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EXECUTION VERSION

 

 
Amended and Restated Credit Agreement

Dated as of
August 6, 2007

among

McMoRan Exploration Co.,
As Parent,
 
McMoRan Oil & Gas LLC,
as Borrower,

JPMorgan Chase Bank, N.A.,
as Administrative Agent,

Merrill Lynch Capital,
a division of Merrill Lynch Business Financial Services, Inc.
as SyndicationAgent,

BNP Paribas,
As Documentation Agent,

and

The Lenders Party Hereto

 

 
Joint Lead Arrangers and Joint Book Runners
 
J.P. Morgan Securities
Inc.                                                                                                                                                                   
Merrill Lynch Capital,
                                                                                                                                                                                  
a division of Merrill Lynch Business Financial Services, Inc.
 

 

             

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TABLE OF CONTENTS
 
Page

ARTICLE I
DEFINITIONS AND ACCOUNTING MATTERS
Section 1.01
Section 1.02
Section 1.03
Section 1.04
Section 1.05
Terms Defined Above
Certain Defined Terms
Types of Loans and Borrowings
Terms Generally; Rules of Construction
Accounting Terms and Determinations:  GAAP
1
1
19
19
20
ARTICLE II
THE CREDITS
Section 2.01
Section 2.02
Section 2.03
Section 2.04
Section 2.05
Section 2.06
Section 2.07
Section 2.08
Commitments
Loans and borrowings
Requests for Borrowings
Interest Elections
Funding of Borrowings
Termination and Reduction of Aggregate Maximum Credit Amounts
Borrowing Base
Letters of Credit
20
21
21
22
23
24
25
27
ARTICLE III
PAYMENTS OF PRINCIPAL AND INTEREST; PREPAYMENTS; FEES
Section 3.01
Section 3.02
Section 3.03
Section 3.04
Section 3.05
Repayment of Loans
Interest
Alternate Rate of Interest
Prepayments
Fees
31
32
32
33
34
ARTICLE IV
PAYMENTS; PRO RATA TREATMENT; SHARING OF SET-OFFS
Section 4.01
Section 4.02
Section 4.03
Section 4.04
Payments Generally; Pro Rata Treatment; Sharing of Set-offs
Presumption of Payment by the Borrower
Certain Deductions by the Administrative Agent
Disposition of Proceeds
35
36
36
37
ARTICLE V
INCREASED COSTS; BREAK FUNDING PAYMENTS; TAXES
Section 5.01
Section 5.02
Section 5.03
Section 5.04
Increased Costs
Break Funding Payments
Taxes
Designation of Different Lending Office
 
37
38
38
40
 

 
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Section 5.05
 
Replacement of Lenders
 
40
ARTICLE VI
CONDITIONS PRECEDENT
Section 6.01
Section 6.02
Effective Date
Each Credit Event
41
44
ARTICLE VII
REPRESENTATIONS AND WARRANTIES
Section 7.01
Section 7.02
Section 7.03
Section 7.04
Section 7.05
Section 7.06
Section 7.07
Section 7.08
Section 7.09
Section 7.10
Section 7.11
Section 7.12
Section 7.13
Section 7.14
Section 7.15
Section 7.16
Section 7.17
Section 7.18
Section 7.19
Section 7.20
Section 7.21
Section 7.22
Organization; Powers
Authority; Enforceability
Approvals; No Conflicts
Financial Condition; No Material Adverse Change
Litigation
Environmental Matters
Compliance with the Laws and Agreements; No Defaults
Investment Company Act
Taxes
ERISA
Disclosure; No Material Misstatements
Insurance
Restriction on Liens
Subsidiaries
Location of Business and Offices
Properties; Titles, Etc.
Maintenance of Properties
Gas Imbalances, Prepayments
Marketing of Production
Swap Agreements
Use of Loans and Letters of Credit
Solvency
45
45
45
45
46
46
47
47
48
48
49
49
49
50
50
50
51
51
51
52
52
52
ARTICLE VIII
AFFIRMATIVE COVENANTS

Section 8.01
Section 8.02
Section 8.03
Section 8.04
Section 8.05
Section 8.06
Section 8.07
Section 8.08
Section 8.09
Section 8.10
Section 8.11
Section 8.12
Section 8.13
Financial  Statements; Other Information
Notices of Material Events
Existence; Conduct of Business
Payment of Obligations
Performance of Obligations under Loan Documents
Operation and Maintenance of Properties
Insurance
Books and Records; Inspection Rights
Compliance with Laws
Environmental Matters
Further Assurances
Reserve Reports
Title Information
52
55
55
55
56
56
56
57
57
57
58
58
59

 
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Section 8.14
Section 8.15
Section 8.16
Section 8.17
Section 8.18
Additional Collateral; Additional Guarantors
ERISA Compliance
Unrestricted Subsidiaries
Marketing activities
Swap Agreements
60
61
61
62
62

 
ARTICLE IX
NEGATIVE COVENANTS
Section 9.01
Section 9.02
Section 9.03
Section 9.04
Section 9.05
Section 9.06
Section 9.07
Section 9.08
Section 9.09
Section 9.10
Section 9.11
Section 9.12
Section 9.13
Section 9.14
Section 9.15
Section 9.16
Section 9.17
Section 9.18
Section 9.19
Financial Covenants
Debt
Liens
Dividends, Distributions and Redemptions
Investments, Loans and Advances
Nature of Business; International Operations
Proceeds of Notes
ERISA Compliance
Sale or Discount of Receivables
Mergers, Etc.
Sale of Properties
Environmental Matters
Transactions with Affiliates
Subsidiaries
Negative Pledge Agreements; Dividend Restrictions
Gas Imbalances, take-or-Pay or Other Prepayments
Swap Agreements
Acquisition Documents
Unrestricted Subsidiaries
62
63
65
65
66
67
67
68
69
69
69
69
70
70
70
70
70
71
71
ARTICLE X
EVENTS OF DEFAULT; REMEDIES
Section 10.01
Section 10.02
Events of Default
Remedies
71
73
ARTICLE XI
THE ADMINISTRATIVE AGENT
Section 11.02
Section 11.03
Section 11.04
Section 11.05
Section 11.06
Section 11.07
Section 11.08
Section 11.09
Section 11.10
Section 11.11
 
Duties and Obligations of Administrative Agent
Action by Administrative Agent
Reliance by Administrative Agent
Subagents
Resignation of Administrative Agent
Agents as Lenders
No Reliance
Administrative Agent May File Proofs of Claim
Authority of Administrative Agent to Release collateral and Liens
The Arrangers and the Agents
74
75
76
76
76
76
76
77
78
78

 
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ARTICLE XII
MISCELLANEOUS
Section 12.01
Section 12.02
Section 12.03
Section 12.04
Section 12.05
Section 12.06
Section 12.07
Section 12.08
Section 12.09
Section 12.10
Section 12.11
Section 12.12
Section 12.13
Section 12.14
Section 12.15
Section 12.16
Notices
Waivers; Amendments
Expenses, Indemnity; Damage Waiver
Successors and Assigns
Survival; Revival; Reinstatement
Counterparts; Integration; Effectiveness
Severability
Right of Setoff
GOVERNING LAW; JURISDICTION; CONSENT TO SERVICE  PROCESS
Headings
Confidentiality
Interest Rate Limitation
Collateral Matters; Swap Agreements
No Third Party Beneficiaries
Acknowledgements
USA Patriot Act Notice
78
78
80
82
84
85
85
85
86
87
87
87
88
88
88
88

     

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ANNEXES, EXHIBITS AND SCHEDULES
 
 

 
Annex I                                List of Maximum Credit Amounts

Exhibit A                                Form of Note
Exhibit B                                 Form of Borrowing Request
Exhibit C                                 Form of Interest Election Request
Exhibit D                                Form of Compliance Certificate
Exhibit E                                 Form of Legal Opinion of Jones Walker,
special counsel to theBorrower
Exhibit F-1                              Security Instruments
Exhibit F-2                              Form of Guaranty and Collateral
Agreement
Exhibit G                                 Form of Assignment and Assumption
Exhibit H                                Form of Exemption Certificate
Exhibit I                                  Form of Intercreditor Agreement

Schedule 1.02                        Approved Counterparties
Schedule 1.02(b)                   Preferential Purchase Right Properties
Schedule 7.05                        Litigation
Schedule 7.10(d)                   ERISA Plan
Schedule 7.10(f)                    Under-funded ERISA Plan
Schedule 7.12                        Insurance
Schedule 7.14                        Subsidiaries
Schedule 7.16                        Title Exceptions
Schedule 7.18                        Gas Imbalances
Schedule 7.19                        Marketing Contracts
Schedule 7.20                        Swap Agreements
Schedule 9.02                        Existing Debt
Schedule 9.03                        Existing Liens
Schedule 9.05                        Investments

     

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THIS AMENDED AND RESTATED CREDIT AGREEMENT dated as of August 6, 2007, is among:
McMoRan Exploration Co., a Delaware corporation (the “Parent”), McMoRan Oil &
Gas LLC, a Delaware limited liability company (the “Borrower”); each of the
Lenders from time to time party hereto; JPMorgan Chase Bank, N.A. (in its
individual capacity, “JPMorgan”), as administrative agent for the Lenders (in
such capacity, together with its successors in such capacity, the
“Administrative Agent”); Merrill Lynch Capital, a division of Merrill Lynch
Business Financial Services, Inc., as syndication agent for the Lenders (in such
capacity, together with its successors in such capacity, the “Syndication
Agent”); and BNP Paribas, as documentation agent for the Lenders (in such
capacity, together with its successors in such capacity, a “Documentation
Agent”)
 
R E C I T A L S
 
A.           The Borrower, the Administrative Agent, the lenders and others
party thereto entered into that certain Credit Agreement dated as of April 19,
2006 (as amended prior to the Effective Date, the “Existing Credit Agreement”)
pursuant to which the lenders party thereto made certain loans to and extensions
of credit available on behalf of the Borrower.
 
B.           The Parent and the Borrower have requested that the Administrative
Agent, the Syndication Agent, the Documentation Agents and the Lenders, and each
has agreed to, amend, restate, and increase the Existing Credit Agreement to
make certain loans and extensions of credit to the Borrower subject to the terms
and conditions of this Agreement.
 
C.           In consideration of the mutual covenants and agreements herein
contained and of the loans, extensions of credit and commitments hereinafter
referred to, the parties hereto agree as follows:
 
ARTICLE I
Definitions and Accounting Matters
 

Section 1.01  Terms Defined Above.  As used in this Agreement, each term defined
above has the meaning indicated above.
 
Section 1.02  Certain Defined Terms.  As used in this Agreement, the following
terms have the meanings specified below:
 
“ABR”, when used in reference to any Loan or Borrowing, refers to whether such
Loan, or the Loans comprising such Borrowing, are bearing interest at a rate
determined by reference to the Alternate Base Rate.
 
“Acquisition” means the acquisition of certain oil, gas and mineral Properties
pursuant to the terms and conditions of the Acquisition Documents.
 
“Acquisition Agreement” means the Purchase and Sale Agreement between Seller and
Borrower, as Buyer, dated June 20, 2007, to be effective July 1, 2007.
 
“Acquisition Documents” means (a) the Acquisition Agreement, (b) the P&A Escrow
Agreement, (c) the Transition Services Agreement, (d) the Title Indemnity
Agreement and (e) all bills of sale, assignments, agreements, instruments and
documents executed and delivered in connection therewith, in each case, as
amended from time to time in accordance with Section 9.18.
 
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“Acquisition Properties” means the Oil and Gas Properties and other properties
acquired by the Borrower pursuant to the Acquisition Documents.
 
“Adjusted LIBO Rate” means, with respect to any Eurodollar Borrowing for any
Interest Period, an interest rate per annum (rounded upwards, if necessary, to
the next 1/16 of 1%) equal to (a) the LIBO Rate for such Interest Period
multiplied by (b) the Statutory Reserve Rate.
 
“Administrative Questionnaire” means an Administrative Questionnaire in a form
supplied by the Administrative Agent.
 
“Affiliate” means, with respect to a specified Person, another Person that
directly, or indirectly through one or more intermediaries, Controls or is
Controlled by or is under common Control with the Person specified.
 
“Agents” means, collectively, the Administrative Agent, the Syndication Agent
and the Documentation Agent; and “Agent” shall mean any of the Administrative
Agent, the Syndication Agent or any Documentation Agent, as the context
requires.
 
“Aggregate Maximum Credit Amounts” at any time shall equal the sum of the
Maximum Credit Amounts, as the same may be reduced or terminated pursuant to
Section 2.06.
 
“Aggregated Subsidiaries” means any group of Subsidiaries which in the aggregate
would constitute a Significant Subsidiary.
 
“Agreement” means this Amended and Restated Credit Agreement, dated as of August
6, 2007, as the same may from time to time be amended, modified, supplemented or
restated.
 
“Alternate Base Rate” means, for any day, a rate per annum equal to the greater
of (a) the Prime Rate in effect on such day and (b) the Federal Funds Effective
Rate in effect on such day plus ½ of 1%.  Any change in the Alternate Base Rate
due to a change in the Prime Rate or the Federal Funds Effective Rate shall be
effective from and including the effective date of such change in the Prime Rate
or the Federal Funds Effective Rate, respectively.
 
“Applicable Margin” means, for any day, with respect to any Loan or the
Commitment Fee Rate, the applicable rate per annum set forth below based upon
the Borrowing Base Utilization Percentage then in effect:

 
Borrowing
Base Utilization Percentage
Eurodollar
Loans
ABR
Loans
Commitment
Fee Rate
> 115%
275 b.p.
125 b.p.
50 b.p.
> 100% and < 115%
250 b.p.
100 b.p.
50 b.p.
> 90% and < 100%
225 b.p.
75 b.p.
50 b.p.
> 75% and < 90%
200 b.p.
50 b.p.
50 b.p.
> 50% and < 75%
175 b.p.
25 b.p.
37.5 b.p.
< 50%
150 b.p.
0 b.p.
37.5 b.p.

 
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Each change in the Applicable Margin and the Commitment Fee Rate shall apply
during the period commencing on the effective date of a change in the Borrowing
Base Utilization Percentage and ending on the date immediately preceding the
effective date of the next such change, provided, however, that if at any time
the Borrower fails to deliver a Reserve Report pursuant to Section 8.12(a), then
the “Applicable Margin” means the rate per annum set forth on the grid when the
Borrowing Base Utilization Percentage is at its highest level.  Notwithstanding
anything to the contrary herein contained, for the period from the Effective
Date until November 1, 2007, the Applicable Margin shall be based upon the
Borrowing Base Utilization Percentage grid and in no event shall the Applicable
Margin be less than 250 b.p. for Eurodollar Loans, 100 b.p. for ABR Loans and 50
b.p. for the Commitment Fee Rate.
 
“Applicable Percentage” means, with respect to any Lender, the percentage of the
Aggregate Maximum Credit Amounts represented by such Lender’s Maximum Credit
Amount as such percentage is set forth on Annex I.
 
“Approved Counterparty” means (a) any Lender or any Affiliate of a Lender, (b)
any other Person whose long term senior unsecured debt rating at the time a
particular Swap Agreement transaction is entered into is A/A2 by S&P or Moody’s
(or their equivalent) or higher, or (c) with regard to Swap Agreements in
respect of commodities, and subject to the conditions set forth therein, any
other Person listed on Schedule 1.02.
 
“Approved Petroleum Engineers” means (a) Netherland, Sewell & Associates, Inc.,
(b) Ryder Scott Company Petroleum Consultants, L.P. and (c) any other
independent petroleum engineers reasonably acceptable to the Administrative
Agent.
 
“Arrangers” means J.P. Morgan Securities Inc. and Merrill Lynch Capital, a
division of Merrill Lynch Business Financial Services, Inc., in their capacities
as the joint lead arrangers and joint book runners hereunder.
 
“Assignee” has the meaning set forth in Section 12.04(b).
 
“Assignment and Assumption” means an assignment and assumption entered into by a
Lender and an assignee (with the consent of any party whose consent is required
by Section 12.04(b)), and accepted by the Administrative Agent, in the form of
Exhibit G or any other form approved by the Administrative Agent.
 
“Availability Period” means the period from and including the Effective Date to
but excluding the Termination Date.
 
“Board” means the Board of Governors of the Federal Reserve System of the United
States of America or any successor Governmental Authority.
 
“Borrowing” means Loans of the same Type, made, converted or continued on the
same date and, in the case of Eurodollar Loans, as to which a single Interest
Period is in effect.
 
“Borrowing Base” means at any time an amount equal to the amount determined in
accordance with Section 2.07, as the same may be adjusted from time to time
pursuant to Section 2.08(k), Section 8.13(c), Section 8.13(d) or Section
9.11(d). Prior to April 1, 2009, the Borrowing Base and Conforming Borrowing
Base (defined below) shall be two separate and distinct determinations under
Section 2.07; provided, that, on and after April 1, 2009, there shall only be a
single determination under Section 2.07 of the Borrowing Base.
 
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“Borrowing Base Deficiency” occurs if at any time the total Revolving Credit
Exposures exceeds the Borrowing Base then in effect.
 
“Borrowing Base Utilization Percentage” means, as of any day, the fraction
expressed as a percentage, the numerator of which is the sum of the Revolving
Credit Exposures of the Lenders on such day, and the denominator of which is (i)
prior to April 1, 2009, the Conforming Borrowing Base in effect on such day and
(ii) on and after April 1, 2009, the Borrowing Base in effect on such day.
 
“Borrowing Request” means a request by the Borrower for a Borrowing in
accordance with Section 2.03.
 
“Bridge Credit Agreement” means the Credit Agreement, dated as of Effective
Date, among the Parent, as borrower, the lenders party thereto from time to
time, JPMorgan Chase Bank, N.A., as administrative agent, and Merrill Lynch,
Pierce, Fenner & Smith Incorporated, as syndication agent, as the same may be
amended from time to time in accordance with Section 9.04(b).
 
“Bridge Loans” means the senior term loans in favor of the Parent under the
Bridge Credit Agreement in an aggregate principal amount not to exceed
$800,000,000.
 
“Business Day” means any day that is not a Saturday, Sunday or other day on
which commercial banks in New York City or Houston, Texas are authorized or
required by law to remain closed; and if such day relates to a Borrowing or
continuation of, a payment or prepayment of principal of or interest on, or a
conversion of or into, or the Interest Period for, a Eurodollar Loan or a notice
by the Borrower with respect to any such Borrowing or continuation, payment,
prepayment, conversion or Interest Period, any day which is also a day on which
dealings in dollar deposits are carried out in the London interbank market.
 
“Capital Leases” means, in respect of any Person, all leases which shall have
been, or should have been, in accordance with GAAP, recorded as capital leases
on the balance sheet of the Person liable (whether contingent or otherwise) for
the payment of rent thereunder.
 
“Casualty Event” means any loss, casualty or other insured damage to, or any
nationalization, taking under power of eminent domain or by condemnation or
similar proceeding of, any Property of any Loan Party having a fair market value
in excess of $1,000,000.
 
“Change in Control” means (a) the acquisition of ownership, directly or
indirectly, beneficially or of record, by any Person or group (within the
meaning of the Securities Exchange Act of 1934 and the rules of the SEC
thereunder as in effect on the date hereof), of Equity Interests representing
more than 35% of the aggregate ordinary voting power represented by the issued
and outstanding Equity Interests of the Parent, (b) occupation of a majority of
the seats (other than vacant seats) on the board of directors of the Parent by
Persons who were neither (i) nominated by the board of directors of the Parent
nor (ii) appointed by directors so nominated, or (c) the failure of the Parent
to at any time own, directly or indirectly, beneficially or of record, 100% of
all of the issued and outstanding Equity Interests of the Borrower.
 
“Change in Law” means (a) the adoption of any law, rule or regulation after the
date of this Agreement, (b) any change in any law, rule or regulation or in the
interpretation or application thereof by any Governmental Authority after the
date of this Agreement or (c) compliance by any Lender or the Issuing Bank (or,
for purposes of Section 5.01(b)), by any lending office of such Lender or by
such Lender’s or the Issuing Bank’s holding company, if any) with any request,
guideline or directive (whether
 
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or not having the force of law) of any Governmental Authority made or issued
after the date of this Agreement.
 
“Code” means the Internal Revenue Code of 1986, as amended from time to time,
and any successor statute.
 
“Commitment” means, with respect to each Lender, the commitment of such Lender
to make Loans and to acquire participations in Letters of Credit hereunder,
expressed as an amount representing the maximum aggregate amount of such
Lender’s Revolving Credit Exposure hereunder, as such commitment may be (a)
reduced or terminated from time to time pursuant to Section 2.06 and (b)
modified from time to time pursuant to assignments by or to such Lender pursuant
to Section 12.04(b); and “Commitments” means the aggregate amount of the
Commitments of all the Lenders.  The amount representing each Lender’s
Commitment shall at any time be the lesser of such Lender’s Maximum Credit
Amount and such Lender’s Applicable Percentage of the then effective Borrowing
Base.  As of the Effective Date, the aggregate Commitments of the Lenders are
$700,000,000.
 
“Commitment Fee Rate” is set forth in the definition of Applicable Margin.
 
“Conduit Lender” means any special purpose corporation organized and
administered by any Lender for the purpose of making Loans otherwise required to
be made by such Lender and designated by such Lender in a written instrument
delivered to the Administrative Agent and the Borrower; provided, that the
designation by any Lender of a Conduit Lender shall not relieve the designating
Lender of any of its obligations under this Agreement if, for any reason, its
Conduit Lender fails to meet any such obligations, and the designating Lender
(and not the Conduit Lender) shall have the sole right and responsibility to
deliver all consents and waivers required or requested under this Agreement with
respect to its Conduit Lender, and provided, further, that no Conduit Lender
shall (a) be entitled to receive any greater amount pursuant to Section 5.01,
5.02, 5.03 or 12.03 than the designating Lender would have been entitled to
receive in respect of the extensions of credit made by such Conduit Lender or
(b) be deemed to have any Commitment.
 
“Conforming Borrowing Base” means at any time an amount equal to the amount
determined in accordance with Section 2.07, as the same may be adjusted from
time to time pursuant to Section 2.08(k), Section 8.13(c), Section 8.13(d) or
Section 9.11(d).
 
“Consolidated Net Income” means with respect to the Parent and the Consolidated
Subsidiaries, for any period, the aggregate of the net income (or loss) of the
Parent and the Consolidated Subsidiaries after allowances for taxes for such
period determined on a consolidated basis in accordance with GAAP; provided that
there shall be excluded from such net income (to the extent otherwise included
therein) the following: (a) the net income of any Person in which the Parent or
any Consolidated Subsidiary has an interest (which interest does not cause the
net income of such other Person to be consolidated with the net income of the
Parent and the Consolidated Subsidiaries in accordance with GAAP), except to the
extent of the amount of dividends or distributions actually paid in cash during
such period by such other Person to the Parent or to a Consolidated Subsidiary,
as the case may be; (b) the net income (but not loss) during such period of any
Consolidated Subsidiary to the extent that the declaration or payment of
dividends or similar distributions or transfers or loans by that Consolidated
Subsidiary is not at the time permitted by operation of the terms of its charter
or any agreement, instrument or Governmental Requirement applicable to such
Consolidated Subsidiary or is otherwise restricted or prohibited, in each case
determined in accordance with GAAP; (c) any extraordinary non-cash gains or
losses during such period; (d) non-cash gains or losses under FAS 133 resulting
from the net change in Parent’s mark to market portfolio of commodity price risk
management activities during that period; (e) any gains or losses attributable
to writeups or writedowns of assets, including ceiling test writedowns; (f) any
non-cash gains or losses attributable to any non-cash impairment charges
resulting from the application of Statement of
 
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Financial Accounting Standards No. 142 and No. 144 and any amortization of
intangibles pursuant to Statement of Financial Accounting Standards No. 141; (g)
any net after-tax income or loss from discontinued operations and any net
after-tax gain or loss on disposal of discontinued operations; (h) the
cumulative effect of a change in accounting principles; (i) fees, premiums and
expenses incurred in connection with the Transactions, this Agreement, the Loan
Documents, the Bridge Loans, the Senior Notes, the Acquisition and the repayment
of Debt under the Second Lien Term Loan Agreement up to $25,000,000 in the
aggregate and (j) any non-cash compensation expense under FAS 142R recognized
from grants of stock appreciation or similar rights, stock options, restricted
stock, restricted stock units or other rights to officers, directors and
employees of such Person or any of its Restricted Subsidiaries, provided that if
such non-cash expense subsequently becomes a cash expense, it will be included
in the period during which it became a cash expense; provided that for the
purposes of calculating Consolidated Net Income for any period of four
consecutive fiscal quarters (each, a “Reference Period”"), if during such
Reference Period (or, in the case of pro forma calculations, during the period
from the last day of such Reference Period to and including the date as of which
such calculation is made) the Borrower or any Restricted Subsidiary shall have
made a Material Disposition or Material Acquisition, Consolidated Net Income for
such Reference Period shall be calculated after giving pro forma effect thereto
as if such Material Disposition or Material Acquisition occurred on the first
day of such Reference Period (with the Reference Period for the purposes of pro
forma calculations being the most recent period of  four consecutive fiscal
quarters for which the relevant financial information is available). As used in
this definition, “Material Acquisition” means any acquisition of property or
series of related acquisitions of property that involves consideration in excess
of $10,000,000; and “Material Disposition” means any sale, transfer or other
disposition of property or series of related sales, transfers or other
dispositions of property that yields gross proceeds to the Borrower or any
Restricted Subsidiary in excess of $10,000,000.

“Consolidated Subsidiaries” means each Restricted Subsidiary of the Parent
(whether now existing or hereafter created or acquired) the financial statements
of which shall be (or should have been) consolidated with the financial
statements of the Parent in accordance with GAAP.
 
“Control” means the possession, directly or indirectly, of the power to direct
or cause the direction of the management or policies of a Person, whether
through the ability to exercise voting power, by contract or
otherwise.  “Controlling” and “Controlled” have meanings correlative thereto.
 
“Debt” means, for any Person, the sum of the following (without duplication):
(a) all obligations of such Person for borrowed money or evidenced by bonds,
bankers’ acceptances, debentures, notes or other similar instruments; (b) all
obligations of such Person (whether contingent or otherwise) in respect of
letters of credit, surety or other bonds and similar instruments; (c) all
accounts payable and all accrued expenses, liabilities or other obligations of
such Person to pay the deferred purchase price of Property or services; (d) all
obligations under Capital Leases; (e) all obligations under Synthetic Leases;
(f) all Debt (as defined in the other clauses of this definition) of others
secured by (or for which the holder of such Debt has an existing right,
contingent or otherwise, to be secured by) a Lien on any Property of such
Person, whether or not such Debt is assumed by such Person; (g) all Debt (as
defined in the other clauses of this definition) of others guaranteed by such
Person or in which such Person otherwise assures a creditor against loss of the
Debt (howsoever such assurance shall be made) but only to the extent of the
lesser of the amount of such Debt and the maximum stated amount of such
guarantee or assurance against loss; (h) all obligations or undertakings of such
Person to maintain or cause to be maintained the financial position or covenants
of others or to purchase the Debt or Property of others; (i) obligations to
deliver commodities, goods or services, including, without limitation,
Hydrocarbons, in consideration of one or more advance payments, other than gas
balancing arrangements in the ordinary course of business; (j) obligations to
pay for goods or services even if such goods or services are not actually
received or utilized by such Person; (k) any Debt of a partnership for which
such Person is liable either by agreement, by
 
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operation of law or by a Governmental Requirement but only to the extent of such
liability; (l) Disqualified Capital Stock; and (m) the undischarged balance of
any production payment created by such Person or for the creation of which such
Person directly or indirectly received payment.  The Debt of any Person shall
include all obligations of such Person of the character described above to the
extent such Person remains legally liable in respect thereof notwithstanding
that any such obligation is not included as a liability of such Person under
GAAP.
 
“Default” means any event or condition which constitutes an Event of Default or
which upon notice, lapse of time or both would, unless cured or waived, become
an Event of Default.
 
“Disqualified Capital Stock” means any Equity Interest that, by its terms (or by
the terms of any security into which it is convertible or for which it is
exchangeable) or upon the happening of any event, requires the payment of
dividends (other than dividends payable solely in Equity Interests which do not
otherwise constitute Disqualified Capital Stock) or matures or is mandatorily
redeemable for any consideration other than other Equity Interests (which would
not constitute Disqualified Capital Stock), pursuant to a sinking fund
obligation or otherwise, or is convertible or exchangeable for Debt or
redeemable for any consideration other than other Equity Interests (which would
not constitute Disqualified Capital Stock) at the option of the holder thereof,
in whole or in part, on or prior to the date that is one year after the earlier
of (a) the Maturity Date and (b) the date on which there are no Loans, LC
Exposure or other obligations hereunder outstanding and all of the Commitments
are terminated; provided, however, preferred Equity Interests which would be
Disqualified Capital Stock solely by virtue of a requirement to pay dividends in
cash shall not be Disqualified Capital Stock to the extent the cash proceeds
thereof are used to repay or redeem Bridge Loans or Exchange Notes; and provided
further, however, preferred Equity Interests which would be Disqualified Capital
Stock solely by virtue of a requirement to pay dividends in cash shall not be
Disqualified Capital Stock to the extent the cash proceeds thereof are used to
make an Investment in an Unrestricted Subsidiary under Section
9.05(l).  Notwithstanding the preceding sentence, any Equity Interest that would
constitute Disqualified Capital Stock solely because the holders thereof have
the right to require the Person to repurchase such Equity Interests upon the
occurrence of a change of control or an asset sale, shall not constitute
Disqualified Capital Stock.
 
“dollars” or “$” refers to lawful money of the United States of America.
 
“Domestic Subsidiary” means any Restricted Subsidiary of the Parent that is
organized under the laws of the United States of America or any state thereof or
the District of Columbia.
 
“EBITDAX” means, for any period, the sum of Consolidated Net Income for such
period plus the following expenses or charges to the extent deducted from
Consolidated Net Income in such period: interest, income taxes, depreciation,
depletion, amortization, exploration expenses and other similar noncash charges,
minus all noncash income added to Consolidated Net Income.
 
“Effective Date” means the date on which the conditions specified in Section
6.01 are satisfied (or waived in accordance with Section 12.02).
 
“Engineering Reports” has the meaning assigned such term in Section 2.07(c)(i).
 
“Environmental Laws” means any and all Governmental Requirements pertaining in
any way to health, safety the environment or the preservation or reclamation of
natural resources, in effect in any and all jurisdictions in which the Borrower
or any Restricted Subsidiary is conducting or at any time has conducted
business, or where any Property of the Borrower or any Restricted Subsidiary is
located, including without limitation, the Oil Pollution Act of 1990 (“OPA”), as
amended, the Clean Air Act, as
 
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amended, the Comprehensive Environmental, Response, Compensation, and Liability
Act of 1980 (“CERCLA”), as amended, the Federal Water Pollution Control Act, as
amended, the Occupational Safety and Health Act of 1970, as amended, the
Resource Conservation and Recovery Act of 1976 (“RCRA”), as amended, the Safe
Drinking Water Act, as amended, the Toxic Substances Control Act, as amended,
the Superfund Amendments and Reauthorization Act of 1986, as amended, the
Hazardous Materials Transportation Act, as amended, and other environmental
conservation or protection Governmental Requirements.  The term “oil” shall have
the meaning specified in OPA, the terms “hazardous substance” and “release” (or
“threatened release”) have the meanings specified in CERCLA, the terms “solid
waste” and “disposal” (or “disposed”) have the meanings specified in RCRA and
the term “oil and gas waste” shall have the meaning specified in Section 91.1011
of the Texas Natural Resources Code (“Section 91.1011”); provided, however, that
(a) in the event either OPA, CERCLA, RCRA or Section 91.1011 is amended so as to
broaden the meaning of any term defined thereby, such broader meaning shall
apply subsequent to the effective date of such amendment and (b) to the extent
the laws of the state or other jurisdiction in which any Property of the
Borrower or any Restricted Subsidiary is located establish a meaning for “oil,”
“hazardous substance,” “release,” “solid waste,” “disposal” or “oil and gas
waste” which is broader than that specified in either OPA, CERCLA, RCRA or
Section 91.1011, such broader meaning shall apply.
 
“Equity Interests” means shares of capital stock, partnership interests,
membership interests in a limited liability company, beneficial interests in a
trust or other equity ownership interests in a Person, and any warrants, options
or other rights entitling the holder thereof to purchase or acquire any such
Equity Interest.
 
“Equity Issuance” means the issuance, sale or other disposition after the
Effective Date by the Parent of its Equity Interests.
 
“ERISA” means the Employee Retirement Income Security Act of 1974, as amended,
and any successor statute.
 
“ERISA Affiliate” means each trade or business (whether or not incorporated)
which together with the Parent or any Subsidiary of the Parent would be deemed
to be a “single employer” within the meaning of section 4001(b)(1) of ERISA or
subsections (b), (c), (m) or (o) of section 414 of the Code.
 
“ERISA Event” means (a) a “Reportable Event” described in section 4043 of ERISA
and the regulations issued thereunder, (b) the withdrawal of the Parent, any
Loan Party or any ERISA Affiliate from a Plan during a plan year in which it was
a “substantial employer” as defined in section 4001(a)(2) of ERISA, (c) the
filing of a notice of intent to terminate a Plan or the treatment of a Plan
amendment as a termination under section 4041 of ERISA, (d) the institution of
proceedings to terminate a Plan by the PBGC, (e) receipt of a notice of
withdrawal liability pursuant to Section 4202 of ERISA, (f) any other event or
condition which might constitute grounds under section 4042 of ERISA for the
termination of, or the appointment of a trustee to administer, any Plan or (g)
on and after the effectiveness of the Pension Act, a determination that a Plan
is, or is expected to be, in “at risk” status (as defined n 303(i)(4) of ERISA
or 430(i)(4) of the Code).
 
“Eurodollar”, when used in reference to any Loan or Borrowing, refers to whether
such Loan, or the Loans comprising such Borrowing, are bearing interest at a
rate determined by reference to the Adjusted LIBO Rate.
 
“Event of Default” has the meaning assigned such term in Section 10.01.
 
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“Excepted Liens” means:  (a) Liens for taxes, assessments or other governmental
charges or levies which are not delinquent or which are being contested in good
faith by appropriate action and for which adequate reserves have been maintained
in accordance with GAAP; (b) Liens in connection with workers’ compensation,
unemployment insurance or other social security, old age pension or public
liability obligations which are not delinquent or which are being contested in
good faith by appropriate action and for which adequate reserves have been
maintained in accordance with GAAP; (c) statutory landlord’s liens, operators’,
vendors’, carriers’, warehousemen’s, repairmen’s, mechanics’, suppliers’,
workers’, materialmen’s, construction or other like Liens arising by operation
of law in the ordinary course of business or incident to the exploration,
development, operation and maintenance of Oil and Gas Properties each of which
is in respect of obligations that are not delinquent or which are being
contested in good faith by appropriate action and for which adequate reserves
have been maintained in accordance with GAAP; (d) contractual Liens which arise
in the ordinary course of business under operating agreements, joint venture
agreements, oil and gas partnership agreements, oil and gas leases, farm-out
agreements, division orders, contracts for the sale, transportation or exchange
of oil and natural gas, unitization and pooling declarations and agreements,
area of mutual interest agreements, overriding royalty agreements, marketing
agreements, processing agreements, net profits agreements, development
agreements, gas balancing or deferred production agreements, injection,
repressuring and recycling agreements, salt water or other disposal agreements,
seismic or other geophysical permits or agreements, and other agreements which
are usual and customary in the oil and gas business and are for claims which are
not delinquent or which are being contested in good faith by appropriate action
and for which adequate reserves have been maintained in accordance with GAAP,
provided that any such Lien referred to in this clause does not materially
impair the use of the Property covered by such Lien for the purposes for which
such Property is held by the Borrower or any Restricted Subsidiary or materially
impair the value of such Property subject thereto; (e) Liens arising solely by
virtue of any statutory or common law provision relating to banker’s liens,
rights of set-off or similar rights and remedies and burdening only deposit
accounts or other funds maintained with a depository or financial institution;
(f) easements, restrictions, servitudes, permits, conditions, covenants,
exceptions or reservations in any Property of the Borrower or any Restricted
Subsidiary for the purpose of roads, pipelines, transmission lines,
transportation lines, distribution lines for the removal of gas, oil, coal or
other minerals or timber, and other like purposes, or for the joint or common
use of real estate, rights of way, facilities and equipment, that do not secure
any monetary obligations and which in the aggregate do not materially impair the
use of such Property for the purposes of which such Property is held by the
Borrower or any or materially impair the value of such Property subject thereto;
(g) Liens on cash or securities pledged or subject to an escrow agreement to
secure plugging and abandoning obligations under the P&A Escrow Agreement,
performance of tenders, surety and appeal bonds, government contracts,
performance and return of money bonds, bids, trade contracts, leases, statutory
obligations, regulatory obligations and other obligations of a like nature
incurred in the ordinary course of business and (h) judgment and attachment
Liens not giving rise to an Event of Default, provided that any appropriate
legal proceedings which may have been duly initiated for the review of such
judgment shall not have been finally terminated or the period within which such
proceeding may be initiated shall not have expired and no action to enforce such
Lien has been commenced; provided, further that Liens described in clause (e)
shall remain “Excepted Liens” only for so long as no action to enforce such Lien
has been commenced, and no intention to subordinate the first priority Lien
granted in favor of the Administrative Agent and the Lenders is to be hereby
implied or expressed by the permitted existence of such Excepted Liens.
 
“Exchange Notes” means any securities issued in exchange for the Bridge Loans
having terms and conditions substantially as set forth in Exhibit H to the
Bridge Credit Agreement.
 
“Existing Convertible Notes” means approximately $215,870,000 of outstanding
convertible notes of the Parent consisting of (i) its $100,870,000 6% senior
convertible notes due 2008 and (ii) its $115,000,000 5 ½ % senior convertible
notes due 2011.
 
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“Federal Funds Effective Rate” means, for any day, the weighted average (rounded
upwards, if necessary, to the next 1/100 of 1%) of the rates on overnight
Federal funds transactions with members of the Federal Reserve System arranged
by Federal funds brokers, as published on the next succeeding Business Day by
the Federal Reserve Bank of New York, or, if such rate is not so published for
any day that is a Business Day, the average (rounded upwards, if necessary, to
the next 1/100 of 1%) of the quotations for such day for such transactions
received by the Administrative Agent from three Federal funds brokers of
recognized standing selected by it.
 
“Financial Officer” means, for any Person, any vice president, the chief
financial officer, principal accounting officer, treasurer or controller of such
Person.  Unless otherwise specified, all references herein to a Financial
Officer means a Financial Officer of the Parent.
 
