, property, financial and other condition or creditworthiness of any
of Borrower or any of its Affiliates which may come into the possession of any
Related Party of Administrative Agent.

 

Section 11.7     Indemnification of Administrative Agent.  Whether or not the
transactions contemplated hereby are consummated, Lenders shall indemnify upon
demand each Related Party of Administrative Agent (to the extent not reimbursed
by or on behalf of Borrower and without limiting the obligation of Borrower to
do so), pro rata, and hold harmless each Related Party of Administrative Agent
from and against any and all liabilities and costs incurred by it; provided that
no Lender shall be liable for the payment to any Related Party of Administrative
Agent of any portion of such liabilities and costs to the extent determined in a
final, non-appealable judgment by a court of competent jurisdiction to have
resulted from such Related Party’s of Administrative Agent own gross negligence
or willful misconduct; provided further that no action taken in accordance with
the directions of the Required Lenders shall be deemed to constitute gross
negligence or willful misconduct for purposes of this Section 11.7.  Without
limitation of the foregoing, each Lender shall reimburse Administrative Agent
upon demand for its ratable share of any costs or out-of-pocket expenses
(including attorneys’ fees and expenses) incurred by Administrative Agent in
connection with the preparation, execution, delivery, administration,
modification, amendment or enforcement (whether through negotiations, legal
proceedings or otherwise) of, or legal advice in respect of rights or
responsibilities under, this Agreement, any other Loan Document, or any document
contemplated by or referred to herein, to the extent that Administrative Agent
is not reimbursed for such expenses by or on behalf of Borrower. The undertaking
in this Section 11.7 shall survive termination of the Note Amount, the payment
of all other obligations and the resignation of Administrative Agent.

 

Section 11.8     Administrative Agent in its Individual Capacity.  MBL and its
Affiliates may make loans to, acquire Equity Interests in and generally engage
in any kind of financial advisory, underwriting or other business with Borrower
and its Affiliates as though MBL were not Administrative Agent hereunder and
without notice to or consent of Lenders.  Lenders acknowledge that, pursuant to
such activities, MBL or its Affiliates may receive information regarding
Borrower or its Affiliates (including information that may be subject to
confidentiality obligations in favor of Borrower or such Affiliate), and Lenders
further acknowledge that Administrative Agent shall be under no obligation to
provide such information to any of them.  With respect to its Advances, MBL, in
its individual capacity as a Lender, shall have the same rights and powers under
this Agreement as any other Lender and may exercise such rights and powers as
though it were not Administrative Agent and the terms “Lender” and “Lenders”
include MBL in its individual capacity.

59

 

 

Section 11.9       Successor Administrative Agent.  Subject to the appointment
and acceptance of a successor Administrative Agent as provided in this Section
11.9, Administrative Agent may resign as Administrative Agent upon 30 days
notice to Lenders and Administrative Agent may be removed at any time with or
without cause by the Required Lenders.  If Administrative Agent resigns or is
removed under this Agreement, the Required Lenders shall appoint from among
Lenders a successor Administrative Agent for Lenders.  Such appointment will be
made with the consent of Borrower (such consent not to be unreasonably withheld,
conditioned or delayed) unless an Event of Default exists, in which case
Borrower’s consent will not be required.  If no successor Administrative Agent
is appointed prior to the effective date of the resignation or retirement of
Administrative Agent, Administrative Agent may appoint, after consulting with
Lenders and Borrower, a successor Administrative Agent from among Lenders. Upon
the acceptance of its appointment as successor Administrative Agent hereunder,
the Person acting as such successor Administrative Agent shall succeed to all
the rights, powers and duties of the retiring or removed Administrative Agent
and the term “Administrative Agent” shall mean such successor Administrative
Agent and the retiring or removed Administrative Agent’s appointment, powers and
duties as Administrative Agent shall be terminated.  After any retiring
Administrative Agent’s resignation or removal hereunder as Administrative Agent,
the provisions of this Article XI shall inure to its benefit as to any actions
taken or omitted to be taken by it while it was Administrative Agent under this
Agreement.  If no successor Administrative Agent has accepted appointment as
Administrative Agent by the date which is 30 days following a retiring
Administrative Agent’s notice of resignation, the retiring or removed
Administrative Agent’s resignation or removal shall nevertheless thereupon
become effective and Lenders shall perform all of the duties of Administrative
Agent hereunder until such time, if any, as the Required Lenders appoint a
successor Administrative Agent as provided for above.

 

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

 

(a)           to file and prove a claim for the whole amount of the principal
and interest owing and unpaid in respect of the Loan, and all other Obligations
that are owing and unpaid and to file such other documents as may be necessary
or advisable in order to have the claims of Lenders and Administrative Agent
(including any claim for the reasonable compensation, expenses, disbursements
and advances of Lenders and Administrative Agent and their respective Related
Parties and counsel and all other amounts due Lenders and Administrative Agent
under Section 1.11 and Section 12.9 allowed in such judicial proceeding; and

60

 

 

(b)           to collect and receive any monies or other property payable or
deliverable in respect of any such claims and to distribute the same; and any
custodian, receiver, assignee, trustee, liquidator, sequestrator or other
similar official in any such judicial proceeding is hereby authorized by each
Lender to make such payments to Administrative Agent and, in the event that
Administrative Agent shall consent to the making of such payments directly to
Lenders, to pay to Administrative Agent any amount due for the reasonable
compensation, expenses, disbursements and advances of Administrative Agent and
its Related Parties and counsel, and any other amounts due Administrative Agent
under Section 1.11 and Section 12.9.

 

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

 

Section 11.11  Collateral Matters.

 

(a)    Collateral Matters.

 

(i)    Each Lender authorizes and directs Administrative Agent to enter into the
Security Documents for the ratable benefit of Lenders.  Each Lender agrees that
(A) any action taken by Administrative Agent in respect of any Collateral in
accordance with the provisions of this Agreement or the Security Documents and
(B) the exercise by the Administrative Agent of powers in respect of the
Collateral set out in any Security Documents, together with other reasonably
incidental powers, shall be authorized by and binding upon all Lenders.

 

(ii)           In the event any Lien under any Security Document is, on its
face, granted to a Lender rather than to Administrative Agent (for the ratable
benefit of all Lenders), the Administrative Agent, Lenders, and Borrower confirm
that it is their intent that all such Liens shall be granted (or deemed granted)
to Administrative Agent for the ratable benefit of all Lenders.  All such
Security Documents are hereby amended to the extent necessary to reflect that
the Liens granted under those Security Documents are granted to Administrative
Agent (for the ratable benefit of all Lenders), and Borrower hereby grant all
Liens under all Security Documents to Administrative Agent, for the ratable
benefit of Lenders.

 

(iii)           Administrative Agent is authorized on behalf of all Lenders,
without the necessity of any notice to or further consent from any Lender, from
time to time while no Default or Event of Default exists, to take any action
with respect to any Collateral or Security Documents that may be necessary to
perfect and maintain the perfection of the Liens upon the Collateral granted by
the Security Documents.

 

(iv)    Administrative Agent has no obligation whatsoever to any Lender or to
any other Person to assure that the Collateral exists or is owned by the party
pledging the Collateral or is cared for, protected or insured or has been
encumbered or that the Liens granted to Administrative Agent for the benefit of
Lenders under the Security Documents have been properly or sufficiently or
lawfully created, perfected, protected or enforced, or are entitled to any
particular priority.

61

 

 

(v)   Administrative Agent shall exercise the same care and prudent judgment
with respect to the Collateral and the Security Documents as it normally and
customarily exercises in respect of similar collateral and security documents.

 

(b)     Release Collateral.  Lenders irrevocably authorize Administrative Agent,
at its option and in its discretion, to release any Lien or encumbrance on any
property granted to or held by Administrative Agent under any Loan Document or
Security Document (i) upon termination of the Note Amount and payment in full of
all Obligations (other than contingent indemnification obligations), (ii) that
is sold or to be sold as part of or in connection with any sale permitted under
the Agreement or under any other Loan Document, or (iii) if approved, authorized
or ratified in writing by the Required Lenders.

 

(c)           Subordinate Liens.  Lenders irrevocably authorize Administrative
Agent, at its option and in its discretion, to subordinate any Lien or
encumbrance on any property granted to or held by Administrative Agent under any
Loan Document or Security Document to the holder of any Lien or encumbrance on
such property that constitutes a purchase money lien or a capital lease.

 

(d)      Confirm Authority.  Upon request by Administrative Agent at any time,
the Required Lenders will confirm in writing Administrative Agent’s authority to
release or subordinate its interest in particular types or items of property.

 

Section 11.12    Advance Procedure.

 

(a)    Subject to compliance with Section 1.4 and Article VIII, Borrower may
request the Advance of the Loan by submitting an Advance Request to
Administrative Agent, and Administrative Agent shall promptly notify each Lender
of the Advance Request and its contents.  An Advance Request is irrevocable and
binding on Borrower.  Each Advance Request must be received by Administrative
Agent no later than 12:00 p.m. Houston, Texas, Time on the third (3rd) Business
Day preceding the proposed Advance date.

 

(b)           By 11:00 a.m. Houston, Texas, time on the Advance date, each
Lender shall remit its Percentage Share of each requested Advance by wire
transfer to Administrative Agent pursuant to Administrative Agent’s wire
transfer instructions on Appendix B (or as otherwise directed by Administrative
Agent) in funds that are available for immediate use by Administrative Agent.
Subject to receipt of such funds, Administrative Agent shall make such funds
available to Borrower as directed in the Advance Request (unless it has actual
knowledge that any applicable condition precedent has not been satisfied by
Borrower).

62

 

 

(c)      Absent contrary written notice from a Lender, Administrative Agent may
assume that each Lender has made its Percentage Share of the requested Advance
available to Administrative Agent on the applicable Advance date, and
Administrative Agent may, in reliance upon such assumption (but is not required
to), make available to Borrower a corresponding amount.  If a Lender fails to
make its Percentage Share of any requested Advance available to Administrative
Agent on the applicable Advance date, Administrative Agent may (to the extent
such amount was actually advanced to Borrower) recover the applicable amount on
demand from that Lender, together with interest at the Prime Rate for the period
commencing on the date the amount was made available to Borrower by
Administrative Agent and ending on (but excluding) the date Administrative Agent
recovers the amount from that Lender.

 

Section 11.13    Payments.  Borrower shall make each payment on the Obligations
as provided in this Agreement, provided that all such payments shall be paid to
Administrative Agent and shall be without offset, counterclaim or
deduction.  Any payment of the Obligations from Borrower or any of its
Affiliates which is received by any Lender (including under Section 10.4), shall
be promptly forwarded to Administrative Agent.  Payments received after the
designated time will be deemed received on the next Business
Day.  Administrative Agent shall pay each Lender any payment to which that
Lender is entitled on the Business Day following the day Administrative Agent
receives the funds from Borrower. If and to the extent that Administrative Agent
does not make a payment to Lenders when due, the unpaid amounts shall accrue
interest at the Prime Rate from the due date until (but not including) the date
paid and such interest shall be paid by Administrative Agent to that Lender.

 

Section 11.14   Application of Payments.

 

(a)     If no Default or Event of Default then exists, all scheduled payments
shall be applied ratably in accordance with Section 1.8(b) above.

 

(b)     If no Default or Event of Default then exists, all prepayments shall be
applied ratably in accordance with Section 1.8(b) above.

