Exhibit 10.1

 

 

 

CREDIT AGREEMENT

Dated as of September 30, 2010

among

GULFPORT ENERGY CORPORATION,

as Borrower,

THE BANK OF NOVA SCOTIA,

as Administrative Agent

and

L/C Issuer and Lead Arranger,

and

The Other Lenders Party Hereto

 

 

 

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TABLE OF CONTENTS

 

Section

      

Page

ARTICLE I. DEFINITIONS AND ACCOUNTING TERMS

   1

1.01.

  Defined Terms    1

1.02.

  Other Interpretive Provisions    21

1.03.

  Accounting Terms    21

1.04.

  Rounding    22

1.05.

  Times of Day    22

1.06.

  Letter of Credit Amounts    22

ARTICLE II. THE COMMITMENTS AND CREDIT EXTENSIONS

   22

2.01.

  Loans    22

2.02.

  Borrowings, Conversions and Continuations of Loans    22

2.03.

  Letters of Credit    23

2.04.

  Prepayments    30

2.05.

  Termination or Reduction of Commitments    30

2.06.

  Repayment of Loans    31

2.07.

  Interest    31

2.08.

  Fees    31

2.09.

  Computation of Interest and Fees    32

2.10.

  Evidence of Debt    32

2.11.

  Payments Generally; Agent’s Clawback    33

2.12.

  Sharing of Payments    34

2.13.

  Collateral    35

2.14.

  No Fees Paid to Defaulting Lenders    36

ARTICLE III. TAXES, YIELD PROTECTION AND ILLEGALITY

   36

3.01.

  Taxes    36

3.02.

  Illegality    38

3.03.

  Inability to Determine Rates    38

3.04.

  Increased Costs    39

3.05.

  Compensation for Losses    40

3.06.

  Mitigation Obligations; Replacement of Lenders    40

3.07.

  Survival    41

ARTICLE IV. BORROWING BASE

   41

4.01.

  Borrowing Base    41

4.02.

  Periodic Determinations of Borrowing Base    41

4.03.

  Special Determinations of Borrowing Base    42

4.04.

  General Procedures With Respect to Determination of Borrowing Base    42

4.05.

  Borrowing Base Reductions    43

4.06.

  Borrowing Base Deficiency    43

4.07.

  Borrowing Base Increase Fee    44

4.08.

  Mortgage of Additional Properties    44

 

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ARTICLE V. CONDITIONS PRECEDENT TO CREDIT EXTENSIONS

   45

5.01.

  Conditions of Initial Credit Extension    45

5.02.

  Conditions to all Credit Extensions    47

ARTICLE VI. REPRESENTATIONS AND WARRANTIES

   48

6.01.

  Existence, Qualification and Power; Compliance with Laws    48

6.02.

  Authorization; No Contravention    48

6.03.

  Governmental Authorization; Other Consents    48

6.04.

  Binding Effect    48

6.05.

  Financial Statements; No Material Adverse Effect    49

6.06.

  Litigation    49

6.07.

  No Default    49

6.08.

  Ownership of Property; Liens    49

6.09.

  Environmental Compliance    50

6.10.

  Insurance    50

6.11.

  Taxes    50

6.12.

  ERISA Compliance    50

6.13.

  Subsidiaries    51

6.14.

  Margin Regulations; Investment Company Act    51

6.15.

  Disclosure    51

6.16.

  Compliance with Laws    51

6.17.

  Intellectual Property; Licenses, Etc.    51

6.18.

  Rights in Collateral; Priority of Liens    52

6.19.

  Concerning the Collateral    52

6.20.

  Swap Contracts and Forward Sales Contracts    52

6.21.

  Engineering Reports    52

6.22.

  Gas Balancing Agreements and Advance Payment Contracts    52

6.23.

  Warranties and Collateral Documents    52

6.24.

  Tax Shelter Regulations    53

6.25.

  OFAC    53

6.26.

  Solvency    53

ARTICLE VII. AFFIRMATIVE COVENANTS

   53

7.01.

  Financial Statements    53

7.02.

  Certificates; Other Information    54

7.03.

  Notices    55

7.04.

  Payment of Obligations    56

7.05.

  Preservation of Existence, Etc.    56

7.06.

  Maintenance of Properties    56

7.07.

  Maintenance of Insurance    56

7.08.

  Compliance with Laws    57

7.09.

  Books and Records    57

7.10.

  Inspection Rights    57

7.11.

  Use of Proceeds    57

7.12.

  Financial Covenants    57

7.13.

  Title Data    57

7.14.

  Additional Subsidiaries    58

7.15.

  Required Reserve Value    58

 

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7.16.

  Further Assurances    58

ARTICLE VIII. NEGATIVE COVENANTS

   58

8.01.

  Liens    58

8.02.

  Investments    60

8.03.

  Indebtedness    61

8.04.

  Fundamental Changes    62

8.05.

  Dispositions    62

8.06.

  Restricted Payments    64

8.07.

  Change of Operator    64

8.08.

  Forward Sales Contracts    64

8.09.

  Swap Contracts    64

8.10.

  Change in Nature of Business    65

8.11.

  Transactions with Affiliates    65

8.12.

  Burdensome Agreements    65

8.13.

  Use of Proceeds    66

8.14.

  Gas Balancing Agreements and Advance Payment Contracts    66

8.15.

  Accounting Changes    66

ARTICLE IX. EVENTS OF DEFAULT AND REMEDIES

   66

9.01.

  Events of Default    66

9.02.

  Remedies Upon Event of Default    68

9.03.

  Application of Funds    68

ARTICLE X. ADMINISTRATIVE AGENT

   69

10.01.

  Appointment and Authorization of Administrative Agent    69

10.02.

  Rights as a Lender    69

10.03.

  Exculpatory Provisions    69

10.04.

  Reliance by Administrative Agent    70

10.05.

  Delegation of Duties    70

10.06.

  Resignation of Agent    71

10.07.

  Non-Reliance on Agent and Other Lenders    71

10.08.

  No Other Duties, Etc.    71

10.09.

  Administrative Agent May File Proofs of Claim    72

10.10.

  Collateral and Guarantor Matters    72

ARTICLE XI. MISCELLANEOUS

   74

11.01.

  Amendments, Etc.    74

11.02.

  Notices; Effectiveness; Electronic Communications    75

11.03.

  No Waiver; Cumulative Remedies; Enforcement    76

11.04.

  Expenses; Indemnity; Damage Waiver    77

11.05.

  Payments Set Aside    79

11.06.

  Successors and Assigns    79

11.07.

  Treatment of Certain Information; Confidentiality    82

11.08.

  Right of Setoff    83

11.09.

  Interest Rate Limitation    83

11.10.

  Counterparts ; Integration; Effectiveness    84

 

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11.11.

  Survival of Representations and Warranties    84

11.12.

  Severability    84

11.13.

  Legal Representation of Agent    84

11.14.

  Replacement of Lenders    85

11.15.

  Governing Law; Jurisdiction; Etc.    85

11.16.

  Waiver of Right to Trial by Jury    86

11.17.

  USA PATRIOT Act Notice    86

11.18.

  No Advisory or Fiduciary Responsibility    86

11.19.

  Electronic Execution of Assignments    87

11.20.

  Concerning Swap Contracts and Lender Forward Sales Contracts    87

11.21.

  Concerning Cash Management Agreements    87

11.22.

  Time of the Essence    88

11.23.

  Entire Agreement    89

SCHEDULES

  

2.01

  Commitments and Applicable Percentages   

5.01

  Loan Documents to be Executed at Closing   

6.05

  Supplement to Interim Financial Statements   

6.06

  Litigation   

6.09

  Environmental Matters   

6.13

  Subsidiaries and Other Equity Investments   

6.20

  Existing Swap Contracts   

8.01

  Existing Liens   

8.03

  Existing Indebtedness   

11.02

  Administrative Agent’s Office, Certain Addresses for Notices   

11.06

  Processing and Recording Fees   

EXHIBITS

  

Form of

  

A

  Loan Notice   

B

  Note   

C

  Compliance Certificate   

D

  Assignment and Assumption   

E

  Opinion Matters   

F

  Affidavit of Payment and Trade Bills   

G

  Property Certificate   

H

  Reconciliation Schedule   

I

  List of Mortgaged Properties as of Closing Date   

J

  List of Bank of America Mortgages   

 

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CREDIT AGREEMENT

CREDIT AGREEMENT (this “Agreement”) is entered into as of September 30, 2010,
among GULFPORT ENERGY CORPORATION, a Delaware corporation (“Borrower”), each
lender from time to time party hereto (collectively, “Lenders” and individually,
a “Lender”), and THE BANK OF NOVA SCOTIA, as Administrative Agent and L/C
Issuer.

Borrower has requested that Lenders provide a revolving credit facility, and
Lenders are willing to do so on the terms and conditions set forth herein. In
consideration of the mutual covenants and agreements herein contained, the
parties hereto covenant and agree as follows:

ARTICLE I. DEFINITIONS AND ACCOUNTING TERMS

1.01. Defined Terms. As used in this Agreement, the following terms shall have
the meanings set forth below:

“Administrative Agent” or “Agent” means Scotia Capital in its capacity as
administrative agent under any of the Loan Documents, or any successor
administrative agent.

“Administrative Agent’s Office” means Agent’s address and, as appropriate,
account as set forth on Schedule 11.02, or such other address or account as
Agent may from time to time notify Borrower and Lenders.

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

“Advance Payment Contract” means any contract whereby any Loan Party either
receives or becomes entitled to receive (either directly or indirectly) any
payment (an “Advance Payment”) to be applied toward payment of the purchase
price of hydrocarbons produced or to be produced from Mineral Interests owned by
any Loan Party and which Advance Payment is paid or to be paid in advance of
actual delivery of such production to or for the account of the purchaser
regardless of such production; provided that inclusion of the standard “take or
pay” provision in any gas sales or purchase contract or any other similar
contract shall not, in and of itself, constitute such contract as an Advance
Payment Contract for the purposes hereof.

“Affidavit of Payment of Trade Bills” has the meaning specified in
Section 5.01(a)(x).

“Affiliate” means, with respect to any 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 Commitments” means the Commitments of all Lenders, which aggregate
amount, as set forth on Schedule 2.01, is the lesser of $100,000,000, or the
Borrowing Base.

“Agreement” means this Credit Agreement.

“Applicable Percentage” means with respect to any Lender at any time, the
percentage (carried out to the ninth decimal place) of the Aggregate Commitments
represented by such Lender’s Commitment at such time. If the Commitment of each
Lender to make Loans and the obligation of the L/C Issuer to make L/C Credit
Extensions have been terminated pursuant to Section 9.02 or if the Aggregate
Commitments have expired, then the Applicable Percentage of each Lender shall be
determined based on the Applicable Percentage of such Lender most recently in
effect, giving effect to any subsequent assignments. The initial Applicable
Percentage of each Lender is set forth opposite the name of such Lender on
Schedule 2.01 or in the Assignment and Assumption pursuant to which such Lender
becomes a party hereto, as applicable.

 

CREDIT AGREEMENT – Page 1

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“Applicable Rate” means, from time to time, the following percentages per annum,
based upon the Applicable Usage Level:

Applicable Rate

 

Applicable
Usage Level

   Commitment fee     Eurodollar Rate
Loans and  Letters
of Credit     Base Rate Loans  

Level 1

   0.50 %    2.75 %    1.75 % 

Level 2

   0.50 %    3.00 %    2.00 % 

Level 3

   0.625 %    3.25 %    2.25 % 

Level 4

   0.625 %    3.50 %    2.50 % 

Any increase or decrease in the Applicable Rate resulting from a change in the
Applicable Usage Level shall become effective as of the date of the change in
the Applicable Usage Level. The Applicable Rate shall be Level 4 during any
period that a Borrowing Base deficiency is being paid back in installments as
permitted by Section 4.06.

“Applicable Usage Level” means on any date the level set forth below that
corresponds to the percentage, as of the close of business on such day,
equivalent to (a) Total Outstandings, divided by (b) the Borrowing Base:

Applicable Usage Level

 

Level

  

Usage Percent

Level 1

   Less than 25%

Level 2

   25% or greater but less than 50%

Level 3

   50% or greater but less than 75%

Level 4

   75% or greater

“Applicable Usury Laws” has the meaning set forth in Section 11.09 hereof.

“Approved Fund” means any Fund that is administered or managed by (a) a Lender,
(b) an Affiliate of a Lender or (c) an entity or an Affiliate of an entity that
administers or manages a Lender.

“Arranger” means Scotia Capital, in its capacity as sole lead arranger and sole
book runner.

“ASC 815” means the Accounting Standards Codification No. 815 (Derivatives and
Hedging), as issued by the Financial Accounting Standards Board.

“Asset Disposition” means the sale, assignment, lease, license, transfer,
exchange or other Disposition by any Loan Party of any oil and gas property
included in the Borrowing Base, provided that the sale of the hydrocarbons,
including Advance Payment Contracts, Forward Sales Contracts and Swap Contracts,
in the ordinary course of business shall not be deemed to be an Asset
Disposition.

“Assignee Group” means two or more Eligible Assignees that are Affiliates of one
another or two or more Approved Funds managed by the same investment advisor.

 

CREDIT AGREEMENT – Page 2

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“Assignment and Assumption” means an assignment and assumption entered into by a
Lender and an Eligible Assignee (with the consent of any party whose consent is
required by Section 11.06(b)), and accepted by Agent, in substantially the form
of Exhibit D or any other form approved by Agent.

“Attributable Indebtedness” means, on any date, (a) in respect of any capital
lease of any Person, the capitalized amount thereof that would appear on a
balance sheet of such Person prepared as of such date in accordance with GAAP,
and (b) in respect of any Synthetic Lease Obligation, the capitalized amount of
the remaining lease payments under the relevant lease that would appear on a
balance sheet of such Person prepared as of such date in accordance with GAAP if
such lease were accounted for as a capital lease.

“Audited Financial Statements” means the audited consolidated balance sheet of
Borrower and its Subsidiaries for the fiscal year ended December 31, 2009, and
the related consolidated statements of income or operations, shareholders’
equity and cash flows for such fiscal year of Borrower and its Subsidiaries,
including the notes thereto.

“Availability Period” means the period from and including the Closing Date to
the earliest of (a) the Maturity Date, (b) the date of termination of the
Aggregate Commitments pursuant to Section 2.05, and (c) the date of termination
of the commitment of each Lender to make Loans and of the obligation of the L/C
Issuer to make L/C Credit Extensions pursuant to Section 9.02.

“Bank of America Mortgages” means the mortgages, deeds of trust and financing
statements listed on Exhibit J.

“Base Rate” means for any day a fluctuating rate per annum equal to the highest
of (a) the Federal Funds Rate plus 1/2 of 1%, (b) the rate of interest in effect
for such day as publicly announced from time to time by Agent as its “prime
rate,” and (c) the Eurodollar Rate for an Interest Period of one month plus
1.00%. The “prime rate” is a rate set by Agent based upon various factors
including Agent’s costs and desired return, general economic conditions and
other factors, and is used as a reference point for pricing some loans, which
may be priced at, above, or below such announced rate. Any change in the Federal
Funds Rate, the prime rate or the Eurodollar Rate for a period of one month
shall be effective on the effective date of such change.

“Base Rate Loan” means a Loan that bears interest based on the Base Rate.

“Borrower” has the meaning specified in the introductory paragraph hereto.

“Borrower Account” has the meaning specified in Section 2.11(a)(ii).

“Borrower Materials” has the meaning specified in Section 7.02.

“Borrowing” means a borrowing consisting of simultaneous Loans of the same Type
and, in the case of Eurodollar Rate Loans, having the same Interest Period made
by each of the Lenders pursuant to Section 2.01.

“Borrowing Base” means the maximum loan amount that may be supported by the oil
and gas properties of the Loan Parties included in the most recent Reserve
Report provided to Agent, as determined by Agent and approved by the Required
Lenders, or all of the Lenders, as applicable, in accordance with Article IV.

“Borrowing Base Deficiency Notice” has the meaning specified in Section 4.06.

 

CREDIT AGREEMENT – Page 3

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“Business Day” means any day other than a Saturday, Sunday or other day on which
commercial banks are authorized to close under the Laws of, or are in fact
closed in, the state where Administrative Agent’s Office is located and, if such
day relates to any Eurodollar Rate Loan, means any such day on which dealings in
Dollar deposits are conducted by and between banks in the London interbank
eurodollar market.

“Cash Collateral” and “Cash Collateralize” have the meanings specified in
Section 2.03(g).

“Cash Management Agreement” means any agreement to provide cash management
services, including treasury, depositing, overdraft, credit or debit card,
electronic funds transfer and other cash management arrangements.

“Cash Management Obligations” means all obligations, indebtedness, and
liabilities of Borrower and any Subsidiary arising under any Secured Cash
Management Agreement, whether direct or indirect (including those acquired by
assumption), absolute or contingent, due or to become due, now existing or
hereafter arising and including interest, fees and other amounts that accrue
after the commencement by or against Borrower or any Subsidiary of any
proceeding under any Debtor Relief Law naming the Borrower or such Subsidiary as
the debtor in such proceeding, regardless of whether such interest, fees or
other amounts are allowed claims in such proceeding.

“Cash Management Party” means any Person that is a Lender or an Affiliate of a
Lender, in its capacity as a party to such Cash Management Agreement.

“Change in Law” means the occurrence, after the date of this Agreement, of any
of the following: (a) the adoption or taking effect of any Law, rule, regulation
or treaty, (b) any change in any Law, rule, regulation or treaty or in the
administration, interpretation or application thereof by any Governmental
Authority or (c) the making or issuance of any request, guideline or directive
(whether or not having the force of law) by any Governmental Authority.

“Change of Control” means, with respect to any Loan Party other than Borrower,
an event or series of events by which Borrower ceases to Control such Loan
Party, and means with respect to Borrower, any event or series of events by
which:

(a) any “person” or “group” (as such terms are used in Sections 13(d) and 14(d)
of the Securities Exchange Act of 1934, but excluding any employee benefit plan
of such person or its subsidiaries, and any person or entity acting in its
capacity as trustee, agent or other fiduciary or administrator of any such plan)
other than one or more Permitted Holders becomes the “beneficial owner” (as
defined in Rules 13d-3 and 13d-5 under the Securities Exchange Act of 1934,
except that a person or group shall be deemed to have “beneficial ownership” of
all securities that such person or group has the right to acquire (such right,
an “option right”), whether such right is exercisable immediately or only after
the passage of time), directly or indirectly, of 40% or more of the voting power
of the Equity Interests of such Person entitled to vote for members of the board
of directors or equivalent governing body of such Person on a fully-diluted
basis (and taking into account all such securities that such person or group has
the right to acquire pursuant to any option right);

(b) during any period of 12 consecutive months, a majority of the members of the
board of directors or other equivalent governing body of such Person cease to be
composed of individuals (i) who were members of that board or equivalent
governing body on the first day of such period, (ii) whose election or
nomination to that board or equivalent governing body was approved by
individuals referred to in clause (i) above constituting at the time of such
election or nomination at least a majority of that board or equivalent governing
body, (iii) whose election or nomination to that board or other equivalent
governing body was approved by individuals referred to in clauses (i) and
(ii) above constituting at the time of such election or nomination at least a
majority of that board or equivalent governing body, or (iv) whose election or
nomination was approved by one or more Permitted Holders; or

 

CREDIT AGREEMENT – Page 4

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(c) any Person or two or more Persons (other than Permitted Holders) acting in
concert shall have acquired by contract or otherwise, or shall have entered into
a contract or arrangement that, upon consummation thereof, will result in its or
their acquisition of the power to exercise, directly or indirectly, a
controlling influence over the management or policies of such Person, or control
over the equity securities of such Person entitled to vote for members of the
board of directors or equivalent governing body of such Person on a
fully-diluted basis (and taking into account all such securities that such
Person(s) or group has the right to acquire pursuant to any option right)
representing 40% or more of the combined voting power of such securities;

provided, for avoidance of doubt, a Disposition of Equity Interests among Loan
Parties permitted by Section 8.05(c) shall not be considered a Change of
Control.

“Closing Date” means the first date all the conditions precedent in Section 5.01
are satisfied or waived in accordance with Section 11.01.

“Code” means the Internal Revenue Code of 1986.

“Collateral” shall mean any and all assets and rights and interests in or to
property of Borrower and each of the other Loan Parties, whether real or
personal, tangible or intangible, in which a Lien is granted or purported to be
granted pursuant to the Collateral Documents.

“Collateral Documents” means all Oil and Gas Mortgages, each Security Agreement,
each Subsidiary Security Agreement, each Pledge Agreement, each Subsidiary
Pledge Agreement, and all other agreements, instruments and documents (other
than Lender Swap Contracts) now or hereafter executed and delivered in
connection with this Agreement pursuant to which Liens are granted or purported
to be granted to Agent in Collateral securing all or part of the Obligations,
each in form and substance satisfactory to Agent.

“Commitment” means, as to each Lender at any time, its obligation to (a) make
Loans to Borrower pursuant to Section 2.01, and (b) purchase participations in
L/C Obligations, in an aggregate principal amount at any one time outstanding
not to exceed the lesser of (x) the amount set forth opposite such Lender’s name
on Schedule 2.01 or in the Assignment and Assumption pursuant to which such
Lender becomes a party hereto, as applicable, as such amount may be adjusted
from time to time in accordance with this Agreement, or (y) such Lender’s
Applicable Percentage of the Borrowing Base as in effect from time to time.

“Compliance Certificate” means a certificate substantially in the form of
Exhibit C.

“Contractual Obligation” means, as to any Person, any provision of any security
issued by such Person or of any agreement, instrument or other undertaking to
which such Person is a party or by which it or any of its property is bound.

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

 

CREDIT AGREEMENT – Page 5

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“Credit Extension” means each of the following: (a) a Borrowing and (b) an L/C
Credit Extension.

“Debtor Relief Laws” means the Bankruptcy Code of the United States, and all
other liquidation, conservatorship, bankruptcy, assignment for the benefit of
creditors, moratorium, rearrangement, receivership, insolvency, reorganization,
or similar debtor relief Laws of the United States or other applicable
jurisdictions from time to time in effect and affecting the rights of creditors
generally.

“Default” means any event or condition that constitutes an Event of Default or
that, with the giving of any notice, the passage of time, or both, would be an
Event of Default.

“Default Rate” means (a) when used with respect to Obligations other than L/C
Fees an interest rate equal to (i) the Base Rate plus (ii) the Applicable Rate
applicable to Base Rate Loans plus (iii) 2% per annum; provided, however, that
with respect to a Eurodollar Rate Loan, the Default Rate shall be an interest
rate equal to the interest rate (including any Applicable Rate) otherwise
applicable to such Loan plus 2% per annum, but in each case in no event in
excess of the Maximum Rate, and (b) when used with respect to L/C Fees, a rate
equal to the Applicable Rate plus 2% per annum.

“Defaulting Lender” means any Lender that (a) has failed to perform any of its
funding obligations hereunder, including in respect of its Loans or
participations in respect of Letters of Credit, on the Closing Date or, with
respect to Loans requested after the Closing Date, within three Business Days of
the date required to be funded by it hereunder, (b) has notified the Borrower or
the Agent that it does not intend to comply with any such funding obligations,
(c) has failed, within three Business Days after request by the Agent, to
confirm in a manner satisfactory to the Agent, that it will comply with such
funding obligations, or (d) has, or has a direct or indirect parent company that
has, (i) become the subject of a proceeding under any Debtor Relief Law,
(ii) had a receiver, conservator, trustee, administrator, assignee for the
benefit of creditors or similar Person charged with reorganization or
liquidation of its business or a custodian appointed for it, or (iii) taken any
action in furtherance of, or indicated its consent to, approval of or
acquiescence in any such proceeding or appointment; provided that a Lender shall
not be a Defaulting Lender solely by virtue of the ownership or acquisition of
any equity interest in such Lender or any direct or indirect parent company
thereof by a Governmental Authority.

“Designated Investment Entities” means Grizzly Oil Sands ULC, Tatex Thailand II
LLC and Tatex Thailand III, LLC.

“Disposition” or “Dispose” means the sale, transfer, license, lease or other
disposition (including any sale and leaseback transaction) of any property by
any Person, including any Asset Disposition and any sale, assignment, transfer
or other disposal, with or without recourse, of any notes or accounts receivable
or any rights and claims associated therewith.

“Dollar” and “$” mean lawful money of the United States.

“Domestic Subsidiary” means any Subsidiary that is organized under the laws of
any political subdivision of the United States.