“Financial Statements” means the financial statement or statements of the Parent
and its Consolidated Subsidiaries referred to in Section 7.04, including all
footnotes attached thereto.
 
“First Lien Debt” means the aggregate Revolving Credit Exposures of the Lenders
under this Agreement.
 
“Foreign Subsidiary” means any Restricted Subsidiary that is not a Domestic
Subsidiary.
 
“GAAP” means generally accepted accounting principles in the United States of
America as in effect from time to time subject to the terms and conditions set
forth in Section 1.05.
 
“Governmental Authority” means the government of the United States of America,
any other nation or any political subdivision thereof, whether state or local,
and any agency, authority, instrumentality, regulatory body, court, central bank
or other entity exercising executive, legislative, judicial, taxing, regulatory
or administrative powers or functions of or pertaining to government over any
Loan Party, any of their Properties, any Agent, the Issuing Bank or any Lender.
 
“Governmental Requirement” means any law, statute, code, ordinance, order,
determination, rule, regulation, judgment, decree, injunction, franchise,
permit, certificate, license, authorization or other directive or requirement,
whether now or hereinafter in effect, including, without limitation,
Environmental Laws, energy regulations and occupational, safety and health
standards or controls, of any Governmental Authority.
 
“Guarantors” means:
 
 
(a)
the Parent;

 
 
(b)
K-Mc Venture I LLC, a Delaware limited liability company;

 
 
(c)
Freeport Canadian Exploration Company, a Delaware corporation;

 
 
(d)
McMoRan International Inc., a Delaware corporation; and

 
 
(e)
each other Domestic Subsidiary which is a Wholly-Owned Subsidiary that
guarantees the Indebtedness pursuant to Section 8.14(b).

“Guaranty Agreement” means an agreement executed by the Guarantors in
substantially the form of Exhibit F-2 unconditionally guarantying on a joint and
several basis, payment of the Indebtedness, as the same may be amended, modified
or supplemented from time to time.
 
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“Hydrocarbon Interests” means all rights, titles, interests and estates now or
hereafter acquired in and to oil and gas leases, oil, gas and mineral leases, or
other liquid or gaseous hydrocarbon leases, mineral fee interests, overriding
royalty and royalty interests, net profit interests and production payment
interests, including any reserved or residual interests of whatever nature.
 
“Hydrocarbons” means oil, gas, casinghead gas, drip gasoline, natural gasoline,
condensate, distillate, liquid hydrocarbons, gaseous hydrocarbons and all
products refined or separated therefrom.
 
“Indebtedness” means any and all amounts owing or to be owing by any Loan Party
(whether direct or indirect (including those acquired by assumption), absolute
or contingent, due or to become due, now existing or hereafter arising): (a) to
the Administrative Agent, the Issuing Bank or any Lender under any Loan
Document; (b) to any Lender or any Affiliate of a Lender under any Swap
Agreement between any Loan Party and such Lender or Affiliate of a Lender while
such Person (or in the case of its Affiliate, the Person affiliated therewith)
is a Lender hereunder and (c) all renewals, extensions and/or rearrangements of
any of the above.
 
“Information Memorandum” means the Confidential Information Memorandum dated
June 2007 relating to the Parent, the Borrower and the Transactions.
 
“Initial Reserve Report” means the engineering information provided by the
Borrower and delivered to the Administrative Agent, with respect to the value of
the Oil and Gas Properties of the Borrower and its Restricted Subsidiaries as of
December 31, 2006 and with respect to the Acquisition Properties the merged
report of Ryder Scott Petroleum Company, L.P. and the Seller dated as of June
30, 2007.
 
“Intercreditor Agreement” means that certain Intercreditor Agreement in
substantially the form of Exhibit I among the Administrative Agent, the Borrower
and Guarantors and the agent on behalf of the lenders under the Bridge Loans
and/or the holders of the Exchange Notes, as the same may from time to time be
amended, modified, supplemented or restated in accordance with the provisions
thereof.
 
“Interest Election Request” means a request by the Borrower to convert or
continue a Borrowing in accordance with Section 2.04.
 
“Interest Payment Date” means (a) with respect to any ABR Loan, the last day of
each March, June, September and December and (b) with respect to any Eurodollar
Loan, the last day of the Interest Period applicable to the Borrowing of which
such Loan is a part and, in the case of a Eurodollar Borrowing with an Interest
Period of more than three months’ duration, each day prior to the last day of
such Interest Period that occurs at intervals of three months’ duration after
the first day of such Interest Period.
 
“Interest Period” means with respect to any Eurodollar Borrowing, the period
commencing on the date of such Borrowing and ending on the numerically
corresponding day in the calendar month that is one, two, three or six months
(or, if available to each Lender, periods of less than one month and periods of
nine or twelve months) thereafter, as the Borrower may elect; provided, that (a)
if any Interest Period would end on a day other than a Business Day, such
Interest Period shall be extended to the next succeeding Business Day unless
such next succeeding Business Day would fall in the next calendar month, in
which case such Interest Period shall end on the next preceding Business Day,
(b) no Interest Period may have a term which would extend beyond the Maturity
Date, (c) no Interest Period shall extend beyond the date of scheduled Aggregate
Maximum Credit Amount reductions if repayments of any Loans are required on such
dates, and (d) any Interest Period pertaining to a Eurodollar Borrowing that
commences on the last Business Day of a calendar month (or on a day for which
there is no numerically
 
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corresponding day in the last calendar month of such Interest Period) shall end
on the last Business Day of the last calendar month of such Interest
Period.  For purposes hereof, the date of a Borrowing initially shall be the
date on which such Borrowing is made and thereafter shall be the effective date
of the most recent conversion or continuation of such Borrowing.
 
“Interim Assignment Properties” means those certain Acquisition Properties
listed on Schedule 7.16 for which the Seller has beneficial title but not
obtained all conveyance documents necessary to vest record legal title in itself
and as a result which the Borrower will not have record legal title vested in it
as of the Effective Date.
 
“Interim Redetermination” has the meaning assigned such term in Section 2.07(b).
 
“Interim Redetermination Date” means the date on which a Borrowing Base that has
been redetermined pursuant to an Interim Redetermination becomes effective as
provided in Section 2.07(d).
 
“Investment” means, for any Person: (a) the acquisition (whether for cash,
Property, services or securities or otherwise) of Equity Interests of any other
Person or any agreement to make any such acquisition (including, without
limitation, any “short sale” or any sale of any securities at a time when such
securities are not owned by the Person entering into such short sale); (b) the
making of any advance, loan or capital contribution to, the assumption of Debt
of, the purchase or other acquisition of any other Debt of or equity
participation or interest in, or other extension of credit to, any other Person
(including the purchase of Property from another Person subject to an
understanding or agreement, contingent or otherwise, to resell such Property to
such Person for any value other than the then fair market value of such
Property, but excluding any such advance, loan or extension of credit having a
term not exceeding ninety (90) days representing the purchase price of
inventory, material, equipment or supplies sold by such Person in the ordinary
course of business); (c) the purchase or acquisition (in one or a series of
transactions) of Property of another Person that constitutes a business unit or
(d) the entering into of any guarantee of, or other contingent obligation
(including the deposit of any Equity Interests to be sold) with respect to, Debt
or other liability of any other Person and (without duplication) any amount
committed to be advanced, lent or extended to such Person.
 
“Issuing Bank” means JPMorgan, in its capacity as the issuer of Letters of
Credit hereunder, and its successors in such capacity as provided in Section
2.08(i).  The Issuing Bank may, in its discretion, arrange for one or more
Letters of Credit to be issued by Affiliates of the Issuing Bank, in which case
the term “Issuing Bank” shall include any such Affiliate with respect to Letters
of Credit issued by such Affiliate.
 
“LC Commitment” at any time means Two Hundred Million Dollars ($200,000,000.00).
 
“LC Disbursement” means a payment made by the Issuing Bank pursuant to a Letter
of Credit.
 
“LC Exposure” means, at any time, the sum of (a) the aggregate undrawn amount of
all outstanding Letters of Credit at such time plus (b) the aggregate amount of
all LC Disbursements that have not yet been reimbursed by or on behalf of the
Borrower at such time.  The LC Exposure of any Lender at any time shall be its
Applicable Percentage of the total LC Exposure at such time.
 
“Lenders” means the Persons listed on Annex I and any Person that shall have
become a party hereto pursuant to an Assignment and Assumption, other than any
such Person that ceases to be a party hereto pursuant to an Assignment and
Assumption; provided, that unless the context otherwise requires, each reference
herein to the Lenders shall be deemed to include any Conduit Lender.
 
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“Letter of Credit” means any letter of credit issued pursuant to this Agreement,
including without limitation the PPR Letter of Credit.
 
“Letter of Credit Agreements” means all letter of credit applications and other
agreements (including any amendments, modifications or supplements thereto)
submitted by the Borrower, or entered into by the Borrower, with the Issuing
Bank relating to any Letter of Credit.
 
“LIBO Rate” means, with respect to each day during each Interest Period
pertaining to a Eurodollar Loan, the rate per annum determined on the basis of
the rate for deposits in dollars for a period equal to such Interest Period
commencing on the first day of such Interest Period appearing on the Reuters
Screen LIBOR01 Page as of 11:00 A.M., London time, two Business Days prior to
the beginning of such Interest Period.  In the event that such rate does not
appear on such page (or otherwise on such screen), the “LIBO Rate” shall be
determined by reference to such other comparable publicly available service for
displaying eurodollar rates as may be selected by the Administrative Agent or,
in the absence of such availability, by reference to the rate at which the
Administrative Agent is offered dollar deposits at or about 11:00 A.M., London
time, two Business Days prior to the beginning of such Interest Period in the
interbank eurodollar market where its eurodollar and foreign currency and
exchange operations are then being conducted for delivery on the first day of
such Interest Period for the number of days comprised therein.
 
“Lien” means  any interest in Property securing an obligation owed to, or a
claim by, a Person other than the owner of the Property, whether such interest
is based on the common law, statute or contract, and whether such obligation or
claim is fixed or contingent, and including but not limited to (a) the lien or
security interest arising from a mortgage, encumbrance, pledge, security
agreement, conditional sale or trust receipt or a lease, consignment or bailment
for security purposes or (b) production payments and the like payable out of Oil
and Gas Properties.  The term “Lien” shall include easements, restrictions,
servitudes, permits, conditions, covenants, exceptions or reservations. For the
purposes of this Agreement, the Parent and its Restricted Subsidiaries shall be
deemed to be the owner of any Property which it has acquired or holds subject to
a conditional sale agreement, or leases under a financing lease or other
arrangement pursuant to which title to the Property has been retained by or
vested in some other Person in a transaction intended to create a financing.
 
“Loan Documents” means this Agreement, the Notes, the Letter of Credit
Agreements, the Letters of Credit and the Security Instruments.
 
“Loan Party” means the Parent, the Borrower and any other Guarantor.
 
“Loans” means the loans made by the Lenders to the Borrower pursuant to this
Agreement.
 
“Majority Lenders” means, at any time while no Loans or LC Exposure is
outstanding, Lenders having greater than fifty percent (50%) of the Aggregate
Maximum Credit Amounts; and at any time while any Loans or LC Exposure is
outstanding, Lenders holding greater than fifty percent (50%) of the outstanding
aggregate principal amount of the Loans or participation interests in Letters of
Credit (without regard to any sale by a Lender of a participation in any Loan
under Section 12.04(c)).
 
“Material Adverse Effect” means a material adverse change in, or material
adverse effect on (a) the business, operations or financial condition of the
Parent and the Loan Parties taken as a whole, (b) the ability of any Loan Party
to perform any of its obligations under any Loan Document to which it is a
party, (c) the validity or enforceability of any Loan Document or (d) the rights
and remedies of or benefits available to the Administrative Agent, any other
Agent, the Issuing Bank or any Lender under the Loan Documents.
 
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“Material Indebtedness” means Debt (other than the Loans and Letters of Credit),
or obligations in respect of one or more Swap Agreements, of any one or more of
any Loan Party in an aggregate principal amount exceeding $25,000,000.  For
purposes of determining Material Indebtedness, the “principal amount” of the
obligations of any Loan Party in respect of any Swap Agreement at any time shall
be the Swap Termination Value.
 
“Maturity Date” means August 6, 2012.
 
“Maximum Credit Amount” means, as to each Lender, the amount set forth opposite
such Lender’s name on Annex I under the caption “Maximum Credit Amounts”, as the
same may be (a) reduced or terminated from time to time in connection with a
reduction or termination of the Aggregate Maximum Credit Amounts pursuant to
Section 2.06, or (b) modified from time to time pursuant to any assignment
permitted by Section 12.04(b). As of the Effective Date, the aggregate Maximum
Credit Amounts of the Lenders are $700,000,000.
 
“Moody’s” means Moody’s Investors Service, Inc. and any successor thereto that
is a nationally recognized rating agency.
 
“Mortgaged Property” means any Property owned by the Borrower or any Guarantor
which is subject to the Liens existing and to exist under the terms of the
Security Instruments.
 
“Multiemployer Plan” means a Plan which is a multiemployer plan as defined in
section 3(37) or 4001 (a)(3) of ERISA.
 
“New Borrowing Base Notice” has the meaning assigned such term in Section
2.07(d).
 
“Non-Recourse Debt” means any Debt of any Unrestricted Subsidiary, in each case
in respect of which: (a) the holder or holders thereof (i) shall have recourse
only to, and shall have the right to require the obligations of such
Unrestricted Subsidiary to be performed, satisfied, and paid only out of, the
Property of such Unrestricted Subsidiary and/or one or more of its Subsidiaries
(but only to the extent that such Subsidiaries are Unrestricted Subsidiaries)
and/or any other Person (other than the Parent, the Borrower and/or any
Restricted Subsidiary) and (ii) shall have no direct or indirect recourse
(including by way of guaranty, support or indemnity) to the Parent, the Borrower
or any Restricted Subsidiary or to any of the Property of the Parent, the
Borrower or any Restricted Subsidiary, whether for principal, interest, fees,
expenses or otherwise; and (b) the terms and conditions relating to the
non-recourse nature of such Debt are in form and substance reasonably acceptable
to the Administrative Agent.
 
“Non-US Lender” has the meaning set forth in Section 1.01(d).
 
“Notes” means the promissory notes, if any, of the Borrower described in Section
2.02(d) and being substantially in the form of Exhibit A, together with all
amendments, modifications, replacements, extensions and rearrangements thereof.
 
“Oil and Gas Properties” means (a) Hydrocarbon Interests; (b) the Properties now
or hereafter pooled or unitized with Hydrocarbon Interests; (c) all presently
existing or future unitization, pooling agreements and declarations of pooled
units and the units created thereby (including without limitation all units
created under orders, regulations and rules of any Governmental Authority) which
may affect all or any portion of the Hydrocarbon Interests; (d) all operating
agreements, contracts and other agreements, including production sharing
contracts and agreements, which relate to any of the Hydrocarbon Interests or
the production, sale, purchase, exchange or processing of Hydrocarbons from or
attributable to such Hydrocarbon Interests; (e) all Hydrocarbons in and under
and which may be produced and saved or attributable to the Hydrocarbon
Interests, including all oil in tanks, and all rents, issues, profits, proceeds,
 
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products, revenues and other incomes from or attributable to the Hydrocarbon
Interests; (f) all tenements, hereditaments, appurtenances and Properties in any
manner appertaining, belonging, affixed or incidental to the Hydrocarbon
Interests and (g) all Properties, rights, titles, interests and estates
described or referred to above, including any and all Property, real or
personal, now owned or hereinafter acquired and situated upon, used, held for
use or useful in connection with the operating, working or development of any of
such Hydrocarbon Interests or Property (excluding drilling rigs, automotive
equipment, rental equipment or other personal Property which may be on such
premises for the purpose of drilling a well or for other similar temporary uses)
and including any and all oil wells, gas wells, injection wells or other wells,
buildings, structures, fuel separators, liquid extraction plants, plant
compressors, pumps, pumping units, field gathering systems, tanks and tank
batteries, fixtures, valves, fittings, machinery and parts, engines, boilers,
meters, apparatus, equipment, appliances, tools, implements, cables, wires,
towers, casing, tubing and rods, surface leases, rights-of-way, easements and
servitudes together with all additions, substitutions, replacements, accessions
and attachments to any and all of the foregoing.
 
“P&A Escrow Agreement” means that certain P&A Escrow Agreement dated as of
August 6, 2007 among the Borrower and the Seller.
 
“Parent Loan” means the intercompany loan agreement by and between the Borrower,
as borrower, and the Parent, as lender, dated as of April 17, 2006.
 
“Participant” has the meaning set forth in Section 12.04(c)(i).
 
“PBGC” means the Pension Benefit Guaranty Corporation, or any successor thereto.
 
“Pension Act”: means the Pension Protection Act of 2006, as it presently exists
or as it may be amended from time to time.
 
“Permitted Refinancing Debt” means Debt (for purposes of this definition, “new
Debt”) incurred in exchange for, or proceeds of which are used to refinance, all
of any other Debt (the “Refinanced Debt”); provided that (a) such new Debt is in
an aggregate principal amount not in excess of the sum of (i) the aggregate
principal amount then outstanding of the Refinanced Debt (or, if the Refinanced
Debt is exchanged or acquired for an amount less than the principal amount
thereof to be due and payable upon a declaration of acceleration thereof, such
lesser amount) and (ii) an amount necessary to pay any fees and expenses,
including premiums, related to such exchange or refinancing; (b) such new Debt
has a stated maturity no earlier than the stated maturity of the Refinanced Debt
and an average life no shorter than the average life of the Refinanced Debt;
(c) such new Debt (and any guarantees thereof) is secured by no more collateral
than the collateral which secured, or is permitted by the terms of this
Agreement to secure, the Refinanced Debt; (d) the obligor(s) in respect of such
new Debt shall be the same as the obligor(s) in respect of such Refinanced Debt
and if such Refinanced Debt is not guarantied by any Loan Party, then such new
Debt shall also not be guarantied by any Loan Party; and (e) the Liens, if any,
securing such new Debt are subordinated to the Liens securing the Indebtedness
(or, if applicable, the Guaranty Agreement) to at least the same extent as the
Liens securing the Refinanced Debt.
 
“Person” means any natural person, corporation, limited liability company,
trust, joint venture, association, company, partnership, Governmental Authority
or other entity.
 
“Plan” means any employee pension benefit plan, as defined in section 3(2) of
ERISA, which (a) is currently or hereafter sponsored, maintained or contributed
to by a Loan Party or an ERISA Affiliate or (b) was at any time during the six
calendar years preceding the date hereof, sponsored, maintained or contributed
to by a Loan Party or an ERISA Affiliate.
 
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“PPR Letter of Credit” means the Letter of Credit issued pursuant to Section
2.08(k).
 
“Preferential Purchase Right Properties” means each of the Oil and Gas
Properties listed in Schedule 1.02(b).
 
“Prime Rate” means the rate of interest per annum publicly announced from time
to time by JPMorgan as its prime rate in effect at its principal office in New
York City; each change in the Prime Rate shall be effective from and including
the date such change is publicly announced as being effective.  Such rate is set
by the Administrative Agent as a general reference rate of interest, taking into
account such factors as the Administrative Agent may deem appropriate; it being
understood that many of the Administrative Agent’s commercial or other loans are
priced in relation to such rate, that it is not necessarily the lowest or best
rate actually charged to any customer and that the Administrative Agent may make
various commercial or other loans at rates of interest having no relationship to
such rate.
 
“Property” means any interest in any kind of property or asset, whether real,
personal or mixed, or tangible or intangible, including, without limitation,
cash, securities, accounts and contract rights.
 
“Proposed Borrowing Base” has the meaning assigned to such term in Section
2.07(c)(i).
 
“Proposed Borrowing Base Notice” has the meaning assigned to such term in
Section 2.07(c)(ii).
 
“Redemption” means with respect to any Debt, the repurchase, redemption,
prepayment, repayment, defeasance or any other acquisition or retirement for
value (or the segregation of funds with respect to any of the foregoing) of such
Debt.  “Redeem” has the correlative meaning thereto.
 
“Redetermination Date” means, with respect to any Scheduled Redetermination or
any Interim Redetermination, the date that the redetermined Borrowing Base
related thereto becomes effective pursuant to Section 2.07(d).
 
“Register” has the meaning assigned such term in Section 12.04(b)(iv).
 
“Regulation D” means Regulation D of the Board, as the same may be amended,
supplemented or replaced from time to time.
 
“Related Parties” means, with respect to any specified Person, such Person’s
Affiliates and the respective directors, officers, employees, agents and
advisors (including attorneys, accountants and experts) of such Person and such
Person’s Affiliates.
 
“Remedial Work” has the meaning assigned such term in Section 8.10(a).
 
“Required Lenders” means, at any time while no Loans or LC Exposure is
outstanding, Lenders having at least sixty-six and two thirds percent (66-2/3%)
of the Aggregate Maximum Credit Amounts; and at any time while any Loans or LC
Exposure is outstanding, Lenders holding at least sixty-six and two thirds
percent (66-2/3%) of the outstanding aggregate principal amount of the Loans or
participation interests in Letters of Credit (without regard to any sale by a
Lender of a participation in any Loan under Section 12.04(c)).
 
“Reserve Report” means the Initial Reserve Report and each other report setting
forth, as of each January 1st or July 1st (or such other date in the event of an
Interim Redetermination), the oil and gas reserves attributable to the Oil and
Gas Properties of the Borrower and the Restricted Subsidiaries, together with a
projection of the rate of production and future net income, taxes, operating
expenses and
 
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capital expenditures with respect thereto as of such date based upon the
economic assumptions consistent with the Administrative Agent’s lending
requirements at the time.
 
“Responsible Officer” means, as to any Person, the Chief Executive Officer, the
President, any Financial Officer or any Vice President of such Person.  Unless
otherwise specified, all references to a Responsible Officer herein shall mean a
Responsible Officer of the Parent.
 
“Restricted Payment” means any dividend or other distribution (whether in cash,
securities or other Property) with respect to any Equity Interests in any
Person, or any payment (whether in cash, securities or other Property),
including any sinking fund or similar deposit, on account of the purchase,
redemption, retirement, acquisition, cancellation or termination of any such
Equity Interests or any option, warrant or other right to acquire any such
Equity Interests.
 
“Restricted Subsidiary” means any direct or indirect Subsidiary of the Parent
that is not an Unrestricted Subsidiary.
 
“Revolving Credit Exposure” means, with respect to any Lender at any time, the
sum of the outstanding principal amount of such Lender’s Loans and its LC
Exposure at such time.
 
“Scheduled Redetermination” has the meaning assigned such term in Section
2.07(b).
 
“Scheduled Redetermination Date” means the date on which a Borrowing Base that
has been redetermined pursuant to a Scheduled Redetermination becomes effective
as provided in Section 2.07(d).
 
“SEC” means the Securities and Exchange Commission or any successor Governmental
Authority.
 
“Second Lien Notes” means the $100,000,000 Second Lien Term Notes issued
pursuant to the Second Lien Term Loan Agreement.
 
“Second Lien Term Loan Agreement” means that certain Second Lien Term Loan
Agreement dated as of January 19, 2007 among the Borrower, JPMorgan Chase Bank,
N.A., as administrative agent and the lenders party thereto.
 
“Securities Act” means the Securities Act of 1933, as amended from time to time.
 
“Security Instruments” means the Guaranty Agreement, the Intercreditor Agreement
(if and when executed), mortgages, deeds of trust and other agreements,
instruments or certificates described or referred to in Exhibit F-1, and any and
all other agreements, instruments, consents or certificates now or hereafter
executed and delivered by the Parent, the Borrower or any other Person (other
than Swap Agreements with the Lenders or any Affiliate of a Lender or
participation or similar agreements between any Lender and any other lender or
creditor with respect to any Indebtedness pursuant to this Agreement) in
connection with, or as security for the payment or performance of the
Indebtedness, the Notes, this Agreement, or reimbursement obligations under the
Letters of Credit, as such agreements may be amended, modified, supplemented or
restated from time to time.
 
“Seller” means Newfield Exploration Company, a Delaware corporation.
 
“Senior Notes” means (a) any senior, senior subordinated or subordinated Debt
issued by the Parent or the Borrower (and any guarantees thereof by any Loan
Party) on or after the Effective Date under Section 9.02(j) which is unsecured
and any Permitted Refinancing Debt in respect thereof, and (b)
 
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any convertible Debt issued by the Parent (and any guarantees thereof by any
Loan Party) on or after the Effective Date under Section 9.02(j) which is
unsecured and any Permitted Refinancing Debt in respect thereof.
 
“Significant Subsidiary” has the meaning set forth in the indentures relating to
the Existing Convertible Notes.
 
“S&P” means Standard & Poor’s Ratings Group, a division of The McGraw-Hill
Companies, Inc., and any successor thereto that is a nationally recognized
rating agency.
 
“Statutory Reserve Rate” means a fraction (expressed as a decimal), the
numerator of which is the number one and the denominator of which is the number
one minus the aggregate of the maximum reserve percentages (including any
marginal, special, emergency or supplemental reserves) expressed as a decimal
established by the Board to which the Administrative Agent is subject, with
respect to the Adjusted LIBO Rate, for eurocurrency funding (currently referred
to as “Eurocurrency Liabilities” in Regulation D of the Board).  Such reserve
percentages shall include those imposed pursuant to such Regulation
D.  Eurodollar Loans shall be deemed to constitute eurocurrency funding and to
be subject to such reserve requirements without benefit of or credit for
proration, exemptions or offsets that may be available from time to time to any
Lender under such Regulation D or any comparable regulation.  The Statutory
Reserve Rate shall be adjusted automatically on and as of the effective date of
any change in any reserve percentage.
 
“Subsidiary” means: (a) any Person of which at least a majority of the
outstanding Equity Interests having by the terms thereof ordinary voting power
to elect a majority of the board of directors, manager or other governing body
of such Person (irrespective of whether or not at the time Equity Interests of
any other class or classes of such Person shall have or might have voting power
by reason of the happening of any contingency) is at the time directly or
indirectly owned or controlled by the Parent and/or one or more of its
Subsidiaries and (b) any partnership of which the Parent or any Loan Party is a
general partner.  Unless otherwise indicated herein, each reference to the term
“Subsidiary” shall mean a direct or indirect Subsidiary of the Parent.
 
“Swap Agreement” means any agreement with respect to any swap, forward, future
or derivative transaction or option or similar agreement, whether exchange
traded, “over-the-counter” or otherwise, involving, or settled by reference to,
one or more interest rates, currencies, commodities, equity or debt instruments
or securities, or economic, financial or pricing indices or measures of
economic, financial or pricing risk or value or any similar transaction or any
combination of these transactions; provided that no phantom stock or similar
plan providing for payments only on account of services provided by current or
former directors, officers, employees or consultants of any Loan Party shall be
a Swap Agreement.
 
“Swap Termination Value” means, in respect of any one or more Swap Agreements,
after taking into account the effect of any legally enforceable netting
agreement relating to such Swap Agreements, (a) for any date on or after the
date such Swap Agreements have been closed out and termination value(s)
determined in accordance therewith, such termination value(s) and (b) for any
date prior to the date referenced in clause (a), the amount(s) determined as the
mark-to-market value(s) for such Swap Agreements, as determined by the
counterparties to such Swap Agreements.
 
“Synthetic Leases” means, in respect of any Person, all leases which shall have
been, or should have been, in accordance with GAAP, treated as operating leases
on the financial statements of the Person liable (whether contingently or
otherwise) for the payment of rent thereunder and which were properly treated as
indebtedness for borrowed money for purposes of U.S. federal income taxes, if
the lessee in respect thereof is obligated to either purchase for an amount in
excess of, or pay upon early termination
 
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an amount in excess of, 80% of the residual value of the Property subject to
such operating lease upon expiration or early termination of such lease.
 
“Termination Date” means the earlier of the Maturity Date and the date of
termination of the Commitments.
 
“Title Indemnity Agreement” means that certain Title Indemnity Agreement dated
as of August 6, 2007 among the Borrower and the Seller.
 
“Total Debt” means, at any date, all Debt for borrowed money of the Parent and
the Consolidated Subsidiaries on a consolidated basis.
 
“Transactions” means, with respect to (a) the Borrower, the execution, delivery
and performance by the Borrower of this Agreement and each other Loan Document
and Acquisition Document to which it is a party, the Acquisition, the borrowing
of Loans, the use of the proceeds thereof and the issuance of Letters of Credit
hereunder, and the grant of Liens by the Borrower on Mortgaged Properties and
other Properties pursuant to the Security Instruments and (b) each Guarantor,
the execution, delivery and performance by such Guarantor of each Loan Document
and Acquisition Document to which it is a party, the Acquisition, the
guaranteeing of the Indebtedness and the other obligations under the Guaranty
Agreement by such Guarantor and such Guarantor’s grant of the security interests
and provision of collateral under the Security Instruments, and the grant of
Liens by such Guarantor on Mortgaged Properties and other Properties pursuant to
the Security Instruments.
 
“Transferee” means any Assignee or Participant.
 
“Transition Services Agreement” means that certain Transition Services Agreement
dated as of August 6, 2007 among the Borrower and the Seller.
 
“Type”, when used in reference to any Loan or Borrowing, refers to whether the
rate of interest on such Loan, or on the Loans comprising such Borrowing, is
determined by reference to the Alternate Base Rate or the Adjusted LIBO Rate.
 
“Unrestricted Subsidiary” means Freeport-McMoRan Energy, LLC, a Delaware limited
liability company, any other Subsidiary of the Parent designated as such on
Schedule 7.14 and each other Subsidiary of any of the foregoing.
 
“Wholly-Owned Subsidiary” means any Restricted Subsidiary of which all of the
outstanding Equity Interests (other than any directors’ qualifying shares
mandated by applicable law), on a fully-diluted basis, are owned by the Parent
and/or one or more of the Wholly-Owned Subsidiaries.
 
Section 1.03  Types of Loans and Borrowings.  For purposes of this Agreement,
Loans and Borrowings, respectively, may be classified and referred to by Type
(e.g., a “Eurodollar Loan” or a “Eurodollar Borrowing”).
 
Section 1.04  Terms Generally; Rules of Construction.  The definitions of terms
herein shall apply equally to the singular and plural forms of the terms
defined.  Whenever the context may require, any pronoun shall include the
corresponding masculine, feminine and neuter forms.  The words “include”,
“includes” and “including” shall be deemed to be followed by the phrase “without
limitation”.  The word “will” shall be construed to have the same meaning and
effect as the word “shall”.  Unless the context requires otherwise (a) any
definition of or reference to any agreement, instrument or other document herein
shall be construed as referring to such agreement, instrument or other document
as from time to time amended, supplemented or otherwise modified (subject to any
restrictions on such amendments, supplements or modifications set forth in the
Loan Documents), (b) any reference herein to any law shall
 
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be construed as referring to such law as amended, modified, codified or
reenacted, in whole or in part, and in effect from time to time, (c) any
reference herein to any Person shall be construed to include such Person’s
successors and assigns (subject to the restrictions contained in the Loan
Documents), (d) the words “herein”, “hereof” and “hereunder”, and words of
similar import, shall be construed to refer to this Agreement in its entirety
and not to any particular provision hereof, (e) with respect to the
determination of any time period, the word “from” means “from and including” and
the word “to” means “to and including” and (f) any reference herein to Articles,
Sections, Annexes, Exhibits and Schedules shall be construed to refer to
Articles and Sections of, and Annexes, Exhibits and Schedules to, this
Agreement.  No provision of this Agreement or any other Loan Document shall be
interpreted or construed against any Person solely because such Person or its
legal representative drafted such provision.
 
Section 1.05  Accounting Terms and Determinations; GAAP.  Unless otherwise
specified herein, all terms of an accounting or financial nature shall be
construed in accordance with GAAP, as in effect from time to time; provided
that, if the Borrower or the Parent notifies the Administrative Agent that the
Borrower or the Parent requests an amendment to any provision hereof to
eliminate the effect of any change occurring after the date hereof in GAAP or in
the application thereof on the operation of such provision (or if the
Administrative Agent notifies the Borrower or the Parent that the Required
Lenders request an amendment to any provision hereof for such purpose),
regardless of whether any such notice is given before or after such change in
GAAP or in the application thereof, then such provision shall be interpreted on
the basis of GAAP as in effect and applied immediately before such change shall
have become effective until  such notice shall have been withdrawn or such
provision  amended in accordance herewith.
 
ARTICLE II 
The Credits
 
Section 2.01  Commitments.  Subject to the terms and conditions set forth
herein, each Lender agrees to make Loans to the Borrower during the Availability
Period in an aggregate principal amount that will not result in (a) such
Lender’s Revolving Credit Exposure exceeding such Lender’s Commitment or (b) the
total Revolving Credit Exposures exceeding the total Commitments.  Within the
foregoing limits and subject to the terms and conditions set forth herein, the
Borrower may borrow, repay and reborrow the Loans.  On the Effective Date (or as
soon as practicable with respect to (iii)):
 
(i)  the Borrower shall pay all accrued and unpaid commitment fees, break
funding fees under Section 5.02 and all other fees that are outstanding under
the Existing Credit Agreement for the account of each “Lender” under the
Existing Credit Agreement;
 
(ii)  each “ABR Loan” and “Eurodollar Loan” outstanding under the Existing
Credit Agreement shall be deemed to be repaid with the proceeds of a new ABR
Loan or Eurodollar Loan, as applicable, under this Agreement;
 
(iii)  the Administrative Agent shall use reasonable efforts to cause such
“Lender” under the Existing Credit Agreement to deliver to the Borrower as soon
as practicable after the Effective Date the Note issued by the Borrower to it
under the Existing Credit Agreement, marked “canceled” or otherwise similarly
defaced;
 
(iv)  each Letter of Credit issued and outstanding under the Existing Credit
Agreement (if any) shall be deemed issued under this Agreement without the
payment of additional fees; and
 
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(v)  the Existing Credit Agreement and the commitments thereunder shall be
superceded by this Agreement and such commitments shall terminate.
 
It is the intent of the parties hereto that this Agreement not constitute a
novation of the obligations and liabilities existing under the Existing Credit
Agreement or evidence repayment of any such obligations and liabilities and that
this Agreement amend and restate in its entirety the Existing Credit Agreement
and re-evidence the obligations of the Borrower outstanding thereunder.
 
Section 2.02  Loans and Borrowings.
 
(a)  Borrowings; Several Obligations.  Each Loan shall be made as part of a
Borrowing consisting of Loans made by the Lenders ratably in accordance with
their respective Commitments.  The failure of any Lender to make any Loan
required to be made by it shall not relieve any other Lender of its obligations
hereunder; provided that the Commitments are several and no Lender shall be
responsible for any other Lender’s failure to make Loans as required.
 
(b)  Types of Loans.  Subject to Section 3.03, each Borrowing shall be comprised
entirely of ABR Loans or Eurodollar Loans as the Borrower may request in
accordance herewith.  Each Lender at its option may make any Eurodollar Loan by
causing any domestic or foreign branch or Affiliate of such Lender to make such
Loan; provided that any exercise of such option shall not affect the obligation
of the Borrower to repay such Loan in accordance with the terms of this
Agreement.
 
(c)  Minimum Amounts; Limitation on Number of Borrowings.  At the commencement
of each Interest Period for any Eurodollar Borrowing, such Borrowing shall be in
an aggregate amount that is an integral multiple of $500,000 and not less than
$1,000,000.  At the time that each ABR Borrowing is made, such Borrowing shall
be in an aggregate amount that is an integral multiple of $250,000 and not less
than $1,000,000.  Borrowings of more than one Type may be outstanding at the
same time, provided that there shall not at any time be more than a total of ten
(10) Eurodollar Borrowings outstanding.  Notwithstanding any other provision of
this Agreement, the Borrower shall not be entitled to request, or to elect to
convert or continue, any Borrowing if the Interest Period requested with respect
thereto would end after the Maturity Date.
 
(d)  Notes.  If a Lender shall make a written request to the Administrative
Agent and the Borrower to have its Loans evidenced by a promissory note, then
the Borrower shall execute and deliver a single promissory note of the Borrower
in substantially the form of Exhibit A, payable to the order of such Lender in a
principal amount equal to its Maximum Credit Amount as then in effect, and
otherwise duly completed.  The date, amount, Type, interest rate and, if
applicable, Interest Period of each Loan made by each Lender, and all payments
made on account of the principal thereof, may be recorded by such Lender on its
books for its Note, and, prior to any transfer, may be endorsed by such Lender
on a schedule attached to such Note or any continuation thereof or on any
separate record maintained by such Lender; provided that the failure to make any
such notation or to attach a schedule shall not affect any Lender’s or the
Borrower’s rights or obligations in respect of such Loans or affect the validity
of such transfer by any Lender of its Note.
 
Section 2.03  Requests for Borrowings  To request a Borrowing, the Borrower
shall notify the Administrative Agent of such request by telephone (a) in the
case of a Eurodollar Borrowing, not later than 12:00 noon, New York City time,
three Business Days before the date of the proposed Borrowing or (b) in the case
of an ABR Borrowing, not later than 12:00 noon, New York City time, on the date
of the proposed Borrowing; provided that no such notice shall be required for
any deemed request of an ABR Borrowing to finance the reimbursement of an LC
Disbursement as provided in Section 2.08(e).  Each such telephonic Borrowing
Request shall be irrevocable and shall be confirmed promptly by hand
 
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delivery or telecopy to the Administrative Agent of a written Borrowing Request
in substantially the form of Exhibit B and signed by the Borrower.  Each such
telephonic and written Borrowing Request shall specify the following information
in compliance with Section 2.02:
 
(i)  the aggregate amount of the requested Borrowing;
 
(ii)  the date of such Borrowing, which shall be a Business Day;
 
(iii)  whether such Borrowing is to be an ABR Borrowing or a Eurodollar
Borrowing;
 
(iv)  in the case of a Eurodollar Borrowing, the initial Interest Period to be
applicable thereto, which shall be a period contemplated by the definition of
the term “Interest Period”;
 
(v)  the amount of the then effective Borrowing Base and the then effective
Conforming Borrowing Base (if then applicable), the current total Revolving
Credit Exposures (without regard to the requested Borrowing) and the pro forma
total Revolving Credit Exposures (giving effect to the requested Borrowing); and
 
(vi)  the location and number of the Borrower’s account to which funds are to be
disbursed, which shall comply with the requirements of Section 2.05.
 
After April 1, 2009 (unless the Conforming Borrowing Base remains in effect),
information regarding the Conforming Borrowing Base may be omitted from
subsequent Borrowing Requests.
 