 

(c)           All proceeds realized from the liquidation or other disposition of
Collateral or otherwise received after maturity of the Promissory Notes, whether
by acceleration or otherwise, shall be applied: first, to reimbursement of
expenses and indemnities provided for in this Agreement and the Security
Documents; second, to accrued interest on the Promissory Notes; third, to fees;
fourth, pro rata to principal outstanding on the Promissory Notes and
Obligations in respect of the Swap Agreement; fifth, to any other Obligations;
and any excess shall be paid to the Borrower or as otherwise required by any
Governmental Authority.

 

Section 11.15     Liens.  The Liens granted by Borrower under the Loan Documents
are granted to Administrative Agent for the ratable benefit of Lenders and Swap
Counterparty.

 

Section 11.16      Payment Priority.  The right of each Lender to receive any
payments or prepayments under or in respect of the Agreement, any Loan Document,
or any Collateral shall be pari passu with the payment rights of all other
Lenders acting in their capacity as a Lender pursuant to this Agreement,
provided that payments of principal and interest will be allocated to each
Lender in accordance with its Percentage Share of such payment or prepayment.

63

 

 

Section 11.17     Sharing of Payments by Lenders.  If any Lender shall, by
exercising any right of set-off or counterclaim or otherwise, obtain payment in
respect of any principal of or interest on any of its Advances or fees resulting
in such Lender receiving payment of a greater proportion of the aggregate amount
of its Advances or fees and accrued interest thereon than the proportion
received by any other Lender, then the Lender receiving such greater proportion
shall purchase (for cash at face value) participations in the Advances or fees
of other Lenders to the extent necessary so that the benefit of all such
payments shall be shared by Lenders ratably in accordance with the aggregate
amount of principal of and accrued interest on their respective Advances;
provided that (a) if any such participations are purchased and all or any
portion of the payment giving rise thereto is recovered, such participations
shall be rescinded and the purchase price restored to the extent of such
recovery, without interest, and (b) the provisions of this Section 11.17 shall
not be construed to apply to any payment made by Borrower pursuant to and in
accordance with the express terms of this Agreement or any payment obtained by a
Lender as consideration for the assignment of or sale of a participation in any
of its Advances to any assignee or participant, other than to Borrower or any
Affiliate thereof (as to which the provisions of this Section 11.17 shall
apply).  Borrower consents to the foregoing and agrees, to the extent it may
effectively do so under applicable law, that any Lender acquiring a
participation pursuant to the foregoing arrangements may exercise against
Borrower rights of set-off and counterclaim with respect to such participation
as fully as if such Lender were a direct creditor of Borrower in the amount of
such participation.

 

Section 11.18       Relationship of Lenders.  This Agreement, and the documents
delivered in connection herewith, does not create a partnership or joint venture
among Administrative Agent and Lenders or among Lenders.

 

Section 11.19        Actions by Administrative Agent.  Notwithstanding Section
11.1 above, Administrative Agent shall not take any of the following actions
(collectively, the “Material Changes”):

 

(a)       increase the Commitment of any Lender without the written consent of
such Lender;

 

(b)      reduce the principal amount of any Advance or reduce the rate of
interest thereon, or reduce any fees payable hereunder, or reduce any other
Obligations hereunder or under any other Loan Document, without the written
consent of each Lender affected thereby;

 

(c)      postpone the scheduled date of payment of the principal amount of any
Advance, or any interest thereon, or any fees payable hereunder, or any other
Obligations hereunder or under any other Loan Document, or reduce the amount of,
waive or excuse any such payment, or postpone or extend the Availability
Termination Date without the written consent of each Lender affected thereby;

64

 

 

(d)      change this Agreement in a manner that would alter the pro rata sharing
of payments required thereby, without the written consent of each Lender;

 

(e)      release any of the Collateral (except as expressly provided in Section
11.11(b));

 

(f)      change Section 5.20, without the written consent of each Lender; or

 

(g)     change (i) any of the provisions of this Section 11.19, (ii) the
definition of “Required Lenders” or (iii) any other provision hereof specifying
the number or percentage of Lenders required to (A) waive, amend or modify any
rights hereunder or under any other Loan Documents or (B) make any determination
or grant any consent hereunder or any other Loan Documents, without the written
consent of each Lender.

 

Section 11.20     Replacement of Lenders.

 

(a)      If any Lender becomes a Defaulting Lender, then (i) Administrative
Agent may, upon notice to the Defaulting Lender and Borrower, require such
Defaulting Lender to assign and delegate, without recourse (in accordance with
and subject to the restrictions contained in, and consents required by, Section
12.1), all of its interests, rights and obligations under this Agreement and the
related Loan Documents to an assignee, pursuant to the terms and conditions of
Section 12.1, that shall assume such obligations (which assignee may be another
Lender, if a Lender accepts such assignment) and (ii) Borrower may, as long as
no Event of Default exists and upon notice to the Defaulting Lender and
Administrative Agent and at Borrower’s sole cost and expense, require such
Defaulting Lender to assign, without recourse (in accordance with and subject to
the restrictions contained in, and consents required by, Section 12.1), all of
its interests, rights and obligations under this Agreement and the related Loan
Documents to an assignee that shall assume such obligations (which assignee may
be another Lender, if a Lender accepts such assignment), provided that:

 

(A)      as to assignments required by Borrower, Borrower shall have paid to
Administrative Agent the expenses specified in Section 12.1;

 

(B)      such Defaulting Lender shall have received payment of an amount equal
to the outstanding principal of its Advances, accrued interest thereon, accrued
fees and all other amounts payable to it hereunder and under the other Loan
Documents (including any Breakage Costs) from the assignee (to the extent of
such outstanding principal and accrued interest and fees) or Borrower (in the
case of all other amounts);

 

(C)      any such assignment is consistent with the requirements of Section
12.1;

 

(D)      such assignment does not conflict with applicable Law; and

 

(E)        the proposed agreement, amendment, waiver, consent or release with
respect to this Agreement or any other Loan Document has been Approved by the
Required Lenders and such agreement, amendment, waiver, consent or release can
be effected as a result of the assignment contemplated by this Section.

 

(b)           A Lender shall not be required to make any such assignment or
delegation if, prior thereto, as a result of a waiver by such Lender or
otherwise, the circumstances entitling Borrower to require such assignment and
delegation cease to apply.  Solely for purposes of effecting the assignment
required for a Defaulting Lender under this Section 11.20 and to the extent
permitted under applicable Law, each Lender hereby designates and appoints
Administrative Agent as true and lawful agent and attorney-in-fact, with full
power and authority, for and on behalf of and in the name of such Lender to
execute, acknowledge and deliver the assignment required hereunder if such
Lender was a Defaulting Lender and such Lender shall be bound thereby as fully
and effectively as if such Lender had personally executed, acknowledged and
delivered the same.  In lieu of Borrower or Administrative Agent replacing a
Defaulting Lender as provided in this Section 11.20, Borrower may terminate such
Defaulting Lender’s Percentage Share as provided herein.

 

65

 

ARTICLE XII

MISCELLANEOUS

 

Section 12.1   Assignment.

 

(a)   This Agreement is entered into for the benefit of Borrower and Lenders and
their respective successors and permitted assignees; it will be binding upon and
inure to the benefit of those parties and their respective successors and
permitted assignees.  Neither the rights nor the obligations of Borrower or any
other Obligor under any of the Loan Documents may be assigned without the
Consent of Administrative Agent.  Each Lender may, upon notice to Borrower,
assign any of such Lender’s rights and obligations under any of the Loan
Documents (i) to any Affiliate of such Lender at any time, or (ii) to any other
Person if an Event of Default exists.  If no Event of Default exists, each
Lender may assign any of its rights and obligations to any Person that is not an
Affiliate upon the prior written consent of Borrower, such consent not to be
unreasonably withheld, delayed or conditioned.

 

(b)    If any Lender makes an assignment pursuant to Section 12.1(a), Borrower
shall, at its expense, execute and deliver to such Lender and the assignee such
documents as such Lender may reasonably request in connection with that
transaction, including the issuance of one or more replacement Promissory
Notes.  In addition, any Person that owns or acquires an interest in the Loan
can (as long as Borrower’s rights and obligations hereunder are not adversely
affected) grant a Lien over that interest to its own lender(s) to secure any
Debt.

 

Section 12.2   Notices.

 

(a)    Addresses for Notices.  Any notice, demand or document which either party
is required or may desire to give to the other will be in writing and, except as
otherwise provided in this Agreement, given by messenger, nationally recognized
courier, overnight delivery, facsimile or other electronic transmission, or
United States certified mail, postage prepaid, return receipt requested,
addressed to the recipient at the location shown below, or at any other address
as either party may furnish to the other by notice given in accordance with this
provision.

66

 

 

If to Administrative Agent, to:

 

Macquarie Bank Limited

Level 15, No. 1 Martin Place

Metals and Energy Capital

Sydney

New South Wales 2000

Australia

Attention:   Executive Director

Telephone:   +61 2 8232 3333

Facsimile:   +61 2 8232 3590

E-Mail:   katie.choi@macquarie.com

 

with a copy to:

 

Macquarie Bank Limited

Houston Representative Office

500 Dallas Street, Suite 3250

Houston, Texas  77002

Attention:   Michael Sextro

Telephone:   (713) 275-6207

Facsimile:   (713) 275-6222

E-Mail:   MECLoansHouston@macquarie.com

 

If to Borrower, to its principal place of business at:

 

Voyager Oil & Gas, Inc.

2718 Montana Ave.

Suite 220

Billings, Montana 59101

Attention:   Mitchell R. Thompson

Telephone:   (406) 245-4901

Facsimile:   (406) 245-4914

E-Mail:   mitch.thompson@voyageroil.com

 

If a notice is to be sent to any other Obligor, it will be sent to Borrower and
to the address set forth in Loan Document to which that Obligor is a party.

 

(b)    Notice is Effective Upon Receipt.  Any notice delivered or made by
messenger, facsimile, electronic mail or United States mail will be deemed to be
given on the date of actual delivery as shown by messenger receipt, the sender’s
facsimile machine confirmation or other verifiable electronic receipt, or the
registry or certification receipt.

67

 

 

(c)     Unintelligible E-Mail Messages.  Notwithstanding Section 12.2(b), if
either party receives from the other any message via electronic mail that
purports to be a notice under this Agreement but that contains information that
is syntactically incorrect, garbled or otherwise unintelligible, the recipient
will promptly (and in any event within one Business Day) notify the sender.  If
the recipient so notifies the sender, then the notice will not be deemed to be
given until it is successfully delivered (including redelivery by electronic
mail) pursuant to this Section 12.2.

 

(d)    When Oral Notice is Effective.  If Administrative Agent receives oral
notice from an Authorized Officer that an event or circumstance has occurred
that would constitute a Default under this Agreement, Administrative Agent is
conclusively entitled to rely on that notice from the date that it is received
and as if it had been given in writing pursuant to this Section 12.2.  If a
discrepancy exists or arises between that oral notice and any written
confirmation received by Administrative Agent from Borrower (or in the absence
of a written confirmation), the oral notice, as reasonably understood by
Administrative Agent, will be deemed the controlling notice for all purposes.

 

Section 12.3   Waivers; Amendments; Schedules.

 

(a)     No (i) restraint or delay by Administrative Agent in exercising any of
its rights or remedies under the Loan Documents (regardless of the length of
that delay), (ii) abandonment or suspension by Administrative Agent of any
efforts to assert or enforce any of those rights or remedies, or (iii) alleged
course of conduct or course of dealing between Administrative Agent, Lenders and
any other Person, will operate as a waiver or limitation of any of the rights
and remedies of Administrative Agent or Lenders under the Loan Documents.