“EBITDAX” means net income, excluding any non-cash revenue or expense associated
with Swap Contracts resulting from ASC 815, plus without duplication and to the
extent deducted from revenues in determining net income, the sum of (a) the
aggregate amount of consolidated Interest Expense for such period, (b) the
aggregate amount of income, franchise, capital or similar tax expense (other
than ad valorem taxes) for such period, (c) all amounts attributable to
depletion, depreciation, amortization and asset or goodwill impairment or
writedown for such period, (d) all other non-cash charges, (e) exploration costs
deducted in determining net income under successful efforts accounting,
(f) non-cash losses from minority investments, (g) actual cash distributions
received from minority investments, (h) to the extent actually reimbursed by
insurance, expenses with respect to liability on casualty events or business
interruption, and (i) all reasonable transaction expenses related to
Dispositions and acquisitions of assets, investments and debt and equity
offerings by any Loan Party (in each case whether or not successful, provided
that expenses related to unsuccessful Dispositions shall be limited to
$3,000,000 in the aggregate for the period from the Closing Date to the Maturity
Date), and less non-cash income attributable to equity income from minority
investments, all determined on a consolidated basis with respect to Borrower and
its subsidiaries in accordance with GAAP, using the results of the twelve-month
period ending with that reporting period.

 

CREDIT AGREEMENT – Page 6

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“Eligible Assignee” means (a) a Lender; (b) an Approved Fund; (c) an Affiliate
of a Lender; and (d) any other Person (other than a natural person) approved by
(i) Agent and the L/C Issuer, and (ii) unless an Event of Default has occurred
and is continuing, Borrower (each such approval not to be unreasonably withheld
or delayed); provided that notwithstanding the foregoing, “Eligible Assignee”
shall not include Borrower or any of Borrower’s Affiliates or Subsidiaries.

“Environmental Laws” means any and all Federal, state, local, and foreign
statutes, Laws, regulations, ordinances, rules, judgments, orders, decrees,
permits, concessions, grants, franchises, licenses, agreements or governmental
restrictions relating to pollution and the protection of the environment or the
release of any materials into the environment, including those related to
hazardous substances or wastes, air emissions and discharges to waste or public
systems.

“Environmental Liability” means any liability, contingent or otherwise
(including any liability for damages, costs of environmental remediation, fines,
penalties or indemnities), of Borrower, any other Loan Party or any of their
respective Subsidiaries resulting from (a) violation of any Environmental Law,
(b) the generation, use, handling, transportation, storage, treatment or
disposal of any Hazardous Materials, (c) exposure to any Hazardous Materials,
(d) the release or threatened release of any Hazardous Materials into the
environment or (e) any contract, agreement or other consensual arrangement
pursuant to which liability is assumed or imposed with respect to any of the
foregoing.

“Equity Interests” means, with respect to any Person, all of the shares of
capital stock of (or other ownership or profit interests in) such Person, all of
the warrants, options or other rights for the purchase or acquisition from such
Person of shares of capital stock of (or other ownership or profit interests in)
such Person, all of the securities convertible into or exchangeable for shares
of capital stock of (or other ownership or profit interests in) such Person or
warrants, rights or options for the purchase or acquisition from such Person of
such shares (or such other interests), and all of the other ownership or profit
interests in such Person (including partnership, member or trust interests
therein), whether voting or nonvoting, and whether or not such shares, warrants,
options, rights or other interests are outstanding on any date of determination.

“ERISA” means the Employee Retirement Income Security Act of 1974.

“ERISA Affiliate” means any trade or business (whether or not incorporated)
under common control with Borrower within the meaning of Section 414(b) or
(c) of the Code (and Sections 414(m) and (o) of the Code for purposes of
provisions relating to Section 412 of the Code).

“ERISA Event” means (a) a Reportable Event with respect to a Pension Plan; (b) a
withdrawal by Borrower or any ERISA Affiliate from a Pension Plan subject to
Section 4063 of ERISA during a plan year in which it was a substantial employer
(as defined in Section 4001(a)(2) of ERISA) or a cessation of operations that is
treated as such a withdrawal under Section 4062(e) of ERISA; (c) a complete or
partial withdrawal by Borrower or any ERISA Affiliate from a Multiemployer Plan
or notification that a Multiemployer Plan is in reorganization; (d) the filing
of a notice of intent to terminate, the treatment of a Plan amendment as a
termination under Sections 4041 or 4041A of ERISA, or the commencement of
proceedings by the PBGC to terminate a Pension Plan or Multiemployer Plan;
(e) an event or condition which constitutes grounds under Section 4042 of ERISA
for the termination of, or the appointment of a trustee to administer, any
Pension Plan or Multiemployer Plan; or (f) the imposition of any liability under
Title IV of ERISA, other than for PBGC premiums due but not delinquent under
Section 4007 of ERISA, upon Borrower or any ERISA Affiliate.

 

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“Eurodollar Base Rate” has the meaning specified in the definition of Eurodollar
Rate.

“Eurodollar Rate” means for any Interest Period with respect to a Eurodollar
Rate Loan, a rate per annum determined by Agent pursuant to the following
formula:

 

Eurodollar Rate =   

Eurodollar Base Rate

      1.00 – Eurodollar Reserve Percentage   

Where,

“Eurodollar Base Rate” means, for such Interest Period (rounded upwards, as
necessary, to the nearest 1/100 of 1%):

(a) the rate per annum equal to the rate determined by Agent to be the London
interbank offered rate that appears on Reuters Screen LIBOR01 Page (or any
successor thereto) for deposits in Dollars (for delivery on the first day of
such Interest Period) with a term equivalent to such Interest Period, determined
as of approximately 11:00 a.m. (London time) two Business Days prior to the
first day of such Interest Period, or

(b) if the rate referenced in the preceding clause (a) does not appear on such
page or service or such page or service shall not be available, the rate per
annum equal to the rate determined by Agent to be the offered rate on such other
page or other service that displays an average British Bankers Association
Interest Settlement Rate for deposits in Dollars (for delivery on the first day
of such Interest Period) with a term equivalent to such Interest Period,
determined as of approximately 11:00 a.m. (London time) two Business Days prior
to the first day of such Interest Period, or

(c) if the rates referenced in the preceding clauses (a) and (b) are not
available, Agent shall determine such rate as the average of quotations for
three (3) major New York money center banks of whom the Agent shall inquire as
the “London Interbank Offered Rate” for deposits in U.S. Dollars at
approximately 4:00 p.m. (London time) two Business Days prior to the first day
of such Interest Period.

“Eurodollar Reserve Percentage” means, for any day during any Interest Period,
the reserve percentage (expressed as a decimal, carried out to five decimal
places) in effect on such day, whether or not applicable to any Lender, under
regulations issued from time to time by the Board of Governors of the Federal
Reserve System of the United States for determining the maximum reserve
requirement (including any emergency, supplemental or other marginal reserve
requirement) with respect to Eurocurrency funding (currently referred to as
“Eurocurrency liabilities”). The Eurodollar Rate for each outstanding Eurodollar
Rate Loan shall be adjusted automatically as of the effective date of any change
in the Eurodollar Reserve Percentage.

 

CREDIT AGREEMENT – Page 8

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“Eurodollar Rate Loan” means a Loan that bears interest at a rate based on the
Eurodollar Rate.

“Event of Default” has the meaning specified in Section 9.01.

“Excluded Taxes” means, with respect to the Administrative Agent, any Lender,
the L/C Issuer or any other recipient of any payment to be made by or on account
of any obligation of the Borrower hereunder, (a) taxes imposed on or measured by
its overall net income (however denominated), and franchise taxes imposed on it
(in lieu of net income taxes), by the jurisdiction (or any political subdivision
thereof) 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 or any similar tax imposed by any other jurisdiction in which
the Borrower is located and (c) in the case of a Foreign Lender, any withholding
tax that is imposed on amounts payable to such Foreign Lender at the time such
Foreign Lender becomes a party hereto (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 3.01(e), except to the extent
that such Foreign Lender (or its assignor, if any) was entitled, at the time of
designation of a new Lending Office (or assignment), to receive additional
amounts from the Borrower with respect to such withholding tax pursuant to
Section 3.01(a).

“Federal Funds Rate” means, for any day, the 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 on such
day, as published by the Federal Reserve Bank of New York on the Business Day
next succeeding such day; provided that (a) if such day is not a Business Day,
the Federal Funds Rate for such day shall be such rate on such transactions on
the next preceding Business Day as so published on the next succeeding Business
Day, and (b) if no such rate is so published on such next succeeding Business
Day, the Federal Funds Rate for such day shall be the average rate (rounded
upward, if necessary, to a whole multiple of 1/100 of 1%) charged to Agent on
such day on such transactions as determined by Agent.

“Fee Letter” means the letter agreement dated August 20, 2010, between Borrower
and Agent.

“Filing” has the meaning specified in Section 6.03.

“Foreign Lender” means any Lender that is organized under the Laws of a
jurisdiction other than that in which the Borrower is resident for tax purposes
(including such a Lender acting in the capacity of the L/C Issuer). For purposes
of this definition, the United States, each State thereof and the District of
Columbia shall be deemed to constitute a single jurisdiction.

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

“Forward Sales Contract” means an agreement to sell hydrocarbons, and be paid
for such sale, at a point in time in the future.

“FRB” means the Board of Governors of the Federal Reserve System of the United
States.

“Fund” means any Person (other than a natural person) that is (or will be)
engaged in making, purchasing, holding or otherwise investing in commercial
loans and similar extensions of credit in the ordinary course of its activities.

“Funded Debt” means, as of any date of determination, for the Borrower and its
Subsidiaries on a consolidated basis, the sum of (a) the outstanding principal
amount of all obligations, whether current or long-term, for borrowed money
(including Obligations hereunder) and all obligations evidenced by bonds,
debentures, notes, loan agreements or other similar instruments, (b) all
purchase money Indebtedness, (c) all direct obligations arising under letters of
credit (including standby and commercial), bankers’ acceptances, bank
guaranties, surety bonds and similar instruments, (d) all obligations in respect
of the deferred purchase price of property or services (other than trade
accounts payable in the ordinary course of business), (e) Indebtedness in
respect of capital leases, (f) without duplication, all Guarantees with respect
to outstanding Indebtedness of the types specified in clauses (a) through
(e) above of Persons other than the Borrower or any Subsidiary, and (g) all
Indebtedness of the types referred to in clauses (a) through (f) above of any
partnership or other entity where owners of Equity Interests thereof have
liability for the obligations of such entity in which the Borrower or a
Subsidiary is a general partner or owner of such Equity Interests, unless
(1) such Indebtedness is expressly made non-recourse to the Borrower or such
Subsidiary, or (2) such Indebtedness is owed by such entity to the owners of the
Equity Interests thereof. For avoidance of doubt, Funded Debt does not include
Wexford ULC Obligations.

 

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“Future Acquisition Documents” has the meaning specified in Section 5.02(e)(i).

“GAAP” means generally accepted accounting principles in the United States set
forth in the opinions and pronouncements of the Accounting Principles Board and
the American Institute of Certified Public Accountants and statements and
pronouncements of the Financial Accounting Standards Board or such other
principles as may be approved by a significant segment of the accounting
profession in the United States, that are applicable to the circumstances as of
the date of determination, consistently applied.

“Gas Balancing Agreement” means any agreement or arrangement whereby any Loan
Party, or any other party having an interest in any hydrocarbons to be produced
from Mineral Interests in which any Loan Party owns an interest, has a right to
take more than its proportionate share of production therefrom.

“Governmental Authority” means the government of the United States or any other
nation, or of 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 (including any
supra-national bodies such as the European Union or the European Central Bank).

“Guarantee” means, as to any Person, any obligation, contingent or otherwise, of
such Person guaranteeing or having the economic effect of guaranteeing any
Indebtedness or other obligation payable or performable by another Person (the
“primary obligor”) in any manner, whether directly or indirectly, and including
any obligation of such Person, direct or indirect, (i) to purchase or pay (or
advance or supply funds for the purchase or payment of) such Indebtedness or
other obligation, (ii) to purchase or lease property, securities or services for
the purpose of assuring the obligee in respect of such Indebtedness or other
obligation of the payment or performance of such Indebtedness or other
obligation, (iii) to maintain working capital, equity capital or any other
financial statement condition or liquidity or level of income or cash flow of
the primary obligor so as to enable the primary obligor to pay such Indebtedness
or other obligation, or (iv) entered into for the purpose of assuring in any
other manner the obligee in respect of such Indebtedness or other obligation of
the payment or performance thereof or to protect such obligee against loss in
respect thereof (in whole or in part). The amount of any Guarantee shall be
deemed to be an amount equal to the stated or determinable amount of the related
primary obligation, or portion thereof, in respect of which such Guarantee is
made or, if not stated or determinable, the maximum reasonably anticipated
liability in respect thereof as determined by the guaranteeing Person in good
faith. The term “Guarantee” as a verb has a corresponding meaning.

 

CREDIT AGREEMENT – Page 10

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“Guarantor” means each Domestic Subsidiary of Borrower that now or hereafter
executes a Guaranty pursuant to Section 7.14, and any other Person which
subsequently guarantees the payment and performance of the Obligations.

“Guaranty” means the Guaranty made by the Guarantor in favor of Agent and the
Lenders, in form and substance satisfactory to Agent.

“Hazardous Materials” means all explosive or radioactive substances or wastes
and all hazardous or toxic substances, wastes or other pollutants, including
petroleum or petroleum distillates, asbestos or asbestos-containing materials,
polychlorinated biphenyls, radon gas, infectious or medical wastes and all other
substances or wastes, the release or presence of which requires reporting,
permitting, remediation or investigation pursuant to any Environmental Law.

“Indebtedness” means, as to any Person at a particular time, without
duplication, all of the following, whether or not included as indebtedness or
liabilities in accordance with GAAP:

(a) all obligations of such Person for borrowed money and all obligations of
such Person evidenced by bonds, debentures, notes, loan agreements or other
similar instruments;

(b) all direct or contingent obligations of such Person arising under letters of
credit (including standby and commercial), bankers’ acceptances, bank
guaranties, surety bonds and similar instruments;

(c) net obligations of such Person under any Swap Contract;

(d) all obligations of such Person to pay the deferred purchase price of
property or services (other than trade accounts payable in the ordinary course
of business);

(e) indebtedness (excluding prepaid interest thereon) secured by a Lien on
property owned or being purchased by such Person (including indebtedness arising
under conditional sales or other title retention agreements), whether or not
such indebtedness shall have been assumed by such Person or is limited in
recourse;

(f) capital leases and Synthetic Lease Obligations;

(g) all obligations of such Person to purchase, redeem, retire, defease or
otherwise make any payment in respect of any Equity Interest in such Person or
any other Person, valued, in the case of a redeemable preferred interest, at the
greater of its voluntary or involuntary liquidation preference plus accrued and
unpaid dividends;

(h) obligations of such Person under any Forward Sales Contract; and

(i) all Guarantees of such Person in respect of any of the foregoing.

The amount of any unassumed Indebtedness under clause (e) above shall be deemed
to be the lesser of the amount of such Indebtedness and the fair market value of
the property of such Person securing such Indebtedness. For all purposes hereof,
the Indebtedness of any Person shall include the Indebtedness of any partnership
or other entity where owners of Equity Interests thereof have liability for the
obligations of such entity in which such Person is a general partner or owner of
Equity Interests, unless (1) such Indebtedness is expressly made non-recourse to
such Person, or (2) such Indebtedness is owed by such Person to the owners of
the Equity Interests thereof. The amount of any net obligation under any Swap
Contract on any date shall be deemed to be the Swap Termination Value thereof as
of such date. The amount of any capital lease or Synthetic Lease Obligation as
of any date shall be deemed to be the amount of Attributable Indebtedness in
respect thereof as of such date. The amount of any obligation under any Forward
Sales Contract on any date shall be the obligation on such date of any Loan
Party arising from the cancellation of, termination of, default under, or for
any other reason, a Forward Sales Contract ceases to exist prior to its full
performance by all parties thereto. Notwithstanding the foregoing, it is
understood and agreed that Indebtedness shall not include (x) obligations under
agreements providing for the adjustment of the purchase price, working capital
or similar adjustments in connection with any Investment, acquisition or
Disposition and indemnity obligations under such agreements, or (y) obligations
which are identified as liabilities on a Person’s balance sheet in accordance
with GAAP in connection with a noncompete, consulting or other similar
arrangement. For avoidance of doubt, Indebtedness does not include Wexford ULC
Obligations.

 

CREDIT AGREEMENT – Page 11

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“Indemnified Taxes” means Taxes other than Excluded Taxes.

“Indemnitees” has the meaning specified in Section 11.04(b).

“Information” has the meaning specified in Section 11.07.

“Interest Expense” means, as of the last day of any fiscal quarter, the interest
expense, both expensed and capitalized (including the interest component in
respect of capitalized lease obligations), accrued or paid by Borrower and its
Subsidiaries during such period, determined on a consolidated basis in
accordance with GAAP, using the results of the twelve-month period ending with
that reporting period.

“Interest Payment Date” means, (a) as to any Loan other than a Base Rate Loan,
the last day of each Interest Period applicable to such Loan and the Maturity
Date; provided, however, that if any Interest Period for a Eurodollar Rate Loan
exceeds three months, the respective dates that fall every three months after
the beginning of such Interest Period shall also be Interest Payment Dates; and
(b) as to any Base Rate Loan, the last Business Day of each March, June,
September and December and the Maturity Date.

“Interest Period” means, as to each Eurodollar Rate Loan, the period commencing
on the date such Eurodollar Rate Loan is disbursed or converted to or continued
as a Eurodollar Rate Loan and ending on the date one, two, three, six or twelve
months thereafter, as selected by Borrower in its Loan Notice; provided that:

(i) any Interest Period that would otherwise end on a day that is not a Business
Day shall be extended to the next succeeding Business Day unless such Business
Day falls in another calendar month, in which case such Interest Period shall
end on the next preceding Business Day;

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

(iii) no Interest Period shall extend beyond the Maturity Date.

“Investment” means, as to any Person (a) the purchase or other acquisition of
Equity Interests of another Person, (b) a loan, advance or capital contribution
to, Guarantee or assumption of Indebtedness of, or purchase or other acquisition
of any other debt or equity participation or interest in, another Person,
including any partnership interest and any arrangement pursuant to which the
investor Guarantees Indebtedness of such other Person, or (c) the purchase or
other acquisition (in one transaction or a series of transactions) of assets of
another Person that constitute a business unit. For purposes of covenant
compliance, the amount of any Investment shall be the amount actually invested,
without adjustment for subsequent increases or decreases in the value of such
Investment.

 

CREDIT AGREEMENT – Page 12

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“IRS” means the United States Internal Revenue Service.

“ISP” means, with respect to any Letter of Credit, the “International Standby
Practices 1998” published by the Institute of International Banking Law &
Practice (or such later version thereof as may be in effect at the time of
issuance).

“Issuer Documents” means with respect to any Letter of Credit, the L/C
Application, and any other document, agreement and instrument entered into by
the L/C Issuer and Borrower (or any Subsidiary) or in favor of the L/C Issuer
and relating to any such Letter of Credit.

“Laws” means, collectively, all international, foreign, Federal, state and local
statutes, treaties, rules, guidelines, regulations, ordinances, codes and
administrative or judicial precedents or authorities, including the
interpretation or administration thereof by any Governmental Authority charged
with the enforcement, interpretation or administration thereof, and all
applicable administrative orders, directed duties, requests, licenses,
authorizations and permits of, and agreements with, any Governmental Authority,
in each case whether or not having the force of law.

“L/C Advance” means, with respect to each Lender, such Lender’s funding of its
participation in any L/C Borrowing in accordance with its Applicable Percentage.

“L/C Application” means an application and agreement for the issuance or
amendment of a Letter of Credit in the form from time to time in use by the L/C
Issuer.

“L/C Borrowing” means an extension of credit resulting from a drawing under any
Letter of Credit which has not been reimbursed on the date when made or
refinanced as a Borrowing.

“L/C Credit Extension” means, with respect to any Letter of Credit, the issuance
thereof or extension of the expiry date thereof, or the increase of the amount
thereof.

“L/C Expiration Date” means the day that is seven days prior to the Maturity
Date then in effect (or, if such day is not a Business Day, the next preceding
Business Day).

“L/C Fee” has the meaning specified in Section 2.03(i).

“L/C Issuer” means Scotia Capital in its capacity as issuer of Letters of Credit
hereunder, or any successor issuer of Letters of Credit hereunder.

“L/C Obligations” means, as at any date of determination, the aggregate amount
available to be drawn under all outstanding Letters of Credit plus the aggregate
of all Unreimbursed Amounts, including all L/C Borrowings. For purposes of
computing the amount available to be drawn under any Letter of Credit, the
amount of such Letter of Credit shall be determined in accordance with
Section 1.06. For all purposes of this Agreement, if on any date of
determination a Letter of Credit has expired by its terms but any amount may
still be drawn thereunder by reason of the operation of Rule 3.14 of the ISP,
such Letter of Credit shall be deemed to be “outstanding” in the amount so
remaining available to be drawn.

 

CREDIT AGREEMENT – Page 13

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“L/C Sublimit” means an amount equal to $5,000,000. The L/C Sublimit is part of,
and not in addition to, the Aggregate Commitments.

“Lender” has the meaning specified in the introductory paragraph hereto.

“Lender Forward Sales Contract” means any Forward Sales Contract between
Borrower or any Subsidiary and any Lender or Affiliate of such Lender while such
Person (or in the case of its Affiliate, the Person affiliated therewith) is a
Lender hereunder.

“Lender Swap Contract” means any Swap Contract between Borrower or any
Subsidiary and any Lender or Affiliate of such Lender while such Person (or in
the case of its Affiliate, the Person affiliated therewith) is a Lender
hereunder. “Lender Swap Contract” shall not include any transactions or
confirmations with a Lender or an Affiliate of such Lender entered into after
such Lender ceases to be a Lender or such Affiliate ceases to be an Affiliate of
such Lender.

“Lending Office” means, as to any Lender, the office or offices of such Lender
described as such in such Lender’s Administrative Questionnaire, or such other
office or offices as a Lender may from time to time notify Borrower and Agent.

“Letter of Credit” means any standby letter of credit issued hereunder.

“Lien” means any mortgage, pledge, hypothecation, assignment, deposit
arrangement, encumbrance, lien (statutory or other), charge, or preference,
priority or other security interest or preferential arrangement in the nature of
a security interest of any kind or nature whatsoever (including any conditional
sale or other title retention agreement, any easement, right of way or other
encumbrance on title to real property, and any financing lease having
substantially the same economic effect as any of the foregoing).

“Loan” has the meaning specified in Section 2.01.

“Loan Documents” means this Agreement, each Note, each Issuer Document, the Fee
Letter, each Collateral Document, each Guaranty, the Affidavit of Payment of
Trade Bills, the Property Certificate, the Reconciliation Schedule, the Title
Indemnity Agreement, each Security Agreement, each Subsidiary Security
Agreement, each Pledge Agreement, each Subsidiary Pledge Agreement, and all
other documents and instruments executed and/or delivered by any Loan Party in
connection with any Loan, together with all renewals, extensions, modifications
and amendments from time to time of any such document, but excluding any Lender
Swap Contract, any Lender Forward Sales Contract and any Secured Cash Management
Agreement.

“Loan Notice” means a notice of (a) a Borrowing, (b) a conversion of Loans from
one Type to the other, or (c) a continuation of Eurodollar Rate Loans, pursuant
to Section 2.02(a), which, if in writing, shall be substantially in the form of
Exhibit A.

“Loan Parties” means, collectively, Borrower and each Guarantor.

“Material Adverse Effect” means (a) a material adverse change in, or a material
adverse effect upon, the operations, business, properties, condition (financial
or otherwise) of Borrower or Borrower and its Subsidiaries taken as a whole;
(b) a material impairment of the ability of any Loan Party to perform its
obligations under any Loan Document to which it is a party; (c) a material
adverse effect upon the legality, validity, binding effect or enforceability
against any Loan Party of any Loan Document to which it is a party; or (d) a
material adverse change in, or a material adverse effect upon, Mortgaged
Properties having an aggregate value in excess of $3,000,000 as reflected in the
most recent Reserve Report furnished to Agent.

 

CREDIT AGREEMENT – Page 14

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“Material Gas Imbalance” means, with respect to all Gas Balancing Agreements to
which any Loan Party is a party or by which any Mineral Interest owned by any
Loan Party is bound, a net gas imbalance to Borrower or any other Loan Party,
individually or taken as a whole in excess of $1,000,000. Gas imbalances will be
determined based on written agreements, if any, specifying the method of
calculation thereof, or, alternatively, if no such agreements are in existence,
gas imbalances will be calculated by multiplying (x) the volume of gas imbalance
as of the date of calculation (expressed in thousand cubic feet) by (y) the
heating value in BTU’s per thousand cubic feet, times the Henry Hub average
daily spot price for the month immediately preceding the date of calculation,
adjusted for location differential and transportation costs based on the
location where the Mineral Interests giving rise to the imbalances are located.

“Maturity Date” means September 30, 2013; provided however that, if such date is
not a Business Day, the Maturity Date shall be the next preceding Business Day.

“Maximum Amount” and “Maximum Rate” have the meanings specified in
Section 11.09.

“Mineral Interests” means (a) all present and future interests and estates
existing under any oil and gas leases including without limitation working
interests, royalties, overriding royalties, production payments and net profits
interests, (b) all present and future rights in mineral fee interests and rights
therein, including without limitation, any reversionary or carried interests
relating thereto, (c) all rights, titles and interests created by or arising
under the terms of all present and future unitization, communitization, and
pooling arrangements (and all properties covered and units created thereby)
whether arising by contract or operation of Law which now or hereafter include
all or any part of the foregoing, and (d) all rights, remedies, powers and
privileges with respect to all of the foregoing.

