Exhibit 10.1

 
 

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THIRD AMENDED AND RESTATED CREDIT AGREEMENT
 
dated as of February 28, 2012
 
among
 
Northern Oil and Gas, Inc.,
 
as Borrower,
 
Royal Bank of Canada,
 
as Administrative Agent,
 
SunTrust Bank,
 
as Syndication Agent,
 
Bank of Montreal,
 
KeyBank, N.A., and
 
U.S. Bank National Association,
 
as Co-Documentation Agents
 
and
 
The Lenders Party Hereto
 

 

RBC Capital Markets
 
SunTrust Robinson
Humphrey, Inc.

 
Joint Lead Arrangers and Bookrunners
 

 
 
 

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TABLE OF CONTENTS
 

         
Page
 
Article I
Definitions and Accounting Matters
 
Section 1.01
Terms Defined Above
1
Section 1.02
Certain Defined Terms
2
Section 1.03
Types of Loans and Borrowings
23
Section 1.04
Terms Generally; Rules of Construction
23
Section 1.05
Accounting Terms and Determinations; GAAP
23      
Article II
The Credits
     
Section 2.01
Commitments
24
Section 2.02
Loans and Borrowings
24
Section 2.03
Requests for Borrowings
25
Section 2.04
Interest Elections; Conversions
26
Section 2.05
Funding of Borrowings
27
Section 2.06
Termination, Reduction of Aggregate Maximum Credit Amounts
28
Section 2.07
Borrowing Base
28
Section 2.08
Letters of Credit
31
Section 2.09
Loans and Borrowings Under Existing Credit Agreement
36  
Article III
Payments of Principal and Interest; Prepayments; Fees
 
Section 3.01
Repayment of Loans   
36
Section 3.02
Interest
36
Section 3.03
Alternate Rate of Interest
37
Section 3.04
Prepayments
38
Section 3.05
Fees
40  
Article IV
Payments; Pro Rata Treatment; Sharing of Set-offs
 
Section 4.01
Payments; Pro Rata Treatment; Sharing of Set-offs
41
Section 4.02
Presumption of Payment by the Borrower
42
Section 4.03
Deductions by the Administrative Agent; Defaulting Lender
42
Section 4.04
Disposition of Proceeds
44  
Article V
Increased Costs; Break Funding Payments; Taxes; Illegality
 
Section 5.01
Increased Costs
45
Section 5.02
Break Funding Payments
46 Section 5.03 Taxes  46 Section 5.04 Mitigation Obligations; Replacement of
Lenders  49 Section 5.05 Illegality  50    Article VI Conditions Precedent  
 Section 6.01 Effective Date 50 

 
 
 
 
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Section 6.02
Each Credit Event
52
Section 6.03
Additional Conditions to Credit Events
53
 
Article VII
Representations and Warranties
 
Section 7.01
Organization; Powers
54
Section 7.02
Authority; Enforceability
54
Section 7.03
Approvals; No Conflicts
54
Section 7.04
Financial Condition; No Material Adverse Change
55
Section 7.05
Litigation
55
Section 7.06
Environmental Matters
55
Section 7.07
Compliance with the Laws and Agreements; No Defaults
56
Section 7.08
Investment Company Act
57
Section 7.09
Taxes
57
Section 7.10
ERISA
57
Section 7.11
Disclosure; No Material Misstatements
58
Section 7.12
Insurance
58
Section 7.13
Restriction on Liens
59
Section 7.14
Subsidiaries
59
Section 7.15
Location of Business and Offices
59
Section 7.16
Properties; Titles, Etc.
59
Section 7.17
Maintenance of Properties
60
Section 7.18
Gas Imbalances, Prepayments
60
Section 7.19
Marketing of Production
61
Section 7.20
Swap Agreements
61
Section 7.21
Use of Loans and Letters of Credit
61
Section 7.22
Solvency
61
Section 7.23
Casualty Events
62
Section 7.24
Material Agreements
62
Section 7.25
No Brokers
62
Section 7.26
Reliance
62
Section 7.27
Payments by Purchasers of Production
63
Section 7.28
Existing Accounts Payable
63
Section 7.29
Foreign Corrupt Practices
63
Section 7.30
Money Laundering
63
Section 7.31
OFAC
63

     
Article VIII
Affirmative Covenants
 
Section 8.01
Financial Statements; Ratings Change; Other Information
64
Section 8.02
Notices of Material Events
67
Section 8.03
Existence; Conduct of Business
68
Section 8.04
Payment of Obligations
68
Section 8.05
Performance of Obligations under Loan Documents
68
Section 8.06
Operation and Maintenance of Properties
68
Section 8.07
Insurance
69
Section 8.08
Books and Records; Inspection Rights
69

 
 
 
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Section 8.09
Compliance with Laws
70
Section 8.10
Environmental Matters
70
Section 8.11
Further Assurances
71
Section 8.12
Reserve Reports
71
Section 8.13
Title Information
72
Section 8.14
Additional Collateral; Additional Guarantors
73
Section 8.15
ERISA Compliance
74
Section 8.16
Marketing Activities
74
Section 8.17
Disclosures
75
 
Article IX
Negative Covenants
 
Section 9.01
Financial Covenants
75
Section 9.02
Debt
75
Section 9.03
Liens
76
Section 9.04
Dividends and Distributions
76
Section 9.05
Investments, Loans and Advances
77
Section 9.06
Nature of Business
78
Section 9.07
Limitation on Leases
78
Section 9.08
Proceeds of Notes
78
Section 9.09
ERISA Compliance
78
Section 9.10
Sale or Discount of Receivables
79
Section 9.11
Mergers, Etc
79
Section 9.12
Sale of Properties
79
79Section 9.13
Environmental Matters
80
Section 9.14
Material Agreements
80
Section 9.15
Transactions with Affiliates
80
Section 9.16
Subsidiaries
80
Section 9.17
Negative Pledge Agreements; Dividend Restrictions
80
Section 9.18
Gas Imbalances, Take-or-Pay or Other Prepayments
81
Section 9.19
Swap Agreements
81
Section 9.20
Sale and Leasebacks
81
Section 9.21
Amendments to Organizational Documents
81

 
Article X
Events of Default; Remedies
 
Section 10.01
Events of Default
81
Section 10.02
Remedies
83
 
Article XI
The Administrative Agent
 
Section 11.01
Appointment; Powers
85
Section 11.02
Duties and Obligations of Administrative Agent
85
Section 11.03
Action by Administrative Agent
86
Section 11.04
Reliance by Administrative Agent
86
Section 11.05
Subagents
87
Section 11.06
Resignation or Removal of Administrative Agent
87
Section 11.07
Administrative Agent and Syndication Agent as Lender
87

 
 
 
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Section 11.08
No Reliance
87
Section 11.09
Administrative Agent May File Proofs of Claim
88
Section 11.10
Authority of Administrative Agent to Release Collateral and Liens
89
 
Article XII
Miscellaneous
 
Section 12.01
Notices
89
Section 12.02
Waivers; Amendments
90
Section 12.03
Expenses, Indemnity; Damage Waiver
91
Section 12.04
Successors and Assigns
94
Section 12.05
Survival; Revival; Reinstatement
97
Section 12.06
Counterparts; Integration; Effectiveness
98
Section 12.07
Severability
98
Section 12.08
Right of Setoff
98
Section 12.09
Governing Law; Jurisdiction; Consent to Service of Process
99
Section 12.10
Headings
100
Section 12.11
Confidentiality
100
Section 12.12
Interest Rate Limitation
101
Section 12.13
Exculpation Provisions
101
Section 12.14
Collateral Matters; Swap Agreements
102
Section 12.15
No Third Party Beneficiaries
102
Section 12.16
USA Patriot Act Notice
102
Section 12.17
Existing Credit Agreement
102

 
 

 
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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                               Security Instruments
Exhibit F                               Form of Assignment and Assumption
Exhibit G                               Form of Swap Agreement Certificate
Exhibit H                               Form of Reserve Report Certificate
Exhibit I                                 List of Unmortgaged Properties
 
Schedule 7.05                                           Litigation
Schedule 7.14                                           Subsidiaries
Schedule 7.18                                           Gas Imbalances
Schedule 7.19                                           Marketing Agreements
Schedule 7.20                                           Swap Agreements
Schedule 7.24                                           Material Agreements
Schedule 7.28                                           Existing Accounts
Payable
 

 

 
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THIS THIRD AMENDED AND RESTATED CREDIT AGREEMENT dated as of February 28, 2012,
is among: Northern Oil and Gas, Inc., a corporation duly formed and existing
under the laws of the State of Minnesota (the “Borrower”), each of the Lenders
from time to time party hereto, Royal Bank of Canada (in its individual
capacity, “RBC”), as administrative agent for the Lenders (in such capacity,
together with its successors in such capacity, the “Administrative Agent”),
SunTrust Bank, as syndication agent (the “Syndication Agent”) and Bank of
Montreal, KeyBank, N.A., and U.S. Bank National Association, as co-documentation
agents (the “Co-Documentation Agents”).
 
R E C I T A L S
 
A.           The Borrower, Macquarie Bank Limited, as administrative agent (the
“Existing Administrative Agent”) and the lender party thereto have heretofore
entered into that certain Second Amended and Restated Credit Agreement, dated as
of August 8, 2011 (as amended, the “Existing Credit Agreement”) pursuant to
which the lenders thereunder (the “Existing Lenders”), have made Loans (as
defined in the Existing Credit Agreement) to the Borrower and other extensions
of credit (all amounts due and owing to the Existing Lenders on account of such
Loans, hereinafter the “Original Indebtedness”).
 
B.           In connection with the Existing Credit Agreement, the Borrower has
also entered into the Security Instruments (as defined in the Existing Credit
Agreement) pursuant to which the Borrower has, among other things, granted Liens
on its Property for the benefit of the Existing Lenders (the “Original Liens”)
 
C.           In connection with this Agreement, the Borrower, the Administrative
Agent, the Lenders, the Existing Administrative Agent and the Existing Lenders
under the Existing Credit Agreement will enter into the Assignment of Notes and
Liens (as defined below) pursuant to which the Existing Administrative Agent
will assign to the Administrative Agent the Original Indebtedness, the Security
Instruments and the Original Liens.
 
D.           On the Effective Date, this Agreement shall supersede and replace
in its entirety the Existing Credit Agreement; provided, however, that (i) all
Original Indebtedness on such date shall thereafter constitute Loans,
obligations, liabilities and other Indebtedness under this Agreement and (ii)
the execution and delivery of this Agreement or any of the Loan Documents
hereunder shall not constitute a novation of the Original Indebtedness.
 
E.           The Borrower has requested the Lenders, and the Lenders have agreed
to amend and restate the Existing Credit Agreement subject to the terms and
conditions of this Agreement.
 
F.           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.
 

 
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Section 1.02   Certain Defined Terms.  As used in this Agreement, the following
terms have the meanings specified below:
 
“ABR”, when used in reference to any Loan or Borrowing, refers to whether such
Loan, or the Loans comprising such Borrowing, are bearing interest at a rate
determined by reference to the Alternate Base Rate.
 
“Adjusted LIBO Rate” means, with respect to any Eurodollar Borrowing for any
Interest Period, an interest rate per annum (rounded upwards, if necessary, to
the next 1/100 of 1%) equal to the LIBO Rate for such Interest Period multiplied
by the Statutory Reserve Rate.
 
“Administrative Questionnaire” means an Administrative Questionnaire in a form
supplied by the Administrative Agent.
 
“Affected Loans” has the meaning assigned such term in Section 5.05.
 
“Affiliate” means, with respect to a specified Person, another Person that
directly, or indirectly through one or more intermediaries, Controls or is
Controlled by or is under common Control with the Person specified.
 
“Aggregate Maximum Credit Amounts” at any time shall equal the sum of the
Maximum Credit Amounts, as the same may be reduced or terminated pursuant to
Section 2.06.
 
“Agreement” means this Third Amended and Restated Credit Agreement, as the same
may from time to time be amended, modified, supplemented or restated.
 
“Alternate Base Rate” means the greatest of (a) the Prime Rate in effect on such
day, (b) the Federal Funds Effective Rate in effect on such day plus one half of
one percent (0.5%) and (c) the Adjusted LIBO Rate for a one (1) month Interest
Period plus one percent (1.0%) per annum, in each case changing from time to
time as and when that rate changes.
 
“Applicable Margin” means, for any day, with respect to any ABR Loan or
Eurodollar Loan, as the case may be, the rate per annum set forth in the
Utilization Grid below based upon the Borrowing Base Utilization Percentage then
in effect:
 
Utilization Grid
 
Borrowing Base Utilization Percentage
<25%
³25%
<50%
³50%
<75%
³75%
<90%
³90%
Eurodollar Loans
1.75%
2.00%
2.25%
2.50%
2.75%
ABR Loans
0.75%
1.00%
1.25%
1.50%
1.75%

Each change in the Applicable Margin shall apply during the period commencing on
the effective date of such change and ending on the date immediately preceding
the effective date of the next such change; provided 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.
 

 
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“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 Fund” means (i) any Person (other than a natural person) that is
engaged in making, purchasing, holding, or investing in commercial loans and
similar extensions of credit and that is administered or managed by (a) a
Lender, (b) an Affiliate of a Lender or (c) an entity or an Affiliate of an
entity that administers, advises or manages a Lender; (ii) with respect to any
Lender that is an investment fund, any other investment fund that invests in
loans and that is advised, administered or managed by the same investment
advisor as such Lender or by an Affiliate of such investment advisor; and (iii)
any third party which provides “warehouse financing” to a Person described in
the preceding clause (i) or (ii) (and any Person described in said clause (i) or
(ii) shall also be deemed an Approved Fund with respect to such third party
providing such warehouse financing).
 
“Approved Petroleum Engineers” means (a) Ryder Scott Company Petroleum
Consultants, L.P. and (b) any other independent petroleum engineers reasonably
acceptable to the Administrative Agent.
 
“Arrangers” means RBC Capital Markets and SunTrust Robinson Humphrey, Inc. in
their capacities as Joint Lead Arrangers and Bookrunners.
 
“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(a)), and accepted by the Administrative Agent, in the form of
Exhibit F or any other form approved by the Administrative Agent.
 
“Assignment of Notes and Liens” means that certain Master Assignment dated as of
the date hereof between the Borrower, the Administrative Agent, the Lenders, the
lenders party to the Existing Credit Agreement and Macquarie Bank Limited, in
its capacity as administrative agent under the Existing Credit Agreement.
 
“Availability Period” means the period from and including the Effective Date to
but excluding the Termination Date.
 
“BB Hedge” means any hedge position or Swap Agreement considered by the
Administrative Agent in determining the then effective Borrowing Base.
 
“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 2.07(e), Section 8.13(c) or Section 9.12(d).
 

 
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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 the
Borrowing Base on such day.
 
“Borrowing Request” means a request by the Borrower for a Borrowing in
accordance with Section 2.03.
 
“Business Day” means any day that is not a Saturday, Sunday or other day on
which commercial banks in New York City or Houston, Texas are authorized or
required by law to remain closed; and if such day relates to a Borrowing or
continuation of, a payment or prepayment of principal of or interest on, or a
conversion of or into, or the Interest Period for, a Eurodollar Loan or a notice
by the Borrower with respect to any such Borrowing or continuation, payment,
prepayment, conversion or Interest Period, any day which is also a day on which
banks are open for dealings in dollar deposits in the London interbank market.
 
“Capital Expenditures” means, in respect of any Person, for any period, the
aggregate (determined without duplication) of all exploration and development
expenditures and costs that should be capitalized in accordance with GAAP and
any other expenditures that are capitalized on the balance sheet of such Person
in accordance with GAAP.
 
“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.
 
“Cash Collateral” has the meaning assigned such term in Section 2.08(i).
 
“Cash Collateralize” means to pledge and deposit with or deliver to the
Administrative Agent (as a first-priority, perfected security interest), for the
benefit of the Issuing Bank and the Lenders, cash in dollars, at a location and
pursuant to documentation in form and substance satisfactory to the
Administrative Agent.  “Cash Collateralized” has a correlative meaning.
 
“Cash Receipts” means all cash or cash equivalents received by or on behalf of
the Borrower and its Subsidiaries with respect to the following: (a) sales from
the Oil and Gas Properties (including any other working interest owner receipts
received by Borrower or its Affiliates as operator of Oil and Gas Properties),
(b) cash representing operating revenue earned or to be earned by the Borrower
and its Subsidiaries, (c) any insurance proceeds received by the Borrower or its
Subsidiaries, (d) any net proceeds from Swap Agreements and (e) any other cash
or cash equivalents received by the Borrower or its Subsidiaries from whatever
source; provided that advances under the Loans, and any capital contributions or
transfers made to the Borrower by any of its members, or by the Borrower to any
of its Subsidiaries, shall not constitute “Cash Receipts”.
 
“Casualty Event” means any loss, casualty or other insured damage to any
Property of the Borrower or any of its Subsidiaries in an amount greater than
$250,000, or any nationalization, taking under power of eminent domain or by
condemnation or similar proceeding of, any
 

 
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Property of the Borrower or any of its Subsidiaries having a fair market value
in excess of $250,000.
 
“Change in Control” means the occurrence of the following events:  (a) the
acquisition of ownership, directly or indirectly, beneficially or of record, by
any Person or group (within the meaning of the Securities Exchange Act of 1934
and the rules of the SEC thereunder as in effect on the date hereof) other than
Michael Reger or Ryan Gilbertson of Equity Interests so that such Person or
group owns 35% or more of the aggregate ordinary voting power represented by the
issued and outstanding Equity Interests of the Borrower, or (b) occupation of a
majority of the seats (other than vacant seats) on the board of directors of the
Borrower by Persons who were neither (i) nominated by the board of directors of
the Borrower nor (ii) appointed by directors so nominated.
 
“Change in Law” means (a) the adoption of any law, rule or regulation after the
date of this Agreement by any Governmental Authority, (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 or not having the
force of law) of any Governmental Authority made or issued after the date of
this Agreement; provided that notwithstanding anything herein to the contrary
(i) the Dodd-Frank Wall Street Reform and Consumer Protection Act and all
requests, rules, guidelines or directives thereunder or issued in connection
therewith and (ii) all requests, rules, guidelines or directives concerning
capital adequacy promulgated by the Bank for International Settlements, the
Basel Committee on Banking Regulations and Supervisory Practices (or any
successor similar authority) or the United States financial regulatory
authorities, in each case pursuant to Basel III, shall be deemed to be a “Change
in Law”, regardless of the date enacted, adopted, promulgated or issued.
 
“Code” means the Internal Revenue Code of 1986, as amended from time to time,
and any successor statute.
 
“Collateral Account” has the meaning assigned such term in Section 2.08(i).
 
“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 potential Revolving Credit Exposure hereunder, as such commitment may
be (a) modified from time to time pursuant to Section 2.06 and (b) modified from
time to time pursuant to assignments by or to such Lender pursuant to Section
12.04.  The amount representing each Lender’s Commitment shall at any time be
the lesser of such Lender’s Maximum Credit Amount and such Lender’s Applicable
Percentage of the then effective Borrowing Base.
 
“Commitment Fee Rate” means, on any day, a rate per annum set forth in the
Commitment Fee Grid below based upon the Borrowing Base Utilization Percentage
then in effect:
 
 
 
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Commitment Fee Grid
Borrowing Base Utilization Percentage
<50%
³50%
Commitment Fee
0.375%
0.500%

“Consolidated Net Income” means with respect to the Borrower and the
Consolidated Subsidiaries, for any period, the aggregate of the net income (or
loss) of the Borrower 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 Borrower 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 Borrower and its 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 Borrower 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 gains or losses during such period and (d) any gains
or losses attributable to writeups or writedowns of assets, including ceiling
test writedowns; and provided further that if the Borrower or any Consolidated
Subsidiary shall acquire or dispose of any Property during such period, then
Consolidated Net Income shall be calculated after giving pro forma effect to
such acquisition or disposition, as if such acquisition or disposition had
occurred on the first day of such period.
 
“Consolidated Subsidiaries” means each Subsidiary of the Borrower (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
Borrower 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.  For the
purposes of this definition, and without limiting the generality of the
foregoing, any Person that owns directly or indirectly 10% or more of the Equity
Interests having ordinary voting power for the election of the directors or
other governing body of a Person (other than as a limited partner of such other
Person) will be deemed to “control” such other Person.  “Controlling” and
“Controlled” have meanings correlative thereto.
 
“Credit Parties” means, collectively, the Borrower and Guarantors, if any.
 
“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 that are
more than sixty
 

 
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(60) days past the due date other than those which are being contested in good
faith by appropriate action and for which adequate reserves have been maintained
in accordance with GAAP; (d) all obligations of such Person under Capital
Leases; (e) all obligations of such Person 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) 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) all obligations of such Person 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) all obligations of such
Person to pay for goods or services whether or not such goods or services are
actually received or utilized by such Person; (k) any Debt of a partnership for
which such Person is liable either by agreement, by operation of law or by a
Governmental Requirement but only to the extent of such liability; (l) any
Disqualified Capital Stock issued by such Person; and (m) the undischarged
balance of any production payment created by such Person or for the creation of
which such Person 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
that upon notice, lapse of time or both would, unless cured or waived, become an
Event of Default.
 
“Defaulting Lender” means, at any time, a Lender as to which the Administrative
Agent has notified the Borrower that such Lender, as reasonably determined by
the Administrative Agent, has (a) failed to fund any portion of its Loans or
participations in Letters of Credit within three Business Days of the date
required to be funded by it hereunder (other than due to a failure of a
condition precedent to be satisfied), (b) notified the Borrower, the
Administrative Agent, the Issuing Bank or any Lender in writing that it does not
intend to comply with its funding obligations under this Agreement or has made a
public statement to the effect that it does not intend to comply with its
funding obligations under this Agreement or under any other agreement in which
it commits to extend credit (other than due to a failure of a condition
precedent to be satisfied), (c) failed, within three Business Days after request
by the Administrative Agent, to confirm that it will comply with the terms of
this Agreement relating to its obligations to fund prospective Loans and
participations in then outstanding Letters of Credit (but such Lender shall
cease to be a Defaulting Lender upon providing this confirmation), (d) otherwise
failed to pay over to the Administrative Agent, the Issuing Bank or any Lender
any other amount required to be paid by it hereunder within three Business Days
of the date when due, unless the subject of a good faith dispute, (e) become or
is insolvent or has a parent company that has become or is insolvent, or (f)
become the subject of a bankruptcy or insolvency proceeding, or has had a
receiver, conservator, trustee or custodian appointed for it, or has taken any
action in furtherance of, or indicating its consent to, approval of or
acquiescence in any such proceeding or appointment or has a parent company that
has become the subject of a bankruptcy or insolvency
 

 
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proceeding, or has had a receiver, conservator, trustee or custodian appointed
for it, or has taken any action in furtherance of, or indicating its consent to,
approval of or acquiescence in any such proceeding or appointment.
 
“Disqualified Capital Stock” means any Equity Interest that, by its terms (or by
the terms of any security into which it is convertible or for which it is
exchangeable) or upon the happening of any event, matures or is mandatorily
redeemable for any consideration other than other Equity Interests (which would
not constitute Disqualified Capital Stock), pursuant to a sinking fund
obligation or otherwise, or is convertible or exchangeable for Debt or
redeemable for any consideration other than other Equity Interests (which would
not constitute Disqualified Capital Stock) at the option of the holder thereof,
in whole or in part, on or prior to the date that is one year after the earlier
of (a) the Termination Date and (b) the date on which there are no Loans, LC
Exposure or other obligations hereunder outstanding and all of the Commitments
are terminated.
 
“dollars” or “$” refers to lawful money of the United States of America.
 
“EBITDAX” means, as of any date of determination, the sum of Consolidated Net
Income for the period of four fiscal quarters ending on the last day of the most
recently completed fiscal quarter plus (a) the following expenses or charges to
the extent deducted from Consolidated Net Income in such period: interest,
income taxes, depreciation, depletion, amortization, one-time fees and expenses
paid or accrued in connection with debt financings capital-raising transactions,
acquisitions and other non-recurring corporate transactions, the fair market
value of capital stock issued for consideration, non-cash, share-based
compensation deducted in accordance with ASC 718, exploration expenditures and
costs, unrealized losses on any Swap Agreement and other similar noncash
charges, minus (b) without duplication and to the extent added to Consolidated
Net Income in such period: income tax benefits, unrealized gains on Swap
Agreements, and gains on sales of assets.
 
“Effective Date” means the date on which the conditions specified in Section
6.01 are satisfied (or waived in accordance with Section 12.02).
 
“Eligible Obligor” means that on any date of determination, such obligor is (i)
an entity duly organized and validly existing under the laws of, and has its
chief executive offices in, the United States or any political subdivision
thereof, and has a billing address within the United States, (ii) a legal
operating entity or holding company, and not a natural person, (iii) not a
governmental authority, and (iv) not subject to insolvency proceedings.
 
“Eligible Assignee” means any Person that meets the requirements to be an
assignee under Section 12.04.
 
“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, the preservation or reclamation of
natural resources, or the management, Release or threatened Release of any
Hazardous Materials, in effect in any and all jurisdictions in which the
Borrower or any Subsidiary is conducting, or at any time has conducted,
business, or where any Property of the Borrower or any Subsidiary is located,
 

 
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including without limitation, the Oil Pollution Act of 1990, as amended, the
Clean Air Act, as amended, the Comprehensive Environmental, Response,
Compensation, and Liability Act of 1980 (“CERCLA”), as amended, the Federal
Water Pollution Control Act, as amended, the Occupational Safety and Health Act
of 1970, as amended, the Resource Conservation and Recovery Act of 1976
(“RCRA”), as amended, the 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 Law, as amended,
and other environmental conservation or protection Governmental Requirements.
 
“Environmental Permit” means any permit, registration, license, notice,
approval, consent, exemption, variance, or other authorization required under or
issued pursuant to applicable Environmental Laws.
 
“Equity Interests” means shares of capital stock, partnership interests,
membership interests in a limited liability company, beneficial interests in a
trust or other equity ownership interests in a Person, and any warrants, options
or other rights entitling the holder thereof to purchase or acquire any such
Equity Interest.
 
“ERISA” means the Employee Retirement Income Security Act of 1974, as amended,
and any successor statute.
 
“ERISA Affiliate” means each trade or business (whether or not incorporated)
which together with the Borrower or a Subsidiary would be deemed to be a “single
employer” within the meaning of section 4001(b)(1) of ERISA or subsections (b),
(c), (m) or (o) of section 414 of the Code.
 