 

(b)     No single or partial exercise by Administrative Agent or Lenders of any
right or remedy under the Loan Documents will preclude any other or further
exercise of the same—or any other—right or remedy of Administrative Agent or
Lenders under the Loan Documents.

 

(c)   No waiver by Administrative Agent or Lenders of any right or remedy under
the Loan Documents—nor any consent by Administrative Agent or Lenders to
Borrower’s non-compliance with any provision of the Loan Documents—will be
effective unless it is in writing and signed by Administrative Agent or Lenders,
as applicable.  Any written waiver or consent given by Administrative Agent or
Lenders will be effective only in the specific instance and for the specific
purpose for which it is given.  The making of an Advance will not constitute a
waiver of any Default, even if the Administrative Agent or Lenders had notice of
the Default at the time the Advance was made.

68

 

 

(d)    Should any of the information or disclosures provided on any of the
Schedules originally attached hereto become outdated or incorrect in any
material respect, Borrower shall deliver to Administrative Agent within thirty
(30) days after the end of the month in which such change occurs, along with the
compliance certificate required under Section 4.3, such revisions or updates to
such Schedule(s) as may be necessary or appropriate to update or correct such
Schedule(s); provided that no such revisions or updates to any Schedule(s) shall
be deemed to have amended, modified or superseded such Schedule(s) as originally
attached hereto, or to have cured any breach of warranty or representation
resulting from the inaccuracy or incompleteness of any such Schedule(s), unless
and until Administrative Agent shall have Approved in writing such proposed
revisions or updates to such Schedule(s).  Without limiting the generality of
the foregoing or of Section 4.3, each representation and warranty contained in
this Agreement and the other Loan Documents shall be continuous in nature and
shall remain accurate, complete and not misleading in all material respects at
all times during the term of this Agreement, except for revisions or updates to
any Schedule(s) approved by Administrative Agent pursuant to the preceding
sentence and such changes in the circumstances of Borrower that are expressly
permitted under this Agreement.

 

Section 12.4    Confidentiality; Permitted Disclosures.

 

(a)     For as long as this Agreement is in effect and for twelve months
thereafter, unless disclosure is authorized under Section 12.4(b) or (c),

 

(i)      Borrower will keep confidential the Loan Documents and the terms and
conditions of the Loan extended to it by Lenders under this Agreement,

 

(ii)     Administrative Agent and Lenders will keep confidential all agreements,
documents, certificates, reports, and other information delivered to it by
Borrower under this Agreement.

 

(b)     Notwithstanding that Section 12.4(a) would otherwise require it to
maintain such information in confidence, either party may disclose confidential
information described in Section 12.4(a):

 

(i)      where the disclosure is required by Law but, to the extent practicable
and if the disclosing party can lawfully do so, it first gives prompt written
notice of the planned disclosure to the other party;

 

(ii)      if the information becomes known to the disclosing party through a
source that is not subject to a confidentiality obligation with respect to that
same information;

 

(iii)     in connection with any court or arbitration proceeding to enforce or
interpret any of the Loan Documents;

 

(iv)     to its attorneys, accountants, engineers and other advisors and
consultants if (A) the disclosure of the confidential information is reasonably
necessary to facilitate their representation of Borrower and (B) prior to
disclosure, the disclosing party makes the recipient aware of (and obtains, for
the express benefit of the party to whom the confidentiality obligation is owed,
the recipient’s agreement to comply with) the confidentiality obligations
imposed by this Section 12.4.

69

 

 

(c)     In addition, and notwithstanding that Section 12.4(a) would otherwise
require it to maintain such information in confidence, Administrative Agent and
Lenders may disclose confidential information described in Section 12.4(a):

 

(i)     to create, perfect, maintain or continue any Lien in favor of
Administrative Agent, for the ratable benefit of each Lender or the Swap
Counterparty;

 

(ii)     in connection with the exercise of any right or remedy of
Administrative Agent under the Loan Documents or under any Law, including the
publication of notices related to any public or private foreclosure sale; or

 

(iii)    to potential lenders, participants, assignees and investment bankers
and their respective attorneys, accountants, engineers and other advisors and
consultants if (A) disclosure of the confidential information is reasonably
necessary to facilitate their representation of the disclosing party and (B)
prior to disclosure, the disclosing party makes the recipient aware of (and
obtains, for the express benefit of the party to whom the confidentiality
obligation is owed, the recipient’s agreement to comply with) the
confidentiality obligations imposed by this Section 12.4.

 

(d)     Neither party will issue (or allow the issuance of) any press release or
other public announcement relating to the Loan without the prior written consent
of the other party; but each of them may each publish a customary “tombstone”
announcement regarding the Loan.

 

(e)    This Section 12.4 supersedes any prior agreement between Administrative
Agent, Lenders and Borrower or any of its Affiliates regarding the
confidentiality of information described in Section 12.4(a)(ii).

 

Section 12.5    Form of Documents.  In all instances where this Agreement or any
other Loan Document requires Borrower to (or to Cause another Person to)
prepare, execute or deliver any document to Administrative Agent, the document
will be in form and substance reasonably satisfactory to Administrative Agent

 

Section 12.6    Third-Party Beneficiaries.  Except for the benefits expressly
transferred to a permitted assignee under Section 12.1, the benefits of this
Agreement will not inure to any Person other than Borrower, Administrative Agent
and Lenders.  None of the Loan Documents will be construed to create any rights,
claims or causes of action against Administrative Agent or Lenders or any of
their respective Related Parties by any Person other than Borrower,
notwithstanding anything contained in any Loan Document or any course of dealing
or course of conduct by any party or its representatives before or after signing
this Agreement.

70

 

 

Section 12.7  Governing Law; Venue.

 

(a)           The Loan Documents (except to the extent any of the Security
Documents are deemed to be performable in another jurisdiction) and the
transactions contemplated by them are to be performed in the State of
Texas.  Except to the extent the Laws of another jurisdiction are mandatorily
applicable, all of the Loan Documents and the transactions contemplated by them
are to be governed by, interpreted and construed under and enforced pursuant to
the Laws of the State of Texas, regardless of that jurisdiction’s conflicts of
laws provisions.

 

(b)      The parties agree that any proceeding arising from or related to the
Loan Documents or the transactions contemplated by them will be brought
exclusively in the State and Federal courts located in Harris County,
Texas.  This choice of venue is intended by the parties to be (a) mandatory and
not permissive in nature and (b) preclude any party from commencing or
maintaining any proceeding against another party in any jurisdiction other than
the State and Federal courts located in Harris County, Texas if that proceeding
arises from or is related to the Loan Documents or the transactions contemplated
by them.  Each party irrevocably waives any right it may have to assert the
doctrine of forum non conveniens or similar doctrine or to object to venue with
respect to any proceeding commenced or maintained in accordance with this
Section 12.7(b).  Each party stipulates that the State and Federal courts
located in Harris County, Texas shall have in personam jurisdiction and venue
over each of them in connection with any proceeding arising out of or related to
the Loan Documents or the transactions contemplated by them.  Any final judgment
rendered against a party in any proceeding will be conclusive with respect to
the subject matter of that final judgment and may be enforced in any
jurisdiction in any manner provided by Law.

 

Section 12.8     Waiver of Jury Trial, Punitive Damages, Etc.  Borrower,
Administrative Agent and Lenders each:

 

(a)           knowingly, voluntarily, intentionally and irrevocably waive, to
the maximum extent not prohibited by Law, any right it may have to (i) a trial
by jury in any connection with any litigation arising from or related to the
Loan, the Loan Documents or any transaction contemplated by any of the Loan
Documents, whether before or after the Maturity Date, or (ii) claim or recover
in any such litigation any Special Damages;

 

(b)           represent and warrant to the other that the party making the
representation is not relying on any representation, understanding or suggestion
(whether express or implied) by the other party that the other party would not,
in the event of litigation, seek to enforce the waivers in Section 12.8(a); and

 

(c)           acknowledge that its waivers, representations and warranties in
this Section 12.8 constitute a material inducement to the other party to enter
into the transactions contemplated by this Agreement and the other Loan
Documents.

71

 

 

Section 12.9      Fees, Costs and Expenses.  Borrower will promptly (and, in any
event, within 30 days after the presentation of any invoice by Administrative
Agent) pay (a) all Related Costs, (b) all transfer, stamp, mortgage, documentary
or other similar Taxes, assessments or charges levied by any Taxing Authority in
connection with the Loan Documents or the transactions contemplated by them, (c)
all reasonable out-of-pocket costs and expenses incurred by or on behalf of
Administrative Agent and Lenders (including the reasonable fees, expenses and
disbursements of its attorneys and consultants) in connection with (i) preparing
the Loan Documents and any modifications to them, (ii) filing, recording and
registering any Security Documents, (iii) making Advances, (iv) administering
the Loan and monitoring Borrower’s compliance with the Loan Documents, (v)
enforcing Administrative Agent or Lender’s rights and remedies under the Loan
Documents, and (vi) investigating, prosecuting or defending any claim or alleged
claim arising under or in connection with the Loan Documents and the
transactions contemplated by them.

 

Section 12.10   Compliance with Usury Laws.

 

(a)         Administrative Agent, Lenders, Borrower and the other Obligors
intend to comply with all applicable usury Laws, whether existing on the date of
this Agreement or to be enacted in the future.  As such, and notwithstanding any
provision of any Loan Document, no Loan Document will be construed to require
the payment or permit the collection of interest in excess of the maximum amount
permitted by Law.

 

(b)         If ever the performance of any provision of any Loan Document will
resulting in the charging or collection of interest in excess of the maximum
amount permitted by Law, then the obligation to be fulfilled will, ipso facto,
be reduced to the allowable limit.  In addition, if Administrative Agent or
Lenders ever receive under any Loan Document anything of value as interest or
that is deemed to be interest under Law such the amount of interest received by
Administrative Agent or Lender would exceed the Highest Lawful Rate, then (i)
the amount that would otherwise constitute excessive interest will instead be
applied by Administrative Agent as a prepayment of the principal outstanding
under the Promissory Note or on account of any other Obligations, and (ii) if no
such principal amount or Obligations exists, then Administrative Agent or such
Lender will refund the excess amount to Borrower.

 

(c)         In determining whether or not the interest paid or payable under the
Loan Documents exceeds the Highest Lawful Rate, Borrower, Administrative Agent
and Lenders will, to the maximum extent permitted by Law, (i) characterize any
non principal payment as an expense, fee or premium rather than as interest,
(ii) exclude voluntary prepayments and the effects of them, (iii) amortize,
prorate, allocate and spread the total amount of interest actually paid
throughout the full term of the indebtedness so that the actual rate of interest
does not exceed the Highest Lawful Rate, and (iv) allocate interest between
portions of the Obligations so that no portion will bear interest at a rate
greater than that permitted by Law.

 

Section 12.11      Limited Power of Attorney.  Borrower grants to Administrative
Agent a power of attorney for the purpose of executing on behalf of Borrower,
whenever an Event of Default exists, documents related to the enforcement of
Administrative Agent’s rights and remedies under the Loan Documents, including
to the execution of any document to be filed with or approved by any
Governmental Authority in connection with a foreclosure on any of the
Collateral.  This power of attorney is a right coupled with an interest and will
be irrevocable for as long as any of the Obligations remain outstanding.

72

 

 

Section 12.12    Severability.  If any provision of this Agreement is determined
by the final, non-appealable judgment of a court of competent jurisdiction to be
invalid, illegal or unenforceable, it will not impair, invalidate or nullify the
remainder of this Agreement.