“Monthly Reduction Amount” has the meaning specified in Section 4.05.

“Mortgaged Properties” means all present and future Mineral Interests of one or
more Loan Parties in all oil and gas properties in which such Loan Parties have
granted or do hereafter grant a mortgage or Lien to Agent for the ratable
benefit of the Lenders. The Mortgaged Properties as of the Closing Date are
listed on Exhibit I.

“Multiemployer Plan” means any employee benefit plan of the type described in
Section 4001(a)(3) of ERISA, to which Borrower or any ERISA Affiliate makes or
is obligated to make contributions, or during the preceding five plan years, has
made or been obligated to make contributions.

“Note” means a promissory note made by Borrower in favor of a Lender evidencing
Loans made by such Lender, substantially in the form of Exhibit B, and all
renewals, extensions, modifications and amendments thereto, and substitutions
therefor.

“Obligations” means, collectively, all advances to and all debts, obligations,
liabilities, (including all renewals and extensions thereof, or any part
thereof), and all covenants and duties of, any Loan Party arising under any Loan
Document or otherwise with respect to any Loan or Letter of Credit, or under any
Secured Cash Management Agreement, whether direct or indirect (including those
acquired by assumption), absolute or contingent, due or to become due, now
existing or hereafter arising and including (i) net obligations under any Lender
Swap Contract which any Loan Party may have with any Lender or any Affiliate of
any Lender (which net obligations shall be deemed to be the Swap Termination
Value as of the date the Obligations are being determined), and (ii) interest
and fees that accrue after the commencement by or against any Loan Party of any
proceeding under any Debtor Relief Laws naming such Person as the debtor in such
proceeding, regardless of whether such interest and fees are allowed claims in
such proceeding, and (iii) all obligations of any Loan Party described in
Section 11.04 hereof, and (iv) obligations of any Loan Party under any Lender
Forward Sales Contract which is terminated or ceases to exist or is not fully
performed for any reason.

 

CREDIT AGREEMENT – Page 15

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“OFAC” means the U.S. Department of the Treasury’s Office of Foreign Assets
Control.

“Oil and Gas Mortgage” has the meaning specified in Section 2.13(a).

“Organization Documents” means, (a) with respect to any corporation, the
certificate or articles of incorporation and the bylaws (or equivalent or
comparable constitutive documents with respect to any non-U.S. jurisdiction);
(b) with respect to any limited liability company, the certificate or articles
of formation or organization and operating agreement; and (c) with respect to
any partnership, trust or other form of business entity, the partnership or
other applicable agreement of formation or organization and any agreement,
instrument, filing or notice with respect thereto filed in connection with its
formation or organization with the applicable Governmental Authority in the
jurisdiction of its formation or organization and, if applicable, any
certificate or articles of formation or organization of such entity.

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

“Outstanding Amount” means (i) with respect to Loans on any date, the aggregate
outstanding principal amount thereof after giving effect to any borrowings and
prepayments or repayments of Loans, as the case may be, occurring on such date;
and (ii) with respect to any L/C Obligations on any date, the amount of such L/C
Obligations on such date after giving effect to any L/C Credit Extension
occurring on such date and any other changes in the aggregate amount of the L/C
Obligations as of such date, including as a result of any reimbursements by
Borrower of Unreimbursed Amounts.

“Participant” has the meaning specified in Section 11.06(d).

“PBGC” means the Pension Benefit Guaranty Corporation.

“Pension Plan” means any “employee pension benefit plan” (as such term is
defined in Section 3(2) of ERISA), other than a Multiemployer Plan, that is
subject to Title IV of ERISA and is sponsored or maintained by Borrower or any
ERISA Affiliate or to which Borrower or any ERISA Affiliate contributes or has
an obligation to contribute, or in the case of a multiple employer or other plan
described in Section 4064(a) of ERISA, has made contributions at any time during
the immediately preceding five plan years.

“Permitted Holder” means (i) Charles E. Davidson, (ii) the members of the
immediate family of Charles E. Davidson, (iii) any trust created for the benefit
of the Persons described in clause (i) or (ii) above or any of their estates, or
(iv) any Person that is Controlled by any Person described in clauses (i),
(ii) or (iii) above or any Related Party of any such Person described in
clauses (i), (ii) or (iii).

“Permitted Liens” has the meaning specified in Section 8.01.

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

 

CREDIT AGREEMENT – Page 16

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“Plan” means any “employee benefit plan” (as such term is defined in
Section 3(3) of ERISA) established by Borrower or, with respect to any such plan
that is subject to Section 412 of the Code or Title IV of ERISA, any ERISA
Affiliate.

“Platform” has the meaning specified in Section 7.02.

“Pledge Agreement” has the meaning specified in Section 2.13(d).

“Projected Oil and Gas Production” means the projected production of oil or gas
(measured by volume unit or BTU equivalent, not sales price) for the term of the
contracts or a particular month, as applicable, from properties and interests
owned by a Loan Party which are located in or offshore of the United States and
which have attributable to them proved developed producing oil and gas reserves,
as such production is projected in the most recent Reserve Report delivered to
Agent, after deducting projected production from any properties or interests
sold or under contract for sale that had been included in such report and after
adding projected production from any properties or interests that have not been
reflected in such report but that are reflected in a separate or supplemental
reports acceptable to Agent.

“Property Certificates” has the meaning specified in Section 5.01(a)(xi).

“Proved Mineral Interest” means, collectively, (i) all Mineral Interests which
constitute proved developed producing reserves, (ii) all Mineral Interests which
constitute proved developed non-producing reserves, and (iii) all Mineral
Interests which constitute proved undeveloped reserves.

“Public Lender” has the meaning specified in Section 7.02.

“Recognized Value” means the value determined by Lenders attributed to the
Mineral Interests in the oil and gas properties of the Loan Parties from the
most recent determination of the Borrowing Base, based upon the discounted
present value of the estimated net cash flow to be realized from the production
of hydrocarbons from such Mineral Interests and the other standards specified in
Section 4.01 hereof.

“Reconciliation Schedule” has the meaning specified in Section 5.01(a)(xiii).

“Register” has the meaning specified in Section 11.06(c).

“Registered Public Accounting Firm” has the meaning specified in the Securities
Laws and shall be independent of Borrower as prescribed by the Securities Laws.

“Related Parties” means, with respect to any Person, such Person’s Affiliates
and the partners, directors, officers, employees, agents and advisors of such
Person and of such Person’s Affiliates.

“Reportable Event” means any of the events set forth in Section 4043(c) of
ERISA, other than events for which the 30 day notice period has been waived.

“Request for Credit Extension” means (a) with respect to a Borrowing, conversion
or continuation of Loans, a Loan Notice, and (b) with respect to an L/C Credit
Extension, an L/C Application.

“Required Lenders” means, as of any date of determination, Lenders having at
least 66-2/3% of the Aggregate Commitments or, if the commitment of each Lender
to make Loans and the obligation of the L/C Issuer to make L/C Credit Extensions
have been terminated pursuant to Section 9.02, Lenders holding in the aggregate
at least 66-2/3% of the Total Outstandings (with the aggregate amount of each
Lender’s risk participation and funded participation in L/C Obligations being
deemed “held” by such Lender for purposes of this definition); provided that the
Commitment of, and the portion of the Total Outstandings held or deemed held by,
any Defaulting Lender shall be excluded for purposes of making a determination
of Required Lenders.

 

CREDIT AGREEMENT – Page 17

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“Required Reserve Value” means Proved Mineral Interests that have a Recognized
Value of not less than eighty percent (80%) of the Recognized Value of all
Proved Mineral Interests of those oil and gas properties of the Loan Parties
which are included in the most recent Reserve Report furnished to Agent.

“Reserve Report” means a report in form and substance satisfactory to Agent
evaluating the oil and gas reserves attributable to the Mineral Interests of the
Loan Parties in certain of their oil and gas properties, which shall at a
minimum include the Mortgaged Properties, and which shall, among other things,
(a) identify the wells covered thereby, (b) specify such engineers’ opinions
with respect to the total volume of reserves (the “available reserves”) of
hydrocarbons (using the terms or categories “proved developed producing
reserves,” “proved developed nonproducing reserves” and “proved undeveloped
reserves”) which Borrower has advised such engineers that the Loan Parties have
the right to produce for their own account, (c) set forth such engineers’
opinions with respect to the projected future cash proceeds from the available
reserves, discounted for present value at a rate acceptable to Agent, for each
calendar year or portion thereof after the date of such findings and data,
(d) set forth such engineers’ opinions with respect to the projected future rate
of production of the available reserves, (e) contain such other information as
requested by Agent with respect to the projected rate of production, gross
revenues, operating expenses, taxes, capital costs, net revenues and present
value of future net revenues attributable to such reserves and production
therefrom, and (f) contain a statement of the price and escalation parameters,
procedures and assumptions upon which such determinations were based.

“Responsible Officer” means the chief executive officer, president, chief
financial officer, treasurer, assistant treasurer or controller of a Loan Party
and, solely for purposes of notices given pursuant to Article II, any other
officer of the applicable Loan Party so designated by any of the foregoing
officers in a notice to Agent. Any document delivered hereunder that is signed
by a Responsible Officer of a Loan Party shall be conclusively presumed to have
been authorized by all necessary corporate, partnership and/or other action on
the part of such Loan Party and such Responsible Officer shall be conclusively
presumed to have acted on behalf of such Loan Party.

“Restricted Payment” means any dividend or other distribution (whether in cash,
securities or other property) with respect to any capital stock or other Equity
Interest of Borrower or any Subsidiary, or any payment (whether in cash,
securities or other property), including any sinking fund or similar deposit, on
account of the purchase, redemption, retirement, acquisition, cancellation or
termination of any such capital stock or other Equity Interest or on account of
any return of capital to Borrower’s stockholders, partners or members (or the
equivalent Person thereof).

“Sanctioned Entity” means (a) an agency of the government of, (b) an
organization directly or indirectly controlled by, or (c) a Person resident in a
country that is subject to a sanctions program identified on the list maintained
by OFAC and available at http://www.treas.gov/offices/eotffc/ofac/
sanctions/index.html, or as otherwise published from time to time as such
program may be applicable to such agency, organization or Person.

 

CREDIT AGREEMENT – Page 18

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“Sanctioned Person” means a person named on the list of Specially Designated
Nationals or Blocked Persons maintained by OFAC available at
http://www.treas.gov/offices/eotffc/ofac/sdn/index.html, or as otherwise
published from time to time.

“Sarbanes-Oxley” means the Sarbanes-Oxley Act of 2002.

“Scotia Capital” means The Bank of Nova Scotia, a financial institution
organized under the laws of Canada.

“SEC” means the Securities and Exchange Commission, or any Governmental
Authority succeeding to any of its principal functions.

“Secured Cash Management Agreement” means any Cash Management Agreement that is
entered into by and between Borrower or any Subsidiary and any Cash Management
Party.

“Securities Laws” means the Securities Act of 1933, the Securities Exchange Act
of 1934, Sarbanes-Oxley and the applicable accounting and auditing principles,
rules, standards and practices promulgated, approved or incorporated by the SEC
or the Public Company Accounting Oversight Board, as each of the foregoing may
be amended and in effect on any applicable date hereunder.

“Security Agreement” has the meaning specified in Section 2.13(c).

“Solvent” means, as to any Person at any time, that (a) the fair value of the
property of such Person is greater than the total amount of such Person’s
liabilities (including contingent liabilities), (b) the present fair saleable
value of all of the property of such Person is not less than the amount that
will be required to pay the probable liability of such Person on its debts as
they become absolute and matured, (c) such Person does not intend to, and does
not believe that it will, incur debts or liabilities beyond such Person’s
ability to pay as such debts and liabilities mature, and (d) such Person is able
to pay its debts and liabilities, contingent obligations and other commitments
as they mature in the ordinary course of business. The amount of contingent
liabilities at any time shall be computed as the amount that, in the light of
all the facts and circumstances existing at such time, represents the amount
that can reasonably be expected to become an actual or matured liability.

“Subsidiary” of a Person means a corporation, partnership, limited liability
company or other business entity of which a majority of the Equity Interests
having ordinary voting power for the election of directors or other governing
body (other than securities or interests having such power only by reason of the
happening of a contingency) are at the time beneficially owned, or the
management of which is otherwise controlled, directly, or indirectly through one
or more intermediaries, or both, by such Person. Unless otherwise specified, all
references herein to a “Subsidiary” or to “Subsidiaries” shall refer to a
Subsidiary or Subsidiaries of Borrower. For purposes of clarification, the
Designated Investment Entities are not Subsidiaries.

“Subsidiary Pledge Agreement” has the meaning specified in Section 2.13(e).

“Subsidiary Security Agreement” has the meaning specified in Section 2.13(e).

“Swap Contract” means (a) any and all rate swap transactions, basis swaps,
credit derivative transactions, forward rate transactions, commodity swaps,
commodity options, forward commodity contracts, forward sale of production,
equity or equity index swaps or options, bond or bond price or bond index swaps
or options or forward bond or forward bond price or forward bond index
transactions, interest rate options, forward foreign exchange transactions, cap
transactions, floor transactions, collar transactions, currency swap
transactions, cross-currency rate swap transactions, currency options, spot
contracts, or any other similar transactions or any combination of any of the
foregoing (including any options to enter into any of the foregoing), whether or
not any such transaction is governed by or subject to any master agreement, and
(b) any and all transactions of any kind, and the related confirmations, which
are subject to the terms and conditions of, or governed by, any form of master
agreement published by the International Swaps and Derivatives Association,
Inc., any International Foreign Exchange Master Agreement, or any other master
agreement (any such master agreement, together with any related schedules, a
“Master Agreement”), including any such obligations or liabilities under any
Master Agreement. Notwithstanding the foregoing, a Forward Sales Contract is not
a Swap Contract, and vice versa.

 

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“Swap Termination Value” means, in respect of any one or more Swap Contracts,
after taking into account the effect of any legally enforceable netting
agreement relating to such Swap Contracts, (a) for any date on or after the date
such Swap Contracts 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 Contracts, as determined based upon one or
more mid-market or other readily available quotations provided by any recognized
dealer in such Swap Contracts (which may include a Lender or any Affiliate of a
Lender).

“Synthetic Lease Obligation” means the monetary obligation of a Person under a
so-called synthetic, off-balance sheet or tax retention lease.

“Taxes” means all present or future taxes, levies, imposts, duties, deductions,
withholdings, assessments, fees or other charges imposed by any Governmental
Authority, including any interest, additions to tax or penalties applicable
thereto.

“Texaco Lien” means a Lien securing obligations relating to plugging, replugging
and abandonment of oil and gas wells and injection and disposal wells acquired
from Texaco Exploration and Production, Inc. pursuant to documentation dated as
of March 11, 1997, relating to properties of Borrower known as the West Cote
Blanche Bay properties.

“Title Indemnity Agreement” has the meaning specified in Section 5.01(a)(xii).

“Total Outstandings” means the aggregate Outstanding Amount of all Loans and all
L/C Obligations.

“Type” means, with respect to a Loan, its character as a Base Rate Loan or a
Eurodollar Rate Loan.

“Unfunded Pension Liability” means the excess of a Pension Plan’s benefit
liabilities under Section 4001(a)(16) of ERISA, over the current value of that
Pension Plan’s assets, determined in accordance with the assumptions used for
funding the Pension Plan pursuant to Section 412 of the Code for the applicable
plan year.

“United States” and “U.S.” mean the United States of America.

“Unreimbursed Amount” has the meaning specified in Section 2.03(c)(i).

“Wexford ULC Obligations” means any obligations which Grizzly Holdings, Inc. (a
Subsidiary Controlled by Borrower) may owe to Grizzly Oil Sands Inc. (an entity
Controlled by Wexford Capital LP) arising by virtue of the fact that both
Grizzly Holdings, Inc. and Grizzly Oil Sands Inc. are owners of Equity Interests
in Grizzly Oil Sands ULC, a corporation formed under the laws of Alberta,
Canada.

 

CREDIT AGREEMENT – Page 20

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1.02. Other Interpretive Provisions. With reference to this Agreement and each
other Loan Document, unless otherwise specified herein or in such other Loan
Document:

(a) The definitions of terms herein shall apply equally to the singular and
plural forms of the terms defined. Whenever the context may require, any pronoun
shall include the corresponding masculine, feminine and neuter forms. The words
“include,” “includes” and “including” shall be deemed to be followed by the
phrase “without limitation.” The word “will” shall be construed to have the same
meaning and effect as the word “shall.” Unless the context requires otherwise,
(i) any definition of or reference to any agreement, instrument or other
document (including any Organization Document) 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 herein or in any other Loan
Document), (ii) any reference herein to any Person shall be construed to include
such Person’s successors and assigns, (iii) the words “herein,” “hereof” and
“hereunder,” and words of similar import when used in any Loan Document, shall
be construed to refer to such Loan Document in its entirety and not to any
particular provision thereof, (iv) all references in a Loan Document to
Articles, Sections, Exhibits and Schedules shall be construed to refer to
Articles and Sections of, and Exhibits and Schedules to, the Loan Document in
which such references appear, (v) any reference to any Law shall include all
statutory and regulatory provisions consolidating, amending, replacing or
interpreting such Law and any reference to any Law or regulation shall, unless
otherwise specified, refer to such Law or regulation as amended, modified or
supplemented from time to time, and (vi) the words “asset” and “property” shall
be construed to have the same meaning and effect and to refer to any and all
tangible and intangible assets and properties, including cash, securities,
accounts and contract rights.

(b) In the computation of periods of time from a specified date to a later
specified date, the word “from” means “from and including;” the words “to” and
“until” each mean “to but excluding;” and the word “through” means “to and
including.”

(c) Section headings herein and in the other Loan Documents are included for
convenience of reference only and shall not affect the interpretation of this
Agreement or any other Loan Document.

(d) For purposes of Section 9.01, a breach of a financial covenant contained in
Section 7.12 shall be deemed to have occurred as of any date of reasonable
determination thereof by the Agent on or after the last date of any specified
measuring period, regardless of when the financial statements or the Compliance
Certificate reflecting such breach are delivered to the Agent and the Lenders.

1.03. Accounting Terms.

(a) Generally. All accounting terms not specifically or completely defined
herein shall be construed in conformity with, and all financial data (including
financial ratios and other financial calculations) required to be submitted
pursuant to this Agreement shall be prepared in conformity with, GAAP applied on
a consistent basis, as in effect from time to time, applied in a manner
consistent with that used in preparing the Audited Financial Statements, except
as otherwise specifically prescribed herein.

(b) Changes in GAAP. If at any time any change in GAAP would affect the
computation of any financial ratio or requirement set forth in any Loan
Document, and Borrower or the Required Lenders shall so request, Agent, Lenders
and Borrower shall negotiate in good faith to amend such ratio or requirement to
preserve the original intent thereof in light of such change in GAAP (subject to
the approval of Borrower and the Required Lenders); provided that, until so
amended, (i) such ratio or requirement shall continue to be computed in
accordance with GAAP prior to such change therein and (ii) Borrower shall
provide to Agent and Lenders financial statements and other documents required
under this Agreement or as reasonably requested hereunder setting forth a
reconciliation between calculations of such ratio or requirement made before and
after giving effect to such change in GAAP.

 

CREDIT AGREEMENT – Page 21

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1.04. Rounding. Any financial ratios required to be maintained by Borrower
pursuant to this Agreement shall be calculated by dividing the appropriate
component by the other component, carrying the result to one place more than the
number of places by which such ratio is expressed herein and rounding the result
up or down to the nearest number (with a rounding-up if there is no nearest
number).

1.05. Times of Day. Unless otherwise specified, all references herein to times
of day shall be references to Central time (daylight or standard, as
applicable).

1.06. Letter of Credit Amounts. Unless otherwise specified herein the amount of
a Letter of Credit at any time shall be deemed to be the stated amount of such
Letter of Credit in effect at such time; provided, however, that with respect to
any Letter of Credit that, by its terms or the terms of any Issuer Document
related thereto, provides for one or more automatic increases in the stated
amount thereof, the amount of such Letter of Credit shall be deemed to be the
maximum stated amount of such Letter of Credit after giving effect to all such
increases, whether or not such maximum stated amount is in effect at such time.

ARTICLE II. THE COMMITMENTS AND CREDIT EXTENSIONS

2.01. Loans. Subject to the terms and conditions set forth herein, each Lender
severally agrees to make loans (each such loan, a “Loan”) to Borrower from time
to time, on any Business Day during the Availability Period, in an aggregate
amount not to exceed at any time outstanding the amount of such Lender’s
Commitment; provided, however, that after giving effect to any Borrowing,
(i) the Total Outstandings shall not exceed the Aggregate Commitments, and
(ii) the aggregate Outstanding Amount of the Loans of any Lender, plus such
Lender’s Applicable Percentage of the Outstanding Amount of all L/C Obligations
shall not exceed such Lender’s Commitment. Within the limits of each Lender’s
Commitment, and subject to the other terms and conditions hereof, Borrower may
borrow under this Section 2.01, prepay under Section 2.04, and reborrow under
this Section 2.01. Loans may be Base Rate Loans or Eurodollar Rate Loans, as
further provided herein.

2.02. Borrowings, Conversions and Continuations of Loans.

(a) Each Borrowing, each conversion of Loans from one Type to the other, and
each continuation of Eurodollar Rate Loans shall be made upon Borrower’s
irrevocable notice to Agent, which may be given by telephone. Each such notice
must be received by Agent not later than 11:00 a.m. (i) three Business Days
prior to the requested date of any Borrowing of, conversion to or continuation
of Eurodollar Rate Loans or of any conversion of Eurodollar Rate Loans to Base
Rate Loans, and (ii) on the requested date of any Borrowing of Base Rate Loans,
whereupon Agent shall give prompt notice to Lenders of such request and, in the
case of Eurodollar Rate Loans, determine whether the requested Interest Period
is acceptable to all of them. In the case of Eurodollar Rate Loans, not later
than 12:00 p.m., three (3) Business Days before the requested date of such
Borrowing, conversion or continuation, Agent shall notify Borrower (which notice
may be by telephone) whether or not the requested Interest Period has been
consented to by all Lenders. Each telephonic notice by Borrower pursuant to this
Section 2.02(a) must be confirmed promptly by delivery to Agent of a written
Loan Notice, appropriately completed and signed by a Responsible Officer of
Borrower. Each Borrowing of, conversion to or continuation of Eurodollar Rate
Loans shall be in a principal amount of $1,000,000 or a whole multiple of
$250,000 in excess thereof. Except as provided in Sections 2.03(c), each
Borrowing of or conversion to Base Rate Loans shall be in a principal amount of
$500,000 or a whole multiple of $100,000 in excess thereof. Each Loan Notice
(whether telephonic or written) shall specify (i) whether Borrower is requesting
a Borrowing, a conversion of Loans from one Type to the other, or a continuation
of Eurodollar Rate Loans, (ii) the requested date of the Borrowing, conversion
or continuation, as the case may be (which shall be a Business Day), (iii) the
principal amount of Loans to be borrowed, converted or continued, (iv) the Type
of Loans to be borrowed or to which existing Loans are to be converted, and
(v) if applicable, the duration of the Interest Period with respect thereto. If
Borrower fails to specify a Type of Loan in a Loan Notice or if Borrower fails
to give a timely notice requesting a conversion or continuation, then the
applicable Loans shall be made as, or converted to, Base Rate Loans. Any such
automatic conversion to Base Rate Loans shall be effective as of the last day of
the Interest Period then in effect with respect to the applicable Eurodollar
Rate Loans. If Borrower requests a Borrowing of, conversion to, or continuation
of Eurodollar Rate Loans in any such Loan Notice, but fails to specify an
Interest Period, it will be deemed to have specified an Interest Period of one
month.

 

CREDIT AGREEMENT – Page 22

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(b) Following receipt of a Loan Notice, Agent shall promptly notify each Lender
of the amount of its Applicable Percentage of the applicable Loans, and if no
timely notice of a conversion or continuation is provided by Borrower, Agent
shall notify each Lender of the details of any automatic conversion to Base Rate
Loans described in the preceding subsection. In the case of a Borrowing, each
Lender shall make the amount of its Loan available to Agent in immediately
available funds at Administrative Agent’s Office not later than 1:00 p.m. on the
Business Day specified in the applicable Loan Notice. Upon satisfaction of the
applicable conditions set forth in Section 5.02 (and, if such Borrowing is the
initial Credit Extension, Section 5.01), Agent shall make all funds so received
available to Borrower in like funds as received by Agent either by (i) crediting
the account of Borrower on the books of Agent with the amount of such funds or
(ii) wire transfer of such funds, in each case in accordance with instructions
provided to (and acceptable to) Agent by Borrower; provided, however, that if,
on the date the Loan Notice with respect to such Borrowing is given by Borrower,
there are L/C Borrowings outstanding, then the proceeds of such Borrowing first,
shall be applied, to the payment in full of any such L/C Borrowings, and second,
shall be made available to Borrower as provided above.