If no election as to the Type of Borrowing is specified, then the requested
Borrowing shall be an ABR Borrowing.  If no Interest Period is specified with
respect to any requested Eurodollar Borrowing, then the Borrower shall be deemed
to have selected an Interest Period of one month’s duration.  Each Borrowing
Request shall constitute a representation that the amount of the requested
Borrowing shall not cause the total Revolving Credit Exposures to exceed the
total Commitments (i.e., the lesser of the Aggregate Maximum Credit Amounts and
the then effective Borrowing Base).
 
Promptly following receipt of a Borrowing Request in accordance with this
Section 2.03, the Administrative Agent shall advise each Lender of the details
thereof and of the amount of such Lender’s Loan to be made as part of the
requested Borrowing.
 
Section 2.04  Interest Elections.
 
(a)  Conversion and Continuance.  Each Borrowing initially shall be of the Type
specified in the applicable Borrowing Request and, in the case of a Eurodollar
Borrowing, shall have an initial Interest Period as specified in such Borrowing
Request.  Thereafter, the Borrower may elect to convert such Borrowing to a
different Type or to continue such Borrowing and, in the case of a Eurodollar
Borrowing, may elect Interest Periods therefor, all as provided in this Section
2.04.  The Borrower may elect different options with respect to different
portions of the affected Borrowing, in which case each such portion shall be
allocated ratably among the Lenders holding the Loans comprising such Borrowing,
and the Loans comprising each such portion shall be considered a separate
Borrowing.
 
(b)  Interest Election Requests.  To make an election pursuant to this Section
2.04, the Borrower shall notify the Administrative Agent of such election by
telephone by the time that a Borrowing Request would be required under Section
2.03 if the Borrower were requesting a Borrowing of the Type resulting from such
election to be made on the effective date of such election.  Each such
telephonic
 
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Interest Election Request shall be irrevocable and shall be confirmed promptly
by hand delivery or telecopy to the Administrative Agent of a written Interest
Election Request in substantially the form of Exhibit C and signed by the
Borrower.
 
(c)  Information in Interest Election Requests.  Each telephonic and written
Interest Election Request shall specify the following information in compliance
with Section 2.02:
 
(i)  the Borrowing to which such Interest Election Request applies and, if
different options are being elected with respect to different portions thereof,
the portions thereof to be allocated to each resulting Borrowing (in which case
the information to be specified pursuant to Section 2.04(c)(iii) and (iv) shall
be specified for each resulting Borrowing);
 
(ii)  the effective date of the election made pursuant to such Interest Election
Request, which shall be a Business Day;
 
(iii)  whether the resulting Borrowing is to be an ABR Borrowing or a Eurodollar
Borrowing; and
 
(iv)  if the resulting Borrowing is a Eurodollar Borrowing, the Interest Period
to be applicable thereto after giving effect to such election, which shall be a
period contemplated by the definition of the term “Interest Period”.
 
If any such Interest Election Request requests a Eurodollar Borrowing but does
not specify an Interest Period, then the Borrower shall be deemed to have
selected an Interest Period of one month’s duration.
 
(d)  Notice to Lenders by the Administrative Agent.  Promptly following receipt
of an Interest Election Request, the Administrative Agent shall advise each
Lender of the details thereof and of such Lender’s portion of each resulting
Borrowing.
 
(e)  Effect of Failure to Deliver Timely Interest Election Request and Events of
Default and Borrowing Base Deficiencies on Interest Election.  If the Borrower
fails to deliver a timely Interest Election Request with respect to a Eurodollar
Borrowing prior to the end of the Interest Period applicable thereto, then,
unless such Borrowing is repaid as provided herein, at the end of such Interest
Period such Borrowing shall be converted to an ABR Borrowing.  Notwithstanding
any contrary provision hereof, if an Event of Default or a Borrowing Base
Deficiency has occurred and is continuing:  (i) no outstanding Borrowing may be
converted to or continued as a Eurodollar Borrowing (and any Interest Election
Request that requests the conversion of any Borrowing to, or continuation of any
Borrowing as, a Eurodollar Borrowing shall be ineffective) and (ii) unless
repaid, each Eurodollar Borrowing shall be converted to an ABR Borrowing at the
end of the Interest Period applicable thereto.
 
Section 2.05  Funding of Borrowings.
 
(a)  Funding by Lenders.  Each Lender shall make each Loan to be made by it
hereunder on the proposed date thereof by wire transfer of immediately available
funds by 1:00 p.m., New York City time, to the account of the Administrative
Agent most recently designated by it for such purpose by notice to the
Lenders.  The Administrative Agent will make such Loans available to the
Borrower by promptly crediting the amounts so received, in like funds, to an
account of the Borrower maintained with the Administrative Agent in New York,
New York and designated by the Borrower in the applicable Borrowing Request;
provided that ABR Loans made to finance the reimbursement of an LC Disbursement
as provided in Section 2.08(e) shall be remitted by the Administrative Agent to
the Issuing Bank.  Nothing herein shall be deemed to obligate any Lender to
obtain the funds for its Loan in any particular place or
 
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manner or to constitute a representation by any Lender that it has obtained or
will obtain the funds for its Loan in any particular place or manner.
 
(b)  Presumption of Funding by the Lenders.  Unless the Administrative Agent
shall have received notice from a Lender prior to the proposed date of any
Borrowing that such Lender will not make available to the Administrative Agent
such Lender’s share of such Borrowing, the Administrative Agent may assume that
such Lender has made such share available on such date in accordance with
Section 2.05(a) and may, in reliance upon such assumption, make available to the
Borrower a corresponding amount.  In such event, if a Lender has not in fact
made its share of the applicable Borrowing available to the Administrative
Agent, then the applicable Lender and the Borrower severally agree to pay to the
Administrative Agent forthwith on demand such corresponding amount with interest
thereon, for each day from and including the date such amount is made available
to the Borrower to but excluding the date of payment to the Administrative
Agent, at (i) in the case of such Lender, the greater of the Federal Funds
Effective Rate and a rate determined by the Administrative Agent in accordance
with banking industry rules on interbank compensation or (ii) in the case of the
Borrower, the interest rate applicable to ABR Loans.  If such Lender pays such
amount to the Administrative Agent, then such amount shall constitute such
Lender’s Loan included in such Borrowing.
 
Section 2.06  Termination and Reduction of Aggregate Maximum Credit Amounts.
 
(a)  Scheduled Termination of Commitments.  Unless previously terminated, the
Commitments shall terminate on the Maturity Date.  If at any time the Aggregate
Maximum Credit Amounts or the Borrowing Base is terminated or reduced to zero,
then the Commitments shall terminate on the effective date of such termination
or reduction.
 
(b)  Optional Termination and Reduction of Aggregate Maximum Credit Amounts.
 
(i)  The Borrower may at any time terminate, or from time to time reduce, the
Aggregate Maximum Credit Amounts; provided that (A) each reduction of the
Aggregate Maximum Credit Amounts shall be in an amount that is an integral
multiple of $1,000,000 and not less than $10,000,000 and (B) the Borrower shall
not terminate or reduce the Aggregate Maximum Credit Amounts if, after giving
effect to any concurrent prepayment of the Loans in accordance with Section
3.04(c), the total Revolving Credit Exposures would exceed the total
Commitments.
 
(ii)  The Borrower shall notify the Administrative Agent of any election to
terminate or reduce the Aggregate Maximum Credit Amounts under Section
2.06(b)(i) at least three Business Days prior to the effective date of such
termination or reduction, specifying such election and the effective date
thereof.  Promptly following receipt of any notice, the Administrative Agent
shall advise the Lenders of the contents thereof.  Each notice delivered by the
Borrower pursuant to this Section 2.06(b)(ii) shall be irrevocable.  Any
termination or reduction of the Aggregate Maximum Credit Amounts shall be
permanent and may not be reinstated.   Each reduction of the Aggregate Maximum
Credit Amounts pursuant to this Section 2.06(b)(ii) shall be made ratably among
the Lenders in accordance with each Lender’s Applicable Percentage.
 
(c)  Scheduled and Mandatory Reductions of Aggregate Maximum Commitment Amounts.
 
(i)  The Aggregate Maximum Credit Amounts shall reduce by $300,000,000 in five
(5) consecutive and equal quarterly installments of $60,000,000, the initial
reduction of which shall occur on December 31, 2007 and the last such reduction
shall occur on December 31, 2008.  Each
 
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reduction of the Aggregate Maximum Credit Amounts pursuant to this Section
2.06(c)(i) shall be made ratably among the Lenders in accordance with each
Lender’s Applicable Percentage.
 
(ii)  The Aggregate Maximum Credit Amounts shall automatically reduce by an
amount equal to the prepayment amounts accepted by the Lenders from time to time
pursuant to Section 3.04(c)(iv).  Each reduction of the Aggregate Maximum Credit
Amounts pursuant to this Section 2.06(c)(ii) shall be made ratably among the
Lenders in accordance with each Lender’s Applicable Percentage.
 
Section 2.07  Borrowing Base.
 
(a)  Initial Borrowing Base and Initial Conforming Borrowing Base.  For the
period from and including the Effective Date to but excluding the first
Redetermination Date, the amount of the Borrowing Base shall be $700,000,000 and
the amount of the Conforming Borrowing Base shall be
$500,000,000.   Notwithstanding the foregoing, the Borrowing Base may be subject
to further adjustments from time to time pursuant to Section 2.08(k)
[preferential purchase rights], Section 8.13(c) [title defects], Section 8.13(d)
[MMS approvals] or Section 9.11(d) [asset sales].  As of April 1, 2009, the
Conforming Borrowing Base shall equal the Borrowing Base and all references to
“Conforming Borrowing Base” in this Agreement shall mean the Borrowing
Base.  The Borrowing Base shall, under no circumstances, exceed the Aggregate
Maximum Credit Amounts.
 
(b)  Scheduled and Interim Redeterminations.  The Borrowing Base and the
Conforming Borrowing Base shall be redetermined semi-annually in accordance with
this Section 2.07 (a “Scheduled Redetermination”), and, subject to Section
2.07(d), such redetermined Borrowing Base and Conforming Borrowing Base shall
become effective and applicable to the Borrower, the Agents, the Issuing Bank
and the Lenders on April 1st and October 1st of each year; provided that the
initial Scheduled Redetermination shall be November 1, 2007.  In addition, the
Borrower may, by notifying the Administrative Agent thereof, and the
Administrative Agent may, at the direction of the Required Lenders, by notifying
the Borrower thereof, one time during any 12 month period, each elect to cause
the Borrowing Base and the Conforming Borrowing Base to be redetermined between
Scheduled Redeterminations (an “Interim Redetermination”) in accordance with
this Section 2.07; provided that the Required Lenders shall not have the right
to make such a request for an Interim Redetermination during calendar year 2007
for the thirty (30) days following the Effective Date.
 
(c)  Scheduled and Interim Redetermination Procedure.
 
(i)  Each Scheduled Redetermination and each Interim Redetermination shall be
effectuated as follows:  Upon receipt by the Administrative Agent of (A) the
Reserve Report and the certificate required to be delivered by the Borrower to
the Administrative Agent, in the case of a Scheduled Redetermination, pursuant
to Section 8.12(a) and (c), and, in the case of an Interim Redetermination,
pursuant to Section 8.12(b) and (c), and (B) such other reports, data and
supplemental information, including, without limitation, the information
provided pursuant to Section 8.12(c), as may, from time to time, be reasonably
requested by the Majority Lenders (the Reserve Report, such certificate and such
other reports, data and supplemental information being the “Engineering
Reports”), the Administrative Agent shall evaluate the information contained in
the Engineering Reports and shall, in its sole discretion, propose a new
Borrowing Base and which shall prior to October 1, 2008 further specify a new
Conforming Borrowing Base (collectively, the “Proposed Borrowing Base”) based
upon such information and such other information (including, without limitation,
the status of title information with respect to the Oil and Gas Properties as
described in the Engineering Reports and the existence of any other Debt)
 
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as the Administrative Agent deems appropriate in its sole discretion and
consistent with its customary oil and gas lending criteria as it exists at the
particular time.
 
(ii)  The Administrative Agent shall notify the Borrower and the Lenders of the
Proposed Borrowing Base (the “Proposed Borrowing Base Notice”):
 
(A)  in the case of a Scheduled Redetermination (1) if the Administrative Agent
shall have received the Engineering Reports required to be delivered by the
Borrower pursuant to Section 8.12(a) and (c) in a timely and complete manner,
then on or before March 15th and September 15th of such year following the date
of delivery or (2) if the Administrative Agent shall not have received the
Engineering Reports required to be delivered by the Borrower pursuant to Section
8.12(a) and (c) in a timely and complete manner, then promptly after the
Administrative Agent has received complete Engineering Reports from the Borrower
and has had a reasonable opportunity to determine the Proposed Borrowing Base in
accordance with Section 2.07(c)(i); and
 
(B)  in the case of an Interim Redetermination, promptly, and in any event,
within fifteen (15) days after the Administrative Agent has received the
required Engineering Reports.
 
(iii)  Any Proposed Borrowing Base that would increase the Borrowing Base (or
the Conforming Borrowing Base) then in effect must be approved or deemed to have
been approved by all of the Lenders as provided in this Section 2.07(c)(iii);
and any Proposed Borrowing Base that would decrease or maintain the Borrowing
Base (or the Conforming Borrowing Base) then in effect must be approved or be
deemed to have been approved by the Required Lenders as provided in this Section
2.07(c)(iii).  Such decisions will be made by each Lender based upon such
criteria as such Lender deems appropriate in its sole discretion and consistent
with its customary oil and gas lending criteria as it exists at the particular
time.  Upon receipt of the Proposed Borrowing Base Notice, each Lender shall
have fifteen (15) days to agree with the Proposed Borrowing Base or disagree
with the Proposed Borrowing Base by proposing an alternate Borrowing Base (which
proposal must also propose a Conforming Borrowing Base, if appropriate).  If at
the end of such fifteen (15) days, any Lender has not communicated its approval
or disapproval in writing to the Administrative Agent, such silence shall be
deemed to be an approval of the Proposed Borrowing Base.  If, at the end of such
15-day period, all of the Lenders, in the case of a Proposed Borrowing Base that
would increase the Borrowing Base (or the Conforming Borrowing Base) then in
effect, or the Required Lenders, in the case of a Proposed Borrowing Base that
would decrease or maintain the Borrowing Base (or the Conforming Borrowing Base)
then in effect, have approved or deemed to have approved, as aforesaid, then the
Proposed Borrowing Base shall become the new Borrowing Base (and the new
Conforming Borrowing Base), effective on the date specified in Section
2.07(d).  If, however, at the end of such 15-day period, all of the Lenders or
the Required Lenders, as applicable, have not approved or deemed to have
approved, as aforesaid, then the Administrative Agent shall poll the Lenders to
ascertain the highest Borrowing Base (or the highest Conforming Borrowing Base)
then acceptable to a number of Lenders sufficient to constitute the Required
Lenders and, so long as such amount does not increase the Borrowing Base (or the
Conforming Borrowing Base) then in effect, such amount shall become the new
Borrowing Base (and the new Conforming Borrowing Base), effective on the date
specified in Section 2.07(d).  While the Conforming Borrowing Base is in effect,
the foregoing procedures shall apply to each proposed Borrowing Base and each
proposed Conforming Borrowing Base separately.
 
(d)  Effectiveness of a Redetermined Borrowing Base.  After a redetermined
Borrowing Base (and Conforming Borrowing Base) is approved or is deemed to have
been approved by all
 
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of the Lenders or the Required Lenders, as applicable, pursuant to Section
2.07(c)(iii), the Administrative Agent shall notify the Borrower and the Lenders
(the “New Borrowing Base Notice”) of the amount of the redetermined Borrowing
Base (and Conforming Borrowing Base), and such amount shall become the new
Borrowing Base (and new Conforming Borrowing Base), effective and applicable to
the Borrower, the Agents, the Issuing Bank and the Lenders:
 
(i)  in the case of a Scheduled Redetermination, (A) if the Administrative Agent
shall have received the Engineering Reports required to be delivered by the
Borrower pursuant to Section 8.12(a) and (c) in a timely and complete manner,
then on the April 1st or October 1st, as applicable, following such notice, or
(B) if the Administrative Agent shall not have received the Engineering Reports
required to be delivered by the Borrower pursuant to Section 8.12(a) and (c) in
a timely and complete manner, then on the Business Day next succeeding delivery
of such notice; and
 
(ii)  in the case of an Interim Redetermination, on the Business Day next
succeeding delivery of such notice.
 
Such amount shall then become the Borrowing Base (and the Conforming Borrowing
Base) until the next Scheduled Redetermination Date, the next Interim
Redetermination Date or the next adjustment to the Borrowing Base (and the
Conforming Borrowing Base) under Section 8.13(c), Section 8.13(d) or Section
9.11(d), whichever occurs first.  Notwithstanding the foregoing, no Scheduled
Redetermination or Interim Redetermination shall become effective until the New
Borrowing Base Notice related thereto is received by the Borrower.
 
Section 2.08  Letters of Credit.
 
(a)  General.  Subject to the terms and conditions set forth herein, the
Borrower may request the issuance of dollar denominated Letters of Credit for
its own account or for the account of the Parent or any of its Restricted
Subsidiaries, in a form reasonably acceptable to the Administrative Agent and
the Issuing Bank, at any time and from time to time during the period from the
Effective Date until the day which is five (5) Business Days prior to the end of
the Availability Period; provided that the Borrower may not request the
issuance, amendment, renewal or extension of Letters of Credit hereunder if a
Borrowing Base Deficiency exists at such time or would exist as a result
thereof.  In the event of any inconsistency between the terms and conditions of
this Agreement and the terms and conditions of any form of letter of credit
application or other agreement submitted by the Borrower to, or entered into by
the Borrower with, the Issuing Bank relating to any Letter of Credit, the terms
and conditions of this Agreement shall control.
 
(b)  Notice of Issuance, Amendment, Renewal, Extension; Certain Conditions.  To
request the issuance of a Letter of Credit (or the amendment, renewal or
extension of an outstanding Letter of Credit), the Borrower shall hand deliver
or telecopy (or transmit by electronic communication, if arrangements for doing
so have been approved by the Issuing Bank) to the Issuing Bank and the
Administrative Agent (not less than five (5) Business Days in advance of the
requested date of issuance, amendment, renewal or extension) a notice:
 
(i)  requesting the issuance of a Letter of Credit or identifying the Letter of
Credit to be amended, renewed or extended;
 
(ii)  specifying the date of issuance, amendment, renewal or extension (which
shall be a Business Day);
 
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(iii)  specifying the date on which such Letter of Credit is to expire (which
shall comply with Section 2.08(c));
 
(iv)  specifying the amount of such Letter of Credit;
 
(v)  specifying the name and address of the beneficiary thereof and such other
information as shall be necessary to prepare, amend, renew or extend such Letter
of Credit; and
 
(vi)  specifying the amount of the then effective Borrowing Base and whether a
Borrowing Base Deficiency exists at such time, the current total Revolving
Credit Exposures (without regard to the requested Letter of Credit or the
requested amendment, renewal or extension of an outstanding Letter of Credit)
and the pro forma total Revolving Credit Exposures (giving effect to the
requested Letter of Credit or the requested amendment, renewal or extension of
an outstanding Letter of Credit).
 
Each notice shall constitute a representation that after giving effect to the
requested issuance, amendment, renewal or extension, as applicable, (i) the LC
Exposure shall not exceed the LC Commitment, provided clause (i) shall not be
applicable to the PPR Letter of Credit and (ii) the total Revolving Credit
Exposures shall not exceed the total Commitments (i.e. the lesser of the
Aggregate Maximum Credit Amounts and the then effective Borrowing Base).
 
If requested by the Issuing Bank, the Borrower also shall submit a letter of
credit application on the Issuing Bank’s standard form in connection with any
request for a Letter of Credit and shall guarantee the reimbursement of any
Letter of Credit issued for the account of the Parent or a Restricted
Subsidiary.
 
(c)  Expiration Date.  Each Letter of Credit shall expire at or prior to the
close of business on the earlier of (i) the date one year after the date of the
issuance of such Letter of Credit (or, in the case of any renewal or extension
thereof, one year after such renewal or extension) and (ii) the date that is
five Business Days prior to the Maturity Date.
 
(d)  Participations.  By the issuance of a Letter of Credit (or an amendment to
a Letter of Credit increasing the amount thereof) and without any further action
on the part of the Issuing Bank or the Lenders, the Issuing Bank hereby grants
to each Lender, and each Lender hereby acquires from the Issuing Bank, a
participation in such Letter of Credit equal to such Lender’s Applicable
Percentage of the aggregate amount available to be drawn under such Letter of
Credit.  In consideration and in furtherance of the foregoing, each Lender
hereby absolutely and unconditionally agrees to pay to the Administrative Agent,
for the account of the Issuing Bank, such Lender’s Applicable Percentage of each
LC Disbursement made by the Issuing Bank or of any reimbursement payment
required to be refunded to the Borrower for any reason.  Each Lender
acknowledges and agrees that its obligation to acquire participations pursuant
to this Section 2.08(d) in respect of Letters of Credit is absolute and
unconditional and shall not be affected by any circumstance whatsoever,
including any amendment, renewal or extension of any Letter of Credit or the
occurrence and continuance of a Default, the existence of a Borrowing Base
Deficiency or reduction or termination of the Commitments, and that each such
payment shall be made without any offset, abatement, withholding or reduction
whatsoever.
 
(e)  Reimbursement.  If the Issuing Bank shall make any LC Disbursement in
respect of a Letter of Credit, the Borrower shall reimburse such LC Disbursement
by paying to the Administrative Agent an amount equal to such LC Disbursement
not later than 2:00 p.m., New York City time, on the date that is one (1)
Business Day after such LC Disbursement is made, if the Borrower shall have
received notice of such LC Disbursement prior to 12:00 noon, New York City time,
on the payment date, or, if such notice has not been received by the Borrower
prior to such time on the payment date, then not later than
 
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2:00 p.m., New York City time, on the second Business Day after the Borrower
receives such notice; provided that if such LC Disbursement is not less than
$1,000,000, the Borrower shall, subject to the conditions to Borrowing set forth
herein, be deemed to have requested, and the Borrower does hereby request under
such circumstances, that such payment be financed with an ABR Borrowing in an
equivalent amount and, to the extent so financed, the Borrower’s obligation to
make such payment shall be discharged and replaced by the resulting ABR
Borrowing.  If the Borrower fails to make such payment when due, the
Administrative Agent shall notify each Lender of the applicable LC Disbursement,
the payment then due from the Borrower in respect thereof and such Lender’s
Applicable Percentage thereof.  Promptly following receipt of such notice, each
Lender shall pay to the Administrative Agent its Applicable Percentage of the
payment then due from the Borrower, in the same manner as provided in Section
2.05 with respect to Loans made by such Lender (and Section 2.05 shall apply,
mutatis mutandis, to the payment obligations of the Lenders), and the
Administrative Agent shall promptly pay to the Issuing Bank the amounts so
received by it from the Lenders.  Promptly following receipt by the
Administrative Agent of any payment from the Borrower pursuant to this Section
2.08(e), the Administrative Agent shall distribute such payment to the Issuing
Bank or, to the extent that Lenders have made payments pursuant to this Section
2.08(e) to reimburse the Issuing Bank, then to such Lenders and the Issuing Bank
as their interests may appear.  Any payment made by a Lender pursuant to this
Section 2.08(e) to reimburse the Issuing Bank for any LC Disbursement shall not
constitute a Loan and shall not relieve the Borrower of its obligation to
reimburse such LC Disbursement.
 
(f)  Obligations Absolute.  The Borrower’s obligation to reimburse LC
Disbursements as provided in Section 2.08(e) shall be absolute, unconditional
and irrevocable, and shall be performed strictly in accordance with the terms of
this Agreement under any and all circumstances whatsoever and irrespective of
(i) any lack of validity or enforceability of any Letter of Credit, any Letter
of Credit Agreement or this Agreement, or any term or provision therein, (ii)
any draft or other document presented under a Letter of Credit proving to be
forged, fraudulent or invalid in any respect or any statement therein being
untrue or inaccurate in any respect, (iii) payment by the Issuing Bank under a
Letter of Credit against presentation of a draft or other document that does not
comply with the terms of such Letter of Credit or any Letter of Credit
Agreement, or (iv) any other event or circumstance whatsoever, whether or not
similar to any of the foregoing, that might, but for the provisions of this
Section 2.08(f), constitute a legal or equitable discharge of, or provide a
right of setoff against, the Borrower’s obligations hereunder.  Neither the
Administrative Agent, the Lenders nor the Issuing Bank, nor any of their Related
Parties shall have any liability or responsibility by reason of or in connection
with the issuance or transfer of any Letter of Credit or any payment or failure
to make any payment thereunder (irrespective of any of the circumstances
referred to in the preceding sentence), or any error, omission, interruption,
loss or delay in transmission or delivery of any draft, notice or other
communication under or relating to any Letter of Credit (including any document
required to make a drawing thereunder), any error in interpretation of technical
terms or any consequence arising from causes beyond the control of the Issuing
Bank; provided that the foregoing shall not be construed to excuse the Issuing
Bank from liability to the Borrower to the extent of any direct damages (as
opposed to consequential damages, claims in respect of which are hereby waived
by the Borrower to the extent permitted by applicable law) suffered by the
Borrower that are caused by the Issuing Bank’s failure to exercise care when
determining whether drafts and other documents presented under a Letter of
Credit comply with the terms thereof.  The parties hereto expressly agree that,
in the absence of gross negligence or willful misconduct on the part of the
Issuing Bank (as finally determined by a court of competent jurisdiction), the
Issuing Bank shall be deemed to have exercised all requisite care in each such
determination.  In furtherance of the foregoing and without limiting the
generality thereof, the parties agree that, with respect to documents presented
which appear on their face to be in substantial compliance with the terms of a
Letter of Credit, the Issuing Bank may, in its sole discretion, either accept
and make payment upon such documents without responsibility for further
investigation, regardless of any notice or information to the contrary, or
refuse to
 
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accept and make payment upon such documents if such documents are not in strict
compliance with the terms of such Letter of Credit.
 
(g)  Disbursement Procedures.  The Issuing Bank shall, promptly following its
receipt thereof, examine all documents purporting to represent a demand for
payment under a Letter of Credit.  The Issuing Bank shall promptly notify the
Administrative Agent and the Borrower by telephone (confirmed by telecopy) of
such demand for payment and whether the Issuing Bank has made or will make an LC
Disbursement thereunder; provided that any failure to give or delay in giving
such notice shall not relieve the Borrower of its obligation to reimburse the
Issuing Bank and the Lenders with respect to any such LC Disbursement.
 
(h)  Interim Interest.  If the Issuing Bank shall make any LC Disbursement,
then, until the Borrower shall have reimbursed the Issuing Bank for such LC
Disbursement, the unpaid amount thereof shall bear interest, for each day from
and including the date such LC Disbursement is made to but excluding the date
that the Borrower reimburses such LC Disbursement, at the rate per annum then
applicable to ABR Loans.  Interest accrued pursuant to this Section 2.08(h)
shall be for the account of the Issuing Bank, except that interest accrued on
and after the date of payment by any Lender pursuant to Section 2.08(e) to
reimburse the Issuing Bank shall be for the account of such Lender to the extent
of such payment.
 
(i)  Replacement of the Issuing Bank.  The Issuing Bank may be replaced at any
time by written agreement among the Borrower, the Administrative Agent, the
replaced Issuing Bank and the successor Issuing Bank.  The Administrative Agent
shall notify the Lenders of any such replacement of the Issuing Bank.  At the
time any such replacement shall become effective, the Borrower shall pay all
unpaid fees accrued for the account of the replaced Issuing Bank pursuant to
Section 3.05(b).  From and after the effective date of any such replacement, (i)
the successor Issuing Bank shall have all the rights and obligations of the
Issuing Bank under this Agreement with respect to Letters of Credit to be issued
thereafter and (ii) references herein to the term “Issuing Bank” shall be deemed
to refer to such successor or to any previous Issuing Bank, or to such successor
and all previous Issuing Banks, as the context shall require.  After the
replacement of the Issuing Bank hereunder, the replaced Issuing Bank shall
remain a party hereto and shall continue to have all the rights and obligations
of the Issuing Bank under this Agreement with respect to Letters of Credit
issued by it prior to such replacement, but shall not be required to issue
additional Letters of Credit.
 
(j)  Cash Collateralization.  If (i) any Event of Default shall occur and be
continuing and the Borrower receives notice from the Administrative Agent or the
Majority Lenders demanding the deposit of cash collateral pursuant to this
Section 2.08(j), or (ii) the Borrower is required to pay to the Administrative
Agent the excess attributable to an LC Exposure in connection with any
prepayment pursuant to Section 3.04(c), then the Borrower shall deposit, in an
account with the Administrative Agent, in the name of the Administrative Agent
and for the benefit of the Lenders, an amount in cash equal to, in the case of
an Event of Default, the LC Exposure, and in the case of a payment required by
Section 3.04(c), the amount of such excess as provided in Section 3.04(c), as of
such date plus any accrued and unpaid interest thereon; provided that the
obligation to deposit such cash collateral shall become effective immediately,
and such deposit shall become immediately due and payable, without demand or
other notice of any kind, upon the occurrence of any Event of Default with
respect to the Borrower or any Restricted Subsidiary described in Section
10.01(h) or Section 10.01(i).  The Borrower hereby grants to the Administrative
Agent, for the benefit of the Issuing Bank and the Lenders, an exclusive first
priority and continuing perfected security interest in and Lien on such account
and all cash, checks, drafts, certificates and instruments, if any, from time to
time deposited or held in such account, all deposits or wire transfers made
thereto, any and all investments purchased with funds deposited in such account,
all interest, dividends, cash, instruments, financial assets and other Property
from time to time received, receivable or
 
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otherwise payable in respect of, or in exchange for, any or all of the
foregoing, and all proceeds, products, accessions, rents, profits, income and
benefits therefrom, and any substitutions and replacements therefor.  The
Borrower’s obligation to deposit amounts pursuant to this Section 2.08(j) shall
be absolute and unconditional, without regard to whether any beneficiary of any
such Letter of Credit has attempted to draw down all or a portion of such amount
under the terms of a Letter of Credit, and, to the fullest extent permitted by
applicable law, shall not be subject to any defense or be affected by a right of
set-off, counterclaim or recoupment which the Borrower or any of its Restricted
Subsidiaries may now or hereafter have against any such beneficiary, the Issuing
Bank, the Administrative Agent, the Lenders or any other Person for any reason
whatsoever.  Such deposit shall be held as collateral securing the payment and
performance of the Borrower’s and the Guarantor’s obligations under this
Agreement and the other Loan Documents.  The Administrative Agent shall have
exclusive dominion and control, including the exclusive right of withdrawal,
over such account.  Other than any interest earned on the investment of such
deposits, which investments shall be made at the option and sole discretion of
the Administrative Agent and at the Borrower’s risk and expense, such deposits
shall not bear interest.  Interest or profits, if any, on such investments shall
accumulate in such account.  Moneys in such account shall be applied by the
Administrative Agent to reimburse the Issuing Bank for LC Disbursements for
which it has not been reimbursed and, to the extent not so applied, shall be
held for the satisfaction of the reimbursement obligations of the Borrower for
the LC Exposure at such time or, if the maturity of the Loans has been
accelerated, be applied to satisfy other obligations of the Borrower and the
Guarantors under this Agreement or the other Loan Documents.  If the Borrower is
required to provide an amount of cash collateral hereunder as a result of the
occurrence of an Event of Default, and the Borrower is not otherwise required to
pay to the Administrative Agent the excess attributable to an LC Exposure in
connection with any prepayment pursuant to Section 3.04(c), then such amount (to
the extent not applied as aforesaid) shall be returned to the Borrower within
three Business Days after all Events of Default have been cured or waived.
 
(k)  Preferential Purchase Right Letter of Credit.  Without limitation of the
foregoing, on the Effective Date, the Issuing Bank will issue a Letter of Credit
(the “PPR Letter of Credit”) for the benefit of the Seller, in an amount not to
exceed $110,000,000 (provided that the amount of the PPR Letter of Credit shall
not be deducted from the LC Commitment) to fund the purchase of the Preferential
Purchase Right Properties subject of preferential purchase rights which rights
have not expired, have not been waived or have not been exercised by the holders
thereof on or before the Effective Date.  The PPR Letter of Credit shall expire
on the 45th day after the Effective Date, and to the extent such preferential
purchase rights in respect of a Preferential Purchase Right Property are waived
or expire without being exercised after the Effective Date, the PPR Letter of
Credit will be drawn in an amount equal to the allocated purchase price for such
Preferential Purchase Right Property and such Preferential Purchase Right
Properties subject thereof will be conveyed to the Borrower.  In connection with
such conveyance, the Borrower shall grant to the Administrative Agent a first
priority perfected Lien in such conveyed Preferential Purchase Right
Properties.  Otherwise, if such preferential purchase rights in respect of a
Preferential Purchase Right Property are exercised, the PPR Letter of Credit
will reduce by an amount equal to the purchase price allocated to Preferential
Purchase Right Property in the Acquisition Documents.  In addition, the
Borrowing Base and Conforming Borrowing Base will be permanently reduced by an
amount equal to the value, if any, attributed to such Property in the Borrowing
Base based on Initial Reserve Report.
 
ARTICLE III
Payments of Principal and Interest; Prepayments; Fees
 
Section 3.01  Repayment of Loans.  The Borrower hereby unconditionally promises
to pay to the Administrative Agent for the account of each Lender the then
unpaid principal amount of each Loan on the Termination Date.
 
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Section 3.02  Interest.
 
(a)  ABR Loans.  The Loans comprising each ABR Borrowing shall bear interest at
the Alternate Base Rate plus the Applicable Margin.
 
(b)  Eurodollar Loans.  The Loans comprising each Eurodollar Borrowing shall
bear interest at the Adjusted LIBO Rate for the Interest Period in effect for
such Borrowing plus the Applicable Margin.
 
(c)  Post-Default Rate Rate.  Notwithstanding the foregoing, if an Event of
Default has occurred and is continuing, or if any principal of or interest on
any Loan or any fee or other amount payable by the Borrower or any Guarantor
hereunder or under any other Loan Document is not paid when due, whether at
stated maturity, upon acceleration or otherwise, and including any payments in
respect of a Borrowing Base Deficiency under Section 3.04(c), then all Loans
outstanding, in the case of an Event of Default, and such overdue amount, in the
case of a failure to pay amounts when due, shall on or after the date the
Required Lenders so request bear interest, after as well as before judgment, at
a rate per annum equal to two percent (2%) plus the rate applicable to ABR Loans
as provided in Section 3.02(a).
 
(d)  Interest Payment Dates.  Accrued interest on each Loan shall be payable in
arrears on each Interest Payment Date for such Loan and on the Termination Date;
provided that (i) interest accrued pursuant to Section 3.02(c) shall be payable
on demand, (ii) in the event of any repayment or prepayment of any Loan (other
than an optional prepayment of an ABR Loan prior to the Termination Date),
accrued interest on the principal amount repaid or prepaid shall be payable on
the date of such repayment or prepayment, and (iii) in the event of any
conversion of any Eurodollar Loan prior to the end of the current Interest
Period therefor, accrued interest on such Loan shall be payable on the effective
date of such conversion.
 
(e)  Interest Rate Computations.  All interest hereunder shall be computed on
the basis of a year of 360 days, except that interest computed by reference to
the Alternate Base Rate at times when the Alternate Base Rate is based on the
Prime Rate shall be computed on the basis of a year of 365 days (or 366 days in
a leap year), and in each case shall be payable for the actual number of days
elapsed (including the first day but excluding the last day).  The applicable
Alternate Base Rate, Adjusted LIBO Rate or LIBO Rate shall be determined by the
Administrative Agent, and such determination shall be conclusive absent manifest
error, and be binding upon the parties hereto.
 
Section 3.03  Alternate Rate of Interest.  If prior to the commencement of any
Interest Period for a Eurodollar Borrowing:
 
(a)  the Administrative Agent determines (which determination shall be
conclusive absent manifest error) that adequate and reasonable means do not
exist for ascertaining the Adjusted LIBO Rate or the LIBO Rate for such Interest
Period; or
 
(b)  the Administrative Agent is advised by the Majority Lenders that the
Adjusted LIBO Rate or LIBO Rate, as applicable, for such Interest Period will
not adequately and fairly reflect the cost to such Lenders of making or
maintaining their Loans included in such Borrowing for such Interest Period;
 
then the Administrative Agent shall give notice thereof to the Borrower and the
Lenders by telephone or telecopy as promptly as practicable thereafter and,
until the Administrative Agent notifies the Borrower and the Lenders that the
circumstances giving rise to such notice no longer exist, (i) any Interest
Election Request that requests the conversion of any Borrowing to, or
continuation of any Borrowing as, a
 
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Eurodollar Borrowing shall be ineffective, and (ii) if any Borrowing Request
requests a Eurodollar Borrowing, such Borrowing shall be made as an ABR
Borrowing.
 
Section 3.04  Prepayments.
 
(a)  Optional Prepayments.  The Borrower shall have the right at any time and
from time to time to prepay any Borrowing in whole or in part, subject to prior
notice in accordance with Section 3.04(b).
 
(b)  Notice and Terms of Optional Prepayment.  The Borrower shall notify the
Administrative Agent by telephone (confirmed by telecopy) of any prepayment
hereunder (i) in the case of prepayment of a Eurodollar Borrowing, not later
than 12:00 noon, New York City time, three Business Days before the date of
prepayment, or (ii) in the case of prepayment of an ABR Borrowing, not later
than 12:00 noon, New York City time, one Business Day before the date of
prepayment.  Each such notice shall be irrevocable and shall specify the
prepayment date and the principal amount of each Borrowing or portion thereof to
be prepaid.  Promptly following receipt of any such notice relating to a
Borrowing, the Administrative Agent shall advise the Lenders of the contents
thereof.  Each partial prepayment of any Borrowing shall be in an amount that
would be permitted in the case of an advance of a Borrowing of the same Type as
provided in Section 2.02.  Each prepayment of a Borrowing shall be applied
ratably to the Loans included in the prepaid Borrowing.  Prepayments shall be
accompanied by accrued interest to the extent required by Section 3.02 and any
amounts due under Section 5.02.
 
(c)  Mandatory Prepayments.
 
(i)  If, after giving effect to any termination or reduction of the Aggregate
Maximum Credit Amounts pursuant to Section 2.06(b) or Section 2.06(c), the total
Revolving Credit Exposures exceeds the total Commitments, then the Borrower
shall (A) prepay the Borrowings on the date of such termination or reduction in
an aggregate principal amount equal to such excess, and (B) if any excess
remains after prepaying all of the Borrowings as a result of an LC Exposure, pay
to the Administrative Agent on behalf of the Lenders an amount equal to such
excess to be held as cash collateral as provided in Section 2.08(j).
 