 

Section 12.13   Defined Terms; Interpretation, Etc.

 

(a)    Defined Terms.  Capitalized terms used but not defined elsewhere in this
Agreement are defined in Appendix A.

 

(b)    Exhibits and Schedules.  All exhibits, appendices and schedules attached
to this Agreement are part of this Agreement for all purposes.

 

(c)    References to Documents.  Unless the context otherwise requires or unless
this Agreement otherwise provides, references in this Agreement to a particular
document also refer to and include all amendments and restatements of that
document.  The previous sentence will not, however, be construed to authorize
any amendment or restatement.

 

(d)   Exhibits and Schedules.  References in this Agreement to exhibits,
appendices, schedules, articles, sections, subsections and other subdivisions
refer to the exhibits, appendices, schedules, articles, sections, subsections
and other subdivisions of this Agreement unless this Agreement provides
otherwise.

 

(e)    Headings and Titles.  Headings and titles appearing throughout this
Agreement are for convenience only, do not constitute any part of the provisions
of this Agreement, and are to be disregarded when construing the terms and
conditions of this Agreement.

 

(f)     Interpretation.  The words “this Agreement,” “herein” and words of
similar import refer to this Agreement as a whole and not to any particular
subdivision unless the context otherwise requires; “this section,” “this
subsection” and similar phrases refer only to the sections or subsections of
this Agreement in which those phrases occur; the word “or” is not exclusive; the
word “including” (in its various forms) means “including without limitation;”
and the word “will” has the same meaning and effect as “shall.”  In determining
any time period, the word “from” means “from and including;” and the word “to”
means “to and including.”  Pronouns in masculine, feminine and neuter genders
include any other gender; words in the singular form include the plural and vice
versa.  Unless the context requires otherwise, references to any Person include
that Person’s successors and permitted assigns.

 

(g)    Knowledge.  Where any statement is made “to Borrower’s knowledge,” it is
made to the best of Borrower’s knowledge, after making due inquiry to those
Persons within Borrower’s organization and among Borrower’s consultants and
contractors who are believed to be best situated to have information bearing on
the statement made.

73

 

 

(h)   Joint Drafting.  Borrower acknowledges that it and its legal counsel have
actively participated in the drafting and negotiation of the Loan Documents and,
as such, each of the Loan Documents will be construed as having been jointly
drafted by Borrower, Administrative Agent and Lenders.

 

(i)     Accounting Terms.  All accounting terms used herein shall be
interpreted, and all financial statements and certificates and reports as to
financial matters required to be delivered to Administrative Agent hereunder
shall be prepared, in accordance with GAAP applied on a basis consistent with
those used in the preparation of the latest financial statements furnished to
Administrative Agent hereunder.  All calculations made for the purposes of
determining compliance with this Agreement shall be made by application of GAAP
applied on a basis consistent with those used in the preparation of the annual
or quarterly financial statements furnished to Administrative Agent pursuant to
Section 4.2 most recently delivered prior to or concurrently with such
calculations (or, prior to the delivery of the first financial statements under
Section 4.2, used in the preparation of the financial statements delivered to
Administrative Agent prior to Closing).

 

Section 12.14      This Agreement Controls if Terms Conflict.  In the event of a
conflict between the terms of this Agreement and any other Loan Document, the
terms of this Agreement will control.

 

Section 12.15     Counterpart Execution.  This Agreement may be executed
simultaneously in one or more counterparts, each of which will be deemed an
original, but all of which together will constitute one and the same
instrument.  Delivery of an executed counterpart signature page of this
Agreement by facsimile or electronic transmission is as effective as executing
and delivering this Agreement in the presence of the other parties to this
Agreement.

 

Section 12.16      Acknowledgment of Exculpatory Provisions.  Borrower
acknowledges that it (a) has had the benefit of independent legal counsel of its
choosing in connection with the drafting and negotiation of the Loan Documents,
(b) has consulted (or had ample opportunity to consult) with its legal counsel
with respect to all of the Loan Documents prior to Closing, (c) has a duty to
read—and has in fact read—each of the Loan Documents prior to executing them at
Closing, (d) is fully informed and has notice of all of the terms and conditions
of the Loan Documents.  Borrower further acknowledges that the Loan Documents
obligate Borrower to assume liability for and indemnify Administrative Agent,
Lenders and other Persons against certain liabilities—including, in some
instances, liabilities that arise from the negligence of Administrative Agent,
Lenders and/or those other Persons.  Borrower agrees that it will not contest
the validity or enforceability of any exculpatory provision in this Agreement or
the other Loan Documents on the basis that it had no notice or knowledge of the
provision or that the provision is not “conspicuous.”

 

Section 12.17     Final Agreement.  The Loan Documents and the exhibits,
schedules and annexes attached to them constitute the final, entire agreement
among the parties and supersede all prior or contemporaneous proposals,
commitments, promises, agreements and understandings (in each instance, whether
oral or written) between the parties with respect to the subject matter of this
Agreement and the other Loan Documents, all of which are merged into and
replaced by the Loan Documents.

74

 

 

The Loan Documents cannot be contradicted by evidence of any prior,
contemporaneous or subsequent oral agreement between the parties.

 

There are no unwritten oral agreements between the parties.

 

• Signatures Begin on the Following Page •

 

75

 

 

 

IN WITNESS WHEREOF, the undersigned has caused this Agreement to be executed by
its duly authorized undersigned officer effective as of the date first written
above.

 

  Borrower:         Voyager Oil & Gas, Inc.,   a Montana corporation            
  By: /s/ J.R. Reger     James Russell (J.R.) Reger     Chief Executive Officer

 

Signature Page to Credit Agreement

 

 

 

 

 

 

IN WITNESS WHEREOF, the undersigned has caused this Agreement to be executed by
its duly authorized undersigned representatives effective as of the date first
written above.

 

  Administrative Agent and a Lender:         Macquarie Bank Limited,   a bank
incorporated under the laws of Australia               By: /s/ Katie Choi  
Name: Katie Choi   Title: Division Director, Macquarie Bank Limited            
  By: /s/ Robert McRobbie   Name: Robert McRobbie   Title: Division Director,
Legal Risk Management               Macquarie POA No. 594/10 dated 25 November
2010, expiring 30 November 2012, signed in Sydney        

 

 

Signature Page to Credit Agreement

 

 

 

  

 

Appendix A

 

Definitions

 

“Acceptable Bank” means:

 

(a)           a financial institution that has a rating for its long-term
unsecured and non credit-enhanced debt obligations of A or higher by Standard &
Poor’s Rating Services, A or higher by Fitch Ratings Ltd., or A-2 or higher by
Moody’s Investor Services Limited (an “’A’ Equivalent Rating”); or

 

(b)     any other financial institution Approved by Administrative Agent in its
reasonable discretion.

 

“Action” is defined in Section 3.10.

 

“Advance” means an advance of funds under the Loan.

 

“Advance Fee” is defined in Section 1.13(b).

 

“Advance Request” means a written request for an Advance substantially in the
form of Exhibit C together with all supporting documentation required by this
Agreement.

 

“AFE” means an authorization for expenditure representing an estimate of work to
be performed for a specific drilling, completion or other operation.

 

“Affiliate” means as to any Person (a) any other Person who directly or
indirectly controls, is under common control with, or is controlled by that
Person; (b) any director or officer of that Person or of any Person referred to
in clause (a); or (c) if any Person in clause (a) is an individual, any member
of her immediate family (including parents, spouse and children), any trust
whose principal beneficiary is the individual or one or more members of his
immediate family, and any Person who is controlled by any such family member or
trust.  As used in this definition, “control” (including, with its correlative
meanings, “controlled by” and “under common control with”) means possession,
directly or indirectly, of power to direct or cause the direction of management
or policies (whether through ownership of Equity Interests, by contract or
otherwise); but any Subsidiary of Borrower is an Affiliate of Borrower.  For the
avoidance of doubt, neither (x) MBL nor any of its Affiliates will be deemed to
be an Affiliate of Borrower.

 

“Agreement” means this Credit Agreement and includes any amendment,
modification, supplement or restatement.

 

“Applicable Margin” means (a) with respect to a Revolving Loan, the margin set
forth at the appropriate intersection in the table below, based upon the
Borrowing Base Utilization and the type of Loan:

Appendix-1

 

 

 

 

Borrowing Base

Utilization

LIBOR Loan Base Rate Loan ≥.75 3.25% 2.25% ≥.50 and <.75 3.00% 2.00% <.50 2.75%
1.75%

and (b) with respect to a Term Loan seven and one-half percent (7.5%).

 

“Approval” and “Consent” mean, with respect to any consent or approval sought by
Borrower and given by Administrative Agent, the writings executed by
Administrative Agent that (a) authorize Borrower to take the action for which
the consent or approval is sought and (b) set forth the conditions, if any, upon
which the consent or approval is given by Administrative Agent.  “Approve” and
“Approved” have the correlative meaning.

 

“Approved Marketing Contract” is defined in Section 3.41.

 

“Authorized Officer” is defined in Section 4.3.

 

“Availability Termination Date” means (a) with respect to the Revolving Loan,
the Maturity Date and (b) with respect to the Term Loan [insert date that is
exactly 30 months after Closing].

 

“Bankruptcy Code” means Title 11 of the United States Code as amended from time
to time, and any successor statute and all rules and regulations promulgated
thereunder.

 

“Base Rate Loan” is defined in Section 1.7(c).

 

“Basic Documents” includes all agreements necessary or convenient to the
ownership and operation of the Properties, including all Leases; Operating
Agreements; Hydrocarbon purchase, sales, exchange, processing, gathering,
treatment, compression and transportation agreements; farm-out or farm-in
agreements; pooling or unitization agreements; joint venture, exploration,
limited or general partnership, dry hole, bottom hole, acreage contribution,
purchase and acquisition agreements; area of mutual interest agreements; salt
water disposal agreements; servicing contracts; and easements, surface leases,
permits, licenses, rights-of-way, servitudes, or other similar interests; in
each instance, to the extent it relates to the Properties or the Hydrocarbons
produced from the Properties.

 

“Board” is defined in Section 3.28 of this Agreement.

 

“Borrowing Base” means, subject to the Revolving Loan Note Amount, the loan
amount for the Revolving Loan, as determined by Administrative Agent from time
to time in accordance with Section 1.2(b).

Appendix-2

 

 

“Borrowing Base Deficiency” means, and occurs when, the amount by which the
outstanding principal amount of the Revolving Loan, together with accrued and
unpaid interest, exceeds the Borrowing Base in effect at such time, whether as
the result of a redetermination, a scheduled reduction, or otherwise.

 

“Borrowing Base Utilization” means at any time, an amount equal to the quotient
of (a) the aggregate principal amount of the Revolving Loan then outstanding,
divided by (b) the Borrowing Base then in effect.

 

“Borrower” is defined in the first paragraph of this Agreement.

 

“Breakage Costs” includes all costs, expenses and losses incurred by any Lender
that result from any prepayment of a LIBOR Loan on a day prior to the day on
which the applicable Interest Period ends (whether voluntary, mandatory,
automatic, by reason of acceleration, or otherwise), including any cost, expense
or loss arising from the liquidation or reemployment of funds obtained by such
Lender to maintain that Loan or from fees payable to terminate the deposits from
which those funds were obtained.

 

“Business Day” means (a) any day other than a day on which commercial banks are
authorized or required to close in Houston, Texas, or Sydney, Australia, and (b)
if such day relates to the making of any Advance by Lenders, the making of any
payment or prepayment by Borrower or the continuation of any Interest Period, in
each case with respect to a LIBOR Loan any day that is both (i) a “Business Day”
under the preceding clause (a) and (ii) a day on which dealings in Dollar
deposits are carried out in the London interbank market.