(c) During the existence of a Default, no Loans may be requested as, converted
to or continued as Eurodollar Rate Loans without the consent of the Required
Lenders, and, during the existence of a Default, the Required Lenders may demand
that any or all of the then outstanding Eurodollar Rate Loans be converted
immediately to Base Rate Loans and Borrower agrees to pay all amounts due under
Section 3.05 in accordance with the terms thereof due to any such conversion.

(d) Agent shall promptly notify Borrower and Lenders of the interest rate
applicable to any Interest Period for Eurodollar Rate Loans upon determination
of such interest rate. At any time that Base Rate Loans are outstanding, Agent
shall notify Borrower and Lenders of any change in Agent’s prime rate used in
determining the Base Rate promptly following the public announcement of such
change.

(e) After giving effect to all Borrowings, all conversions of Loans from one
Type to the other, and all continuations of Loans as the same Type, there shall
not be more than six (6) Interest Periods in effect with respect to Loans.

2.03. Letters of Credit. (a) The Letter of Credit Commitment.

(i) Subject to the terms and conditions set forth herein, (A) the L/C Issuer
agrees, in reliance upon the agreements of the other Lenders set forth in this
Section 2.03, (1) from time to time on any Business Day during the period from
the Closing Date until the L/C Expiration Date, to issue Letters of Credit for
the account of Borrower or its Subsidiaries, and to amend or extend Letters of
Credit previously issued by it, in accordance with subsection (b) below, and
(2) to honor drawings under the Letters of Credit; and (B) the Lenders severally
agree to participate in Letters of Credit issued for the account of Borrower or
its Subsidiaries and any drawings thereunder; provided that after giving effect
to any L/C Credit Extension with respect to any Letter of Credit, (x) the Total
Outstandings shall not exceed the Aggregate Commitments, (y) the aggregate
Outstanding Amount of the Loans of any Lender, plus such Lender’s Applicable
Percentage of the Outstanding Amount of all L/C Obligations shall not exceed
such Lender’s Commitment, and (z) the Outstanding Amount of the L/C Obligations
shall not exceed the L/C Sublimit. Each request by Borrower for the issuance or
amendment of a Letter of Credit shall be deemed to be a representation by
Borrower that the L/C Credit Extension so requested complies with the conditions
set forth in the proviso to the preceding sentence. Within the foregoing limits,
and subject to the terms and conditions hereof, Borrower’s ability to obtain
Letters of Credit shall be fully revolving, and accordingly Borrower may, during
the foregoing period, obtain Letters of Credit to replace Letters of Credit that
have expired or that have been drawn upon and reimbursed.

 

CREDIT AGREEMENT – Page 23

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(ii) The L/C Issuer shall not issue any Letter of Credit, if:

(A) the expiry date of such requested Letter of Credit would occur more than
twelve (12) months after the date of issuance or last extension, unless the
Required Lenders have approved such expiry date; or

(B) the expiry date of such requested Letter of Credit would occur after the L/C
Expiration Date, unless all the Lenders have approved such expiry date.

(iii) The L/C Issuer shall not be under any obligation to issue any Letter of
Credit if:

(A) any order, judgment or decree of any Governmental Authority or arbitrator
shall by its terms purport to enjoin or restrain the L/C Issuer from issuing
such Letter of Credit, or any Law applicable to the L/C Issuer or any request or
directive (whether or not having the force of law) from any Governmental
Authority with jurisdiction over the L/C Issuer shall prohibit, or request that
the L/C Issuer refrain from, the issuance of letters of credit generally or such
Letter of Credit in particular or shall impose upon the L/C Issuer with respect
to such Letter of Credit any restriction, reserve or capital requirement (for
which the L/C Issuer is not otherwise compensated hereunder) not in effect on
the Closing Date, or shall impose upon the L/C Issuer any unreimbursed loss,
cost or expense which was not applicable on the Closing Date and which the L/C
Issuer in good faith deems material to it;

(B) the issuance of such Letter of Credit would violate one or more applicable
policies of the L/C Issuer;

(C) except as otherwise agreed by Agent and the L/C Issuer, such Letter of
Credit is in an initial stated amount less than $100,000;

(D) such Letter of Credit is to be denominated in a currency other than Dollars
or Canadian dollars;

 

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(E) unless specifically provided for in this agreement, such Letter of Credit
contains any provisions for automatic reinstatement of the stated amount after
any drawing thereunder; or

(F) a default of any Lender’s obligations to fund under Section 2.03(c) exists
or any Lender is at such time a Defaulting Lender hereunder, unless the L/C
Issuer has entered into satisfactory arrangements with Borrower, such Lender or
all other Lenders to eliminate the L/C Issuer’s risk with respect to such
Lender.

(iv) The L/C Issuer shall be under no obligation to amend any Letter of Credit
if (A) the L/C Issuer would have no obligation at such time to issue such Letter
of Credit in its amended form under the terms hereof, or (B) the beneficiary of
such Letter of Credit does not accept the proposed amendment to such Letter of
Credit.

(v) The L/C Issuer shall act on behalf of the Lenders with respect to any
Letters of Credit issued by it and the documents associated therewith, and the
L/C Issuer shall have all of the benefits and immunities (A) provided to Agent
in Article X with respect to any acts taken or omissions suffered by the L/C
Issuer in connection with Letters of Credit issued by it or proposed to be
issued by it and Issuer Documents pertaining to such Letters of Credit as fully
as if the term “Administrative Agent” or “Agent” as used in Article X included
the L/C Issuer with respect to such acts or omissions, and (B) as additionally
provided herein with respect to the L/C Issuer.

(b) Procedures for Issuance and Amendment of Letters of Credit.

(i) Each Letter of Credit shall be issued or amended, as the case may be, upon
the request of Borrower delivered to the L/C Issuer (with a copy to Agent) in
the form of a L/C Application, appropriately completed and signed by a
Responsible Officer of Borrower. Such L/C Application must be received by the
L/C Issuer and Agent not later than 11:00 a.m. at least two Business Days (or
such later date and time as Agent and the L/C Issuer may agree in a particular
instance in their sole discretion) prior to the proposed issuance date or date
of amendment, as the case may be. In the case of a request for an initial
issuance of a Letter of Credit, such L/C Application shall specify in form and
detail satisfactory to the L/C Issuer: (A) the proposed issuance date of the
requested Letter of Credit (which shall be a Business Day); (B) the amount
thereof; (C) the expiry date thereof; (D) the name and address of the
beneficiary thereof; (E) the documents to be presented by such beneficiary in
case of any drawing thereunder; (F) the full text of any certificate to be
presented by such beneficiary in case of any drawing thereunder; and (G) such
other matters as the L/C Issuer may reasonably require. In the case of a request
for an amendment of any outstanding Letter of Credit, such L/C Application shall
specify in form and detail satisfactory to the L/C Issuer (w) the Letter of
Credit to be amended; (x) the proposed date of amendment thereof (which shall be
a Business Day); (y) the nature of the proposed amendment; and (z) such other
matters as the L/C Issuer may reasonably require. Additionally, Borrower shall
furnish to the L/C Issuer and Agent such other documents and information
pertaining to such requested Letter of Credit issuance or amendment, including
any Issuer Documents, as the L/C Issuer or Agent may reasonably require.

(ii) Promptly after receipt of any L/C Application at the address set forth in
Section 11.02 for receiving L/C Applications and related correspondence, the L/C
Issuer will confirm with Agent (by telephone or in writing) that Agent has
received a copy of such L/C Application from Borrower and, if not, the L/C
Issuer will provide Agent with a copy thereof. Unless the L/C Issuer has
received written notice from any Lender, Agent or any Loan Party, at least one
Business Day prior to the requested date of issuance or amendment of the
applicable Letter of Credit, that one or more applicable conditions in Article V
shall not then be satisfied, then, subject to the terms and conditions hereof,
the L/C Issuer shall, on the requested date, issue a Letter of Credit for the
account of Borrower (or the applicable Subsidiary) or enter into the applicable
amendment, as the case may be, in each case in accordance with the L/C Issuer’s
usual and customary business practices. Immediately upon the issuance of each
Letter of Credit, each Lender shall be deemed to, and hereby irrevocably and
unconditionally agrees to, purchase from the L/C Issuer a risk participation in
such Letter of Credit in an amount equal to the product of such Lender’s
Applicable Percentage times the amount of such Letter of Credit.

 

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(iii) Promptly after its delivery of any Letter of Credit or any amendment to a
Letter of Credit to an advising bank with respect thereto or to the beneficiary
thereof, the L/C Issuer will also deliver to Borrower and Agent a true and
complete copy of such Letter of Credit or amendment.

(c) Drawings and Reimbursements; Funding of Participations.

(i) Upon receipt from the beneficiary of any Letter of Credit of any notice of a
drawing under such Letter of Credit, the L/C Issuer shall notify Borrower and
Agent thereof. Not later than 11:00 a.m. on the date of any payment by the L/C
Issuer under a Letter of Credit (each such date, an “Honor Date”), Borrower
shall reimburse the L/C Issuer through Agent in an amount equal to the amount of
such drawing. If Borrower fails to so reimburse the L/C Issuer by such time,
Agent shall promptly notify each Lender of the Honor Date, the amount of the
unreimbursed drawing (the “Unreimbursed Amount”), and the amount of such
Lender’s Applicable Percentage thereof. In such event, Borrower shall be deemed
to have requested a Borrowing of Base Rate Loans to be disbursed on the Honor
Date in an amount equal to the Unreimbursed Amount, without regard to the
minimum and multiples specified in Section 2.02 for the principal amount of Base
Rate Loans, but subject to the amount of the unutilized portion of the Aggregate
Commitments and the conditions set forth in Section 5.02 (other than the
delivery of a Loan Notice). Any notice given by the L/C Issuer or Agent pursuant
to this Section 2.03(c)(i) may be given by telephone if immediately confirmed in
writing; provided that the lack of such an immediate confirmation shall not
affect the conclusiveness or binding effect of such notice.

(ii) Each Lender shall upon any notice pursuant to Section 2.03(c)(i) make funds
available to Agent for the account of the L/C Issuer at the Administrative
Agent’s Office in an amount equal to its Applicable Percentage of the
Unreimbursed Amount not later than 1:00 p.m. on the Business Day specified in
such notice by Agent, whereupon, subject to the provisions of
Section 2.03(c)(iii), each Lender that so makes funds available shall be deemed
to have made a Base Rate Loan to Borrower in such amount. Agent shall remit the
funds so received to the L/C Issuer.

(iii) With respect to any Unreimbursed Amount that is not fully refinanced by a
Borrowing of Base Rate Loans because the conditions set forth in Section 5.02
cannot be satisfied or for any other reason, Borrower shall be deemed to have
incurred from the L/C Issuer an L/C Borrowing in the amount of the Unreimbursed
Amount that is not so refinanced, which L/C Borrowing shall be due and payable
on demand (together with interest) and shall bear interest at the Default Rate.
In such event, each Lender’s payment to Agent for the account of the L/C Issuer
pursuant to Section 2.03(c)(ii) shall be deemed payment in respect of its
participation in such L/C Borrowing and shall constitute an L/C Advance from
such Lender in satisfaction of its participation obligation under this
Section 2.03.

 

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(iv) Until each Lender funds its Loan or L/C Advance pursuant to this
Section 2.03(c) to reimburse the L/C Issuer for any amount drawn under any
Letter of Credit, interest in respect of such Lender’s Applicable Percentage of
such amount shall be solely for the account of the L/C Issuer.

(v) Each Lender’s obligation to make Loans or L/C Advances to reimburse the L/C
Issuer for amounts drawn under Letters of Credit, as contemplated by this
Section 2.03(c), shall be absolute and unconditional and shall not be affected
by any circumstance, including (A) any setoff, counterclaim, recoupment, defense
or other right which such Lender may have against the L/C Issuer, Borrower or
any other Person for any reason whatsoever; (B) the occurrence or continuance of
a Default, or (C) any other occurrence, event or condition, whether or not
similar to any of the foregoing; provided, however, that each Lender’s
obligation to make Loans pursuant to this Section 2.03(c) is subject to the
conditions set forth in Section 5.02 (other than delivery by Borrower of a Loan
Notice). No such making of an L/C Advance shall relieve or otherwise impair the
obligation of Borrower to reimburse the L/C Issuer for the amount of any payment
made by the L/C Issuer under any Letter of Credit, together with interest as
provided herein.

(vi) If any Lender fails to make available to Agent for the account of the L/C
Issuer any amount required to be paid by such Lender pursuant to the foregoing
provisions of this Section 2.03(c) by the time specified in Section 2.03(c)(ii),
the L/C Issuer shall be entitled to recover from such Lender (acting through
Agent), on demand, such amount with interest thereon for the period from the
date such payment is required to the date on which such payment is immediately
available to the L/C Issuer at a rate per annum equal to the greater of the
Federal Funds Rate and a rate determined by the L/C Issuer in accordance with
banking industry rules on interbank compensation, plus any administrative,
processing or similar fees customarily charged by the L/C Issuer in connection
with the foregoing. If such Lender pays such amount (with interest and fees as
aforesaid), the amount so paid shall constitute such Lender’s Loan included in
the relevant Borrowing or L/C Advance in respect of the relevant L/C Borrowing,
as the case may be. A certificate of the L/C Issuer submitted to any Lender
(through Agent) with respect to any amounts owing under this clause (vi) shall
be conclusive absent manifest error.

(d) Repayment of Participations.

(i) At any time after the L/C Issuer has made a payment under any Letter of
Credit and has received from any Lender such Lender’s L/C Advance in respect of
such payment in accordance with Section 2.03(c), if Agent receives for the
account of the L/C Issuer any payment in respect of the related Unreimbursed
Amount or interest thereon (whether directly from Borrower or otherwise,
including proceeds of Cash Collateral applied thereto by Agent), Agent will
distribute to such Lender its Applicable Percentage thereof (appropriately
adjusted, in the case of interest payments, to reflect the period of time during
which such Lender’s L/C Advance was outstanding) in the same funds as those
received by Agent.

(ii) If any payment received by Agent for the account of the L/C Issuer pursuant
to Section 2.03(c)(i) is required to be returned under any of the circumstances
described in Section 11.05 (including pursuant to any settlement entered into by
the L/C Issuer in its discretion), each Lender shall pay to Agent for the
account of the L/C Issuer its Applicable Percentage thereof on demand of Agent,
plus interest thereon from the date of such demand to the date such amount is
returned by such Lender, at a rate per annum equal to the Federal Funds Rate
from time to time in effect. The obligations of Lenders under this clause shall
survive the payment in full of the Obligations and the termination of this
Agreement.

 

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(e) Obligations Absolute. The obligation of Borrower to reimburse the L/C Issuer
for each drawing under each Letter of Credit and to repay each L/C Borrowing
shall be absolute, unconditional and irrevocable, and shall be paid strictly in
accordance with the terms of this Agreement under all circumstances, including
the following:

(i) any lack of validity or enforceability of such Letter of Credit, this
Agreement, or any other Loan Document;

(ii) the existence of any claim, counterclaim, setoff, defense or other right
that Borrower or any Subsidiary may have at any time against any beneficiary or
any transferee of such Letter of Credit (or any Person for whom any such
beneficiary or any such transferee may be acting), the L/C Issuer or any other
Person, whether in connection with this Agreement, the transactions contemplated
hereby or by such Letter of Credit or any agreement or instrument relating
thereto, or any unrelated transaction;

(iii) any draft, demand, certificate or other document presented under such
Letter of Credit proving to be forged, fraudulent, invalid or insufficient in
any respect or any statement therein being untrue or inaccurate in any respect;
or any loss or delay in the transmission or otherwise of any document required
in order to make a drawing under such Letter of Credit;

(iv) any payment by the L/C Issuer under such Letter of Credit against
presentation of a draft or certificate that does not strictly comply with the
terms of such Letter of Credit; or any payment made by the L/C Issuer under such
Letter of Credit to any Person purporting to be a trustee in bankruptcy,
debtor-in-possession, assignee for the benefit of creditors, liquidator,
receiver or other representative of or successor to any beneficiary or any
transferee of such Letter of Credit, including any arising in connection with
any proceeding under any Debtor Relief Law; or

(v) any other circumstance or happening whatsoever, whether or not similar to
any of the foregoing, including any other circumstance that might otherwise
constitute a defense available to, or a discharge of, Borrower or any
Subsidiary.

Borrower shall promptly examine a copy of each Letter of Credit and each
amendment thereto that is delivered to it and, in the event of any claim of
noncompliance with Borrower’s instructions or other irregularity, Borrower will
promptly notify the L/C Issuer. Borrower shall be conclusively deemed to have
waived any such claim against the L/C Issuer and its correspondents unless such
notice is given as aforesaid.

(f) Role of L/C Issuer. Each Lender and Borrower agree that, in paying any
drawing under a Letter of Credit, the L/C Issuer shall not have any
responsibility to obtain any document (other than any sight draft, certificates
and documents expressly required by the Letter of Credit) or to ascertain or
inquire as to the validity or accuracy of any such document or the authority of
the Person executing or delivering any such document. None of the L/C Issuer,
Agent, any of their respective Related Parties nor any correspondent,
participant or assignee of the L/C Issuer shall be liable to any Lender for
(i) any action taken or omitted in connection herewith at the request or with
the approval of Lenders or the Required Lenders, as applicable; (ii) any action
taken or omitted in the absence of gross negligence or willful misconduct; or
(iii) the due execution, effectiveness, validity or enforceability of any
document or instrument related to any Letter of Credit or Issuer Document.
Borrower hereby assumes all risks of the acts or omissions of any beneficiary or
transferee with respect to its use of any Letter of Credit; provided, however,
that this assumption is not intended to, and shall not, preclude Borrower’s
pursuing such rights and remedies as it may have against the beneficiary or
transferee at law or under any other agreement. None of the L/C Issuer, Agent,
any of their respective Related Parties nor any correspondent, participant or
assignee of the L/C Issuer, shall be liable or responsible for any of the
matters described in clauses (i) through (v) of Section 2.03(e); provided,
however, that anything in such clauses to the contrary notwithstanding, Borrower
may have a claim against the L/C Issuer, and the L/C Issuer may be liable to
Borrower, to the extent, but only to the extent, of any direct, as opposed to
consequential or exemplary, damages suffered by Borrower which Borrower proves
were caused by the L/C Issuer’s willful misconduct or gross negligence or the
L/C Issuer’s willful failure to pay under any Letter of Credit after the
presentation to it by the beneficiary of a sight draft and certificate(s)
strictly complying with the terms and conditions of a Letter of Credit. In
furtherance and not in limitation of the foregoing, the L/C Issuer may accept
documents that appear on their face to be in order, without responsibility for
further investigation, regardless of any notice or information to the contrary,
and the L/C Issuer shall not be responsible for the validity or sufficiency of
any instrument transferring or assigning or purporting to transfer or assign a
Letter of Credit or the rights or benefits thereunder or proceeds thereof, in
whole or in part, which may prove to be invalid or ineffective for any reason.

 

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(g) Cash Collateral. Upon the request of Agent, (i) if the L/C Issuer has
honored any full or partial drawing request under any Letter of Credit and such
drawing has resulted in an L/C Borrowing, or (ii) if, as of the L/C Expiration
Date, any L/C Obligation for any reason remains outstanding, Borrower shall, in
each case, immediately Cash Collateralize the then Outstanding Amount of all L/C
Obligations. Sections 2.04 and 9.02(c) set forth certain additional requirements
to deliver Cash Collateral hereunder. For purposes of this Section 2.03,
Section 2.04, and Section 9.02(c), “Cash Collateralize” means to pledge and
deposit with or deliver to Agent, for the benefit of the L/C Issuer and the
Lenders, as collateral for the L/C Obligations, cash or deposit account balances
pursuant to documentation in form and substance satisfactory to Agent and the
L/C Issuer (which documents are hereby consented to by Lenders). “Cash
Collateral” shall have a corresponding meaning. Borrower hereby grants to Agent,
for the benefit of the L/C Issuer and Lenders, a security interest in all such
cash, deposit accounts and all balances therein and all proceeds of the
foregoing. Cash Collateral shall be maintained in blocked, non-interest bearing
deposit accounts at Agent.

(h) Applicability of ISP and UCP. Unless otherwise expressly agreed by the L/C
Issuer and Borrower when a Letter of Credit is issued, the rules of the ISP
shall apply to each standby Letter of Credit.

(i) L/C Fees. Borrower shall pay to Agent for the account of the Lenders (to be
paid by Agent to each Lender (other than any Defaulting Lender) in accordance
with its Applicable Percentage) an aggregate fee (the “L/C Fee”) for the
issuance of each Letter of Credit in an amount per annum equal to the greater of
the Applicable Rate times the maximum face amount of the Letter of Credit
determined in accordance with Section 1.06 or $1,000. Such L/C Fee shall be
payable prior to the issuance of each Letter of Credit and thereafter in
quarterly installments on the first Business Day after the end of each March,
June, September and December, commencing on the first such date to occur after
the issuance of such Letter of Credit, on the L/C Expiration Date and thereafter
on demand. If there is any change in the Applicable Rate during any quarter, the
L/C Fee shall be computed and multiplied by the Applicable Rate separately for
each period during such quarter that such Applicable Rate was in effect.
Notwithstanding anything to the contrary contained herein, upon request of the
Required Lenders, while any Event of Default exists, all L/C Fees shall accrue
at the Default Rate.

(j) Fronting Fee and Documentary and Processing Charges Payable to L/C Issuer.
Borrower shall pay directly to the L/C Issuer for its own account a fronting fee
for the issuance or extension of each Letter of Credit equal to the greater of
$500 or 0.1875% per annum times the maximum face amount of such Letter of Credit
determined in accordance with Section 1.06. Such fronting fee shall be due and
payable upon the issuance or extension of each Letter of Credit. In addition,
Borrower shall pay directly to the L/C Issuer for its own account the customary
issuance, presentation, amendment and other processing fees, and other standard
costs and charges, of the L/C Issuer relating to letters of credit as from time
to time in effect. Such individual customary fees and standard costs and charges
are due and payable on demand and are nonrefundable.

 

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(k) Conflict with Issuer Documents. In the event of any conflict between the
terms of the Loan Documents and the terms of any Issuer Documents, the terms
hereof shall control.

(l) Letters of Credit Issued for Subsidiaries. Notwithstanding that a Letter of
Credit issued or outstanding hereunder is in support of any obligations of, or
is for the account of, a Subsidiary, Borrower shall be obligated to reimburse
the L/C Issuer hereunder for any and all drawings under such Letter of Credit.
Borrower hereby acknowledges that the issuance of Letters of Credit for the
account of Subsidiaries inures to the benefit of Borrower, and that Borrower’s
business derives substantial benefits from the businesses of such Subsidiaries.

2.04. Prepayments.

(a) Borrower may, upon notice to Agent, at any time or from time to time
voluntarily prepay Loans in whole or in part without premium or penalty;
provided that (i) such notice must be received by Agent not later than 11:00
a.m. (A) three (3) Business Days prior to any date of prepayment of Eurodollar
Rate Loans and (B) one (1) Business Day prior to any date of prepayment of Base
Rate Loans; (ii) any prepayment of Eurodollar Rate Loans shall be in a principal
amount of $500,000 or a whole multiple of $100,000 in excess thereof; and
(iii) any prepayment of Base Rate Loans shall be in a principal amount of
$100,000 or a whole multiple of $100,000 in excess thereof or, in each case, if
less, the entire principal amount thereof then outstanding. Each such notice
shall specify the date and amount of such prepayment and the Type(s) of Loans to
be prepaid and, if Eurodollar Rate Loans are to be repaid, the Interest
Period(s) of such Loans. Agent will promptly notify each Lender of its receipt
of each such notice, and of the amount of such Lender’s Applicable Percentage of
such prepayment. If such notice is given by Borrower, Borrower shall make such
prepayment and the payment amount specified in such notice shall be due and
payable on the date specified therein. Any prepayment of a Eurodollar Rate Loan
shall be accompanied by all accrued interest on the amount prepaid, together
with any additional amounts required pursuant to Section 3.05. Each such
prepayment shall be applied to the Loans of Lenders in accordance with their
respective Applicable Percentages.

(b) If for any reason (including without limitation those arising from a
reduction of the Borrowing Base described in Section 4.05) the Total
Outstandings at any time exceed the Aggregate Commitments then in effect,
Borrower shall within three (3) Business Days prepay Loans and/or Cash
Collateralize the L/C Obligations in an aggregate amount equal to such excess;
provided, however, that Borrower shall not be required to Cash Collateralize the
L/C Obligations pursuant to this Section 2.04(b) unless after the prepayment in
full of the Loans the Total Outstandings exceed the Aggregate Commitments then
in effect; and provided further, however, that the provisions of Section 4.06
shall control in the event the reason the Total Outstandings exceed the
Aggregate Commitments is due to the redetermination of the Borrowing Base
pursuant to Section 4.02 or Section 4.03.

(c) Borrower may make a prepayment of Loans pursuant to Section 4.06.