“Eurodollar”, when used in reference to any Loan or Borrowing, refers to whether
such Loan, or the Loans comprising such Borrowing, are bearing interest at a
rate determined by reference to the Adjusted LIBO Rate.
 
“Event of Default” has the meaning assigned such term in Section 10.01.
 
“Excepted Liens” means:  (a) Liens for Taxes, assessments or other governmental
charges or levies which are not delinquent or which are being contested in good
faith by 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
 

 
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exchange of oil and natural gas, unitization and pooling declarations and
agreements, area of mutual interest agreements, royalty 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 Subsidiary or
materially impair the value of such Property subject thereto; (e) Liens arising
solely by virtue of any statutory or common law provision relating to banker’s
liens, rights of set-off or similar rights and remedies and burdening only
deposit accounts or other funds maintained with a creditor depository
institution, provided that no such deposit account is a dedicated cash
collateral account or is subject to restrictions against access by the depositor
in excess of those set forth by regulations promulgated by the Board and no such
deposit account is intended by Borrower or any of its Subsidiaries to provide
collateral to the depository institution; (f) easements, restrictions,
servitudes, permits, conditions, covenants, exceptions or reservations in any
Property of the Borrower or any Subsidiary for the purpose of roads, pipelines,
transmission lines, transportation lines, distribution lines for the removal of
gas, oil, coal or other minerals or timber, and other like purposes, or for the
joint or common use of real estate, rights of way, facilities and equipment, and
Liens related to surface leases and surface operations, 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 Subsidiary or materially impair the value of such Property subject
thereto; (g) Liens on cash or securities pledged to secure performance of
tenders, surety and appeal bonds, government contracts, performance and return
of money bonds, bids, trade contracts, leases, statutory obligations, regulatory
obligations and other obligations of a like nature incurred in the ordinary
course of business 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 clauses (a) through (e) shall remain “Excepted
Liens” only for so long as no action to enforce such Lien has been commenced and
no intention to subordinate the first priority Lien granted in favor of the
Administrative Agent and the Lenders is to be hereby implied or expressed by the
permitted existence of such Excepted Liens.
 
“Excess Cash Flow” for any period shall mean EBITDAX for such period less cash
payments for (a) taxes during such period, (b) any changes in working capital
from the preceding period (as determined in accordance with GAAP) made during
such period and (c) Capital Expenditures made during such period that are
approved by the Majority Lenders or are otherwise permitted under this
Agreement.
 
“Excluded Taxes” means, with respect to the Administrative Agent, any Lender,
the Issuing Bank or any other recipient of any payment to be made by or on
account of any obligation of the Borrower or any Guarantor hereunder or under
any other Loan Document, (a) income taxes or franchise taxes (imposed in lieu of
net income taxes), by the United States of
 

 
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America or such other jurisdiction (or any political subdivision) under the laws
of which such recipient is organized or in which its principal office is located
or, in the case of any Lender, in which its applicable lending office is
located, (b) any branch profits taxes imposed by the United States of America or
any similar tax imposed by any other jurisdiction in which the Borrower or any
Guarantor is located, (c) in the case of a Foreign Lender (other than an
assignee pursuant to a request by the Borrower under Section 5.04(b)), any
withholding tax that is imposed by the United States of America on amounts
payable to such Foreign Lender at the time such Foreign Lender becomes a party
to this Agreement (or designates a new lending office) or is attributable to
such Foreign Lender’s failure or inability (other than as a result of a Change
in Law) to comply with Section 5.03(f), except to the extent that such Foreign
Lender (or its assignor, if any) was entitled, at the time of designation of a
new lending office (or assignment), to receive additional amounts with respect
to such withholding tax pursuant to Section 5.03(a) or Section 5.03(b), and (d)
any U.S. Federal Withholding Taxes imposed by FATCA.
 
“FATCA” means Sections 1471 through 1474 of the Code (or any amended or
successor version that is substantively comparable) and any current or future
regulations or official interpretations thereof.
 
“FCPA” means the U.S. Foreign Corrupt Practices Act of 1977, as amended.
 
“Federal Funds Effective Rate” means, for any day, an interest rate per annum
equal to the weighted average of the rates on overnight federal funds
transactions with members of the Federal Reserve System arranged by federal
funds brokers, as published for such day by the Federal Reserve Bank of New
York, or if such rate is not so published for such day, the average of the
quotations for such day on such transactions received by the Administrative
Agent from three federal funds brokers of recognized standing selected by it.
 
“Fee Letters” means (a) that certain Fee Letter, dated as of February 7, 2012 by
and between the Borrower, the Administrative Agent and Royal Bank of Canada
Capital Markets and (b) that certain Fee Letter, dated as of February 7, 2012 by
and between the Borrower, the Syndication Agent and Suntrust Robinson Humphrey,
Inc.
 
“Financial Officer” means, for any Person, the chief financial officer,
principal accounting officer, treasurer, manager or controller of such
Person.  Unless otherwise specified, all references herein to a Financial
Officer means a Financial Officer of the Borrower.
 
“Financial Statements” means the financial statement or statements of the
Borrower and its Consolidated Subsidiaries referred to in Section 7.04(a).
 
“Foreign Lender” means any Lender that is organized under the laws of a
jurisdiction other than that in which the Borrower is located.  For purposes of
this definition, the United States of America, each State thereof and the
District of Columbia shall be deemed to constitute a single jurisdiction.
 
“Foreign Subsidiary” means any Subsidiary that is not organized under the laws
of the United States of America or any state thereof or the District of
Columbia.
 

 
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“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.
 
“Governmental Requirement” means any law, statute, code, ordinance, order,
determination, rule, regulation, judgment, decree, injunction, franchise,
permit, certificate, license, rules of common law, authorization or other
directive or requirement, whether now or hereinafter in effect, of any
Governmental Authority.
 
“Guarantors” means any Subsidiary of the Borrower that guarantees the
Indebtedness pursuant to Section 8.14(b).
 
“Guaranty Agreement” means that certain Third Amended and Restated Guaranty and
Collateral Agreement executed by the Borrower and the Guarantors, if any, in
form and substance reasonably acceptable to the Administrative Agent
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.
 
“Hazardous Material” means any substance regulated or as to which liability
might arise under any applicable Environmental Law and including without
limitation:  (a) any chemical, compound, material, product, byproduct, substance
or waste defined as or included in the definition or meaning of “hazardous
substance,” “hazardous material,” “hazardous waste,” “solid waste,” “toxic
waste,” “extremely hazardous substance,” “toxic substance,” “contaminant,”
“pollutant,” or words of similar meaning or import found in any applicable
Environmental Law; (b) Hydrocarbons, petroleum products, petroleum substances,
natural gas, oil, oil and gas waste, crude oil, and any components, fractions,
or derivatives thereof; and (c) radioactive materials, explosives, asbestos or
asbestos containing materials, polychlorinated biphenyls, radon, infectious or
medical wastes.
 
“Highest Lawful Rate” means, with respect to each Lender, the maximum
nonusurious interest rate, if any, that at any time or from time to time may be
contracted for, taken, reserved, charged or received on the Notes or on other
Indebtedness under laws applicable to such Lender which are presently in effect
or, to the extent allowed by law, under such applicable laws which may hereafter
be in effect and which allow a higher maximum nonusurious interest rate than
applicable laws allow as of the date hereof.
 
“Hydrocarbon Interests” means all of the Credit Parties’ 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.
 

 
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“Hydrocarbons” means oil, gas, casinghead gas, drip gasoline, natural gasoline,
condensate, distillate, liquid hydrocarbons, gaseous hydrocarbons and all
products refined or separated therefrom.
 
“Indebtedness” means any and all amounts owing or to be owing by the Borrower,
any Subsidiary or any Guarantor (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, any Lender or any Affiliate of a Lender, or any Secured Swap Counterparty
under any Loan Document; and (b) all renewals, extensions and/or rearrangements
of any of the above.
 
“Indemnified Taxes” means Taxes other than Excluded Taxes.
 
“Indemnitee” has the meaning set forth in Section 12.03.
 
“Initial Reserve Report” means the report dated as of December 31, 2011 prepared
by Ryder Scott Company Petroleum Consultants, L.P., with respect to certain Oil
and Gas Properties of the Borrower.
 
“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 during 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 or three months
thereafter, as the Borrower may elect; provided, that (a) if any Interest Period
would end on a day other than a Business Day, such Interest Period shall be
extended to the next succeeding Business Day unless such next succeeding
Business Day would fall in the next calendar month, in which case such Interest
Period shall end on the next preceding Business Day and (b) any Interest Period
pertaining to a Eurodollar Borrowing that commences on the last Business Day of
a calendar month (or on a day for which there is no numerically corresponding
day in the last calendar month of such Interest Period) shall end on the last
Business Day of the last calendar month of such Interest Period.  For purposes
hereof, the date of a Borrowing initially shall be the date on which such
Borrowing is made and thereafter shall be the effective date of the most recent
conversion or continuation of such Borrowing.
 
“Interim Redetermination” has the meaning assigned such term in Section 2.07(b).
 
“Interim Redetermination Date” means the date on which a Borrowing Base that has
been redetermined pursuant to an Interim Redetermination becomes effective as
provided in Section 2.07(d).
 

 
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“Investment” means, for any Person: (a) the acquisition (whether for cash,
Property, services or securities or otherwise) of Equity Interests of any other
Person, the contribution of capital to 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) or capital contribution; (b) the making of
any deposit with, or advance, loan or capital contribution to, assumption of
Debt of, purchase or other acquisition of any other Debt or equity participation
or interest in, or other extension of credit to, any other Person (including the
purchase of Property from another Person subject to an understanding or
agreement, contingent or otherwise, to resell such Property to such Person, but
excluding any such advance, loan or extension of credit having a term not
exceeding ninety (90) days representing the purchase price of inventory or
supplies sold by such Person in the ordinary course of business); (c) the
purchase or acquisition (in one or a series of transactions) of Property of
another Person that constitutes a business unit or (d) the entering into of any
guarantee of, or other contingent obligation (including the deposit of any
Equity Interests to be sold) with respect to, Debt or other liability of any
other Person and (without duplication) any amount committed to be advanced, lent
or extended to such Person.
 
“Issuing Bank” means Royal Bank of Canada, in its capacity as the issuer of
Letters of Credit and any Lender or any other Person, reasonably acceptable to
the Borrower, named by the Administrative Agent that agrees to act as an Issuing
Bank hereunder.  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 ten million dollars ($10,000,000).
 
“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.
 
“Lender Parties” has the meaning set forth in Section 12.04.
 
“Lenders” means the Persons listed on Annex I and any Person that shall have
become a party hereto pursuant to an Assignment and Assumption, other than any
such Person that ceases to be a party hereto pursuant to an Assignment and
Assumption.
 
“Letter of Credit” means any letter of credit issued or deemed issued pursuant
to this Agreement.
 
“Letter of Credit Agreements” means all letter of credit applications and other
agreements (including any amendments, modifications or supplements thereto)
submitted by the Borrower, or entered into by the Borrower, with the Issuing
Bank relating to any Letter of Credit.
 

 
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“LIBO Rate” means, with respect to any Eurodollar Borrowing for any Interest
Period:
 
(a)           the rate of interest per annum, expressed on the basis of a year
of 360 days, determined by the Administrative Agent,  which is equal to the
offered rate that appears on the page of the Reuters LIBOR01 screen (or any
successor thereto as may be selected by the Administrative Agent) that displays
an average British Bankers Association Interest Settlement Rate for deposits in
dollars with a term equivalent to such Interest Period, determined as of
approximately 11:00 a.m. (London time) two (2) business days prior to the first
day of such Interest Period, or
 
(b)           if the rates referenced in the preceding subsection (a) are not
available, the rate per annum determined by the Administrative Agent as the rate
of interest, expressed on a basis of 360 days at which deposits in dollars for
delivery on the first day of such Interest Period in same day funds in the
approximate amount of the LIBO Rate loan being made, continued or converted by
the Administrative Agent and with a term and amount comparable to such Interest
Period and principal amount of such LIBO Rate loan as would be offered by the
Administrative Agent’s London Branch to major banks in the offshore dollar
market at their request at approximately 11:00 a.m. (London time) two (2)
business days prior to the first day of such Interest Period.
 
“Lien” means any interest in Property securing an obligation owed to, or a claim
by, a Person other than the owner of the Property, whether such interest is
based on the common law, statute or contract, and whether such obligation or
claim is fixed or contingent, and including but not limited to (a) the lien or
security interest arising from a mortgage, encumbrance, pledge, security
agreement, conditional sale or trust receipt or a lease, consignment or bailment
for security purposes or (b) production payments and the like payable out of Oil
and Gas Properties.  The term “Lien” shall include easements, restrictions,
servitudes, permits, conditions, covenants, exceptions or reservations. For the
purposes of this Agreement, the Borrower and its 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 Fee Letters, any Secured
Swap Agreement, the Letter of Credit Agreements, the Letters of Credit and the
Security Instruments.
 
“Loans” means the loans made by the Lenders to the Borrower pursuant to this
Agreement.
 
“Majority Lenders” means, at any time while no Loans or LC Exposure is
outstanding, Lenders having more than fifty percent (50%) of the Aggregate
Maximum Credit Amounts; and at any time while any Loans or LC Exposure is
outstanding, Lenders holding more than fifty percent (50%) of the outstanding
aggregate principal amount of the Loans and 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)); provided, that if there are less than three Lenders,
all Lenders shall be required to constitute the “Majority Lenders”; provided
further that the Maximum Credit
 

 
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Amounts and the principal amount of the Loans and participation interests in
Letters of Credit of the Defaulting Lenders (if any) shall be excluded from the
determination of Majority Lenders.
 
“Material Adverse Effect” means a material adverse change in, or material
adverse effect on (a) the business, operations, Property or financial condition
of the Borrower and its Subsidiaries taken as a whole, (b) the ability of the
Borrower, any Subsidiary or any Guarantor 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, the Issuing Bank or any Lender
under any Loan Document.
 
“Material Agreements” has the meaning assigned such term in Section 7.24.
 
“Material Debt” means Debt (other than the Loans and Letters of Credit), or
obligations in respect of one or more Swap Agreements, of any one or more of the
Borrower and its Subsidiaries in an aggregate principal amount exceeding
$2,000,000.  For purposes of determining Material Debt, the “principal amount”
of the obligations of the Borrower or any Subsidiary in respect of any Swap
Agreement at any time shall be the Swap Termination Value.
 
“Maximum Credit Amount” means, as to each Lender, the amount set forth opposite
such Lender’s name on Annex I under the caption “Maximum Credit Amounts”, as the
same may be (a) reduced or terminated from time to time in connection with a
reduction or termination of the Aggregate Maximum Credit Amounts pursuant to
Section 2.06(b) or (b) modified from time to time pursuant to any assignment
permitted by Section 12.04.
 
“Money Laundering Laws” means the laws, rules and regulations created pursuant
to the Money Laundering Control Act of 1986.
 
“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.
 
“Net Hedge Value” means, as to any novation, assignment, unwinding, termination,
or amendment of a BB Hedge, the net effect of such transaction (after giving
effect to any new hedge position or Swap Agreement entered into since the
determination of the Borrowing Base then in effect), if any, on the then
effective Borrowing Base, as determined by the Administrative Agent.
 
“New Borrowing Base Notice” has the meaning assigned such term in Section
2.07(d).
 
“Non-Defaulting Lender” means, at any time, each Lender that is not a Defaulting
Lender at such time.
 
“Notes” means, if requested by any Lender, the promissory notes of the Borrower
described in Section 2.02(d) and being substantially in the form of Exhibit A,
together with all amendments, modifications, replacements, extensions and
rearrangements thereof.
 

 
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“OFAC” means the U.S. Treasury Department Office of Foreign Assets Control.
 
“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,
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 hereafter 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.
 
“Organizational Documents” means, with respect to any Person, (a) in the case of
any corporation, the certificate of incorporation and by-laws (or similar
documents) of such Person, (b) in the case of any limited liability company, the
certificate of formation and limited liability company agreement (or similar
documents) of such Person, (c) in the case of any limited partnership, the
certificate of formation and limited partnership agreement (or similar
documents) of such Person, (d) in the case of any general partnership, the
partnership agreement (or similar document) of such Person and (e) in any other
case, the functional equivalent of the foregoing.
 
“Other Taxes” means any and all present or future stamp or documentary taxes or
any other excise or property taxes, charges or similar levies arising from any
payment made hereunder or from the execution, delivery or enforcement of, or
otherwise with respect to, this Agreement and any other Loan Document.
 
“Participant” has the meaning set forth in Section 12.04(c)(i).
 
“Patriot Act” has the meaning assigned such term in Section 12.16.
 

 
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“Permitted Additional Debt” shall mean unsecured debt that is senior, senior
subordinated or subordinated Debt issued by the Borrower or a Subsidiary, (a)
the terms of which do not provide for any scheduled principal repayment,
mandatory principal redemption or sinking fund obligation prior to the 91st day
after the Termination Date (other than customary offers to purchase upon a
change of control, asset sale, or casualty or condemnation event and customary
acceleration rights after an event of default), (b) the covenants, events of
default, guarantees and other terms of which, taken as a whole, are not
materially more restrictive on the Borrower and its Subsidiaries than the terms
of this Agreement (as in effect at the time of such issuance or incurrence), (c)
if such Debt is senior subordinated or subordinated Debt, the terms of such Debt
provide for customary subordination of such Debt to the Indebtedness and all
terms of subordination are reasonably satisfactory to the Administrative Agent,
and (d) no Subsidiary of the Borrower shall be an obligor or guarantor under
such Debt unless it also is or becomes a Guarantor.
 
“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 the Borrower, a Subsidiary or an ERISA Affiliate or (b) was at any time
during the six calendar years preceding the date hereof, sponsored, maintained
or contributed to by the Borrower or a Subsidiary or an ERISA Affiliate.
 
“Post Default Rate” shall mean, in respect of the principal of any Loan or any
other amount payable by the Borrower under this Agreement or any other Loan
Document, a rate per annum during the period commencing on the date of
occurrence of an Event of Default until such amount is paid in full or all
Events of Default are cured or waived equal to the applicable interest rate plus
two percent (2.0%) per annum, but in no event to exceed the Highest Lawful Rate.
 
“Prime Rate” means, means the rate of interest per annum determined by Royal
Bank of Canada from time to time as its prime commercial lending rate for United
States Dollar loans in the United States for such day. The Prime Rate is not
necessarily the lowest rate that Royal Bank of Canada is charging any corporate
customer.
 
“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).
 
“Proved Reserves” means “Proved Reserves” as defined in the Definitions for Oil
and Gas Reserves (in this paragraph, the “Definitions”) promulgated by the
Society of Petroleum Engineers (or any generally recognized successor) as in
effect at the time in question.  “Proved Developed Producing Reserves” means
Proved Reserves which are categorized as both “Developed” and “Producing” in the
Definitions, “Proved Developed Nonproducing Reserves”
 

 
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means Proved Reserves which are categorized as both “Developed” and
“Nonproducing” in the Definitions, and “Proved Undeveloped Reserves” means
Proved Reserves which are categorized as “Undeveloped” in the Definitions.
 
“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).
 
“Registrar” 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.
 
“Release” means any depositing, spilling, leaking, pumping, pouring, placing,
emitting, discarding, abandoning, emptying, discharging, migrating, injecting,
escaping, leaching, dumping, or disposing.
 
“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 and
participation interests in such Letters of Credit (without regard to any sale by
a Lender of a participation in any Loan under Section 12.04(c)) provided, that
if there are less than three Lenders, all Lenders shall be required to
constitute the “Required Lenders”; provided further that the Maximum Credit
Amounts and the principal amount of the Loans and participation interests in
Letters of Credit of the Defaulting Lenders (if any) shall be excluded from the
determination of Required Lenders.
 
“Reserve Report” means a report, in form and substance reasonably satisfactory
to the Administrative Agent, setting forth, as of each December 31st or June
30th (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
Subsidiaries, together with a projection of the rate of production and future
net income, taxes, operating expenses and Capital Expenditures with respect
thereto as of such date, based upon the economic assumptions consistent with the
Administrative Agent’s lending requirements at the time.
 

 
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“Responsible Officer” means, as to any Person, the Chief Executive Officer, the
President, any Financial Officer, any Vice President or any Manager of such
Person.  Unless otherwise specified, all references to a Responsible Officer
herein shall mean a Responsible Officer of the Borrower.
 
“Restricted Payment” means any dividend or other distribution (whether in cash,
securities or other Property) with respect to any Equity Interests in the
Borrower or any of its Subsidiaries, or any payment (whether in cash, securities
or other Property), including any sinking fund or similar deposit, on account of
the purchase, redemption, retirement, acquisition, cancellation or termination
of any such Equity Interests in the Borrower or any of its Subsidiaries or any
option, warrant or other right to acquire any such Equity Interests in the
Borrower or any of its Subsidiaries.
 
“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 U.S. Securities and Exchange Commission or any successor
Governmental Authority.
 
“Security Instruments” means the Guaranty Agreement, mortgages, deeds of trust
and other agreements, instruments or certificates described or referred to in
Exhibit E, and any and all other agreements, guarantees, instruments, consents
or certificates now or hereafter executed and delivered by the Borrower or any
other Person (other than Swap Agreements with the Lenders or any Affiliate of a
Lender or participation or similar agreements between any Lender and any other
lender or creditor with respect to any Indebtedness pursuant to this Agreement)
in connection with, or as security for the payment or performance of the
Indebtedness, the Notes, if any, this Agreement, or reimbursement obligations
under the Letters of Credit, as such agreements may be amended, modified,
supplemented or restated from time to time.
 
“Secured Swap Agreement” means any Swap Agreement of the Borrower or any
Subsidiary with a Person in effect or entered into while such Person is a Lender
or an Affiliate of a Lender; provided that if such Person ceases to be a Lender
or an Affiliate of a Lender, the Swap Agreement with such Person shall only be a
Secured Swap Agreement to the extent transactions under such Swap Agreement were
in effect or entered into while such Person was a Lender or an Affiliate of a
Lender.  For the avoidance of doubt, the Swap Agreements listed on Schedule 7.20
are Secured Swap Agreements.
 
“Secured Swap Counterparty” means any Person that is party to a Secured Swap
Agreement with the Borrower or any Subsidiary that entered into such Secured
Swap Agreement while such Person is or before such Person becomes a Lender or an
Affiliate of a Lender, whether or not such Person at any time ceases to be a
Lender or an Affiliate of a Lender, as the case may be.
 

 
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“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.
 
“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 or managers or other governing
body of such Person (irrespective of whether or not at the time Equity Interests
of any other class or classes of such Person shall have or might have voting
power by reason of the happening of any contingency) is at the time directly or
indirectly owned or controlled by the Borrower or one or more of its
Subsidiaries or by the Borrower and one or more of its Subsidiaries and (b) any
partnership of which the Borrower or any of its Subsidiaries is a general
partner.  Unless otherwise indicated herein, each reference to the term
“Subsidiary” shall mean a Subsidiary of the Borrower.
 
“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.
 
“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 rates, currencies, commodities, equity or debt instruments or
securities, or economic, financial or pricing indices or measures of economic,
financial or pricing risk or value or any similar transaction or any combination
of these transactions; provided that no phantom stock or similar plan providing
for payments only on account of services provided by current or former
directors, officers, employees or consultants of the Borrower or the
Subsidiaries shall be a Swap Agreement.
 
“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
 

 
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thereunder and which were properly treated as indebtedness for borrowed money
for purposes of U.S. federal income taxes, if the lessee in respect thereof is
obligated to either purchase for an amount in excess of, or pay upon early
termination an amount in excess of, 80% of the residual value of the Property
subject to such operating lease upon expiration or early termination of such
lease.
 
“Taxes” means any and all present or future taxes, levies, imposts, duties,
deductions, charges or withholdings imposed by any Governmental Authority.
 
“Termination Date” means the earlier to occur of (i) January 1, 2017 or (ii) the
date that the Aggregate Maximum Credit Amount is sooner terminated pursuant to
Section 2.06 or Section 10.02.
 
“Total Reserve Value” means, with respect to any Proved Reserves expected to be
produced from any Oil and Gas Properties, the net present value, discounted at
10% per annum, of the future net revenues expected to accrue to the Borrower’s
and its Subsidiaries’ collective interests in such reserves during the remaining
expected economic lives of such reserves.  Each calculation of such expected
future net revenues shall be made in accordance with the then existing standards
of the Society of Petroleum Engineers, provided that in any event (a)
appropriate deductions shall be made for severance and ad valorem taxes, and for
operating, gathering, transportation and marketing costs required for the
production and sale of such reserves, (b) the pricing assumptions used in
determining Total Reserve Value for any particular reserves shall be based upon
(i) annual quotations on the New York Mercantile Exchange for Henry Hub (natural
gas) or Cushing, Oklahoma (oil) futures on the date of the relevant Reserve
Report for each calendar year to the extent such quotations are available for
future periods, provided that with respect to quotations for calendar years
after the fifth calendar year, the quotation for the fifth calendar year shall
be applied, (ii) with respect to future periods for which quotations are not
available on the New York Mercantile Exchange, constant pricing for such periods
based on the quotation for the last period for which a quotation is available on
the New York Mercantile Exchange for Henry Hub (natural gas) or Cushing,
Oklahoma (oil), (c) operating expenses shall be held constant, (d) future
Capital Expenditures shall be expressed in current year dollars (i.e., inflation
shall not be assumed), (e) to the extent basis Swap Agreements are not in place,
the cash-flows derived from the pricing assumptions set forth in clause (b)
above shall be further adjusted to account for the historical basis
differentials for each month during the preceding 12-month period calculated by
comparing realized crude oil and natural gas prices to Cushing, Oklahoma and
Henry Hub NYMEX prices for each month during such period and (f) to the extent
that Swap Agreements are in place the cash-flows derived from the pricing
assumptions set forth in clause (b) above shall be, (i) in the case of volumes
subject to a swap or other fixed priced hedge, at the applicable fixed price and
(ii) in the case of volumes subject to a floor or ceiling hedge (including a
collar), at the price set out in the preceding clause (b)(i), but not to exceed
such ceiling or to be less than such floor.
 
“Transactions” means, with respect to (a) the Borrower, the execution, delivery
and performance by the Borrower of this Agreement , and each other Loan Document
to which it is a party, 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
 

 
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and performance by such Guarantor of each Loan Document to which it is a party,
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.
 