 

“Capital Leases” means all leases that have been, or should have been, in
accordance with GAAP, recorded as capital leases on the balance sheet of the
Person that is liable (whether contingent or otherwise) for the payment of rent
under those leases.

 

“Cash Equivalents” means at any time:

 

(a)   certificates of deposit, time deposits, Eurodollar time deposits or
overnight bank deposits maturing within one year after the relevant date of
calculation and issued by an Acceptable Bank;

 

(b)    any investment in marketable debt obligations issued or guaranteed by the
government of the United States of America (or any of its instrumentalities or
agencies having an equivalent credit rating) maturing within one year after the
relevant date of calculation and not convertible into or exchangeable for any
other security;

 

(c)   commercial paper that is not convertible into or exchangeable for any
other security and that (i) trades on a recognized market, (ii) matures within
one year after the relevant date of calculation, and (iii) has a credit rating
of either A-1 or higher by Standard & Poor’s Rating Services or F-1 or higher by
Fitch Ratings Ltd or P-1 or higher by Moody’s Investor Services Limited (an
“’A-1’ Equivalent Rating”), or, if no rating is available in respect of the
commercial paper, the issuer of which has, in respect of its long-term unsecured
and non-credit enhanced debt obligations, an equivalent rating;

Appendix-3

 

 

(d)   any investment in money market funds that (i) have an ‘A-1’ Equivalent
Rating, (ii) invest substantially all of their assets in securities of the types
described in paragraphs (a)–(c), and (iii) can be converted into cash on not
more than 30 days notice.

 

“Cause” means, when any Person is obligated to cause another Person to take or
refrain from taking any action, (a) that such Person in fact causes its
Affiliates to take or refrain from taking the specified action, or (b) that such
Person uses all commercially reasonable efforts to cause any non-Affiliate to
take or refrain from taking the specified action, as applicable.

 

“CERCLA” means the Comprehensive Environmental Response, Compensation and
Liability Act of 1980, as amended.

 

“Change of Control” means the occurrence of any event pursuant to which:

 

(a)    any Person who is not an Affiliate (either alone or jointly with any
other Person) acquires control of Borrower, or Borrower becomes a Subsidiary of
any such Person, or any such Person or group of Persons acting in concert to
gain direct or indirect control of Borrower succeeds in gaining direct or
indirect control of Borrower, in a transaction not approved by the Continuing
Directors or members, as applicable; for purposes of this definition, control
means:

 

(i)    the power (whether by way of ownership of shares, proxy, contract, agency
or otherwise) to:

 

(A)    cast, or control the casting of, more than thirty-five percent (35%) of
the maximum number of votes that might be cast at a general meeting of Borrower,
as applicable; or

 

(B)     appoint or remove all, or the majority, of the directors or other
equivalent officers of Borrower; or

 

(C)    give directions with respect to the operating and financial policies of
Borrower with which the directors or other equivalent officers of Borrower are
obliged to comply.

 

(ii)    the holding beneficially of more than thirty-five percent (35%) of the
issued share capital of; and

 

(iii)     “acting in concert” means, a group of Persons who, pursuant to an
agreement or understanding (whether formal or informal), actively co-operate,
through the acquisition of shares directly or indirectly in Borrower by any of
them, either directly or indirectly, to obtain or consolidate control of
Borrower;

 

(b)    Either J.R. Reger or Mitch Thompson cease to be materially involved in
the management of the Borrower and the development of the Properties or either
resign or are removed as Chief Executive Officer and Chief Financial Officer,
respectively, of Borrower and a replacement reasonably acceptable to the
Administrative Agent is not identified to Administrative Agent within ninety
(90) days of such removal or resignation and is not employed by Borrower within
an additional thirty (30) days after such identification.

Appendix-4

 

 

“Charter Documents” means, as applicable for any Person that is not an
individual, the articles or certificate of incorporation or formation, company
agreement, certificate of limited partnership, regulations, bylaws, partnership
or limited partnership agreement, and all similar documents related to the
formation and governance of that Person, together with all amendments to any of
those documents.

 

“Claims” is defined in Section 7.4.

 

“Closing” is defined in Section 8.1.

 

“Closing Date” is defined in Section 8.1.

 

“Collateral” means all of the Properties.

 

“Commitment Fee” is defined in Section 1.13(a).

 

“Commitment Termination Date” means the earlier of (a) the Maturity Date and (b)
the termination in whole of Lenders’ commitments to provide the Loan hereunder
pursuant to Section 1.2(d).

 

“Continuation Notice” is defined in Section 1.7(e).

 

“Continuing Directors” means (a) any member of the board of directors who was a
director (or comparable manager) of Borrower on the Closing Date, and (b) any
individual who becomes a member of the board of directors after the Closing Date
if such individual was recommended, appointed or nominated for election to the
board of directors by a majority of the continuing directors, but excluding any
such individual originally proposed for election in opposition to the board of
directors in office at the Closing Date in an actual or threatened election
contest relating to the election of the directors (or comparable managers) of
Borrower and whose initial assumption of office resulted from such contest or
the settlement thereof.

 

“Contract Rate” means (a) with respect to a Term Loan, a rate per annum equal to
the lesser of (i) the LIBOR Rate plus the Applicable Margin, and (ii) the
Highest Lawful Rate, and (b) with respect to a Revolving Loan, a rate per annum
equal to (i) the lesser of (A) Prime Rate plus the Applicable Margin and (B) the
Highest Lawful Rate or (ii) the lesser of (A) the LIBOR Rate plus the Applicable
Margin, and (B) the Highest Lawful Rate, as selected by Borrower in the Advance
Request or in accordance with Section 1.7(c).

 

“COPAS” means the Accounting Procedures for Joint Operations Recommended by the
Council of Petroleum Accountants Societies, then in effect, with respect to
onshore or offshore operations, as applicable, and as applied to properties
located in the same geographical area as the Leases.

 

“Crude Oil” means all crude oil, condensate and other liquid hydrocarbon
substances.

Appendix-5

 

 

“Curative Equity” is defined in Section 5.20(d).

 

“Current Assets” means on any date of determination, the consolidated current
assets that would, in accordance with GAAP, be classified as of that date as
current assets, including any amounts under the Loan which are committed
hereunder, but not yet funded by Lenders, less any non-cash amount required to
be included in current assets as the result of the application of GAAP,
including non-cash commodity and interest rate hedges assets and liabilities.

 

“Current Liabilities” means, on any date of determination, the consolidated
obligations that would, in accordance with GAAP, be classified as of that date
as current liabilities, excluding (a) non-cash obligations under GAAP including
non-cash commodity and interest rate hedges assets and liabilities, and (b) the
current portion of long-term Debt (including the long-term Debt arising under
this Agreement).

 

“Current Ratio” means, as of any date, the ratio of (i) Borrower’s Current
Assets to (ii) Borrower’s Current Liabilities on that date.

 

“Debt” means, for any Person, the sum of all of the following (without
duplication):

 

(a)   obligations for borrowed money or evidenced by bonds, bankers’
acceptances, debentures, notes or other similar instruments;

 

(b)   obligations (whether contingent or otherwise) in respect of letters of
credit, surety or other bonds and similar instruments;

 

(c)   obligations to pay for goods or services and other accounts payable,
including all accrued expenses, liabilities or other obligations to pay the
deferred purchase price of goods or services;

 

(d)   Capital Lease obligations that are required to be recorded as a balance
sheet liability under GAAP;

 

(e)   Synthetic Lease obligations;

 

(f)   obligations or undertakings to maintain (or cause another Person to
maintain) the financial position or covenants of another Person or to purchase
the Debt or property of another Person;

 

(g)  obligations to deliver any commodities, goods, or services in consideration
of one or more advance payments except for Natural Gas balancing arrangements in
the ordinary course of business;

 

(h)    Disqualified Capital Stock;

 

(i)    the undischarged balance of any production payment created by that Person
or pursuant to which that Person received any direct or indirect payment;

Appendix-6

 

 

(j)   other monetary obligations (including obligations of another Person) for
which that Person is or becomes directly or indirectly liable or that are or
become secured by any of the Collateral, even if that obligation is not
considered to be a liability of that Person under GAAP.

 

“Debt Coverage Ratio” means, as of the last day of any fiscal quarter, the ratio
of (i) Borrower’s Debt to (ii) Borrower’s EBITDA for the four (4) most recent
fiscal quarters occurring in whole or in part after the Debt Coverage Ratio
Commencement Date; provided that (x) for the first fiscal quarter after the Debt
Coverage Ratio Commencement Date, the Debt Coverage Ratio will be calculated
using Borrowers’ EBITDA for that first fiscal quarter multiplied by four; (y)
for the second fiscal quarter after the Debt Coverage Ratio Commencement Date,
the Debt Coverage Ratio will be calculated using Borrowers’ aggregate EBITDA for
those first two fiscal quarters multiplied by two; and (z) for the third fiscal
quarter after the Debt Coverage Ratio Commencement Date, the Debt Coverage Ratio
will be calculated using Borrowers’ aggregate EBITDA for those first three
fiscal quarters multiplied by one and one-third (1.33).

 

“Debt Coverage Ratio Commencement Date” is defined in Section 5.20(b).

 

“Debtor Relief Laws” means the Bankruptcy Code and all other applicable
liquidation, conservatorship, bankruptcy, insolvency, rearrangement, moratorium,
reorganization, fraudulent transfer or conveyance or similar debtor relief laws
affecting the rights of creditors generally from time to time in effect.

 

“Default” means the occurrence of any event which, with the passing of time or
the giving of notice or both, will become an Event of Default.

 

“Default Rate” is defined in Section 1.7(a).

 

“Defaulting Lender” means any Lender that (a) has failed to fund any portion of
the Loan it is required to fund under this Agreement within one Business Day of
the date such funding is required, (b) has otherwise failed or notified Borrower
or Administrative Agent in writing or has made a public statement to the effect
that it does not intend or expect to pay over to Administrative Agent or any
other Lender any other amount required to be paid by it under this Agreement or
any other Loan Document within one Business Day of the date when due, or (c) has
become insolvent or become the subject of a bankruptcy or insolvency proceeding
under any Debtor Relief Law.

 

“Defensible Title” means, with respect to each Property, title that:

 

(a)           entitles the owner to receive (free and clear of all royalties,
overriding royalties and net profits interests or other burdens on or measured
by the production of Hydrocarbons, without regard to whether such interest
appears of record) not less than the Net Revenue Interest set forth on Exhibit A
(or in such other certificate or writing provided to Administrative Agent
representing the interests in the Properties, including any Mortgage) in all
Hydrocarbons produced, saved and marketed from the Property for the productive
life of the Property, free and clear of all Liens except (i) the Permitted
Encumbrances, and (ii) Liens in favor of Administrative Agent to secure the
Obligations; and

Appendix-7

 

 

(b)   obligates the owner to bear costs and expenses relating to the
maintenance, development and operation of such Property in an amount not greater
than the Working Interest set forth on Exhibit A for the productive life of such
Property.

 

“Deposit Account Control Agreement” means Deposit Account Control Agreement(s)
among Borrower, Administrative Agent and the depository bank(s) in form and
substance reasonably acceptable to Administrative Agent and covering the deposit
accounts set forth in Schedule 3.42.