2.05. Termination or Reduction of Commitments. Borrower may, upon notice to
Agent, terminate the Aggregate Commitments, or from time to time permanently
reduce the Aggregate Commitments; provided that (i) any such notice shall be
received by Agent not later than 11:00 a.m. five (5) Business Days prior to the
date of termination or reduction, (ii) any such partial reduction shall be in an
aggregate amount of $500,000 or any whole multiple of $500,000 in excess
thereof, (iii) Borrower shall not terminate or reduce the Aggregate Commitments
if, after giving effect thereto and to any concurrent prepayments hereunder, the
Total Outstandings would exceed the Aggregate Commitments, and (iv) if, after
giving effect to any reduction of the Aggregate Commitments, the L/C Sublimit
exceeds the amount of the Aggregate Commitments, the L/C Sublimit shall be
automatically reduced by the amount of such excess. Agent will promptly notify
the Lenders of any such notice of termination or reduction of the Aggregate
Commitments. Any reduction of the Aggregate Commitments shall be applied to the
Commitment of each Lender according to its Applicable Percentage. All fees
accrued until the effective date of any termination of the Aggregate Commitments
shall be paid on the effective date of such termination.

 

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2.06. Repayment of Loans. Borrower shall repay to Lenders on the Maturity Date
the aggregate principal amount of Loans outstanding on such date.

2.07. Interest.

(a) Subject to the provisions of subsection (b) below, (i) each Eurodollar Rate
Loan shall bear interest on the outstanding principal amount thereof for each
Interest Period at a rate per annum equal to the lesser of (1) the Eurodollar
Rate for such Interest Period plus the Applicable Rate or (2) the Maximum Rate;
and (ii) each Base Rate Loan shall bear interest on the outstanding principal
amount thereof from the applicable borrowing date at a rate per annum equal to
the lesser of (1) the Base Rate plus the Applicable Rate or (2) the Maximum
Rate.

(b) (i) If any amount of principal of any Loan is not paid when due (without
regard to any applicable grace periods), whether at stated maturity, by
acceleration or otherwise, such amount shall thereafter bear interest at a
fluctuating interest rate per annum at all times equal to the Default Rate to
the fullest extent permitted by applicable Laws.

(ii) If any amount (other than principal of any Loan) payable by Borrower under
any Loan Document is not paid when due (without regard to any applicable grace
periods), whether at stated maturity, by acceleration or otherwise, then upon
the request of the Required Lenders, such amount shall thereafter bear interest
at a fluctuating interest rate per annum at all times equal to the Default Rate
to the fullest extent permitted by applicable Laws.

(iii) Upon the request of the Required Lenders, while any Event of Default
exists, Borrower shall pay interest on the principal amount of all outstanding
Obligations hereunder at a fluctuating interest rate per annum at all times
equal to the Default Rate to the fullest extent permitted by applicable Laws.

(iv) Accrued and unpaid interest on past due amounts (including interest on past
due interest) shall be due and payable upon demand.

(c) Interest on each Loan shall be due and payable in arrears on each Interest
Payment Date applicable thereto and at such other times as may be specified
herein. Interest hereunder shall be due and payable in accordance with the terms
hereof before and after judgment, and before and after the commencement of any
proceeding under any Debtor Relief Law.

2.08. Fees. In addition to certain fees described in subsections (i) and (j) of
Section 2.03 and in Section 4.07:

(a) Commitment Fee. Borrower shall pay to Agent for the account of the Lenders
(to be paid by Agent to each Lender (other than any Defaulting Lender) in
accordance with its Applicable Percentage) an aggregate commitment fee in an
amount per annum equal to the Applicable Rate times the actual daily amount by
which the Aggregate Commitments exceed the sum of (i) the Outstanding Amount of
Loans and (ii) the Outstanding Amount of L/C Obligations. The commitment fee
shall accrue at all times during the Availability Period, including at any time
during which one or more of the conditions in Article V is not met, and shall be
due and payable quarterly in arrears on the last Business Day of each March,
June, September and December, commencing with the first such date to occur after
the Closing Date, and on the Maturity Date. The commitment fee shall be
calculated quarterly in arrears, and if there is any change in the Applicable
Rate during any quarter, the actual daily amount shall be computed and
multiplied by the Applicable Rate on a per diem basis separately for each period
during such quarter that such Applicable Rate was in effect.

 

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(b) Agent’s Fees. Borrower shall pay to Agent for Agent’s own account, fees in
the amounts and at the times specified in the Fee Letter. Unless otherwise
specified in the Fee Letter, such fees shall be fully earned when paid and shall
be nonrefundable for any reason whatsoever.

(c) Lenders’ Upfront Fee. On the Closing Date, Borrower shall pay to Agent, for
the account of the Lenders (to be paid by Agent to each Lender (other than any
Defaulting Lender) in accordance with its Applicable Percentage), an aggregate
upfront fee in the amount provided in the commitment letter between the parties
dated as of August 20, 2010. Such upfront fees are for the credit facilities
committed by Lenders under this Agreement and are fully earned on the date paid.
The upfront fee paid to each Lender is solely for its own account and is
nonrefundable for any reason whatsoever.

2.09. Computation of Interest and Fees. All computations of interest for Base
Rate Loans when the Base Rate is determined by Agent’s “prime rate” shall be
made on the basis of a year of 365 or 366 days, as the case may be, and actual
days elapsed. All other computations of fees and interest shall be made on the
basis of a 360-day year and actual days elapsed (which results in more fees or
interest, as applicable, being paid than if computed on the basis of a 365-day
year). Interest shall accrue on each Loan for the day on which the Loan is made,
and shall not accrue on a Loan, or any portion thereof, for the day on which the
Loan or such portion is paid, provided that any Loan that is repaid on the same
day on which it is made shall, subject to Section 2.11(a), bear interest for one
day. Each determination by Agent of an interest rate or fee hereunder shall be
conclusive and binding for all purposes, absent manifest error.

2.10. Evidence of Debt.

(a) The Credit Extensions made by each Lender shall be evidenced by one or more
accounts or records maintained by such Lender and by Agent in the ordinary
course of business. The accounts or records maintained by Agent and each Lender
shall be conclusive absent manifest error of the amount of the Credit Extensions
made by Lenders to Borrower and the interest and payments thereon. Any failure
to so record or any error in doing so shall not, however, limit or otherwise
affect the obligation of Borrower hereunder to pay any amount owing with respect
to the Obligations. In the event of any conflict between the accounts and
records maintained by any Lender and the accounts and records of Agent in
respect of such matters, the accounts and records of Agent shall control in the
absence of manifest error. Upon the request of any Lender made through Agent,
Borrower shall execute and deliver to such Lender (through Agent) a Note, which
shall evidence such Lender’s Loans in addition to such accounts or records. Each
Lender may attach schedules to its Note and endorse thereon the date, Type (if
applicable), amount and maturity of its Loans and payments with respect thereto.

(b) In addition to the accounts and records referred to in subsection (a), each
Lender and Agent shall maintain in accordance with its usual practice accounts
or records evidencing the purchases and sales by such Lender of participations
in Letters of Credit. In the event of any conflict between the accounts and
records maintained by Agent and the accounts and records of any Lender in
respect of such matters, the accounts and records of Agent shall control in the
absence of manifest error.

 

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2.11. Payments Generally; Agent’s Clawback.

(a) (i) General. All payments to be made by Borrower shall be made without
condition or deduction for any counterclaim, defense, recoupment or setoff.
Except as otherwise expressly provided herein, all payments by Borrower
hereunder shall be made to Agent, for the account of the respective Lenders to
which such payment is owed, at the Administrative Agent’s Office in Dollars and
in immediately available funds not later than 12:00 noon on the date specified
herein. Agent will promptly distribute to each Lender its Applicable
Percentage(or other applicable share as provided herein) of such payment in like
funds as received by wire transfer to such Lender’s Lending Office. All payments
received by Agent after 12:00 noon shall be deemed received on the next
succeeding Business Day and any applicable interest or fee shall continue to
accrue. If any payment to be made by Borrower shall come due on a day other than
a Business Day, payment shall be made on the next following Business Day, and
such extension of time shall be reflected in computing interest or fees, as the
case may be.

(ii) On each date when the payment of any principal, interest or fees are due
hereunder or under any Note, Borrower agrees to maintain on deposit in an
ordinary checking account maintained by Borrower with Agent (as such account
shall be designated by Borrower in a written notice to Agent from time to time,
the “Borrower Account”) an amount sufficient to pay such principal, interest or
fees in full on such date. Borrower hereby authorizes Agent (A) to deduct
automatically all principal, interest or fees when due hereunder or under any
Note from the Borrower Account, and (B) if and to the extent any payment of
principal, interest or fees under this Agreement or any Note is not made when
due to deduct any such amount from any or all of the accounts of Borrower
maintained at Agent. Agent agrees to provide written notice to Borrower of any
automatic deduction made pursuant to this Section 2.11(a)(ii) showing in
reasonable detail the amounts of such deduction. Lenders agree to reimburse
Borrower based on their Applicable Percentage for any amounts deducted from such
accounts in excess of amounts due hereunder and under any other Loan Documents.

(iii) Funding by Lenders; Presumption by Agent. Unless Agent shall have received
notice from a Lender prior to the proposed date of any Borrowing of Eurodollar
Rate Loans (or, in the case of any Borrowing of Base Rate Loans, prior to 12:00
noon on the date of such Borrowing) that such Lender will not make available to
Agent such Lender’s share of such Borrowing, Agent may assume that such Lender
has made such share available on such date in accordance with Section 2.02 (or,
in the case of a Borrowing of Base Rate Loans, that such Lender has made such
share available in accordance with and at the time required by Section 2.02) and
may, in reliance upon such assumption, make available to Borrower a
corresponding amount. In such event, if a Lender has not in fact made its share
of the applicable Borrowing available to Agent, then the applicable Lender and
Borrower severally agree to pay to Agent forthwith on demand such corresponding
amount in immediately available funds with interest thereon, for each day from
and including the date such amount is made available to Borrower to but
excluding the date of payment to Agent, at (A) in the case of a payment to be
made by such Lender, the greater of the Federal Funds Rate and a rate determined
by Agent in accordance with banking industry rules on interbank compensation,
plus any administrative, processing or similar fees customarily charged by Agent
in connection with the foregoing and (B) in the case of a payment to be made by
Borrower, the interest rate applicable to Base Rate Loans. If Borrower and such
Lender shall pay such interest to Agent for the same or an overlapping period,
Agent shall promptly remit to Borrower the amount of such interest paid by
Borrower for such period. If such Lender pays its share of the applicable
Borrowing to Agent, then the amount of its share of such applicable Borrowing so
paid shall constitute such Lender’s Loan included in such Borrowing. Any payment
by Borrower shall be without prejudice to any claim Borrower may have against a
Lender that shall have failed to make such payment to Agent.

 

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(iv) Payments by Borrower; Presumptions by Agent. Unless Agent shall have
received notice from Borrower prior to the date on which any payment is due to
Agent for the account of the Lenders or the L/C Issuer hereunder that Borrower
will not make such payment, Agent may assume that Borrower has made such payment
on such date in accordance herewith and may, in reliance upon such assumption,
distribute to Lenders or the L/C Issuer, as the case may be, the amount due. In
such event, if Borrower has not in fact made such payment, then each of Lenders
or the L/C Issuer, as the case may be, severally agrees to repay to Agent
forthwith on demand the amount so distributed to such Lender or the L/C Issuer,
in immediately available funds 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 Agent, at the greater of the Federal Funds Rate and a rate determined
by Agent in accordance with banking industry rules on interbank compensation.

A notice of Agent to any Lender or Borrower with respect to any amount owing
under this subsection (b) shall be conclusive, absent manifest error.

(b) Failure to Satisfy Conditions Precedent. If any Lender makes available to
Agent funds for any Loan to be made by such Lender as provided in the foregoing
provisions of this Article II, and such funds are not made available to Borrower
by Agent because the conditions to the applicable Credit Extension set forth in
Article V are not satisfied or waived in accordance with the terms hereof, Agent
shall return such funds (in like funds as received from such Lender) to such
Lender, without interest.

(c) Obligations of Lenders Several. The obligations of Lenders hereunder to make
Loans, to fund participations in Letters of Credit and to make payments pursuant
to Section 11.04(c) are several and not joint. The failure of any Lender to make
any Loan, to fund any such participation or to make any payment under
Section 11.04(c) on any date required hereunder shall not relieve any other
Lender of its corresponding obligation to do so on such date, and no Lender
shall be responsible for the failure of any other Lender to so make its Loan,
purchase its participation or to make its payment under Section 11.04(c):

(d) Funding Source. Nothing herein shall be deemed to obligate any Lender to
obtain the funds for any 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
any Loan in any particular place or manner.

2.12. Sharing of Payments. If any Lender shall, by exercising any right of
setoff or counterclaim or otherwise, obtain payment in respect of any principal
of or interest on any of the Loans made by it, or the participations in L/C
Obligations held by it resulting in such Lender’s receiving payment of a
proportion of the aggregate amount of such Loans or participations and accrued
interest thereon greater than its pro rata share thereof as provided herein,
then the Lender receiving such greater proportion shall (a) notify Agent of such
fact, and (b) purchase (for cash at face value) participations in the Loans and
subparticipations in L/C Obligations of the other Lenders, or make such other
adjustments as shall be equitable, 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 other amounts
owing them, provided that:

(i) if any such participations or subparticipations are purchased and all or any
portion of the payment giving rise thereto is recovered, such participations or
subparticipations shall be rescinded and the purchase price restored to the
extent of such recovery, without interest; and

 

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(ii) the provisions of this Section shall not be construed to apply to (x) any
payment made by Borrower pursuant to and in accordance with the express terms of
this Agreement or (y) any payment obtained by a Lender as consideration for the
assignment of or sale of a participation in any of its Loans or
subparticipations in L/C Obligations to any assignee or participant, other than
to Borrower or any Subsidiary thereof (as to which the provisions of this
Section shall apply).

Each Loan Party 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 such
Loan Party rights of setoff and counterclaim with respect to such participation
as fully as if such Lender were a direct creditor of such Loan Party in the
amount of such participation.

2.13. Collateral.

(a) Mortgaged Properties. The payment and performance of the Notes and all of
the other Obligations hereunder and under the Loan Documents shall be secured by
a first and superior Lien, subject to Permitted Liens, against the entire
Mineral Interest of each Loan Party in the Mortgaged Properties pursuant to the
terms of one or more deeds of trust (each an “Oil and Gas Mortgage”), in favor
of Agent for the ratable benefit of Lenders which shall be in form and substance
satisfactory to Agent. Each Oil and Gas Mortgage to be filed in a county where a
Bank of America Mortgage has been filed shall be a restatement of that
particular Bank of America Mortgage, such Bank of America Mortgages having been
assigned to Agent for the ratable benefit of Lenders pursuant to documentation
acceptable to Agent. Borrower covenants that the Recognized Value of all oil and
gas properties under mortgage to Agent shall at all times be not less than the
Required Reserve Value. On or before each determination of the Borrowing Base
and at such other times as Agent shall request, the Loan Parties shall mortgage
such additional proved producing properties to Agent for the ratable benefit of
Lenders having aggregate Recognized Values as are necessary to maintain the
Required Reserve Value of the Mortgaged Properties securing the Obligations.

(b) Title Assurances. At any time any Loan Party is required to execute and
deliver Oil and Gas Mortgages to Agent pursuant to this Section 2.13, such Loan
Party shall also deliver to Agent such opinions of counsel (including, if so
requested, title opinions addressed to Agent) or other evidence of title as
Agent shall deem necessary or appropriate to verify (i) its title to the oil and
gas properties which are subject to such Oil and Gas Mortgages, and (ii) the
validity and perfection of the Liens created by such Oil and Gas Mortgages.

(c) Personal Property of Borrower. The payment and performance of the Notes and
all of the other Obligations hereunder and under the other Loan Documents shall
also be secured by a first priority Lien, subject to Permitted Liens, against
all personal property of Borrower other than Equity Interests owned by Borrower
pursuant to the terms of an agreement (the “Security Agreement”) in favor of
Agent for the ratable benefit of Lenders which shall be in form and substance
satisfactory to Agent. Equity Interests owned by Borrower shall not be covered
by the Security Agreement. Instead, such Equity Interests shall be pledged
pursuant to the Pledge Agreement described in Section 2.13(d).

(d) Equity Interests of Subsidiaries and Designated Investment Entities. The
payment and performance of the Notes and all of the other Obligations hereunder
and under the Loan Documents shall be secured by a first priority Lien against
the following Equity Interests owned by Borrower pursuant to the terms of an
agreement (the “Pledge Agreement”), in favor of Agent for the ratable benefit of
Lenders which shall be in form and substance satisfactory to Agent:

 

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(i) 100% of the issued and outstanding Equity Interest of each existing and
future Domestic Subsidiary;

(ii) 65% of the issued and outstanding Equity Interest of each existing and
future Foreign Subsidiary; and

(iii) the entire Equity Interest owned by Borrower in the Designated Investment
Entities; provided that if such Equity Interest exceeds 65% of all of the issued
and outstanding Equity Interests of such entity, then the Lien shall be limited
to 65% of the issued and outstanding Equity Interests of such entity.

(e) Concerning Domestic Subsidiaries. The payment and performance of the Notes
and all of the other Obligations hereunder and under the Loan Documents
(i) shall be unconditionally guaranteed by each Domestic Subsidiary pursuant to
a Guaranty which shall be satisfactory in form and substance to Agent, and
(ii) shall be secured by a first priority Lien (subject only to Permitted Liens)
against those oil and gas properties of such Domestic Subsidiaries having a
Recognized Value of not less than the Required Reserve Value pursuant to one or
more Oil and Gas Mortgages, and (iii) shall be secured by a first priority Lien,
subject to Permitted Liens, against all personal property other than Equity
Interests owned by such Domestic Subsidiaries, pursuant to the terms of one or
more agreements (each a “Subsidiary Security Agreement”) in favor of Agent for
the ratable benefit of Lenders which shall be satisfactory in form and substance
to Agent, and (iv) shall be secured by a first priority Lien against any Equity
Interests (but limited to 65% in the case of Equity Interests of a Foreign
Subsidiary) which such Domestic Subsidiary may now own or hereafter acquire
pursuant to the terms of one or more agreements (each a “Subsidiary Pledge
Agreement”) in favor of Agent for the ratable benefit of Lenders which shall be
in form and substance satisfactory to Agent.

If any such Equity Interests are evidenced by issued and outstanding physical
certificates, Borrower shall deliver such certificates and appropriate stock
powers simultaneously with its execution and delivery of the Pledge Agreement or
Subsidiary Pledge Agreement, as applicable.

2.14. No Fees Paid to Defaulting Lenders. Notwithstanding any provision of this
Agreement to the contrary, if a Lender becomes a Defaulting Lender, then all
fees shall cease to accrue on the unfunded portion of the Commitment of such
Defaulting Lender pursuant to Section 2.08.

ARTICLE III. TAXES, YIELD PROTECTION AND ILLEGALITY

3.01. Taxes.

(a) Payments Free of Taxes. Any and all payments by Borrower to or on account of
any obligation of Borrower hereunder or under any other Loan Document shall be
made free and clear of and without reduction or withholding for any Indemnified
Taxes or Other Taxes, provided that if Borrower shall be required by any
applicable law to deduct any Indemnified Taxes (including any 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), Agent, Lender or L/C Issuer, as the
case may be, receives an amount equal to the sum it would have received had no
such deductions been made, (ii) Borrower shall make such deductions, and
(iii) Borrower shall timely pay the full amount deducted to the relevant
Governmental Authority in accordance with applicable law.

 

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(b) Payment of Other Taxes by Borrower. Without limiting the provisions of
subsection (a) above, Borrower shall timely pay any Other Taxes to the relevant
Governmental Authority in accordance with applicable law.

(c) Indemnification by Borrower. Borrower shall indemnify Agent, each Lender and
the L/C Issuer, within 10 days after demand therefor, for the full amount of any
Indemnified Taxes or Other Taxes (including Indemnified Taxes or Other Taxes
imposed or asserted on or attributable to amounts payable under this Section)
paid by Agent, such Lender or the L/C Issuer, as the case may be, and any
penalties, interest and reasonable expenses arising therefrom or with respect
thereto (other than any such penalties, interest and expenses resulting from
Agent’s, Lender’s or L/C Issuer’s gross negligence or willful misconduct
provided that for purposes of clarification, contesting the payment of any such
Indemnified Taxes or Other Taxes shall not be considered gross negligence or
willful misconduct), whether or not such Indemnified Taxes or Other Taxes were
correctly or legally imposed or asserted by the relevant Governmental Authority.
A certificate as to the amount of such payment or liability delivered to
Borrower by a Lender or the L/C Issuer (with a copy to Agent), or by Agent on
its own behalf or on behalf of a Lender or the L/C Issuer, shall be conclusive
absent manifest error.

(d) Evidence of Payments. As soon as practicable after any payment of
Indemnified Taxes or Other Taxes by Borrower to a Governmental Authority,
Borrower shall deliver to 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 Agent.

(e) Status of Lenders. Any Foreign Lender that is entitled to an exemption from
or reduction of withholding tax under the law of the jurisdiction in which
Borrower is resident for tax purposes, or any treaty to which such jurisdiction
is a party, with respect to payments hereunder or under any other Loan Document
shall deliver to Borrower (with a copy to the Agent), at the time or times
prescribed by applicable law or reasonably requested by Borrower or the Agent,
such properly completed and executed documentation prescribed by applicable law
as will permit such payments to be made without withholding or at a reduced rate
of withholding. In addition, any Lender, if requested by Borrower or the Agent,
shall deliver such other documentation prescribed by applicable law or
reasonably requested by Borrower or the Agent as will enable Borrower or the
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 Borrower is
resident for tax purposes in the United States, any Foreign Lender shall deliver
to Borrower and the 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 from time to time thereafter upon the request of
Borrower or the 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 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 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

 

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(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 Borrower to determine the withholding or deduction
required to be made.

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

3.02. Illegality. If any Lender determines that any Law has made it unlawful, or
that any Governmental Authority has asserted that it is unlawful, for any Lender
or its applicable Lending Office to make, maintain or fund Eurodollar Rate
Loans, or to determine or charge interest rates based upon the Eurodollar Rate,
or any Governmental Authority has imposed material restrictions on the authority
of such Lender to purchase or sell, or to take deposits of, Dollars in the
London interbank market, then, on notice thereof by such Lender to Borrower
through Agent, any obligation of such Lender to make or continue Eurodollar Rate
Loans or to convert Base Rate Loans to Eurodollar Rate Loans shall be suspended
until such Lender notifies Agent and Borrower that the circumstances giving rise
to such determination no longer exist. Upon receipt of such notice, Borrower
shall, upon demand from such Lender (with a copy to Agent), prepay (on a pro
rata basis) or, if applicable, convert all Eurodollar Rate Loans of such Lender
to Base Rate Loans, either on the last day of the Interest Period therefor, if
such Lender may lawfully continue to maintain such Eurodollar Rate Loans to such
day, or immediately, if such Lender may not lawfully continue to maintain such
Eurodollar Rate Loans. Upon any such prepayment or conversion, Borrower shall
also pay accrued interest on the amount so prepaid or converted and all amounts
due under Section 3.05 in accordance with the terms thereof due to such
prepayment or conversion.

3.03. Inability to Determine Rates. If Agent determines in connection with any
request for a Eurodollar Rate Loan or a conversion to or continuation thereof
that (a) Dollar deposits are not being offered to banks in the London interbank
eurodollar market for the applicable amount and Interest Period of such
Eurodollar Rate Loan, (b) adequate and reasonable means do not exist for
determining the Eurodollar Base Rate for any requested Interest Period with
respect to a proposed Eurodollar Rate Loan, or (c) the Eurodollar Base Rate for
any requested Interest Period with respect to a proposed Eurodollar Rate Loan
does not adequately and fairly reflect the cost to such Lenders of funding such
Loan, Agent will promptly so notify Borrower and each Lender. Thereafter, the
obligation of Lenders to make or maintain Eurodollar Rate Loans shall be
suspended until Agent (upon the instruction of the Required Lenders) revokes
such notice. Upon receipt of such notice, Borrower may revoke any pending
request for a Borrowing of, conversion to or continuation of Eurodollar Rate
Loans or, failing that, will be deemed to have converted such request into a
request for a Borrowing of Base Rate Loans in the amount specified therein.

 

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3.04. Increased Costs.

(a) Increased Costs Generally. If any Change in Law shall:

(i) impose, modify or deem applicable any reserve, special deposit, compulsory
loan, insurance charge or similar requirement against assets of, deposits with
or for the account of, or credit extended or participated in by, any Lender
(except any reserve requirement reflected in the Eurodollar Rate) or the L/C
Issuer;

(ii) subject any Lender or the L/C Issuer to any tax of any kind whatsoever with
respect to this Agreement, any Letter of Credit, any participation in a Letter
of Credit or any Eurodollar Rate Loan made by it, or change the basis of
taxation of payments to such Lender or the L/C Issuer in respect thereof (except
for Indemnified Taxes or Other Taxes covered by Section 3.01 and the imposition
of, or any change in the rate of, any Excluded Tax payable by such Lender or the
L/C Issuer); or

(iii) impose on any Lender or the L/C Issuer or the London interbank market any
other condition, cost or expense affecting this Agreement or Eurodollar Rate
Loans made by such Lender or any Letter of Credit or participation therein;

and the result of any of the foregoing shall be to increase the cost to such
Lender of making or maintaining any Eurodollar Rate Loan (or of maintaining its
obligation to make any such Loan), or to increase the cost to such Lender or the
L/C Issuer of participating in, issuing or maintaining any Letter of Credit (or
of maintaining its obligation to participate in or to issue any Letter of
Credit), or to reduce the amount of any sum received or receivable by such
Lender or the L/C Issuer hereunder (whether of principal, interest or any other
amount) then, upon request of such Lender or the L/C Issuer, Borrower will pay
to such Lender or the L/C Issuer, as the case may be, such additional amount or
amounts as will compensate such Lender or the L/C Issuer, as the case may be,
for such additional costs incurred or reduction suffered.