(ii)  Upon any redetermination of or adjustment to the amount of the Borrowing
Base in accordance with Section 2.07, Section 8.13(c) or Section 8.13(d), if the
total Revolving Credit Exposures exceeds the redetermined or adjusted Borrowing
Base, then the Borrower shall (A) prepay the Borrowings in an aggregate
principal amount equal to such excess, and (B) if any excess remains after
prepaying all of the Borrowings as a result of an LC Exposure, pay to the
Administrative Agent on behalf of the Lenders an amount equal to such excess to
be held as cash collateral as provided in Section 2.08(j).  The Borrower shall
be obligated to make such prepayment and/or deposit of cash collateral within
forty-five (45) days following its receipt of the New Borrowing Base Notice in
accordance with Section 2.07(d) or the date the adjustment occurs; provided that
all payments required to be made pursuant to this Section 3.04(c)(ii) must be
made on or prior to the Termination Date.
 
(iii)  Upon any adjustments to the Borrowing Base pursuant to Section 9.11(d),
if the total Revolving Credit Exposures exceeds the Borrowing Base as adjusted,
then the Borrower shall (A) prepay the Borrowings in an aggregate principal
amount equal to such excess, and (B) if any excess remains after prepaying all
of the Borrowings as a result of an LC Exposure, pay to the Administrative Agent
on behalf of the Lenders an amount equal to such excess to be held as cash
collateral as provided in Section 2.08(j).  The Borrower shall be obligated to
make such prepayment and/or deposit of cash collateral within two (2) Business
Days following the date it or any Restricted
 
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Subsidiary receives cash proceeds as a result of such disposition; provided that
all payments required to be made pursuant to this Section 3.04(c)(iii)  must be
made on or prior to the Termination Date.
 
(iv)  If at any time, the Borrower or the Parent shall be required to prepay or
redeem (or make any offer to prepay or redeem) all or any portion of the Bridge
Loans or any Exchange Notes (other than (i) a prepayment or redemption with the
proceeds of an Equity Issuance (other than an Equity Issuance of Disqualified
Capital Stock), (ii) with the proceeds of Permitted Refinancing Debt or (iii) a
change of control offer as defined in the Bridge Credit Agreement or the
Exchange Notes), then not later than the fifth (5th) Business Day prior to the
day on which such prepayment or redemption (or earlier offer to prepay or
redeem) of any Bridge Loans or Exchange Notes shall be made, the Borrower shall
make an offer to the Lenders by notice to the Administrative Agent to prepay
outstanding Loans under this Agreement and cash collateralize Letters of Credit
in an amount equal to such amount required to be prepaid or redeemed (or offered
to prepay or redeem) under the Bridge Credit Agreement or any agreement
evidencing the Exchange Notes, provided that if such prepayment or redemption is
the result of an asset sale, then (A) if the aggregate Revolving Credit
Exposures of the Lenders exceeds  or is equal to the Conforming Borrowing Base
(or if no Conforming Borrowing Base is then in effect, the Borrowing Base), the
amount offered to the Lenders shall be the amount required to be prepaid or
redeemed (or offered to prepay or redeem) under the Bridge Credit Agreement or
any agreement evidencing the Exchange Notes and (B) if the aggregate Revolving
Credit Exposures of the Lenders is less than the Conforming Borrowing Base (or
if no Conforming Borrowing Base is then in effect, the Borrowing Base), the
amount offered to the Lenders shall be the lesser of (x) the amount allocated
the Properties subject of such asset sale in the most recent Conforming
Borrowing Base and (y) the Net Available Cash (as defined in the Bridge Credit
Agreement) from such asset sale received by a Loan Party.  Within three Business
Days after the Administrative Agent receives notice of an offer from the
Borrower under this Section 3.04(c)(iv), each Lender shall decide to accept or
decline such prepayment of Loans.  If a Lender shall fail to respond within
three Business Days, its failure shall be deemed a rejection of the offer.  If
the Majority Lenders have agreed to accept such prepayment, then each of the
Lenders shall accept its pro rata share of the entire prepayment amount.  If the
prepayment is accepted by the Majority Lenders then such prepayment amounts
shall be paid by the Borrower to the Lenders within one Business Day following
acceptance.  If the Majority Lenders fail to accept such prepayment, then the
entire prepayment amount shall be applied as required pursuant to the mandatory
prepayment provisions of the Bridge Loans or Exchange Notes.  Any amounts not
required to be offered to the Lenders under clause (B) shall be applied as
required pursuant to the mandatory prepayment provisions of the Bridge Loans or
Exchange Notes.
 
(v)  Each prepayment of Borrowings pursuant to this Section 3.04(c) shall be
applied, first, ratably to any ABR Borrowings then outstanding, and, second, to
any Eurodollar Borrowings then outstanding as the Borrower may direct.
 
(vi)  Prepayments pursuant to this Section 3.04(c) shall be accompanied by
accrued interest to the extent required by Section 3.02.
 
(d)  No Premium or Penalty.  Prepayments permitted or required under this
Section 3.04 shall be without premium or penalty, except as required under
Section 5.02.
 
Section 3.05  Fees.
 
(a)  Commitment Fees.  The Borrower agrees to pay to the Administrative Agent
for the account of each Lender a commitment fee, which shall accrue at the
applicable Commitment Fee Rate on the average daily amount of the unused amount
of the Commitment of such Lender during the period from and including the date
of this Agreement to but excluding the Termination Date.  Accrued
 
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commitment fees shall be payable in arrears on the third Business Day after the
last day of March, June, September and December of each year and on the
Termination Date, commencing on the first such date to occur after the date
hereof.  All commitment fees shall be computed on the basis of a year of 360
days and shall be payable for the actual number of days elapsed (including the
first day but excluding the last day).
 
(b)  Letter of Credit Fees.  The Borrower agrees to pay (i) to the
Administrative Agent for the account of each Lender a participation fee with
respect to its participations in Letters of Credit, which shall accrue at the
same Applicable Margin used to determine the interest rate applicable to
Eurodollar Loans on the average daily amount of such Lender’s LC Exposure
(excluding any portion thereof attributable to unreimbursed LC Disbursements)
during the period from and including the date of this Agreement to but excluding
the later of the date on which such Lender’s Commitment terminates and the date
on which such Lender ceases to have any LC Exposure, (ii) to the Issuing Bank a
fronting fee, which shall accrue at the rate of 0.125% per annum on the average
daily amount of the LC Exposure (excluding any portion thereof attributable to
unreimbursed LC Disbursements) during the period from and including the date of
this Agreement to but excluding the later of the date of termination of the
Commitments and the date on which there ceases to be any LC Exposure, provided
that in no event shall such fee be less than $500 during any quarter, and (iii)
to the Issuing Bank, for its own account, its standard fees with respect to the
issuance, amendment, renewal or extension of any Letter of Credit or processing
of drawings thereunder.  Participation fees and fronting fees accrued through
and including the last day of March, June, September and December of each year
shall be payable on the third Business Day following such last day, commencing
on the first such date to occur after the date of this Agreement; provided that
all such fees shall be payable on the Termination Date and any such fees
accruing after the Termination Date shall be payable on demand.  Any other fees
payable to the Issuing Bank pursuant to this Section 3.05(b) shall be payable
within 10 days after demand.  All participation fees and fronting fees shall be
computed on the basis of a year of 360 days and shall be payable for the actual
number of days elapsed (including the first day but excluding the last day).
 
(c)  Administrative Agent Fees.  The Borrower agrees to pay to the
Administrative Agent, for its own account, fees payable in the amounts and at
the times separately agreed upon between the Borrower and the Administrative
Agent.
 
ARTICLE IV
Payments; Pro Rata Treatment; Sharing of Set-offs
 
Section 4.01  Payments Generally; Pro Rata Treatment; Sharing of Set-offs.
 
(a)  Payments by the Borrower.  The Borrower shall make each payment required to
be made by it hereunder (whether of principal, interest, fees or reimbursement
of LC Disbursements, or of amounts payable under Section 5.01, Section 5.02,
Section 5.03 or otherwise) prior to noon, New York, New York time, on the date
when due, in immediately available funds, without defense, deduction,
recoupment, set-off or counterclaim.  Fees, once paid, shall be fully earned and
shall not be refundable under any circumstances.  Any amounts received after
such time on any date may, in the discretion of the Administrative Agent, be
deemed to have been received on the next succeeding Business Day for purposes of
calculating interest thereon.  All such payments shall be made to the
Administrative Agent at its offices specified in Section 12.01, except payments
to be made directly to the Issuing Bank as expressly provided herein and except
that payments pursuant to Section 5.01, Section 5.02, Section 5.03 and Section
12.03 shall be made directly to the Persons entitled thereto.  The
Administrative Agent shall distribute any such payments received by it for the
account of any other Person to the appropriate recipient promptly following
receipt thereof.  If any payment hereunder shall be due on a day that is not a
Business Day, the date for payment shall be extended to the next succeeding
Business Day, and, in the case of any payment
 
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accruing interest, interest thereon shall be payable for the period of such
extension.  All payments hereunder shall be made in dollars.
 
(b)  Application of Insufficient Payments.  If at any time prior the Termination
Date, insufficient funds are received by and available to the Administrative
Agent to pay fully all amounts of principal, unreimbursed LC Disbursements,
interest, fees and other amounts then due hereunder, such funds shall be
applied:  first, ratably to reimbursement of expenses and indemnities provided
for in this Agreement and the Security Instruments; second, to accrued interest
on the Loans; third, to fees; fourth, pro rata to outstanding principal of the
Loans and unreimbursed LC Disbursements; and fifth, if applicable, to serve as
cash collateral to be held by the Administrative Agent to secure the LC
Exposure, in each case, ratably among the parties entitled thereto in accordance
with the amounts then due to such parties.
 
(c)  Sharing of Payments by Lenders.  Except as provided under Section
3.04(c)(iv), if any Lender shall, by exercising any right of set-off or
counterclaim or otherwise, obtain payment in respect of any principal of or
interest on any of its Loans or participations in LC Disbursements resulting in
such Lender receiving payment of a greater proportion of the aggregate amount of
its Loans and participations in LC Disbursements and accrued interest thereon
than the proportion received by any other Lender, then the Lender receiving such
greater proportion shall purchase (for cash at face value) participations in the
Loans and participations in LC Disbursements of other Lenders to the extent
necessary so that the benefit of all such payments shall be shared by the
Lenders ratably in accordance with the aggregate amount of principal of and
accrued interest on their respective Loans and participations in LC
Disbursements; provided that (i) if any such participations are purchased and
all or any portion of the payment giving rise thereto is recovered, such
participations shall be rescinded and the purchase price restored to the extent
of such recovery, without interest, and (ii) the provisions of this Section
4.01(c) shall not be construed to apply to any payment made by the Borrower
pursuant to and in accordance with the express terms of this Agreement or any
payment obtained by a Lender as consideration for the assignment of or sale of a
participation in any of its Loans or participations in LC Disbursements to any
assignee or participant, other than to the Borrower or any Restricted Subsidiary
or Affiliate thereof (as to which the provisions of this Section 4.01(c) shall
apply).  The Borrower consents to the foregoing and agrees, to the extent it may
effectively do so under applicable law, that any Lender acquiring a
participation pursuant to the foregoing arrangements may exercise against the
Borrower rights of set-off and counterclaim with respect to such participation
as fully as if such Lender were a direct creditor of the Borrower in the amount
of such participation.
 
Section 4.02  Presumption of Payment by the Borrower.  Unless the Administrative
Agent shall have received notice from the Borrower prior to the date on which
any payment is due to the Administrative Agent for the account of the Lenders or
the Issuing Bank that the Borrower will not make such payment, the
Administrative Agent may assume that the Borrower has made such payment on such
date in accordance herewith and may, in reliance upon such assumption,
distribute to the Lenders or the Issuing Bank, as the case may be, the amount
due.  In such event, if the Borrower has not in fact made such payment, then
each of the Lenders or the Issuing Bank, as the case may be, severally agrees to
repay to the Administrative Agent forthwith on demand the amount so distributed
to such Lender or Issuing Bank with interest thereon, for each day from and
including the date such amount is distributed to it to but excluding the date of
payment to the Administrative Agent, at the greater of the Federal Funds
Effective Rate and a rate determined by the Administrative Agent in accordance
with banking industry rules on interbank compensation.
 
Section 4.03  Certain Deductions by the Administrative Agent.  If any Lender
shall fail to make any payment required to be made by it pursuant to Section
2.05(b), Section 2.08(d), Section 2.08(e) or Section 4.02 then the
Administrative Agent may, in its discretion (notwithstanding any contrary
provision hereof), apply any amounts thereafter received by the Administrative
Agent for the account of
 
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such Lender to satisfy such Lender’s obligations under such Sections until all
such unsatisfied obligations are fully paid.
 
Section 4.04  Disposition of Proceeds.  The Security Instruments contain an
assignment by the Borrower and/or the Guarantors unto and in favor of the
Administrative Agent for the benefit of the Lenders of all of the Borrower’s or
each Guarantor’s interest in and to production and all proceeds attributable
thereto which may be produced from or allocated to the Mortgaged Property.  The
Security Instruments further provide in general for the application of such
proceeds to the satisfaction of the Indebtedness and other obligations described
therein and secured thereby.  Notwithstanding the assignment contained in such
Security Instruments, until the occurrence of an Event of Default, (a) the
Administrative Agent and the Lenders agree that they will neither notify the
purchaser or purchasers of such production nor take any other action to cause
such proceeds to be remitted to the Administrative Agent or the Lenders, but the
Lenders will instead permit such proceeds to be paid to the Borrower and its
Restricted Subsidiaries and (b) the Lenders hereby authorize the Administrative
Agent to take such actions as may be necessary to cause such proceeds to be paid
to the Borrower and/or such Subsidiaries.
 
ARTICLE V
Increased Costs; Break Funding Payments; Taxes
 
Section 5.01  Increased Costs.
 
(a)  Eurodollar Changes in Law.  If any Change in Law shall:
 
(i)  impose, modify or deem applicable any reserve, special deposit or similar
requirement against assets of, deposits with or for the account of, or credit
extended by, any Lender (except any such reserve requirement reflected in the
Adjusted LIBO Rate); or
 
(ii)  impose on any Lender or the London interbank market any other condition
affecting this Agreement or Eurodollar Loans made by such Lender;
 
and the result of any of the foregoing shall be to increase the cost to such
Lender of making or maintaining any Eurodollar Loan (or of maintaining its
obligation to make any such Loan) or to reduce the amount of any sum received or
receivable by such Lender (whether of principal, interest or otherwise), then
the Borrower will pay to such Lender such additional amount or amounts as will
compensate such Lender for such additional costs incurred or reduction suffered.
 
(b)  Capital Requirements.  If any Lender or the Issuing Bank determines that
any Change in Law regarding capital requirements has or would have the effect of
reducing the rate of return on such Lender’s or the Issuing Bank’s capital or on
the capital of such Lender’s or the Issuing Bank’s holding company, if any, as a
consequence of this Agreement or the Loans made by, or participations in Letters
of Credit held by, such Lender, or the Letters of Credit issued by the Issuing
Bank, to a level below that which such Lender or the Issuing Bank or such
Lender’s or the Issuing Bank’s holding company could have achieved but for such
Change in Law (taking into consideration such Lender’s or the Issuing Bank’s
policies and the policies of such Lender’s or the Issuing Bank’s holding company
with respect to capital adequacy), then from time to time the Borrower will pay
to such Lender or the Issuing Bank, as the case may be, such additional amount
or amounts as will compensate such Lender or the Issuing Bank or such Lender’s
or the Issuing Bank’s holding company for any such reduction suffered.
 
(c)  Certificates.  A certificate of a Lender or the Issuing Bank setting forth
the amount or amounts necessary to compensate such Lender or the Issuing Bank or
its holding company, as the case may be, as specified in Section 5.01(a) or (b)
shall be delivered to the Borrower and shall be
 
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conclusive absent manifest error.  The Borrower shall pay such Lender or the
Issuing Bank, as the case may be, the amount shown as due on any such
certificate within 10 days after receipt thereof.
 
(d)  Effect of Failure or Delay in Requesting Compensation.  Failure or delay on
the part of any Lender or the Issuing Bank to demand compensation pursuant to
this Section 5.01 shall not constitute a waiver of such Lender’s or the Issuing
Bank’s right to demand such compensation; provided that the Borrower shall not
be required to compensate a Lender or the Issuing Bank pursuant to this Section
5.01 for any increased costs or reductions incurred more than 365 days prior to
the date that such Lender or the Issuing Bank, as the case may be, notifies the
Borrower of the Change in Law giving rise to such increased costs or reductions
and of such Lender’s or the Issuing Bank’s intention to claim compensation
therefor; provided further that, if the Change in Law giving rise to such
increased costs or reductions is retroactive, then the 365-day period referred
to above shall be extended to include the period of retroactive effect thereof.
 
Section 5.02  Break Funding Payments.  In the event of (a) the payment of any
principal of any Eurodollar Loan other than on the last day of an Interest
Period applicable thereto (including as a result of an Event of Default), (b)
the conversion of any Eurodollar Loan into an ABR Loan other than on the last
day of the Interest Period applicable thereto, or (c) the failure to borrow,
convert, continue or prepay any Eurodollar Loan on the date specified in any
notice delivered pursuant hereto, then, in any such event, the Borrower shall
compensate each Lender for the loss, cost and expense attributable to such
event.  In the case of a Eurodollar Loan, such loss, cost or expense to any
Lender shall be deemed to include an amount determined by such Lender to be the
excess, if any, of (i) the amount of interest which would have accrued on the
principal amount of such Loan had such event not occurred, at the Adjusted LIBO
Rate that would have been applicable to such Loan, for the period from the date
of such event to the last day of the then current Interest Period therefor (or,
in the case of a failure to borrow, convert or continue, for the period that
would have been the Interest Period for such Loan), over (ii) the amount of
interest which would accrue on such principal amount for such period at the
interest rate which such Lender would bid were it to bid, at the commencement of
such period, for dollar deposits of a comparable amount and period from other
banks in the eurodollar market.
 
A certificate of any Lender setting forth any amount or amounts that such Lender
is entitled to receive pursuant to this Section 5.02 shall be delivered to the
Borrower and shall be conclusive absent manifest error.  The Borrower shall pay
such Lender the amount shown as due on any such certificate within 10 days after
receipt thereof.
 
Section 5.03  Taxes.
 
(a)  All payments made by any Loan Party under this Agreement or any Loan
Document shall be made free and clear of, and without deduction or withholding
for or on account of, any present or future income, stamp or other taxes,
levies, imposts, duties, charges, fees, deductions or withholdings, now or
hereafter imposed, levied, collected, withheld or assessed by any Governmental
Authority, excluding net income taxes and franchise taxes (imposed in lieu of
net income taxes) imposed on the Administrative Agent or any Lender as a result
of a present or former connection between the Administrative Agent or such
Lender and the jurisdiction of the Governmental Authority imposing such tax or
any political subdivision or taxing authority thereof or therein (other than any
such connection arising solely from the Administrative Agent or such Lender
having executed, delivered or performed its obligations or received a payment
under, or enforced, this Agreement or any other Loan Document).  If any such
non-excluded taxes, levies, imposts, duties, charges, fees, deductions or
withholdings (“Non-Excluded Taxes”) or other taxes are required to be withheld
from any amounts payable to the Administrative Agent or any Lender hereunder,
the amounts so payable to the Administrative Agent or such Lender shall be
increased to the extent necessary to yield to the Administrative Agent or such
 
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Lender (after payment of all Non-Excluded Taxes and other taxes) interest or any
such other amounts payable hereunder at the rates or in the amounts specified in
this Agreement, provided, however, that the Borrower shall not be required to
increase any such amounts payable to any Lender with respect to any Non-Excluded
Taxes (i) that are attributable to such Lender’s failure to comply with the
requirements of Section 5.03(d) or (e) or (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 the Borrower with respect to such Non-Excluded Taxes
pursuant to this Section 5.03(a).
 
(b)  In addition, the Borrower shall pay any other taxes to the relevant
Governmental Authority in accordance with applicable law.
 
(c)  Whenever any Non-Excluded Taxes or other taxes are payable by a Loan Party,
as promptly as possible thereafter such Loan Party shall send to the
Administrative Agent for its own account or for the account of the relevant
Lender, as the case may be, a certified copy of an original official receipt
received by such Loan Party showing payment thereof.  If such Loan Party fails
to pay any Non-Excluded Taxes or other taxes when due to the appropriate taxing
authority or fails to remit to the Administrative Agent the required receipts or
other required documentary evidence, the Borrower shall indemnify the
Administrative Agent and the Lenders for any incremental taxes, interest or
penalties that may become payable by the Administrative Agent or any Lender as a
result of any such failure.
 
(d)  Each Lender (or Transferee) that is not a “U.S. Person” as defined in
Section 7701(a)(30) of the Code (a “Non-U.S. Lender”) shall deliver to the
Borrower and the Administrative Agent (or, in the case of a Participant, to the
Lender from which the related participation shall have been purchased) two
copies of either U.S. Internal Revenue Service Form W-8BEN or Form W-8ECI, or,
in the case of a Non-U.S. Lender claiming exemption from U.S. federal
withholding tax under Section 871(h) or 881(c) of the Code with respect to
payments of “portfolio interest”, a statement substantially in the form of
Exhibit H and a Form W-8BEN, or any subsequent versions thereof or successors
thereto, properly completed and duly executed by such Non-U.S. Lender claiming
complete exemption from, or a reduced rate of, U.S. federal withholding tax on
all payments by the Loan Parties under this Agreement and the other Loan
Documents.  Such forms shall be delivered by each Non-U.S. Lender on or before
the date it becomes a party to this Agreement (or, in the case of any
Participant, on or before the date such Participant purchases the related
participation).  In addition, each Non-U.S. Lender shall deliver such forms
promptly upon the obsolescence or invalidity of any form previously delivered by
such Non-U.S. Lender.  Each Non-U.S. Lender shall promptly notify the Borrower
at any time it determines that it is no longer in a position to provide any
previously delivered certificate to the Borrower (or any other form of
certification adopted by the U.S. taxing authorities for such
purpose).  Notwithstanding any other provision of this Section 5.03(d), a
Non-U.S. Lender shall not be required to deliver any form pursuant to this
Section 5.03(d) that such Non-U.S. Lender is not legally able to deliver.
 
(e)  A Lender that is entitled to an exemption from or reduction of non-U.S.
withholding tax under the law of the jurisdiction in which the Borrower is
located, or any treaty to which such jurisdiction is a party, with respect to
payments under this Agreement or any Loan Document shall deliver to the Borrower
(with a copy to the Administrative Agent), at the time or times prescribed by
applicable law or reasonably requested by the Borrower, such properly completed
and executed documentation prescribed by applicable law as will permit such
payments to be made without withholding or at a reduced rate, provided that such
Lender is legally entitled to complete, execute and deliver such documentation
and in such Lender’s judgment such completion, execution or submission would not
materially prejudice the legal position of such Lender.
 
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(f)  If the Administrative Agent or any Lender determines, in its sole
discretion, that it has received a refund of any Non-Excluded Taxes or other
taxes as to which it has been indemnified by the Borrower or with respect to
which the Borrower has paid additional amounts pursuant to this Section 5.03, it
shall pay over such refund to the Borrower (but only to the extent of indemnity
payments made, or additional amounts paid, by the Borrower under this Section
5.03 with respect to the Non-Excluded Taxes or other taxes giving rise to such
refund), net of all out-of-pocket expenses of the Administrative Agent or such
Lender and without interest (other than any interest paid by the relevant
Governmental Authority with respect to such refund); provided, that the
Borrower, upon the request of the Administrative Agent or such Lender, agrees to
repay the amount paid over to the Borrower (plus any penalties, interest or
other charges imposed by the relevant Governmental Authority) to the
Administrative Agent or such Lender in the event the Administrative Agent or
such Lender is required to repay such refund to such Governmental Authority.
This Section 5.03 shall not be construed to require the Administrative Agent or
any Lender to make available its tax returns (or any other information relating
to its taxes which it deems confidential) to the Borrower or any other Person.
 
(g)  The agreements in this Section 5.03 shall survive the termination of this
Agreement and the payment of the Loans and all other amounts payable hereunder.
 
Section 5.04  Designation of Different Lending Office.  If any Lender requests
compensation under Section 5.01, or if the Borrower is required to pay any
additional amount to any Lender or any Governmental Authority for the account of
any Lender pursuant to Section 5.03, then such Lender shall use reasonable
efforts to designate a different lending office for funding or booking its Loans
hereunder or to assign its rights and obligations hereunder to another of its
offices, branches or affiliates, if, in the judgment of such Lender, such
designation or assignment (i) would eliminate or reduce amounts payable pursuant
to Section 5.01 or Section 5.03, as the case may be, in the future and (ii)
would not subject such Lender to any unreimbursed cost or expense and would not
otherwise be disadvantageous to such Lender.  The Borrower hereby agrees to pay
all reasonable costs and expenses incurred by any Lender in connection with any
such designation or assignment.
 
Section 5.05  Replacement of Lenders.  If (a) any Lender requests compensation
under Section 5.01, (b) the Borrower is required to pay any additional amount to
any Lender or any Governmental Authority for the account of any Lender pursuant
to Section 5.03, (c) any Lender defaults in its obligation to fund Loans
hereunder, (d) any Lender has not approved (or is not deemed to have approved)
an increase in the Borrowing Base proposed by the Administrative Agent pursuant
to Section 2.07(c)(iii) which has been approved by Lenders holding 75% or more
of the then outstanding Commitments or (e) any Lender has not approved a
proposed waiver or amendment requiring 100% approval or consent but which has
been approved by Lenders holding 75% or more of the then outstanding
Commitments, then the Borrower may, at its sole expense and effort, upon notice
to such Lender and the Administrative Agent, require such Lender to assign and
delegate, without recourse (in accordance with and subject to the restrictions
contained in Section 12.04(b)), all its interests, rights and obligations under
this Agreement to an assignee that shall assume such obligations (which assignee
may be another Lender, if a Lender accepts such assignment); provided that (i)
the Borrower shall have received the prior written consent of the Administrative
Agent, which consent shall not unreasonably be withheld, (ii) such Lender shall
have received payment of an amount equal to the outstanding principal of its
Loans and participations in LC Disbursements, accrued interest thereon, accrued
fees and all other amounts payable to it hereunder, from the assignee (to the
extent of such outstanding principal and accrued interest and fees) or the
Borrower (in the case of all other amounts) and (iii) in the case of any such
assignment resulting from a claim for compensation under Section 5.01 or
payments required to be made pursuant to Section 5.03, such assignment will
result in a reduction in such compensation or payments or will result in the
approval of the proposed Borrowing Base.  A Lender shall not be required to make
any such
 
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assignment and delegation if, prior thereto, as a result of a waiver by such
Lender or otherwise, the circumstances entitling the Borrower to require
such  assignment and delegation cease to apply.
 
ARTICLE VI
Conditions Precedent
 
Section 6.01  Effective Date.  The obligations of the Lenders to amend and
restate the Existing Credit Agreement, to make Loans and of the Issuing Bank to
issue Letters of Credit hereunder shall not become effective until the date on
which each of the following conditions is satisfied (or waived in accordance
with Section 12.02):
 
(a)  The Administrative Agent, the Arrangers and the Lenders shall have received
all fees and other amounts due and payable on or prior to the Effective Date,
including, to the extent invoiced, reimbursement or payment of all out-of-pocket
expenses required to be reimbursed or paid by the Borrower hereunder.
 
(b)  The Administrative Agent shall have received a certificate of the Secretary
or an Assistant Secretary of the Borrower and each Guarantor setting forth (i)
resolutions of its board of directors or other appropriate governing body with
respect to the authorization of the Borrower or such Guarantor to execute and
deliver the Loan Documents to which it is a party and to enter into the
transactions contemplated in those documents, (ii) the officers of the Borrower
or such Guarantor (y) who are authorized to sign the Loan Documents to which the
Borrower or such Guarantor is a party and (z) who will, until replaced by
another officer or officers duly authorized for that purpose, act as its
representative for the purposes of signing documents and giving notices and
other communications in connection with this Agreement and the transactions
contemplated hereby, (iii) specimen signatures of such authorized officers, and
(iv) the articles or certificate of incorporation and by-laws or other
applicable organizational documents of the Borrower and such Guarantor,
certified as being true and complete.  The Administrative Agent and the Lenders
may conclusively rely on such certificate until the Administrative Agent
receives notice in writing from the Borrower to the contrary.
 
(c)  The Administrative Agent shall have received certificates of the
appropriate State agencies with respect to the existence, qualification and good
standing of the Borrower and each Guarantor.
 
(d)  The Administrative Agent shall have received from each party hereto
counterparts (in such number as may be requested by the Administrative Agent) of
this Agreement signed on behalf of such party.
 
(e)  The Administrative Agent shall have received from each party thereto duly
executed counterparts (in such number as may be requested by the Administrative
Agent) of the Security Instruments, including the Guaranty Agreement and the
other Security Instruments described on Exhibit F-1, but excluding the
Intercreditor Agreement.  In connection with the execution and delivery of the
Security Instruments, the Administrative Agent shall:
 
(i)  be reasonably satisfied that the Security Instruments create first
priority, perfected Liens (except that Excepted Liens identified in clauses (a)
to (d) and (f) of the definition thereof, but subject to the provisos at the end
of such definition may exist) on at least 90% of the total value of the Oil and
Gas Properties evaluated in the Initial Reserve Report (provided that, to the
extent Preferential Purchase Right Properties or Interim Assignment Properties
which were evaluated in the Initial Reserve Report are not conveyed to the
Borrower on the Effective Date, compliance with such 90% requirement on the
Effective Date shall be calculated without regard to such Properties); and
 
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(ii)  have received certificates, if appropriate, together with undated, blank
stock powers for each such certificate, representing all of the issued and
outstanding Equity Interests of the Borrower, each of the Guarantors (other than
the Parent) and not less than 65% of all of the issued and outstanding capital
stock of each Foreign Subsidiary that is not a Guarantor, which is directly
owned by either the Borrower or a Domestic Subsidiary.
 
(f)  The Administrative Agent shall have received an opinion of (i) Jones
Walker, special counsel to the Borrower, substantially in a form and of
substance reasonably acceptable to the Administrative Agent and (ii) local
counsel in the State of Mississippi, substantially in a form and of substance
reasonably acceptable to the Administrative Agent.
 
(g)  The Administrative Agent shall have received a certificate of insurance
coverage of the Borrower evidencing that the Borrower is carrying insurance in
accordance with Section 7.12.
 
(h)  The Administrative Agent shall have received title information as the
Administrative Agent may reasonably require satisfactory to the Administrative
Agent setting forth the status of title to at least 90% of the total value of
the Oil and Gas Properties evaluated in the Initial Reserve Report; provided
that, preferential purchase rights associated with the Preferential Purchase
Right Properties and conveyance deficiencies associated with the Interim
Assignment Properties will not render title to such Properties unacceptable for
purposes of compliance with such 90% requirement on the Effective Date, and
provided further that such title information shall be limited to (i) audits of
the Borrower’s title diligence materials prepared in connection with the
Acquisition and other existing well or lease files and (ii) receipt of
assignments conveying the Acquisition Properties to the Seller.
 
(i)  The Administrative Agent shall have received a certificate of a Responsible
Officer of the Borrower certifying that (i) all government and third party
approvals necessary in connection with the Transactions have been obtained on
satisfactory terms and (ii) no action or proceeding is pending or threatened in
any court or before any Governmental Authority seeking to restrain or prohibit
the consummation of the transactions contemplated by the Acquisition Documents
or to obtain substantial damages from the Borrower related to the Acquisition
Documents.
 
(j)  The Administrative Agent shall have received the financial statements
referred to in Section 7.04(a) and 7.04(b) and the Initial Reserve Report
accompanied by a certificate covering the matters described in Section
8.12(c)(i), (ii) and (iii).  The Administrative Agent and the Lenders shall have
received projections (broken down by quarter for the first year and by year
thereafter) for the Parent and its Restricted Subsidiaries after giving effect
to the Acquisition and the other transactions contemplated hereby through the
fifth anniversary of the Effective Date.
 
(k)  The Administrative Agent shall have received appropriate UCC search
certificates reflecting no prior Liens encumbering the Acquisition Properties
and the Properties of the Parent, the Borrower and the Restricted Subsidiaries
for each of the following jurisdictions:  Delaware, Louisiana, Texas, Alabama,
Mississippi and any other jurisdiction requested by the Administrative Agent;
other than those being released on or prior to the Effective Date or Liens
permitted by Section 9.03.
 
(l)  The Administrative Agent shall have received evidence that the Borrower has
purchased one or more commodity price swaps with one or more Approved
Counterparties which have aggregate notional volumes of not less than 80% of the
reasonably estimated projected crude oil production and not less than 80% of the
reasonably estimated projected natural gas production, in each case, from its
proved developed, producing Oil and Gas Properties (excluding Main Pass 299) as
determined by reference to the Initial Reserve Reports for each year during the
calendar years 2008, 2009
 
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and 2010; provided however, that the Swap Agreements for production related to
months during July, August, September and October during each such calendar year
shall be in the form of puts and/or floors.
 
(m)  The Administrative Agent shall have received (i) a certificate of a
Responsible Officer of the Borrower certifying:  (A) that the Borrower is
concurrently consummating the Acquisition in accordance with applicable law and
the terms of the Acquisition Documents (with all of the material conditions
precedent thereto having been satisfied in all material respects or waived by
the parties thereto) and acquiring substantially all of the Acquisition
Properties contemplated by the Acquisition Documents (other than the
Preferential Purchase Right Properties); (B) that no provision of the
Acquisition Agreement has been waived, amended, supplemented or otherwise
modified in any respect materially adverse to the Borrower or the Lenders
without the prior consent of the Arrangers; (C) that the terms of the other
Acquisition Documents are not inconsistent in any material respect with the
terms of the Acquisition Agreement; (D) that attached thereto is the Preliminary
Closing Statement as defined in the Acquisition Documents in such detail as may
reasonably be requested by the Administrative Agent and (E) that attached
thereto are (i) a true and complete list of all Preferential Purchase Right
Properties which are currently pending final decision by a third party regarding
purchase of such property in accordance with such preferential right; (ii) a
true and complete executed copy of each of the Acquisition Documents; and (iii)
original counterparts or copies, certified as true and complete, of the bills of
sale and assignment to the Borrower for all of the Acquisition Properties.
 
(n)  The Borrower shall have unused availability (i.e. the Borrowing Base less
the aggregate Revolving Credit Exposures) under this Agreement of not less than
$125,000,000.
 
(o)  The Administrative Agent shall have received a certificate of a Responsible
Officer of the Parent certifying (i) that the Parent is contemporaneously
closing the Bridge Loans with gross cash proceeds of not less than $800,000,000
on terms approved by the Arrangers; and ('iii) that immediately after giving
effect to the Acquisition, the Parent and its Restricted Subsidiaries will have
outstanding no Debt for borrowed money or Disqualified Capital Stock other than
(A) the Indebtedness under this Agreement; (B) Debt associated with the Bridge
Loans (and any intercompany loan of the proceeds thereof by the Parent to the
Borrower) in an aggregate principal amount of not less than $800,000,000; (C)
the Existing Convertible Notes and (D) the Parent Loan.
 
(p)  The Administrative Agent shall have received a certificate of a Financial
Officer of the Parent certifying that, after giving effect to the Acquisition,
the borrowings under this Agreement and the Bridge Loans, the Parent and its
Restricted Subsidiaries, taken as a whole, are solvent as contemplated by
Section 7.22.
 
(q)  The Administrative Agent shall have received evidence reasonably
satisfactory to Administrative Agent of the payment in full of all amounts due
under the Second Lien Term Loan Agreement and the release of all Liens securing
such obligations and any other obligations secured thereby contemporaneously
with the proceeds of the initial funding under this Agreement.
 
The Administrative Agent shall notify the Borrower and the Lenders of the
Effective Date, and such notice shall be conclusive and
binding.  Notwithstanding the foregoing, the obligations of the Lenders to amend
and restate the Existing Credit Agreement and make Loans and of the Issuing Bank
to issue Letters of Credit hereunder shall not become effective unless each of
the foregoing conditions is satisfied (or waived pursuant to Section 12.02) at
or prior to 1:00 p.m., New York New York time, on August 15, 2007 (and, in the
event such conditions are not so satisfied or waived, the Commitments shall
terminate at such time).
 
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Section 6.02  Each Credit Event.  The obligation of each Lender to make a Loan
on the occasion of any Borrowing (including the initial funding), and of the
Issuing Bank to issue, amend, renew or extend any Letter of Credit, is subject
to the satisfaction of the following conditions:
 
(a)  At the time of and immediately after giving effect to such Borrowing or the
issuance, amendment, renewal or extension of such Letter of Credit, as
applicable, no Default shall have occurred and be continuing.
 
(b)  At the time of and immediately after giving effect to such Borrowing or the
issuance, amendment, renewal or extension of such Letter of Credit, as
applicable, no event, development or circumstance has occurred or shall then
exist that has resulted in, or could reasonably be expected to have, a Material
Adverse Effect; provided that with respect to the initial funding on the
Effective Date, this condition precedent shall not apply.
 
(c)  The representations and warranties of the Borrower and the Guarantors set
forth in this Agreement and in the other Loan Documents shall be true and
correct on and as of the date of such Borrowing or the date of issuance,
amendment, renewal or extension of such Letter of Credit, as applicable, except
to the extent any such representations and warranties are expressly limited to
an earlier date, in which case, on and as of the date of such Borrowing or the
date of issuance, amendment, renewal or extension of such Letter of Credit, as
applicable, such representations and warranties shall continue to be true and
correct as of such specified earlier date; provided that with respect to the
initial funding on the Effective Date, the Parent and the Borrower are not
required to make the representation contained in Section 7.04(c) and the only
representations (and related Defaults) the making of which shall be a condition
precedent under this Section 6.02(c) on the Effective Date shall be (i) with
respect to the Parent and its Restricted Subsidiaries, those representations
contained in Sections 7.01, 7.02, 7.03(b) (but only with respect to the extent
of a Loan Party’s charter, by-laws or other organizational documents), 7.08 and
7.21 and (ii) with respect to the Acquisition Properties, such of the
representations made by or with respect to the Assets in the Acquisition
Agreement as are material to the interests of the Lenders (but only to the
extent that the Borrower has the right to terminate its obligations under the
Acquisition Agreement as a result of a breach of such representations in the
Acquisition Agreement (determined without regard to any waiver, amendment or
other modification of the Acquisition Agreement)).
 