 

“Development Plan” means the comprehensive plan or plans in effect from time to
time with respect to the development of the Properties and any other
expenditures that have been Approved (not to be unreasonably withheld or
delayed) by Administrative Agent.  A Development Plan shall provide for, among
other things, the location, timing and estimated costs of Wells to be drilled or
recompleted as well as names of key personnel known to Borrower to be required
to undertake those operations and their associated responsibilities.

 

“Disqualified Capital Stock” means any Equity Interest that, by its terms (or by
the terms of any security into which it is convertible or for which it is
exchangeable) or upon the happening of any event (a) requires the issuer to make
any payments to the holder, (b) is redeemable for cash or other consideration,
or (c) is convertible or exchangeable into any other instrument except other
Equity Interests that are not also Disqualified Capital Stock, prior to the
first anniversary of the Maturity Date.

 

“EBITDA” means for Borrower for any period, the consolidated (a) net income, in
accordance with GAAP for such period plus (b) to the extent deducted in
determining net income for such period, interest expense, income Taxes, non-cash
stock-based compensation expense, non-cash accretion of asset retirement
obligations and non-cash depreciation and amortization expense for such period,
minus (c) non-cash mark-to-market unrealized income and plus (d) non-cash
mark-to-market unrealized expense added to net income for such period.  EBITDA
shall be calculated without including non-cash mark-to-market adjustments
arising from the application of FASB Statement 133 or FASB Statement 143 (or any
successor GAAP which serves to amend, supplement or replace FASB Statements 133
and 143).

 

“Employee Plan” means an employee pension benefit plan covered by Title IV of
ERISA.

 

“Engineers” means an independent reservoir petroleum engineering firm selected
by Borrower and Approved by Administrative Agent, such approval not to be
unreasonably withheld or delayed.

 

“EHS Regulations” means all applicable federal, state or local Laws with respect
to any environmental, pollution, toxic or hazardous waste or health and safety
law, including those promulgated by the United States Environmental Protection
Agency, the Federal Energy Regulatory Commission, the Department of Energy, the
Occupational Safety and Health Administration, the Department of the Interior,
or any other Governmental Authority, or any of their predecessor or successor
agencies.

Appendix-8

 

 

“Environmental Laws” shall mean any and all Laws and EHS Regulations pertaining
to health or the environment in effect in any and all jurisdictions in which
Borrower is conducting or at any time has conducted business, or where any
Property is located, including, the OPA, CERCLA, RCRA, the Safe Drinking Water
Act, as amended, the Toxic Substances Control Act, as amended, the Superfund
Amendments and Reauthorization Act of 1986, as amended, the Hazardous Materials
Transportation Act, as amended, and other environmental conservation or
protection laws.  The term “oil” shall have the meaning specified in OPA, the
term “hazardous substance” has the meaning specified in CERCLA, and the terms
“solid waste” and “disposal” (or “disposed”) have the meanings specified in
RCRA; but (a) in the event either OPA, CERCLA or RCRA is amended so as to
broaden the meaning of any term defined thereby, such broader meaning shall
apply subsequent to the effective date of such amendment and (b) to the extent
the laws of the state in which any Property is located establish a meaning for
“oil,” “hazardous substance,” “solid waste” or “disposal” which is broader than
that specified in either OPA, CERCLA or RCRA, such broader meaning shall apply
to those issues covered by the applicable state laws.

 

“Equipment” has the meaning given to it in the UCC and includes all surface or
subsurface machinery, goods, equipment, fixtures, facilities, supplies or other
personal or moveable property of any kind (excluding property rented by Borrower
or taken to the premises for temporary uses) now owned or later acquired by
Borrower that are at any time located on or under any of the lands attributable
to the Properties and that are used in connection with the production,
gathering, treatment, processing, storage or transportation of Hydrocarbons and
whether or not attributable to the Properties, including (a) all Wells, casing,
tubing, tubular goods, rods, pumping units and engines, Christmas trees,
platforms, derricks, separators, compressors, gun barrels, flow lines, water
injection lines, tanks, gas systems (for gathering, treating and compression),
pipelines (including gathering lines, laterals and trunklines), chemicals,
solutions, water systems (for treating, disposal and injection), power plants,
poles, lines, transformers, starters and controllers, machine shops, tools,
storage yards and equipment stored therein, telegraph, telephone and other
communication systems, loading docks, loading racks, shipping facilities,
platforms, well equipment, wellhead valves, meters, motors, pumps, tankage,
regulators, furniture, fixtures, automotive equipment, forklifts, storage and
handling equipment, (b) all accessions, additions, attachments, replacements,
accessories and parts, (c) all manuals, blueprints, documentation, warranties
and other similar rights against suppliers, manufacturers and other Persons, and
(d) to the extent not prohibited by written agreement between Borrower and any
other Person, all seismic data, geological data and geophysical data and all
analyses and interpretations of any of them.

 

“Equity Equivalents” means any rights, warrants, options, convertible
securities, exchangeable securities, indebtedness or other rights issued by a
Person that are exercisable for or convertible or exchangeable into, directly or
indirectly, Equity Interests of that Person, even if the right to exercise,
convert or exchange is conditioned upon the passage of time or the occurrence of
some future event.

Appendix-9

 

 

“Equity Interests” means shares of capital stock, partnership interests,
membership interests in a limited liability company, beneficial interests in a
trust or other equity ownership interests in a Person, and any Equity
Equivalents of that Person.

 

“ERISA” means the Employee Retirement Income Security Act of 1974, as amended,
and related rules and regulations.

 

“Event of Default” is defined in Section 9.1.

 

“Excluded Taxes” means, with respect to Administrative Agent or any Lender:
(a)  income, branch profits or franchise Taxes imposed on (or measured by) net
income and any similar Tax imposed on it in lieu of net income, net worth Taxes,
capital Taxes, Taxes on Loans or liabilities or any similar Taxes, in each case
by any jurisdiction, or as a result of a present or former connection between
such Borrower and the jurisdiction imposing such Tax or any political
subdivision or taxing authority thereof (other than any such connection arising
solely from such recipient having executed, delivered or performed its
obligations or received any payment under, or enforced, this Agreement or any
other Loan Document), (b) any U.S. Federal withholding Taxes resulting from any
law in effect on the date such Lender or Administrative Agent becomes a party to
this Agreement (or designates a new lending office) or is attributable to such
Lender or Administrative Agent’s failure to comply with Section 1.14(d), except
to the extent that such Lender or Administrative agent (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 Taxes pursuant to Section 1.14(d), (c) any Taxes payable under
FATCA, and (d) all related interest, penalties, fines and additions to tax now
or hereafter imposed under clauses (a) and (b).

 

“Facility Termination Date” means the earliest of (i) the Maturity Date, (ii)
the date on which all of Obligations under the Loan Documents are Indefeasibly
paid in full in cash (other than indemnity obligations and similar obligations
that survive the termination of this Agreement) and Lenders have no further
obligation to make any Advance, or (iii) the date on which Administrative Agent
notifies Borrower of the acceleration of Obligations under this Agreement
following an Event of Default.

 

“FATCA” means Sections 1471 through 1474 of the Internal Revenue Code of 1986,
as amended, as of the date of this Agreement and any regulations or official
interpretations thereof.

 

“Financial Accounting Standards Board” or “FASB” means the board by this name
(or its successor) recognized by the United States Securities and Exchange
Commission.

 

“First Reserve Report Date” means December 31, 2011.

 

“G&A Expenses” means the actual general and administrative expenses of Borrower
including capitalized general and administrative expenses, calculated in
accordance with GAAP, but excluding non-cash compensation, audit fees associated
with Annual Financial Statements and fees associated with any Reserve Report.

Appendix-10

 

 

“GAAP” means generally accepted accounting principles recognized as such by the
FASB consistently applied and maintained throughout the period indicated and
consistent with all Laws, except for changes mandated by the FASB or any similar
accounting authority of comparable standing.  If a change in any accounting
principle or practice is required by FASB in order for that principle or
practice to continue as a generally accepted principle or practice, all
financial reports or statements required under this Agreement may be prepared in
accordance with that change, but all calculations and determinations to be made
under this Agreement may be made in accordance with that change only if Borrower
and Administrative Agent agree to do so.  Accounting terms used but not defined
in this Agreement have the meanings given to them by GAAP.

 

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

 

“Hazardous Materials” means and include (i) all elements or compounds that are
contained in the list of hazardous substances adopted by the United States
Environmental Protection Agency and the list of toxic pollutants designated by
the United States Congress or the Environmental Protection Agency or under any
Hazardous Substance Laws (as hereinafter defined), and (ii) any “hazardous
waste,” “hazardous substance,” “toxic substance,” “regulated substance,”
“pollutant” or “contaminant” as defined under any Hazardous Substance Laws.

 

“Hazardous Substance Laws” means CERCLA, RCRA, the Federal Water Pollution
Control Act, as amended, 33 U.S.C. 1251 et seq., the Toxic Substances Control
Act, 15 U.S.C. 2601 et seq., the Hazardous Liquid Pipeline Safety Act of 1979,
as amended, 40 U.S.C. 2001 et seq., the Federal Insecticide, Fungicide, and
Rodenticide Act, 7 U.S.C. 136 et seq., the Federal Clean Air Act, 42 U.S.C. 7401
et seq., any so called federal, state or local “superfund” or “super lien”
statute, and any other applicable federal, state or local law, rule, regulation
or ordinance related to the remediation, clean up or reporting of environmental
pollution or contamination or imposing liability (including strict liability) or
standards of conduct concerning any Hazardous Materials.

 

“Hedging Agreement” means:

 

(a)    all rate swap transactions, basis swaps, credit derivative transactions,
forward rate transactions, commodity swaps, commodity options, forward commodity
contracts, equity or equity index options, swaps or options, bond or bond price
or bond index swaps or options or forward bond or forward bond price or forward
bond index transactions, interest rate options, forward foreign exchange
transactions, cap transactions, floor transactions, collar transactions,
currency swap transactions, cross-currency rate swap transactions, currency
options, spot contracts or any other similar transactions (including any option
to enter into any of the foregoing), whether or not the transaction is governed
by a Master Agreement (as defined in paragraph (b)), and including the Swap
Agreement; and

Appendix-11

 

 

(b)   all transactions and related confirmations that are governed by or are
subject to the terms and conditions of any form of master agreement published by
the International Swaps and Derivatives Association, Inc. or any International
Foreign Exchange Master Agreement (each, with its schedules, being a “Master
Agreement”).

 

“Highest Lawful Rate” means the maximum non-usurious interest rate, if any, that
any Lender is allowed by any current or future Law to contract for, take,
reserve, charge or receive in respect of the Obligations.

 

“Hydrocarbons” means all Crude Oil and Natural Gas.

 

“Implementation Documents” is defined in Section 7.1(a)

 

“Indefeasibly” means, with respect to the repayment of Borrower’s monetary
Obligations, receipt by Administrative Agent of immediately available funds
equal to the total monetary Obligations then outstanding, without prejudice to
any right that Administrative Agent or any Lender may at any time have to seek
to reassert or reinstate any Lien following the defeasance, disgorgement or
forfeiture of any amount received by Administrative Agent or any Lender in
respect of the Obligations.

 

“Indemnified Party” is defined in Section 7.4(a).