“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.
 
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” as used in this Agreement shall be deemed to be
followed by the phrase “without limitation”.  The word “will” shall be construed
to have the same meaning and effect as the word “shall”.  Unless the context
requires otherwise (a) any definition of or reference to any agreement,
instrument or other document herein shall be construed as referring to such
agreement, instrument or other document as from time to time amended,
supplemented or otherwise modified (subject to any restrictions on such
amendments, supplements or modifications set forth in the Loan Documents), (b)
any reference herein to any law shall be construed as referring to such law as
amended, modified, codified or reenacted, in whole or in part, and in effect
from time to time, (c) any reference herein to any Person shall be construed to
include such Person’s successors and assigns (subject to the restrictions
contained in the Loan Documents), (d) the words “herein”, “hereof” and
“hereunder”, and words of similar import, shall be construed to refer to this
Agreement in its entirety and not to any particular provision hereof, (e) with
respect to the determination of any time period, the word “from” means “from and
including” and the word “to” means “to and including” and (f) any reference
herein to Articles, Sections, Annexes, Exhibits and Schedules shall be construed
to refer to Articles and Sections of, and Annexes, Exhibits and Schedules to,
this Agreement.  No provision of this Agreement or any other Loan Document shall
be interpreted or construed against any Person solely because such Person or its
legal representative drafted such provision.
 
Section 1.05 Accounting Terms and Determinations; GAAP.  Unless otherwise
specified herein, all accounting terms used herein shall be interpreted, all
determinations with respect to accounting matters hereunder shall be made, and
all financial statements and certificates and reports as to financial matters
required to be furnished to the Administrative Agent or the Lenders hereunder
shall be prepared, in accordance with GAAP, applied on a basis consistent with
the Financial Statements except for changes in which the Borrower’s independent
certified public accountants concur and which are disclosed to the
Administrative Agent on the next date on which financial statements are required
to be delivered to the Lenders pursuant to Section 8.01(a); provided that,
unless the Borrower and the Majority Lenders shall otherwise agree in writing,
no such change shall modify or affect the manner in which compliance with the
 

 
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Section 1.06 covenants contained herein is computed such that all such
computations shall be conducted utilizing financial information presented
consistently with prior periods.
 
ARTICLE II
 
The Credits
 
Section 2.01 Commitments.  Subject to the terms and conditions set forth herein,
each Lender agrees to make Loans to the Borrower during the Availability Period
in an aggregate principal amount that will not result in (a) such Lender’s
Revolving Credit Exposure exceeding such Lender’s Commitment or (b) the total
Revolving Credit Exposures exceeding the total Commitments.  Within the
foregoing limits and subject to the terms and conditions set forth herein, the
Borrower may borrow, repay and reborrow the Loans.
 
Section 2.02 Loans and Borrowings.
 
(a) Borrowings; Several Obligations.  Each Loan shall be made as part of a
Borrowing consisting of Loans made by the Lenders ratably in accordance with
their respective Commitments.  The failure of any Lender to make any Loan
required to be made by it shall not relieve any other Lender of its obligations
hereunder; provided that the Commitments are several and no Lender shall be
responsible for any other Lender’s failure to make Loans as required.
 
(b) Types of Loans.  Subject to Section 3.03, each Borrowing shall be comprised
entirely of ABR Loans or Eurodollar Loans as the Borrower may request in
accordance herewith.  Each Lender at its option may make any Eurodollar Loan by
causing any domestic or foreign branch or Affiliate of such Lender to make such
Loan; provided that any exercise of such option shall not affect the obligation
of the Borrower to repay such Loan in accordance with the terms of this
Agreement.
 
(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 $100,000 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 $100,000 and not less
than $1,000,000; provided that an ABR Borrowing may be in an aggregate amount
that is equal to the entire unused balance of the total Commitments or that is
required to finance the reimbursement of an LC Disbursement as contemplated by
Section 2.08(e).  Borrowings of more than one Type may be outstanding at the
same time, provided that there shall not at any time be more than a total of
eight (8) Eurodollar Borrowings outstanding.  Notwithstanding any other
provision of this Agreement, the Borrower shall not be entitled to request, or
to elect to convert or continue, any Borrowing if the Interest Period requested
with respect thereto would end after the Termination Date.
 
(d) Notes.  The Loans made by each Lender shall be evidenced by a single
promissory note of the Borrower upon request by such Lender in substantially the
form of Exhibit A, dated, in the case of (i) any Lender party hereto as of the
date of this Agreement, as of the date of this Agreement or (ii) any Lender that
becomes a party hereto pursuant to an Assignment and Assumption, as of the
effective date of the Assignment and Assumption, payable to such Lender or its
registered assigns in a principal amount equal to its Maximum
 

 
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(e) Credit Amount as in effect on such date, and otherwise duly completed.  In
the event that any Lender’s Maximum Credit Amount decreases for any reason
(whether pursuant to Section 2.06, Section 12.04 or otherwise), the Borrower
shall deliver or cause to be delivered on the effective date of such decrease, a
new Note payable to such Lender in a principal amount equal to its Maximum
Credit Amount after giving effect to such decrease, and otherwise duly
completed.  The date, amount, Type, interest rate and, if applicable, Interest
Period of each Loan made by each Lender, and all payments made on account of the
principal thereof, shall be recorded by such Lender on its books for its
Note.  Failure to make any such notation shall not affect any Lender’s or the
Borrower’s rights or obligations in respect of such Loans. Upon surrender of any
Note at the principal office of Administrative Agent for registration of
transfer or exchange (and in the case of a surrender for registration of
transfer, duly endorsed or accompanied by a written instrument of transfer duly
executed by the registered holder or its attorney duly authorized in writing and
accompanied by the address for notices of each transferee of such Note or part
thereof), and an assignment agreement in form and substance acceptable to
Administrative Agent whereby the assignee holder agrees to be bound by the terms
hereof that are applicable to holders, shall execute and deliver, at Borrower’s
expense, a new Note in exchange therefor.
 
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 11:00 a.m., Houston time, three
(3) Business Days before the date of the proposed Borrowing or (b) in the case
of an ABR Borrowing, not later than 11:00 a.m., Houston time, one (1) Business
Day before the date of the proposed Borrowing; provided that no such notice
shall be required for any deemed request of an ABR Borrowing to finance the
reimbursement of an LC Disbursement as provided in Section 2.08(e).  Each such
telephonic Borrowing Request shall be irrevocable and shall be confirmed
promptly by hand delivery or telecopy to the Administrative Agent of a written
Borrowing Request in substantially the form of Exhibit B and signed by the
Borrower.  Each such telephonic and written Borrowing Request shall specify the
following information:
 
(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” and which shall not extend beyond the Termination
Date;
 
(v) the amount of the then effective Borrowing Base, (or Aggregate Maximum
Credit Amounts, if such amount is less than the then effective Borrowing Base),
the current total Revolving Credit Exposures (without regard to the requested
Borrowing) and the pro forma total Revolving Credit Exposures (giving effect to
the requested Borrowing); and
 

 
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(vi) the location and number of the Borrower’s account to which funds are to be
disbursed, which shall comply with the requirements of Section 2.05.
 
If no election as to the Type of Borrowing is specified, then the requested
Borrowing shall be an ABR Borrowing.  If no Interest Period is specified with
respect to any requested Eurodollar Borrowing, then the Borrower shall be deemed
to have selected an Interest Period of one month’s duration.  Each Borrowing
Request shall constitute a representation that no Borrowing Base Deficiency
exists and 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; Conversions.
 
(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; provided that, each such portion of the affected Borrowing shall be
in an aggregate amount that is an integral multiple of $100,000 and not less
than $1,000,000.
 
(b) Interest Election Requests; Conversion Requests.  To make an election or
conversion, as the case may be, 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
was requesting a Borrowing of the Type resulting from such election to be made
on the effective date of such election.  Each such telephonic Interest Election
Request shall be irrevocable and shall be confirmed promptly by hand delivery or
telecopy to the Administrative Agent of a written Interest Election Request in
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);
 

 
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(ii) the effective date of the election made pursuant to such Interest Election
Request, which shall be a Business Day;
 
(iii) whether the resulting Borrowing is to be an ABR Borrowing or a Eurodollar
Borrowing; and
 
(iv) if the resulting Borrowing is a Eurodollar Borrowing, the Interest Period
to be applicable thereto after giving effect to such election, which shall be a
period contemplated by the definition of the term “Interest Period” and which
shall not extend beyond the Termination Date.
 
If any such Interest Election Request requests a Eurodollar Borrowing but does
not specify an Interest Period, then the Borrower shall be deemed to have
selected an Interest Period of one month’s duration.
 
(d) Notice to Lenders by the Administrative Agent.  Promptly following receipt
of an Interest Election Request, the Administrative Agent shall advise each
Lender of the details thereof and of such Lender’s portion of each resulting
Borrowing.
 
(e) Effect of Failure to Deliver Timely Interest Election Request and Events of
Default on Interest Election.  If the Borrower fails to deliver a timely
Interest Election Request with respect to a Eurodollar Borrowing prior to the
end of the Interest Period applicable thereto, then, unless such Borrowing is
repaid as provided herein, at the end of such Interest Period such Borrowing
shall be converted to an ABR Borrowing.  Notwithstanding any contrary provision
hereof, if an Event of Default has occurred and is continuing:  (i) no
outstanding Borrowing may be converted to or continued as a Eurodollar Borrowing
(and any Interest Election Request that requests the conversion of any Borrowing
to, or continuation of any Borrowing as, a Eurodollar Borrowing shall be
ineffective) and (ii) unless repaid, each Eurodollar Borrowing shall be
converted to an ABR Borrowing at the end of the Interest Period applicable
thereto.
 
Section 2.05 Funding of Borrowings.
 
(a) Funding by Lenders.  Each Lender shall make each Loan to be made by it
hereunder on the funding date in the Borrowing Request by wire transfer of
immediately available funds by 12:00 noon, Houston 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 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
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
 

 
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(c) 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 Termination Date.  If at any time the
Aggregate Maximum Credit Amounts are terminated or reduced to zero by the
Borrower, or the Borrowing Base is reduced to zero by the Lenders, 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 $1,000,000 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(a), 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 (3) Business Days prior to the effective date of such
termination or reduction, specifying such election and the effective date
thereof.  Promptly following receipt of any notice, the Administrative Agent
shall advise the Lenders of the contents thereof.  Each notice delivered by the
Borrower pursuant to this Section 2.06(b)(ii) shall be irrevocable.  Any
termination or reduction of the Aggregate Maximum Credit Amounts shall be
permanent and may not be reinstated.  Each reduction of the Aggregate Maximum
Credit Amounts shall be made ratably among the Lenders in accordance with each
Lender’s Applicable Percentage.
 
Section 2.07 Borrowing Base.
 
(a) Initial Borrowing Base.  For the period from and including the Effective
Date to but excluding the first Redetermination Date, the amount of the
Borrowing Base shall be
 

 
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(b) $250,000,000.  Notwithstanding the foregoing, the Borrowing Base may be
subject to further adjustments from time to time pursuant to Section 2.07(e),
Section 8.13(c) or Section 9.12.
 
(c) Scheduled and Interim Redeterminations.  The 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 shall become effective and applicable to the Borrower, the Issuing Bank and
the Lenders on April 1st and October 1st of each year, commencing October 1,
2012.  In addition, one time between Scheduled Redeterminations (i) the Borrower
may, by notifying the Administrative Agent thereof, (ii) the Administrative
Agent may, by notifying the Borrower thereof and (iii) the Required Lenders may,
by directing the Administrative Agent to notify the Borrower thereof, each elect
to cause the Borrowing Base to be redetermined between Scheduled
Redeterminations (an “Interim Redetermination”) in accordance with this Section
2.07.
 
(d) 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, (1) in the case of a Scheduled Redetermination,
pursuant to Section 8.12(a) and (c), and (2) 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 Required 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 (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, the internal credit
evaluation and other financial information) as the Administrative Agent deems
appropriate in its sole discretion.
 
(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) and other information requested by
the Administrative Agent 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
 

 
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(B) Borrower and has had a reasonable opportunity to determine the Proposed
Borrowing Base in accordance with Section 2.07(c)(i); and
 
(C) in the case of an Interim Redetermination, promptly, and in any event,
within thirty (30) days after the Administrative Agent has received the required
Engineering Reports.
 
(iii) Any Proposed Borrowing Base that would increase the Borrowing Base then in
effect must be approved by all of the Lenders in their sole discretion as
provided in this Section 2.07(c)(iii); and any Proposed Borrowing Base that
would decrease or maintain the Borrowing Base then in effect must be approved by
the Required Lenders as provided in this Section 2.07(c)(iii).  Upon receipt of
the Proposed Borrowing Base Notice, each Lender shall have fifteen (15) days to
agree with the Proposed Borrowing Base or disagree with the Proposed Borrowing
Base by proposing an alternate Borrowing Base.  If at the end of such fifteen
(15) days, any Lender has not communicated its approval or disapproval in
writing to the Administrative Agent, such silence shall be deemed to be an
approval of the Proposed Borrowing Base.  If, at the end of such 15-day period,
all of the Lenders, in the case of a Proposed Borrowing Base that would increase
the Borrowing Base then in effect, or the Required Lenders, in the case of a
Proposed Borrowing Base that would decrease or maintain the Borrowing Base then
in effect, have approved, as aforesaid, then the Proposed Borrowing Base shall
become the new Borrowing Base, effective on the date specified in Section
2.07(d).  If, however, at the end of such 15-day period, all of the Lenders or
the Required Lenders, as applicable, have not approved, as aforesaid, then the
Administrative Agent shall poll the Lenders to ascertain the highest Borrowing
Base then acceptable to all of the Lenders in their sole discretion or the
Required Lenders, as applicable, and such amount shall become the new Borrowing
Base, effective on the date specified in Section 2.07(d).
 
(e) Effectiveness of a Redetermined Borrowing Base.  After a redetermined
Borrowing Base is approved or is deemed to have been approved by all of the
Lenders or Required Lenders, as applicable, pursuant to Section 2.07(c)(iii), or
adjusted pursuant to Section 2.07(e), Section 8.13(c) or Section 9.12(d), the
Administrative Agent shall notify the Borrower and the Lenders of the amount of
the redetermined or adjusted Borrowing Base (the “New Borrowing Base Notice”),
and such amount shall become the new Borrowing Base, effective and applicable to
the Borrower, the Administrative Agent, 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 May 1st or November 1st, as applicable, following such notice, or
(B) if the Administrative Agent shall not have received the Engineering Reports
required to be delivered by the Borrower pursuant to Section 8.12(a) and (c) in
a timely and complete manner, then on the Business Day next succeeding delivery
of such notice; and
 
(ii) in the case of an Interim Redetermination, on the Business Day next
succeeding delivery of such notice.
 

 
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(iii) Borrowing Base Reduction Events.
 
(iv) If the Borrower or any Subsidiary novates, assigns, unwinds, terminates, or
amends any BB Hedge, the Borrowing Base then in effect shall automatically be
reduced by an amount equal to the Net Hedge Value, if any, resulting from such
event (which right shall be in addition to the Agent’s right to request an
unscheduled interim redetermination between each scheduled redetermination).
 
(v) If the Borrower or any Subsidiary sells any Oil and Gas Property or a
Subsidiary owning Oil and Gas Properties included in the most recently delivered
Reserve Report for cash consideration during any period between two successive
Scheduled Redetermination Dates having a fair market value in excess of
$2,000,000, individually or in the aggregate, the Borrowing Base then in effect
shall automatically be reduced by an amount equal to the fair market value, if
any, assigned such Property in the most recently delivered Reserve Report (which
right shall be in addition to the Administrative Agent’s right to request an
unscheduled interim redetermination between each scheduled redetermination).
 
(vi) Notwithstanding anything to the contrary contained herein, if the Borrower
or any Subsidiary issues any Permitted Additional Debt during the period between
Scheduled Redetermination dates or not in conjunction with an Interim
Redetermination, then on the date on which such Permitted Additional Debt is
issued, the Borrowing Base then in effect shall automatically be reduced by an
amount equal to the product of 0.25 multiplied by the stated principal amount of
such Permitted Additional Debt.  The Borrowing Base as so reduced shall become
the new Borrowing Base immediately upon the date of such issuance, effective and
applicable to the Borrower, the Administrative Agent, each Issuing Bank and the
Lenders on such date until the next redetermination or modification thereof
hereunder.  For purposes of this Section 2.07(e)(iii), if any such Permitted
Additional Debt is issued at a discount or otherwise sold for less than “par”,
the reduction shall be calculated based upon the stated principal amount without
reference to such discount.
 
Such amount shall then become the Borrowing Base until the next Scheduled
Redetermination Date, the next Interim Redetermination Date or the next
adjustment to the Borrowing Base under Section 2.07(e), Section 8.13(c) or
Section 9.12, 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 any of its Subsidiaries, in a form reasonably
acceptable to the Administrative Agent and the Issuing Bank, at any time and
from time to time during 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
 

 
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(b) 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.
 
(c) 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 seven (7) 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);
 
(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 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.
 
Subject to the terms and conditions contained herein, the Issuing Bank shall
then issue the requested Letter of Credit on the Borrower’s behalf.
 
(d) 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
 

 
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(e) 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 (5) Business Days
prior to the Termination Date.
 
(f) 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 and not reimbursed by the Borrower on
the date due as provided in Section 2.08(e), or of any reimbursement payment
required to be refunded to the Borrower for any reason.  Each Lender
acknowledges and agrees that its obligation to acquire participations pursuant
to this Section 2.08(d) in respect of Letters of Credit is absolute and
unconditional and shall not be affected by any circumstance whatsoever,
including any amendment, renewal or extension of any Letter of Credit or the
occurrence and continuance of a Default, 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.
 
(g) Reimbursement.  If the Issuing Bank shall make any LC Disbursement in
respect of a Letter of Credit, the Borrower shall reimburse the Administrative
Agent (for itself or any of its Affiliates) such LC Disbursement by paying to
the Administrative Agent an amount equal to such LC Disbursement not later than
11:00 a.m., Houston time, on the date that such LC Disbursement is made, if the
Borrower shall have received notice of such LC Disbursement prior to 9:00 a.m.,
Houston time, on such date, or, if such notice has not been received by the
Borrower prior to such time on such date, then not later than 11:00 a.m.,
Houston time, on (i) the Business Day that the Borrower receives such notice, if
such notice is received prior to 9:00 a.m., Houston time, on the day of receipt,
or (ii) the Business Day immediately following the day that the Borrower
receives such notice, if such notice is not received prior to such time on the
day of receipt; provided that any such LC Disbursement 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 any Lenders that have made payments pursuant
to this Section 2.08(e) to reimburse the Issuing Bank, then to such Lenders
 

 
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(h) 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 (other than the funding of ABR Loans as contemplated above) shall
not constitute a Loan and shall not relieve the Borrower of its obligation to
reimburse such LC Disbursement.
 
(i) 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 or the Administrative Agent.  In furtherance of the foregoing and without
limiting the generality thereof, the Borrower agrees 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 accept and make payment upon such
documents if such documents are not in strict compliance with the terms of such
Letter of Credit.
 
(j) 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, facsimile or email 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.
 
(k) 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 (either with its own funds or a Borrowing under Section 2.08(e)),
the unpaid amount thereof shall bear interest, for each day from and including
the date such LC Disbursement is made to but excluding the date that the
Borrower reimburses such LC Disbursement, at the rate per annum then applicable
to ABR Loans.  Interest accrued pursuant to this Section 2.08(h) shall be
 

 
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(l) 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.
 
(m) Cash Collateralization.
 
(i) If (A) any Event of Default shall occur and be continuing and the Borrower
receives notice from the Administrative Agent or the Majority Lenders demanding
that the Borrower Cash Collateralize the outstanding LC Exposure pursuant to
this Section 2.08(i), (B) the Borrower is required to Cash Collateralize the
excess attributable to an LC Exposure in connection with any prepayment pursuant
to Section 3.04(c), or (C) the Borrower is required to Cash Collateralize a
Defaulting Lender’s LC Exposure pursuant to Section 4.03(c)(iii)(B), then the
Borrower shall Cash Collateralize such LC Exposure or the excess attributable to
such LC Exposure, as the case may be, as of such date plus any accrued and
unpaid interest thereon; provided that the obligation to Cash Collateralize
pursuant to this Section 2.08(i) shall become effective immediately, and
immediately due and payable, without demand or other notice of any kind, upon
the occurrence of any Event of Default described in Section 10.01(h) or Section
10.01(i).
 
(ii) 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 each account (a “Collateral Account”)
in which the Borrower has Cash Collateralized any obligation hereunder and all
cash, checks, drafts, certificates and instruments, if any, from time to time
deposited or held in such Collateral Account, all deposits or wire transfers
made thereto, any and all investments purchased with funds deposited in such
account, all interest, dividends, cash, instruments, financial assets and other
Property from time to time received, receivable or otherwise payable in respect
of, or in exchange for, any or all of the foregoing, and all proceeds, products,
accessions, rents, profits, income and benefits therefrom, and any substitutions
and replacements therefor (collectively, the “Cash Collateral”).
 
(iii) The Borrower’s obligation to Cash Collateralize pursuant to this Section
2.08(i) shall be absolute and unconditional, without regard to whether any
beneficiary of any 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
Subsidiary 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.
 
(iv) Each Collateral Account and all Cash Collateral shall secure the payment
and performance of the Borrower’s and the Guarantors’ 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 each Collateral Account and the Cash Collateral.  Other than any interest
earned on the investment of such deposits, which investments shall be made at
the option and reasonable sole discretion of the Administrative Agent and at the
Borrower’s risk and
 

 
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(v) expense, such deposits shall not bear interest.  Interest or profits, if
any, on such investments shall accumulate in each Collateral 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 Cash Collateralize 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) or
Cash Collateralize a Defaulting Lender’s LC Exposure pursuant to Section
4.03(c)(iii)(B), then such amount (to the extent not applied as aforesaid) shall
be returned to the Borrower within three (3) Business Days after all Events of
Default have been cured or waived.
 
(n) Confirmation.  Upon written request of the Borrower, the Issuing Bank shall
provide the Borrower, at the sole cost and expense of the Borrower, with a
confirmation of the existence of  an outstanding Letter of Credit.
 
Section 2.09 Loans and Borrowings Under Existing Credit Agreement.  In
connection with the amendment and restatement of the Existing Credit Agreement:
 
(a) each “ABR Borrowing” outstanding under the Existing Credit Agreement shall
be extended and renewed so as to continue as a new ABR Borrowing under this
Agreement;
 
(b) each “Eurodollar Borrowing” outstanding under the Existing Credit Agreement
shall be deemed repaid on the Effective Date and funded as a new Eurodollar
Borrowing under this Agreement; and
 
(c) the Existing Credit Agreement and the commitments thereunder shall be
superseded by this Agreement and such commitments shall terminate.
 
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 in full in cash on the Termination Date.
All payments by the Borrower of principal, interest, fees and other obligations
shall be made in dollars in immediately available funds, and shall be absolute
and unconditional, without defense, rescission, recoupment, setoff or
counterclaim, free of any restriction or condition.
 
Section 3.02 Interest.
 
(a) ABR Loans.  The Loans comprising each ABR Borrowing shall bear interest at
the Alternate Base Rate plus the Applicable Margin, but in no event to exceed
the Highest Lawful Rate.
 

 
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(b) Eurodollar Loans.  The Loans comprising each Eurodollar Borrowing shall bear
interest at the Adjusted LIBO Rate for the Interest Period in effect for such
Borrowing plus the Applicable Margin, but in no event to exceed the Highest
Lawful Rate.
 
(c) Post Default Rate.  Notwithstanding the foregoing, if 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 bear interest, after as well as before
judgment, at the lesser of (i) the Highest Lawful Rate or (ii) the Post Default
Rate.
 
(d) Interest Payment Dates.  Accrued interest on each Loan shall be payable in
arrears on each Interest Payment Date for such Loan and on the Termination Date;
provided that (i) interest accrued pursuant to Section 3.02(c) shall be payable
on demand, (ii) in the event of any repayment or prepayment of any Loan (other
than an optional prepayment of an ABR Loan prior to the Termination Date),
accrued interest on the principal amount repaid or prepaid shall be payable on
the date of such repayment or prepayment, and (iii) in the event of any
conversion of any Eurodollar Loan prior to the end of the current Interest
Period therefor, accrued interest on such Loan shall be payable on the effective
date of such conversion.
 
(e) Interest Rate Computations.  All interest hereunder shall be computed on the
basis of a year of 360 days, unless such computation would exceed the Highest
Lawful Rate, in which case interest shall be computed on the basis of a year of
365 days (or 366 days in a leap year), 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 the 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) (i) that adequate and reasonable means do not exist for
ascertaining the Adjusted LIBO Rate or the LIBO Rate for such Interest Period or
(ii) deposits (whether in dollars or an alternative currency) are not being
offered to Lenders in the applicable offshore interbank market for such currency
for the applicable amount and Interest Period of such Eurodollar Borrowing; 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
 

 
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notifies the Borrower and the Lenders that the circumstances giving rise to such
notice no longer exist, (i) any Interest Election Request that requests the
conversion of any Borrowing to, or continuation of any Borrowing as, a
Eurodollar Borrowing shall be ineffective, and (ii) if any Borrowing Request
requests a Eurodollar Borrowing, such Borrowing shall be made either as an ABR
Borrowing or at an alternate rate of interest determined by all Lenders,
sufficient to cover each Lender’s cost of funds.
 
Section 3.04 Prepayments.
 
(a) Optional Prepayments.  Subject to any break funding costs payable pursuant
to Section 5.02 and prior notice in accordance with Section 3.04(b), the
Borrower shall have the right at any time and from time to time to prepay any
Borrowing in whole or in part, in an aggregate amount that is an integral
multiple of $100,000 and not less than $1,000,000, or if less than $1,000,000,
the remaining balance of the Loans.
 
(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 11:00 a.m., Houston time, three (3) Business Days before the date of
prepayment, or (ii) in the case of prepayment of an ABR Borrowing, not later
than 11:00 a.m., Houston 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.
 
(c) Mandatory Prepayments.
 
(i) If, after giving effect to any termination or reduction of the Aggregate
Maximum Credit Amounts pursuant to Section 2.06(b), the total Revolving Credit
Exposures exceeds the total Commitments, then the Borrower shall prepay the
Borrowings on the date of such termination or reduction in an aggregate
principal amount equal to such excess, and if any excess remains after prepaying
all of the Borrowings as a result of an LC Exposure, Cash Collateralize such
excess as provided in Section 2.08(i).
 