(d)  The making of such Loan or the issuance, amendment, renewal or extension of
such Letter of Credit, as applicable, would not conflict with, or cause any
Lender or the Issuing Bank to violate or exceed, any applicable Governmental
Requirement, and no Change in Law shall have occurred, and no litigation shall
be pending or threatened, which does or, with respect to any threatened
litigation, seeks to, enjoin, prohibit or restrain, the making or repayment of
any Loan, the issuance, amendment, renewal, extension or repayment of any Letter
of Credit or any participations therein or the consummation of the transactions
contemplated by this Agreement or any other Loan Document; provided that with
respect to the initial funding on the Effective Date, this condition precedent
shall not apply.
 
(e)  The receipt by the Administrative Agent of a Borrowing Request in
accordance with Section 2.03 or a request for a Letter of Credit in accordance
with Section 2.08(b), as applicable.
 
Each request for a Borrowing and each request for the issuance, amendment,
renewal or extension of any Letter of Credit shall be deemed to constitute a
representation and warranty by the Parent and the Borrower on the date thereof
as to the matters specified in Section 6.02(a) through (e).
 
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ARTICLE VII
Representations and Warranties
 
The Parent and the Borrower represent and warrant to the Lenders that:
 
Section 7.01  Organization; Powers.  Each of the Parent and each Restricted
Subsidiary is duly organized, validly existing and in good standing under the
laws of the jurisdiction of its organization, has all requisite power and
authority, and has all material governmental licenses, authorizations, consents
and approvals necessary, to own its assets and to carry on its business as now
conducted, and is qualified to do business in, and is in good standing in, every
jurisdiction where such qualification is required, except where failure to have
such power, authority, licenses, authorizations, consents, approvals and
qualifications could not reasonably be expected to have a Material Adverse
Effect.
 
Section 7.02  Authority; Enforceability.  The Transactions are within each Loan
Party’s corporate powers and have been duly authorized by all necessary
corporate and, if required, stockholder action.  Each Loan Document and
Acquisition Document to which a Loan Party is a party has been duly executed and
delivered by it and constitutes its legal, valid and binding obligation, as
applicable, enforceable in accordance with its terms, subject to applicable
bankruptcy, insolvency, reorganization, moratorium or other laws affecting
creditors’ rights generally and subject to general principles of equity,
regardless of whether considered in a proceeding in equity or at law.
 
Section 7.03  Approvals; No Conflicts.  The Transactions (a) do not require any
consent or approval of, registration or filing with, or any other action by, any
Governmental Authority or any other third Person, nor is any such consent,
approval, registration, filing or other action necessary for the validity or
enforceability of any Loan Document or the consummation of the transactions
contemplated thereby, except such as have been obtained or made and are in full
force and effect other than the recording and filing of the Security Instruments
as required by this Agreement, (b) will not violate any applicable law or
regulation or the charter, by-laws or other organizational documents of any Loan
Party or any order of any Governmental Authority, (c) will not violate or result
in a default under any indenture, agreement or other instrument binding upon any
Loan Party or its Properties, or give rise to a right thereunder to require any
payment to be made by any Loan Party and (d) will not result in the creation or
imposition of any Lien on any Property of any Loan Party (other than the Liens
created by the Loan Documents).
 
Section 7.04  Financial Condition; No Material Adverse Change.
 
(a)  The Parent has furnished to the Lenders (i) its audited consolidated
balance sheets and related statements of income, stockholders’ equity and cash
flows as of and for the fiscal years ended December 31, 2006, December 31, 2005
and December 31, 2004 (which audit reports for such financial statements are not
subject to any qualification), (ii) its unaudited consolidated balance sheets
and related statements of income, stockholders’ equity and cash flows for the
fiscal quarter ended March 31, 2007, (iii) audited statements of revenues and
operating expenses for the Assets for the fiscal year ended December 31, 2006
(which audit reports for such financial statements are not subject to any
qualification) and (iv) unaudited statements of revenues and operating expenses
for the Assets for the fiscal quarter ending March 31, 2007 (and for the
comparable period in the preceding fiscal year), which financial statements
shall be prepared in accordance with GAAP.  The financial statements in clauses
(i) and (ii) present fairly, in all material respects, consolidated financial
condition of the Parent as of the dates and for the periods set forth above in
accordance with GAAP, subject to year-end audit adjustments and the absence of
footnotes in the case of the unaudited quarterly financial statements.  The
financial statements in clauses (iii) and (iv) present fairly, in all material
respects, revenues and operating expenses for the
 
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Assets as of the dates and for the periods set forth above in accordance with
GAAP, subject to year-end audit adjustments and the absence of footnotes in the
case of the unaudited quarterly financial statements.
 
(b)  The Parent has heretofore furnished to the Lenders a pro forma consolidated
balance sheet of the Parent as of June 30, 2007 and a pro forma statement of
operations as of December 31, 2006, and as of June 30, 2007 and 12-month period
ending on June 30, 2007, in each case adjusted to give effect to the Acquisition
and the other transactions contemplated hereby, the other transactions related
thereto and any other transactions that would be required to be given pro forma
effect by Regulation S-X promulgated under the Securities Act and such other
adjustments as are agreed between the Parent and the Arrangers.
 
(c)  Since December 31, 2006, there has been no event, development or
circumstance that has had or could reasonably be expected to have a Material
Adverse Effect.
 
(d)  Neither the Parent nor any of its Restricted Subsidiaries has on the date
hereof any material Debt (including Disqualified Capital Stock) or any
contingent liabilities, off-balance sheet liabilities or partnerships,
liabilities for taxes, unusual forward or long-term commitments or unrealized or
anticipated losses from any unfavorable commitments, except as referred to or
reflected or provided for in the Financial Statements.
 
Section 7.05  Litigation.
 
(a)  Except as set forth on Schedule 7.05, there are no actions, suits,
investigations or proceedings by or before any arbitrator or Governmental
Authority pending against or, to the knowledge of the Parent or the Borrower,
threatened against or affecting the Parent and its Restricted Subsidiaries or
involving the Acquisition (i) not fully covered by insurance (except for normal
deductibles) as to which there is a reasonable possibility of an adverse
determination that, if adversely determined, could reasonably be expected,
individually or in the aggregate, to result in a Material Adverse Effect or (ii)
that involve any Loan Document, any Acquisition Document or the Transactions.
 
(b)  Since the date of this Agreement, there has been no change in the status of
the matters disclosed in Schedule 7.05 that, individually or in the aggregate,
has resulted in, or materially increased the likelihood of, a Material Adverse
Effect.
 
Section 7.06  Environmental Matters.  Except as could not be reasonably expected
to have a Material Adverse Effect (or with respect to (c), (d) and (e) below,
where the failure to take such actions could not be reasonably expected to have
a Material Adverse Effect):
 
(a)  neither any Property of the Parent and its Restricted Subsidiaries nor the
operations conducted thereon violate any order or requirement of any court or
Governmental Authority or any Environmental Laws.
 
(b)  no Property of the Parent and its Restricted Subsidiaries nor the
operations currently conducted thereon are in violation of or subject to any
existing, pending or threatened action, suit, investigation, inquiry or
proceeding by or before any court or Governmental Authority or to any remedial
obligations under Environmental Laws.
 
(c)  all notices, permits, licenses, exemptions, approvals or similar
authorizations, if any, required to be obtained or filed in connection with the
operation or use of any and all Property of the Parent and its Restricted
Subsidiaries, including, without limitation, past or present treatment, storage,
disposal or release of a hazardous substance, oil and gas waste or solid waste
into the environment, have
 
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been duly obtained or filed, and the Parent and its Restricted Subsidiaries are
in compliance with the terms and conditions of all such notices, permits,
licenses and similar authorizations.
 
(d)  all hazardous substances, solid waste and oil and gas waste, if any,
generated at any and all Property of the Parent and its Restricted Subsidiaries
have in the past been transported, treated and disposed of in accordance with
Environmental Laws and so as not to pose an imminent and substantial
endangerment to public health or the environment, and, to the actual knowledge
of the Borrower, all such transport carriers and treatment and disposal
facilities have been and are operating in compliance with Environmental Laws and
so as not to pose an imminent and substantial endangerment to public health or
the environment, and are not the subject of any existing, pending or threatened
action, investigation or inquiry by any Governmental Authority in connection
with any Environmental Laws.
 
(e)  the Borrower has taken all steps reasonably necessary to determine and has
determined that no oil, hazardous substances, solid waste or oil and gas waste,
have been disposed of or otherwise released and there has been no threatened
release of any oil, hazardous substances, solid waste or oil and gas waste on or
to any Property of the Parent and its Restricted Subsidiaries except in
compliance with Environmental Laws and so as not to pose an imminent and
substantial endangerment to public health or welfare or the environment.
 
(f)  to the extent applicable, all Property of the Parent and its Restricted
Subsidiaries currently satisfies all design, operation, and equipment
requirements imposed by the OPA, and the Borrower does not have any reason to
believe that such Property, to the extent subject to the OPA, will not be able
to maintain compliance with the OPA requirements during the term of this
Agreement.
 
(g)  neither the Parent nor any Restricted Subsidiary has any known contingent
liability or Remedial Work in connection with any release or threatened release
of any oil, hazardous substance, solid waste or oil and gas waste into the
environment.
 
Section 7.07  Compliance with the Laws and Agreements; No Defaults.
 
(a)  The Parent and its Restricted Subsidiaries are in compliance with all
Governmental Requirements applicable to it or its Property and all agreements
and other instruments binding upon it or its Property, and possesses all
licenses, permits, franchises, exemptions, approvals and other governmental
authorizations necessary for the ownership of its Property and the conduct of
its business, except where the failure to do so, individually or in the
aggregate, could not reasonably be expected to result in a Material Adverse
Effect.
 
(b)  Neither the Parent nor any of its Restricted Subsidiaries are in default
nor has any event or circumstance occurred which, but for the expiration of any
applicable grace period or the giving of notice, or both, would constitute a
default or would require the Parent or any Restricted Subsidiary to Redeem or
make any offer to Redeem all or any portion of any Debt outstanding under any
indenture, note, credit agreement or instrument pursuant to which any Material
Indebtedness is outstanding or by which the Parent or any of its Restricted
Subsidiaries or any of their Properties is bound.
 
(c)  No Default has occurred and is continuing.
 
Section 7.08  Investment Company Act.  No Loan Party is an “investment company”
or a company “controlled” by an “investment company,” within the meaning of, or
subject to regulation under, the Investment Company Act of 1940, as amended.
 
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Section 7.09  Taxes.  The Parent and each of its Subsidiaries has timely filed
or caused to be filed all tax returns and reports required to have been filed
and has paid or caused to be paid all taxes required to have been paid by it,
except (a) taxes that are being contested in good faith by appropriate
proceedings and for which the Parent, as applicable, has set aside on its books
adequate reserves in accordance with GAAP or (b) to the extent that the failure
to do so could not reasonably be expected to result in a Material Adverse
Effect.  The charges, accruals and reserves on the books of the Parent in
respect of taxes and other governmental charges are, in the reasonable opinion
of the Parent, adequate.  No tax Lien has been filed and, to the knowledge of
the Parent, no claim is being asserted with respect to any such tax or other
such governmental charge.
 
Section 7.10  ERISA.
 
(a)  The Parent and each ERISA Affiliate have complied in all material respects
with ERISA and, where applicable, the Code regarding each Plan.
 
(b)  Each Plan is, and has been, maintained in substan­tial compliance with
ERISA and, where applicable, the Code.
 
(c)  No act, omission or transaction has occurred which could result in
imposition on any the Parent or any of its Subsidiaries or any ERISA Affiliate
(whether directly or indirectly) of (i) either a civil penalty assessed pursuant
to subsections (c), (i) or (l) of section 502 of ERISA or a tax imposed pursuant
to Chapter 43 of Subtitle D of the Code or (ii) breach of fiduciary duty
liability damages under section 409 of ERISA.
 
(d)  Except as provided in Schedule 7.10(d), no Plan (other than a defined
contribu­tion plan) or any trust created under any such Plan has been terminated
since September 2, 1974.  No liability to the PBGC (other than for the payment
of current premiums which are not past due) by the Parent or any of its
Subsidiaries or any ERISA Affiliate has been or is expected by any Loan Party or
any ERISA Affiliate to be incurred with respect to any Plan.  No ERISA Event
with respect to any Plan has occurred.
 
(e)  Full payment when due has been made of all amounts which Parent or any of
its Subsidiaries or any ERISA Affiliate is required under the terms of each Plan
or applicable law to have paid as contribu­tions to such Plan as of the date
hereof, no accumulated funding deficiency (as defined in section 302 of ERISA
and section 412 of the Code), whether or not waived, exists with respect to any
Plan and, on and after the effectiveness of the Pension Act, and no Plan has
failed to satisfy the minimum funding standards (within the meaning of Section
412 of the Code or Section 302 of ERISA) applicable to such Plan.
 
(f)  Except as provided in Schedule 7.10(f), the actuarial present value of the
benefit liabili­ties under each Plan which is subject to Title IV of ERISA does
not, as of the end of the Borrower’s most recently ended fiscal year, exceed the
current value of the assets (computed on a plan termination basis in accordance
with Title IV of ERISA) of such Plan allocable to such benefit liabilities by an
amount in excess of $500,000.  The term “actuarial present value of the benefit
liabilities” shall have the meaning specified in section 4041 of ERISA.
 
(g)  Neither the Parent and any of its Subsidiaries nor any ERISA Affiliate
sponsors, maintains, or contributes to an employee welfare benefit plan, as
defined in section 3(1) of ERISA, including, without limitation, any such plan
maintained to provide benefits to former employees of such entities, that may
not be terminated by the Parent or any ERISA Affiliate in its sole discretion at
any time without any material liability.
 
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(h)  Neither the Parent and any of its Subsidiaries nor any ERISA Affiliate
sponsors, maintains or contributes to, or has at any time in the six-year period
preceding the date hereof sponsored, maintained or contributed to, any
Multiemployer Plan.
 
(i)  Neither the Parent and any of its Subsidiaries nor any ERISA Affiliate is
required to provide security under section 401(a)(29) of the Code due to a Plan
amendment that results in an increase in current liability for the Plan.
 
Section 7.11  Disclosure; No Material Misstatements.  The Parent and the
Borrower have disclosed to the Administrative Agent and the Lenders all material
agreements, instruments and corporate or other restrictions to which it or any
of its Restricted Subsidiaries is subject, and all other matters known to it,
that, individually or in the aggregate, could reasonably be expected to result
in a Material Adverse Effect.  Neither the Information Memorandum nor any of the
other reports, financial statements, certificates or other information furnished
by or on behalf of the Parent and its Restricted Subsidiaries to the
Administrative Agent or any Lender or any of their Affiliates in connection with
the negotiation of this Agreement or any other Loan Document or delivered
hereunder or under any other Loan Document (as modified or supplemented by other
information so furnished) contains any material misstatement of fact or omits to
state any material fact necessary to make the statements therein, in the light
of the circumstances under which they were made, not misleading; provided that,
with respect to projected financial information, the Parent and the Borrower
represent only that such information was prepared in good faith based upon
assumptions believed to be reasonable at the time; and further provided that the
representations regarding information and projections with respect to the
Acquisition Properties shall be limited to the best knowledge of the
Parent.  There is no fact peculiar to the Parent and its Restricted Subsidiaries
which could reasonably be expected to have a Material Adverse Effect or in the
future is reasonably likely to have a Material Adverse Effect and which has not
been set forth in this Agreement or the Loan Documents or the other documents,
certificates and statements furnished to the Administrative Agent or the Lenders
by or on behalf of the Parent and its Restricted Subsidiaries prior to, or on,
the date hereof in connection with the transactions contemplated hereby.  There
are no statements or conclusions in any Reserve Report which are based upon or
include misleading information or fail to take into account material information
regarding the matters reported therein, it being understood that projections
concerning volumes attributable to the Oil and Gas Properties and production and
cost estimates contained in each Reserve Report are necessarily based upon
professional opinions, estimates and projections and that neither the Parent,
the Borrower, Restricted the Subsidiaries nor such Responsible Officer warrants
that such opinions, estimates and projections will ultimately prove to have been
accurate.
 
Section 7.12  Insurance.  The Borrower has, and has caused all of its Restricted
Subsidiaries to have, (a) all insurance policies sufficient for the compliance
by each of them with all material Governmental Requirements and all material
agreements and (b) insurance coverage in at least amounts and against such risk
(including, without limitation, public liability) that are usually insured
against by companies similarly situated and engaged in the same or a similar
business for the assets and operations of the Borrower and its Restricted
Subsidiaries.  Schedule 7.12, as of the date hereof, sets forth a list of all
insurance maintained by the Borrower and all its Restricted Subsidiaries.  The
Administrative Agent and the Lenders have been named as additional insureds in
respect of such liability insurance policies and the Administrative Agent has
been named as loss payee with respect to Property loss insurance.
 
Section 7.13  Restriction on Liens.  Neither the Parent nor any of its
Restricted Subsidiaries is a party to any material agreement or arrangement
(other than Capital Leases creating Liens permitted by Section 9.03(c), Liens
permitted by clause (g) of the definition of Excepted Liens and the Bridge
Credit Agreement), but then only on the Property subject of such Capital Lease),
or subject to any order, judgment, writ or decree, which either restricts or
purports to restrict its ability to grant Liens to the
 
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Administrative Agent and the Lenders on or in respect of their Properties to
secure the Indebtedness and the Loan Documents.
 
Section 7.14  Subsidiaries.  Except as set forth on Schedule 7.14 or as
disclosed in writing to the Administrative Agent (which shall promptly furnish a
copy to the Lenders), which shall be a supplement to Schedule 7.14, the Parent
has no Subsidiaries.  Schedule 7.14 sets forth each Subsidiary’s status as a
Restricted Subsidiary or an Unrestricted Subsidiary.
 
Section 7.15  Location of Business and Offices.  The Parent’s jurisdiction of
organization is Delaware; the name of the Parent as listed in the public records
of its jurisdiction of organization is McMoRan Exploration Co.; and the
organizational identification number of the Parent in its jurisdiction of
organization is 2927190 (or, in each case, as set forth in a notice delivered to
the Administrative Agent pursuant to Section 8.01(m) in accordance with Section
12.01).  The Borrower’s jurisdiction of organization is Delaware; the name of
the Borrower as listed in the public records of its jurisdiction of organization
is McMoRan Oil & Gas LLC; and the organizational identification number of the
Borrower in its jurisdiction of organization is 2927213 (or, in each case, as
set forth in a notice delivered to the Administrative Agent pursuant to Section
8.01(m) in accordance with Section 12.01).  The Parent’s and the Borrower’s
principal place of business and chief executive offices are located at the
address specified in Section 12.01 (or as set forth in a notice delivered
pursuant to Section 8.01(m) and Section 12.01(c)).  Each Subsidiary’s
jurisdiction of organization, name as listed in the public records of its
jurisdiction of organization, organizational identification number in its
jurisdiction of organization, and the location of its principal place of
business and chief executive office is stated on Schedule 7.14 (or as set forth
in a notice delivered pursuant to Section 8.01(m)).
 
Section 7.16  Properties; Titles, Etc.
 
(a)  Except as set forth in Schedule 7.16, each of the Borrower and the
Restricted Subsidiaries (as applicable) has good and defensible title to the Oil
and Gas Properties evaluated in the most recently delivered Reserve Report and
good title to all its personal Properties, in each case, free and clear of all
Liens except Liens permitted by Section 9.03.  After giving full effect to the
Excepted Liens, the Borrower or the Restricted Subsidiary specified as the owner
owns the net interests in production attributable to the Hydrocarbon Interests
as reflected in the most recently delivered Reserve Report, and the ownership of
such Properties shall not in any material respect obligate the Borrower or such
Restricted Subsidiary to bear the costs and expenses relating to the
maintenance, development and operations of each such Property in an amount in
excess of the working interest of each Property set forth in the most recently
delivered Reserve Report that is not offset by a corresponding proportionate
increase in the Borrower’s or such Restricted Subsidiary’s net revenue interest
in such Property.  The Parent owns no direct interests in any Oil and Gas
Properties.
 
(b)  All material leases and agreements necessary for the conduct of the
business of the Borrower and the Restricted Subsidiaries are valid and
subsisting, in full force and effect, and there exists no default or event or
circumstance which with the giving of notice or the passage of time or both
would give rise to a default under any such lease or leases, which could
reasonably be expected to have a Material Adverse Effect.
 
(c)  The rights and Properties presently owned, leased or licensed by the
Borrower and the Restricted Subsidiaries including, without limitation, all
easements and rights of way, include all rights and Properties necessary to
permit the Borrower and the Restricted Subsidiaries to conduct their business in
all material respects in the same manner as its business has been conducted
prior to the date hereof.
 
 
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(d)  All of the Properties of the Borrower and the Restricted Subsidiaries which
are reasonably necessary for the operation of their businesses are in good
working condition and are maintained in accordance with prudent business
standards.
 
(e)  The Borrower and each Restricted Subsidiary owns, or is licensed to use,
all trademarks, tradenames, copyrights, patents and other intellectual Property
material to its business, and the use thereof by the Borrower and such
Restricted Subsidiary does not infringe upon the rights of any other Person,
except for any such infringements that, individually or in the aggregate, could
not reasonably be expected to result in a Material Adverse Effect.  The Borrower
and its Restricted Subsidiaries either own or have valid licenses or other
rights to use all databases, geological data, geophysical data, engineering
data, seismic data, maps, interpretations and other technical information used
in their businesses as presently conducted, subject to the limitations contained
in the agreements governing the use of the same, which limitations are customary
for companies engaged in the business of the exploration and production of
Hydrocarbons, with such exceptions as could not reasonably be expected to have a
Material Adverse Effect.
 
Section 7.17  Maintenance of Properties.  Except for such acts or failures to
act as could not be reasonably expected to have a Material Adverse Effect, the
Oil and Gas Properties (and Properties unitized therewith) of the Borrower and
its Restricted Subsidiaries have been maintained, operated and developed in a
good and workmanlike manner and in conformity with all Governmental Requirements
and in conformity with the provisions of all leases, subleases or other
contracts comprising a part of the Hydrocarbon Interests and other contracts and
agreements forming a part of the Oil and Gas Properties of the Borrower and its
Restricted Subsidiaries.  Specifically in connection with the foregoing, except
for those as could not be reasonably expected to have a Material Adverse Effect,
(i) no Oil and Gas Property of the Parent or its Restricted Subsidiaries is
subject to having allowable production reduced below the full and regular
allowable (including the maximum permissible tolerance) because of any
overproduction (whether or not the same was permissible at the time) and (ii)
none of the wells comprising a part of the Oil and Gas Properties (or Properties
unitized therewith) of the Parent or its Restricted Subsidiaries is deviated
from the vertical more than the maximum permitted by Governmental Requirements,
and such wells are, in fact, bottomed under and are producing from, and the well
bores are wholly within, the Oil and Gas Properties (or in the case of wells
located on Properties unitized therewith, such unitized Properties) of the
Borrower or such Restricted Subsidiary.  All pipelines, wells, gas processing
plants, platforms and other material improvements, fixtures and equipment owned
in whole or in part by the Borrower or any of its Restricted Subsidiaries that
are necessary to conduct normal operations are being maintained in a state
adequate to conduct normal operations, and with respect to such of the foregoing
which are operated by the Borrower or any of its Restricted Subsidiaries, in a
manner consistent with the Borrower’s or its Restricted Subsidiaries’ past
practices (other than those the failure of which to maintain in accordance with
this Section 7.17  could not reasonably be expected to have a Material Adverse
Effect).
 
Section 7.18  Gas Imbalances, Prepayments.  Except as set forth on Schedule 7.18
or on the most recent certificate delivered pursuant to Section 8.12(c), on a
net basis there are no gas imbalances, take or pay or other prepayments which
would require the Borrower or any of its Restricted Subsidiaries to deliver
Hydrocarbons produced from the Oil and Gas Properties at some future time
without then or thereafter receiving full payment therefor exceeding two and
one-half percent (2.5%) of the aggregate volumes of Hydrocarbons (on an Mcf
equivalent basis) listed in the most recent Reserve Report.
 
Section 7.19  Marketing of Production.  Except for contracts listed and in
effect on the date hereof on Schedule 7.19, and thereafter either disclosed in
writing to the Administrative Agent or included in the most recently delivered
Reserve Report (with respect to all of which contracts the Borrower represents
that it or its Restricted Subsidiaries are receiving a price for all production
sold
 
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thereunder which is computed substantially in accordance with the terms of the
relevant contract and are not having deliveries curtailed substantially below
the subject Property’s delivery capacity), no material agreements exist which
are not cancelable on 60 days notice or less without penalty or detriment for
the sale of production from the Borrower’s or its Restricted Subsidiaries’
Hydrocarbons (including, without limitation, calls on or other rights to
purchase, production, whether or not the same are currently being exercised)
that (a) pertain to the sale of production at a fixed price and (b) have a
maturity or expiry date of longer than six (6) months from the date hereof.
 
Section 7.20  Swap Agreements.  Schedule 7.20, as of the date hereof, and after
the date hereof, each report required to be delivered by the Borrower pursuant
to Section 8.01(d), sets forth, a true and complete list of all Swap Agreements
of the Parent and its Restricted Subsidiaries, the material terms thereof
(including the type, term, effective date, termination date and notional amounts
or volumes), the net mark to market value thereof, all credit support agreements
relating thereto (including any margin required or supplied) and the
counterparty to each such agreement.
 
Section 7.21  Use of Loans and Letters of Credit.  The proceeds of the Loans and
the Letters of Credit shall be used to refinance the Second Lien Notes, to
provide funding in connection with the Acquisition, to provide for bonding
requirement with the MMS (defined herein), to finance the PPR Letter of Credit,
to provide working capital for exploration and production operations and to
provide funding and Letters of Credit for general corporate purposes of the
Borrower and its Restricted Subsidiaries.  Neither the Parent nor any Restricted
Subsidiary is engaged principally, or as one of its or their important
activities, in the business of extending credit for the purpose, whether
immediate, incidental or ultimate, of buying or carrying margin stock (within
the meaning of Regulation T, U or X of the Board).  No part of the proceeds of
any Loan or Letter of Credit will be used for any purpose which violates the
provisions of Regulations T, U or X of the Board.
 
Section 7.22  Solvency.  After giving effect to the transactions contemplated
hereby, (a) the aggregate assets (after giving effect to amounts that could
reasonably be received by reason of indemnity, offset, insurance or any similar
arrangement), at a fair valuation, of the Loan Parties, taken as a whole, will
exceed the aggregate Debt of the Loan Parties on a consolidated basis, as the
Debt becomes absolute and matures, (b) each Loan Party will not have incurred or
intended to incur, and will not believe that it will incur, Debt beyond its
ability to pay such Debt (after taking into account the timing and amounts of
cash to be received by it and the amounts to be payable on or in respect of its
liabilities, and giving effect to amounts that could reasonably be received by
reason of indemnity, offset, insurance or any similar arrangement) as such Debt
becomes absolute and matures and (c) each Loan Party will not have (and will
have no reason to believe that it will have thereafter) unreasonably small
capital for the conduct of its business.
 
ARTICLE VIII
Affirmative Covenants
 
Until the Commitments have expired or been terminated and the principal of and
interest on each Loan and all fees payable hereunder and all other amounts
payable under the Loan Documents shall have been paid in full and all Letters of
Credit shall have expired or terminated and all LC Disbursements shall have been
reimbursed, the Parent and the Borrower covenant and agree with the Lenders
that:
 
Section 8.01  Financial Statements; Other Information
 
.  The Parent and the Borrower will furnish to the Administrative Agent and each
Lender:
 
(a)  Annual Financial Statements.  As soon as available, but in any event in
accordance with then applicable law and not later than 90 days after the end of
each fiscal year of the
 
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Parent and the Borrower, each of their audited consolidated balance sheets and
related statements of operations, stockholders’ equity, as applicable, and cash
flows as of the end of and for such year, setting forth in each case in
comparative form the figures for the previous fiscal year, all reported on by
Ernst & Young LLP or other independent public accountants of recognized national
standing (without a “going concern” or like qualification or exception and
without any qualification or exception as to the scope of such audit) to the
effect that such consolidated financial statements present fairly in all
material respects the financial condition and results of operations of the
Parent and the Borrower and their consolidated Subsidiaries on a consolidated
basis in accordance with GAAP consistently applied.
 
(b)  Quarterly Financial Statements.  As soon as available, but in any event in
accordance with then applicable law and not later than 45 days after the end of
each of the first three fiscal quarters of each fiscal year of the Parent and
the Borrower, each of their consolidated balance sheet and related statements of
operations and cash flows as of the end of and for such fiscal quarter and the
then elapsed portion of the fiscal year, setting forth in each case in
comparative form the figures for the corresponding period or periods of (or, in
the case of the balance sheet, as of the end of) the previous fiscal year, all
certified by one of its Financial Officers as presenting fairly in all material
respects the financial condition and results of operations of the Parent and the
Borrower and their consolidated Subsidiaries on a consolidated basis in
accordance with GAAP consistently applied, subject to normal year-end audit
adjustments and the absence of footnotes.
 
(c)  Certificate of Financial Officer -- Compliance.  Concurrently with any
delivery of financial statements under Section 8.01(a) or Section 8.01(b),
commencing with the delivery of financial statements for the fiscal quarter
ending September 30, 2007, a certificate of a Financial Officer of the Parent in
substantially the form of Exhibit D hereto (i) certifying as to whether a
Default has occurred and, if a Default has occurred, specifying the details
thereof and any action taken or proposed to be taken with respect thereto and
(ii) setting forth reasonably detailed calculations demonstrating compliance
with Section 9.01.
 
(d)  Certificate of Financial Officer – Swap Agreements.  Concurrently with any
delivery of financial statements under Section 8.01(a) and Section 8.01(b),
commencing with the delivery of financial statements for the fiscal quarter
ending September 30, 2007, a certificate of a Financial Officer, in form and
substance satisfactory to the Administrative Agent, setting forth as of the last
Business Day of such fiscal quarter or fiscal year, a true and complete list of
all Swap Agreements of each Loan Party, the material terms thereof (including
the type, term, effective date, termination date and notional amounts or
volumes), the net mark-to-market value therefor, any new credit support
agreements relating thereto not listed on Schedule 7.20, any margin required or
supplied under any credit support document, and the counterparty to each such
agreement.
 
(e)  Certificate of Financial Officer -- Consolidating Information.  If, at any
time, all of the consolidated Subsidiaries of the Parent are not Consolidated
Subsidiaries, then concurrently with any delivery of financial statements under
Section 8.01(a) or Section 8.01(b), a certificate of a Financial Officer setting
forth consolidating spreadsheets that show all Unrestricted Subsidiaries and the
eliminating entries, in such form as would be presentable to the auditors of the
Parent.
 
(f)  Certificate of Insurer -- Insurance Coverage.  Concurrently with any
delivery of financial statements under Section 8.01(a), a certificate of
insurance coverage with respect to the insurance required by Section 8.07, in
form and substance satisfactory to the Administrative Agent, and, if requested
by the Administrative Agent or any Lender, all copies of the applicable
policies.
 
(g)  Other Accounting Reports.  Promptly upon receipt thereof, a copy of each
other report or letter submitted to any Loan Party by independent accountants in
connection with any annual,
 
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interim or special audit made by them of the books of any such Person, and a
copy of any response by such Person, or the board of directors or other
appropriate governing body of such Person, to such letter or report.
 
(h)  SEC and Other Filings; Reports to Shareholders.  Promptly after the same
become publicly available, copies of all periodic and other reports, proxy
statements and other materials filed by the Parent with the SEC, or  with any
national securities exchange, or distributed by the Parent or the Borrower to
its shareholders generally, as the case may be.  Documents required to be
delivered pursuant to Section 8.01 may be delivered electronically and if so
delivered, shall be deemed to have been delivered on the date on which the
Parent posts such documents to EDGAR (or such other free, publicly-accessible
internet database that may be established and maintained by the SEC as a
substitute for or successor to EDGAR).
 
(i)  Notices Under Material Instruments.  Promptly after the furnishing thereof,
copies of any financial statement, report or notice furnished to or by any
Person pursuant to the terms of any preferred stock designation, indenture, loan
or credit or other similar agreement, other than this Agreement and not
otherwise required to be furnished to the Lenders pursuant to any other
provision of this Section 8.01.
 
(j)  Lists of Purchasers.  Concurrently with the delivery of any Reserve Report
to the Administrative Agent pursuant to Section 8.12, a list of all Persons
purchasing Hydrocarbons from the Borrower or any Restricted Subsidiary.
 
(k)  Notice of Sales of Oil and Gas Properties.  In the event the Borrower or
any Restricted Subsidiary intends to sell, transfer, assign or otherwise dispose
of any Oil or Gas Properties or any Equity Interests in any Restricted
Subsidiary with a fair market value in excess of $5,000,000 in accordance with
Section 9.11, prior written notice of such disposition, the price thereof and
the anticipated date of closing and any other details thereof reasonably
requested by the Administrative Agent or any Lender.
 
(l)  Notice of Casualty Events.  Prompt written notice, and in any event within
three Business Days, of the occurrence of any Casualty Event or the commencement
of any legal action or proceeding that could reasonably be expected to result in
a Casualty Event, in each case, of any Property of any Loan Party having a fair
market value in excess of $10,000,000.
 
(m)  Information Regarding Borrower and Guarantors.  Prompt written notice of
(and in any event at least ten (10) Business Days following) any change (i) in
the Borrower or any Guarantor’s corporate name or in any trade name used to
identify such Person in the conduct of its business or in the ownership of its
Properties, (ii) in the location of the Borrower or any Guarantor’s chief
executive office or principal place of business, (iii) in the Borrower or any
Guarantor’s identity or corporate structure or in the jurisdiction in which such
Person is incorporated or formed, (iv) in the Borrower or any Guarantor’s
jurisdiction of organization or such Person’s organizational identification
number in such jurisdiction of organization, and (v) in the Borrower or any
Guarantor’s federal taxpayer identification number.
 
(n)  Production Report and Lease Operating Statements.  In connection with each
Reserve Report delivered pursuant to Section 8.12(a), a report setting forth,
for each month during the then current fiscal year to date, the volume of
production and sales attributable to production (and the prices at which such
sales were made and the revenues derived from such sales) for each such calendar
month during such period from the Oil and Gas Properties, and setting forth the
related ad valorem, severance and production taxes and lease operating expenses
attributable thereto and incurred for each such calendar month.
 
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(o)  Notices Relating to Acquisition.  In the event that after the Effective
Date:  (i) the Borrower is required to purchase any Preferential Purchase Right
Property, (ii) the Borrower and the Seller calculate and agree upon the “final
settlement statement” as contemplated by the Acquisition Documents, or (iii) the
Borrower furnishes the Seller with any notices or reports under the P&A Escrow
Agreement then, in each such case, the Borrower shall promptly give the
Administrative Agent notice in reasonable detail of such circumstances.
 
(p)  Patriot Act.  Promptly upon request, all documentation and other
information required by regulatory authorities under applicable “know your
customer” and anti-money laundering rules and regulations, including the USA
Patriot Act.
 
(q)  Other Requested Information.  Promptly following any request therefor, such
other information regarding the operations, business affairs and financial
condition of the Parent or any Subsidiary (including, without limitation, any
Plan or Multiemployer Plan and any reports or other information required to be
filed under ERISA), or compliance with the terms of this Agreement or any other
Loan Document, as the Administrative Agent or any Lender may reasonably request.
 
Section 8.02  Notices of Material Events.  The Parent and the Borrower will
furnish to the Administrative Agent and each Lender prompt written notice of the
following:
 
(a)  the occurrence of any Default;
 
(b)  the filing or commencement of, or the threat in writing of, any action,
suit, proceeding, investigation or arbitration by or before any arbitrator or
Governmental Authority against or affecting the Parent or any Restricted
Subsidiary thereof not previously disclosed in writing to the Lenders or any
material adverse development in any action, suit, proceeding, investigation or
arbitration (whether or not previously disclosed to the Lenders) that, in either
case could reasonably be expected to result in liability in excess of
$10,000,000, not fully covered by insurance, subject to normal deductibles;
 
(c)  the occurrence of any ERISA Event that, alone or together with any other
ERISA Events that have occurred, could reasonably be expected to result in
liability of the Parent or any Restricted Subsidiary in an aggregate amount
exceeding $5,000,000; and
 
(d)  any other development that results in, or could reasonably be expected to
result in, a Material Adverse Effect.
 
Each notice delivered under this Section 8.02 shall be accompanied by a
statement of a Responsible Officer setting forth the details of the event or
development requiring such notice and any action taken or proposed to be taken
with respect thereto.
 
Section 8.03  Existence; Conduct of Business.  The Parent will, and will cause
each Restricted Subsidiary to, do or cause to be done all things necessary to
preserve, renew and keep in full force and effect its legal existence and the
rights, licenses, permits, privileges and franchises material to the conduct of
its business and maintain, if necessary, its qualification to do business in
each other jurisdiction in which its Oil and Gas Properties is located or the
ownership of its Properties requires such qualification, except where the
failure to so qualify could not reasonably be expected to have a Material
Adverse Effect; provided that the foregoing shall not prohibit any merger,
consolidation, liquidation or dissolution permitted under Section 9.10.
 
Section 8.04  Payment of Obligations.  The Parent will, and will cause each
Restricted Subsidiary to, pay its obligations, including tax liabilities of the
Borrower and all of its Restricted
 
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Subsidiaries before the same shall become delinquent or in default, except where
(a) the validity or amount thereof is being contested in good faith by
appropriate proceedings, (b) the Borrower or such Restricted Subsidiary has set
aside on its books adequate reserves with respect thereto in accordance with
GAAP and (c) the failure to make payment pending such contest could not
reasonably be expected to result in a Material Adverse Effect.
 
Section 8.05  Performance of Obligations under Loan Documents.  The Borrower
will pay the Loans according to the reading, tenor and effect thereof, and the
Parent and the Borrower will, and will cause each Restricted Subsidiary to, do
and perform every act and discharge all of the obligations to be performed and
discharged by them under the Loan Documents, including, without limitation, this
Agreement, at the time or times and in the manner specified.
 
Section 8.06  Operation and Maintenance of Properties.  The Borrower, at its own
expense, will, and will cause each Restricted Subsidiary to:
 
(a)  operate its Oil and Gas Properties and other material Properties or cause
such Oil and Gas Properties and other material Properties to be operated in a
careful and efficient manner in accordance with the customary practices of the
industry and in compliance with all applicable contracts and agreements and in
compliance with all Governmental Requirements, including, without limitation,
applicable pro ration requirements and Environmental Laws, and all applicable
laws, rules and regulations of every other Governmental Authority from time to
time constituted to regulate the development and operation of its Oil and Gas
Properties and the production and sale of Hydrocarbons and other minerals
therefrom, except, in each case, where the failure to comply could not
reasonably be expected to have a Material Adverse Effect.
 