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

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

 

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(d) Delay in Requests. Failure or delay on the part of any Lender or the L/C
Issuer to demand compensation pursuant to the foregoing provisions of this
Section shall not constitute a waiver of such Lender’s or the L/C Issuer’s right
to demand such compensation, provided that Borrower shall not be required to
compensate a Lender or the L/C Issuer pursuant to the foregoing provisions of
this Section for any increased costs incurred or reductions suffered more than
six months prior to the date that such Lender or the L/C Issuer, as the case may
be, notifies Borrower of the Change in Law giving rise to such increased costs
or reductions and of such Lender’s or the L/C Issuer’s intention to claim
compensation therefor (except that, if the Change in Law giving rise to such
increased costs or reductions is retroactive, then the six-month period referred
to above shall be extended to include the period of retroactive effect thereof).

3.05. Compensation for Losses. Upon demand of any Lender (with a copy to Agent)
from time to time, Borrower shall promptly compensate such Lender for and hold
such Lender harmless from any actual loss, cost or expense incurred by it as a
result of:

(a) any continuation, conversion, payment or prepayment of any Loan other than a
Base Rate Loan on a day other than the last day of the Interest Period for such
Loan (whether voluntary, mandatory, automatic, by reason of acceleration, or
otherwise);

(b) any failure by Borrower (for a reason other than the failure of such Lender
to make a Loan) to prepay, borrow, continue or convert any Loan other than a
Base Rate Loan on the date or in the amount notified by Borrower; or

(c) any assignment of a Eurodollar Rate Loan on a day other than the last day of
the Interest Period therefor as a result of a request by the Borrower pursuant
to Section 11.14;

including any loss of anticipated profits and any loss or expense arising from
the liquidation or reemployment of funds obtained by it to maintain such Loan or
from fees payable to terminate the deposits from which such funds were obtained.
Borrower shall also pay any customary administrative fees charged by such Lender
in connection with the foregoing. For purposes of calculating amounts payable by
Borrower to Lenders under this Section 3.05, each Lender shall be deemed to have
funded each Eurodollar Rate Loan made by it at the Eurodollar Base Rate used in
determining the Eurodollar Rate for such Loan by a matching deposit or other
borrowing in the London interbank eurodollar market for a comparable amount and
for a comparable period, whether or not such Eurodollar Rate Loan was in fact so
funded.

3.06. Mitigation Obligations; Replacement of Lenders.

(a) Designation of a Different Lending Office. If any Lender requests
compensation under Section 3.04, or Borrower is required to pay any additional
amount to any Lender, the L/C Issuer, or any Governmental Authority for the
account of any Lender or the L/C Issuer pursuant to Section 3.01, or if any
Lender gives a notice pursuant to Section 3.02, then such Lender or the L/C
Issuer shall, as applicable, 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 or the L/C Issuer, such
designation or assignment (i) would eliminate or reduce amounts payable pursuant
to Section 3.01 or 3.04, as the case may be, in the future, or eliminate the
need for the notice pursuant to Section 3.02, as applicable, and (ii) in each
case, would not subject such Lender or the L/C Issuer, as the case may be, to
any unreimbursed cost or expense and would not otherwise be disadvantageous to
such Lender or the L/C Issuer, as the case may be. Borrower hereby agrees to pay
all reasonable costs and expenses incurred by any Lender or the L/C Issuer in
connection with any such designation or assignment.

 

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(b) Replacement of Lenders. If any Lender requests compensation under
Section 3.04, or if Borrower is required to pay any additional amount to any
Lender or any Governmental Authority for the account of any Lender pursuant to
Section 3.01, Borrower may replace such Lender in accordance with Section 11.14.

3.07. Survival. All of Borrower’s obligations under this Article III shall
survive termination of the Aggregate Commitments and repayment of all other
Obligations hereunder.

ARTICLE IV. BORROWING BASE

4.01. Borrowing Base. The Borrowing Base shall represent the approval in their
sole discretion of the Required Lenders or all Lenders, as applicable, of
Agent’s determination of the maximum loan amount that may be supported by the
oil and gas properties of the Loan Parties included in the most recent Reserve
Report furnished to Agent, based upon Lenders’ in-house evaluation of such
properties. The determination of the Borrowing Base will be made in accordance
with then-current practices, economic and pricing parameters, methodology,
assumptions, and customary procedures and standards established by each Lender
from time to time for its petroleum industry customers including without
limitation (a) an analysis of such reserve and production data with respect to
the Mineral Interests of the Loan Parties in all of their oil and gas
properties, including the Mortgaged Properties, as is provided to Lenders in
accordance herewith, (b) an analysis of the assets, liabilities, cash flow,
business, properties, prospects, management and ownership of each Loan Party and
its Affiliates, and (c) such other credit factors consistently applied as each
Lender customarily considers in evaluating similar oil and gas credits. Borrower
and Lenders acknowledge that (i) due to the uncertainties of the oil and gas
extraction process, the properties included in any Reserve Report are not
subject to evaluation with a high degree of accuracy and are subject to
potential rapid deterioration in value, and (ii) for this reason and the
difficulties and expenses involved in liquidating and collecting against the
Mortgaged Properties, the determination of the maximum loan amount with respect
to the properties included in any Reserve Report contains an equity cushion
(market value in excess of loan amount) which Borrower acknowledges to be
essential for the adequate protection of Lenders. The Borrowing Base shall
initially be $50,000,000.

4.02. Periodic Determinations of Borrowing Base.

(a) On each April 1 and October 1 commencing April 1, 2011, until the Maturity
Date, Borrower shall furnish to Agent a Reserve Report, which shall set out as
of the six (6) months ending January 1 and July 1, respectively, the Proved
Mineral Interests attributable to the Mortgaged Properties and such other oil
and gas properties of the Loan Parties as Borrower may select. Each October 1
Reserve Report may be prepared by Borrower’s own engineers and shall be
certified by the President or other Responsible Officer of Borrower. Each
April 1 Reserve Report shall be a complete report prepared by independent
reservoir engineers reasonably acceptable to Agent relating to the Proved
Mineral Interests attributable to the Mortgage Properties known as “West Cote
Blanche Bay” and “Permian Basin”, and such other oil and gas properties of the
Loan Parties as Borrower may select. In addition, Borrower may submit with each
April 1 Reserve Report a separate Reserve Report prepared by Borrower’s own
engineers and certified by the President or other Responsible Officer of
Borrower covering such other oil and gas properties of the Loan Parties as
Borrower may select. Upon receipt of each such Reserve Report, Agent shall make
a determination of the Borrowing Base and the Monthly Reduction Amount which
shall become effective upon approval by the Required Lenders or all Lenders in
accordance with the procedure set forth in Section 4.04 and subsequent written
notification from Agent to Borrower, and which, subject to the other provisions
of this Agreement shall be the Borrowing Base and the Monthly Reduction Amount
until the effective date of the next redetermination as provided in this Article
IV.

 

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(b) In the event that Borrower does not furnish to Agent a Reserve Report by the
dates specified in Section 4.02(a), then Agent and Lenders may nonetheless
redetermine the Borrowing Base and redesignate the Borrowing Base from time to
time thereafter in their sole discretion until Agent receives the relevant
Reserve Report, whereupon Agent and Lenders shall redetermine the Borrowing Base
as otherwise specified in this Article IV.

4.03. Special Determinations of Borrowing Base.

(a) Special determinations of the Borrowing Base may be requested by Agent or
Borrower not more than one time per calendar year each. If any special
determination is requested by Borrower, it shall be accompanied by
internally-prepared engineering data for the oil and gas reserves included in
the Mortgaged Properties, and such additional properties as Borrower may select,
brought forward from the most recent Reserve Report furnished by Borrower to
Agent. If any special determination is requested by Agent, Borrower will provide
Agent with internally prepared engineering data for the oil and gas reserves
included in the Mortgaged Properties, and such additional properties as Borrower
may select, updated from the most recent Reserve Report furnished to Agent, as
soon as is reasonably practicable following the request. The determination
whether to increase or decrease the Borrowing Base and the Monthly Reduction
Amount shall then be made in accordance with the standards set forth in
Section 4.01 hereof and the procedures set forth in Section 4.04 hereof. In the
event of any special determination of the Borrowing Base pursuant to this
Section, Agent in the exercise of its discretion may suspend the next regularly
scheduled determination of the Borrowing Base.

(b) Borrower shall give Agent ten (10) Business Days prior written notice of any
proposed amendment, modification or termination of any Swap Contract or Forward
Sales Contract, or any other action which Borrower or any Subsidiary proposes to
take in connection with any Swap Contract or Forward Sales Contract which could
impact its Recognized Value in the then current Borrowing Base. Agent reserves
the right to redetermine the Borrowing Base. As the result of any such action,
and any such redetermination shall not be considered a special determination
requested by Agent within the meaning of the first sentence of Section 4.03(a).
If requested by Borrower, Agent shall inform Borrower by email within such ten
(10) Business Day period of the likely reduction of the Borrowing Base as the
result of any action described in the first sentence of this Section 4.03(b).

4.04. General Procedures With Respect to Determination of Borrowing Base. Agent
shall propose a redetermined Borrowing Base and a Monthly Reduction Amount
within sixty (60) days following receipt by Agent and Lenders of a Reserve
Report and other applicable information. After having received notice of such
proposal from Agent, Required Lenders (or all Lenders in the event of a proposed
increase in the Borrowing Base or decrease in the Monthly Reduction Amount)
shall have fifteen (15) days to agree or disagree with such proposal. At the end
of such fifteen (15) day period, if Required Lenders (or all Lenders, in the
event of a proposed increase of the Borrowing Base or decrease of the Monthly
Reduction Amount) shall not have communicated their approval or disapproval,
such silence shall be deemed an approval, and Agent’s proposal shall be the new
Borrowing Base and Monthly Reduction Amount. If, however, Required Lenders (or
any Lender, in the event of a proposed increase of the Borrowing Base or
decrease of the Monthly Reduction Amount) notify Agent within such fifteen
(15) days of their disapproval, Agent and Required Lenders (or all Lenders, in
the event of a proposed increase of the Borrowing Base or decrease of the
Monthly Reduction Amount) shall agree on a new Borrowing Base and Monthly
Reduction Amount. If the Required Lenders (or all Lenders, in the event of a
proposed increase of the Borrowing Base or decrease of the Monthly Reduction
Amount), cannot agree on the amount of the Borrowing Base or Monthly Reduction
Amount, as applicable, within seven (7) days after Agent has been notified of
their disapproval, then Agent shall propose a new redetermined Borrowing Base
and a new Monthly Reduction Amount within fifteen (15) days after the end of
such seven (7) day period and the foregoing process shall be repeated. This
process shall be repeated until the Required Lenders (or all Lenders, in the
event of a proposed increase of the Borrowing Base or decrease of the Monthly
Reduction Amount) agree on a new Borrowing Base and Monthly Reduction Amount. In
taking the above actions, Agent and Lenders shall act in accordance with their
normal and customary procedures for evaluating oil and gas reserves and other
related assets as such exist at that particular time and will otherwise act in
their sole discretion. Further, each Lender may consider such other credit
factors as it deems appropriate which are consistent with its normal and
customary procedures for evaluating oil and gas reserves. Without limiting the
foregoing, Lenders may exclude any oil and gas reserves or portion of production
therefrom or any income from any other property from the Borrowing Base, at any
time, because title information is not satisfactory or such oil and gas reserves
are not Mortgaged Properties.

 

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4.05. Borrowing Base Reductions.

(a) At the time of any periodic or special redetermination of the Borrowing
Base, Lenders reserve the right to establish an amount (the “Monthly Reduction
Amount”) by which the Borrowing Base shall be automatically reduced effective on
the first day of each successive calendar month until the next Borrowing Base
redetermination. Lenders’ determination of the Monthly Reduction Amount shall be
made in accordance with the standards specified in Section 4.01 hereof and the
procedures specified in Section 4.04 hereof. Initially, the Monthly Reduction
Amount will be set at zero dollars ($0). If the Total Outstandings shall exceed
the Borrowing Base solely because of the reduction of the Borrowing Base by the
Monthly Reduction Amount, Borrower shall promptly make a single lump sum payment
in an amount sufficient to reduce the Total Outstandings to or below the
Borrowing Base.

(b) If any Swap Contract is terminated or is not fully performed for any reason,
the Borrowing Base shall be reduced by the amount of the Recognized Value given
such Swap Contract in the then current Borrowing Base as determined by Agent.

(c) If any Forward Sales Contract is terminated or is not fully performed for
any reason, the Borrowing Base shall be reduced by the amount of the Recognized
Value given such Forward Sales Contract in the then current Borrowing Base as
determined by Agent.

(d) The Borrowing Base shall be reduced if the aggregate of Asset Dispositions
in any calendar year exceeds 5% of the then existing Borrowing Base as provided
in Section 8.05(h).

4.06. Borrowing Base Deficiency.

(a) If the Total Outstandings exceed the amount of the Borrowing Base because of
a periodic or special determination made pursuant to Section 4.02 or
Section 4.03 hereof (or a periodic or special redetermination combined with the
Monthly Reduction Amount), then Agent shall notify Borrower of the same (a
“Borrowing Base Deficiency Notice”), and Borrower shall within thirty (30) days
following receipt of such Borrowing Base Deficiency Notice elect whether to
(i) prepay an amount which would, if prepaid immediately, reduce the Total
Outstandings to the amount of the Borrowing Base, (ii) mortgage (or cause a
Guarantor to mortgage) such other oil and gas properties as are acceptable to
Lenders, pursuant to security documents acceptable to Agent having present
values which, in the opinion of Lenders, based upon Lenders’ evaluation of the
engineering data provided them, taken in the aggregate are sufficient to
increase the Borrowing Base to an amount at least equal to the Total
Outstandings, or (iii) do any combination of the foregoing as is acceptable to
Agent. If Borrower fails to make an election within thirty (30) days after
Borrower’s receipt of the Borrowing Base Deficiency Notice, then Borrower shall
be deemed to have selected the prepayment option specified in clause (i) above.

(b) Borrower shall deliver such prepayments or mortgages of additional oil and
gas properties in accordance with its election (or deemed election) pursuant to
Section 4.06(a) as follows:

(i) Prepayment Elections. If Borrower elects (or is deemed to have elected) to
prepay an amount in accordance with Section 4.06(a)(i) above, then Borrower may
make such prepayment in one installment within forty-five (45) days after
Borrower’s receipt of the Borrowing Base Deficiency Notice or in six (6) equal
consecutive monthly installments beginning within forty-five (45) days after
Borrower’s receipt of the Borrowing Base Deficiency Notice and continuing on the
same day of each month thereafter.

 

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(ii) Elections to Mortgage Additional Oil and Gas Properties. If Borrower elects
to mortgage additional oil and gas properties in accordance with
Section 4.06(a)(ii) above, then (1) such property shall be acceptable to Agent
and Lenders with values determined by Agent and Lenders in accordance with this
Article IV and (2) Borrower or such Guarantor shall execute, acknowledge and
deliver to Agent security instruments acceptable to Agent within forty-five
(45) days after Borrower’s receipt of the Borrowing Base Deficiency Notice;
provided, however (x) if none of the additional oil and gas properties offered
by Borrower are acceptable to Lenders, Borrower shall be deemed to have elected
the prepayment option specified in Section 4.06(a)(i) (and Borrower shall make
such prepayment in accordance with Section 4.06(b)(i)); and (y) if the aggregate
present values of additional oil and gas properties which are acceptable to
Lenders are insufficient to eliminate the Borrowing Base deficiency, then
Borrower shall be deemed to have selected the option specified in
Section 4.06(a)(iii) (and Borrower shall make prepayment and deliver security
instruments as provided in Section 4.06(b)(iii)).

(iii) Combination Elections. If Borrower elects (or is deemed to have elected)
to eliminate the Borrowing Base deficiency by a combination of prepayment and
mortgaging of additional oil and gas properties in accordance with
Section 4.06(a)(iii), then within forty-five (45) days after Borrower’s receipt
of the Borrowing Base Deficiency Notice, Borrower shall (or shall cause a
Guarantor to) execute, acknowledge and deliver to Agent security instruments
acceptable to Agent covering such additional oil and gas properties and pay
Agent the amount by which the Borrowing Base deficiency exceeds the present
values of such additional oil and gas properties (x) in one installment within
forty-five (45) days after Borrower’s receipt of the Borrowing Base Deficiency
Notice, or (y) six (6) equal consecutive monthly installments beginning within
forty-five (45) days after Borrower’s receipt of the Borrowing Base Deficiency
Notice and continuing on the same day of each month thereafter.

4.07. Borrowing Base Increase Fee. A fee shall be paid for each incremental
increase in the new Borrowing Base over the previously existing Borrowing Base.
The amount of each such fee shall be determined by Agent in accordance with then
prevailing market conditions and shall be shared among Lenders in accordance
with their Applicable Percentages. There shall be no obligation imposed upon
Borrower to accept an increase of the Borrowing Base proposed by Lenders.
However, if Borrower accepts the increase in the Borrowing Base, the fee shall
be due and payable immediately and without regard as to whether Borrower ever
borrows the increased amount available under such new Borrowing Base.
Determinations of when a fee is due shall be made by Agent and shall be
conclusive and binding on the parties absent manifest error.

4.08. Mortgage of Additional Properties. Borrower may from time to time upon
written notice to Agent propose to add oil and gas properties of Borrower or any
other Loan Party as Mortgaged Properties to be included in the Borrowing Base.
Any such proposal shall be accompanied by an internally-prepaid Reserve Report
applicable to such properties that conforms with the requirements of this
Agreement and evidence sufficient to establish that Borrower or such other Loan
Party, as applicable, has title to such properties. Any such addition shall
become effective at such time as (i) Agent, with the approval of Lenders, has
made a determination of the amount by which the Borrowing Base would be
increased as the result of such addition, (ii) the conditions set out in Article
IV hereof, to the extent they are applicable to such additional properties, have
been satisfied, (iii) if requested by Agent, Agent shall have received an
Affidavit of Payment of Trade Bills, Property Certificates, a Title Indemnity
Agreement and a Reconciliation Schedule with respect to such additional
properties, (iv) Oil and Gas Mortgages duly executed by the applicable Loan
Party have been delivered to Agent, and (v) arrangements satisfactory to Agent
have been made with respect to payment of recording fees and taxes, as
applicable. In determining the increase in the Borrowing Base pursuant to this
Section, Agent and Lenders shall apply the parameters and other credit factors
set forth in this Article IV. A proposal by Borrower pursuant to this
Section 4.08 shall constitute a request for a special determination of the
Borrowing Base for purposes of Section 4.03(a).

 

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ARTICLE V. CONDITIONS PRECEDENT TO CREDIT EXTENSIONS

5.01. Conditions of Initial Credit Extension. The obligation of the L/C Issuer
and each Lender to make its initial Credit Extension hereunder is subject to
satisfaction of the following conditions precedent:

(a) Agent’s receipt of the following, each of which shall be originals or
telecopies (followed promptly by originals) unless otherwise specified, each
properly executed by a Responsible Officer of the signing Loan Party, each dated
the Closing Date (or, in the case of certificates of governmental officials, a
recent date before the Closing Date) and each in form and substance satisfactory
to Agent and each of the Lenders:

(i) executed counterparts of this Agreement and those Loan Documents listed on
Schedule 5.01, sufficient in number for distribution to Agent, each Lender and
Borrower

(ii) a Note executed by Borrower in favor of each Lender requesting a Note;

(iii) such certificates of resolutions or other action, incumbency certificates
and/or other certificates of Responsible Officers of each Loan Party as Agent
may require evidencing the identity, authority and capacity of each Responsible
Officer thereof authorized to act as a Responsible Officer in connection with
this Agreement and the other Loan Documents to which such Loan Party is a party;

(iv) such documents and certifications as Agent may require to evidence that
each Loan Party is duly organized or formed, and that each Loan Party is validly
existing, in good standing and qualified to engage in business in each
jurisdiction where its ownership, lease or operation of properties or the
conduct of its business requires such qualification, except to the extent that
failure to do so could not reasonably be expected to have a Material Adverse
Effect;

(v) a favorable opinion of counsel to the Loan Parties acceptable to Agent
addressed to Agent and each Lender, as to the matters set forth in Exhibit E and
such other matters concerning the Loan Parties and the Loan Documents as Agent
may reasonably request and in form and substance reasonably satisfactory to
Agent;

(vi) a certificate of a Responsible Officer of each Loan Party either
(A) attaching copies of all consents, licenses and approvals required in
connection with the execution, delivery and performance by such Loan Party and
the validity against such Loan Party of the Loan Documents to which it is a
party, and such consents, licenses and approvals shall be in full force and
effect, or (B) stating that no such consents, licenses or approvals are so
required;

 

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(vii) a certificate signed by a Responsible Officer of Borrower certifying
(A) that the conditions specified in Sections 5.02(a) and (b) have been
satisfied, and (B) that there has been no event or circumstance since June 30,
2010, that has had or could have, either individually or in the aggregate, a
Material Adverse Effect;

(viii) evidence that all insurance required to be maintained by Section 7.07
hereof has been obtained and is in effect;

(ix) a duly completed Compliance Certificate as of the last day of the fiscal
quarter of Borrower most recently ended prior to the Closing Date, signed by a
Responsible Officer of Borrower;

(x) an affidavit in the form of Exhibit F attached hereto (the “Affidavit of
Payment of Trade Bills”) containing the information as provided therein;

(xi) certificates (whether one or more, the “Property Certificates”) for each
producing oil and gas lease, well or unit, as appropriate, relating to the oil
and gas properties described in an Oil and Gas Mortgage, which Property
Certificates shall be in the form of Exhibit G attached hereto containing the
information as provided therein;

(xii) title opinions and/or other title information and data acceptable to Agent
covering not less than the Required Reserve Value of those Mortgaged Properties
included in the Borrowing Base, reflecting title to the Mineral Interests of the
Loan Parties in such Mortgaged Properties which is acceptable to Agent, and
these title assurances shall include a title indemnity from Borrower (the “Title
Indemnity Agreement”);

(xiii) a schedule (the “Reconciliation Schedule”) in the form of Exhibit H
confirming that, except as otherwise shown on the Reconciliation Schedule,
(a) each well and unit described on the exhibits to the Oil and Gas Mortgages is
also included in the engineering reports previously delivered to Agent, and
(b) the respective net revenue interests and working interests for each well and
unit described on the exhibits to the Oil and Gas Mortgages are also the net
revenue interests and working interests for the same well or unit included in
the engineering reports previously furnished to Agent, and (c) each well and
unit included in the engineering reports previously furnished to Agent is
described on the exhibits to the Oil and Gas Mortgages;

(xiv) such environmental information regarding the Mortgaged Properties as Agent
may request;

(xv) a schedule of Swap Contracts and Forward Sales Contracts then in force and
effect;

(xvi) a deposit of $2,500 with Winstead PC, counsel for Agent, to be held by
such counsel and applied toward payment of costs and expenses for recordation of
the Oil and Gas Mortgages as provided in Section 2.13(a) hereof. If such deposit
exceeds the amount of such costs and expenses, the excess will be returned to
Borrower. If such deposit is less than such costs and expenses, the deficit
shall be paid by Borrower or applied to other indemnified liabilities pursuant
to Section 11.04;

(xvii) evidence of (1) the amount necessary to pay off all indebtedness of
Borrower to Bank of America, N.A., and (2) the agreement of Bank of America,
N.A., upon such pay-off, to execute and delivery to Agent endorsements and
assignments of Borrower’s indebtedness to Bank of America, N.A., and Bank of
America, N.A.’s Lien against the Mortgaged Properties as are acceptable to
Agent;

 

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(xviii) Uniform Commercial Code, judgment and tax lien searches in such
jurisdictions as required by Agent evidencing the absence of Liens except for
Liens being released on the Closing Date and Permitted Liens; and

(xix) such other assurances, certificates, documents, consents or opinions as
Agent, the L/C Issuer or the Required Lenders may require.

(b) Any fees required to be paid on or before the Closing Date, including the
upfront fee described in Section 2.08 (c), shall have been paid.

(c) Unless waived by Agent, Borrower shall have paid all fees, charges and
disbursements of counsel to Agent to the extent invoiced prior to or on the
Closing Date, plus such additional amounts of such fees, charges and
disbursements as shall constitute its reasonable estimate of such fees, charges
and disbursements incurred or to be incurred by it through the closing
proceedings (provided that such estimate shall not thereafter preclude a final
settling of accounts between Borrower and Agent).