(ii) Upon any redetermination of or adjustment to the amount of the Borrowing
Base in accordance with Section 2.07 or Section 8.13(c), if the total Revolving
Credit Exposures exceeds the redetermined or adjusted Borrowing Base, then the
Borrower shall either:
 
(A) prepay the Borrowings in an aggregate principal amount equal to such excess
and if any excess remains after prepaying all of the Borrowings as a result of
an LC Exposure, Cash Collateralized such excess as provided in Section 2.08(i);
or
 

 
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(B) pledge additional collateral not included in the most recent Reserve Report
to the Administrative Agent having a fair market value equal to at least the
amount of the deficiency or otherwise satisfactory to the Administrative Agent
such that the total Revolving Credit Exposures are less than or equal to the
Borrowing Base as redetermined or adjusted; or
 
(C) prepay the Borrowings in an aggregate principal amount equal to such excess
(and if any excess remains after prepaying all of the Borrowings as a result of
an LC Exposure, Cash Collateralize such excess as provided in Section 2.08(i))
in not more than six (6) equal monthly installments plus accrued interest
thereon.
 
The Borrower shall be obligated to make such prepayment and/or Cash
Collateralize such excess pursuant to clause (A), pledge of collateral pursuant
to clause (B) or first monthly prepayment pursuant to clause (C) within thirty
(30) 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 9.12, 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, Cash Collateralize such excess
as provided in Section 2.08(i).  The Borrower shall be obligated to make such
prepayment and/or Cash Collateralize such excess on the date it or any
Subsidiary receives proceeds as a result of such disposition; provided that all
payments required to be made pursuant to this Section 3.04(c)(iii) must be made
on or prior to the Termination Date.
 
(iv) If a Borrowing Base Deficiency exists, or during an Event of Default, the
Borrower shall prepay the Borrowings with (a) all net cash proceeds received
from sales and other dispositions of Properties, (b) any proceeds received
pursuant to the termination of any Swap Agreement and (c) any proceeds received
pursuant to an issuance of Permitted Additional Debt under Section 9.02(f).
 
(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, and if more than one Eurodollar
Borrowing is then outstanding, to each such Eurodollar Borrowing in order of
priority beginning with the Eurodollar Borrowing with the least number of days
remaining in the Interest Period applicable thereto and ending with the
Eurodollar Borrowing with the most number of days remaining in the Interest
Period applicable thereto.
 
(vi) Each prepayment of Borrowings shall be applied ratably to the Loans of each
Lender included in the prepaid Borrowings.  Prepayment pursuant to this
 

 
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(vii) 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
Commitment Fee Rate on the average daily 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 commitment fees shall be payable in
arrears on the last day of March, June, September and December of each year and
on the Termination Date, commencing 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, unless such computation would exceed the Highest Lawful Rate, in which
case interest shall be computed on the basis of a year of 365 days (or 366 days
in a leap year), 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 0.175% 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, the 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
pursuant to this Section 3.05(b) shall be payable within ten (10) days after
demand.  All participation fees and fronting fees shall be computed on the basis
of a year of 360 days, unless such computation would exceed the Highest Lawful
Rate, in which case interest shall be computed on the basis of a year of 365
days (or 366 days in a leap year), 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
 

 
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(d) separately agreed upon between the Borrower and the Administrative Agent as
outlined in the Fee Letters.
 
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 11:00 a.m., Houston 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
to the account of the Administrative Agent most recently designated by it for
such purpose, 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 accruing
interest, interest thereon shall be payable for the period of such
extension.  All payments hereunder shall be made in dollars.
 
(b) Application of Insufficient Payments.  If at any time insufficient funds are
received by and available to the Administrative Agent to pay fully all amounts
of principal, unreimbursed LC Disbursements, interest and fees then due
hereunder, such funds shall be applied (i) first, towards payment of interest
and fees then due hereunder, ratably among the parties entitled thereto in
accordance with the amounts of interest and fees then due to such parties, and
(ii) second, towards payment of principal and unreimbursed LC Disbursements then
due hereunder, ratably among the parties entitled thereto in accordance with the
amounts of principal and unreimbursed LC Disbursements then due to such parties.
 
(c) Sharing of Payments by Lenders.  If any Lender shall, by exercising any
right of set-off or counterclaim or otherwise, obtain payment in respect of any
principal of or interest on any of its Loans or participations in LC
Disbursements resulting in such Lender receiving payment of a greater proportion
of the aggregate amount of its Loans and participations in LC Disbursements and
accrued interest thereon than the proportion received by any other Lender, then
the Lender receiving such greater proportion shall purchase (for cash at face
value) participations in the Loans and participations in LC Disbursements of
other Lenders to the extent necessary so that the benefit of all such payments
shall be shared by the Lenders ratably in accordance with the aggregate amount
of principal of and accrued interest on their respective Loans and
participations in LC Disbursements; provided that (i) if any such participations
are purchased and all or any portion of the payment giving rise thereto is
recovered, such
 

 
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(d) participations shall be rescinded and the purchase price restored to the
extent of such recovery, without interest, and (ii) the provisions of this
Section 4.01(c) shall not be construed to apply to any payment made by the
Borrower pursuant to and in accordance with the express terms of this Agreement
or any payment obtained by a Lender as consideration for the assignment of or
sale of a participation in any of its Loans or participations in LC
Disbursements to any assignee or participant, other than to the Borrower or any
Subsidiary or Affiliate thereof (as to which the provisions of this Section
4.01(c) shall apply).  The Borrower consents to the foregoing and agrees, to the
extent it may effectively do so under applicable law, that any Lender acquiring
a participation pursuant to the foregoing arrangements may exercise against the
Borrower rights of set-off and counterclaim with respect to such participation
as fully as if such Lender were a direct creditor of the Borrower in the amount
of such participation.
 
Section 4.02 Presumption of Payment by the Borrower.  Unless the Administrative
Agent shall have received notice from the Borrower prior to the date on which
any payment is due to the Administrative Agent for the account of the Lenders or
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 Deductions by the Administrative Agent; Defaulting Lender.
 
(a) If any Lender shall fail to make any payment required to be made by it
pursuant to Section 2.05(b), Section 2.08(c), Section 2.08(e) or Section 4.02,
then the Administrative Agent may, in its sole discretion (notwithstanding any
contrary provision hereof), apply any amounts thereafter received by the
Administrative Agent for the account of such Lender to satisfy such Lender’s
obligations under such Sections until all such unsatisfied obligations are fully
paid in cash.
 
(b) Payments to Defaulting Lenders.  If a Defaulting Lender (or a Lender who
would be a Defaulting Lender but for the expiration of the relevant grace
period) as a result of the exercise of a set-off shall have received a payment
in respect of its Revolving Credit Exposure which results in its Revolving
Credit Exposure being less than its Applicable Percentage of the aggregate
Revolving Credit Exposures, then no payments will be made to such Defaulting
Lender until such time as such Defaulting Lender shall have complied with
Section 4.03(c) and all amounts due and owing to the Lenders have been equalized
in accordance with each Lender’s respective pro rata share of the
Indebtedness.  Further, if at any time prior to the acceleration or maturity of
the Loans, the Administrative Agent shall receive any payment in respect of
principal of a Loan or a reimbursement of an LC Disbursement while one or more
Defaulting Lenders shall be party to this Agreement, the Administrative Agent
shall apply such payment first to the Borrowing(s) for which such Defaulting
Lender(s) shall have failed to fund
 

 
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(c) its pro rata share until such time as such Borrowing(s) are paid in full or
each Lender (including each Defaulting Lender) is owed its Applicable Percentage
of all Loans then outstanding.  After acceleration or maturity of the Loans,
subject to the first sentence of this Section 4.03(b), all principal will be
paid ratably as provided in Section 10.02(c).
 
(d) Defaulting Lenders.  Notwithstanding any provision of this Agreement to the
contrary, if any Lender becomes a Defaulting Lender, then the following
provisions shall apply for so long as such Lender is a Defaulting Lender:
 
(i) fees otherwise payable pursuant to Section 3.05(a) shall cease to accrue on
the unfunded portion of the Commitment of such Defaulting Lender.
 
(ii) the Commitment and Revolving Credit Exposure of such Defaulting Lender
shall not be included in determining whether all Lenders, the Majority Lenders
or the Required Lenders have taken or may take any action hereunder (including
any consent to any amendment or waiver pursuant to Section 12.02), provided that
any waiver, amendment or modification (A) that would increase the Commitment or
the Maximum Credit Amount of such Defaulting Lender or (B) requiring the consent
of all Lenders or each adversely affected Lender which affects such Defaulting
Lender differently than all other Lenders or all other adversely affected
Lenders, as the case may be, shall require the consent of such Defaulting
Lender; and provided further that any redetermination or affirmation of the
Borrowing Base shall occur without the participation of a Defaulting Lender, but
the Commitment (i.e. the Applicable Percentage of the Borrowing Base of a
Defaulting Lender) may not be increased without the consent of such Defaulting
Lender.
 
(iii) if any LC Exposure exists at the time a Lender becomes a Defaulting Lender
then:
 
(A) all or any part of such LC Exposure shall be reallocated among the
Non-Defaulting Lenders in accordance with their respective Applicable
Percentages but only to the extent (1) the sum of all Non-Defaulting Lenders’
Revolving Credit Exposures plus such Defaulting Lender’s LC Exposure does not
exceed the total of all Non-Defaulting Lenders’ Commitments, (2) the conditions
set forth in Section 6.02 are satisfied at such time, and (3) the sum of each
Non-Defaulting Lender’s Revolving Credit Exposure plus its reallocated share of
such Defaulting Lender’s LC Exposure does not exceed such Non-Defaulting
Lender’s Commitment; provided, that no such reallocation will constitute a
waiver or release of any claim the Borrower, the Administrative Agent, the
Issuing Bank or any Lender may have against such Defaulting Lender or cause such
Defaulting Lender to be a Non-Defaulting Lender;
 
(B) if the reallocation described in Section 4.03(c)(iii)(A) cannot, or can only
partially, be effected, then the Borrower shall within one Business Day
following notice by the Administrative Agent Cash Collateralize such Defaulting
Lender’s LC Exposure (after giving effect to any partial
 

 
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(C) reallocation pursuant to Section 4.03(c)(iii)(A)) for so long as such LC
Exposure is outstanding;
 
(D) if the Borrower Cash Collateralizes any portion of such Defaulting Lender’s
LC Exposure pursuant to Section 4.03(c)(iii)(B)), then the Borrower shall not be
required to pay any fees to such Defaulting Lender pursuant to Section 3.05(b)
with respect to such Defaulting Lender’s LC Exposure during the period such
Defaulting Lender’s LC Exposure is Cash Collateralized;
 
(E) if the LC Exposure of the Non-Defaulting Lenders is reallocated pursuant to
Section 4.03(c)(iii)(A), then the fees payable to the Lenders pursuant to
Section 3.05(b) shall be adjusted in accordance with such Non-Defaulting
Lenders’ Applicable Percentages; and
 
(F) if any Defaulting Lender’s LC Exposure is neither Cash Collateralized nor
reallocated pursuant to Section 4.03(c)(iii), then, without prejudice to any
rights or remedies of the Issuing Bank or any Lender hereunder, all letter of
credit fees payable under Section 3.05(b) with respect to such Defaulting
Lender’s LC Exposure shall be payable to the Issuing Bank until such LC Exposure
is Cash Collateralized and/or reallocated.
 
(e) In the event that the Administrative Agent, the Borrower and the Issuing
Bank each agrees that a Defaulting Lender has adequately remedied all matters
that caused such Lender to be a Defaulting Lender, then the LC Exposure of the
Lenders shall be readjusted to reflect the inclusion of such Lender’s Commitment
and on such date such Lender shall purchase at par such of the Loans of the
other Lenders as the Administrative Agent shall determine may be necessary in
order for such Lender to hold such Loans in accordance with its Applicable
Percentage; provided, that no adjustments will be made retroactively with
respect to fees accrued while such Lender was a Defaulting Lender; and provided,
further, that except to the extent otherwise expressly agreed by the affected
parties, no change hereunder from Defaulting Lender to Non-Defaulting Lender
will constitute a waiver or release of any claim of any party hereunder arising
from such Lender having been a Defaulting Lender.
 
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 an Event of Default has occurred and is continuing,
(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 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.
 

 
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Section 4.05 
 
Increased Costs; Break Funding Payments; Taxes; Illegality
 
Section 4.06 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 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 ten (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 180 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
 

 
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(e) 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 180-day period referred to above shall be
extended to include the period of retroactive effect thereof.
 
Section 4.07 Break Funding Payments.  In the event of (a) the payment of any
principal of any Eurodollar Loan other than on the last day of an Interest
Period applicable thereto (including as a result of an Event of Default), (b)
the conversion of any Eurodollar Loan into an ABR Loan other than on the last
day of the Interest Period applicable thereto, (c) the failure to borrow,
convert, continue or prepay any Eurodollar Loan on the date specified in any
notice delivered pursuant hereto, or (d) the assignment of any Eurodollar Loan
other than on the last day of the Interest Period applicable thereto as a result
of a request by the Borrower pursuant to Section 5.04, 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), minus (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 ten (10) days
after receipt thereof.
 
Section 4.08 Taxes.
 
(a) Payments Free of Taxes.  Any and all payments by or on account of any
obligation of the Borrower or any Guarantor under any Loan Document shall be
made free and clear of and without deduction for any Indemnified Taxes or Other
Taxes; provided that if the Borrower or any Guarantor shall be required to
deduct any Indemnified Taxes or Other Taxes from such payments, then (i) the sum
payable shall be increased as necessary so that after making all required
deductions (including deductions applicable to additional sums payable under
this Section 5.03(a)), the Administrative Agent, each Lender or the Issuing
Bank, as the case may be, receives an amount equal to the sum it would have
received had no such deductions been made, (ii) the Borrower or such Guarantor
shall make such deductions and (iii) the Borrower or such Guarantor shall pay
the full amount deducted to the relevant Governmental Authority in accordance
with applicable law.
 
(b) Payment of Other Taxes by the Borrower.  The Borrower shall pay any Other
Taxes to the relevant Governmental Authority in accordance with applicable law.
 

 
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(c) Indemnification by the Borrower.  The Borrower shall indemnify the
Administrative Agent, each Lender and the Issuing Bank, within ten (10) days
after written demand therefor, for the full amount of any Indemnified Taxes or
Other Taxes paid by the Administrative Agent, such Lender or the Issuing Bank,
as the case may be, on or with respect to any payment by or on account of any
obligation of the Borrower hereunder (including Indemnified Taxes or Other Taxes
imposed or asserted on or attributable to amounts payable under this Section
5.03) and any penalties, interest and reasonable expenses arising therefrom or
with respect thereto, whether or not such Indemnified Taxes or Other Taxes were
correctly or legally imposed or asserted by the relevant Governmental
Authority.  A certificate of the Administrative Agent, a Lender or the Issuing
Bank as to the amount of such payment or liability under this Section 5.03 shall
be delivered to the Borrower and shall be conclusive absent manifest error.
 
(d) Indemnification by the Lenders.  Each Lender shall severally indemnify the
Administrative Agent for the full amount of any Excluded Taxes attributable to
such Lender that are paid or payable by the Administrative Agent in connection
with any Loan Documents and any reasonable expenses arising therefrom or with
respect thereto, whether or not such Excluded Taxes were correctly or legally
imposed or asserted by the relevant Governmental Authority.  The indemnity under
this paragraph (d) shall be paid within 10 days after the Administrative Agent
delivers to the applicable Lender a certificate stating the amount of Excluded
Taxes so payable by the Administrative Agent.  Such certificate shall be
conclusive of the amount so payable absent manifest error.
 
(e) Evidence of Payments.  As soon as practicable after any payment of
Indemnified Taxes or Other Taxes by the Borrower or a Guarantor to a
Governmental Authority, the Borrower shall deliver to the Administrative Agent
the original or a certified copy of a receipt issued by such Governmental
Authority evidencing such payment, a copy of the return reporting such payment
or other evidence of such payment reasonably satisfactory to the Administrative
Agent.
 
(f) Foreign Lenders.  Any Foreign Lender that is entitled to an exemption from
or reduction of withholding tax under the law of the jurisdiction in which the
Borrower is located, or any treaty to which such jurisdiction is a party, with
respect to payments under this Agreement or any other Loan Document shall
deliver to the Borrower (with a copy to the Administrative Agent), at the time
or times prescribed by applicable law, such properly completed and executed
documentation prescribed by applicable law or reasonably requested by the
Borrower as will permit such payments to be made without withholding or at a
reduced rate.  In addition, any Lender, if requested by the Borrower or the
Administrative Agent, shall deliver such other documentation prescribed by
applicable law or reasonably requested by the Borrower or the Administrative
Agent as will enable the Borrower or the Administrative Agent to determine
whether or not such Lender is subject to backup withholding or information
reporting requirements.
 
Without limiting the generality of the foregoing, in the event that the Borrower
is resident for tax purposes in the United States of America, any Foreign Lender
shall deliver to the Borrower and the Administrative Agent (in such number of
copies as shall be requested by the recipient) on or prior to the date on which
such Foreign Lender becomes a Lender under this Agreement (and
 

 
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from time to time thereafter upon the request of the Borrower or the
Administrative Agent, but only if such Foreign Lender is legally entitled to do
so), whichever of the following is applicable:
 
(i) duly completed copies of Internal Revenue Service Form W-8BEN claiming
eligibility for benefits of an income tax treaty to which the United States of
America is a party,
 
(ii) duly completed copies of Internal Revenue Service Form W-8ECI,
 
(iii) in the case of a Foreign Lender claiming the benefits of the exemption for
portfolio interest under section 881(c) of the Code, (x) a certificate to the
effect that such Foreign Lender is not (A) a “bank” within the meaning of
section 881(c)(3)(A) of the Code, (B) a “10 percent shareholder” of the Borrower
within the meaning of section 881(c)(3)(B) of the Code, or (C) a “controlled
foreign corporation” described in section 881(c)(3)(C) of the Code and (y) duly
completed copies of Internal Revenue Service Form W-8BEN, or
 
(iv) any other form prescribed by applicable law as a basis for claiming
exemption from or a reduction in United States Federal withholding tax duly
completed together with such supplementary documentation as may be prescribed by
applicable law to permit the Borrower to determine the withholding or deduction
required to be made.
 
(g) Notwithstanding anything to the contrary herein, a Foreign Lender shall not
be required to provide any form or statement pursuant to this section that such
Foreign Lender is not legally able to deliver.  Borrower shall not be required
to pay any additional amount to any  Foreign Lender to the extent that
withholding or deduction from payments is the result of such Lender failing to
provide such forms, certificates or other evidence (collectively, “Exemption
Forms”) required by Section 5.03(f) above, establishing that such Foreign Lender
is exempt from United States federal withholding tax, or to notify Borrower of
its inability to provide such Exemption Forms  as the case may be, provided that
if such Foreign Lender shall have satisfied the requirements to provide such
Exemption Forms on the Effective Date or upon such Foreign Lender becoming a
Lender hereunder, nothing in this last sentence of this Section 5.03(g) shall
relieve Borrower of its obligation to pay any additional amounts pursuant to
this Section 5.03(g) in the event that, as a result of a change in law, treaty,
governmental rule, regulation or order (or the interpretation, administration or
application thereof), at a subsequent date such Exemption Forms were no longer
applicable to such Lender or such Lender was no longer properly entitled to
complete or deliver such Exemption Forms.
 
(h) Effect of Tax Refund.  If a Lender determines, in its sole discretion, that
it has received a benefit in the nature of a refund, deduction or credit
(including a refund in the form of a deduction from or credit against taxes that
are otherwise payable by such Lender) of any Taxes or Other Taxes with respect
to which the Borrower has made a payment under this Section 5.03, such Lender
will notify the Borrower and agrees to reimburse the Borrower to the extent of
the benefit of such refund, deduction or credit, including any interest paid by
the relevant Governmental Authority, promptly after such Lender reasonably
determines that such refund, deduction or credit has become final; provided,
that the Borrower, upon request of the Lender, agrees to repay the amount paid
over to the Borrower (plus any penalties, interest or
 

 
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(i) other charges imposed by the relevant Governmental Authority) to such Lender
in the event that such Lender is required to repay such refund to such
Governmental Authority. Nothing contained in this Section 5.03(h) shall require
any Lender to make available its tax returns (or any other information relating
to its taxes which it deems to be confidential) or to attempt to obtain any such
refund, deduction or credit (including any interest paid by the relevant
Governmental Authority and received by such Lender), which attempt would be
inconsistent with any reporting position otherwise taken by any Lender on its
applicable tax returns.
 
(j) FATCA.  If a payment made to a Lender under this Agreement would be subject
to U.S. Federal withholding tax imposed by FATCA if such Lender fails to comply
with the applicable reporting requirements of FATCA (including those contained
in Section 1471(b) or 1472(b) of the Code, as applicable), such Lender shall
deliver to the Borrower or the Administrative Agent, at the time or times
prescribed by law and at such time or times reasonably requested by the Borrower
or the Administrative Agent, such documentation prescribed by applicable law
(including as prescribed by Section 1471(b)(3)(C)(i) of the Code) and such
additional documentation reasonably requested by the Borrower or the
Administrative Agent as may be necessary for the Borrower or the Administrative
Agent to comply with its obligations under FATCA, to determine that such Lender
has complied with such Lender’s obligations under FATCA or to determine the
amount to deduct and withhold from any such  payments.  For purposes of this
Section 5.03(i), FATCA shall include any regulations or official interpretations
of FATCA.
 
Section 4.09 Mitigation Obligations; Replacement of Lenders.
 
(a) Designation of Different Lending Office.  If any Lender requests
compensation under Section 5.01, or if the Borrower is required to pay any
additional amount to any Lender or any Governmental Authority for the account of
any Lender pursuant to Section 5.03, then such Lender shall use reasonable
efforts to designate a different lending office for funding or booking its Loans
hereunder or to assign its rights and obligations hereunder to another of its
offices, branches or affiliates, if, in the judgment of such Lender, such
designation or assignment (i) would eliminate or reduce amounts payable pursuant
to Section 5.01 or Section 5.03, as the case may be, in the future and (ii)
would not subject such Lender to any unreimbursed cost or expense and would not
otherwise be disadvantageous to such Lender.  The Borrower hereby agrees to pay
all reasonable costs and expenses incurred by any Lender in connection with any
such designation or assignment.
 
(b) If any Lender requests compensation under Section 5.01, or if the Borrower
is required to pay additional amounts to any Lender or any Governmental
Authority for the account of any Lender pursuant to Section 5.03 and, in each
case, such Lender has declined or is unable to designate a different lending
office in accordance with Section 5.04(a), or if any Lender is a Defaulting
Lender, 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, and consents required by, Section 12.04), all of its interests,
rights and obligations under this Agreement and the related Loan Documents to an
Eligible Assignee that shall assume such
 

 
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(c) obligations (which assignee may be another Lender, if a Lender accepts such
assignment); provided, that:
 
(i) the Borrower shall have paid to the Administrative Agent the assignment fee
(if any);
 
(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 and under the other Loan Documents (including any amounts under
Section 5.02) 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);
 
(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
thereafter; and
 
(iv) such assignment does not conflict with applicable law.
 
Section 4.10 Illegality.  Notwithstanding any other provision of this Agreement,
in the event that it becomes unlawful for any Lender or its applicable lending
office to honor its obligation to make or maintain Eurodollar Loans either
generally or having a particular Interest Period hereunder, then (a) such Lender
shall promptly notify the Borrower and the Administrative Agent thereof and such
Lender’s obligation to make such Eurodollar Loans shall be suspended (the
“Affected Loans”) until such time as such Lender may again make and maintain
such Eurodollar Loans and (b) all Affected Loans which would otherwise be made
by such Lender shall be made instead as ABR Loans (and, if such Lender so
requests by notice to the Borrower and the Administrative Agent, all Affected
Loans of such Lender then outstanding shall be automatically converted into ABR
Loans on the date specified by such Lender in such notice) and, to the extent
that Affected Loans are so made as (or converted into) ABR Loans, all payments
of principal which would otherwise be applied to such Lender’s Affected Loans
shall be applied instead to its ABR Loans.
 
ARTICLE V
 
Conditions Precedent
 
Section 5.01 Effective Date.  The obligations of the Lenders 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 Lenders, and the Arrangers shall have received
all commitment, facility and agency fees, including those set forth in the Fee
Letters, and all other fees and 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 (including, without limitation, the fees and expenses of Vinson &
Elkins LLP, counsel to the Administrative Agent).
 

 
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(b) The Administrative Agent shall have received a certificate of the
Responsible Officer of each Credit Party setting forth (i) resolutions of its
board of directors with respect to the authorization of such Credit Party 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 such
Credit Party (A) who are authorized to sign the Loan Documents to which such
Credit Party is a party and (B) 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 Organizational
Documents of such Credit Party, 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 any Credit Party
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
each Credit Party.
 
(d) The Administrative Agent shall have received a compliance certificate which
shall be substantially in the form of Exhibit D, duly and properly executed by a
Responsible Officer of the Borrower and dated as of the Effective Date.
 
(e) The Administrative Agent shall have received from each party hereto
counterparts (in such number as may be requested by the Administrative Agent) of
this Agreement signed on behalf of such party.
 
(f) The Administrative Agent shall have received duly executed Notes (if
requested by any Lender) payable to each such Lender in a principal amount equal
to its Maximum Credit Amount dated as of the date hereof.
 
(g) The Administrative Agent shall have received from each party thereto duly
executed counterparts (in such number as may be requested by the Administrative
Agent) of the Security Instruments, including the Guaranty Agreement, and the
other Security Instruments described on Exhibit E.  In connection with the
execution and delivery of the Security Instruments, the Administrative Agent
shall be reasonably satisfied that the Security Instruments create first
priority, perfected Liens (subject only to Excepted Liens identified in clauses
(a) to (d) and (f) of the definition thereof, but subject to the provisos at the
end of such definition) on at least 80% of the Total Reserve Value of the Oil
and Gas Properties evaluated in the Initial Reserve Report.
 
(h) The Administrative Agent and the Lenders shall be reasonably satisfied with
the environmental condition of the Oil and Gas Properties of the Borrower and
its Subsidiaries.
 
(i) The Administrative Agent shall have received a certificate of a Responsible
Officer of the Borrower certifying that the Borrower has received all consents
and approvals required by Section 7.03.
 