(b)  keep and maintain in good repair, working order and condition (ordinary
wear and tear excepted) all of its material Oil and Gas Properties and other
Properties material to the conduct of its business, including, without
limitation, all equipment, machinery and facilities, except to the extent any
such Property is no longer capable of producing Hydrocarbons in economically
reasonable amounts.
 
(c)  promptly pay and discharge, or make commercially reasonable efforts to
cause to be paid and discharged, all delay rentals, royalties, expenses and
indebtedness accruing under the leases or other agreements affecting or
pertaining to its Oil and Gas Properties.
 
(d)  promptly perform or make commercially reasonable efforts to cause to be
performed, in accordance with industry standards, the obligations required by
each and all of the assignments, deeds, leases, sub-leases, contracts and
agreements affecting its interests in its Oil and Gas Properties and other
material Properties.
 
(e)  to the extent the Borrower is not the operator of any Property, the
Borrower shall use commercially reasonable efforts to cause the operator to
comply with this Section 8.06.
 
Section 8.07  Insurance.  The Borrower will, and will cause each Restricted
Subsidiary to, maintain, with financially sound and reputable insurance
companies, insurance in such amounts and against such risks as are customarily
maintained by companies engaged in the same or similar businesses operating in
the same or similar locations.  The loss payable clauses or provisions in said
insurance policy or policies insuring any of the collateral for the Loans shall
be endorsed in favor of and made payable to the Administrative Agent as its
interests may appear and such liability policies shall name the Administrative
Agent and the Lenders as “additional insureds” and provide that the insurer will
endeavor to give at least 30 days prior notice of any cancellation to the
Administrative Agent.
 
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Section 8.08  Books and Records; Inspection Rights.  The Parent will, and will
cause each Restricted Subsidiary to, keep proper books of record and account in
which full, true and correct entries are made of all dealings and transactions
in relation to its business and activities.  The Parent will, and will cause
each Restricted Subsidiary to, permit any representatives designated by the
Administrative Agent or any Lender, upon reasonable prior notice, to visit and
inspect its Properties, to examine and make extracts from its books and records,
and to discuss its affairs, finances and condition with its officers and
independent accountants, all at such reasonable times and as often as reasonably
requested.
 
Section 8.09  Compliance with Laws.  The Parent will, and will cause each
Restricted Subsidiary to, comply with all laws, rules, regulations and orders of
any Governmental Authority applicable to it or its Property, except where the
failure to do so, individually or in the aggregate, could not reasonably be
expected to result in a Material Adverse Effect.
 
Section 8.10  Environmental Matters.
 
(a)  The Borrower shall at its sole expense: (i) comply, and shall cause its
Properties and operations and each Restricted Subsidiary and each Restricted
Subsidiary’s Properties and operations to comply, with all applicable
Environmental Laws, the breach of which Environmental Laws could be reasonably
expected to have a Material Adverse Effect; (ii) not dispose of or otherwise
release, and shall cause each Restricted Subsidiary not to dispose of or
otherwise release, any oil, oil and gas waste, hazardous substance, or solid
waste on, under, about or from any of the Borrower’s or its Restricted
Subsidiaries’ Properties or any other Property to the extent caused by the
Borrower’s or any of its Restricted Subsidiaries’ operations except in
compliance with applicable Environmental Laws, the disposal or release of which
could reasonably be expected to have a Material Adverse Effect; (iii) timely
obtain or file, and shall cause each Restricted Subsidiary to timely obtain or
file, all notices, permits, licenses, exemptions, approvals, registrations or
other authorizations, if any, required under applicable Environmental Laws to be
obtained or filed in connection with the operation or use of the Borrower’s or
its Restricted Subsidiaries’ Properties, which failure to obtain or file could
reasonably be expected to have a Material Adverse Effect; (iv) promptly commence
and diligently prosecute to completion, and shall cause each Restricted
Subsidiary to promptly commence and diligently prosecute to completion, any
assessment, evaluation, investigation, monitoring, containment, cleanup,
removal, repair, restoration, remediation or other remedial obligations
(collectively, the “Remedial Work”) in the event any Remedial Work is required
or reasonably necessary under applicable Environmental Laws because of or in
connection with the actual or suspected past, present or future disposal or
other release of any oil, oil and gas waste, hazardous substance or solid waste
on, under, about or from any of the Borrower’s or its Restricted Subsidiaries’
Properties, which failure to commence and diligently prosecute to completion
could reasonably be expected to have a Material Adverse Effect; and
(v) establish and implement, and shall cause each Restricted Subsidiary to
establish and implement, such policies of environmental audit and compliance as
may be necessary to continuously determine and assure that the Borrower’s and
its Restricted Subsidiaries’ obligations under this Section 8.10(a) are timely
and fully satisfied, which failure to establish and implement could reasonably
be expected to have a Material Adverse Effect.
 
(b)  The Borrower will promptly, but in no event later than five days of the
occurrence of a triggering event, notify the Administrative Agent and the
Lenders in writing of any threatened action, investigation or inquiry by any
Governmental Authority or any threatened demand or lawsuit by any landowner or
other third party against the Borrower or its Restricted Subsidiaries or their
Properties of which the Borrower has knowledge in connection with any
Environmental Laws (excluding routine testing and corrective action) if the
Borrower reasonably anticipates that such action will result in liability
(whether individually or in the aggregate) in excess of $10,000,000, not fully
covered by insurance, subject to normal deductibles.
 
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Section 8.11  Further Assurances.
 
(a)  The Parent and the Borrower at its sole expense will, and will cause each
Restricted Subsidiary to, promptly execute and deliver to the Administrative
Agent all such other documents, agreements and instruments reasonably requested
by the Administrative Agent to comply with, cure any defects or accomplish the
conditions precedent, covenants and agreements of any Loan Party, as the case
may be, in the Loan Documents or to further evidence and more fully describe the
collateral intended as security for the Indebtedness, or to correct any
omissions in this Agreement or the Security Instruments, or to state more fully
the obligations secured therein, or to perfect, protect or preserve any Liens
created pursuant to this Agreement or any of the Security Instruments or the
priority thereof, or to make any recordings, file any notices or obtain any
consents, all as may be reasonably necessary or appropriate, in the sole
discretion of the Administrative Agent, in connection therewith.
 
(b)  The Borrower hereby authorizes the Administrative Agent to file one or more
financing or continuation statements, and amendments thereto, relative to all or
any part of the Mortgaged Property without the signature of the Borrower or any
other Guarantor where permitted by law.  A carbon, photographic or other
reproduction of the Security Instruments or any financing statement covering the
Mortgaged Property or any part thereof shall be sufficient as a financing
statement where permitted by law.
 
Section 8.12  Reserve Reports.
 
(a)  On or before March 1st and September 1st of each year (and on October 1,
2007 for the purposes of the initial November 1, 2007 Scheduled
Redetermination), the Borrower shall furnish to the Administrative Agent and the
Lenders a Reserve Report evaluating the Oil and Gas Properties of the Borrower
and its Restricted Subsidiaries as of the immediately preceding January 1 and
July 1.  The Reserve Report as of January 1 of each year shall be prepared by
one or more Approved Petroleum Engineers (and such report delivered in
conjunction with the initial November 1, 2007 Scheduled Redetermination shall be
prepared primarily by one or more Approved Petroleum Engineers), and the July 1
Reserve Report of each year may be prepared by on or more Approved Petroleum
Engineers or under the supervision of the chief engineer of the Borrower who
shall certify such Reserve Report to be true and accurate and to have been
prepared in accordance with the procedures used in the immediately preceding
January 1 Reserve Report.
 
(b)  In the event of an Interim Redetermination, the Borrower shall furnish to
the Administrative Agent and the Lenders a Reserve Report prepared by or under
the supervision of the chief engineer of the Borrower who shall certify such
Reserve Report to be true and accurate and to have been prepared in accordance
with the procedures used in the immediately preceding January 1 Reserve
Report.  For any Interim Redetermination requested by the Administrative Agent
or the Borrower pursuant to Section 2.07(b), the Borrower shall provide such
Reserve Report with an “as of” date as required by the Administrative Agent as
soon as possible, but in any event no later than forty-five (45) days following
the receipt of such request.
 
(c)  With the delivery of each Reserve Report, the Borrower shall provide to the
Administrative Agent and the Lenders a certificate from a Responsible Officer
certifying that in all material respects: (i) the information contained in the
Reserve Report and any other information delivered in connection therewith is
true and correct (it being understood that projections concerning volumes
attributable to the Oil and Gas Properties and production and cost estimates
contained in each Reserve Report are necessarily based upon professional
opinions, estimates and projections and that neither the Parent, the Borrower,
Restricted the Subsidiaries nor such Responsible Officer warrants that such
opinions, estimates and projections will ultimately prove to have been
accurate), (ii) the Borrower or its
 
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Restricted Subsidiaries owns good and defensible title (subject to the title
deficiencies set forth on Schedule 7.16) to the Oil and Gas Properties evaluated
in such Reserve Report and such Properties are free of all Liens except for
Liens permitted by Section 9.03, (iii) except as set forth on an exhibit to the
certificate, on a net basis there are no gas imbalances, take or pay or other
prepayments in excess of the volume specified in Section 7.18 with respect to
its Oil and Gas Properties evaluated in such Reserve Report which would require
the Parent or any Restricted Subsidiary to deliver Hydrocarbons either generally
or produced from such Oil and Gas Properties at some future time without then or
thereafter receiving full payment therefor, (iv) none of their Oil and Gas
Properties have been sold since the date of the last Borrowing Base
determination except as set forth on an exhibit to the certificate, which
exhibit shall list all of its Oil and Gas Properties sold and in such detail as
reasonably required by the Administrative Agent, (v) attached to the certificate
is a list of all marketing agreements entered into subsequent to the later of
the date hereof or the most recently delivered Reserve Report which the Borrower
could reasonably be expected to have been obligated to list on Schedule 7.19 had
such agreement been in effect on the date hereof and (vi) attached thereto is a
schedule of the Oil and Gas Properties evaluated by such Reserve Report that are
Mortgaged Properties and demonstrating compliance with Section 8.14(a).
 
Section 8.13  Title Information.
 
(a)  On or before the delivery to the Administrative Agent and the Lenders of
each Reserve Report required by Section 8.12(a), the Borrower will deliver title
information in form and substance acceptable to the Administrative Agent
covering enough of the Oil and Gas Properties evaluated by such Reserve Report
that were not included in the immediately preceding Reserve Report, so that the
Administrative Agent shall have received together with title information
previously delivered to the Administrative Agent, satisfactory title information
on at least 85% of the total value of the Oil and Gas Properties evaluated by
such Reserve Report.
 
(b)  If the Borrower has provided title information for additional Properties
under Section 8.13(a), the Borrower shall, within 90 days of notice from the
Administrative Agent that title defects or exceptions exist with respect to such
additional Properties, either (i) cure any such title defects or exceptions
(including defects or exceptions as to priority) which are not permitted by
Section 9.03 raised by such information, (ii) substitute acceptable Mortgaged
Properties with no title defects or exceptions except for Excepted Liens (other
than Excepted Liens described in clauses (e), (g) and (h) of such definition)
having an equivalent value or (iii) deliver title information in form and
substance acceptable to the Administrative Agent so that the Administrative
Agent shall have received, together with title information previously delivered
to the Administrative Agent, satisfactory title information on at least 85% of
the value of the Oil and Gas Properties evaluated by such Reserve Report.
 
(c)  If the Borrower is unable to cure any title defect requested by the
Administrative Agent or the Lenders to be cured within the 90-day period or the
Borrower does not comply with the requirements to provide acceptable title
information covering 85% of the value of the Oil and Gas Properties evaluated in
the most recent Reserve Report, such default shall not be a Default, but instead
the Administrative Agent and/or the Majority Lenders shall have the right to
exercise the following remedy in their sole discretion from time to time, and
any failure to so exercise this remedy at any time shall not be a waiver as to
future exercise of the remedy by the Administrative Agent or the Lenders.  To
the extent that the Administrative Agent or the Majority Lenders are not
satisfied with title to any Mortgaged Property after the 90-day period has
elapsed, such unacceptable Mortgaged Property shall not count towards the 85%
requirement, and the Administrative Agent may send a notice to the Borrower and
the Lenders that the then outstanding Borrowing Base (and if the Conforming
Borrowing Base is then in effect, the Conforming Borrowing Base) shall be
reduced by an amount as determined by the Required Lenders to cause the Borrower
to be in compliance with the requirement to provide acceptable title information
on
 
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85% of the value of the Oil and Gas Properties.  This new Borrowing Base (and if
the Conforming Borrowing Base is then in effect, this new Conforming Borrowing
Base) shall become effective immediately after receipt of such notice.
 
(d)  The Borrower shall (1) use all commercially reasonable efforts to promptly
obtain approval from the Mineral Management Services of the United States
Department of Interior (the “MMS”) of the assignment of each Acquisition
Property to the Borrower and shall provide evidence of such approval to the
Administrative Agent, in such form and substance acceptable to the
Administrative Agent, and (2) within 60 days of  the Effective Date provide
certified copies of the recorded leases, conveyances or assignments filed in the
conveyance, real property records or similar records of the proper Louisiana
parish or Texas, Mississippi or Alabama counties for each Acquisition Property
(including each Interim Assignment Property) into the Seller in order to
properly evidence the chain out title into Seller as the Administrative Agent
shall reasonably request; provided that to the extent the Administrative Agent
is reasonably satisfied that the Borrower has diligently pursued compliance with
the requirements of this clause (2) within such 60 day period and to the extent
at the end of such 60 day period such requirements have not been fully
satisfied, then the Borrower shall have an additional period of 60 days within
which to comply.  To the extent that the Borrower fails to obtain such certified
copies of leases, conveyances or assignments within the time periods provided
herein (including any extensions) for any of the Acquisition Properties or
Interim Assignment Properties, then such default shall not be a Default, but
instead the Administrative Agent shall have the right to exercise the following
remedy in its sole discretion from time to time, and any failure to so exercise
this remedy at any time shall not be a waiver as to future exercise of the
remedy by the Administrative Agent.  To the extent that such lease, conveyance
or assignment document has not been obtained, the Administrative Agent may send
a notice to the Borrower and the Lenders that the then outstanding Borrowing
Base and Conforming Borrowing Base shall be reduced by an amount as determined
by the Required Lenders to be the value allocated to such Acquisition Properties
in the most recent redetermination of the Borrowing Base and Conforming
Borrowing Base.  This new Borrowing Base and Conforming Borrowing Base shall
become effective immediately after receipt of such notice.  To the extent,
however, that any assignment is not a transaction for which the MMS typically
issues approval, Borrower shall be deemed to have met its obligations hereunder
by providing the Administrative Agent with certified copies of any such
assignment showing recordation in the conveyance, real property or similar
records of the proper Louisiana parish or Texas county.
 
Section 8.14  Additional Collateral; Additional Guarantors.
 
(a)  In connection with each redetermination of the Borrowing Base, the Borrower
shall review the Reserve Report and the list of current Mortgaged Properties (as
described in Section 8.12(c)(vi)) to ascertain whether the Mortgaged Properties
represent at least 85% of the total value of the Oil and Gas Properties
evaluated in the most recently completed Reserve Report after giving effect to
exploration and production activities, acquisitions, dispositions and
production.  In the event that the Mortgaged Properties do not represent at
least 85% of such total value, then the Borrower shall, and shall cause its
Restricted Subsidiaries to, grant, within thirty (30) days of delivery of the
certificate required under Section 8.12(c), to the Administrative Agent as
security for the Indebtedness a first-priority Lien interest (provided that
Excepted Liens of the type described in clauses (a) to (d) and (f) of the
definition thereof may exist, but subject to the provisos at the end of such
definition) on additional Oil and Gas Properties not already subject to a Lien
of the Security Instruments such that after giving effect thereto, the Mortgaged
Properties will represent at least 85% of such total value.  All such Liens will
be created and perfected by and in accordance with the provisions of deeds of
trust, security agreements and financing statements or other Security
Instruments, all in form and substance reasonably satisfactory to the
Administrative Agent and in sufficient executed (and acknowledged where
necessary or appropriate) counterparts for recording purposes.  
 
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(b)  The Parent shall promptly cause each newly created or acquired Domestic
Subsidiary that is a Wholly-Owned Subsidiary (other than the Borrower) to
guarantee the Indebtedness pursuant to the Guaranty Agreement.  In connection
with any such guaranty, the Parent shall, or shall cause such Domestic
Subsidiary to: (A) execute and deliver a supplement to the Guaranty Agreement
executed by such Subsidiary, (B) pledge all of the Equity Interests of such new
Subsidiary (including, without limitation, delivery (if applicable) of original
certificates evidencing the Equity Interests of such Subsidiary, together with
an appropriate undated stock powers for each certificate duly executed in blank
by the registered owner thereof) and (C) execute and deliver such other
additional closing documents, certificates and legal opinions as shall
reasonably be requested by the Administrative Agent.
 
(c)  In the event that any Loan Party becomes the owner of a Foreign Subsidiary,
then the Borrower shall, or shall promptly cause such Domestic Subsidiary to,
(1) pledge 65% of all the Equity Interests of such Foreign Subsidiary
(including, without limitation, delivery of original stock certificates
evidencing such Equity Interests of such Foreign Subsidiary, together with
appropriate stock powers for each certificate duly executed in blank by the
registered owner thereof) and (2) execute and deliver such other additional
closing documents, certificates and legal opinions as shall reasonably be
requested by the Administrative Agent.
 
Section 8.15  ERISA Compliance.  The Parent will promptly furnish and will cause
each Subsidiary and any ERISA Affiliate to promptly furnish to the
Administrative Agent (i) immediately upon becoming aware of the occurrence of
any ERISA Event or of any “prohibited transaction,” as described in section 406
of ERISA or in section 4975 of the Code, in connection with any Plan or any
trust created thereunder, a written notice of the Parent or such other Loan
Party or ERISA Affiliate, as the case may be, specifying the nature thereof,
what action such Person is taking or proposes to take with respect thereto, and,
when known, any action taken or proposed by the Internal Revenue Service, the
Department of Labor or the PBGC with respect thereto, and (ii) immediately upon
receipt thereof, copies of any notice of the PBGC’s intention to terminate or to
have a trustee appointed to administer any Plan.  With respect to each Plan
(other than a Multiemployer Plan), the Parent will, and will cause each
Subsidiary and ERISA Affiliate to, (i) satisfy in full and in a timely manner,
without incurring any late payment or underpayment charge or penalty and without
giving rise to any lien, all of the contribution and funding requirements of
section 412 of the Code (determined without regard to subsections (d), (e), (f)
and (k) thereof) and of section 302 of ERISA (determined without regard to
sections 303, 304 and 306 of ERISA), and (ii) pay, or cause to be paid, to the
PBGC in a timely manner, without incurring any late payment or underpayment
charge or penalty, all premiums required pursuant to sections 4006 and 4007 of
ERISA.
 
Section 8.16  Unrestricted Subsidiaries.  The Parent:
 
(a)  will cause the management, business and affairs of each of the Parent, the
Borrower and each Restricted Subsidiary to be conducted in such a manner
(including, without limitation, by keeping separate books of account, furnishing
separate financial statements of the Unrestricted Subsidiaries to creditors and
potential creditors thereof and by not permitting Properties of the Parent, the
Borrower and each Restricted Subsidiary to be commingled) so that each
Unrestricted Subsidiary will be treated as a corporate entity separate and
distinct from Borrower and the Restricted Subsidiaries.
 
(b)  will not, and will not permit any of the Restricted Subsidiaries to, incur,
assume, guarantee or be or become liable for any Debt of any of the Unrestricted
Subsidiaries except that the Parent may guarantee or otherwise give credit
support for Debt (other than Debt in respect of borrowed money) of the
Unrestricted Subsidiaries to the extent it could make an Investment in such
Unrestricted Subsidiary under Section 9.05(l).
 
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(c)  will not permit any Unrestricted Subsidiary to hold any Equity Interest in,
or any Debt of, the Borrower or any Restricted Subsidiary.
 
Section 8.17  Marketing Activities.  The Borrower will not, and will not permit
any of its Restricted Subsidiaries to, engage in marketing activities for any
Hydrocarbons or enter into any contracts related thereto other than (i)
contracts for the sale of Hydrocarbons scheduled or reasonably estimated to be
produced from their proved Oil and Gas Properties during the period of such
contract, (ii) contracts for the sale of Hydrocarbons scheduled or reasonably
estimated to be produced from proved Oil and Gas Properties of third parties
during the period of such contract associated with the Oil and Gas Properties of
the Borrower and its Restricted Subsidiaries that the Borrower or one of its
Restricted Subsidiaries has the right to market pursuant to joint operating
agreements, unitization agreements or other similar contracts that are usual and
customary in the oil and gas business and (iii) other contracts for the purchase
and/or sale of Hydrocarbons of third parties (A) which have generally offsetting
provisions (i.e. corresponding pricing mechanics, delivery dates and points and
volumes) such that no “position” is taken and (B) for which appropriate credit
support has been taken to alleviate the material credit risks of the
counterparty thereto.
 
Section 8.18  Swap Agreements.  The Parent shall maintain the hedge position
established by the Swap Agreements required under Section 6.01(l) during the
period specified therein and shall neither assign, terminate or unwind any such
Swap Agreements nor sell any Swap Agreements if the effect of such action (when
taken together with any other Swap Agreements executed contemporaneously with
the taking of such action) would have the effect of canceling its positions
under such Swap Agreements required hereby.
 
ARTICLE IX
Negative Covenants
 
Until the Commitments have expired or terminated and the principal of and
interest on each Loan and all fees payable hereunder and all other amounts
payable under the Loan Documents have been paid in full and all Letters of
Credit have expired or terminated and all LC Disbursements shall have been
reimbursed, the Parent and the Borrower covenant and agree with the Lenders
that:
 
Section 9.01  Financial Covenants.
 
(a)  Ratio of Total Debt to EBITDAX.  The Parent will not, at any time, permit
its ratio of Total Debt as of such time to EBITDAX for the four fiscal quarters
ending on the last day of the fiscal quarter immediately preceding the date of
determination for which financial statements are available to be greater than
the amount set forth below for such period:
 
Period:
 
Ratio:
Effective Date to 12/31/07
 
3.5 to 1.0
     
1/1/08 to 6/30/08
 
3.0 to 1.0
     
7/1/08 to 12/31/08
 
2.75 to 1.0
     
1/1/09 and thereafter
 
2.5 to 1.0
     

provided that for the fiscal quarter ending September 30, 2007, EBITDAX shall be
the EBITDAX for such fiscal quarter multiplied by 4, for the fiscal quarter
ending December 31,
 
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2007, EBITDAX shall be EBITDAX for the six-month period then ended multiplied by
2; and for the fiscal quarter ending March 31, 2008, EBITDAX shall be EBITDAX
for the nine-month period then ended multiplied by 4/3.
 
(b)  First Lien Debt to EBITDAX.  The Parent will not, at any time, permit its
ratio of First Lien Debt as of such time to EBITDAX for the four fiscal quarters
ending on the last day of the fiscal quarter immediately preceding the date of
determination for which financial statements are available to be greater than
the amount set forth below for such period:
 
Period:
 
Ratio:
Effective Date to 12/31/08
 
2.0 to 1.0
     
1/1/09 and thereafter
 
1.5 to 1.0
     

provided that for the fiscal quarter ending September 30, 2007, EBITDAX shall be
the EBITDAX for such fiscal quarter multiplied by 4, for the fiscal quarter
ending December 31, 2007, EBITDAX shall be EBITDAX for the six-month period then
ended multiplied by 2; and for the fiscal quarter ending March 31, 2008, EBITDAX
shall be EBITDAX for the nine-month period then ended multiplied by 4/3.
 
(c)  Current Ratio.  The Parent will not permit, as of the last day of any
fiscal quarter, its ratio of (i) consolidated current assets (including the
unused amount of the total Commitments, but excluding non-cash assets under FAS
133) to (ii) consolidated current liabilities (excluding non-cash obligations
under FAS 133, reclamation obligations to the extent classified as current
liabilities under GAAP, current maturities under Existing Convertible Notes and
current maturities under this Agreement) to be less than 1.0 to 1.0.
 
Section 9.02  Debt.  The Parent will not, and will not permit any Restricted
Subsidiary to, incur, create, assume or suffer to exist any Debt, except:
 
(a)  the Loans or other Indebtedness arising under the Loan Documents or any
guaranty of or suretyship arrangement for the Loans or other Indebtedness
arising under the Loan Documents.
 
(b)  Debt of the Loan Parties and their Restricted Subsidiaries existing on the
date hereof that is reflected in the Financial Statements and set forth on
Schedule 9.02, including without limitation the Existing Convertible Notes and
any Permitted Refinancing Debt in respect thereof.
 
(c)  accounts payable and accrued expenses, liabilities or other obligations to
pay the deferred purchase price of Property or services, from time to time
incurred in the ordinary course of business which are not greater than ninety
(90) days past the date of invoice or which are being contested in good faith by
appropriate action and for which adequate reserves have been maintained in
accordance with GAAP.
 
(d)  Debt of any Loan Party incurred to finance the acquisition, construction or
improvement of any fixed or capital assets, including obligations under Capital
Leases and any Debt assumed in connection with the acquisition of any such
assets or secured by a Lien on any such asset prior to the acquisition thereof,
and extensions, renewals and replacements of any such Debt that do not increase
the outstanding principal amount thereof; provided that (i) such Debt is
incurred prior to or within 90 days after such acquisition or the completion of
such construction or improvement and (ii) the aggregate principal amount of
Indebtedness permitted by this clause (d) shall not exceed $10,000,000.
 
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(e)  Debt in respect of (i) letters of credit, bank or completion guarantees,
surety, performance, warranty, bid, appeal or other bonds or guarantees and
similar instruments, in each case to the extent (x) required by Governmental
Requirements or any third Person and (y) provided in the ordinary course of
business in connection with the operation of the Oil and Gas Properties; and
(ii) the P&A Escrow Agreement.
 
(f)  Debt (i) between the Borrower and the Parent; (ii) between the Borrower and
any Restricted Subsidiary or between Restricted Subsidiaries to the extent
permitted by Section 9.05(g); provided that (1) such Debt is not held, assigned,
transferred, negotiated or pledged to any Person other than a Loan Party, and
(2) any such Debt owed by either the Borrower or a Guarantor shall be
subordinated to the Indebtedness on terms set forth in the Guaranty Agreement
and (iii) of Loan Parties permitted by Section 9.05.
 
(g)  endorsements of negotiable instruments for collection in the ordinary
course of business.
 
(h)  Debt (other than for borrowed money) incurred in the ordinary course of
business in connection with Hydrocarbon transportation, Hydrocarbon purchasing
or other similar arrangements, provided that such arrangements are disclosed to
the Administrative Agent.
 
(i)  Debt incurred in connection with vendor financing provided by Midland Pipe
Corporation and its affiliates not to exceed $15,000,000 in the aggregate at any
one time outstanding.
 
(j)  (i) Debt under the Bridge Loans and any Exchange Notes and any guarantees
thereof by the Borrower or a Guarantor the aggregate principal amount of which
Debt does not exceed $800,000,000 on such terms approved by the Arrangers; (ii)
Debt under the Senior Notes the aggregate principal amount of which Debt does
not exceed $500,000,000, provided that (1) the net cash proceeds of such Senior
Notes are used to prepay in part the Bridge Loans or the Exchange Notes, (2)
such Debt does not have any scheduled amortization prior to one year after the
Maturity Date and (3) such Debt does not mature sooner than one year after the
Maturity Date; and (iii) any renewals, extensions, refundings or refinancings of
Debt described in clauses (i) and (ii) above, provided that (x) the amount of
such Debt is not increased except by an amount necessary to pay interest and
premium on the Debt in clauses (i) and (ii) being refinanced and any fees and
expenses, including premiums relating to such renewals, extensions, refundings
or refinancings and (y)  the maturity of principal of such Debt is not shortened
unless to a maturity occurring no earlier than one year after the Maturity Date.
 
(k)  if no Bridge Loan or Exchange Notes are then outstanding and the Parent has
issued Equity Interests (other than Disqualified Capital Stock and Equity
Interests from conversion of the Existing Convertible Notes) generating gross
cash proceeds of not less than $300,000,000, the Parent may incur additional
Debt so long as at the time of incurrence of such Debt and after giving pro
forma effect thereto, the Parent would be compliant with Section 9.01(a) and
with each instrument governing the Senior Notes.
 
(l)  Debt incurred to finance insurance premiums.
 
(m)  Debt in connection with trade payables owed to FM Services, Inc. arising in
the ordinary course of business.
 
(n)  other Debt not to exceed $10,000,000 in the aggregate at any one time
outstanding.
 
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Section 9.03  Liens.  The Parent will not, and will not permit any Restricted
Subsidiary to, create, incur, assume or permit to exist any Lien on any of its
Properties (now owned or hereafter acquired), except:
 
(a)  Liens securing the payment of any Indebtedness.
 
(b)  Liens existing on the Effective Date and disclosed on Schedule 9.03 and
Excepted Liens.
 
(c)  Liens on fixed or capital assets acquired, constructed or improved by any
Loan Party; provided that (i) such Liens secure Indebtedness permitted by
Section 9.02(d), (ii) such Liens and the Debt secured thereby are incurred prior
to or within 90 days after such acquisition or the completion of such
construction or improvement, (iii) the Debt secured thereby does not exceed 100%
of the cost of acquiring, constructing or improving such fixed or capital assets
and (iv) such security interests shall not apply to any other property or assets
of such Person or any other Loan Party.
 
(d)  Liens on Property to secure the Bridge Loans and any Exchange Notes and any
guaranties thereof as permitted by Section 9.02(j); provided, however, that such
Liens are only on Property constituting collateral to secure the Indebtedness
and other obligations under this Agreement and the other Loan Documents and such
Liens are subordinate to the Liens securing the Indebtedness, this Agreement and
the other Loan Documents pursuant to the Intercreditor Agreement.
 
(e)  Liens on amounts not to exceed the sum of up to three years of regularly
scheduled interest payments in respect of any convertible Debt issued by the
Parent permitted hereby, which amounts shall have been placed in interest
reserve accounts in connection with the issuance of such convertible Debt to
secure the obligations under, such convertible Debt.
 
(f)  other Liens on Property not constituting collateral for the Indebtedness
not to exceed $10,000,000 in the aggregate at any one time outstanding.
 
Section 9.04  Dividends, Distributions and Redemptions.
 
(a)  The Parent will not, and will not permit any of its Restricted Subsidiaries
to, declare or make, or agree to pay or make, directly or indirectly, any
Restricted Payment, return any capital or make any distribution of its Property
to its Equity Interest holders, except (i) the Parent may declare and pay
dividends with respect to its Equity Interests payable solely in additional
shares of its Equity Interests (other than Disqualified Capital Stock), (ii) the
Borrower may make Restricted Payments to the Parent and each other Restricted
Subsidiary may make Restricted Payments to the Borrower, the Parent or any other
Restricted Subsidiary (which, in the case of Restricted Subsidiaries that are
not Wholly-Owned Subsidiaries, shall be made to the Parent, to the Borrower or
to any Restricted Subsidiary that is the direct or indirect parent of such
Restricted Subsidiary and to each other owner of Equity Interests of such
Restricted Subsidiary ratably, based on the relative ownership interests in such
Restricted Subsidiary), (iii) the Parent may pay cash dividends on preferred
Equity Interests, provided, however, to the extent the cash proceeds of such
Equity Issuance were used to make an Investment under Section 9.05(l), such
dividends may be paid only to the extent of cash actually received by the Parent
as dividends, interest or a return of capital in respect of such Investment and
(iv) the Parent may make Restricted Payments pursuant to and in accordance with
stock option plans or other benefit plans for its Restricted Subsidiaries
respective management or employees.
 
(b)  The Parent and the Borrower will not, and will not permit any Restricted
Subsidiary to: (1) prior to the date that is ninety-one (91) days after the
Maturity Date, call, make or offer
 
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to make any optional or voluntary Redemption of or otherwise optionally or
voluntarily Redeem (whether in whole or in part) the Bridge Loans, any Exchange
Notes, the Existing Convertible Notes or the Senior Notes except (i) the
Existing Convertible Notes or any other convertible Debt instrument may be
converted into Equity Interests (other than Disqualified Capital Stock) of the
Parent, (ii) the Parent may make cash payments to the holders of the
Existing  Convertible Notes to induce such holders to convert the Existing
Convertible Notes into Equity Interests of the Parent or (iii) with the proceeds
of an Equity Issuance (other than Disqualified Capital Stock) or with Permitted
Refinancing Debt and, in the case of the Bridge Loan or any Exchange Notes, with
proceeds of the Senior Notes, or (2) amend, modify, waive or otherwise change,
consent or agree to any amendment, modification, waiver or other change to, any
of the terms of any instrument or agreement evidencing or governing any of the
Senior Notes if (A) the effect thereof would be to shorten the maturity of such
Senior Notes or shorten the average life or increase the amount of any scheduled
repayment or mandatory prepayment of principal or increase the interest rate or
increase any call, put or prepayment premiums or shorten any period for payment
of interest thereon or (B) such action adds any covenants or defaults without
this Agreement being contemporaneously amended to add substantially similar
covenants or defaults, provided that the foregoing shall not prohibit the
execution of supplemental agreements to add guarantors if required by the terms
thereof provided that any such guarantor also guarantees the Indebtedness
pursuant to the Guaranty Agreement and each of the Borrower and such guarantor
otherwise complies with Section 8.14(b).
 
Section 9.05  Investments, Loans and Advances.  The Parent will not, and will
not permit any Restricted Subsidiary to, make or permit to remain outstanding
any Investments in or to any Person, except that the foregoing restriction shall
not apply to:
 
(a)  Investments reflected in the Financial Statements or which are disclosed to
the Lenders in Schedule 9.05.
 
(b)  accounts receivable arising in the ordinary course of business.
 
(c)  direct obligations of the United States or any agency thereof, or
obligations guaranteed by the United States or any agency thereof, in each case
maturing within one year from the date of creation thereof.
 
(d)  commercial paper maturing within one year from the date of creation thereof
rated in the highest grade by S&P or Moody’s.
 
(e)  deposits maturing within one year from the date of creation thereof with,
including certificates of deposit issued by, any Lender or any office located in
the United States of any other bank or trust company which is organized under
the laws of the United States or any state thereof, has capital, surplus and
undivided profits aggregating at least $100,000,000 (as of the date of such bank
or trust company’s most recent financial reports) and has a short term deposit
rating of no lower than A2 or P2, as such rating is set forth from time to time,
by S&P or Moody’s, respectively.
 
(f)  deposits in money market funds investing exclusively in Investments
described in Section 9.05(c), Section 9.05(d) or Section 9.05(e).
 
(g)  Investments (i) made by the Parent in the Borrower, (ii) made by the
Borrower in or to the Subsidiary Guarantors, (iii) made by any Domestic
Subsidiary in or to the Borrower or any Guarantor, and (iv) made by the Borrower
or any Guarantor in or to Restricted Subsidiaries which are not Guarantors in an
aggregate amount at any one time outstanding not to exceed $5,000,000.
 
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(h)  subject to the limits in Section 9.06, Investments (including, without
limitation, capital contributions) in general or limited partnerships or other
types of entities (each a “venture”) entered into by the Borrower or a
Restricted Subsidiary with others in the ordinary course of business; provided
that (i) any such venture is engaged exclusively in oil and gas exploration,
development, production, processing and related activities, including
transportation and marketing, (ii) the interest in such venture is acquired in
the ordinary course of business and on fair and reasonable terms and (iii) such
venture interests acquired and capital contributions made (valued as of the date
such interest was acquired or the contribution made) do not exceed, in the
aggregate at any time outstanding an amount equal to $10,000,000.
 
(i)  Investments in direct ownership interests in additional Oil and Gas
Properties and gas gathering systems related thereto or related to farm-out,
farm-in, joint operating, joint venture or area of mutual interest agreements,
gathering systems, pipelines or other similar arrangements all of which are
usual and customary in the oil and gas exploration and production business
located within the geographic boundaries of the United States of America or
Canada.
 
(j)  loans or advances to employees, officers or directors in the ordinary
course of business of the Borrower or any of its Restricted Subsidiaries, in
each case only as permitted by applicable law, including Section 402 of the
Sarbanes Oxley Act of 2002, but in any event not to exceed $500,000 in the
aggregate at any time.
 
(k)  Investments in stock, obligations or securities received in settlement of
debts arising from Investments permitted under this Section 9.05 owing to the
Borrower or any Restricted Subsidiary as a result of a bankruptcy or other
insolvency proceeding of the obligor in respect of such debts or upon the
enforcement of any Lien in favor of the Borrower or any of its Restricted
Subsidiaries.
 
(l)  Investments in Unrestricted Subsidiaries, provided that the aggregate
amount of all such Investments shall not exceed (i) $20,000,000 in any fiscal
year plus (ii) an amount equal to the net cash proceeds of any Equity Issuance
(other than Disqualified Capital Stock) in excess of $300,000,000 after the
Effective Date.
 
(m)  other Investments not to exceed $5,000,000 in the aggregate at any time.
 
Section 9.06  Nature of Business; International Operations.  The Borrower will
not, and will not permit any Restricted Subsidiary to, allow any material change
to be made in the character of its business as an independent oil and gas
exploration and production company.  Except as permitted by Section 9.05(g) or
otherwise in an amount not to exceed an amount of $5,000,000 per year, the
Borrower and its Restricted Subsidiaries will not acquire or make any other
expenditures (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 or Canada.
 
Section 9.07  Proceeds of Notes.  The Borrower will not permit the proceeds of
the Notes to be used for any purpose other than those permitted by Section
7.21.  No Loan Party nor any Person acting on behalf of the Borrower has taken
or will take any action which might cause any of the Loan Documents to violate
Regulations T, U or X or any other regulation of the Board or to violate Section
7 of the Securities Exchange Act of 1934 or any rule or regulation thereunder,
in each case as now in effect or as the same may hereinafter be in effect.  If
requested by the Administrative Agent, the Borrower will furnish to the
Administrative Agent and each Lender a statement to the foregoing effect in
conformity with the requirements of FR Form U-1 or such other form referred to
in Regulation U, Regulation T or Regulation X of the Board, as the case may be.
 