 

“Interest Coverage Ratio” means, as of any date, the ratio of (a Borrower’s
EBITDA for the four (4) most recent fiscal quarters occurring in whole or in
part after the Debt Coverage Ratio Commencement Date; provided that (i) for the
first fiscal quarter after the Debt Coverage Ratio Commencement Date, the Debt
Coverage Ratio will be calculated using Borrowers’ EBITDA for that first fiscal
quarter multiplied by four; (ii) for the second fiscal quarter after the Debt
Coverage Ratio Commencement Date, the Debt Coverage Ratio will be calculated
using Borrowers’ aggregate EBITDA for those first two fiscal quarters multiplied
by two; and (iii) for the third fiscal quarter after the Debt Coverage Ratio
Commencement Date, the Debt Coverage Ratio will be calculated using Borrowers’
aggregate EBITDA for those first three fiscal quarters multiplied by one and
one-third (1.33) to (b) Borrower’s aggregate interest expense for all Debt
(including Debt under this Agreement) for the same period.

 

“Interest Period” means:

 

(a)   with respect to a Base Rate Loan or a LIBOR Loan pursuant to Section
1.7(c), the period commencing on the date of the Advance and ending on the last
Business Day of the month in which the Advance is made; and

 

(b)    with respect to each continuing Advance of a LIBOR Loan, the period
commencing on the date of the Advance and ending on the date that is 30, 60, or
90 days thereafter, as selected by Borrower in a Selection Notice;

 

provided, that

 

(x)    any Interest Period that would otherwise expire on a day that is not a
Business Day will be extended to the next succeeding Business Day unless that
next Business Day falls in another calendar month, in which case the expiring
Interest Period will end on the last Business Day of the month of expiry;

Appendix-12

 

 

(y)   any Interest Period that begins on the last Business Day of a calendar
month (or on a day for which there is no numerically corresponding day in the
expiry month) will end on the last Business Day of the month of expiry; and

 

(z)   no Interest Period will extend beyond the Maturity Date.

 

“Investment” means, with respect to any Person: (a) the acquisition of (or
agreement to acquire) any Equity Interests in another Person (including any
“short sale” or sale of any securities when those securities are not owned by
the Person entering into the short sale); (b) the making of any deposit with
another Person (but excluding amounts collected in the Project Account or in a
deposit account where Borrower, Administrative Agent and the related depository
bank have entered into a Deposit Account Control Agreement with respect to such
account); (c) the making of any advance, loan or other extension of credit to
another Person (including the purchase of property from that other Person with
an understanding or agreement, contingent or otherwise, to resell the property
to that Person (but excluding any advance, loan or extension of credit with a
term not exceeding 90 days and arising in connection with the sale of
Hydrocarbons, inventory or supplies in the ordinary course of business); or (d)
agreeing to guaranty, provide collateral or incur any other contingent
obligation in respect of a Debt of another Person.

 

“Law” means any current or future law, statute, code, ordinance, order,
determination, rule, regulation, judgment, decree, injunction, franchise,
permit, certificate, license, authorization or other directive or requirement
enacted, promulgated, adopted or imposed by any Governmental Authority.

 

“Lease” or “Leases” means, whether one or more, (i) the oil and gas leases,
mineral estates and other mineral rights and interests described on Exhibit A,
and any other interests in the Leases or any other lease of real property,
whether now owned or later acquired, and (ii) all other oil, gas and/or mineral
leases or other interests pertaining to the Properties, whether now owned or
later acquired, and that are at any time made subject to a Lien in favor of
Administrative Agent, together with all extensions, renewals, replacements,
corrections, modifications, elections or amendments to any of them.

 

“Lenders” means the Persons listed on Appendix B, any Person that shall have
become a party hereto pursuant to Section 12.1, other than any such Person that
ceases to be a party hereto pursuant to Section 12.1.

 

“LIBOR Loan” is defined in Section 1.7(c).

 

“LIBOR Rate” means, in respect of an Interest Period and the Advance related
thereto:

 

(a)  if not less than two rates are displayed on Reuters page “LIBO” at or
around 11:00 a.m. (London time) on the second Business Day before the first day
of the period for USD loans over the period which is closest to that period, the
arithmetic mean (expressed as a rate per cent per annum and rounded up to five
decimal places) of not less than two of those rates selected by Administrative
Agent; or

Appendix-13

 

 

(b)     if less than two (2) rates for USD loans over that period are displayed
on Reuters page “LIBO” at or around that time, the arithmetic mean (expressed as
a rate per cent per annum and rounded up to five decimal places) of the offer
rates quoted to Administrative Agent by not less than two banks which ordinarily
display rates on Reuters page “LIBO” on application by Administrative Agent for
USD loans equal to that amount over the period equal to that period; or

 

(c)   if Administrative Agent is unable to determine a rate under paragraph (a)
or (b) because an insufficient number of rates are displayed (in the case of
paragraph (a)) or Administrative Agent is unable to obtain the necessary number
of quotes (in the case of paragraph (b)), the rate (expressed as a rate per cent
per annum and rounded up to five decimal places) specified in good faith by
Administrative Agent at or around that time having regard, to the extent
possible, to the offer rates otherwise quoted to Administrative Agent for USD
loans equal to that amount over the period equal to that period at or around
that time.

 

“Lien” means any interest in real or personal property to secure an obligation
owed to, or a claim by, a Person other than the owner of the property, whether
that interest is based on the common law, statute or contract, and whether that
obligation or claim is fixed or contingent, including (a) a lien or security
interest arising from a mortgage, encumbrance, pledge, security agreement,
conditional sale or trust receipt, or a lease, consignment or bailment for
security purposes, (b) production payments and the like payable out of
Hydrocarbons produced from any oil and gas properties, and (c) easements,
servitudes, restrictions, permits, conditions, covenants, exceptions or
reservations. For purposes of this Agreement, Borrower shall be deemed to be the
owner (to the extent of its interest therein) of any real or personal property
that it has acquired or holds subject to a conditional sale agreement, or leases
under a financing lease or other arrangement pursuant to which title to the
property has been retained by or vested in some other Person in a transaction
intended to create a financing.

 

“Loan” means the Revolving Loan and the Term Loan, each as applicable.

 

“Loan Documents” means this Agreement, the Promissory Note, the Security
Documents,  the Swap Agreement, and all other agreements, certificates,
documents, instruments and writings delivered at any time under or in connection
any of those documents (but excluding all term sheets, commitment letters,
correspondence and similar documents used in the negotiation of the Loan
facility except to the extent those documents contain information about Borrower
or its Affiliates, properties, business or prospects).

 

“Market Disruption Notice” is defined in Section 1.7(g).

 

“Material Adverse Effect” means any event or circumstance:

 

(a)  that has a materially adverse effect on:

Appendix-14

 

 

(i)  the business, assets, liabilities or condition (financial or otherwise) of
Borrower; or

 

(ii)     the ability of Borrower to pay and perform its obligations as required
under the Loan Documents; or

 

(b)     that could reasonably be expected to result in any Security Document not
providing to Administrative Agent the Liens and/or security interests in a
material amount of the assets expressed to be secured under that Security
Document.

 

“Material Changes” is defined in Section 11.19.

 

“Maturity Date” means [insert date that is exactly 36 months from Closing].

 

“MBL” is defined in the first paragraph of this Agreement.

 

“Monthly Reporting Package” is defined in Section 4.1.

 

“Mortgage” means a mortgage, deed of trust, assignment of production, security
agreement and financing statement substantially in the form of Exhibit H
pursuant to which any Obligor grants a first and prior Lien in a Property to
Administrative Agent subject only to the Permitted Encumbrances.

 

“Natural Gas” means all natural gas, and any natural gas liquids and all
products recovered in the processing of natural gas (other than condensate)
including natural gasoline, casinghead gas, iso butane, normal butane, propane
and ethane (including such methane allowable in commercial ethane) produced from
or attributable to the Properties.

 

“Net Revenue Interest” means, with respect to any Property, the decimal or
percentage share of Hydrocarbons produced and saved from or allocable to that
Property, after deduction of Royalty Interests and other burdens on or paid out
of such production.

 

“Note Amount” means the sum of the Term Loan Note Amount and the Revolving Loan
Note Amount.

 

“NYMEX” means the New York Mercantile Exchange.

 

“Obligations” include all loans and advances (including the Loan), debts,
liabilities, obligations, covenants, duties and amounts owing or to be owing by
Borrower or any other Obligor to Administrative Agent, Lenders or their
respective Affiliates, including any Swap Counterparty, of any kind or nature,
present or future, whether or not evidenced by any note, guaranty, letter of
credit or other instrument, arising directly or indirectly, under the Loan
Documents (including the Swap Agreement), and all renewals, extensions and/or
rearrangements of any of the foregoing.  The term “Obligations” also includes
all interest, reasonable and documented charges, out-of-pocket expenses, fees of
attorneys and consultants and other sums payable by Borrower, or any other
Obligor under the Loan Documents and all Related Costs.

Appendix-15

 

 

“Obligor” means Borrower and any other Person who is or becomes an obligor with
respect to any portion of the Obligations.

 

“OPA” means the Oil Pollution Act of 1990, as amended.

 

“Operating Agreement” means (a) any joint operating agreements covering or
relating to any one or more of the Properties and set forth on Schedule 3.33,
(b) any other joint operating agreement covering or relating to any one or more
of the Properties executed or adopted by Borrower with Administrative Agent’s
Consent after the date of this Agreement, and (c) any joint operating agreements
covering or relating to any Properties acquired by Borrower after the date
of  this Agreement and which exist before Borrower’s acquisition of the
Property.

 

“Operator” means, with respect to the Properties, Borrower and any other
operators, including contract operators, of the Properties, in each case
Approved (not to be unreasonably withheld or delayed) by Administrative Agent
but such Approval is required only for those Properties where Borrower or any of
its Affiliates is the operator or has the legal right to control the selection
of the operator.  The Operators of each of the Properties as of the date of this
Agreement are identified on Schedule 3.33.

 

“Other Taxes” is defined in Section 1.14(b).

 

“Percentage Share” means, with respect to any Lender, the percentage of the
total commitments represented by such Lender’s commitment as such percentage is
set forth on Appendix B, as modified from time to time to reflect assignments
permitted by Section 12.1.

 

“Permit” means any permit, license, approval and similar authorization given by
or required from any Governmental Authority or other Person.

 

“Permitted Encumbrances” means (a) Liens for property Taxes and assessments or
governmental charges or levies that are either not yet due or, if past due, are
being contested in good faith by appropriate action promptly initiated and
diligently conducted and for which adequate reserves are maintained in
accordance with GAAP; (b) Liens on cash and Cash Equivalents securing the
performance of bids, tenders, trade or government contracts, leases (other than
Capital Leases) or licenses or to secure statutory obligations, surety,
performance or appeal bonds, letters of credit or other similar Liens incurred
in the ordinary course of business and not in connection with the borrowing of
money or the acquisition of property other than oil and gas properties or as
permitted by clause (e) herein; (c) Liens arising as a matter of Law (other than
a Lien imposed by ERISA) in the ordinary course of business or incidental to the
ownership of Properties (including Liens under worker’s compensation, social
security, unemployment insurance and other similar Laws, Liens in favor of
carriers, mechanics, builders, suppliers, materialmen, repairmen, vendors,
warehousemen, architects, attorneys, and Liens arising under an Operating
Agreement in favor of operators and non-operators) to secure for sums that are
either not yet due or, if past due, are being contested in good faith by
appropriate action promptly initiated and diligently conducted and for which
adequate reserves are maintained in accordance with GAAP; (d) survey exceptions,
encroachments, easements, reservations, rights of others for rights-of-way,
servitudes, utilities and other similar purposes, zoning or other restrictions
as to the use of real properties, and other issues relating to the
merchantability of title or any statement of fact that an accurate survey would
disclose that could not reasonably be expected to have a Material Adverse
Effect; (e) purchase money Liens against specific Equipment securing Debt
expressly authorized by this Agreement or incurred with the Consent of
Administrative Agent; (f) judgment and attachment liens not giving rise to an
Event of Default (g) Liens arising under any Lease to secure the payment of
royalties due under that agreement or related to the right of a Royalty Interest
owner to take in kind; (h) Liens incurred to secure liability not exceeding
$100,000 for premiums to insurance carriers for insurance obtained in the
ordinary course of business; (i) liens arising in favor of Administrative Agent
under any Loan Document; and (j) liens granted with the Consent of
Administrative Agent.