 
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(j) The Administrative Agent and the Lenders shall have received the financial
statements referred to in Section 7.04(a) and the Initial Reserve Report
accompanied by a certificate covering the matters described in Section 8.12(c).
 
(k) The Administrative Agent shall have received appropriate UCC search
certificates reflecting no prior Liens encumbering the Properties of the
Borrower and the Subsidiaries for each of the following jurisdictions:
Minnesota, Montana and North Dakota and any other jurisdiction requested by the
Administrative Agent; other than those being assigned or released on or prior to
the Effective Date or Liens permitted by Section 9.03.
 
(l) The assignment contemplated by the Assignment of Notes and Liens shall have
been consummated.
 
(m) 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 70% of the Total Reserve
Value of the Oil and Gas Properties evaluated in the Initial Reserve Report.
 
(n) The Administrative Agent shall have received an opinion of Faegre Baker
Daniels LLP, special counsel to the Borrower and local counsel in each of the
following states: Montana, North Dakota and any other jurisdictions requested
substantially in form and substance satisfactory to the Administrative Agent.
 
(o) 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.
 
(p) The Administrative Agent shall have received from the Borrower a list of all
Oil and Gas Properties of the Credit Parties not subject to a Lien of the
Security Instruments as of the Effective Date substantially in the form of
Exhibit I attached hereto.
 
(q) The Administrative Agent shall have received such other documents as the
Administrative Agent or special counsel to the Administrative Agent or any
Lender may reasonably request.
 
The Administrative Agent shall notify the Borrower and the Lenders of the
Effective Date, and such notice shall be conclusive and
binding.  Notwithstanding the foregoing, the obligations of the Lenders to make
Loans and of 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., Houston time, on February
29, 2012 (and, in the event such conditions are not so satisfied or waived, the
Commitments shall terminate at such time).
 
Section 5.02 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:
 

 
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Section 5.03 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.
 
(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 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.
 
(b) The representations and warranties of the Credit Parties 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.
 
(c) 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 that enjoins, prohibits or
restrains 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.
 
(d) No litigation shall be pending or threatened, which does or, with respect to
any threatened litigation, seeks to, enjoin, prohibit or restrain, the making or
repayment of any Loan, the issuance, amendment, renewal, extension or repayment
of any Letter of Credit or any participations therein or the consummation of the
transactions contemplated by this Agreement or any other Loan Document.
 
(e) The receipt by the Administrative Agent of a Borrowing Request in accordance
with Section 2.03 or a request for a Letter of Credit in accordance with Section
2.08(b), as applicable.
 
Each 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 Borrower on the date thereof as to the
matters specified in Section 6.02(a) through (f), except that the Borrower’s
representation and warranty with respect to Section 6.02(d) shall be deemed to
be to its knowledge.
 
Section 5.04 Additional Conditions to Credit Events.  In addition to the
conditions precedent set forth in Section 6.02, so long as any Lender is a
Defaulting Lender, the Issuing Bank shall not be required to issue, amend or
increase any Letter of Credit, unless it is satisfied that the LC Exposure will
be 100% covered by the Commitments of the Non-Defaulting Lenders and/or the
Borrower will Cash Collateralize the LC Exposure in accordance with Section
 

 
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Section 5.05 4.03(c)(iii), and participating interests in any such newly issued
or increased Letter of Credit shall be allocated among Non-Defaulting Lenders in
accordance with Section 4.03(c)(iii)(A) (and Defaulting Lenders shall not
participate therein).
 
ARTICLE VI
 
Representations and Warranties
 
The Borrower represents and warrants to the Lenders that:
 
Section 6.01 Organization; Powers.  Each Credit Party is an Eligible Obligor, 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 6.02 Authority; Enforceability.  The Transactions are within each Credit
Party’s corporate, limited partnership or limited liability powers and have been
duly authorized by all necessary corporate, limited partnership, limited
liability company and, if required, stockholder action (including, without
limitation, any action required to be taken by any class of directors of the
Borrower or any other Person, whether interested or disinterested, in order to
ensure the due authorization of the Transactions).  Each Loan Document to which
the Credit Parties are a party has been duly executed and delivered by each
Credit Party and constitutes a legal, valid and binding obligation of each such
Credit Party, 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 6.03 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 (including shareholders or any
class of directors, whether interested or disinterested, of the Borrower or any
other Person), nor is any such consent, approval, registration, filing or other
action necessary for the validity or enforceability of any Loan Document or the
consummation of the transactions contemplated thereby, except such as have been
obtained or made and are in full force and effect other than (i) the recording
and filing of the Security Instruments as required by this Agreement, (ii) those
third party approvals or consents which, if not made or obtained, would not
cause a Default hereunder, could not reasonably be expected to have a Material
Adverse Effect or do not have an adverse effect on the enforceability of the
Loan Documents and (iii) the filing by the Borrower of a current report on Form
8-K with the SEC disclosing this Agreement and the Transactions, (b) will not
violate any applicable law or regulation or any Organizational Document of any
Credit 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 Credit Party or its Properties, or give rise to a right thereunder to
require any payment to be made by any Credit Party and (d) will not result in
 

 
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Section 6.04 the creation or imposition of any Lien on any Property of any
Credit Party (other than the Liens created by the Loan Documents).
 
Section 6.05 Financial Condition; No Material Adverse Change.
 
(a) The Borrower has heretofore furnished to the Lenders its consolidated
balance sheet and statements of income, stockholders equity and cash flows (i)
as of and for the fiscal year ended December 31, 2010, reported on by Mantyla
McReynolds LLC, independent public accountants, and (ii) as of and for the
fiscal quarter and portion of the fiscal year ended September 30, 2011,
certified by its chief financial officer.  Such financial statements present
fairly, in all material respects, the financial position and results of
operations and cash flows of the Borrower and its Consolidated Subsidiaries as
of such dates and for such periods 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) Since September 30, 2011, (i) there has been no event, development or
circumstance that has had or could reasonably be expected to have a Material
Adverse Effect and (ii) the business of the Borrower and its Subsidiaries has
been conducted only in the ordinary course consistent with past business
practices.
 
(c) Neither the Borrower nor any Subsidiary 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 or
unrealized or anticipated losses from any unfavorable commitments, except as
referred to or reflected or provided for in the financial statements described
in Section 7.04(a) or in the most recent financial statements delivered pursuant
to Section 8.01(a) or (b).
 
Section 6.06 Litigation.
 
(a) Except as set forth on Schedule 7.05 on the Effective Date or as otherwise
disclosed in writing to the Administrative Agent and the Lenders after the
Effective Date (which shall supplement 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 Borrower, threatened
against or affecting the Borrower or any Subsidiary (i) 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 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 6.07 Environmental Matters.  Except for such matters that, individually
or in the aggregate, could not reasonably be expected to have a Material Adverse
Effect on any Credit Party:
 

 
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Section 6.08 The Credit Parties and each of their respective Properties and
operations thereon are, and within all applicable statute of limitation periods
have been, in compliance with all applicable Environmental Laws.
 
(a) The Credit Parties have obtained all Environmental Permits required for
their respective operations and each of their Properties, with all such
Environmental Permits being currently in full force and effect, and none of the
Credit Parties have received any written notice or otherwise has knowledge that
any such existing Environmental Permit will be revoked or that any application
for any new Environmental Permit or renewal of any existing Environmental Permit
will be protested or denied.
 
(b) There are no claims, demands, suits, orders, inquiries, or proceedings
concerning any violation of, or any liability (including as a potentially
responsible party) under, any applicable Environmental Laws that is pending or,
to Borrower’s knowledge, threatened against the Credit Parties or any of their
respective Properties or as a result of any operations at such Properties.
 
(c) None of the Properties of the Credit Parties contain or have contained
any:  (i) underground storage tanks; (ii) asbestos-containing materials; (iii)
landfills or dumps; (iv) hazardous waste management units as defined pursuant to
RCRA or any comparable state law; or (v) sites on or nominated for the National
Priority List promulgated pursuant to CERCLA or any state remedial priority list
promulgated or published pursuant to any comparable state law.
 
(d) There has been no Release or, to any Credit Party’s knowledge, threatened
Release, of Hazardous Materials at, on, under or from any Credit Party’s
Properties, there are no investigations, remediations, abatements, removals, or
monitorings of Hazardous Materials required under applicable Environmental Laws
at such Properties and, to the knowledge of any Credit Party, none of such
Properties are adversely affected by any Release or threatened Release of a
Hazardous Material originating or emanating from any other real property.
 
(e) No Credit Party has received any written notice asserting an alleged
liability or obligation under any applicable Environmental Laws with respect to
the investigation, remediation, abatement, removal, or monitoring of any
Hazardous Materials at, under, or Released or threatened to be Released from any
real properties offsite any Credit Party’s Properties and, to any Credit Party’s
knowledge, there are no conditions or circumstances that could reasonably be
expected to result in the receipt of such written notice.
 
(f) There has been no exposure of any Person or Property to any Hazardous
Materials as a result of or in connection with the operations and businesses of
any of the Credit Parties’ Properties that could reasonably be expected to form
the basis for a claim for damages or compensation.
 
(g) The Credit Parties have provided to the Lenders complete and correct copies
of all environmental site assessment reports, investigations, studies, analyses,
and correspondence on environmental matters (including matters relating to any
alleged non-compliance with or liability under Environmental Laws) that are in
any of the Credit Parties’ possession or control and relating to their
respective Properties or operations thereon.
 

 
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(h) Compliance with the Laws and Agreements; No Defaults.
 
(i) Each of the Credit Parties is in compliance with all Governmental
Requirements applicable to it or its Property and all agreements and other
instruments binding upon it or its Property, and possesses all licenses,
permits, franchises, exemptions, approvals and other authorizations granted by
Governmental Authorities 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.
 
(j) No Credit Party is in default nor has any event or circumstance occurred
which, but for the expiration of any applicable grace period or the giving of
notice, or both, would constitute a default or would require a Credit Party to
Redeem or make any offer to Redeem under any indenture, note, credit agreement
or instrument pursuant to which any Material Debt is outstanding or by which any
Credit Party or any of their Properties is bound.
 
(k) No Default has occurred and is continuing.
 
Section 6.09 Investment Company Act.  No Credit 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.
 
Section 6.10 Taxes.  Each Credit Party 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 such
Credit Party, 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 each Credit Party in respect of Taxes and
other governmental charges are, in the reasonable opinion of such Credit Party,
adequate.  No Liens for Taxes have been filed and, to the knowledge of the
Credit Parties, no claim is being asserted with respect to any such Tax or other
such governmental charge.
 
Section 6.11 ERISA.
 
(a) Each Credit Party and each ERISA Affiliate have complied in all material
respects with ERISA and, where applicable, the Code regarding each Plan except
to the extent the failure to do so could not reasonably be expected to result in
a Material Adverse Effect.
 
(b) Each Plan is, and has been, established and maintained in substantial
compliance with its terms, ERISA and, where applicable, the Code except to the
extent the failure to do so could not reasonably be expected to result in a
Material Adverse Effect.
 
(c) No act, omission or transaction has occurred which could result in
imposition on any Credit Party or any ERISA Affiliate (whether directly or
indirectly) of (i) either a civil penalty assessed pursuant to subsections (c),
(i), (l) or (m) 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 except to the extent such penalty or liability could
not reasonably be expected to result in a Material Adverse Effect.
 

 
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(d) Full payment when due has been made of all amounts which a Credit Party 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 except to the
extent the failure to do so could not reasonably be expected to result in a
Material Adverse Effect.
 
(e) No Credit Party 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 a Credit Party
or any ERISA Affiliate in its sole discretion at any time without any material
liability.
 
(f) No Credit Party 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 employee pension benefit plan, as
defined in section 3(2) of ERISA, that is subject to Title IV of ERISA, section
302 of ERISA or section 412 of the Code.
 
Section 6.12 Disclosure; No Material Misstatements.  The Borrower has disclosed
to the Administrative Agent and the Lenders all agreements, instruments and
corporate or other restrictions to which it or any other Credit Party 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.  None of the other reports, financial statements, certificates or other
information furnished by or on behalf of any Credit Party 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 Credit Parties represent
only that such information was prepared in good faith based upon assumptions
believed to be reasonable at the time.  There is no fact peculiar to the
Borrower or other Credit Party 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 Borrower or any other
Credit Party prior to, or on, the date hereof in connection with the
transactions contemplated hereby.  None of the Credit Parties provided any
statements or conclusions in the preparation of any Reserve Report which were
based upon or include misleading information or failed to take into account
material information regarding the matters reported therein, it being understood
that projections concerning volumes attributable to the Oil and Gas Properties
and production and cost estimates contained in each Reserve Report are
necessarily based upon professional opinions, estimates and projections and that
the Credit Parties do not warrant that such opinions, estimates and projections
will ultimately prove to have been accurate.
 
Section 6.13 Insurance.  Each Credit Party has, and has caused all of its
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
 

 
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Section 6.14 the assets and operations of the Borrower and its
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 6.15 Restriction on Liens.  No Credit Party is a party to any material
agreement or arrangement (other than Capital Leases creating Liens permitted by
Section 9.03(c), but 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 Administrative Agent and
the Lenders on or in respect of their Properties to secure the Indebtedness and
the Loan Documents.
 
Section 6.16 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 Borrower has no
Subsidiaries.
 
Section 6.17 Location of Business and Offices.  The Borrower’s jurisdiction of
organization is Minnesota; the name of the Borrower as listed in the public
records of its jurisdiction of organization, as of the date hereof, is Northern
Oil and Gas, Inc.; and the organizational identification number of the Borrower
in its jurisdiction of organization is 3896342-5 (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 principal place of business and
chief executive office is 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 6.18 Properties; Titles, Etc.
 
(a) Each Credit Party has good and defensible title to the Hydrocarbon Interests
in 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, each Credit Party 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 such Credit Party 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 such Credit Party’s net
revenue interest in such Property.
 
(b) All material leases and agreements necessary for the conduct of the business
of the Credit Parties 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
 

 
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(c) would give rise to a default under any such lease or leases, which could
reasonably be expected to have a Material Adverse Effect.
 
(d) The rights and Properties presently owned, leased or licensed by the Credit
Parties including, without limitation, all easements and rights of way, include
all rights and Properties necessary to permit the Credit Parties to conduct
their business in all material respects in the same manner as its business has
been conducted prior to the date hereof.
 
(e) All of the Properties of the Credit Parties which are reasonably necessary
for the operation of their businesses are in good working condition and are
maintained in accordance with prudent business standards.
 
(f) Each Credit Party owns, or is licensed to use, all trademarks, tradenames,
copyrights, patents and other intellectual Property material to its business,
and the use thereof by such Credit Party does not and will 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 Credit Parties 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 6.19 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 Credit Parties
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 Credit Parties.  Specifically in connection with
the foregoing, except for those as could not be reasonably expected to have a
Material Adverse Effect, (a) no Oil and Gas Property of any Credit Party 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 (b)
none of the wells comprising a part of the Oil and Gas Properties (or Properties
unitized therewith) of any Credit Party 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 such Credit Party.  All pipelines,
wells, gas processing plants, platforms and other material improvements,
fixtures and equipment owned in whole or in part by any Credit Party 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 any Credit Party, in a manner consistent with such Credit
Party’s 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).
 

 
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Section 6.20 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 any Credit Party to deliver Hydrocarbons produced from the Oil and
Gas Properties at some future time without then or thereafter receiving full
payment therefor exceeding two percent (2%) of the Credit Parties’ Proved
Reserves of natural gas (on an mcf equivalent basis) in the aggregate.
 
Section 6.21 Marketing of Production.  Except as set forth on Schedule 7.19 or
on the most recent certificate delivered pursuant to Section 8.12(c), no Credit
Party is a party to any material agreements which is not cancelable on sixty
(60) days notice or less without penalty or detriment for the sale of production
from the Credit Parties’ 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
thereof.
 
Section 6.22 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(e), sets forth, a true and complete list of all Swap Agreements
of each Credit Party, the material terms thereof (including the type, term,
effective date, termination date and notional amounts or volumes), all credit
support agreements relating thereto (including any margin required or supplied)
and the counterparty to each such agreement.
 
Section 6.23 Use of Loans and Letters of Credit.  The proceeds of the Loans and
the Letters of Credit shall be used (a) to facilitate the transactions
contemplated by the Assignment of Notes and Liens, (b) to provide for the
issuance of Letters of Credit, (c) to pay fees, commissions and expenses in
connection with the Loan Documents and the transactions contemplated thereby,
(d) to provide working capital for exploration and production operations,
acquisition of oil and gas properties and for general corporate purposes and (e)
for Restricted Payments permitted under Section 9.04.  The Credit Parties are
not engaged principally, or as one of its or their important activities, in the
business of extending credit for the purpose, whether immediate, incidental or
ultimate, of buying or carrying margin stock (within the meaning of Regulation
T, U or X of the Board).  No part of the proceeds of any Loan or Letter of
Credit will be used for any purpose which violates the provisions of Regulations
T, U or X of the Board.
 
Section 6.24 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 Credit Parties, taken as a whole, will
exceed the aggregate Debt of the Credit Parties on a consolidated basis, as the
Debt becomes absolute and matures, (b) no Credit Party has incurred and does not
intend to incur, and does 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 each Credit Party 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) no Credit Party
will have (and has no reason to believe that it will have thereafter)
unreasonably small capital for the conduct of its business.
 

 
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Section 6.25 Casualty Events.  Since December 31, 2010, neither the business nor
any Properties of any Credit Party have been materially and adversely affected
as a result of any fire, explosion, earthquake, flood, drought, windstorm,
accident, strike or other labor disturbance, embargo, requisition or taking of
Property or cancellation of contracts, permits or concessions by any domestic or
foreign Governmental Authority, riot, activities or armed forces or acts of God
or of any public enemy.
 
Section 6.26 Material Agreements.  Set forth on Schedule 7.24 hereto 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 7.24, is a
complete and correct list of all material agreements and other instruments
maintained by the Credit Parties setting forth each counterparty thereto (other
than the Loan Documents, exploration and/or development agreements and joint
operating agreements to which any Credit Party is a party) relating to the
purchase, transportation by pipeline, gas processing, marketing, development,
sale and supply of Hydrocarbons, farmout arrangements, contract operating
agreements or other material contracts (excluding oil and gas leases of the
Credit Parties and joint operating agreements to which any Credit Party is a
party) to which the Credit Parties are a party or by which its Properties is
bound, in each case for which breach, nonperformance, cancellation or failure to
renew could reasonably be expected to have a Material Adverse Effect
(collectively “Material Agreements”) and copies of such documents have been
provided to the Administrative Agent.  All such agreements are in full force and
effect and the Credit Parties are not in default thereunder, nor is there any
uncured default by any Affiliate predecessor in interest to any Credit Party or,
to any Credit Party’s knowledge, by any predecessor in interest to such Credit
Party (other than an Affiliate predecessor) or counterparty thereto, nor has any
Credit Party altered any material item of such agreements since the Effective
Date without the prior written consent of the Lenders.
 
Section 6.27 No Brokers.  No Person is entitled to any brokerage fee or finder’s
fee or similar fee or commission in connection with arranging the Loans
contemplated by this Agreement.
 
Section 6.28 Reliance.  In connection with the negotiation of and the entering
into this Agreement, the Credit Parties acknowledge and represent that none of
the Lenders, the Administrative Agent or any representative of any of the
foregoing is acting as a fiduciary or financial or investment advisor for it; it
is not relying upon any representations (whether written or oral) of such
Persons; they have consulted with their own legal, regulatory, tax, business
investment, financial and accounting advisors to the extent it has deemed
necessary, and they have made their own investment, hedging, and trading
decisions based upon their own judgment and upon any advice from such advisors
as they have deemed necessary and not upon any view expressed by any Lender, the
Administrative Agent or any representative of any of the foregoing; they have
not been given by any Lender, the Administrative Agent or any representative of
any of the foregoing (directly or indirectly through any other Person) any
advice, counsel, assurance, guarantee, or representation whatsoever as to the
expected or projected success, profitability, return, performance, result,
effect, consequence, or benefit (either legal, regulatory, tax, financial,
accounting, or otherwise) of this Agreement or the transactions contemplated
hereby; and they are entering into this Agreement and the other Loan Documents
with a full understanding of all of the risks hereof and thereof (economic and
 

 
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Section 6.29 otherwise), and they are capable of assuming and willing to assume
(financially and otherwise) those risks.
 
Section 6.30 Payments by Purchasers of Production.  All proceeds from the sale
of any Credit Party’s interests in Hydrocarbons from its Oil and Gas Properties
are currently being paid in full by the purchaser thereof on a timely basis and
at prices and terms comparable to market prices and terms generally available at
the time such prices and terms were negotiated for oil and gas production from
producing areas situated near such Oil and Gas Properties, and none of such
proceeds are currently being held in suspense by such purchaser or any other
Person.
 
Section 6.31 Existing Accounts Payable.  As of the Effective Date, set forth on
Schedule 7.28 hereto is a complete and correct list of all existing accounts
payable of the Borrower that are more than sixty (60) days past due.
 
Section 6.32 Foreign Corrupt Practices.  Neither the Borrower nor any of its
Subsidiaries, nor any director, officer, agent, employee or Affiliate of the
Borrower or any of its Subsidiaries is aware of or has taken any action,
directly or indirectly, that would result in a material violation by such
Persons of the FCPA, including without limitation, making use of the mails or
any means or instrumentality of interstate commerce corruptly in furtherance of
an offer, payment, promise to pay or authorization of the payment of any money,
or other property, gift, promise to give, or authorization of the giving of
anything of value to any “foreign official” (as such term is defined in the
FCPA) or any foreign political party or official thereof or any candidate for
foreign political office, in contravention of the FCPA; and, the Borrower, its
Subsidiaries and its and their Affiliates have conducted their business in
material compliance with the FCPA and have instituted and maintain policies and
procedures designed to ensure, and which are reasonably expected to continue to
ensure, continued compliance therewith.
 
Section 6.33 Money Laundering.  The operations of the Borrower and its
Subsidiaries are and have been conducted at all times in material compliance
with applicable financial recordkeeping and reporting requirements of the Money
Laundering Laws, and no action, suit or proceeding by or before any court or
governmental agency, authority or body or any arbitrator involving the Borrower
or any of its Subsidiaries with respect to the Money Laundering Laws is pending
or, to the best knowledge of the Borrower, threatened.
 
Section 6.34 OFAC.  Neither the Borrower nor any of its Subsidiaries, nor any
director, officer, agent, employee or Affiliate of the Borrower or any of its
Subsidiaries is currently subject to any material U.S. sanctions administered by
OFAC, and the Borrower will not directly or indirectly use the proceeds from the
Loans or lend, contribute or otherwise make available such proceeds to any
Subsidiary, joint venture partner or other Person, for the purpose of financing
the activities of any Person currently subject to any U.S. sanctions
administered by OFAC.
 
ARTICLE VII
 
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
 

 
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Documents shall have been paid in full and all Letters of Credit shall have
expired or terminated and all LC Disbursements shall have been reimbursed, the
Borrower covenants and agrees with the Lenders that:
 
Section 7.01 Financial Statements; Ratings Change; Other Information.  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 ninety (90) days after
the end of each fiscal year of the Borrower, its audited consolidated and
consolidating balance sheet and related statements of operations, stockholders’
equity and cash flows as of the end of and for such year, setting forth in each
case in comparative form the figures for the previous fiscal year, all reported
on by (i) Deloitte & Touche LLP, (ii) any independent public accountants of
recognized national standing or (iii) any other independent public accountant
reasonably acceptable to the Administrative Agent (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 and consolidating
financial statements present fairly in all material respects the financial
condition and results of operations of the Borrower and its Consolidated
Subsidiaries on a consolidated and consolidating basis in accordance with GAAP
consistently applied.
 
(b) Quarterly Financial Statements.  Within sixty (60) days after the end of
each fiscal quarter, a balance sheet, income statement and statement of the
cumulative cash flows of the Borrower (including all notes thereto) for the
period from the beginning of the then current fiscal year to the end of such
fiscal quarter, prepared by the Borrower and accompanied by a certification of
an Responsible Officer of the Borrower, dated the date of the delivery of the
financial statements to the Administrative Agent and each Lender, and further
certifying that no Default exists under this Agreement and that such financial
statements present fairly in all material respects the consolidated and
consolidating financial position and results of operations of the Borrower on a
consolidated and consolidating basis in accordance with GAAP, subject to normal
year-end adjustments and the absence of footnotes (other than those reasonably
required to explain financial data).
 
(c) Certificate of Financial Officer – Compliance.  Concurrently with any
delivery of financial statements under Section 8.01(a) or Section 8.01(b), a
certificate of the Chief Executive Officer or a Financial Officer in
substantially the form of Exhibit D attached hereto (i) certifying as to whether
a Default has occurred and, if a Default has occurred, specifying the details
thereof and any action taken or proposed to be taken with respect thereto, (ii)
setting forth reasonably detailed calculations demonstrating compliance with
Section 8.14(a) and Section 9.01, (iii) stating whether any change in GAAP or in
the application thereof has occurred since the date of the audited financial
statements referred to in Section 7.04 and, if any such change has occurred,
specifying the effect of such change on the financial statements accompanying
such certificate, and (iv) if, at any time, the Borrower has any Consolidated
Subsidiaries, setting forth consolidating spreadsheets that show all
Consolidated Subsidiaries and the eliminating entries, in such form as would be
presentable to the auditors of the Borrower.
 
(d) Certificate of Accounting Firm – Defaults.  Concurrently with any delivery
of financial statements under Section 8.01(a), a certificate of the accounting
firm that
 

 
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(e) reported on such financial statements stating whether they obtained
knowledge during the course of their examination of such financial statements of
any Default (which certificate may be limited to the extent required by
accounting rules or guidelines).
 
(f) Certificate of Financial Officer – Swap Agreements.  Concurrently with any
delivery of financial statements under Section 8.01(a) or Section 8.01(b), a
certificate of a Financial Officer, in substantially the form of Exhibit G
attached hereto, 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
Credit 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.
 
(g) Certificate of Insurer – Insurance Coverage.  Upon change or renewal, a
certificate of insurance coverage from each insurer with respect to the
insurance required by Section 8.07, in form and substance satisfactory to the
Administrative Agent, and, if requested by the Administrative Agent or any
Lender, all copies of the applicable policies.
 