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Section 9.08  ERISA Compliance.  The Parent will not, and will not permit any
Subsidiary to, at any time:
 
(a)  engage in, or permit any ERISA Affiliate to engage in, any transaction in
connection with which any Subsidiary or any ERISA Affiliate could be subjected
to either a civil penalty assessed pursuant to subsections (c), (i) or (l) of
section 502 of ERISA or a tax imposed by Chapter 43 of Subtitle D of the Code.
 
(b)  terminate, or permit any ERISA Affiliate to terminate, any Plan in a
manner, or take any other action with respect to any Plan, which could result in
any liability of the Parent or any Subsidiary or any ERISA Affiliate to the
PBGC.
 
(c)  fail to make, or permit any ERISA Affiliate to fail to make, full payment
when due of all amounts which, under the provisions of any Plan, agreement
relating thereto or applicable law, any Subsidiary or any ERISA Affiliate is
required to pay as contribu­tions thereto.
 
(d)  permit to exist, or allow any ERISA Affiliate to permit to exist, any
accumulated funding deficiency within the meaning of section 302 of ERISA or
section 412 of the Code, or, on and after the effectiveness of the Pension Act,
fail to satisfy the minimum funding standards (within the meaning of Section 412
of the Code or Section 302 of ERISA), in any case whether or not waived, with
respect to any Plan.
 
(e)  except as set forth in Schedule 7.10(f), permit, or allow any ERISA
Affiliate to permit, the actuarial present value of the benefit liabilities
under any Plan maintained by any Loan Party or any ERISA Affiliate which is
regulated under Title IV of ERISA to exceed the current value of the assets
(computed on a plan termination basis in accordance with Title IV of ERISA) of
such Plan allocable to such benefit liabilities.  The term “actuarial present
value of the benefit liabilities” shall have the meaning specified in section
4041 of ERISA.
 
(f)  contribute to or assume an obligation to contribute to, or permit any ERISA
Affiliate to contribute to or assume an obligation to contribute to, any
Multiemployer Plan.
 
(g)  acquire, or permit any ERISA Affiliate to acquire, an interest in any
Person that causes such Person to become an ERISA Affiliate with respect to any
Subsidiary or with respect to any ERISA Affiliate if such Person sponsors,
maintains or contributes to, or at any time in the six-year period preceding
such acquisition has sponsored, maintained, or contributed to, (1) any
Multiemployer Plan, or (2) any other Plan that is subject to Title IV of ERISA
under which the actuarial present value of the benefit liabilities under such
Plan exceeds the current value of the assets (computed on a plan termination
basis in accordance with Title IV of ERISA) of such Plan allocable to such
benefit liabilities.
 
(h)  incur, or permit any ERISA Affiliate to incur, a liability to or on account
of a Plan under sections 515, 4062, 4063, 4064, 4201 or 4204 of ERISA.
 
(i)  contribute to or assume an obligation to contribute to, or permit any ERISA
Affiliate to contribute to or assume an obligation to contribute to, any
employee welfare benefit plan, as defined in section 3(1) of ERISA, including,
without limitation, any such plan maintained to provide benefits to former
employees of such entities, that may not be terminated by such entities in their
sole discretion at any time without any material liability.
 
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(j)  amend, or permit any ERISA Affiliate to amend, a Plan resulting in an
increase in current liability such that any Subsidiary or ERISA Affiliate is
required to provide security to such Plan under section 401(a)(29) of the Code.
 
Section 9.09  Sale or Discount of Receivables.  Except for receivables obtained
by the Borrower or any Restricted Subsidiary out of the ordinary course of
business or the settlement of joint interest billing accounts in the ordinary
course of business or discounts granted to settle collection of accounts
receivable or the sale of defaulted accounts arising in the ordinary course of
business in connection with the compromise or collection thereof and not in
connection with any financing transaction, the Parent will not, and will not
permit any Restricted Subsidiary to, discount or sell (with or without recourse)
any of its notes receivable or accounts receivable.
 
Section 9.10  Mergers, Etc.  Neither the Parent nor any Restricted Subsidiary
will merge into or with or consolidate with any other Person, or sell, lease or
otherwise dispose of (whether in one transaction or in a series of transactions)
all or substantially all of its Property to any other Person, except that (i)
any Subsidiary Guarantor may merge with any other Subsidiary Guarantor, (ii) the
Borrower may merge with any Wholly-Owned Subsidiary so long as the Borrower is
the survivor and (iii) any Subsidiary Guarantor may merge with any Wholly-Owned
Subsidiary so long as the Subsidiary Guarantor is a survivor.
 
Section 9.11  Sale of Properties.  The Borrower will not, and will not permit
any Restricted Subsidiary to, sell, assign, farm-out, convey or otherwise
transfer any Property except for (a) the sale of Hydrocarbons in the ordinary
course of business; (b) farmouts in the ordinary course of business of
undeveloped acreage or undrilled depths and assignments in connection with such
farmouts; (c) the sale or transfer of equipment that is no longer necessary for
the business of the Borrower or such Restricted Subsidiary or is replaced by
equipment of at least comparable value and use; (d) the sale or other
disposition (including Casualty Events) of any Oil and Gas Property or any
interest therein or any Restricted Subsidiary; provided that (i) 100% of the
consideration received in respect of such sale or other disposition shall be
cash, (ii) (other than in respect of Casualty Events) the consideration received
in respect of such sale or other disposition shall be equal to or greater than
the fair market value of the Oil and Gas Property, interest therein or
Restricted Subsidiary subject of such sale or other disposition and if requested
by the Administrative Agent, the Borrower shall deliver a certificate of a
Responsible Officer of the Borrower certifying to that effect), (iii) if such
sale or other disposition of Oil and Gas Property or Restricted Subsidiary
owning Oil and Gas Properties (including farm-outs under Section 9.11(a))
included in the most recently delivered Reserve Report during any period between
two successive Scheduled Redetermination Dates has a fair market value in excess
of five percent (5%) of the Borrowing Base as then in effect (as determined by
the Administrative Agent), individually or in the aggregate, the Borrowing Base
(and the Conforming Borrowing Base) shall be reduced, effective immediately upon
such sale or disposition, by an amount equal to the value, if any, attributed to
such Property in the Borrowing Base based on the most recently delivered Reserve
Report and (iv) if any such sale or other disposition is of a Restricted
Subsidiary owning Oil and Gas Properties, such sale or other disposition shall
include all the Equity Interests of such Restricted Subsidiary; (e) sales and
other dispositions of Properties not regulated by Section 9.11(a) to (d) having
a fair market value not to exceed $1,000,000 during any 12-month period; (f)
transfers of Properties to the Borrower or any Guarantor (including any
Subsidiary that becomes a Guarantor after the Effective Date pursuant to Section
9.14); and (g) Casualty Events of Properties which are not Oil and Gas
Properties.
 
Section 9.12  Environmental Matters.  The Parent will not, and will not permit
any Restricted Subsidiary to, cause or permit any of its Property to be in
violation of, or do anything or permit anything to be done which will subject
any such Property to any Remedial Work under any Environmental Laws, assuming
disclosure to the applicable Governmental Authority of all relevant facts,
conditions and
 
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circumstances, if any, pertaining to such Property where such violations or
remedial obligations in connection with any such Remedial Work could reasonably
be expected to have a Material Adverse Effect.
 
Section 9.13  Transactions with Affiliates.  The Parent will not, and will not
permit any Restricted Subsidiary to, enter into any transaction, including,
without limitation, any purchase, sale, lease or exchange of Property or the
rendering of any service, with any Affiliate (other than with Wholly-Owned
Subsidiaries of the Parent and FM Services, Inc.) unless such transactions are
otherwise permitted under this Agreement and are upon fair and reasonable terms
no less favorable to it than it would obtain in a comparable arm’s length
transaction with a Person not an Affiliate.
 
Section 9.14  Subsidiaries.  The Parent will not, and will not permit any
Restricted Subsidiary to, create or acquire any additional Subsidiaries unless
the Borrower gives written notice to the Administrative Agent of such creation
or acquisition and complies with Section 8.14(b) and Section 8.14(c).  The
Parent shall not, and shall not permit any Restricted Subsidiary to, sell,
assign or otherwise dispose of any Equity Interests in any Restricted Subsidiary
except in compliance with Section 9.11(d).
 
Section 9.15  Negative Pledge Agreements; Dividend Restrictions.  The Parent
will not, and will not permit any Restricted Subsidiary to, create, incur,
assume or suffer to exist any contract, agreement or understanding which in any
way prohibits or restricts (a) the granting, conveying, creation or imposition
of any Lien on any of its Property to secure the Indebtedness or which requires
the consent of or notice to other Persons in connection therewith or (b) the
Borrower or any Restricted Subsidiary from paying dividends or making
distributions to any Loan Party, or which requires the consent of or notice to
other Persons in connection therewith; provided that (i) the foregoing shall not
apply to restrictions and conditions (A) imposed by applicable laws, rules or
regulations, (B) under the Loan Documents or (C) existing on the date hereof
under the Bridge Credit Agreement (or the “Loan Documents” thereunder) or under
any instrument or agreement evidencing or governing the Senior Notes, (ii) the
foregoing shall not apply to customary restrictions and conditions contained in
agreements relating to the sale of any asset or a Restricted Subsidiary pending
such sale; provided such restrictions and conditions apply only to the asset or
Restricted Subsidiary that is to be sold and such sale is permitted hereunder,
(iii) the foregoing shall not apply to restrictions and conditions imposed by
any joint venture, partnership or similar arrangement to which any Restricted
Subsidiary is a party to the extent applicable to such joint venture,
partnership or similar agreement or direct or indirect interests therein, (iv)
clause (a) of the foregoing shall not apply to (A) restrictions or conditions
imposed by any agreement relating to secured Indebtedness permitted by this
Agreement if such restrictions or conditions apply only to the property or
assets securing such Indebtedness and (B) customary provisions in leases
restricting the assignment thereof.
 
Section 9.16  Gas Imbalances, Take-or-Pay or Other Prepayments.  The Borrower
will not, and will not permit any Restricted Subsidiary to, allow gas
imbalances, take-or-pay or other prepayments with respect to the Oil and Gas
Properties of the Borrower or any Restricted Subsidiary that would require the
Borrower or such Restricted Subsidiary to deliver Hydrocarbons at some future
time without then or thereafter receiving full payment therefor to exceed two
and one-half percent (2.5%) of the aggregate total remaining volumes of
Hydrocarbons (on an Mcf equivalent basis) listed in the most recent Reserve
Report.
 
Section 9.17  Swap Agreements.  The Parent will not, and will not permit any
Restricted Subsidiary to, enter into any Swap Agreements with any Person other
than (a) Swap Agreements in respect of commodities (i) with an Approved
Counterparty and (ii) the notional volumes for which (when aggregated with other
commodity Swap Agreements then in effect other than puts, floors and basis
differential swaps on volumes already hedged pursuant to other Swap Agreements)
do not exceed, as of
 
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the date such Swap Agreement is executed, for all months other than July,
August, September and October, 80% of the reasonably anticipated projected
production from proved, developed, producing Oil and Gas Properties, excluding
Main Pass 299 (and for the months of July, August, September and October, such
Swap Agreements shall be in the form of puts and floors) for each month during
the period during which such Swap Agreement is in effect for each of crude oil
and natural gas, calculated separately, and (b) Swap Agreements in respect of
interest rates with an Approved Counterparty which effectively convert interest
rates from (i) floating to fixed, the notional amounts of which (when aggregated
with all other Swap Agreements of the Parent and its Restricted Subsidiaries
then in effect effectively converting interest rates from floating to fixed) do
not exceed 75% of the then outstanding principal amount of the Parent’s Debt for
borrowed money which bears interest at a floating rate and (ii) fixed to
floating, the notional amounts of which (when aggregated with all other Swap
Agreements of the Parent and its Restricted Subsidiaries then in effect
effectively converting interest rates from fixed to floating) do not exceed 75%
of the then outstanding principal amount of the Parent’s Debt for borrowed money
which bears interest at a fixed rate.  Except for any Swap Agreement entered
into with a Lender or an Affiliate of a Lender in connection herewith, in no
event shall any Swap Agreement contain any requirement, agreement or covenant
for the Parent or any Restricted Subsidiary to post collateral or margin to
secure their obligations under such Swap Agreement or to cover market exposures.
 
Section 9.18  Acquisition Documents.  The Borrower will not, and will not permit
any of its Restricted Subsidiaries to, amend, modify, supplement or fail to
enforce (i) any indemnity obligations of the Seller under the Acquisition
Documents and (ii) the provisions of the P&A Escrow Agreement, in each case, if
the effect thereof could reasonably be expected to be material and adverse to
the interests of the Lenders (and provided that the Borrower promptly furnishes
to the Administrative Agent a copy of such amendment, modification or
supplement).
 
Section 9.19  Unrestricted Subsidiaries.  The Parent will not permit its
Unrestricted Subsidiaries to incur or suffer to exist any Debt for borrowed
money except Non-Recourse Debt.  No Unrestricted Subsidiary will be redesignated
as a Restricted Subsidiary and no Restricted Subsidiary will be redesignated as
an Unrestricted Subsidiary.
 
ARTICLE X
Events of Default; Remedies
 
Section 10.01  Events of Default.  One or more of the following events shall
constitute an “Event of Default”:
 
(a)  the Borrower shall fail to pay any principal of any Loan or any
reimbursement obligation in respect of any LC Disbursement when and as the same
shall become due and payable, whether at the due date thereof or at a date fixed
for prepayment thereof, by acceleration or otherwise.
 
(b)  the Borrower shall fail to pay any interest on any Loan or any fee or any
other amount (other than an amount referred to in Section 10.01(a)) payable
under any Loan Document, when and as the same shall become due and payable, and
such failure shall continue unremedied for a period of three (3) Business Days.
 
(c)  any representation or warranty made or deemed made by or on behalf of the
Parent, the Borrower or any Restricted Subsidiary in or in connection with any
Loan Document or any amendment or modification of any Loan Document or waiver
under such Loan Document, or in any report, certificate, financial statement or
other document furnished pursuant to or in connection with any Loan Document or
any amendment or modification thereof or waiver thereunder, shall prove to have
been incorrect when made or deemed made.
 
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(d)  the Parent, the Borrower or any Restricted Subsidiary shall fail to observe
or perform any covenant, condition or agreement contained in Section 8.01(j),
Section 8.01(m), Section 8.02, Section 8.03, Section 8.14 or in ARTICLE IX.
 
(e)  the Parent, the Borrower or any Restricted Subsidiary shall fail to observe
or perform any covenant, condition or agreement contained in this Agreement
(other than those specified in Section 10.01(a), Section 10.01(b), Section
10.01(c) or Section 10.01(d)) or any other Loan Document, and such failure shall
continue unremedied for a period of 30 days after the earlier to occur of (A)
notice thereof from the Administrative Agent to the Borrower (which notice will
be given at the request of any Lender) or (B) a Responsible Officer of the
Borrower or such Restricted Subsidiary otherwise becoming aware of such default.
 
(f)  (i) the Borrower or any Guarantor shall fail to make any payment (whether
of principal or interest and regardless of amount) in respect of any Material
Indebtedness, when and as the same shall become due and payable or (ii) so long
as any Existing Convertible Notes remain outstanding, (A) any Significant
Subsidiary fails to make any payment by the end of the applicable grace period,
if any, after the final scheduled payment date for such payment with respect to
any indebtedness for borrowed money in an aggregate amount in excess of
$10,000,000 or (B) indebtedness for borrowed money of any Significant Subsidiary
in an aggregate amount in excess of $10,000,000 shall have been accelerated or
otherwise declared due and payable, or required to be prepaid or repurchased
(other than by regularly scheduled required prepayment) prior to the scheduled
maturity thereof as a result of a default with respect to such indebtedness, in
either case without such indebtedness referred to in subclause (A) or (B) above
having been discharged, cured, waived, rescinded or annulled, for a period of 30
days after receipt by the Borrower of a notice of default.
 
(g)  any event or condition occurs that results in any Material Indebtedness
becoming due prior to its scheduled maturity or that enables or permits
(following any applicable grace period and notice) the holder or holders of any
Material Indebtedness or any trustee or agent on its or their behalf to cause
any Material Indebtedness to become due, or to require the Redemption thereof or
any offer to Redeem to be made in respect thereof, prior to its scheduled
maturity or require the Parent, the Borrower or any Restricted Subsidiary to
make an offer in respect thereof.
 
(h)  an involuntary proceeding shall be commenced or an involuntary petition
shall be filed seeking (i) liquidation, reorganization or other relief in
respect of the Parent, the Borrower or any Restricted Subsidiary or, so long as
any Existing Convertible Notes remain outstanding, any Significant Subsidiary or
any Aggregated Subsidiaries, or its or their debts, or of a substantial part of
its or their assets, under any  Federal, state or foreign bankruptcy,
insolvency, receivership or similar law now or hereafter in effect or (ii) the
appointment of a receiver, trustee, custodian, sequestrator, conservator or
similar official for the Parent, the Borrower, any Restricted Subsidiary or, so
long as any Existing Convertible Notes remain outstanding, any Significant
Subsidiary or any Aggregated Subsidiaries or for a substantial part of its or
their assets, and, in any such case, such proceeding or petition shall continue
undismissed for thirty (30) days or an order or decree approving or ordering any
of the foregoing shall be entered.
 
(i)  the Parent, the Borrower, any Restricted Subsidiary or, so long as any
Existing Convertible Notes remain outstanding, any Significant Subsidiary or any
Aggregated Subsidiaries, shall (i) voluntarily commence any proceeding or file
any petition seeking liquidation, reorganization or other relief under any
Federal, state or foreign bankruptcy, insolvency, receivership or similar law
now or hereafter in effect, (ii) consent to the institution of, or fail to
contest in a timely and appropriate manner, any proceeding or petition described
in Section 10.01(h), (iii) apply for or consent to the appointment of a
receiver, trustee, custodian, sequestrator, conservator or similar official for
the Borrower, any Restricted
 
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Subsidiary or, so long as any Existing Convertible Notes remain outstanding, any
Significant Subsidiary or any Aggregated Subsidiaries, or for a substantial part
of its or their assets, (iv) file an answer admitting the material allegations
of a petition filed against it or them in any such proceeding, (v) make a
general assignment for the benefit of creditors or (vi) take any action for the
purpose of effecting any of the foregoing; or any stockholder of the Parent
shall make any request or take any action for the purpose of calling a meeting
of the stockholders of the Parent to consider a resolution to dissolve and wind
up the Parent’s affairs.
 
(j)  the Parent, the Borrower or any Restricted Subsidiary shall become unable,
admit in writing its inability or fail generally to pay its debts as they become
due.
 
(k)  (i) one or more judgments for the payment of money in an aggregate amount
in excess of $25,000,000 (to the extent not covered by independent third party
insurance provided by insurers of the highest claims paying rating or financial
strength as to which the insurer does not dispute coverage and is not subject to
an insolvency proceeding) or (ii) any one or more non-monetary judgments that
have, or could reasonably be expected to have, individually or in the aggregate,
a Material Adverse Effect, shall be rendered against any Loan Party or any
combination thereof and the same shall remain undischarged for a period of 30
consecutive days during which execution shall not be effectively stayed, or any
action shall be legally taken by a judgment creditor to attach or levy upon any
assets of any Loan Party to enforce any such judgment.
 
(l)  the Loan Documents after delivery thereof shall for any reason, except to
the extent permitted by the terms thereof, cease to be in full force and effect
and valid, binding and enforceable in accordance with their terms against the
Borrower or a Guarantor party thereto or shall be repudiated by any of them, or
cease to create a valid and perfected Lien of the priority required thereby on
any of the collateral purported to be covered thereby, except to the extent
permitted by the terms of this Agreement, or the Borrower or any Restricted
Subsidiary or any of their Affiliates shall so state in writing.
 
(m)  an ERISA Event shall have occurred that, in the opinion of the Majority
Lenders, when taken together with all other ERISA Events that have occurred,
could reasonably be expected to result in liability of the Parent and its
Subsidiaries in an aggregate amount exceeding $25,000,000 in any year.
 
(n)  a Change in Control shall occur.
 
Section 10.02  Remedies.
 
(a)  In the case of an Event of Default other than one described in Section
10.01(h), Section 10.01(i) or Section 10.01(j), at any time thereafter during
the continuance of such Event of Default, the Majority Lenders shall, by notice
to the Borrower, take either or both of the following actions, at the same or
different times:  (i) terminate the Commitments, and thereupon the Commitments
shall terminate immediately, and (ii) declare the Loans then outstanding to be
due and payable in whole (or in part, in which case any principal not so
declared to be due and payable may thereafter be declared to be due and
payable), and thereupon the principal of the Loans so declared to be due and
payable, together with accrued interest thereon and all fees and other
obligations of the Loan Parties accrued hereunder and under the Loans and the
other Loan Documents (including, without limitation, the payment of cash
collateral to secure the LC Exposure as provided in Section 2.08(j)), shall
become due and payable immediately, without presentment, demand, protest, notice
of intent to accelerate, notice of acceleration or other notice of any kind, all
of which are hereby waived by each Loan Party; and in case of an Event of
Default described in Section 10.01(h), Section 10.01(i) or  Section 10.01(j),
the Commitments shall automatically terminate and the Notes and the principal of
the Loans then outstanding, together with
 
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accrued interest thereon and all fees and the other obligations of the Borrower
and the Guarantors accrued hereunder and under the Notes and the other Loan
Documents (including, without limitation, the payment of cash collateral to
secure the LC Exposure as provided in Section 2.08(j)), shall automatically
become due and payable, without presentment, demand, protest or other notice of
any kind, all of which are hereby waived by each Loan Party.
 
(b)  In the case of the occurrence of an Event of Default, the Administrative
Agent and the Lenders will have all other rights and remedies available at law
and equity.
 
(c)  All proceeds realized from the liquidation or other disposition of
collateral or otherwise received after maturity of the Notes, whether by
acceleration or otherwise, shall be applied:
 
(i)  first, to payment or reimbursement of that portion of the Indebtedness
constituting fees, expenses and indemnities payable to the Administrative Agent
in its capacity as such;
 
(ii)  second, pro rata to payment or reimbursement of that portion of the
Indebtedness constituting fees, expenses and indemnities payable to the Lenders;
 
(iii)  third, pro rata to payment of accrued interest on the Loans;
 
(iv)  fourth, pro rata to payment of principal outstanding on the Loans and
Indebtedness referred to in Clause (b) of the definition of Indebtedness owing
to a Lender or an Affiliate of a Lender;
 
(v)  fifth, pro rata to any other Indebtedness;
 
(vi)  sixth, to serve as cash collateral to be held by the Administrative Agent
to secure the LC Exposure; and
 
(vii)  seventh, any excess, after all of the Indebtedness shall have been
indefeasibly paid in full in cash, shall be paid to the Borrower or as otherwise
required by any Governmental Requirement.
 
ARTICLE XI
The Administrative Agent
 
Section 11.01  Appointment; Powers.  Each of the Lenders and the Issuing Bank
hereby irrevocably appoints the Administrative Agent as its agent and authorizes
the Administrative Agent to take such actions on its behalf and to exercise such
powers as are delegated to the Administrative Agent by the terms hereof and the
other Loan Documents, together with such actions and powers as are reasonably
incidental thereto.
 
Section 11.02  Duties and Obligations of Administrative Agent.  The
Administrative Agent shall not have any duties or obligations except those
expressly set forth in the Loan Documents.  Without limiting the generality of
the foregoing, (a) the Administrative Agent shall not be subject to any
fiduciary or other implied duties, regardless of whether a Default has occurred
and is continuing (the use of the term “agent” herein and in the other Loan
Documents with reference to the Administrative Agent is not intended to connote
any fiduciary or other implied (or express) obligations arising under agency
doctrine of any applicable law; rather, such term is used merely as a matter of
market custom, and is intended to create or reflect only an administrative
relationship between independent contracting parties), (b) the Administrative
Agent shall have no duty to take any discretionary action or exercise any
discretionary
 
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powers, except as provided in Section 11.03, and (c) except as expressly set
forth herein, the Administrative Agent shall not have any duty to disclose, and
shall not be liable for the failure to disclose, any information relating to the
Parent or any Loan Party that is communicated to or obtained by the bank serving
as Administrative Agent or any of its Affiliates in any capacity.  The
Administrative Agent shall be deemed not to have knowledge of any Default unless
and until written notice thereof is given to the Administrative Agent by the
Borrower or a Lender, and shall not be responsible for or have any duty to
ascertain or inquire into (i) any statement, warranty or representation made in
or in connection with this Agreement or any other Loan Document, (ii) the
contents of any certificate, report or other document delivered hereunder or
under any other Loan Document or in connection herewith or therewith, (iii) the
performance or observance of any of the covenants, agreements or other terms or
conditions set forth herein or in any other Loan Document, (iv) the validity,
enforceability, effectiveness or genuineness of this Agreement, any other Loan
Document or any other agreement, instrument or document, (v) the satisfaction of
any condition set forth in ARTICLE VI or elsewhere herein, other than to confirm
receipt of items expressly required to be delivered to the Administrative Agent
or as to those conditions precedent expressly required to be to the
Administrative Agent’s satisfaction, (vi) the existence, value, perfection or
priority of any collateral security or the financial or other condition of the
Parent and the Loan Parties or any other obligor or guarantor, or (vii) any
failure by the Borrower or any other Person (other than itself) to perform any
of its obligations hereunder or under any other Loan Document or the performance
or observance of any covenants, agreements or other terms or conditions set
forth herein or therein.  For purposes of determining compliance with the
conditions specified in ARTICLE VI, each Lender shall be deemed to have
consented to, approved or accepted or to be satisfied with, each document or
other matter required thereunder to be consented to or approved by or acceptable
or satisfactory to a Lender unless the Administrative Agent shall have received
written notice from such Lender prior to the proposed closing date specifying
its objection thereto.  The Administrative Agent shall take commercially
reasonable steps to make available copies of each Loan Document to the Lenders
promptly upon request.
 
Section 11.03  Action by Administrative Agent.  The Administrative Agent shall
have no duty to take any discretionary action or exercise any discretionary
powers, except discretionary rights and powers expressly contemplated hereby or
by the other Loan Documents that the Administrative Agent is required to
exercise in writing as directed by the Majority Lenders (or such other number or
percentage of the Lenders as shall be necessary under the circumstances as
provided in Section 12.02) and in all cases the Administrative Agent shall be
fully justified in failing or refusing to act hereunder or under any other Loan
Documents unless it shall (a) receive written instructions from the Majority
Lenders or the Lenders, as applicable, (or such other number or percentage of
the Lenders as shall be necessary under the circumstances as provided in Section
12.02) specifying the action to be taken and (b) be indemnified to its
satisfaction by the Lenders against any and all liability and expenses which may
be incurred by it by reason of taking or continuing to take any such
action.  The instructions as aforesaid and any action taken or failure to act
pursuant thereto by the Administrative Agent shall be binding on all of the
Lenders.  If a Default has occurred and is continuing, then the Administrative
Agent shall take such action with respect to such Default as shall be directed
by the requisite Lenders in the written instructions (with indemnities)
described in this Section 11.03, provided that, unless and until the
Administrative Agent shall have received such directions, the Administrative
Agent may (but shall not be obligated to) take such action, or refrain from
taking such action, with respect to such Default as it shall deem advisable in
the best interests of the Lenders.  In no event, however, shall the
Administrative Agent be required to take any action which exposes the
Administrative Agent to personal liability or which is contrary to this
Agreement, the Loan Documents or applicable law.  If a Default has occurred and
is continuing, the Syndication Agent and the Documentation Agent shall have no
obligation to perform any act in respect thereof.  No Agent shall not be liable
for any action taken or not taken by it with the consent or at the request of
the Majority Lenders or the Lenders (or such other number or percentage of the
Lenders as shall be necessary under the circumstances as provided in Section
12.02), and otherwise no Agent shall be liable for any action taken or not taken
by it hereunder or under any other Loan Document or under any other document or
 
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instrument referred to or provided for herein or therein or in connection
herewith or therewith INCLUDING ITS OWN ORDINARY NEGLIGENCE, except for its own
gross negligence or willful misconduct.
 
Section 11.04  Reliance by Administrative Agent.  The Administrative Agent shall
be entitled to rely upon, and shall not incur any liability for relying upon,
any notice, request, certificate, consent, statement, instrument, document or
other writing believed by it to be genuine and to have been signed or sent by
the proper Person.  The Administrative Agent also may rely upon any statement
made to it orally or by telephone and believed by it to be made by the proper
Person, and shall not incur any liability for relying thereon and each of the
Parent, the Borrower, the Lenders and the Issuing Bank hereby waives the right
to dispute the Administrative Agent’s record of such statement, except in the
case of gross negligence or willful misconduct by the Administrative Agent.  The
Administrative Agent may consult with legal counsel (who may be counsel for the
Borrower), independent accountants and other experts selected by it, and shall
not be liable for any action taken or not taken by it in accordance with the
advice of any such counsel, accountants or experts.  The Administrative Agent
may deem and treat the payee of any Note as the holder thereof for all purposes
hereof unless and until a written notice of the assignment or transfer thereof
permitted hereunder shall have been filed with the Administrative Agent.
 
Section 11.05  Subagents.  The Administrative Agent may perform any and all its
duties and exercise its rights and powers by or through any one or more
sub-agents appointed by the Administrative Agent.  The Administrative Agent and
any such sub-agent may perform any and all its duties and exercise its rights
and powers through their respective Related Parties.  The exculpatory provisions
of the preceding Sections of this ARTICLE XI shall apply to any such sub-agent
and to the Related Parties of the Administrative Agent and any such sub-agent,
and shall apply to their respective activities in connection with the
syndication of the credit facilities provided for herein as well as activities
as Administrative Agent.
 
Section 11.06  Resignation of Administrative Agent.  Subject to the appointment
and acceptance of a successor Agent as provided in this Section 11.06, any Agent
may resign at any time by notifying the Lenders, the Issuing Bank and the
Borrower.  Upon any such resignation, the Majority Lenders shall have the right,
in consultation with the Borrower, to appoint a successor.  If no successor
shall have been so appointed by the Majority Lenders and shall have accepted
such appointment within 30 days after the retiring Agent gives notice of its
resignation of the retiring Agent, then the retiring Agent may, on behalf of the
Lenders and the Issuing Bank, appoint a successor Agent.  Upon the acceptance of
its appointment as Agent hereunder by a successor, such successor shall succeed
to and become vested with all the rights, powers, privileges and duties of the
retiring Agent, and the retiring Agent shall be discharged from its duties and
obligations hereunder.  The fees payable by the Borrower to a successor Agent
shall be the same as those payable to its predecessor unless otherwise agreed
between the Borrower and such successor.  After the Agent’s resignation
hereunder, the provisions of this ARTICLE XI and Section 12.03 shall continue in
effect for the benefit of such retiring Agent, its sub-agents and their
respective Related Parties in respect of any actions taken or omitted to be
taken by any of them while it was acting as Agent.
 
Section 11.07  Agents as Lenders.  Each bank serving as an Agent hereunder shall
have the same rights and powers in its capacity as a Lender as any other Lender
and may exercise the same as though it were not an Agent, and such bank and its
Affiliates may accept deposits from, lend money to and generally engage in any
kind of business with the Parent or any Loan Party or other Affiliate thereof as
if it were not an Agent hereunder.
 
Section 11.08  No Reliance.  Each Lender acknowledges that it has, independently
and without reliance upon the Administrative Agent, any other Agent or any other
Lender and based on such
 
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documents and information as it has deemed appropriate, made its own credit
analysis and decision to enter into this Agreement and each other Loan Document
to which it is a party.  Each Lender also acknowledges that it will,
independently and without reliance upon the Administrative Agent, any other
Agent or any other Lender and based on such documents and information as it
shall from time to time deem appropriate, continue to make its own decisions in
taking or not taking action under or based upon this Agreement, any other Loan
Document, any related agreement or any document furnished hereunder or
thereunder.  The Agents shall not be required to keep themselves informed as to
the performance or observance by the Parent, the Borrower or any of its
Restricted Subsidiaries of this Agreement, the Loan Documents or any other
document referred to or provided for herein or to inspect the Properties or
books of any such Person.  Except for notices, reports and other documents and
information expressly required to be furnished to the Lenders by the
Administrative Agent hereunder, no Agent or the Arrangers shall have any duty or
responsibility to provide any Lender with any credit or other information
concerning the affairs, financial condition or business of the Parent or any
Loan Party (or any of their Affiliates) which may come into the possession of
such Agent or any of its Affiliates.  In this regard, each Lender acknowledges
that Vinson & Elkins L.L.P. is acting in this transaction as special counsel to
the Administrative Agent only, except to the extent otherwise expressly stated
in any legal opinion or any Loan Document.  Each other party hereto will consult
with its own legal counsel to the extent that it deems necessary in connection
with the Loan Documents and the matters contemplated therein.
 
Section 11.09  Administrative Agent May File Proofs of Claim.
 
In case of the pendency of any receivership, insolvency, liquidation,
bankruptcy, reorganization, arrangement, adjustment, composition or other
judicial proceeding relative to the Borrower or any of its Restricted
Subsidiaries, the Administrative Agent (irrespective of whether the principal of
any Loan shall then be due and payable as herein expressed or by declaration or
otherwise and irrespective of whether the Administrative Agent shall have made
any demand on the Borrower) shall be entitled and empowered, by intervention in
such proceeding or otherwise:
 
(a)  to file and prove a claim for the whole amount of the principal and
interest owing and unpaid in respect of the Loans and all other Indebtedness
that are owing and unpaid and to file such other documents as may be necessary
or advisable in order to have the claims of the Lenders and the Administrative
Agent (including any claim for the reasonable compensation, expenses,
disbursements and advances of the Lenders and the Administrative Agent and their
respective agents and counsel and all other amounts due the Lenders and the
Administrative Agent under Section 12.03) allowed in such judicial proceeding;
and
 
(b)  to collect and receive any monies or other property payable or deliverable
on any such claims and to distribute the same;
 
and any custodian, receiver, assignee, trustee, liquidator, sequestrator or
other similar official in any such judicial proceeding is hereby authorized by
each Lender to make such payments to the Administrative Agent and, in the event
that the Administrative Agent shall consent to the making of such payments
directly to the Lenders, to pay to the Administrative Agent any amount due for
the reasonable compensation, expenses, disbursements and advances of the
Administrative Agent and its agents and counsel, and any other amounts due the
Administrative Agent under Section 12.03.
 
Nothing contained herein shall be deemed to authorize the Administrative Agent
to authorize or consent to or accept or adopt on behalf of any Lender any plan
of reorganization, arrangement, adjustment or composition affecting the
Indebtedness or the rights of any Lender or to authorize the Administrative
Agent to vote in respect of the claim of any Lender in any such proceeding.
 
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Section 11.10  Authority of Administrative Agent to Release Collateral and
Liens.  Each Lender and the Issuing Bank hereby authorizes the Administrative
Agent to release any collateral that is permitted to be sold or released
pursuant to the terms of the Loan Documents.  Each Lender and the Issuing Bank
hereby authorizes the Administrative Agent to execute and deliver to the
Borrower, at the Borrower’s sole cost and expense, any and all releases of
Liens, termination statements, assignments or other documents reasonably
requested by the Borrower in connection with any sale or other disposition of
Property to the extent such sale or other disposition is permitted by the terms
of Section 9.11 or is otherwise authorized by the terms of the Loan Documents.
 
Section 11.11  The Arrangers and the Agents.  The Arrangers, the Syndication
Agent and the Documentation Agent shall have no duties, responsibilities or
liabilities under this Agreement and the other Loan Documents other than their
duties, responsibilities and liabilities in their capacity as Lenders hereunder.
 
ARTICLE XII
Miscellaneous
 
Section 12.01  Notices.
 
(a)  Except in the case of notices and other communications expressly permitted
to be given by telephone (and subject to Section 12.01(b)), all notices and
other communications provided for herein shall be in writing and shall be
delivered by hand or overnight courier service, mailed by certified or
registered mail or sent by telecopy, as follows:
 
(i)   if to the Borrower, to it at 1615 Poydras Street, New Orleans,
Louisiana  70112, Attention of Kathleen Quirk (Telecopy No. (504) 582-4511);
 
(ii)  if to the Administrative Agent, to it at:  1 Chase Tower, 10 South
Dearborn, IL1-0010, Chicago, Illinois 60603 Attention:  Mi Y Kim, Phone No.
312.732.4853, Fax No. 312.385.7096, and for all other correspondence other than
borrowings, continuation, conversion and Letter of Credit requests 712 Main, 8th
Floor, Houston, Texas 77002, Attention of Ronald Dierker (Telecopy No. (713)
216-7770);
 
(iii)  if to any other Lender, to it at its address (or telecopy number) set
forth in its Administrative Questionnaire.
 
(b)  Notices and other communications to the Lenders hereunder may be delivered
or furnished by electronic communications pursuant to procedures approved by the
Administrative Agent; provided that the foregoing shall not apply to notices
pursuant to ARTICLE II, ARTICLE III, ARTICLE IV and ARTICLE V unless otherwise
agreed by the Administrative Agent and the applicable Lender.  The
Administrative Agent or the Borrower may, in its discretion, agree to accept
notices and other communications to it hereunder by electronic communications
pursuant to procedures approved by it; provided that approval of such procedures
may be limited to particular notices or communications.
 
(c)  Any party hereto may change its address or telecopy number for notices and
other communications hereunder by notice to the other parties hereto.  All
notices and other communications given to any party hereto in accordance with
the provisions of this Agreement shall be deemed to have been given on the date
of receipt.
 
Section 12.02  Waivers; Amendments.
 
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(a)  No failure on the part of the Administrative Agent, the Issuing Bank or any
Lender to exercise and no delay in exercising, and no course of dealing with
respect to, any right, power or privilege, or any abandonment or discontinuance
of steps to enforce such right, power or privilege, under any of the Loan
Documents shall operate as a waiver thereof, nor shall any single or partial
exercise of any right, power or privilege under any of the Loan Documents
preclude any other or further exercise thereof or the exercise of any other
right, power or privilege.  The rights and remedies of the Administrative Agent,
the Issuing Bank and the Lenders hereunder and under the other Loan Documents
are cumulative and are not exclusive of any rights or remedies that they would
otherwise have.  No waiver of any provision of this Agreement or any other Loan
Document or consent to any departure by any Loan Party therefrom shall in any
event be effective unless the same shall be permitted by Section 12.02(b), and
then such waiver or consent shall be effective only in the specific instance and
for the purpose for which given.  Without limiting the generality of the
foregoing, the making of a Loan or issuance of a Letter of Credit shall not be
construed as a waiver of any Default, regardless of whether the Administrative
Agent, any Lender or the Issuing Bank may have had notice or knowledge of such
Default at the time.
 