(d) The Closing Date shall have occurred on or before September 30, 2010.

(e) There shall not have occurred any material disruption or material adverse
change in the financial, banking, or capital markets which Agent deems to
materially impair the syndication of this credit facility.

Without limiting the generality of the provisions of Section 10.04, for purposes
of determining compliance with the conditions specified in this Section 5.01,
each Lender that has signed this Agreement 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 Agent shall have received notice from such
Lender prior to the proposed Closing Date specifying its objection thereto.

5.02. Conditions to all Credit Extensions. The obligation of each Lender to
honor any Request for Credit Extension (other than a Loan Notice requesting only
a conversion of Loans to the other Type, or a continuation of Eurodollar Rate
Loans) is subject to the following conditions precedent:

(a) The representations and warranties of Borrower and each other Loan Party
contained in Article VI or any other Loan Document, or which are contained in
any document furnished at any time under or in connection herewith or therewith,
shall be true and correct on and as of the date of such Credit Extension, except
to the extent that such representations and warranties specifically refer to an
earlier date, in which case they shall be true and correct as of such earlier
date, and except that for purposes of this Section 5.02, the representations and
warranties contained in subsections (a) and (b) of Section 6.05 shall be deemed
to refer to the most recent statements furnished pursuant to clauses (a) and
(b), respectively, of Section 7.01.

(b) No Default shall exist, or would result from such proposed Credit Extension
or from the application of the proceeds thereof.

(c) Agent and, if applicable, the L/C Issuer shall have received a Request for
Credit Extension in accordance with the requirements hereof.

 

CREDIT AGREEMENT – Page 47

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(d) Agent shall have received, in form and substance satisfactory to it, such
other assurances, certificates, documents or consents related to the foregoing
as Agent or the Required Lenders may reasonably require.

Each Request for Credit Extension (other than a Loan Notice requesting only a
conversion of Loans to the other Type, or a continuation of Eurodollar Rate
Loans) submitted by Borrower shall be deemed to be a representation and warranty
that the conditions specified in Sections 5.02(a) and (b) have been satisfied on
and as of the date of the applicable Credit Extension.

ARTICLE VI. REPRESENTATIONS AND WARRANTIES

Borrower represents and warrants to Agent and the Lenders that:

6.01. Existence, Qualification and Power; Compliance with Laws. Each Loan Party
and each Subsidiary thereof (a) if an entity, is duly organized or formed,
validly existing and in good standing under the Laws of the jurisdiction of its
incorporation or organization, (b) has all requisite power and authority and all
requisite governmental licenses, authorizations, consents and approvals to
(i) own or lease its assets and carry on its business and (ii) execute, deliver
and perform its obligations under the Loan Documents to which it is a party,
(c) if an entity, is duly qualified and is licensed and in good standing under
the Laws of each jurisdiction where its ownership, lease or operation of
properties or the conduct of its business requires such qualification or
license, and (d) is in compliance with all Laws; except in each case referred to
in clause (b)(i), (c) or (d), to the extent that failure to do so could not
reasonably be expected to have a Material Adverse Effect.

6.02. Authorization; No Contravention. The execution, delivery and performance
by each Loan Party of each Loan Document to which such Person is party, have
been duly authorized by all necessary corporate or other organizational action,
and do not and will not (a) contravene the terms of any of such Person’s
Organization Documents; (b) conflict with or result in any breach or
contravention of, or the creation of any Lien under, or require any payment to
be made under (i) any Contractual Obligation to which such Person is a party or
affecting such Person or the properties of such Person or any of its
Subsidiaries (except for such events as could not reasonably be expected to
constitute a Material Adverse Effect) or (ii) any order, injunction, writ or
decree of any Governmental Authority or any arbitral award to which such Person
or its property is subject; or (c) violate any Law. Each Loan Party and each
Subsidiary thereof is in compliance with all Contractual Obligations referred to
in clause (b)(i), except to the extent that failure to do so could not
reasonably be expected to have a Material Adverse Effect.

6.03. Governmental Authorization; Other Consents. No approval, consent,
exemption, authorization, or other action by, or notice to, or filing with
(each, a “Filing”), any Governmental Authority or any other Person is necessary
or required in connection with the execution, delivery or performance by, or
enforcement against, any Loan Party of this Agreement or any other Loan Document
other than (i) Filings required by the Loan Documents, (ii) Filings that, if not
made or obtained, would not cause a Default hereunder, and could not reasonably
be expected to have a Material Adverse Effect, (iii) Filings that are
customarily obtained after the closing of an acquisition of Mineral Interests,
and (iv) Filings necessary in connection with the exercise of remedies under the
Loan Documents.

6.04. Binding Effect. This Agreement has been, and each other Loan Document,
when delivered hereunder, will have been, duly executed and delivered by each
Loan Party that is party thereto. This Agreement constitutes, and each other
Loan Document when so delivered will constitute, a legal, valid and binding
obligation of such Loan Party, enforceable against each Loan Party that is party
thereto in accordance with its terms, except as the enforceability thereof may
be limited by (i) applicable bankruptcy, insolvency, moratorium and other
similar Laws affecting the enforcement of creditors’ rights generally and
(ii) the application of general principles of equity (regardless of whether such
enforceability is considered in a proceeding at law or in equity).

 

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6.05. Financial Statements; No Material Adverse Effect.

(a) The Audited Financial Statements (i) were prepared in accordance with GAAP
consistently applied throughout the period covered thereby, except as otherwise
expressly noted therein; (ii) fairly present in all material respects the
financial condition of Borrower and its Subsidiaries as of the date thereof and
their results of operations for the period covered thereby in accordance with
GAAP consistently applied throughout the period covered thereby, except as
otherwise expressly noted therein; and (iii) show all material indebtedness and
other liabilities, direct or contingent, of Borrower and its Subsidiaries as of
the date thereof, including liabilities for taxes, material commitments and
Indebtedness.

(b) The unaudited consolidated balance sheets of Borrower and its Subsidiaries
dated June 30, 2010, and the related consolidated statements of income or
operations, stockholders’ equity and cash flows for the fiscal quarter ended on
that date (i) were prepared in accordance with GAAP consistently applied
throughout the period covered thereby, except as otherwise expressly noted
therein, and (ii) fairly present in all material respects the financial
condition of Borrower and its Subsidiaries as of the date thereof and their
results of operations for the period covered thereby, subject, in the case of
clauses (i) and (ii), to the absence of footnotes and to normal year-end audit
adjustments. Schedule 6.05 sets forth all material indebtedness and other
liabilities, direct or contingent, of Borrower and its consolidated Subsidiaries
as of the date of such financial statements, including liabilities for taxes,
material commitments and Indebtedness, that are not reflected in such balance
sheets.

(c) Since the date of the Audited Financial Statements, there has been no event
or circumstance, either individually or in the aggregate, that has had or could
reasonably be expected to have a Material Adverse Effect.

(d) The drilling budget, capital expenditure budget, forecast of production and
forecast of cash flows of Borrower and its Subsidiaries delivered pursuant to
Section 7.01(c) were prepared in good faith on the basis of the assumptions
stated therein, which assumptions were fair in light of the conditions existing
at the time of delivery of such forecasts, and represented, at the time of
delivery, the Borrower’s best estimate of its future financial performance.

6.06. Litigation. There are no actions, suits, proceedings, claims or disputes
pending or, to the knowledge of Borrower, threatened or contemplated, at law, in
equity, in arbitration or before any Governmental Authority, by or against any
Loan Party or against any of their properties or revenues that (a) purport to
affect or pertain to this Agreement or any other Loan Document, or any of the
transactions contemplated hereby, or (b) except as specifically disclosed in
Schedule 6.06, either individually or in the aggregate, if determined adversely,
could reasonably be expected to have a Material Adverse Effect, and there has
been no material adverse change in the status, or financial effect on any Loan
Party or any Subsidiary thereof, of the matters described on Schedule 6.06.

6.07. No Default. No Loan Party is in default under or with respect to any
Contractual Obligation that could, either individually or in the aggregate,
reasonably be expected to have a Material Adverse Effect. No Default has
occurred and is continuing or would result from the consummation of the
transactions contemplated by this Agreement or any other Loan Document.

6.08. Ownership of Property; Liens. Each Loan Party (i) has good record and
defensible title to the Mineral Interests evaluated in the most recently
delivered Reserve Report that are included in the determination of the Borrowing
Base, as described in Section 6.21, and (ii) good title to the personal property
used in the ordinary conduct of its business, except for such defects in title
as could not, individually or in the aggregate, reasonably be expected to have a
Material Adverse Effect. The property of each Loan Party is subject to no Liens,
other than Permitted Liens.

 

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6.09. Environmental Compliance. Borrower and its Subsidiaries have conducted in
the ordinary course of business a review of claims alleging potential liability
or responsibility for violation of any Environmental Law on their respective
businesses, operations and properties, and as a result thereof Borrower has
reasonably concluded that, except as specifically disclosed in Schedule 6.09,
such claims could not, individually or in the aggregate, reasonably be expected
to have a Material Adverse Effect.

6.10. Insurance. The properties of the Loan Parties are insured with financially
sound and reputable insurance companies not Affiliates of any Loan Party, in
such amounts (after giving effect to any self-insurance compatible with the
following standards; provided the Loan Parties may not self-insure against, and
must have policies of insurance for, business interruption and named windstorm
coverage), with such deductibles and covering such risks as are customarily
carried by companies engaged in similar businesses and owning similar properties
in localities where Borrower or the applicable Loan Party operates.

6.11. Taxes. The Loan Parties have filed all Federal and other material tax
returns and reports required to be filed, and have paid all Federal and other
material taxes, assessments, fees and other governmental charges levied or
imposed upon them or their properties, income or assets otherwise due and
payable, except those which are being contested in good faith by appropriate
proceedings diligently conducted and for which adequate reserves have been
provided in accordance with GAAP and those not yet delinquent. There is no
proposed tax assessment against Borrower or any Loan Party that would, if made,
reasonably be expected to have a Material Adverse Effect.

6.12. ERISA Compliance.

(a) Each Plan is in compliance in all material respects with the applicable
provisions of ERISA, the Code and other Federal or state Laws. Each Plan that is
intended to qualify under Section 401(a) of the Code has received a favorable
determination letter from the IRS, is entitled to rely on a favorable opinion
letter issued to the sponsor of a master or prototype plan adopted by Borrower
or any ERISA Affiliate, or an application for such a letter is currently being
processed by the IRS with respect thereto and, to the best knowledge of
Borrower, nothing has occurred which would prevent, or cause the loss of, such
qualification. Borrower and each ERISA Affiliate have made all required
contributions to each Plan subject to Section 412 of the Code, and no
application for a funding waiver or an extension of any amortization period
pursuant to Section 412 of the Code has been made with respect to any Plan.

(b) There are no pending or, to the best knowledge of Borrower, threatened
claims, actions or lawsuits, or action by any Governmental Authority, with
respect to any Plan that could reasonably be expected to have a Material Adverse
Effect. There has been no prohibited transaction or violation of the fiduciary
responsibility rules with respect to any Plan that has resulted or could
reasonably be expected to result in a Material Adverse Effect.

(c) (i) No ERISA Event has occurred or is reasonably expected to occur; (ii) no
Pension Plan has any Unfunded Pension Liability; (iii) neither Borrower nor any
ERISA Affiliate has incurred, or reasonably expects to incur, any liability
under Title IV of ERISA with respect to any Pension Plan (other than premiums
due and not delinquent under Section 4007 of ERISA); (iv) neither Borrower nor
any ERISA Affiliate has incurred, or reasonably expects to incur, any liability
(and no event has occurred which, with the giving of notice under Section 4219
of ERISA, would result in such liability) under Sections 4201 or 4243 of ERISA
with respect to a Multiemployer Plan; and (v) neither Borrower nor any ERISA
Affiliate has engaged in a transaction that could be subject to Sections 4069 or
4212(c) of ERISA.

 

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6.13. Subsidiaries. As of the Closing Date, Borrower has no Subsidiaries other
than those specifically disclosed in Part (a) of Schedule 6.13, and all of the
outstanding Equity Interests in such Subsidiaries have been validly issued (and,
in the case of Subsidiaries that are corporations, are fully paid and
nonassessable) and are owned by a Loan Party in the amounts specified on Part
(a) of Schedule 6.13 free and clear of all Liens other than Permitted Liens. As
of the Closing Date, Borrower has no equity investments in any other corporation
or entity other than those specifically disclosed in Part(b) of Schedule 6.13.

6.14. Margin Regulations; Investment Company Act.

(a) Borrower is not engaged and will not engage, principally or as one of its
important activities, in the business of purchasing or carrying margin stock
(within the meaning of Regulation U issued by the FRB), or extending credit for
the purpose of purchasing or carrying margin stock.

(b) None of Borrower, any Person Controlling Borrower, or any Subsidiary is or
is required to be registered as an “investment company” under the Investment
Company Act of 1940.

6.15. Disclosure. Borrower has disclosed to Agent and Lenders all agreements,
instruments and corporate or other restrictions to which it or any of its
Subsidiaries is subject, and all other matters known to it, that, individually
or in the aggregate, could reasonably be expected to result in a Material
Adverse Effect. No report, financial statement, certificate or other information
furnished (whether in writing or orally) by or on behalf of any Loan Party to
Agent or any Lender in connection with the transactions contemplated hereby and
the negotiation of this Agreement or delivered hereunder or under any other Loan
Document (in each case, 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, Borrower represents only that such
information was prepared in good faith based upon assumptions believed to be
reasonable at the time; and provided further, that projections concerning
volumes attributable to Mineral Interests or wells and production and costs
estimates contained in each Reserve Report are necessarily based upon
professional opinions, estimates and projections, and the Loan Parties do not
warrant that such estimates and projections will ultimately prove to have been
accurate.

6.16. Compliance with Laws. Each Loan Party is in compliance in all material
respects with the requirements of all Laws and all orders, writs, injunctions
and decrees applicable to it or to its properties, except in such instances in
which (a) such requirement of Law or order, writ, injunction or decree is being
contested in good faith by appropriate proceedings diligently conducted or
(b) the failure to comply therewith, either individually or in the aggregate,
could not reasonably be expected to have a Material Adverse Effect.

6.17. Intellectual Property; Licenses, Etc. The Loan Parties own, or possess the
right to use, all of the trademarks, service marks, trade names, copyrights,
patents, patent rights, franchises, licenses and other intellectual property
rights that are reasonably necessary for the operation of their respective
businesses, without material conflict with the rights of any other Person. To
the best knowledge of Borrower, no slogan or other advertising device, product,
process, method, substance, part or other material now employed, or now
contemplated to be employed, by any Loan Party infringes upon any rights held by
any other Person. No claim or litigation regarding any of the foregoing is
pending or, to the best knowledge of Borrower, threatened, which, either
individually or in the aggregate, could reasonably be expected to have a
Material Adverse Effect.

 

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6.18. Rights in Collateral; Priority of Liens. Borrower and each other Loan
Party own the property granted by it as Collateral under the Collateral
Documents, free and clear of any and all Liens except Permitted Liens. Upon the
proper filing of the Oil and Gas Mortgages and UCC financing statements, and the
taking of the other actions required by the Required Lenders, the Liens granted
pursuant to the Collateral Documents will constitute valid and enforceable
first, prior and perfected Liens on the Collateral in favor of Agent for the
ratable benefit of Lenders, subject to Permitted Liens.

6.19. Concerning the Collateral. The Mortgaged Properties are described in and
covered by the Reserve Reports that have previously been delivered to and relied
upon by Agent and Lenders in connection with this Agreement, and the Loan
Parties own at least the decimal percentage Mineral Interest in such properties
as specified in such engineering reports. As of the Closing Date, Borrower has
provided Agent with title information and title data reflecting title to the
Mineral Interests of the Loan Parties in those Mortgaged Properties that
represent at least the Required Reserve Value of the Loan Parties’ Mineral
Interests in those Mortgaged Properties included in the Borrowing Base.

6.20. Swap Contracts and Forward Sales Contracts. As of the Closing Date, except
as set forth on Schedule 6.20, no Loan Party is a party or subject to any Swap
Contract or Forward Sales Contract. Each report delivered pursuant to
Section 7.02(b) sets forth a true and complete list of (i) all Swap Contracts of
Borrower and each Subsidiary, the material terms thereof (including the type,
term, effective date, termination date and notional amounts or volumes), the net
mark to market value thereof, and the counterparty to each such agreement, and
(ii) all Forward Sales Contracts of Borrower and each Subsidiary and material
terms thereof (including the type, term, effective date, sales date and amounts
or volumes covered thereby).

6.21. Engineering Reports. Each Loan Party executing an Oil and Gas Mortgage
owns or will own the net interest and production attributable to the wells and
units evaluated in the most recent Reserve Report it has previously furnished to
Agent, except such as may result from customary provisions of operating
agreements requiring parties thereto to pay the share of costs of a defaulting
party or allowing for the acquisition of the interests of any nonparticipating
parties. The ownership of such properties shall not in the aggregate in any
material respect obligate such Loan Party to bear costs and expenses relating to
the maintenance, development and operations of such properties in an amount
materially in excess of the working interests of such properties as shown in
such Reserve Report. Each Loan Party executing an Oil and Gas Mortgage has paid
all royalties payable under the oil and gas leases to which it is an operator,
except to those contested in accordance with the terms of the applicable joint
operating agreement or otherwise contested in good faith by appropriate
proceedings. Upon delivery of each Reserve Report furnished to Lenders pursuant
to Section 7.02(d) hereof, the statements made in the preceding sentences of
this Section 6.21 shall be true with respect to such Reserve Report.

6.22. Gas Balancing Agreements and Advance Payment Contracts. As of the Closing
Date, (a) there is no Material Gas Imbalance, and (b) the aggregate amount of
all Advance Payments received by any Loan Party under Advance Payment Contracts
that have not been satisfied by delivery of production does not exceed $100,000.

6.23. Warranties and Collateral Documents. All of the warranties of all Loan
Parties set forth in the Collateral Documents, including without limitation
those with respect to performance of obligations under oil, gas or mineral
leases, sale of production and operation of properties mortgaged to Agent, are
true and correct in all material respects.

 

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6.24. Tax Shelter Regulations. Borrower does not intend to treat Loans and/or
Letters of Credit as being a “reportable transaction” (within the meaning of
Treasury Regulation Section 1.6011-4). In the event Borrower determines to take
any action inconsistent with such intention, it will promptly notify Agent
thereof. If Borrower so notifies Agent, Borrower acknowledges that one or more
Lenders may treat its Loans and/or Letters of Credit as part of a transaction
that is subject to Treasury Regulation Section 301.6112-1, and such Lender or
Lenders, as applicable, will maintain the lists and other records required by
such Treasury Regulation.

6.25. OFAC. No Loan Party nor any Affiliate of a Loan Party: (a) is a Sanctioned
Person, (b) owns assets in Sanctioned Entities, or (c) derives its operating
income from investments in, or transactions with Sanctioned Persons or
Sanctioned Entities. None of the proceeds of any Loan will be used or have been
used to fund any operations in, finance any investments or activities in, or
make any payments to, a Sanctioned Person or a Sanctioned Entity. For purposes
of this representation, neither Charles E. Davidson nor any of his Affiliates
shall be considered to be an Affiliate of a Loan Party.

6.26. Solvency. Each Loan Party is, individually and together with its
Subsidiaries on a consolidated basis, Solvent.

ARTICLE VII. AFFIRMATIVE COVENANTS

So long as any Lender shall have any Commitment hereunder, any Loan or other
Obligation hereunder (other than Obligations under Secured Cash Management
Agreements, Lender Swap Contracts, Lender Forward Sales Contracts and contingent
indemnification obligations under the Loan Documents) shall remain unpaid or
unsatisfied, or any Letter of Credit shall remain outstanding, Borrower shall,
and shall (except in the case of the covenants set forth in Sections 7.01, 7.02,
7.03, and 7.12) cause each Subsidiary to:

7.01. Financial Statements. Deliver to Agent a sufficient number of copies for
delivery by Agent to each Lender, in form and detail reasonably satisfactory to
Agent and the Required Lenders:

(a) as soon as available, but in any event within ninety (90) days after the end
of each fiscal year of Borrower, a consolidated and consolidating balance sheet
of Borrower and its Subsidiaries as at the end of such fiscal year, and the
related consolidated and consolidating statements of income or operations,
shareholders’ equity and cash flows for such fiscal year, setting forth in each
case in comparative form the figures for the previous fiscal year, all in
reasonable detail and prepared in accordance with GAAP, audited and accompanied
by a report and opinion of a Registered Public Accounting Firm of reputable
standing reasonably acceptable to the Agent, which report and opinion shall be
prepared in accordance with generally accepted auditing standards and applicable
Securities Laws and shall not be subject to any “going concern” or like
qualification or exception or any qualification or exception as to the scope of
such audit;

(b) as soon as available, but in any event within 45 days after the end of each
fiscal quarter of each fiscal year of Borrower (excluding the last fiscal
quarter of Borrower’s fiscal year), a consolidated balance sheet of Borrower and
its Subsidiaries as at the end of such fiscal quarter, and the related
consolidated statements of income or operations, shareholders’ equity and cash
flows for such fiscal quarter and for the portion of Borrower’s fiscal year then
ended, setting forth in each case in comparative form the figures for the
corresponding fiscal quarter of the previous fiscal year and the corresponding
portion of the previous fiscal year, all in reasonable detail, certified by a
Responsible Officer of Borrower as fairly presenting in all material respects
the financial condition, results of operations, shareholders’ equity and cash
flows of Borrower and its Subsidiaries in accordance with GAAP, subject only to
normal year-end audit adjustments and the absence of footnotes; and

 

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(c) annually by March 31 of each fiscal year of Borrower (including the fiscal
year in which the Maturity Date occurs), a drilling budget, a capital
expenditure budget, a forecast of production and a forecast of cash flow on a
monthly basis for such fiscal year, in form reasonably satisfactory to Agent.

7.02. Certificates; Other Information. Deliver to Agent a sufficient number of
copies for delivery by Agent to each Lender, in form and detail reasonably
satisfactory to Agent and the Required Lenders:

(a) concurrently with the delivery of the financial statements referred to in
Section 7.01(a), a certificate of its independent certified public accountants
certifying such financial statements;

(b) concurrently with the delivery of the financial statements referred to in
Sections 7.01(a) and (b), a duly completed Compliance Certificate signed by a
Responsible Officer of Borrower and (i) a summary of all Swap Contracts then in
existence entered into by any Loan Party, including the material terms thereof
(the type, term, effective date, termination date and notional amounts or
volumes), and the net mark-to-market value therefor, which are not listed on
Schedule 6.20, and (ii) a summary of all Forward Sales Contracts then in
existence entered into by any Loan Party, including the material terms thereof
(the type, term, effective date, sales date and amounts or volumes covered
thereby) which are not listed on Schedule 6.20;

(c) promptly after any request by Agent or any Lender, copies of any detailed
audit reports, final management letters or recommendations submitted to the
board of directors (or the audit committee of the board of directors) of
Borrower by independent accountants in connection with the accounts or books of
Borrower or any Subsidiary, or any audit of any of them;

(d) (i) on or before April 1 of each year beginning in 2011, a Reserve Report
prepared by independent reservoir engineers acceptable to Agent and if Borrower
so elects the separate in-house Reserve Report described in Section 4.02(a),
(ii) on or before October 1 of each year beginning in 2011, a Reserve Report
prepared by Borrower’s own engineers and certified by the President or another
Responsible Officer of Borrower described in Section 4.02(a), and (iii) with
each Reserve Report, a lease operating statement and a schedule comparing the
net revenue interests of each well, lease or unit mortgaged to Agent as
reflected on each applicable Collateral Document, to the net revenue interests
for such properties reflected in the Reserve Report, along with an explanation
as to any material discrepancies between the two net revenue interest
disclosures;

(e) promptly after the same are available, copies of each annual report, proxy
or financial statement or other report or communication sent generally to the
stockholders of Borrower, and copies of all annual, regular, periodic and
special reports and registration statements which Borrower may file or be
required to file with the SEC under Section 13 or 15(d) of the Securities
Exchange Act of 1934, and not otherwise required to be delivered to Agent
pursuant hereto;

(f) promptly after the furnishing thereof, copies of any statement or report
furnished to any holder of debt securities of any Loan Party or any Subsidiary
thereof pursuant to the terms of any indenture, loan or credit or similar
agreement and not otherwise required to be furnished to the Lenders pursuant to
Section 7.01 or any other clause of this Section 7.02;

(g) promptly, and in any event within five Business Days after receipt thereof
by any Loan Party or any Subsidiary thereof, copies of each notice or other
correspondence received from the SEC (or comparable agency in any applicable
non-U.S. jurisdiction) concerning any investigation or possible investigation or
other inquiry by such agency regarding financial or other operational results of
any Loan Party or any Subsidiary thereof; and

 

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(h) promptly, such additional information regarding the business, financial or
corporate affairs of Borrower or any Subsidiary, or compliance with the terms of
the Loan Documents, as Agent or any Lender may from time to time reasonably
request.