Appendix-16

 

 

“Person” means an individual, corporation, partnership, limited liability
company, joint venture, trust or unincorporated organization, joint stock
company or other similar organization, Governmental Authority or any other legal
entity, whether acting in an individual, fiduciary or other capacity.

 

“Personal Property” means all personal property of every kind, whether now owned
or later acquired, including all goods (including Equipment), documents,
accounts, chattel paper (whether tangible or electronic), money, deposit
accounts, letters of credit and letter-of-credit rights (without regard to
whether the letter of credit is evidenced by a writing), documents, securities
and all other investment property, supporting obligations, any other contract
rights (including all rights in transportation agreements, processing
agreements, delivery agreements and seismic agreements) or rights to the payment
of money, insurance claims and proceeds, all general intangibles (including all
payment intangibles and rights to seismic and other geophysical data) and all
permits, licenses, books and records.

 

“Post-Closing Governmental Consents” is defined in Section 3.4(d).

 

“Prime Rate” with respect to any Interest Period, the greater of (i) the prime
rate of interest specified by the Wall Street Journal and (ii) the Federal Funds
Rate plus 5.5% per annum, in each case, from time to time as and when that rate
changes.  The Prime Rate is a reference rate and does not necessarily represent
the lowest or best rate actually available.

 

“Production Volumes” means, with respect to any or all of the Properties, the
product of Borrower’s Net Revenue Interest multiplied by the gross volume of
Hydrocarbons produced and saved from those Properties.

 

“Project Account” is defined in Section 1.9(a).

 

“Promissory Note” means a promissory note substantially in the form of Exhibit B
executed by Borrower and payable to each Lender (including its successors its
permitted assignees), together with all renewals, extensions, increases and
rearrangements.

 

“Property” or “Properties” means all real property and Personal Property of
Borrower, including the Leases and Wells described on Exhibit A.  For the
purposes of this Agreement, Borrower will be deemed to be the owner of any
Property which it has acquired or holds subject to a conditional sale agreement,
or leases under a financing lease or other arrangement pursuant to which title
to the Property has been retained by or vested in some other Person in a
transaction intended to create a financing.

Appendix-17

 

 

“Proved Developed Non-Producing Present Value” or “PDNP Present Value” means the
present value (discounted at ten percent (10%)) of future net revenues
attributable to all PDNP Reserves from the Properties calculated based on a
Reserve Report.

 

“Proved Developed Producing Present Value” or “PDP Present Value” means the
present value (discounted at ten percent (10%)) of future net revenues
attributable to all PDP Reserves from the Properties calculated based on a
Reserve Report.

 

“Proved Reserves” has the meaning given to that term in the definitions
promulgated by the Society of Petroleum Evaluation Engineers and the World
Petroleum Congress (the “SPE/WPC Definitions”) in effect from time to time;
“Proved Developed Producing Reserves” or “PDP Reserves” means Proved Reserves
which are categorized as both “Developed” and “Producing” in the SPE/WPC
Definitions; “Proved Developed Non Producing Reserves” or “PDNP Reserves” means
Proved Reserves which are categorized as both “Developed” and “Non Producing” in
the SPE/WPC Definitions; and “Proved Undeveloped Reserves” or “PUD Reserves”
means Proved Reserves which are categorized as “Undeveloped” in the SPE/WPC
Definitions.

 

“Proved Undeveloped Present Value” or “PUD Present Value” means the present
value (discounted at ten percent (10%)) of future net revenues attributable to
all PUD Reserves from the Properties calculated based on a Reserve Report.

 

“Prudent Operator” means, with respect to the Operator, a reasonable, prudent
operator experienced in the exploration and production of Hydrocarbons and who
is, at the time of any specific determination, situated similarly to Borrower or
Operator, as applicable, in all material respects, and with respect to Borrower
where it is not the Operator of the Property at issue, a reasonably prudent
owner of a working interest using commercially reasonable judgment who is, at
the time, situated similarly to Borrower in all material respects.

 

“Purchasers” means all Persons, including those parties listed on Exhibit D or
otherwise Approved by Administrative Agent (such approval or disapproval not to
be unreasonably delayed), who purchase Hydrocarbons attributable or allocable to
Borrower’s Net Revenue Interest in the Properties.

 

“RCRA” means the Resource Conservation and Recovery Act of 1976, as amended.

 

“Reimbursement Request” is defined in Section 1.4(c).

 

“Related Costs” means the reasonable and documented fees and out-of-pocket
expenses of counsel for Administrative Agent, Lenders and consultants for
Administrative Agent and Lenders and such other reasonable and documented out of
pocket, third-party expenses incurred by Administrative Agent and Lenders in
connection with the due diligence, negotiation and preparation of documents
relating to the Loan and execution, delivery and filing and/or recording of the
Loan Documents together with any amendments, supplements or modifications
thereto or administration or enforcement thereof.

Appendix-18

 

 

“Related Parties” means, with respect to any Person, each of its Affiliates and
their respective directors, officers, employees, agents and advisors (including
attorneys, accountants and other consultants and advisors) of that Person and
its Affiliates.

 

“Release” means Hazardous Materials that are pumped, spilled, leaked, disposed
of, emptied, discharged or otherwise released into the environment in violation
of any Law.

 

“Remedial Work” is defined in Section 5.3.

 

“Reported Month” is defined in Section 4.1.

 

“Reported Quarter” is defined in Section 4.2(a).

 

“Required Lenders” means, when determined, Lenders holding at least a majority
of the Total Committed Obligations; provided that the holdings of any Defaulting
Lender shall be excluded in the determination of Required Lenders for purposes
of this definition.

 

“Reserve Report” is defined in Section 4.5.

 

“Revolving Loan” is defined in Section 1.1(a).

 

“Revolving Loan Note Amount” is defined in Section 1.1(a).

 

“Royalty Interest” means (a) an expense-free interest in any Property retained
by a mineral lessor in a Lease, (b) an overriding royalty in any Property
reserved by or conveyed to a Person, or (c) any other expense-free right to
receive production or revenues from any Property.

 

“Security Agreements” means collectively, the Security Agreements, and any other
security agreement substantially in the form of Exhibit E and pursuant to which
any Obligor, as debtor, grants to Administrative Agent, as secured party, a
first-priority security interest in the collateral described in that agreement.

 

“Security Documents” means this Agreement, the Mortgages, the Security
Agreements, the Subordination Agreements, the Deposit Account Control Agreements
and any other agreement pursuant to which any Obligor grants to Administrative
Agent a Lien in, on or over any collateral to secure the Obligations.

 

“Selection Notice” is defined in Section 1.7(c).

 

“Solvent” means, as to any Person on any date, (a) the fair saleable value of
that Person’s assets exceed the total amount of its liabilities (including
income Tax liabilities) as they become absolute and matured; and (b) that Person
is able to meet its debts as they mature.

 

“Special Damages” means any and all damages in the nature of special,
consequential, indirect, exemplary or punitive damages (regardless of their name
or description), but it does not include any payments or funds that any Person
has expressly promised to pay or deliver to any other Person.

Appendix-19

 

 

“Specified Financial Covenant” is defined in Section 5.20(d).

 

“Subordination Agreement” means a subordination agreement substantially in the
form of Exhibit F.

 

“Subsidiary” means, with respect to any Person that is not a natural person,
each other Person (i) in which that Person owns, directly or indirectly, at
least 50% of the Equity Interests having ordinary voting power for the election
of directors, members or general partners or (ii)that is required by GAAP to be
included in a consolidated financial statement of that Person.

 

“Supporting Documentation” means a package containing data that is available to
Borrower sufficient to support the cost estimate and the justification for the
proposed Development Plan project, including but not limited to: (a) detailed
work procedure, (b) before and after wellbore schematic, (c) detailed cost
estimate plus bids on major items and other backup as appropriate, (d) reservoir
structure and isopach maps, (e) log sections, core data, and directional survey
for any well being worked on plus key offset wells, (f) notes showing Borrower’s
or Engineer’s reserves calculation, if available, and (g) economic forecast.

 

“Swap Agreement” means any ISDA Master Agreement (as defined in paragraph b) of
the definition of “Hedging Agreement”) executed between Borrower and any Swap
Counterparty, together with any confirmation of trade under that agreement.

 

“Swap Counterparty” means MBL, any Lender or any Affiliate of MBL or any Lender
that is a counterparty to a Swap Agreement with Borrower or any of its
Affiliates.

 

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

 

“Taxes” means any and all present or future taxes, levies, imposts, deductions,
charges or withholdings, and all similar liabilities, plus all related interest,
penalties, fines and additions to tax, now or hereafter imposed by any federal,
state, local or foreign government or other taxing authority.

 

“Term Loan” is defined in Section 1.1(a).

 

“Term Loan Note Amount” is defined in Section 1.1(a).

 

“Taxing Authorities” means any Governmental Authority that has the power to
impose Taxes upon Borrower or any of the Collateral.

 

“Total Committed Obligations” means, as of any date, the total monetary
Obligations owing to Administrative Agent and Lenders under this Agreement and
Swap Counterparty under the Swap Agreement, including any Advances that Lenders
are unconditionally committed to make but have not yet funded).

Appendix-20

 

 

“UCC” means the Uniform Commercial Code presently in effect in the State of
Texas or other applicable jurisdiction.

 

“USA PATRIOT Act” means the Uniting and Strengthening America by Producing
Appropriate Tools Required to Intercept and Obstruct Terrorism (USA PATRIOT) Act
of 2001, Pub. L. 707-56, as amended, and regulations promulgated under that act
as in effect from time to time.

 

“USD” or “$” or “Dollars” shall mean currency of the United States of America.

 

“Well” means any existing or future oil or gas well, salt water disposal well,
injection well, water supply well or any other well located on or related to the
Properties, and any facility or equipment in addition to or replacement of any
well.

 

“Working Interest” means the property interest which entitles its owner to
explore and develop certain land for oil and gas production purposes, whether
under an oil and gas lease or unit, a compulsory pooling order or otherwise.

 

Appendix-21

 

 

Appendix B

 

Lenders

 

 

LENDERS, LENDERS’ PERCENTAGES AND NOTE AMOUNTS

 

 

Lender

Note

Amount

Percentage Macquarie Bank Limited $ 150,000,000 100.0% 

 

 

 

ADMINISTRATIVE AGENT WIRE INSTRUCTIONS

 

 

Administrative Agent’s Office Agent’s Wire Instructions     Macquarie Bank
Limited, Administrative Agent The Bank of New York Mellon 500 Dallas Street New
York, New York 10004 Suite 3250 ABA #021000018 Houston, Texas 77002
Favour:  Macquarie Bank Limited Attn:  Mike Sextro Sydney Phone:  (713) 275-6207
A/C No.: 8900055375 Fax:  (713) 275-6222 Chips UID: 236386
Email:  MECLoansHouston@macquarie.com REFERENCE:  Voyager Oil & Gas, Inc.

 

 

 

Appendix B-1