(b)  Neither this Agreement nor any provision hereof nor any Security Instrument
nor any provision thereof may be waived, amended or modified except pursuant to
an agreement or agreements in writing entered into by the Parent, the Borrower
and the Majority Lenders or by the Parent, the Borrower and the Administrative
Agent with the consent of the Majority Lenders; provided that no such agreement
shall (i) increase the Maximum Credit Amount of any Lender without the written
consent of such Lender, (ii) increase the Borrowing Base or the Conforming
Borrowing Base without the written consent of each Lender, decrease or maintain
the Borrowing Base or the Conforming Borrowing Base without the consent of the
Required Lenders, (iii) reduce the principal amount of any Loan or LC
Disbursement or reduce the rate of interest thereon, or reduce any fees payable
hereunder, or reduce any other Indebtedness hereunder or under any other Loan
Document, without the written consent of each Lender affected thereby, (iv)
postpone the scheduled date of payment or prepayment of the principal amount of
any Loan or LC Disbursement, or any interest thereon, or any fees payable
hereunder, or any other Indebtedness hereunder or under any other Loan Document,
or reduce the amount of, waive or excuse any such payment, or postpone or extend
the date of any scheduled reduction of the Maximum Aggregate Credit Amounts
under Section 2.06(c) or the Termination Date without the written consent of
each Lender affected thereby, (v) change Section 4.01(b) or Section 4.01(c) in a
manner that would alter the pro rata sharing of payments required thereby,
without the written consent of each Lender, (vi) waive or amend Section 10.02(c)
without the written consent of each Lender, (vii) release any Guarantor (except
as set forth in the Guaranty Agreement), release any of the collateral (other
than as provided in Section 11.10), or reduce the percentage set forth in
Section 8.14(a) to less than 85%, without the written consent of each Lender, or
(viii) change any of the provisions of this Section 12.02(b) or the definitions
of “Majority Lenders” or “Required Lenders” or any other provision hereof
specifying the number or percentage of Lenders required to waive, amend or
modify any rights hereunder or under any other Loan Documents or make any
determination or grant any consent hereunder or any other Loan Documents,
without the written consent of each Lender; provided further that no such
agreement shall amend, modify or otherwise affect the rights or duties of the
Administrative Agent, any other Agent or the Issuing Bank hereunder or under any
other Loan Document without the prior written consent of the Administrative
Agent, other such Agent or the Issuing Bank, as the case may
be.  Notwithstanding the foregoing, any supplement to Schedule 7.14
(Subsidiaries) shall be effective simply by delivering to the Administrative
Agent a supplemental schedule clearly marked as such and, upon receipt, the
Administrative Agent will promptly deliver a copy thereof to the
Lenders.  Notwithstanding the foregoing, the Borrower and the Administrative
Agent may amend this Agreement or any other Loan Document without the consent of
the Lenders to add covenants or other provisions in order to permit the Loan
Parties to comply with Section 9.04(b)(ii)(B).
 
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Section 12.03  Expenses, Indemnity; Damage Waiver.

 
(a)  The Borrower shall pay (i) all reasonable out-of-pocket expenses incurred
by the Administrative Agent and its Affiliates, including, without limitation,
the reasonable fees, charges and disbursements of counsel and other outside
consultants for the Administrative Agent, the reasonable travel, photocopy,
mailing, courier, telephone and other similar expenses, and the cost of
environmental audits and surveys and appraisals, in connection with the
syndication of the credit facilities provided for herein, the preparation,
negotiation, execution, delivery and administration (both before and after the
execution hereof and including advice of counsel to the Administrative Agent as
to the rights and duties of the Administrative Agent and the Lenders with
respect thereto) of this Agreement and the other Loan Documents and any
amendments, modifications or waivers of or consents related to the provisions
hereof or thereof (whether or not the transactions contemplated hereby or
thereby shall be consummated), (ii) all costs, expenses, taxes, assessments and
other charges incurred by the any Agent or any Lender in connection with any
filing, registration, recording or perfection of any security interest
contemplated by this Agreement or any Security Instrument or any other document
referred to therein, (iii) all reasonable out-of-pocket expenses incurred by the
Issuing Bank in connection with the issuance, amendment, renewal or extension of
any Letter of Credit or any demand for payment thereunder, (iv) all
out-of-pocket expenses incurred by any Agent, the Issuing Bank or any Lender,
including the fees, charges and disbursements of any counsel for any Agent, the
Issuing Bank or any Lender, in connection with the enforcement or protection of
its rights in connection with this Agreement or any other Loan Document,
including its rights under this Section 12.03, or in connection with the Loans
made or Letters of Credit issued hereunder, including, without limitation, all
such out-of-pocket expenses incurred during any workout, restructuring or
negotiations in respect of such Loans or Letters of Credit.
 
(b)  THE BORROWER SHALL INDEMNIFY THE EACH AGENT, THE ARRANGER, THE ISSUING BANK
AND EACH LENDER, AND EACH RELATED PARTY OF ANY OF THE FOREGOING PERSONS (EACH
SUCH PERSON BEING CALLED AN “INDEMNITEE”) AGAINST, AND HOLD EACH INDEMNITEE
HARMLESS FROM, ANY AND ALL LOSSES, CLAIMS, DAMAGES, LIABILITIES AND RELATED
EXPENSES, INCLUDING THE FEES, CHARGES AND DISBURSEMENTS OF ANY COUNSEL FOR ANY
INDEMNITEE, INCURRED BY OR ASSERTED AGAINST ANY INDEMNITEE ARISING OUT OF, IN
CONNECTION WITH, OR AS A RESULT OF (i) THE EXECUTION OR DELIVERY OF THIS
AGREEMENT OR ANY OTHER LOAN DOCUMENT OR ANY AGREEMENT OR INSTRUMENT CONTEMPLATED
HEREBY OR THEREBY, (ii) THE PERFORMANCE BY THE PARTIES HERETO OR THE PARTIES TO
ANY OTHER LOAN DOCUMENT OF THEIR RESPECTIVE OBLIGATIONS HEREUNDER OR THEREUNDER
OR THE CONSUMMATION OF THE TRANSACTIONS CONTEMPLATED HEREBY OR BY ANY OTHER LOAN
DOCUMENT, (iii) THE FAILURE OF THE PARENT OR ANY LOAN PARTY TO COMPLY WITH THE
TERMS OF ANY LOAN DOCUMENT, INCLUDING THIS AGREEMENT, OR WITH ANY GOVERNMENTAL
REQUIREMENT, (iv) ANY INACCURACY OF ANY REPRESENTATION OR ANY BREACH OF ANY
WARRANTY OR COVENANT OF THE PARENT OR ANY LOAN PARTY SET FORTH IN ANY OF THE
LOAN DOCUMENTS OR ANY INSTRUMENTS, DOCUMENTS OR CERTIFICATIONS DELIVERED IN
CONNECTION THEREWITH, (v) ANY LOAN OR LETTER OF CREDIT OR THE USE OF THE
PROCEEDS THEREFROM, INCLUDING, WITHOUT LIMITATION, (A) ANY REFUSAL BY THE
ISSUING BANK TO HONOR A DEMAND FOR PAYMENT UNDER A LETTER OF CREDIT IF THE
DOCUMENTS PRESENTED IN CONNECTION WITH SUCH DEMAND DO NOT STRICTLY COMPLY WITH
THE TERMS OF SUCH LETTER OF CREDIT, OR (B) THE PAYMENT OF A DRAWING UNDER ANY
LETTER OF CREDIT NOTWITHSTANDING THE NON-COMPLIANCE, NON-DELIVERY OR OTHER
IMPROPER PRESENTATION OF THE DOCUMENTS PRESENTED IN CONNECTION THEREWITH, (vi)
ANY OTHER ASPECT OF THE LOAN DOCUMENTS, (vii) THE OPERATIONS OF THE BUSINESS OF
THE PARENT OR ANY LOAN PARTY BY SUCH
 
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PERSONS, (viii) ANY ASSERTION THAT THE LENDERS WERE NOT ENTITLED TO RECEIVE THE
PROCEEDS RECEIVED PURSUANT TO THE SECURITY INSTRUMENTS, (ix) ANY ENVIRONMENTAL
LAW APPLICABLE TO THE BORROWER OR ANY RESTRICTED SUBSIDIARY OR ANY OF THEIR
PROPERTIES, INCLUDING WITHOUT LIMITATION, THE PRESENCE, GENERATION, STORAGE,
RELEASE, THREATENED RELEASE, USE, TRANSPORT, DISPOSAL, ARRANGEMENT OF DISPOSAL
OR TREATMENT OF OIL, OIL AND GAS WASTES, SOLID WASTES OR HAZARDOUS SUBSTANCES ON
ANY OF THEIR PROPERTIES, (x) THE BREACH OR NON-COMPLIANCE BY THE BORROWER OR ANY
RESTRICTED SUBSIDIARY WITH ANY ENVIRONMENTAL LAW APPLICABLE TO THE BORROWER OR
ANY RESTRICTED SUBSIDIARY, (xi) THE PAST OWNERSHIP BY THE BORROWER OR ANY
RESTRICTED SUBSIDIARY OF ANY OF THEIR PROPERTIES OR PAST ACTIVITY ON ANY OF
THEIR PROPERTIES WHICH, THOUGH LAWFUL AND FULLY PERMISSIBLE AT THE TIME, COULD
RESULT IN PRESENT LIABILITY, (xii) THE PRESENCE, USE, RELEASE, STORAGE,
TREATMENT, DISPOSAL, GENERATION, THREATENED RELEASE, TRANSPORT, ARRANGEMENT FOR
TRANSPORT OR ARRANGEMENT FOR DISPOSAL OF OIL, OIL AND GAS WASTES, SOLID WASTES
OR HAZARDOUS SUBSTANCES ON OR AT ANY OF THE PROPERTIES OWNED OR OPERATED BY THE
BORROWER OR ANY RESTRICTED SUBSIDIARY OR ANY ACTUAL OR ALLEGED PRESENCE OR
RELEASE OF HAZARDOUS MATERIALS ON OR FROM ANY PROPERTY OWNED OR OPERATED BY THE
BORROWER OR ANY OF ITS RESTRICTED SUBSIDIARIES, (xiii) ANY ENVIRONMENTAL
LIABILITY RELATED IN ANY WAY TO THE BORROWER OR ANY OF ITS RESTRICTED
SUBSIDIARIES, (xiv) ANY OTHER ENVIRONMENTAL, HEALTH OR SAFETY CONDITION IN
CONNECTION WITH THE LOAN DOCUMENTS, OR (xv) ANY ACTUAL OR PROSPECTIVE CLAIM,
LITIGATION, INVESTIGATION OR PROCEEDING RELATING TO ANY OF THE FOREGOING,
WHETHER BASED ON CONTRACT, TORT OR ANY OTHER THEORY AND REGARDLESS OF WHETHER
ANY INDEMNITEE IS A PARTY THERETO, AND SUCH INDEMNITY SHALL EXTEND TO EACH
INDEMNITEE NOTWITHSTANDING THE SOLE OR CONCURRENT NEGLIGENCE OF EVERY KIND OR
CHARACTER WHATSOEVER, WHETHER ACTIVE OR PASSIVE, WHETHER AN AFFIRMATIVE ACT OR
AN OMISSION, INCLUDING WITHOUT LIMITATION, ALL TYPES OF NEGLIGENT CONDUCT
IDENTIFIED IN THE RESTATEMENT (SECOND) OF TORTS OF ONE OR MORE OF THE
INDEMNITEES OR BY REASON OF STRICT LIABILITY IMPOSED WITHOUT FAULT ON ANY ONE OR
MORE OF THE INDEMNITEES; PROVIDED THAT SUCH INDEMNITY SHALL NOT, AS TO ANY
INDEMNITEE, BE AVAILABLE TO THE EXTENT THAT SUCH LOSSES, CLAIMS, DAMAGES,
LIABILITIES OR RELATED EXPENSES ARE DETERMINED BY A COURT OF COMPETENT
JURISDICTION BY FINAL AND NONAPPEALABLE JUDGMENT TO HAVE RESULTED FROM THE GROSS
NEGLIGENCE OR WILLFUL MISCONDUCT OF SUCH INDEMNITEE.
 
(c)  To the extent that the Borrower fails to pay any amount required to be paid
by it to any Agent, the Arrangers or the Issuing Bank under Section 12.03(a) or
(b), each Lender severally agrees to pay to such Agent, the Arrangers or the
Issuing Bank, as the case may be, such Lender’s Applicable Percentage
(determined as of the time that the applicable unreimbursed expense or indemnity
payment is sought) of such unpaid amount; provided that the unreimbursed expense
or indemnified loss, claim, damage, liability or related expense, as the case
may be, was incurred by or asserted against such Agent, the Arrangers or the
Issuing Bank in its capacity as such.
 
(d)  To the extent permitted by applicable law, no Loan Party shall assert, and
hereby waives, any claim against any Indemnitee, on any theory of liability, for
special, indirect, consequential or punitive damages (as opposed to direct or
actual damages) arising out of, in connection with, or as a result of, this
Agreement, any other Loan Document or any agreement or instrument contemplated
hereby or thereby, the Transactions, any Loan or Letter of Credit or the use of
the proceeds thereof.
 
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(e)  All amounts due under this Section 12.03 shall be payable not later than 10
days after written demand therefor.
 
Section 12.04  Successors and Assigns.
 
(a)  The provisions of this Agreement shall be binding upon and inure to the
benefit of the parties hereto and their respective successors and assigns
permitted hereby (including any Affiliate of the Issuing Bank that issues any
Letter of Credit), except that (i) the Borrower may not assign or otherwise
transfer any of its rights or obligations hereunder without the prior written
consent of each Lender (and any attempted assignment or transfer by the Borrower
without such consent shall be null and void) and (ii) no Lender may assign or
otherwise transfer its rights or obligations hereunder except in accordance with
this Section 12.04.  Nothing in this Agreement, expressed or implied, shall be
construed to confer upon any Person (other than the parties hereto, their
respective successors and assigns permitted hereby (including any Affiliate of
the Issuing Bank that issues any Letter of Credit), Participants (to the extent
provided in Section 12.04(c)) and, to the extent expressly contemplated hereby,
the Related Parties of each of the Administrative Agent, the Issuing Bank and
the Lenders) any legal or equitable right, remedy or claim under or by reason of
this Agreement.
 
(b)  (i) Subject to the conditions set forth in Section 12.04(b)(ii), any Lender
may assign to one or more assignees (each an “Assignee”) all or a portion of its
rights and obligations under this Agreement (including all or a portion of its
Commitment and the Loans at the time owing to it) with the prior written consent
of:
 
(A)  the Borrower, provided that no consent of the Borrower shall be required
for an assignment to a Lender, an Affiliate of a Lender, an Approved Fund (as
defined below), or, if an Event of Default under Section 10.01(a), (h), (i) or
(j) has occurred and is continuing, is to any other assignee; and
 
(B)  the Administrative Agent and each Issuing Bank (such consent not to be
unreasonably withheld).
 
(ii)  Assignments shall be subject to the following additional conditions:
 
(A)  except in the case of an assignment to a Lender, an Affiliate of a Lender
or an Approved Fund or an assignment of the entire remaining amount of the
assigning Lender’s Commitment or Loans, the amount of the Commitment or Loans of
the assigning Lender subject to each such assignment (determined as of the date
the Assignment and Assumption with respect to such assignment is delivered to
the Administrative Agent) shall not be less than $5,000,000 unless each of the
Borrower and the Administrative Agent otherwise consent, provided that (1) no
such consent of the Borrower shall be required if an Event of Default has
occurred and is continuing and (2) such amounts shall be aggregated in respect
of each Lender and its Affiliates or Approved Funds;
 
(B)  the parties to each assignment shall execute and deliver to the
Administrative Agent an Assignment and Assumption, together with a processing
and recordation fee of $3,500; and
 
(C)  the Assignee, if it shall not be a Lender, shall deliver to the
Administrative Agent an Administrative Questionnaire.
 
For the purposes of this Section 12.04, “Approved Fund” means any Person (other
than a natural person) that is engaged in making, purchasing, holding or
investing in bank loans and similar extensions
 
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of credit in the ordinary course of its business and that is administered or
managed by (a) a Lender, (b) an Affiliate of a Lender or (c) Person or an
Affiliate of a Person that administers or manages a Lender.
 
(iii)  Subject to Section 12.04(b)(iv) and the acceptance and recording thereof,
from and after the effective date specified in each Assignment and Assumption
the Assignee thereunder shall be a party hereto and, to the extent of the
interest assigned by such Assignment and Assumption, have the rights and
obligations of a Lender under this Agreement, and the assigning Lender
thereunder shall, to the extent of the interest assigned by such Assignment and
Assumption, be released from its obligations under this Agreement (and, in the
case of an Assignment and Assumption covering all of the assigning Lender’s
rights and obligations under this Agreement, such Lender shall cease to be a
party hereto but shall continue to be entitled to the benefits of Section 5.01,
Section 5.02, Section 5.03 and Section 12.03).  Any assignment or transfer by a
Lender of rights or obligations under this Agreement that does not comply with
this Section 12.04 shall be treated for purposes of this Agreement as a sale by
such Lender of a participation in such rights and obligations in accordance with
Section 12.04(c).
 
(iv)  The Administrative Agent, acting for this purpose as an agent of the
Borrower, shall maintain at one of its offices a copy of each Assignment and
Assumption delivered to it and a register for the recordation of the names and
addresses of the Lenders, and the Maximum Credit Amount of, and principal amount
of the Loans and LC Disbursements owing to, each Lender pursuant to the terms
hereof from time to time (the “Register”).  The entries in the Register shall be
conclusive, and the Borrower, the Administrative Agent, the Issuing Bank and the
Lenders may treat each Person whose name is recorded in the Register pursuant to
the terms hereof as a Lender hereunder for all purposes of this Agreement,
notwithstanding notice to the contrary.  The Register shall be available for
inspection by the Borrower, the Issuing Bank and any Lender, at any reasonable
time and from time to time upon reasonable prior notice.
 
(v)  Upon its receipt of a duly completed Assignment and Assumption executed by
an assigning Lender and an assignee, the Assignee’s completed Administrative
Questionnaire and, if required hereunder, applicable tax forms (unless the
Assignee shall already be a Lender hereunder), the processing and recordation
fee referred to in Section 12.04(b) and any written consent to such assignment
required by Section 12.04(b), the Administrative Agent shall accept such
Assignment and Assumption and record the information contained therein in the
Register.  No assignment shall be effective for purposes of this Agreement
unless it has been recorded in the Register as provided in this Section
12.04(b).
 
(c)  (i)           Any Lender may, without the consent of the Borrower, the
Administrative Agent or the Issuing Bank, sell participations to one or more
banks or other entities (a “Participant”) in all or a portion of such Lender’s
rights and obligations under this Agreement (including all or a portion of its
Commitment and the Loans owing to it); provided that (A) such Lender’s
obligations under this Agreement shall remain unchanged, (B) such Lender shall
remain solely responsible to the other parties hereto for the performance of
such obligations, (C) the Borrower, the Administrative Agent, the Issuing Bank
and the other Lenders shall continue to deal solely and directly with such
Lender in connection with such Lender’s rights and obligations under this
Agreement and (D) such Lender shall continue to give prompt attention to and
process (including, if required, through discussions with Participants) requests
for waivers or amendments hereunder.  Any agreement or instrument pursuant to
which a Lender sells such a participation shall provide that such Lender shall
retain the sole right to enforce this Agreement and to approve any amendment,
modification or waiver of any provision of this Agreement; provided that such
agreement or instrument may provide that such Lender will not, without the
consent of the Participant, agree to any amendment, modification or waiver
described in the proviso to Section 12.02 that affects such Participant.  In
addition such agreement must provide that the Participant be bound by the
provisions of Section 12.03.  Subject to Section 12.04(c)(ii), the Borrower
agrees that
 
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each Participant shall be entitled to the benefits of Section 5.01, Section 5.02
and Section 5.03 to the same extent as if it were a Lender and had acquired its
interest by assignment pursuant to Section 12.04(b).  To the extent permitted by
law, each Participant also shall be entitled to the benefits of Section 12.08 as
though it were a Lender, provided such Participant agrees to be subject to
Section 4.01(c) as though it were a Lender.
 
(ii)           A Participant shall not be entitled to receive any greater
payment under Section 5.01 or Section 5.03 than the applicable Lender would have
been entitled to receive with respect to the participation sold to such
Participant, unless the sale of the participation to such Participant is made
with the Borrower’s prior written consent.  A Participant that is a Non-U.S.
Lender shall not be entitled to the benefits of Section 5.03 unless the Borrower
is notified of the participation sold to such Participant and such Participant
agrees, for the benefit of the Borrower, to comply with Section 5.03(d) as
though it were a Lender.
 
(d)  Any Lender may at any time pledge or assign a security interest in all or
any portion of its rights under this Agreement to secure obligations of such
Lender, including, without limitation, any pledge or assignment to secure
obligations to a Federal Reserve Bank, and this Section 12.04(d) shall not apply
to any such pledge or assignment of a security interest; provided that no such
pledge or assignment of a security interest shall release a Lender from any of
its obligations hereunder or substitute any such pledgee or Assignee for such
Lender as a party hereto.
 
(e)  Notwithstanding the foregoing, any Conduit Lender may assign any or all of
the Loans it may have funded hereunder to its designating Lender without the
consent of the Borrower or the Administrative Agent and without regard to the
limitations set forth in Section 12.04(b).  Each of the Parent, the Borrower,
each Lender and the Administrative Agent hereby confirms that it will not
institute against a Conduit Lender or join any other Person in instituting
against a Conduit Lender any bankruptcy, reorganization, arrangement, insolvency
or liquidation proceeding under any state bankruptcy or similar law, for one
year and one day after the payment in full of the latest maturing commercial
paper note issued by such Conduit Lender; provided, however, that each Lender
designating any Conduit Lender hereby agrees to indemnify, save and hold
harmless each other party hereto for any loss, cost, damage or expense arising
out of its inability to institute such a proceeding against such Conduit Lender
during such period of forbearance.
 
(f)  Notwithstanding any other provisions of this Section 12.04, no transfer or
assignment of the interests or obligations of any Lender or any grant of
participations therein shall be permitted if such transfer, assignment or grant
would require the Borrower and the Guarantors to file a registration statement
with the SEC or to qualify the Loans under the “Blue Sky” laws of any state.
 
Section 12.05  Survival; Revival; Reinstatement.
 
(a)  All covenants, agreements, representations and warranties made by the Loan
Parties herein and in the certificates or other instruments delivered in
connection with or pursuant to this Agreement or any other Loan Document shall
be considered to have been relied upon by the other parties hereto and shall
survive the execution and delivery of this Agreement and the making of any Loans
and issuance of any Letters of Credit, regardless of any investigation made by
any such other party or on its behalf and notwithstanding that the
Administrative Agent, any other Agent, the Issuing Bank or any Lender may have
had notice or knowledge of any Default or incorrect representation or warranty
at the time any credit is extended hereunder, and shall continue in full force
and effect as long as the principal of or any accrued interest on any Loan or
any fee or any other amount payable under this Agreement is outstanding and
unpaid or any Letter of Credit is outstanding and so long as the Commitments
have not expired or terminated.  The provisions of Section 5.01, Section 5.02,
Section 5.03 and Section 12.03 and
 
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ARTICLE XI shall survive and remain in full force and effect regardless of the
consummation of the transactions contemplated hereby, the repayment of the
Loans, the expiration or termination of the Letters of Credit and the
Commitments or the termination of this Agreement, any other Loan Document or any
provision hereof or thereof.
 
(b)  To the extent that any payments on the Indebtedness or proceeds of any
collateral are subsequently invalidated, declared to be fraudulent or
preferential, set aside or required to be repaid to a trustee, debtor in
possession, receiver or other Person under any bankruptcy law, common law or
equitable cause, then to such extent, the Indebtedness so satisfied shall be
revived and continue as if such payment or proceeds had not been received and
the Administrative Agent’s and the Lenders’ Liens, security interests, rights,
powers and remedies under this Agreement and each Loan Document shall continue
in full force and effect.  In such event, each Loan Document shall be
automatically reinstated and the Parent and the Borrower shall, and shall cause
each other Loan Party to, take such action as may be reasonably requested by the
Administrative Agent and the Lenders to effect such reinstatement.
 
Section 12.06  Counterparts; Integration; Effectiveness.
 
(a)  This Agreement may be executed in counterparts (and by different parties
hereto on different counterparts), each of which shall constitute an original,
but all of which when taken together shall constitute a single contract.
 
(b)  This Agreement, the other Loan Documents and any separate letter agreements
with respect to fees payable to the Administrative Agent constitute the entire
contract among the parties relating to the subject matter hereof and thereof and
supersede any and all previous agreements and understandings, oral or written,
relating to the subject matter hereof and thereof.  This Agreement and the other
Loan Documents represent the final agreement among the parties hereto and
thereto and may not be contradicted by evidence of prior, contemporaneous or
subsequent oral agreements of the parties.  There are no unwritten oral
agreements between the parties.
 
(c)  Except as provided in Section 6.01, this Agreement shall become effective
when it shall have been executed by the Administrative Agent and when the
Administrative Agent shall have received counterparts hereof which, when taken
together, bear the signatures of each of the other parties hereto, and
thereafter shall be binding upon and inure to the benefit of the parties hereto
and their respective successors and assigns.  Delivery of an executed
counterpart of a signature page of this Agreement by telecopy shall be effective
as delivery of a manually executed counterpart of this Agreement.
 
Section 12.07  Severability.  Any provision of this Agreement or any other Loan
Document held to be invalid, illegal or unenforceable in any jurisdiction shall,
as to such jurisdiction, be ineffective to the extent of such invalidity,
illegality or unenforceability without affecting the validity, legality and
enforceability of the remaining provisions hereof or thereof; and the invalidity
of a particular provision in a particular jurisdiction shall not invalidate such
provision in any other jurisdiction.
 
Section 12.08  Right of Setoff.  If an Event of Default shall have occurred and
be continuing, each Lender and each of its Affiliates is hereby authorized at
any time and from time to time, to the fullest extent permitted by law, to set
off and apply any and all deposits (general or special, time or demand,
provisional or final) at any time held and other obligations (of whatsoever
kind, including, without limitations obligations under Swap Agreements) at any
time owing by such Lender or Affiliate to or for the credit or the account of
the Parent or any Loan Party against any of and all the obligations of the
Parent or any other Loan Party owed to such Lender now or hereafter existing
under this Agreement or any other Loan Document, irrespective of whether or not
such Lender shall have made any demand under
 
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this Agreement or any other Loan Document and although such obligations may be
unmatured.  The rights of each Lender under this Section 12.08 are in addition
to other rights and remedies (including other rights of setoff) which such
Lender or its Affiliates may have.
 
Section 12.09  GOVERNING LAW; JURISDICTION; CONSENT TO SERVICE OF PROCESS.
 
(a)  THIS AGREEMENT AND THE NOTES SHALL BE GOVERNED BY, AND CONSTRUED IN
ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK EXCEPT TO THE EXTENT THAT
UNITED STATES FEDERAL LAW PERMITS ANY LENDER TO CONTRACT FOR, CHARGE, RECEIVE,
RESERVE OR TAKE INTEREST AT THE RATE ALLOWED BY THE LAWS OF THE STATE WHERE SUCH
LENDER IS LOCATED.
 
(b)  ANY LEGAL ACTION OR PROCEEDING WITH RESPECT TO THE LOAN DOCUMENTS SHALL BE
BROUGHT IN THE COURTS OF THE STATE OF NEW YORK OR OF THE UNITED STATES OF
AMERICA FOR THE SOUTHERN DISTRICT OF NEW YORK, AND, BY EXECUTION AND DELIVERY OF
THIS AGREEMENT, EACH PARTY HEREBY ACCEPTS FOR ITSELF AND (TO THE EXTENT
PERMITTED BY LAW) IN RESPECT OF ITS PROPERTY, GENERALLY AND UNCONDITIONALLY, THE
JURISDICTION OF THE AFORESAID COURTS.  EACH PARTY HEREBY IRREVOCABLY WAIVES ANY
OBJECTION, INCLUDING, WITHOUT LIMITATION, ANY OBJECTION TO THE LAYING OF VENUE
OR BASED ON THE GROUNDS OF FORUM NON CONVENIENS, WHICH IT MAY NOW OR HEREAFTER
HAVE TO THE BRINGING OF ANY SUCH ACTION OR PROCEEDING IN SUCH RESPECTIVE
JURISDICTIONS.  THIS SUBMISSION TO JURISDICTION IS NON-EXCLUSIVE AND DOES NOT
PRECLUDE A PARTY FROM OBTAINING JURISDICTION OVER ANOTHER PARTY IN ANY COURT
OTHERWISE HAVING JURISDICTION.
 
(c)  EACH PARTY IRREVOCABLY CONSENTS TO THE SERVICE OF PROCESS OF ANY OF THE
AFOREMENTIONED COURTS IN ANY SUCH ACTION OR PROCEEDING BY THE MAILING OF COPIES
THEREOF BY REGISTERED OR CERTIFIED MAIL, POSTAGE PREPAID, TO IT AT THE ADDRESS
SPECIFIED IN SECTION 12.01 OR SUCH OTHER ADDRESS AS IS SPECIFIED PURSUANT TO
SECTION 12.01 (OR ITS ASSIGNMENT AND ASSUMPTION), SUCH SERVICE TO BECOME
EFFECTIVE THIRTY (30) DAYS AFTER SUCH MAILING.  NOTHING HEREIN SHALL AFFECT THE
RIGHT OF A PARTY OR ANY HOLDER OF A NOTE TO SERVE PROCESS IN ANY OTHER MANNER
PERMITTED BY LAW OR TO COMMENCE LEGAL PROCEEDINGS OR OTHERWISE PROCEED AGAINST
ANOTHER PARTY IN ANY OTHER JURISDICTION.
 
(d)  EACH PARTY HEREBY (i) IRREVOCABLY AND UNCONDITIONALLY WAIVES, TO THE
FULLEST EXTENT PERMITTED BY LAW, TRIAL BY JURY IN ANY LEGAL ACTION OR PROCEEDING
RELATING TO THIS AGREEMENT OR ANY OTHER LOAN DOCUMENT AND FOR ANY COUNTERCLAIM
THEREIN; (ii) IRREVOCABLY WAIVES, TO THE MAXIMUM EXTENT NOT PROHIBITED BY LAW,
ANY RIGHT IT MAY HAVE TO CLAIM OR RECOVER IN ANY SUCH LITIGATION ANY SPECIAL,
EXEMPLARY, PUNITIVE OR CONSEQUENTIAL DAMAGES, OR DAMAGES OTHER THAN, OR IN
ADDITION TO, ACTUAL DAMAGES; (iii) CERTIFIES THAT NO PARTY HERETO NOR ANY
REPRESENTATIVE OR AGENT OF COUNSEL FOR ANY PARTY HERETO HAS REPRESENTED,
EXPRESSLY OR OTHERWISE, OR IMPLIED THAT SUCH PARTY WOULD NOT, IN THE EVENT OF
LITIGATION, SEEK TO ENFORCE THE FOREGOING WAIVERS, AND (iv) ACKNOWLEDGES THAT IT
HAS BEEN INDUCED TO ENTER INTO THIS AGREEMENT, THE LOAN DOCUMENTS AND THE
 
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TRANSACTIONS CONTEMPLATED HEREBY AND THEREBY BY, AMONG OTHER THINGS, THE MUTUAL
WAIVERS AND CERTIFICATIONS CONTAINED IN THIS SECTION 12.09.
 
Section 12.10  Headings.  Article and Section headings and the Table of Contents
used herein are for convenience of reference only, are not part of this
Agreement and shall not affect the construction of, or be taken into
consideration in interpreting, this Agreement.
 
Section 12.11  Confidentiality.  Each of the Administrative Agent and each
Lender agrees to keep confidential all non-public information provided to it by
the Parent, the Borrower or any of their Subsidiaries, the Administrative Agent
or any Lender pursuant to or in connection with this Agreement that is
designated by the provider thereof as confidential; provided that nothing herein
shall prevent the Administrative Agent or any Lender from disclosing any such
information (a) to the Administrative Agent, any other Lender or any affiliate
thereof, (b) subject to an agreement to comply with the provisions of this
Section, to any actual or prospective Transferee or any direct or indirect
counterparty to any Swap Agreement (or any professional advisor to such
counterparty), (c) to its employees, directors, agents, attorneys, accountants
and other professional advisors or those of any of its affiliates, (d) upon the
request or demand of any Governmental Authority, (e) in response to any order of
any court or other Governmental Authority or as may otherwise be required
pursuant to any Governmental Requirement, (f) if requested or required to do so
in connection with any litigation or similar proceeding, (g) that has been
publicly disclosed, (h) to the National Association of Insurance Commissioners
or any similar organization or any nationally recognized rating agency that
requires access to information about a Lender’s investment portfolio in
connection with ratings issued with respect to such Lender, or (i) in connection
with the exercise of any remedy hereunder or under any other Loan Document.
 
Each Lender acknowledges that information furnished to it pursuant to this
Agreement or the other Loan Documents may include material non-public
information concerning the Borrower and its Affiliates and their related parties
or their respective securities, and confirms that it has developed compliance
procedures regarding the use of material non-public information and that it will
handle such material non-public information in accordance with those procedures
and applicable law, including Federal and state securities laws.
 
All information, including requests for waivers and amendments, furnished by the
Borrower or the Administrative Agent pursuant to, or in the course of
administering, this Agreement or the other Loan Documents will be
syndicate-level information, which may contain material non-public information
about the Borrower and its Affiliates and their related parties or their
respective securities.  Accordingly, each Lender represents to the Borrower and
the Administrative Agent that it has identified in its Administrative
Questionnaire a credit contact who may receive information that may contain
material non-public information in accordance with its compliance procedures and
applicable law, including Federal and state securities laws.
 
Section 12.12  Interest Rate Limitation.  It is the intention of the parties
hereto that each Lender shall conform strictly to usury laws applicable to
it.  Notwithstanding anything herein to the contrary, if at any time the
interest rate applicable to any Loan, together with all fees, charges and other
amounts which are treated as interest on such Loan under applicable law
(collectively the “Charges”), shall exceed the maximum lawful rate (the “Maximum
Rate”) which may be contracted for, charged, taken, received or reserved by the
Lender holding such Loan in accordance with applicable law, the rate of interest
payable in respect of such Loan, together with all Charges payable in respect
thereof, shall be limited to the Maximum Rate and, to the extent lawful, the
interest and Charges that would have been payable in respect of such Loan but
were not payable as a result of the operation of this Section shall be cumulated
and the interest and Charges payable to such Lender in respect of other Loans or
periods shall be increased (but not above the Maximum Rate therefor) until such
cumulated amount, together with interest
 
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thereon at the Federal Funds Effective Rate to the date of repayment, shall have
been received by such Lender.
 
Section 12.13  Collateral Matters; Swap Agreements.  The benefit of the Security
Instruments and of the provisions of this Agreement relating to any collateral
securing the Indebtedness shall also extend to and be available to those Lenders
or their Affiliates which are counterparties to any Swap Agreement with the
Borrower or any of its Restricted Subsidiaries on a pro rata basis in respect of
any obligations of the Borrower or any of its Restricted Subsidiaries which
arise under any such Swap Agreement while such Person or its Affiliate is a
Lender, but only while such Person or its Affiliate is a Lender, including any
Swap Agreements between such Persons in existence prior to the date
hereof.  This Agreement and each Security Instrument shall be subject to the
terms of the Intercreditor Agreement.  No Lender or any Affiliate of a Lender
shall have any voting rights under any Loan Document as a result of the
existence of obligations owed to it under any such Swap Agreements.
 
Section 12.14  No Third Party Beneficiaries.  This Agreement, the other Loan
Documents, and the agreement of the Lenders to make Loans and the Issuing Bank
to issue, amend, renew or extend Letters of Credit hereunder are solely for the
benefit of the Borrower, and no other Person (including, without limitation, any
Restricted Subsidiary of the Borrower, any obligor, contractor, subcontractor,
supplier or materialsman) shall have any rights, claims, remedies or privileges
hereunder or under any other Loan Document against the Administrative Agent, any
other Agent, the Issuing Bank or any Lender for any reason whatsoever.  There
are no third party beneficiaries.
 
Section 12.15  Acknowledgements.  Each of the Parent and the Borrower hereby
acknowledges that:
 
(a)  it has been advised by counsel in the negotiation, execution and delivery
of this Agreement and the other Loan Documents;
 
(b)  neither the Administrative Agent nor any Lender has any fiduciary
relationship with or duty to the Parent or the Borrower arising out of or in
connection with this Agreement or any of the other Loan Documents, and the
relationship between Administrative Agent and Lenders, on one hand, and the
Parent and the Borrower, on the other hand, in connection herewith or therewith
is solely that of debtor and creditor; and
 
no joint venture is created hereby or by the other Loan Documents or otherwise
exists by virtue of the transactions contemplated hereby among the Lenders or
among the Parent, the Borrower and the Lenders.
 
Section 12.16  USA Patriot Act Notice.  Each Lender hereby notifies the Borrower
that pursuant to the requirements of the USA Patriot Act (Title III of Pub. L.
107-56 (signed into law October 26, 2001)) (the “Act”), it is required to
obtain, verify and record information that identifies the Parent and the
Borrower, which information includes the name and address of the Parent and the
Borrower and other information that will allow such Lender to identify the
Parent and the Borrower in accordance with the Act.
 
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The parties hereto have caused this Agreement to be duly executed as of the day
and year first above written.
 
BORROWER:                                                                           MCMORAN
OIL & GAS LLC
 
By:         __________________________                                                       
Kathleen L. Quirk, Vice President

PARENT:                                                                           MCMORAN
EXPLORATION CO.
 
By:        ____________________________                                                        
Kathleen L. Quirk, Senior Vice
President & Treasurer

 

 

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ADMINISTRATIVE
AGENT:                                                             JPMORGAN
CHASE BANK, N.A.,
as Administrative Agent and as a Lender
 

By: ____________________________________
Name:
Title:

SYNDICATION AGENT:
MERRILL LYNCH CAPITAL, a division of
Merrill Lynch Business Financial Services,
Inc.,as Syndication Agent and as a Lender

By: ____________________________________
Name:
Title:

DOCUMENTATION AGENT:
BNP PARIBAS, as Documentation Agent and
as a Lender

 

By:____________________________________
Name:
Title:

   

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LENDERS:                                                                                     CAPITAL
ONE, N.A., as a Lender

By: __________________________________
Name:
Title:

ING CAPITAL LLC, as a Lender

By: __________________________________
Name:
Title:

 

     

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