(h) Other Accounting Reports.  Promptly upon receipt thereof, a copy of each
other report or letter submitted to any Credit Party by independent accountants
in connection with any annual, interim or special audit made by them of the
books of the Borrower or any such Subsidiary, and a copy of any response by any
Credit Party, or the board of directors of any Credit Party, to such letter or
report.
 
(i) 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 Borrower or any Subsidiary with the
SEC, or with any national securities exchange, or distributed by the Borrower to
its shareholders generally, as the case may be; provided, however that the
Borrower shall be deemed to have complied with the requirements of this Section
8.01(h) to the extent that such reports, proxy statements and other materials
are publicly available on the SEC’s EDGAR filing system or any successor system
and the Borrower has notified the Administrative Agent that such materials are
available.  Notwithstanding the foregoing proviso, the Borrower shall provide
copies of any materials required under this Section 8.01(h) upon request by the
Administrative Agent.
 
(j) 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.
 
(k) 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 to the extent that any Credit Party
controls the marketing and the sale of such Hydrocarbons (which listings shall
include, with respect to each such purchaser, the legal name and address
thereof, the appropriate contact person thereat, the Oil and Gas
 

 
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(l) Properties from which Hydrocarbons were purchased and the volume of
Hydrocarbons purchased).
 
(m) Notice of Sales of Oil and Gas Properties.  In the event any Credit Party
intends to sell, transfer, assign or otherwise dispose of any Oil or Gas
Properties or any Equity Interests in any other Credit Party in accordance with
Section 9.12, prior written notice of such disposition, the price thereof and
the anticipated date of closing and any other details thereof requested by the
Administrative Agent or any Lender.
 
(n) Notice of Casualty Events.  Prompt written notice, and in any event within
three (3) Business Days of the occurrence of any Casualty Event or the
commencement of any action or proceeding that could reasonably be expected to
result in a Casualty Event.
 
(o) Information Regarding Credit Parties.  Prompt written notice (and in any
event within ten Business Days prior thereto) of any change (i) in any Credit
Party’s organizational name, (ii) in the location of any Credit Party’s chief
executive office or principal place of business, (iii) in any Credit Party’s
identity or organizational structure or in the jurisdiction in which such Person
is organized or formed, (iv) in any Credit Party’s jurisdiction of organization
or such Person’s organizational identification number in such jurisdiction of
organization and (v) in any Credit Party’s federal taxpayer identification
number.
 
(p) Other Reports.  The Borrower shall prepare and provide the Lenders and
Administrative Agent the following reports:
 
(i) on a quarterly basis by the 45th day following each calendar quarter, a
report setting forth, for such calendar quarter, 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 quarter from
the Oil and Gas Properties with Proved Developed Producing Reserves described in
the most recent Reserve Report, and setting forth the related ad valorem,
severance and production taxes and lease operating expenses attributable thereto
and incurred for each such calendar quarter;
 
(ii) after the occurrence and during the continuance of any Borrowing Base
Deficiency, the Borrower shall provide, on a monthly basis on the 15th day of
each such month, a report setting forth, for the immediately preceding calendar
month, the Credit Parties’ Excess Cash Flow;
 
(iii) concurrently with any delivery of financial statements under Section
8.01(a), an 12 month budget for the Borrower and its Subsidiaries for the
current calendar year prepared by the management of the Borrower;
 
(iv) on a quarterly basis by the 45th day after the end of each calendar
quarter, an updated report setting forth the Credit Parties’ forecasted Capital
Expenditure budget for the following twelve (12) month period; and
 
(v) such other information as the Administrative Agent may reasonably request,
including, but not limited to, each of the following to the extent
 

 
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(vi) available: an unaudited income statement, a consolidated balance sheet and
a statement of cash flow (with such statement to show any variations from the
budget previously delivered), copies of any Credit Party’s bank account
statements, statement of expenses for the preceding month, notice of any
material changes with regard to oil and gas prices received, contracts or
production expenses or any material litigation affecting the operation of the
Oil and Gas Properties of any Credit Party.
 
(q) Notices of Certain Changes.  Subject to Section 9.21, promptly, but in any
event within five (5) Business Days after the execution thereof, copies of any
amendment, modification or supplement to the Organizational Documents, any
preferred stock designation or any other organizational document of any Credit
Party.
 
(r) Notice of Purchase of Oil and Gas Properties.  In the event a Credit Party
acquires additional Oil and Gas Properties, the Borrower shall deliver promptly,
but in any event within forty-five (45) days after the end of each calendar
quarter in which such acquisition occurred, to the Administrative Agent a list
of all Oil and Gas Properties of the Credit Parties (including each such newly
acquired Oil and Gas Property) not subject to a Lien of the Security Instruments
at the time of delivery of such list to the Administrative Agent, in
substantially the form of Exhibit I attached hereto.
 
(s) Non-Consent Election.  Promptly, but in any event within five (5) Business
Days after any Credit Party’s election thereof, to withhold consent to
participate in any wells located on Oil and Gas Properties.
 
(t) Other Requested Information.  Promptly following any request therefor, such
other information regarding the operations, business affairs and financial
condition of any Credit Party, or compliance with the terms of this Agreement or
any other Loan Document, in each case, as the Administrative Agent or any Lender
may reasonably request.
 
(u) Surface Acreage Reports.  As soon as available and in any event within
thirty (30) days after the last day of each calendar quarter, a report certified
as true and complete in all material respects by a Responsible Officer, in form
and substance satisfactory to Administrative Agent, setting forth as of the last
Business Day of such calendar quarter an accounting of all surface acreage sold
by the Borrower or any Guarantor, the gross and net proceeds received therefore
and the amount of such proceeds distributed to  the partners of Borrower.
 
(v) Tax Returns.  As soon as available and in any event within fifteen (15) days
after the filing of any tax return, or any other filing with a taxing authority,
of the Borrower, any Guarantor or any Subsidiary of either thereof, a copy of
such filed tax return or other filing, together with all exhibits and
attachments thereto.
 
Section 7.02 Notices of Material Events.  The Borrower will furnish to the
Administrative Agent and each Lender prompt written notice of the following:
 
(a) the occurrence of any Default;
 

 
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(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 a Credit Party or any Affiliate
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, if adversely determined, could reasonably be expected to result in a
Material Adverse Effect; and
 
(c) 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 7.03 Existence; Conduct of Business.  The Borrower will, and will cause
each 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
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 9.11.
 
Section 7.04 Payment of Obligations.  The Borrower will, and will cause each
Subsidiary to, pay its obligations, including Tax liabilities of each such
Credit Party and its Subsidiaries before the same shall become delinquent or in
default, except where (a) the validity or amount thereof is being contested in
good faith by appropriate proceedings, (b) such Credit Party has set aside on
its books adequate reserves with respect thereto in accordance with GAAP and (c)
the failure to make payment pending such contest could not reasonably be
expected to result in a Material Adverse Effect or result in the seizure or levy
of any Property of any Credit Party.
 
Section 7.05 Performance of Obligations under Loan Documents.  The Borrower will
pay the Notes according to the reading, tenor and effect thereof, and the
Borrower will, and will cause each 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 7.06 Operation and Maintenance of Properties.  The Borrower, at its own
expense, will, and will cause each 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 practices of the industry
and in compliance with all applicable contracts and agreements and in compliance
with all Governmental Requirements, including, without limitation, applicable
proration requirements and Environmental Laws, and all applicable laws, rules
and regulations of every other Governmental Authority from time to time
 

 
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(b) 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;
 
(c) keep, preserve and maintain all Property material to the conduct of its
business in good working order and condition, ordinary wear and tear excepted,
and preserve, maintain and keep in good repair, working order and efficiency
(ordinary wear and tear excepted) all of its material Oil and Gas Properties and
other material Properties, including, without limitation, all equipment,
machinery and facilities;
 
(d) promptly pay and discharge, or make reasonable and customary efforts to
cause to be paid and discharged, all delay rentals, royalties, expenses and
indebtedness accruing under the leases or other agreements affecting or
pertaining to its Oil and Gas Properties and will do all other things necessary,
in accordance with customary industry standards, to keep unimpaired their rights
with respect thereto and prevent any forfeiture thereof or default thereunder;
 
(e) promptly perform or make reasonable and customary efforts to cause to be
performed, in accordance with industry standards, the obligations required by
each and all of the assignments, deeds, leases, sub-leases, contracts and
agreements affecting its interests in its Oil and Gas Properties and other
material Properties;
 
(f) operate its Oil and Gas Properties and other material Properties or cause or
make reasonable and customary efforts to cause such Oil and Gas Properties and
other material Properties to be operated in accordance with the practices of the
industry and in material compliance with all applicable contracts and agreements
and in compliance in all material respects with all Governmental Requirements;
and
 
(g) to the extent a Credit Party is not the operator of any Property, the Credit
Parties shall use reasonable efforts to cause the operator to comply with this
Section 8.06.
 
Section 7.07 Insurance.  The Borrower will, and will cause each Subsidiary to,
maintain, with financially sound and reputable insurance companies, insurance in
such amounts and against such risks as are customarily maintained by companies
engaged in the same or similar businesses operating in the same or similar
locations.  The loss payable clauses or provisions in said insurance policy or
policies insuring any of the collateral for the Loans shall be endorsed in favor
of and made payable to the Administrative Agent as its interests may appear and
such policies shall name the Administrative Agent and the Lenders as “additional
insureds” and “loss payees”, as applicable, and provide that the insurer will
endeavor to give at least thirty (30) days prior notice of any cancellation to
the Administrative Agent.
 
Section 7.08 Books and Records; Inspection Rights.  The Borrower will, and will
cause each Subsidiary to, keep proper books of record and account in which full,
true and correct entries are made of all dealings and transactions in relation
to its business and activities.  The Borrower will, and will cause each
Subsidiary to, permit any representatives designated by the Administrative Agent
or any Lender, upon reasonable prior notice, to visit and inspect its
 

 
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Section 7.09 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 7.10 Compliance with Laws.  The Borrower will, and will cause each
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 7.11 Environmental Matters.
 
(a) The Borrower shall at its sole expense: (i) comply, and shall cause its
Properties and operations and each Subsidiary and each Subsidiary’s Properties
and operations to comply, with all applicable Environmental Laws, the breach of
which could be reasonably expected to have a Material Adverse Effect; (ii) not
Release or threaten to Release, and shall cause each Subsidiary not to Release
or threaten to Release, any Hazardous Material on, under, about or from any of
such Credit Parties’ Properties or any other property offsite the Property to
the extent caused by a Credit Party’s operations except in compliance with
applicable Environmental Laws, the Release or threatened Release of which could
reasonably be expected to have a Material Adverse Effect; (iii) timely obtain or
file, and shall cause each Subsidiary to timely obtain or file, all
Environmental Permits, if any, required under applicable Environmental Laws to
be obtained or filed in connection with the operation or use of a Credit
Parties’ Properties, which failure to obtain or file could reasonably be
expected to have a Material Adverse Effect; (iv) promptly commence and
diligently prosecute to completion, and shall cause each Subsidiary to promptly
commence and diligently prosecute to completion, any assessment, evaluation,
investigation, monitoring, containment, cleanup, removal, repair, restoration,
remediation or other remedial obligations (collectively, the “Remedial Work”) in
the event any Remedial Work is required or reasonably necessary under applicable
Environmental Laws because of or in connection with the actual or suspected
past, present or future Release or threatened Release of any Hazardous Material
on, under, about or from any of the Credit Parties’ Properties, which failure to
commence and diligently prosecute to completion could reasonably be expected to
have a Material Adverse Effect; (v) conduct, and cause its Subsidiaries to
conduct, their respective operations and businesses in a manner that will not
expose any Property or Person to Hazardous Materials that could reasonably be
expected to form the basis for a claim for damages or compensation that could
reasonably be expected to have a Material Adverse Effect; and (vi) establish and
implement, and shall cause each Subsidiary to establish and implement, such
procedures as may be necessary to continuously determine and assure that the
Credit Parties’ 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 (5) 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 Person against
any Credit Party or their Properties of which the Borrower has knowledge in
connection with any Environmental Laws if the Borrower could reasonably
anticipate that such action will result in liability (whether individually or in
the aggregate) in excess of $100,000, not fully covered by insurance, subject to
normal deductibles.
 

 
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(c) The Borrower will, and will cause each Subsidiary to, provide environmental
assessments, audits and tests in accordance with the most current version of the
American Society of Testing Materials standards upon request by the
Administrative Agent and the Lenders if the Administrative Agent reasonably
believes (i) that there has been a Release of Hazardous Materials or (ii)
non-compliance with an Environmental Law has occurred, and that such an event
could reasonably be expected to cause a Material Adverse Effect (or as otherwise
required to be obtained by the Administrative Agent or the Lenders by any
Governmental Authority), in connection with any Oil and Gas Properties or other
Properties.
 
Section 7.12 Further Assurances.
 
(a) The Borrower at its sole expense will, and will cause each Subsidiary to,
promptly execute and deliver to the Administrative Agent all such other
documents, agreements and instruments reasonably requested by the Administrative
Agent to comply with, cure any defects or accomplish the conditions precedent,
covenants and agreements of the Credit Parties, as the case may be, in the Loan
Documents, including the Notes, if any, or to further evidence and more fully
describe the collateral intended as security for the Indebtedness, or to correct
any defect, error or inaccuracy 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 (or covering “all personal property” or “all
assets”) 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 7.13 Reserve Reports.
 
(a) Commencing on September 1, 2012 and on or before each March 1 and September
1 of each year thereafter, the Borrower shall furnish to the Administrative
Agent and the Lenders a Reserve Report evaluating the Oil and Gas Properties of
the Credit Parties as of the immediately preceding December 31st and June
30th.  The Reserve Report as of December 31 of each year shall be comprised of
(i) a Reserve Report prepared by one or more Approved Petroleum Engineers
evaluating at least 90% of both (A) the Total Reserve Value of the Proved
Developed Producing Reserves of the Credit Parties and (B) the Total Reserve
Value of the Proved Reserves of the Credit Parties and (ii) a Reserve Report
evaluating the remainder of the Oil and Gas Properties of the Credit Parties
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 Reserve Report referred to in clause (i)
above.  The Reserve Report as of June 30 of each year shall be prepared by or
under the supervision of the chief engineer of the Borrower who shall certify
such Reserve Report to be true and accurate and
 

 
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(b) to have been prepared in accordance with the procedures used by the Approved
Petroleum Engineers in the immediately preceding December 31 Reserve Report.
 
(c) In the event of an Interim Redetermination, the Borrower shall furnish to
the Administrative Agent and the Lenders a Reserve Report prepared by one or
more Approved Petroleum Engineers.  For any Interim Redetermination requested by
the Administrative Agent or the Borrower pursuant to Section 2.07(b), the
Borrower shall provide such Reserve Report with an “as of” date as required by
the Administrative Agent as soon as possible, but in any event no later than
thirty (30) days following the receipt of such request.
 
(d) With the delivery of each Reserve Report, the Borrower shall provide to the
Administrative Agent and the Lenders a certificate from a Responsible Officer,
in substantially the form of Exhibit H attached hereto, certifying that in all
material respects: (i) the data contained in the Reserve Report and any other
information delivered in connection therewith is true and correct, (ii) the
Credit Parties own good and defensible title to the Hydrocarbon Interests in 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 any Credit Party to deliver Hydrocarbons
either generally or produced from such Oil and Gas Properties at some future
time without then or thereafter receiving full payment therefor, (iv) none of
their Oil and Gas Properties have been sold since the date of the last Borrowing
Base determination except as set forth on an exhibit to the certificate, which
certificate shall list all of its Oil and Gas Properties sold and in such detail
as reasonably required by the Administrative Agent, (v) attached to the
certificate is a list of all marketing agreements entered into subsequent to the
later of the Effective Date 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 Effective Date and (vi)
attached thereto is a schedule of the Oil and Gas Properties evaluated by such
Reserve Report that are Mortgaged Properties which demonstrates compliance with
Section 8.14(a).
 
Section 7.14 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 reasonably 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, reasonably
satisfactory title information on at least 80% of the Total Reserve 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 forty-five (45) 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
 

 
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(c) to priority) which are not permitted by Section 9.03 raised by such
information, (ii) substitute acceptable Mortgaged Properties with no title
defects or exceptions except for Excepted Liens (other than Excepted Liens
described in clauses (e), (g) and (h) of such definition) having an equivalent
value or (iii) deliver title information in form and substance acceptable to the
Administrative Agent so that the Administrative Agent shall have received,
together with title information previously delivered to the Administrative
Agent, satisfactory title information on at least 80% of the Total Reserve Value
of the Oil and Gas Properties evaluated by such Reserve Report.
 
(d) If the Borrower is unable to cure any title defect requested by the
Administrative Agent or the Lenders to be cured within the 45-day period or the
Borrower does not comply with the requirements to provide acceptable title
information covering 80% of the Total Reserve 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 45-day
period has elapsed, such unacceptable Mortgaged Property shall not count towards
the 80% requirement, and the Administrative Agent may send a notice to the
Borrower and the Lenders that the then outstanding Borrowing Base shall be
reduced by an amount as determined by the Majority Lenders to cause the Borrower
to be in compliance with the requirement to provide acceptable title information
on 80% of the Total Reserve Value of the Oil and Gas Properties.  This new
Borrowing Base shall become effective immediately after receipt of such notice.
 
Section 7.15 Additional Collateral; Additional Guarantors.
 
(a) In connection with each redetermination of the Borrowing Base, the Borrower
shall review the Reserve Report and the list of current Mortgaged Properties (as
described in Section 8.12(c)(vi)) to ascertain whether the Mortgaged Properties
represent at least 80% of the Total Reserve Value of the Oil and Gas Properties
evaluated in the most recently completed Reserve Report.  In the event that the
Mortgaged Properties do not represent at least 80% of such Total Reserve Value,
then the Credit Parties shall, and shall cause their Subsidiaries to, grant,
within forty-five (45) days of delivery of the certificate required under
Section 8.12(c), to the Administrative Agent as security for the Indebtedness a
first-priority Lien interest (provided that Excepted Liens of the type described
in clauses (a) to (d) and (f) of the definition thereof may exist, but subject
to the provisos at the end of such definition) on additional Oil and Gas
Properties not already subject to a Lien of the Security Instruments such that
after giving effect thereto, the Mortgaged Properties will represent at least
80% of such Total Reserve Value.  All such Liens will be created and perfected
by and in accordance with the provisions of deeds of trust, security agreements
and financing statements or other Security Instruments, all in form and
substance reasonably satisfactory to the Administrative Agent and in sufficient
executed (and acknowledged where necessary or appropriate) counterparts for
recording purposes.
 
(b) In the event that a Credit Party forms or acquires any Subsidiary, the
Credit Parties shall promptly cause such Subsidiary to guarantee the
Indebtedness pursuant to the
 

 
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(c) Guaranty Agreement.  In connection with any such guaranty, the Credit
Parties shall, or shall cause such Subsidiary to, (i) execute and deliver a
supplement to the Guaranty Agreement executed by such Subsidiary, (ii) pledge
all of the Equity Interests of such new Subsidiary (including, without
limitation, delivery of original stock 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
(iii) execute and deliver such other additional closing documents, certificates
and legal opinions as shall reasonably be requested by the Administrative Agent.
 
(d) If requested by the Administrative Agent, the Borrower shall, and shall
cause its Subsidiaries to, grant, within thirty (30) days of such request, 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 any Oil and Gas Properties of the Credit Parties
not already subject to a Lien of the Security Instruments.  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.
 
Section 7.16 ERISA Compliance.  The Borrower will promptly furnish and will
cause the Subsidiaries and any ERISA Affiliate to promptly furnish to the
Administrative Agent promptly after the filing thereof with the United States
Secretary of Labor or the Internal Revenue Service, copies of each annual and
other report with respect to each Plan or any trust created thereunder, and
immediately upon becoming aware of the occurrence 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 signed by the President or the principal Financial Officer, the
Subsidiary or the ERISA Affiliate, as the case may be, specifying the nature
thereof, what action such Credit Party, the Subsidiary or the ERISA Affiliate is
taking or proposes to take with respect thereto, and, when known, any action
taken or proposed by the Internal Revenue Service or the Department of Labor
with respect thereto.
 
Section 7.17 Marketing Activities.  The Borrower will not, and will not permit
any of its Subsidiaries to, engage in marketing activities for any Hydrocarbons
or enter into any contracts related thereto other than (a) 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, (b) 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 Credit Parties that a
Credit Party 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 (c) other contracts for the purchase and/or sale
of Hydrocarbons of third parties (i) which have generally offsetting provisions
(i.e. corresponding pricing mechanics, delivery dates and points and volumes)
such that no “position” is taken and (ii) for which appropriate credit support
has been taken to alleviate the material credit risks of the counterparty
thereto.
 

 
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Section 7.18 Disclosures.  The Borrower shall, in any public or private
disclosure concerning the availability under this Agreement, accurately describe
availability as being the lesser of the then effective Borrowing Base and the
Aggregate Maximum Credit Amounts.
 
Section 7.19 Post-Closing Title Information.  Within 60 days of the Effective
Date, the Borrower shall have delivered title information satisfactory to the
Administrative Agent setting forth the status of title to at least 80% of the
Total Reserve Value of the Oil and Gas Properties evaluated in the Initial
Reserve Report.
 
ARTICLE VIII
 
Negative Covenants
 
Until the Commitments have expired or terminated and the principal of and
interest on each Loan and all fees payable hereunder and all other amounts
payable under the Loan Documents have been paid in full and all Letters of
Credit have expired or terminated and all LC Disbursements shall have been
reimbursed, the Borrower covenants and agrees with the Lenders that:
 
Section 8.01 Financial Covenants.
 
(a) Ratio of Debt to EBITDAX.  The Borrower will not, at any time, permit its
ratio of Debt as of such time to EBITDAX to be greater than 4.0 to 1.0.
 
(b) Current Ratio.  The Borrower 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 FASB
ASC 815) to (ii) consolidated current liabilities (excluding current non-cash
obligations under FASB ASC 815 and current maturities under this Agreement) to
be less than 1.0 to 1.0.
 
(c) Ratio of EBITDAX to Interest.  The Borrower will not permit, as of the last
day of any fiscal quarter, its ratio of EBITDAX to interest expense (determined
in accordance with GAAP) for the four fiscal quarters then ended to be less than
3.0 to 1.0.
 
Section 8.02 Debt.  The Borrower will not, and will not permit any Subsidiary
to, incur, create, assume or suffer to exist any Debt, except:
 
(a) the Notes or other Indebtedness arising under the Loan Documents or any
guaranty of or suretyship arrangement for the Notes or other Indebtedness
arising under the Loan Documents;
 
(b) endorsements of negotiable instruments for collection in the ordinary course
of business;
 
(c) Debt under Capital Leases not to exceed $2,000,000 in aggregate principal
amount at any time outstanding;
 

 
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(d) Debt associated with bonds or surety obligations required by Governmental
Requirements in connection with the operation of, or provision for the
abandonment and remediation of, the Oil and Gas Properties;
 
(e) intercompany Debt between any Credit Parties to the extent permitted by
Section 9.05(f); provided that such Debt is not held, assigned, transferred,
negotiated or pledged to any Person other than one of the Credit Parties, and,
provided further, that any such Debt owed by any Credit Party shall be
subordinated to the Indebtedness on terms set forth in the Guaranty Agreement;
and
 
(f) Permitted Additional Debt incurred after the Effective Date, the principal
amount of which does not exceed $300,000,000 at any time outstanding and any
guarantees thereof; provided that (i) the Borrower shall have furnished to the
Administrative Agent and the Lenders, not less than seven Business Days prior
written notice of its intent to incur such Permitted Additional Debt, the amount
thereof, and the anticipated closing date, together with copies of drafts of the
material definitive documents therefor and, when completed, copies of the final
versions of such material definitive documents, (ii) at the time of incurring
such Permitted Additional Debt (A) no Default has occurred and is then
continuing, (B) no Default would result from the incurrence of such Permitted
Additional Debt after giving effect to the incurrence of such Permitted
Additional Debt (and any concurrent repayment of Debt with the proceeds of such
incurrence), and (C) after giving effect to the incurrence thereof, the Borrower
is in pro forma compliance with the financial covenants contained in Section
9.01, (iii) the incurrence of such Permitted Additional Debt (and any concurrent
repayment of Debt with the proceeds of such incurrence) would not result in the
total Revolving Credit Exposure exceeding the Borrowing Base then in effect and
(iv) concurrently with the incurrence of such Debt, the Borrowing Base is
adjusted pursuant to Section 2.07(e)(iii).
 
Section 8.03 Liens.  The Borrower will not, and will not permit any Subsidiary
to, create, incur, assume or permit to exist any Lien on any of its Properties
(now owned or hereafter acquired), except:
 
(a) Liens securing the payment of any Indebtedness;
 
(b) Excepted Liens;
 
(c) Liens securing Capital Leases permitted by Section 9.02(c) but only on the
Property under lease; and
 
(d) Liens on up to $150,000 of cash collateral to secure payment obligations to
Enbridge Pipelines (North Dakota) LLC and its affiliates.
 
Section 8.04 Dividends and Distributions.  The Borrower will not, and will not
permit any of its Subsidiaries to, declare or make, or agree to pay or make,
directly or indirectly, any Restricted Payment, return any capital to its
stockholders or make any distribution of its Property to its Equity Interest
holders, except (a) the Borrower may declare and pay dividends with respect to
its Equity Interests payable solely in additional shares of its Equity Interests
(other than Disqualified Capital Stock), (b) Subsidiaries may declare and pay
dividends and make distributions to the Borrower with respect to their Equity
Interests, and (c) the Borrower may
 

 
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Section 8.05 make Restricted Payments pursuant to and in accordance with stock
option plans or other benefit plans for management or employees of the Credit
Parties.
 
Section 8.06 Investments, Loans and Advances.  The Borrower will not, and will
not permit any 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) accounts receivable arising in the ordinary course of business;
 
(b) 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 acquisition thereof;
 
(c) commercial paper maturing within one year from the date of acquisition
thereof rated in the highest grade by S&P or Moody’s;
 
(d) deposit accounts or deposits maturing within one year from the date of
creation thereof with, including certificates of deposit issued by, any Lender
or any other Person at any office located in the United States 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;
 
(e) deposits in money market funds investing exclusively in Investments
described in Section 9.05(b), Section 9.05(c) or Section 9.05(d);
 
(f) Investments (i) made by the Borrower in or to any Subsidiary which is a
Guarantor and with respect to which 100% of the issued and outstanding Equity
Interests have been pledged to Administrative Agent, and (ii) made by any
Guarantor in or to any other Credit Party;
 
(g) 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 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;
 
(h) Investments in stock, obligations or securities received in settlement of
debts arising from Investments permitted under this Section 9.05 owing to any
Credit Party 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
any Credit Party; provided that the Borrower shall give the Administrative Agent
prompt written notice in the event that the aggregate amount of all Investments
held at any one time outstanding under this Section 9.05(h) exceeds $100,000;
and
 
(i) other Investments not to exceed $200,000 in the aggregate at any time.
 

 
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(j) Nature of Business.  The Borrower will not, and will not permit any
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.  From
and after the date hereof, the Credit Parties and their Subsidiaries will not
acquire or make any other expenditure (whether such expenditure is capital,
operating or otherwise) in or related to, any Oil and Gas Properties not located
within the geographical boundaries of the United States.
 
Section 8.07 Limitation on Leases.  The Borrower will not, and will not permit
any Subsidiary to, create, incur, assume or suffer to exist any obligation for
the payment of rent or hire of Property of any kind whatsoever (real or personal
but excluding Capital Leases and leases of Hydrocarbon Interests), under leases
or lease agreements which would cause the aggregate amount of all payments made
by the Credit Parties and the Subsidiaries pursuant to all such leases or lease
agreements, including, without limitation, any residual payments at the end of
any lease, to exceed $2,000,000 in any period of twelve consecutive calendar
months during the life of such leases.
 
Section 8.08 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 Credit Party nor any Person acting on behalf of a Credit Party has
taken or will take any action which might cause any of the Loan Documents to
violate Regulations T, U or X or any other regulation of the Board or to violate
Section 7 of the Securities Exchange Act of 1934 or any rule or regulation
thereunder, in each case as now in effect or as the same may hereinafter be in
effect.  If requested by the Administrative Agent, the Borrower will furnish to
the Administrative Agent and each Lender a statement to the foregoing effect in
conformity with the requirements of FR Form U-1 or such other form referred to
in Regulation U, Regulation T or Regulation X of the Board, as the case may be.
 
Section 8.09 ERISA Compliance.  The Borrower will not, and will not permit any
Subsidiary to, at any time:
 
(a) engage in, or permit any ERISA Affiliate to engage in, any transaction in
connection with which a Credit Party or any ERISA Affiliate could be subjected
to either a civil penalty assessed pursuant to subsections (c), (i), (l) or (m)
of section 502 of ERISA or a tax imposed by Chapter 43 of Subtitle D of the Code
if such penalty or liability could reasonably be expected to result in a
Material Adverse Effect.
 
(b) 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, a Credit Party or any ERISA Affiliate is
required to pay as contributions thereto if such failure could reasonably be
expected to result in a Material Adverse Effect.
 
(c) contribute to or assume an obligation to contribute to, or permit any ERISA
Affiliate to contribute to or assume an obligation to contribute to (i) 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, or
 

 
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(d) (ii) any employee pension benefit plan, as defined in section 3(2) of ERISA,
that is subject to Title IV of ERISA, section 302 of ERISA or section 412 of the
Code.
 
Section 8.10 Sale or Discount of Receivables.  Except for receivables obtained
by a Credit Party out of the ordinary course of business or the settlement of
joint interest billing accounts in the ordinary course of business or discounts
granted to settle collection of accounts receivable or the sale of defaulted
accounts arising in the ordinary course of business in connection with the
compromise or collection thereof and not in connection with any financing
transaction, the Borrower will not, and will not permit any Subsidiary to,
discount or sell (with or without recourse) any of its notes receivable or
accounts receivable.
 
Section 8.11 Mergers, Etc.  The Borrower will not, and will not permit any
Subsidiary to, merge into or with or consolidate with any other Person, or
permit any other Person to merge into or consolidate with it, or sell, transfer,
lease or otherwise dispose of (whether in one transaction or in a series of
transactions) all or substantially all of its Property to any other Person
(whether now owned or hereafter acquired) (any such transaction, a
“consolidation”), or liquidate or dissolve; provided that any Subsidiary may
participate in a consolidation with (i) the Borrower so long as the Borrower
shall be the continuing or surviving entity or (ii) any other Subsidiary
(provided that if one of such Subsidiaries is a wholly-owned Subsidiary, then
the surviving Person shall be a wholly-owned Subsidiary).
 
Section 8.12 Sale of Properties.  The Borrower will not, and will not permit any
Subsidiary to, sell, assign, farm-out, convey or otherwise transfer (including
through the sale of a production payment or overriding royalty interest) any
Property except for (a) the sale of Hydrocarbons in the ordinary course of
business; (b) farmouts, sales or other dispositions of undeveloped acreage and
assignments in connection with such farmouts with the approval of the
Administrative Agent; (c) the sale or transfer of equipment that is no longer
necessary for the business of a Credit Party 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
Subsidiary owning Oil and Gas Properties; provided that (i) 100% of the
consideration received in respect of such sale or other disposition shall be
cash, (ii) 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 the Subsidiary subject of such sale or
other disposition (as reasonably determined by the board of directors of the
Borrower 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
Subsidiary owning Oil and Gas Properties included in the most recently delivered
Reserve Report during any period between two successive Scheduled
Redetermination Dates has a fair market value in excess of $2,000,000,
individually or in the aggregate, the Borrowing Base shall automatically be
reduced pursuant to Section 2.07(e)(ii), by an amount equal to the value, if
any, assigned such Property in the most recently delivered Reserve Report and
(iv) if any such sale or other disposition is of a Subsidiary owning Oil and Gas
Properties, such sale or other disposition shall include all the Equity
Interests of such Subsidiary; (e) the disposition of Oil and Gas Properties in
exchange for fair consideration in the form of either (i) other Oil and Gas
Properties of a similar use or purpose or (ii) an operator’s commitment to drill
an oil or natural gas well; provided that in the case of each of (i) and (ii)
above, the consideration received is of equivalent or greater fair market value
as the properties
 

 
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Section 8.13 being disposed of, as reasonably determined by the Administrative
Agent and the Borrower has delivered title information and mortgages covering
such Oil and Gas Properties of the Credit Parties as may be required pursuant to
Section 8.13 and Section 8.14; and (a) sales and other dispositions of
Properties not regulated by Section 9.12(a) to (e) having a fair market value
not to exceed $2,000,000 during any twelve (12) month period.
 
Section 8.14 Environmental Matters.  The Borrower will not, and will not permit
any 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 a Release or threatened Release of Hazardous Materials, exposure to any
Hazardous Materials, or to any Remedial Work under any Environmental Laws,
assuming disclosure to the applicable Governmental Authority of all relevant
facts, conditions and circumstances, if any, pertaining to such Property where
such violations, Release or threatened Release, exposure, or Remedial work could
reasonably be expected to have a Material Adverse Effect.
 
Section 8.15 Material Agreements.  The Borrower will not, and will not permit
any Subsidiary to, enter into or amend or otherwise modify any Material
Agreement or any other contract or agreement that involves an individual
commitment from such Person of more than $2,000,000 in the aggregate in any
twelve (12) month period, except for contracts for the acquisition and/or
development of Oil and Gas Properties and the making of Restricted Payments
permitted by Section 9.04.
 
Section 8.16 Transactions with Affiliates.  The Borrower will not, and will not
permit any Subsidiary to, enter into any transaction, including, without
limitation, any purchase, sale, lease or exchange of Property or the rendering
of any service, with any Affiliate (other than the Guarantors and wholly-owned
Subsidiaries of the Borrower) unless such transactions are 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 8.17 Subsidiaries.  The Borrower will not, and will not permit any
Subsidiary to, create any additional Subsidiary unless the Borrower gives
written notice to the Administrative Agent of such creation and complies with
Section 8.14(b).  The Borrower shall not, and shall not permit any Subsidiary
to, sell, assign or otherwise dispose of any Equity Interests in any Subsidiary
except in compliance with Section 9.12(d).  Neither the Borrower nor any
Subsidiary shall have any Foreign Subsidiaries.
 
Section 8.18 Negative Pledge Agreements; Dividend Restrictions.  The Borrower
will not, and will not permit any Subsidiary to, create, incur, assume or suffer
to exist any contract, agreement or understanding (other than this Agreement,
the Security Instruments, or Capital Leases creating Liens permitted by Section
9.03(c)) which in any way prohibits or restricts the granting, conveying,
creation or imposition of any Lien on any of its Property in favor of the
Administrative Agent and the Lenders or restricts any Subsidiary from paying
dividends or making distributions to any Credit Party, or which requires the
consent of or notice to other Persons in connection therewith.
 

 
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Section 8.19 Gas Imbalances, Take-or-Pay or Other Prepayments.  The Borrower
will not, and will not permit any Subsidiary to, allow gas imbalances,
take-or-pay or other prepayments with respect to the Oil and Gas Properties of
any Credit Party that would require a Credit Party to deliver Hydrocarbons at
some future time without then or thereafter receiving full payment therefor to
exceed two percent (2%) of the Credit Parties’ Proved Reserves of natural gas
(on an mcf equivalent basis) in the aggregate.
 
Section 8.20 Swap Agreements.  The Borrower shall neither assign, terminate,
unwind   nor sell any Swap Agreements listed on Schedule 7.20. The Borrower
shall not enter into Swap Agreements in respect of commodities if the effect
thereof would be to cause the notional volumes of all Swap Agreements and
additional fixed-price physical off-take contracts, in the aggregate, to exceed
100% of the reasonably anticipated projected production from the Borrower’s
Proved Developed Producing Reserves for any month continuing through and
including the date that is forty-eight (48) months following the effective date
of each such Swap Agreement (it being understood that any put contracts entered
into for non speculative purposes shall not count against the above
limitation).  The Borrower shall not enter into Swap Agreements converting
interest rates (a) from fixed to floating in excess of 75% of the then
outstanding principal amount of debt for borrowed money which bears interest at
a fixed rate or (b) from floating to fixed in excess of 100% of the then
outstanding principal amount of debt for borrowed money which bears interest at
a floating rate. The Borrower shall not post any collateral to secure Swap
Agreements with a non-Lender.
 
Section 8.21 Sale and Leasebacks.  The Borrower will not, any will not permit
any Subsidiary or Guarantor to enter into any arrangement, directly or
indirectly, with any Person whereby the Borrower or any Subsidiary or Guarantor
shall sell or transfer any of its Property, whether now owned or hereafter
acquired, and whereby Borrower or any Subsidiary or Guarantor shall then or
thereafter rent or lease as lessee such Property or any part thereof or other
Property which Borrower or any Subsidiary or Guarantor intends to use for
substantially the same purpose or purposes as the Property sold or transferred.
 
Section 8.22 Amendments to Organizational Documents.  Without the prior written
consent of the Majority Lenders, neither Borrower nor any Guarantor will amend,
or permit to be amended, its Organizational Documents or waive any right or
obligation of any Person thereunder except to the extent such amendment or
waiver could not reasonably be expected to adversely affect the rights and
benefits of the Administrative Agent, the Lenders and/or other secured parties
under this Agreement or any other Loan Document.
 
ARTICLE IX
 
Events of Default; Remedies
 
Section 9.01 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;
 

 
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(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 a
Credit Party 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 in any material respect
when made or deemed made;
 
(d) a Credit Party shall fail to observe or perform any covenant, condition or
agreement contained in Section 8.01(i), Section 8.01(m), Section 8.02, Section
8.03, Section 8.14, Section 8.18 or in Article IX;
 
(e) a Credit Party shall fail to observe or perform any covenant, condition or
agreement contained in this Agreement (other than those specified in Section
10.01(a), Section 10.01(b) or Section 10.01(d)) or any other Loan Document, and
such failure shall continue unremedied for a period of thirty (30) days after
the earlier to occur of (i) notice thereof from the Administrative Agent to the
Borrower (which notice will be given at the request of any Lender) or (ii) a
Responsible Officer of such Credit Party otherwise becoming aware of such
default;
 
(f) a Credit Party shall fail to make any payment (whether of principal or
interest and regardless of amount) in respect of any Material Debt, beyond any
period of grace provided with respect thereto;
 
(g) any event or condition occurs that results in any Material Debt becoming due
prior to its scheduled maturity or that enables or permits the holder or holders
of any Material Debt or any trustee or agent on its or their behalf to cause any
Material Debt to become due (after taking into account any applicable period of
grace with respect thereto), or to require the Redemption thereof or any offer
to Redeem to be made in respect thereof, prior to its scheduled maturity or an
event or condition requires a Credit Party 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 a Credit Party or its debts, or of a substantial part of its assets,
under any  Federal, state or foreign bankruptcy, insolvency, receivership or
similar law now or hereafter in effect or (ii) the appointment of a receiver,
trustee, custodian, sequestrator, conservator or similar official for a Credit
Party or for a substantial part of its assets, and, in any such case, such
proceeding or petition shall continue undismissed for forty-five (45) days or an
order or decree approving or ordering any of the foregoing shall be entered;
 
(i) a Credit Party 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
 

 
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(j) 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 a Credit Party for a substantial part of its assets,
(iv) file an answer admitting the material allegations of a petition filed
against it in any such proceeding, (v) make a general assignment for the benefit
of creditors or (vi) take any action for the purpose of effecting any of the
foregoing; or any stockholder of the Borrower shall make any request or take any
action for the purpose of calling a meeting of the stockholders of the Borrower
to consider a resolution to dissolve and wind-up the Borrower’s affairs;
 
(k) a Credit Party shall become unable, admit in writing its inability or fail
generally to pay its debts as they become due;
 
(l) (i) one or more judgments for the payment of money in an aggregate amount in
excess of $2,000,000 (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 a Credit Party or any
combination thereof and, in either such case, the same shall remain undischarged
for a period of forty-five (45) 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 a Credit Party to enforce any such
judgment;
 
(m) 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 a Credit Party or any of their
Affiliates shall so state in writing;
 
(n) a Change in Control shall occur;
 
(o) a failure to cure a Borrowing Base Deficiency as outlined in Section
3.04(c)(ii) or (iii); and
 
(p) an “Event of Default”, “Termination Event” or “Additional Termination Event”
(other than an “Event of Default”, “Termination Event” or “Additional
Termination Event” associated with a breach thereof by a Lender) shall occur
under any Swap Agreement between the Borrower and any Lender or Affiliate of any
Lender (in each case after giving effect to any applicable grace periods).
 
Section 9.02 Remedies.
 
(a) In the case of an Event of Default other than one described in Section
10.01(h), Section 10.01(i) or Section 10.01(j), at any time thereafter during
the continuance of such Event of Default, the Administrative Agent may, and at
the request of the Majority Lenders,
 

 
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(b) shall, by notice to the Borrower, take either or both of the following
actions, at the same or different times:  (i) terminate the Commitments, and
thereupon the Commitments shall terminate immediately, and (ii) declare the
Notes and the Loans then outstanding to be due and payable in whole (or in part,
in which case any principal not so declared to be due and payable may thereafter
be declared to be due and payable), and thereupon the principal of the Loans so
declared to be due and payable, together with accrued interest thereon and all
fees and other obligations of the Borrower and the Guarantors accrued hereunder
and under the Notes and the other Loan Documents (including, without limitation,
the payment of cash collateral to secure the LC Exposure as provided in Section
2.08(i)), shall become due and payable immediately, without presentment, demand,
protest, notice of intent to accelerate, notice of acceleration or other notice
of any kind, all of which are hereby waived by the Borrower and each Guarantor;
and in case of an Event of Default described in Section 10.01(h), Section
10.01(i) or Section 10.01(j), the Commitments shall automatically terminate and
such Notes and the principal of such Loans then outstanding, together with
accrued interest thereon and all fees and the other obligations of the Borrower
and the Guarantors accrued hereunder and under such 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(i)), shall automatically
become due and payable, without presentment, demand, protest or other notice of
any kind, all of which are hereby waived by the Borrower and each Guarantor.
 
(c) 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.
 
(d) 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 all other Indebtedness;
 
(v) fifth, to serve as cash collateral to be held by the Administrative Agent to
secure LC Exposure; and
 
(vi) sixth, any excess, after all of the Indebtedness shall have been
indefeasibly paid in full in cash, shall be paid to the Borrower or as otherwise
required by any Governmental Requirement.
 

 
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(vii) 
 
The Administrative Agent
 
Section 9.03 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 9.04 Duties and Obligations of Administrative Agent.  The Administrative
Agent, the Syndication Agent, the Co-Documentation Agents and the Arrangers
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 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 any Credit 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 any Credit Party or any other obligor or
guarantor, or (vii) any failure by a Credit Party or any other Person (other
than itself) to perform any of its obligations hereunder or under any other Loan
Document or the performance or observance of any covenants, agreements or other
terms or conditions set forth herein or therein.  For purposes of determining
compliance with the conditions specified in Article VI, each Lender shall be
deemed to have consented to, approved or accepted or to be satisfied with, each
document or other matter required thereunder to be consented to or approved by
or acceptable or satisfactory to a Lender unless the Administrative Agent shall
have received written notice from such Lender prior to the proposed closing date
specifying its objection thereto.
 

 
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Section 9.05 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.  The Administrative Agent shall
not be liable for any action taken or not taken by it with the consent or at the
request of the Majority Lenders or the Lenders (or such other number or
percentage of the Lenders as shall be necessary under the circumstances as
provided in Section 12.02), and otherwise the Administrative Agent shall not be
liable for any action taken or not taken by it hereunder or under any other Loan
Document or under any other document or instrument referred to or provided for
herein or therein or in connection herewith or therewith INCLUDING ITS OWN
ORDINARY NEGLIGENCE, except for its own gross negligence or willful misconduct.
 
Section 9.06 Reliance by Administrative Agent.  The Administrative Agent shall
be entitled to rely upon, and shall not incur any liability for relying upon,
any notice, request, certificate, consent, statement, instrument, document or
other writing believed by it to be genuine and to have been signed or sent by
the proper Person.  The Administrative Agent also may rely upon any statement
made to it orally or by telephone and believed by it to be made by the proper
Person, and shall not incur any liability for relying thereon and each of the
Borrower, the Issuing Bank and the Lenders hereby waive 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.
 

 
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Section 9.07 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 9.08 Resignation or Removal of Administrative Agent.  Subject to the
appointment and acceptance of a successor Administrative Agent as provided in
this Section 11.06, the Administrative Agent may resign at any time by notifying
the Issuing Bank, the Lenders and the Borrower, and the Administrative Agent may
be removed at any time with or without cause by the Required Lenders.  Upon any
such resignation or removal, the Majority Lenders shall have the right, in
consultation with the Borrower (provided no Event of Default then exist), to
appoint a successor.  If no successor shall have been so appointed by the
Majority Lenders and shall have accepted such appointment within thirty (30)
days after the retiring Administrative Agent gives notice of its resignation or
removal of the retiring Administrative Agent, then the retiring Administrative
Agent may, on behalf of the Issuing Bank and Lenders, appoint a successor
Administrative Agent which shall be a bank with an office in New York, New York,
or an Affiliate of any such bank.  Upon the acceptance of its appointment as
Administrative Agent hereunder by a successor, such successor shall succeed to
and become vested with all the rights, powers, privileges and duties of the
retiring Administrative Agent, and the retiring Administrative Agent shall be
discharged from its duties and obligations hereunder.  The fees payable by the
Borrower to a successor Administrative Agent shall be the same as those payable
to its predecessor unless otherwise agreed between the Borrower and such
successor.  After the Administrative Agent’s resignation hereunder, the
provisions of this Article XI and Section 12.03 shall continue in effect for the
benefit of such retiring Administrative 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 Administrative Agent.
 
Section 9.09 Administrative Agent and Syndication Agent as Lender.  Each Person
serving as an Administrative Agent or Syndication 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 Administrative Agent or Syndication
Agent, and such bank and its Affiliates may accept deposits from, lend money to
and generally engage in any kind of business with the Borrower or any Subsidiary
or other Affiliate thereof as if it were not an Administrative Agent or
Syndication Agent hereunder.
 
Section 9.10 No Reliance.
 
(a) Each Lender acknowledges that it has, independently and without reliance
upon the Administrative Agent or any other Lender and based on such documents
and information as it has deemed appropriate, made its own credit analysis and
decision to enter into this Agreement and each other Loan Document to which it
is a party.  Each Lender also acknowledges that it will, independently and
without reliance upon the Administrative Agent or any other Lender and based on
such documents and information as it shall from time to time
 

 
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(b) 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 Administrative
Agent shall not be required to keep itself informed as to the performance or
observance by the Borrower or any of its Subsidiaries of this Agreement, the
Loan Documents or any other document referred to or provided for herein or to
inspect the Properties or books of the Borrower or its Subsidiaries.  Except for
notices, reports and other documents and information expressly required to be
furnished to the Lenders by the Administrative Agent hereunder, the
Administrative Agent shall not have any duty or responsibility to provide any
Lender with any credit or other information concerning the affairs, financial
condition or business of the Borrower (or any of its Affiliates) which may come
into the possession of such Agent or any of its Affiliates.  In this regard,
each Lender acknowledges that Vinson & Elkins LLP 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.
 
(c) The Lenders acknowledge that the Administrative Agent is acting solely in an
administrative capacity with respect to the structuring and syndication of this
facility and have no duties, responsibilities or liabilities under this
Agreement and the other Loan Documents other than their administrative duties,
responsibilities and liabilities specifically as set forth in the Loan Documents
and in their capacity as Lenders hereunder.  In structuring, arranging or
syndicating this facility, each Lender acknowledges that the Administrative
Agent may be an agent or lender under these Notes, other loans or other
securities and waives any existing or future conflicts of interest associated
with the their role in such other debt instruments.  If in its administration of
this facility or any other debt instrument, the Administrative Agent determines
(or is given written notice by any Lender that a conflict exists), then it shall
eliminate such conflict within ninety (90) days or resign pursuant to Section
11.06 and shall have no liability for action taken or not taken while such
conflict existed.
 
Section 9.11 Administrative Agent May File Proofs of Claim.  In case of the
pendency of any receivership, insolvency, liquidation, bankruptcy,
reorganization, arrangement, adjustment, composition or other judicial
proceeding relative to the Borrower or any of its Subsidiaries, the
Administrative Agent (irrespective of whether the principal of any Loan shall
then be due and payable as herein expressed or by declaration or otherwise and
irrespective of whether the Administrative Agent shall have made any demand on
the Borrower) shall be entitled and empowered, by intervention in such
proceeding or otherwise:
 
(a) to file and prove a claim for the whole amount of the principal and interest
owing and unpaid in respect of the Loans and all other Indebtedness that are
owing and unpaid and to file such other documents as may be necessary or
advisable in order to have the claims of the Lenders and the Administrative
Agent (including any claim for the reasonable compensation, expenses,
disbursements and advances of the Lenders and the Administrative Agent and their
respective agents and counsel and all other amounts due the Lenders and the
Administrative Agent under Section 12.03) allowed in such judicial proceeding;
 

 
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(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.
 
Section 9.12 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 9.12 or is otherwise authorized by the terms of the Loan Documents.
 
ARTICLE X
 
Miscellaneous
 
Section 10.01 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 315 Manitoba Avenue, Suite 200, Wayzata, MN
55391, Attention of Chief Financial Officer (Telecopy No. (952) 476-9801);
 
(ii) if to the Administrative Agent to it at: Royal Bank of Canada, Agency
Services Group, 4th Floor, 20 King Street West, Toronto, Ontario M5H 1C4,
Attention: Manager Agency (Facsimile: (416) 842-4023);
 
(iii) if to the Issuing Bank to it at: Royal Bank of Canada, New York Branch,
One Liberty Plaza, 3rd Floor, New York, New York 10006-1404, Attention: Manager,
Loans Administration (Telephone: (212) 428-6332 and Facsimile: (212) 428-2372);
for matters related to letters of credit to Attention: Manager, Trade Products
 

 
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(iv) (Telephone: (212) 428-6235 and Facsimile: (212) 428-3015); with a copy to
Royal Bank of Canada, 2800 Post Oak Boulevard, 3900 Williams Tower, Houston,
Texas 77056, Attention: Don J. McKinnerney (Telephone: (713) 403-5607,
Facsimile: (713) 403-5624 and Electronic Mail: don.mckinnerney@rbccm.com); and
 
(v) 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 10.02 Waivers; Amendments.
 
(a) No failure on the part of the Administrative Agent, the Issuing Bank, the
Syndication Agent 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, the Syndication Agent and the Lenders
hereunder and under the other Loan Documents are cumulative and are not
exclusive of any rights or remedies that they would otherwise have.  No waiver
of any provision of this Agreement or any other Loan Document or consent to any
departure by the Borrower 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, the Issuing Bank, the
Syndication Agent or any Lender may have had notice or knowledge of such Default
at the time.
 
(b) Neither this Agreement nor any provision hereof nor any Security Instrument
nor any provision thereof may be waived, amended or modified except pursuant to
an agreement or agreements in writing entered into by the Borrower and the
Majority Lenders or by the Borrower and the Administrative Agent with the
consent of the Majority Lenders; provided that no such agreement shall (i)
increase the Commitment or the Maximum Credit Amount of any Lender without the
written consent of such Lender, (ii) increase the Borrowing Base without
 

 
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(c) the written consent of all of the Lenders, decrease or maintain the
Borrowing Base without the consent of the Required Lenders, or modify Section
2.07 in any manner without the consent of each Lender (other than any Defaulting
Lender); provided that a Scheduled Redetermination may be postponed by 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 Termination Date without the written consent of each Lender affected
thereby, (v) change Section 4.01(b) or Section 4.01(c) in a manner that would
alter the pro rata sharing of payments required thereby, without the written
consent of each Lender, (vi) waive or amend Section 3.04(c), Section 6.01,
Section 8.14, Section 10.02(c) or Section 12.14 or change the definition of the
terms “Foreign Subsidiary” or “Subsidiary”, without the written consent of each
Lender (other than any Defaulting Lender), (vii) release any Guarantor (except
as set forth in the Guaranty Agreement) or release any of the collateral (other
than as provided in Section 11.10 without the written consent of each Lender
(other than any Defaulting 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 (other than
any Defaulting Lender); provided further that no such agreement shall amend,
modify or otherwise affect the rights or duties of the Administrative Agent or
the Issuing Bank hereunder or under any other Loan Document without the prior
written consent of the Administrative Agent or the Issuing Bank, as the case may
be.  Notwithstanding the foregoing, any supplement to Schedule 7.14
(Subsidiaries) or Schedule 7.24 (Material Agreements) shall be effective simply
by delivering to the Administrative Agent a supplemental schedule clearly marked
as such and, upon receipt, the Administrative Agent will promptly deliver a copy
thereof to the Lenders.
 
Section 10.03 Expenses, Indemnity; Damage Waiver.
 
(a) The Borrower shall pay (i) all reasonable out-of-pocket expenses incurred by
the Administrative Agent, the Arrangers and their Affiliates, including, without
limitation, the reasonable fees, charges and disbursements of counsel and other
outside consultants for the Administrative Agent and the Arrangers, 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 investigation, 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
Administrative Agent or any Lender in connection with any filing, registration,
recording or perfection of any security interest contemplated by this Agreement
or
 

 
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(b) any Security Instrument or any other document referred to therein, (iii) all
reasonable out-of-pocket expenses incurred by the Administrative Agent and 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 reasonable
out-of-pocket expenses incurred by any Administrative Agent, the Issuing Bank or
any Lender, including the fees, charges and disbursements of any counsel for the
Administrative 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.
 
(c) THE CREDIT PARTIES SHALL INDEMNIFY THE ADMINISTRATIVE AGENT, 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 DEFEND AND HOLD
EACH INDEMNITEE HARMLESS FROM, ANY AND ALL LOSSES, CLAIMS, DAMAGES, PENALTIES,
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, THE PERFORMANCE BY THE
PARTIES HERETO OR THE PARTIES TO ANY OTHER LOAN DOCUMENT OF THEIR RESPECTIVE
OBLIGATIONS HEREUNDER OR THEREUNDER OR THE CONSUMMATION OF THE TRANSACTIONS
CONTEMPLATED HEREBY OR BY ANY OTHER LOAN DOCUMENT, (ii) THE FAILURE OF THE
BORROWER OR ANY SUBSIDIARY TO COMPLY WITH THE TERMS OF ANY LOAN DOCUMENT,
INCLUDING THIS AGREEMENT, OR WITH ANY GOVERNMENTAL REQUIREMENT, (iii) ANY
INACCURACY OF ANY REPRESENTATION OR ANY BREACH OF ANY WARRANTY OR COVENANT OF
THE BORROWER OR ANY GUARANTOR SET FORTH IN ANY OF THE LOAN DOCUMENTS OR ANY
INSTRUMENTS, DOCUMENTS OR CERTIFICATIONS DELIVERED IN CONNECTION THEREWITH, (iv)
ANY LOAN OR LETTER OF CREDIT OR THE USE OF THE PROCEEDS THEREFROM, INCLUDING,
WITHOUT LIMITATION, (A) ANY REFUSAL BY 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, (v) ANY OTHER ASPECT OF THE LOAN DOCUMENTS,
(vi) THE OPERATIONS OF THE BUSINESS OF THE BORROWER AND ITS SUBSIDIARIES BY THE
BORROWER AND ITS SUBSIDIARIES, (vii) ANY ASSERTION THAT THE LENDERS WERE NOT
ENTITLED TO RECEIVE THE PROCEEDS RECEIVED PURSUANT TO THE SECURITY INSTRUMENTS,
(viii) ANY ENVIRONMENTAL LAW APPLICABLE TO THE BORROWER OR ANY SUBSIDIARY OR ANY
OF THEIR PROPERTIES OR OPERATIONS, INCLUDING WITHOUT
 

 
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(d) 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 MATERIALS ON OR AT ANY OF THEIR
PROPERTIES, (ix) THE BREACH OR NON-COMPLIANCE BY THE BORROWER OR ANY SUBSIDIARY
WITH ANY ENVIRONMENTAL LAW APPLICABLE TO THE BORROWER OR ANY SUBSIDIARY, (x) THE
PAST OWNERSHIP BY THE BORROWER OR ANY SUBSIDIARY OF ANY OF THEIR PROPERTIES OR
PAST ACTIVITY ON ANY OF THEIR PROPERTIES WHICH, THOUGH LAWFUL AND FULLY
PERMISSIBLE AT THE TIME, COULD RESULT IN PRESENT LIABILITY, (xi) THE PRESENCE,
USE, RELEASE, STORAGE, TREATMENT, DISPOSAL, GENERATION, THREATENED RELEASE,
TRANSPORT, ARRANGEMENT FOR TRANSPORT OR ARRANGEMENT FOR DISPOSAL OF OIL, OIL AND
GAS WASTES, SOLID WASTES OR HAZARDOUS MATERIALS ON OR AT ANY OF THE PROPERTIES
OWNED OR OPERATED BY THE BORROWER OR ANY SUBSIDIARY OR ANY ACTUAL OR ALLEGED
PRESENCE OR RELEASE OF HAZARDOUS MATERIALS ON OR FROM ANY PROPERTY OWNED OR
OPERATED BY THE BORROWER OR ANY OF ITS SUBSIDIARIES, (xii) ANY ENVIRONMENTAL
LIABILITY RELATED IN ANY WAY TO THE BORROWER OR ANY OF ITS SUBSIDIARIES, OR
(xiii) ANY OTHER ENVIRONMENTAL, HEALTH OR SAFETY CONDITION IN CONNECTION WITH
THE LOAN DOCUMENTS, OR (xiv) ANY ACTUAL OR PROSPECTIVE CLAIM, LITIGATION,
INVESTIGATION OR PROCEEDING RELATING TO ANY OF THE FOREGOING, WHETHER BASED ON
CONTRACT, TORT OR ANY OTHER THEORY AND REGARDLESS OF WHETHER ANY INDEMNITEE IS A
PARTY THERETO, AND SUCH INDEMNITY SHALL EXTEND TO EACH INDEMNITEE
NOTWITHSTANDING THE SOLE OR CONCURRENT NEGLIGENCE OF EVERY KIND OR CHARACTER
WHATSOEVER, WHETHER ACTIVE OR PASSIVE, WHETHER AN AFFIRMATIVE ACT OR AN
OMISSION, INCLUDING WITHOUT LIMITATION, ALL TYPES OF NEGLIGENT CONDUCT
IDENTIFIED IN THE RESTATEMENT (SECOND) OF TORTS OF ONE OR MORE OF THE
INDEMNITEES OR BY REASON OF STRICT LIABILITY IMPOSED WITHOUT FAULT ON ANY ONE OR
MORE OF THE INDEMNITEES; PROVIDED THAT SUCH INDEMNITY SHALL NOT, AS TO ANY
INDEMNITEE, BE AVAILABLE TO THE EXTENT THAT SUCH LOSSES, CLAIMS, DAMAGES,
LIABILITIES OR RELATED EXPENSES ARE DETERMINED BY A COURT OF COMPETENT
JURISDICTION BY FINAL AND NONAPPEALABLE JUDGMENT TO HAVE RESULTED FROM THE GROSS
NEGLIGENCE OR WILFUL MISCONDUCT OF SUCH INDEMNITEE.
 
(e) To the extent that the Borrower fails to pay any amount required to be paid
by it to the Administrative Agent, the Issuing Bank or the Syndication Agent
under Section 12.03(a) or (b), each Lender severally agrees to pay to the
Administrative Agent, the Issuing Bank or the Syndication Agent, 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 the Administrative Agent, the Issuing Bank or the Syndication
Agent in its capacity as such.
 

 
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(f) To the extent permitted by applicable law, the Borrower shall not assert,
and hereby waives, any claim against any Indemnitee, on any theory of liability,
for special, indirect, consequential or punitive damages (as opposed to direct
or actual damages) arising out of, in connection with, or as a result of, this
Agreement, any other Loan Document or any agreement or instrument contemplated
hereby or thereby, the Transactions, any Loan or Letter of Credit or the use of
the proceeds thereof.
 
(g) All amounts due under this Section 12.03 shall be payable promptly after
written demand therefor.
 
Section 10.04 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 all or a portion of its rights and
obligations under this Agreement (including all or a portion of its Commitment
and the Loans at the time owing to it) with the prior written consent (such
consent not to be unreasonably withheld) of:
 
(A) the Borrower, provided that no consent of the Borrower shall be required if
such assignment is to a Lender, an Affiliate of a Lender, an Approved Fund or,
if an Event of Default has occurred and is continuing, is to any other assignee;
and
 
(B) the Administrative Agent and Issuing Bank, provided that no consent of the
Administrative Agent or Issuing Bank shall be required for an assignment to an
assignee that is a Lender immediately prior to giving effect to such assignment.
 
(ii) Assignments shall be subject to the following additional conditions:
 
(A) except in the case of an assignment to a Lender or an Affiliate of a Lender
or an assignment of the entire remaining amount of the assigning Lender’s
Commitment or Loans, the amount of the Commitment or Loans of the assigning
Lender subject to each such assignment (determined as of
 

 
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(B) 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, the Administrative Agent and the Issuing Bank otherwise
consent, provided that no such consent of the Borrower shall be required if an
Event of Default has occurred and is continuing;
 
(C) each partial assignment shall be made as an assignment of a proportionate
part of all the assigning Lender’s rights and obligations under this Agreement;
 
(D) 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
 
(E) the assignee, if it shall not be a Lender, shall deliver to the
Administrative Agent an Administrative Questionnaire.
 
(iii) Subject to Section 12.04(b)(iv) and the acceptance and recording thereof,
from and after the effective date specified in each Assignment and Assumption
the 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 as Registrar (the “Registrar”), acting for this
purpose as an agent of the Borrower, shall maintain (or shall appoint a designee
to maintain) at one of its offices located in the United States 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; provided that,
failure to make any such recordation, or any error in such recordation, shall
not affect any Lender’s Commitments or Borrower’s obligations in respect of any
Loans or LC Disbursements.  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.  In connection with any changes to
the Register, if necessary, the
 

 
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(v) Administrative Agent will reflect the revisions on Annex I and forward a
copy of such revised Annex I to the Borrower, the Issuing Bank and each Lender.
 
(vi) At the request of the registered owner of the Loan or Note, the Registrar
shall note a collateral assignment of the Loan or Note on the Register and,
provided that the Registrar has been given the name and address of such
collateral assignee, the Registrar (A) shall not permit any further transfers of
the Loan or Note on the Register absent receipt of written consent to such
transfers from such collateral assignee and (B) shall record the transfer of the
Loan or Note on the Register to such collateral assignee (or such collateral
assignee's designee, nominee or assignee) upon written request by such
collateral assignee.
 
(vii) Upon its receipt of a duly completed Assignment and Assumption executed by
an assigning Lender and an assignee, the assignee’s providing any information
reasonably requested by the Administrative Agent (unless the assignee shall
already be a Lender hereunder), the processing and recordation fee referred to
in this Section 12.04(b) and any written consent to such assignment required by
Section 12.04(a), 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, or 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 and (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.  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 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.  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
 

 
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(iii) to receive with respect to the participation sold to such Participant,
unless the sale of the participation to such Participant is made with the
Borrower’s prior written consent.  A Participant that would be a Foreign Lender
if it were a Lender shall not be entitled to the benefits of Section 5.03 unless
the Borrower is notified of the participation sold to such Participant and such
Participant agrees, for the benefit of the Borrower, to comply with Section
5.03(f) 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, including to a trustee or other
pledgee, 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 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.
 
(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 be to an Affiliate of the Borrower, provided that an Approved Fund shall
not be deemed an Affiliate of the Borrower.
 
Section 10.05 Survival; Revival; Reinstatement.
 
(a) All covenants, agreements, representations and warranties made by the
Borrower herein and in the certificates or other instruments delivered in
connection with or pursuant to this Agreement or any other Loan Document shall
be considered to have been relied upon by the other parties hereto and shall
survive the execution and delivery of this Agreement and the making of any Loans
and issuance of any Letters of Credit, regardless of any investigation made by
any such other party or on its behalf and notwithstanding that the
Administrative Agent, 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 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
 

 
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(c) 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
Borrower shall take such action as may be reasonably requested by the
Administrative Agent and the Lenders to effect such reinstatement.
 
Section 10.06 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 or any other Loan Document by
telecopy or electronic transmission shall be effective as delivery of a manually
executed counterpart thereof.
 
Section 10.07 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 10.08 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
any Credit Party against any of and all the obligations of a Credit Party owed
to such Lender now or hereafter existing
 

 
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Section 10.09 under this Agreement or any other Loan Document, irrespective of
whether or not such Lender shall have made any demand under 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 10.10 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 LOCATED IN THE BOROUGH OF
MANHATTAN 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
 

 
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(e) 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,
AGENT OR COUNSEL FOR ANY PARTY HERETO HAS REPRESENTED, EXPRESSLY OR OTHERWISE,
OR IMPLIED THAT SUCH PARTY WOULD NOT, IN THE EVENT OF LITIGATION, SEEK TO
ENFORCE THE FOREGOING WAIVERS, AND (IV) ACKNOWLEDGES THAT IT HAS BEEN INDUCED TO
ENTER INTO THIS AGREEMENT, THE LOAN DOCUMENTS AND THE TRANSACTIONS CONTEMPLATED
HEREBY AND THEREBY BY, AMONG OTHER THINGS, THE MUTUAL WAIVERS AND CERTIFICATIONS
CONTAINED IN THIS SECTION 12.09.
 
Section 10.11 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 10.12 Confidentiality.  Each of the Administrative Agent, the Issuing
Bank and the Lenders agrees to maintain the confidentiality of the Information
(as defined below), except that Information may be disclosed (a) to its and its
Affiliates’ directors, officers, employees and agents, including accountants,
legal counsel and other advisors (it being understood that the Persons to whom
such disclosure is made will be informed of the confidential nature of such
Information and instructed to keep such Information confidential), (b) to
potential investors, rating agencies, and secured parties, including Approved
Funds, including accountants, legal counsel and other advisors (it being
understood that the Persons to whom such disclosure is made will be informed of
the confidential nature of such Information and instructed to keep such
Information confidential), (c) to the extent requested by any regulatory
authority, (d) to the extent required by applicable laws or regulations or by
any subpoena or similar legal process, (e) to any other party to this Agreement
or any other Loan Document, (f) in connection with the exercise of any remedies
hereunder or under any other Loan Document or any suit, action or proceeding
relating to this Agreement or any other Loan Document or the enforcement of
rights hereunder or thereunder, (g) subject to an agreement containing
provisions substantially the same as those of this Section 12.11, to (i) any
assignee of or Participant in, or any prospective assignee of or Participant in,
any of its rights or obligations under this Agreement or (ii) any actual or
prospective counterparty (or its advisors) to any Swap Agreement relating to a
Credit Party and its obligations, (h) with the consent of the Borrower or (i) to
the extent such Information (i) becomes publicly available other than as a
result of a breach of this Section 12.11 or (ii) becomes available to the
Administrative Agent, the Issuing Bank or any Lender on a non-confidential basis
from a source other than a Credit Party.  For the purposes of this Section
12.11, “Information” means all information received from any Credit Party
relating to any Credit Party and their businesses, other than any such
information that is available to the Administrative Agent, the Issuing Bank or
any Lender on a non-confidential basis prior to disclosure by a Credit Party;
provided that, in the case of information received from a Credit Party after the
date hereof, such information is clearly identified at the time of delivery as
confidential.  Any Person required to maintain the confidentiality of
Information as provided in this Section 12.11 shall be considered to have
complied with its obligation to do so if such Person has exercised the same
 

 
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Section 10.13 degree of care to maintain the confidentiality of such Information
as such Person would accord to its own confidential information.
 
Section 10.14 Interest Rate Limitation.  It is the intention of the parties
hereto that each Lender shall conform strictly to usury laws applicable to
it.  Accordingly, if the transactions contemplated hereby would be usurious as
to any Lender under laws applicable to it (including the laws of the United
States of America and the State of New York or any other jurisdiction whose laws
may be mandatorily applicable to such Lender notwithstanding the other
provisions of this Agreement), then, in that event, notwithstanding anything to
the contrary in any of the Loan Documents or any agreement entered into in
connection with or as security for the Notes, it is agreed as follows:  (a) the
aggregate of all consideration which constitutes interest under law applicable
to any Lender that is contracted for, taken, reserved, charged or received by
such Lender under any of the Loan Documents or agreements or otherwise in
connection with the Notes shall under no circumstances exceed the maximum amount
allowed by such applicable law, and any excess shall be canceled automatically
and if theretofore paid shall be credited by such Lender on the principal amount
of the Indebtedness (or, to the extent that the principal amount of the
Indebtedness shall have been or would thereby be paid in full, refunded by such
Lender to the Borrower); and (b) in the event that the maturity of the Notes is
accelerated by reason of an election of the holder thereof resulting from any
Event of Default under this Agreement or otherwise, or in the event of any
required or permitted prepayment, then such consideration that constitutes
interest under law applicable to any Lender may never include more than the
maximum amount allowed by such applicable law, and excess interest, if any,
provided for in this Agreement or otherwise shall be canceled automatically by
such Lender as of the date of such acceleration or prepayment and, if
theretofore paid, shall be credited by such Lender on the principal amount of
the Indebtedness (or, to the extent that the principal amount of the
Indebtedness shall have been or would thereby be paid in full, refunded by such
Lender to the Borrower).  All sums paid or agreed to be paid to any Lender for
the use, forbearance or detention of sums due hereunder shall, to the extent
permitted by law applicable to such Lender, be amortized, prorated, allocated
and spread throughout the stated term of the Loans evidenced by the Notes until
payment in full so that the rate or amount of interest on account of any Loans
hereunder does not exceed the maximum amount allowed by such applicable law.  If
at any time and from time to time (i) the amount of interest payable to any
Lender on any date shall be computed at the Highest Lawful Rate applicable to
such Lender pursuant to this Section 12.12 and (ii) in respect of any subsequent
interest computation period the amount of interest otherwise payable to such
Lender would be less than the amount of interest payable to such Lender computed
at the Highest Lawful Rate applicable to such Lender, then, to the extent
permitted by applicable law, the amount of interest payable to such Lender in
respect of such subsequent interest computation period shall continue to be
computed at the Highest Lawful Rate applicable to such Lender until the total
amount of interest payable to such Lender shall equal the total amount of
interest which would have been payable to such Lender if the total amount of
interest had been computed without giving effect to this Section 12.12.
 
Section 10.15 EXCULPATION PROVISIONS.  EACH OF THE PARTIES HERETO SPECIFICALLY
AGREES THAT IT HAS A DUTY TO READ THIS AGREEMENT AND THE OTHER LOAN DOCUMENTS
AND AGREES THAT IT IS CHARGED WITH NOTICE AND KNOWLEDGE OF THE TERMS OF THIS
AGREEMENT AND THE OTHER LOAN DOCUMENTS; THAT IT HAS IN FACT READ THIS AGREEMENT
AND IS FULLY
 

 
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Section 10.16 INFORMED AND HAS FULL NOTICE AND KNOWLEDGE OF THE TERMS,
CONDITIONS AND EFFECTS OF THIS AGREEMENT; THAT IT HAS BEEN REPRESENTED BY
INDEPENDENT LEGAL COUNSEL OF ITS CHOICE THROUGHOUT THE NEGOTIATIONS PRECEDING
ITS EXECUTION OF THIS AGREEMENT AND THE OTHER LOAN DOCUMENTS; AND HAS RECEIVED
THE ADVICE OF ITS ATTORNEY IN ENTERING INTO THIS AGREEMENT AND THE OTHER LOAN
DOCUMENTS; AND THAT IT RECOGNIZES THAT CERTAIN OF THE TERMS OF THIS AGREEMENT
AND THE OTHER LOAN DOCUMENTS RESULT IN ONE PARTY ASSUMING THE LIABILITY INHERENT
IN SOME ASPECTS OF THE TRANSACTION AND RELIEVING THE OTHER PARTY OF ITS
RESPONSIBILITY FOR SUCH LIABILITY.  EACH PARTY HERETO AGREES AND COVENANTS THAT
IT WILL NOT CONTEST THE VALIDITY OR ENFORCEABILITY OF ANY EXCULPATORY PROVISION
OF THIS AGREEMENT AND THE OTHER LOAN DOCUMENTS ON THE BASIS THAT THE PARTY HAD
NO NOTICE OR KNOWLEDGE OF SUCH PROVISION OR THAT THE PROVISION IS NOT
“CONSPICUOUS.”
 
Section 10.17 Collateral Matters; Swap Agreements.  The benefit of the Security
Instruments and of the provisions of this Agreement relating to any collateral
securing the Indebtedness shall also extend to and be available to any Secured
Swap Agreement on a pro rata basis in respect of any obligations of the Credit
Parties.
 
Section 10.18 No Third Party Beneficiaries.  This Agreement, the other Loan
Documents, and the agreement of the Lenders to make Loans and the Issuing Bank
to issue, amend, renew or extend Letters of Credit hereunder are solely for the
benefit of the Borrower, and no other Person (including, without limitation, any
Subsidiary of the Borrower, any obligor, contractor, subcontractor, supplier or
materialsman) shall have any rights, claims, remedies or privileges hereunder or
under any other Loan Document (except to the extent it is a party thereto)
against the Administrative Agent, the Issuing Bank, the Syndication Agent or any
Lender for any reason whatsoever.  There are no third party beneficiaries other
than Secured Swap Counterparties.
 
Section 10.19 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 “Patriot Act”), it is required
to obtain, verify and record information that identifies the Borrower, which
information includes the name and address of the Borrower and other information
that will allow such Lender to identify the Borrower in accordance with the
Patriot Act.
 
Section 10.20 Existing Credit Agreement.  On the Effective Date, this Agreement
shall supersede and replace in its entirety the Existing Credit Agreement;
provided, however, that (i) all Original Indebtedness on such date shall
thereafter constitute Loans and other Indebtedness, obligations and liabilities
under this Agreement, (ii) the execution and delivery of this Agreement or any
of the Loan Documents hereunder shall not constitute a novation of the Original
Indebtedness and (iii) pursuant to the Assignment of Notes and Liens, the
administrative agent under the Existing Credit Agreement will assign to the
Administrative Agent the Original Indebtedness, the Security Instruments, the
Notes and the Original Liens (to the extent of $145,000,000, the proceeds of the
initial funding under the Credit Agreement are being used to
 

 
102

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Section 10.21 purchase the Existing Credit Agreement, any promissory notes
issued thereunder and any obligations outstanding thereunder).  This Agreement
and any Notes issued hereunder have been given in renewal, extension,
rearrangement and increase, and not in extinguishment of the obligations under
the Existing Credit Agreement and the notes and other documents related
thereto.  All Liens, deeds of trust, mortgages, assignments and security
interests securing the Existing Credit Agreement and the obligations relating
thereto are hereby ratified, confirmed, renewed, extended, brought forward and
rearranged as security for the Indebtedness.  None of the Liens and security
interests created pursuant to the Existing Credit Agreement are
released.  Additionally, the substantive rights and obligations of the parties
hereto shall be governed by this Agreement, rather than the Existing Credit
Agreement.
 
[SIGNATURE PAGES FOLLOW]
 

 
103

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

  NORTHERN OIL AND GAS, INC.          
BORROWER:
By:
/s/ Michael Reger     Name: Michael Reger     Title Chief Executive Officer    
     

 
 

Signature Page to Third Amended and Restated Credit Agreement
 
 
 

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ROYAL BANK OF CANADA.
as Administrative Agent
         
ADMINISTRATIVE AGENT
By:
/s/ Ann Hurley     Name: Ann Hurley     Title: Manager, Agency          

 

 

Signature Page to Third Amended and Restated Credit Agreement
 
 
 

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ROYAL BANK OF CANADA,
as a Lender and Issuing Bank
         
LENDERS:
By:
/s/ Don J. McKinnerney     Name: Don J. McKinnerney     Title: Authorized
Signatory          

Signature Page to Third Amended and Restated Credit Agreement
 
 
 

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SUNTRUST BANK,
as Syndication Agent and a Lender
         
 
By:
/s/ Christopher Reasoner     Name: Christopher Reasoner     Title: Managing
Director          

Signature Page to Third Amended and Restated Credit Agreement
 
 
 

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BANK OF MONTREAL,
as a Co-Documentation Agent
         
 
By:
/s/ James V. Ducote     Name:  James V. Ducote     Title: Director          

 
 

 
BMO HARRIS FINANCING, INC.,
as a Lender
         
 
By:
/s/ James V. Ducote     Name:  James V. Ducote     Title: Director          

 
 

 
Signature Page to Third Amended and Restated Credit Agreement
 
 

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KEYBANK N.A.,
as a Co-Documentation Agent and a Lender
         
 
By:
/s/ David Morris     Name: David Morris     Title: Vice President          

 
 
Signature Page to Third Amended and Restated Credit Agreement
 

 
 

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U.S. BANK NATIONAL ASSOCIATION
as a Co-Documentation Agent and a Lender
         
 
By:
/s/ Daniel K. Hansen     Name: Daniel K. Hansen     Title: Vice President      
   

             
 
Signature Page to Third Amended and Restated Credit Agreement
 

 
 

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BANK OF SCOTLAND plc,
as a Co-Documentation Agent and a Lender
         
 
By:
/s/ Julia R. Franklin     Name: Julia R. Franklin     Title: Vice President    
     

 
 
Signature Page to Third Amended and Restated Credit Agreement
 

 
 

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CAPITAL ONE, NATIONAL ASSOCIATION
as a Lender
         
 
By:
/s/ Peter Shen     Name: Peter Shen     Title: Vice President          

 
 
Signature Page to Third Amended and Restated Credit Agreement
 

 
 

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BOKF, NA dba BANK OF OKLAHOMA
as a Lender
         
 
By:
/s/ Guy C. Evangelista     Name: Guy C. Evangelista     Title: Senior Vice
President          

 
 
Signature Page to Third Amended and Restated Credit Agreement
 

 
 

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BRANCH BAKING AND TRUST COMPANY,
as a Lender
         
 
By:
/s/ Ryan K. Michael     Name: Ryan K. Michael     Title: Senior Vice President  
       

 
 
Signature Page to Third Amended and Restated Credit Agreement
 

 
 

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CADENCE BANK, N.A.,
as a Lender
         
 
By:
/s/ Eric Brousbard     Name: Eric Brousbard     Title: Senior Vice President    
     

 
 
Signature Page to Third Amended and Restated Credit Agreement
 

 
 

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MACQUARIE BANK LIMITED,
as a Lender
         
 
By:
/s/ Katie Choi     Name: Katie Choi     Title: Division Director          

 
 

 
MACQUARIE BANK LIMITED,
as a Lender
         
 
By:
/s/ Robert McRobbie     Name: Robert McRobbie     Title: Legal Risk Management  
       

                                                                                                                              
 

Signature Page to Third Amended and Restated Credit Agreement
 

 
 

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