Documents required to be delivered pursuant to Section 7.01(a) or (b) or
Section 7.02(e) (to the extent any such documents are filed or are included in
materials otherwise filed with the SEC) may be delivered electronically and if
so delivered, shall be deemed to have been delivered on the date (i) on which
Borrower posts such documents, or provides a link thereto on Borrower’s website
on the Internet at the website address listed on Schedule 11.02; or (ii) on
which such documents are posted on Borrower’s behalf on an Internet or intranet
website, if any, to which each Lender and the Agent have access (whether the SEC
website, a commercial, third-party website or website sponsored by the Agent);
provided that: (i) Borrower shall deliver paper copies of such documents to the
Agent or any Lender that requests Borrower to deliver such paper copies until a
written request to cease delivering paper copies is given by the Agent or such
Lender and (ii) Borrower shall notify the Agent (by telecopier or electronic
mail) of the posting of any such documents and provide to the Agent by
electronic mail electronic versions (i.e., soft copies) of such documents.
Notwithstanding anything contained herein, in every instance Borrower shall be
required to provide paper copies of the Compliance Certificates required by
Section 7.02(b) to the Agent. Except for such Compliance Certificates, the Agent
shall have no obligation to request the delivery or to maintain copies of the
documents referred to above, and in any event shall have no responsibility to
monitor compliance by Borrower with any such request for delivery, and each
Lender shall be solely responsible for requesting delivery to it or maintaining
its copies of such documents.

Borrower hereby acknowledges that (a) Agent will make available to Lenders and
the L/C Issuer materials and/or information provided by or on behalf of Borrower
hereunder (collectively, “Borrower Materials”) by posting Borrower Materials on
IntraLinks or another similar electronic system (the “Platform”) and (b) certain
of the Lenders may be “public-side” Lenders (i.e., Lenders that do not wish to
receive material non-public information with respect to Borrower or its
securities) (each, a “Public Lender”). Borrower hereby agrees that (w) all
Borrower Materials that are to be made available to Public Lenders shall be
clearly and conspicuously marked “PUBLIC” which, at a minimum, shall mean that
the word “PUBLIC” shall appear prominently on the first page thereof; (x) by
marking Borrower Materials “PUBLIC,” Borrower shall be deemed to have authorized
Agent, the L/C Issuer and the Lenders to treat such Borrower Materials as not
containing any material non-public information with respect to Borrower or its
securities for purposes of United States Federal and state securities laws
(provided, however, that to the extent such Borrower Materials constitute
Information, they shall be treated as set forth in Section 11.07); (y) all
Borrower Materials marked “PUBLIC” are permitted to be made available through a
portion of the Platform designated “Public Side Information;” and (z) Agent and
Arranger shall be entitled to treat any Borrower Materials that are not marked
“PUBLIC” as being suitable only for posting on a portion of the Platform not
designated “Public Side Information”.

7.03. Notices. (a) Promptly notify Agent and each Lender:

(i) of the occurrence of any Default;

(ii) of any matter that has resulted or could reasonably be expected to result
in a Material Adverse Effect, including (i) breach or non-performance of, or any
default under, a Contractual Obligation of Borrower or any Subsidiary; (ii) any
dispute, litigation, investigation, proceeding or suspension between Borrower or
any Subsidiary and any Governmental Authority; or (iii) the commencement of, or
any material development in, any litigation or proceeding affecting Borrower or
any Subsidiary, including pursuant to any applicable Environmental Laws;

(iii) of the occurrence of any ERISA Event; and

 

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(iv) of any material change in accounting policies or financial reporting
practices by any Loan Party.

Each notice pursuant to this Section shall be accompanied by a statement of a
Responsible Officer of Borrower setting forth details of the occurrence referred
to therein and stating what action Borrower has taken and proposes to take with
respect thereto. Each notice pursuant to Section 7.03(a)(i) shall describe with
particularity any and all provisions of this Agreement and any other Loan
Document that have been breached.

(b) Give any such notices as may be required by Section 4.03(b), as applicable.

7.04. Payment of Obligations. Pay and discharge as the same shall become due and
payable, all its obligations and liabilities, including (a) all tax liabilities,
assessments and governmental charges or levies upon it or its properties or
assets, unless the same are being contested in good faith by appropriate
proceedings diligently conducted and adequate reserves in accordance with GAAP
are being maintained by Borrower or such Subsidiary, or such liability is not
yet delinquent; and (b) all lawful claims which, if unpaid, would by law become
a Lien upon its property unless the same are being contested in good faith by
appropriate proceedings diligently conducted and adequate reserves in accordance
with GAAP are being maintained by Borrower or such Subsidiary.

7.05. Preservation of Existence, Etc. (a) Preserve, renew and maintain in full
force and effect its legal existence and good standing under the Laws of the
jurisdiction of its organization except in a transaction permitted by
Section 8.04 or 8.05; (b) take all reasonable action to maintain all rights,
privileges, permits, licenses and franchises necessary or desirable in the
normal conduct of its business, except to the extent that failure to do so could
not reasonably be expected to have a Material Adverse Effect; and (c) preserve
or renew all of its registered patents, trademarks, trade names and service
marks, the non-preservation of which could reasonably be expected to have a
Material Adverse Effect.

7.06. Maintenance of Properties. (a) Maintain, preserve and protect all of its
material properties and equipment necessary in the operation of its business in
good working order and condition, ordinary wear and tear excepted; (b) make all
necessary repairs thereto and renewals and replacements thereof except where the
failure to do so could not reasonably be expected to have a Material Adverse
Effect; and (c) use the standard of care typical in the industry in the
operation and maintenance of its facilities.

7.07. Maintenance of Insurance. (a) Maintain with financially sound and
reputable insurance companies not Affiliates of Borrower, insurance with respect
to its properties and business against loss or damage of the kinds customarily
insured against by Persons engaged in the same or similar business, of such
types and in such amounts (after giving effect to any self-insurance compatible
with the following standards; provided the Loan Parties may not self-insure
against, and must have policies of insurance for, business interruption and
named windstorm coverage) as are customarily carried under similar circumstances
by such other Persons; and (b) use commercially reasonable efforts to cause the
operator of its oil and gas properties to keep its oil and gas properties
insured at all times against risks and to the extent that like properties are
customarily insured by other operators engaged in the same or similar
activities. All such insurance policies maintained by the Loan Parties (but not
those provided by other operators) shall (1) provide that Agent shall receive
prompt notice of any claims filed thereunder; and (2) contain a standard
mortgagee clause in favor of Agent with loss payable for all claims in excess of
$25,000 to Agent; and (3) provide that no adverse alteration or cancellation
thereof shall be effective as against Agent until thirty (30) days after written
notice of such alteration or cancellation is given to Agent. Borrower shall
deliver to Agent certificates of insurance on the Closing Date and thereafter as
and when requested by Agent.

 

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7.08. Compliance with Laws. Comply in all material respects with the
requirements of all Laws and all orders, writs, injunctions and decrees
applicable to it or to its business or property, except in such instances in
which (a) such requirement of Law or order, writ, injunction or decree is being
contested in good faith by appropriate proceedings diligently conducted; or
(b) the failure to comply therewith could not reasonably be expected to have a
Material Adverse Effect.

7.09. Books and Records. (a) Maintain proper books of record and account, in
which full, true and correct entries in conformity with GAAP consistently
applied shall be made of all material financial transactions and matters
involving the material assets and business of Borrower or such Subsidiary, as
the case may be; and (b) maintain such books of record and account in material
conformity with all applicable requirements of any Governmental Authority having
regulatory jurisdiction over Borrower or such Subsidiary, as the case may be.

7.10. Inspection Rights. Permit representatives and independent contractors of
Agent and each Lender to visit and inspect any of its properties, to examine its
corporate, financial and operating records, and make copies thereof or abstracts
therefrom, and to discuss its affairs, finances and accounts with its directors,
officers, and independent public accountants, if no Event of Default exists, at
the expense of Borrower for the first of such visits during any calendar year
and at such reasonable times during normal business hours and as often as may be
reasonably desired, upon reasonable advance notice to Borrower; provided,
however, that when an Event of Default exists Agent or any Lender (or any of
their respective representatives or independent contractors) may do any of the
foregoing at the expense of Borrower at any time during normal business hours
and without advance notice; and provided further, that any such inspections of
foreign properties (other than foreign Mortgaged Properties) and Foreign
Subsidiaries shall be permitted only if reasonably necessary. With respect to
properties or wells not operated by a Loan Party, Borrower’s obligation shall be
limited to making reasonable efforts to provide such access subject to
Contractual Obligations applicable to Loan Parties related to such access by
Loan Parties or their representatives.

7.11. Use of Proceeds. Use the proceeds of Loans solely (a) to provide working
capital, (b) to fund drilling expenses, (c) to fund general oil and gas business
activities, (d) to finance permitted acquisitions of oil and gas properties and
other assets related to the exploration, production and development of oil and
gas properties, and (e) to refinance existing indebtedness owed to Bank of
America, N.A.

7.12. Financial Covenants.

(a) Funded Debt to EBITDAX Ratio. Maintain on a consolidated basis a ratio of
Funded Debt to EBITDAX not exceeding 2.0 to 1.0.

(b) Interest Coverage Ratio. Maintain on a consolidated basis a ratio of EBITDAX
to Interest Expense of at least 3.0 to 1.0.

These ratios will be calculated at the end of each fiscal quarter using the
results of the twelve-month period ending with that fiscal quarter.

7.13. Title Data. In addition to the other title information requirements of
this Agreement, upon the request of Required Lenders, cause to be delivered to
Agent such title opinions and other title information regarding title to Mineral
Interests in oil and gas properties owned by Borrower and any other Loan Party
as are appropriate to determine the status thereof.

 

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7.14. Additional Subsidiaries. Notify Agent at the time that any Person becomes
a Domestic Subsidiary, and promptly thereafter (and in any event within thirty
(30) days), cause such Domestic Subsidiary to comply with the provisions of
Section 2.13 by (a) executing and delivering to Agent a counterpart of the
Guaranty, (b) executing and delivering to Agent such Collateral Documents as
Agent shall deem appropriate for granting Agent a Lien, subject to Permitted
Liens, against all of its assets to the extent required by Section 2.13, and
(c) delivering to Agent documents of the types referred to in clauses (iii) and
(iv) of Section 5.01(a) and favorable opinions of counsel to such Person (which
shall cover, among other things, the legality, validity, binding effect and
enforceability of the documentation referred to in clause (a)), all in form,
content and scope satisfactory to Agent.

7.15. Required Reserve Value. Comply at all times with the Required Reserve
Value as determined in Section 2.13(a).

7.16. Further Assurances. Make, execute or endorse, acknowledge and deliver or
file or cause the same to be done, all such vouchers, invoices, notices,
certifications and additional agreements, undertakings, conveyances, deeds of
trust, mortgages, assignments, financing statements or other assurances, and
take any and all such other actions as Agent may from time to time deem
reasonably necessary or appropriate in connection with this Agreement or any of
the other Loan Documents (i) to cure any defects in the Loan Documents, or
(ii) to evidence further or more fully describe, perfect or realize on the
Collateral, or (iii) to perfect, protect or preserve any liens pursuant to any
of the Loan Documents.

ARTICLE VIII. NEGATIVE COVENANTS

So long as any Lender shall have any Commitment hereunder, any Loan or other
Obligation hereunder (other than Obligations under Secured Cash Management
Agreements, Lender Swap Contracts, Lender Forward Sales Contracts and contingent
indemnification obligations under the Loan Documents) shall remain unpaid or
unsatisfied, or any Letter of Credit shall remain outstanding, Borrower agrees
that it shall not, and, as applicable, shall not permit any Subsidiary to,
directly or indirectly:

8.01. Liens. Create, incur, assume or suffer to exist any Lien upon any of its
property, assets or revenues, whether now owned or hereafter acquired, other
than the following (collectively, the “Permitted Liens”):

(a) Liens securing the Obligations pursuant to any Loan Document;

(b) Liens existing on the date hereof and listed on Schedule 8.01 and any
renewals or extensions thereof, provided that (i) the property covered thereby
is not changed, (ii) the amount secured or benefited thereby is not increased
except as contemplated by Section 8.03(b), (iii) the direct or any contingent
obligor with respect thereto is not changed, and (iv) and any renewal or
extension of the obligations secured or benefited thereby is permitted by
Section 8.03(b);

(c) Liens for taxes not yet delinquent or which are being contested in good
faith and by appropriate proceedings diligently conducted, if adequate reserves
with respect thereto are maintained on the books of the applicable Person in
accordance with GAAP;

(d) carriers’, warehousemen’s, mechanics’, materialmen’s, repairmen’s,
operator’s, landlord’s, customs’ or other like Liens arising in the ordinary
course of business which are not overdue for a period of more than thirty
(30) days or which are being contested in good faith and by appropriate
proceedings diligently conducted, if adequate reserves with respect thereto are
maintained on the books of the applicable Person;

 

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(e) pledges or deposits in the ordinary course of business in connection with
workers’ compensation, unemployment insurance and other social security
legislation, other than any Lien imposed by ERISA;

(f) deposits to secure the performance of bids, trade contracts and leases
(other than Indebtedness), statutory obligations, surety and appeal bonds,
performance bonds and other obligations of a like nature incurred in the
ordinary course of business;

(g) easements, rights-of-way, surface leases and other similar rights in respect
of surface operations, restrictions and other similar encumbrances affecting
real property which, in the aggregate, are not substantial in amount, and are
customary and usual in the oil and gas industry, and which do not in any case
materially detract from the value or operation of the property subject thereto
or materially interfere with the ordinary conduct of the business of the
applicable Person;

(h) Liens securing judgments for the payment of money not constituting an Event
of Default under Section 9.01(h);

(i) Liens securing Indebtedness permitted under Section 8.03(f); provided that
(i) such Liens do not at any time encumber any property other than the property
financed by such Indebtedness and additions and accessions thereto and proceeds
thereof and (ii) the Indebtedness secured thereby does not exceed the cost or
fair market value, whichever is lower, of the property being acquired on the
date of acquisition;

(j) contracts, agreements, lease provisions, defects and irregularities which
were in effect when the properties were acquired and which were not such as to
materially interfere with the operation, value or use thereof;

(k) royalties, overriding royalties, reversionary interests, production payments
and similar lease burdens which are granted in the ordinary course of business
in the oil and gas industry and which are deducted in the calculation of
discounted present value in the Reserve Reports delivered to Agent hereunder;

(l) sale contracts, joint operating agreements, or other arrangements for the
exploration, development, production, transportation, gathering, processing or
sale of hydrocarbons which would not (when considered cumulatively with the
matters discussed in clause (k) immediately preceding) deprive Borrower of any
material right in respect of Borrower’s assets or properties;

(m) Gas Balancing Agreements; provided that the amount of all gas imbalances
known to any Responsible Officer of a Loan Party and the amount of all
production which has been paid for but not delivered shall have been disclosed
or otherwise taken into account in the Reserve Reports delivered to the Agent
hereunder;

(n) Liens to secure plugging and abandonment obligations, including the Texaco
Lien;

(o) Liens expressly permitted by the Collateral Documents;

(p) Liens securing the financing of insurance premiums; and

(q) Liens relating to the establishment of depository relations with banks in
the ordinary course of business.

 

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8.02. Investments. Make any Investments, except:

(a) Investments held by Borrower or such Subsidiary in the form of cash
equivalents or short-term marketable debt securities;

(b) Investments of Borrower or any Subsidiary in any Loan Party;

(c) Investments consisting of extensions of credit in the nature of accounts
receivable, notes receivable, extensions of credit to customers and suppliers,
prepaid expenses, deposits and endorsements of negotiable instruments for
collection arising in the ordinary course of business, and Investments received
in satisfaction or partial satisfaction thereof from financially troubled
account debtors to the extent reasonably necessary in order to prevent or limit
loss;

(d) Guarantees permitted by Section 8.03;

(e) Investments consisting of (i) temporary investments in securities of the
United States or Canada having maturities not in excess of one (1) year,
(ii) demand deposits and certificates of deposit issued by any Lender,
(iii) readily marketable commercial paper rated “A-1” by Standard & Poor’s
Corporation (or similar rating by any similar organization which rates
commercial paper), (iv) readily marketable direct obligations of any state of
the United States of America or any province of Canada or any political
subdivision of any such state or province given on the date of such investment a
credit rating of at least AA by Standard & Poor’s Corporation due within one
year from the acquisition thereof, (v) repurchase agreements with respect to the
investments referred to in the preceding clauses with any bank or trust company
organized under the Laws of the United States of America or any province of
Canada or any state or province thereof and having combined capital, surplus and
undivided profits of not less than $500,000,000 (as of the date of its most
recent financial statements) and having deposits that have received one of the
two highest ratings obtainable from Standard & Poor’s Corporation,
(vi) eurodollar time accounts or eurodollar certificates of deposit each with
any bank or trust company organized under the Laws of the United States of
America or any province of Canada or any state or province thereof having
combined capital, surplus and undivided profits of not less than $500,000,000
(as of the date of its most recent financial statements) and having deposits
that have received one of the two highest ratings obtainable from Standard &
Poor’s Corporation, (vii) demand or timed deposits not to exceed $1,000,000 in
the aggregate outstanding at any time with banks or other financial institutions
in countries (other than the United States or Canada) where a Loan Party has
assets or operations, and (viii) such other Investments as may be approved by
Agent;

(f) Investments in direct ownership interests in additional Mineral Interests,
wells, gas gathering systems or other field facilities including but not limited
to crew boats and other vessels, shore facilities, storage barges, seismic data
and surveys, in each case related to such additional Mineral Interests or wells
or to existing Mineral Interests or wells, or related to farm-out, farm-in,
participation agreements, joint operating agreements, or area of mutual
interests agreements or other similar arrangements which are usual and customary
in the oil and gas exploration and production business; provided that
Investments in non-producing oil and gas properties shall not exceed $5,000,000
in the aggregate during any calendar year;

(g) Investments in the Designated Investment Entities so long as at the time of
any such Investment (i) no Default has occurred or results therefrom, and
(ii) the pro forma Applicable Usage Level is 90% or less;

(h) Investments made with cash proceeds received from the sale of Borrower’s
Equity Interests; and

 

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(i) any other Investments not to exceed $500,000 in the aggregate at any time.

8.03. Indebtedness. Create, incur, assume or suffer to exist any Indebtedness,
except:

(a) Indebtedness under the Loan Documents;

(b) Indebtedness outstanding on the date hereof and listed on Schedule 8.03 and
any refinancings, refundings, renewals or extensions thereof; provided that
(i) the amount of such Indebtedness is not increased at the time of such
refinancing, refunding, renewal or extension except by an amount equal to a
reasonable premium or other reasonable amount paid, accrued and unpaid interest,
and fees and expenses reasonably incurred, in connection with such refinancing
and by an amount equal to any existing commitments unutilized thereunder and
(ii) the terms relating to principal amount, amortization, maturity, collateral
(if any) and subordination (if any), and other material terms taken as a whole,
of any such refinancing, refunding, renewing or extending Indebtedness, and of
any agreement entered into and of any instrument issued in connection therewith,
are no less favorable in any material respect to the Loan Parties or Lenders
than the terms of any agreement or instrument governing the Indebtedness being
refinanced, refunded, renewed or extended;

(c) Guarantees of Borrower or any Subsidiary in respect of Indebtedness
otherwise permitted hereunder of Borrower or any wholly-owned Subsidiary;

(d) obligations (contingent or otherwise) of Borrower or any Subsidiary existing
or arising under any Swap Contract, provided that (i) such obligations are (or
were) entered into by such Person in the ordinary course of business for the
purpose of directly mitigating risks associated with liabilities, commitments,
investments, assets, or property held or reasonably anticipated by such Person,
or changes in the value of securities issued by such Person, and not for
purposes of speculation; (ii) such Swap Contract does not contain any provision
exonerating the non-defaulting party from its obligation to make payments on
outstanding transactions to the defaulting party; and (iii) such Swap Contract
otherwise complies with the provisions of Section 8.09;

(e) obligations (contingent or otherwise) of Borrower or any Subsidiary existing
or arising under any Forward Sales Contract, provided that (i) such obligations
are (or were) entered into by such Person in the ordinary course of business for
the purposes of directly mitigating risks associated with sales of hydrocarbons
and such obligations are unsecured; and (ii) such Forward Sales Contract
otherwise complies with the provisions of Section 8.08;

(f) Indebtedness in respect of capital leases, Synthetic Lease Obligations and
purchase money obligations for fixed or capital assets within the limitations
set forth in Section 8.01(i) and refinancings, refundings, renewals and
extensions thereof; provided, however, that the aggregate amount of all such
Indebtedness at any one time outstanding shall not exceed $3,000,000;

(g) Indebtedness associated with bonds or other surety obligations required by
Governmental Authorities in connection with the operation of the business of the
Loan Parties;

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

(i) Indebtedness representing deferred compensation to employees of Borrower or
any of its Subsidiaries incurred in the ordinary course of business;

 

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(j) Indebtedness consisting of Cash Management Obligations and other
Indebtedness in respect of net services, overdraft protections and similar
arrangements, in each case (x) in connection with cash managing and deposit
accounts and (y) incurred in the ordinary course of business;

(k) intercompany Indebtedness arising out of an Investment permitted under
Section 8.02 so long as such Investment is in or with a Guarantor;

(l) obligations under Advance Payment Contracts so long as the production
covered thereby has not been included in the most recent Reserve Report
furnished to Agent;

(m) oil and gas balancing obligations incurred in the ordinary course of
business;

(n) Indebtedness consisting of the financing of insurance premiums incurred in
the ordinary course of business; and

(o) other Indebtedness not to exceed $1,000,000 in the aggregate at any time
outstanding.

8.04. Fundamental Changes. Merge, dissolve, liquidate, consolidate with or into
another Person, or Dispose of (whether in one transaction or in a series of
transactions) all or substantially all of its assets (whether now owned or
hereafter acquired) to or in favor of any Person, except that, so long as no
Default exists or would result therefrom:

(a) any Subsidiary may merge with (i) Borrower, provided that Borrower shall be
the continuing or surviving Person, or (ii) any one or more other Subsidiaries,
provided that when any wholly-owned Domestic Subsidiary is merging with another
Subsidiary, the wholly-owned Subsidiary shall be the continuing or surviving
Person; and

(b) any Domestic Subsidiary may Dispose of all or substantially all of its
assets (upon voluntary liquidation or otherwise) to Borrower or to another
Domestic Subsidiary.

8.05. Dispositions. Make any Disposition or enter into any agreement to make any
Disposition, except:

(a) Dispositions of obsolete or worn out property, whether now owned or
hereafter acquired, in the ordinary course of business;

(b) Dispositions of equipment to the extent that (i) such equipment is exchanged
for credit against the purchase price of similar replacement equipment or
(ii) the proceeds of such Disposition are promptly applied to the purchase price
of such replacement equipment;

(c) Dispositions of property by Borrower or any Subsidiary to Borrower or to a
wholly-owned Subsidiary; provided that if the transferor of such property is a
Guarantor, the transferee thereof must either be Borrower or a Guarantor;

(d) Dispositions permitted by Sections 8.04 and 8.06;

(e) Sales of hydrocarbons, including pursuant to Advance Payment Contracts
permitted by this Agreement, Forward Sales Contracts and Swap Contracts, in the
ordinary course of business;

 

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(f) Dispositions consisting of any compulsory pooling or unitization ordered by
a Governmental Authority with jurisdiction over each Loan Party’s Mineral
Interests in its oil and gas properties;

(g) Dispositions in connection with farm-outs participation or other similar
agreements in the ordinary course of business of undeveloped acreage or
undrilled depths and assignments in connection therewith;

(h) Asset Dispositions; provided that (1) all of the consideration received in
respect to such Asset Disposition shall be cash or oil and gas properties to be
included in the Borrowing Base pursuant to Section 4.08, (2) the consideration
received shall be equal to or greater than the fair market value thereof (as
reasonably determined by the board of directors or a Responsible Officer of
Borrower and if requested by Agent, Borrower shall deliver a certificate of a
Responsible Officer of Borrower certifying to that effect), and (3) to the
extent that the Recognized Value of the aggregate of all Asset Dispositions in
any calendar year exceeds 5% of the then effective Borrowing Base, then the
Borrowing Base shall be reduced by the amount of such excess (by way of example,
if the Borrowing Base is $50,000,000 on September 1 and Asset Dispositions
having a Recognized Value of $1,000,000 occur on February 1, May 1 and
September 1, then on September 1, the Borrowing Base would automatically reduce
by $500,000 ($3,000,000 - $2,500,000 = $500,000));

(i) leases, subleases, licenses or sublicenses of property other than Mortgaged
Properties in the ordinary course of business and which do not materially
interfere with the value of such property;

(j) transfers of property subject to any condemnation or eminent domain (or deed
in lieu thereof) upon receipt of the casualty proceeds of such event;

(k) Dispositions in the ordinary course of business consisting of the
abandonment of intellectual property rights which, in the reasonable good faith
determination of Borrower, are not material to the conduct of the business of
Borrower and its Subsidiaries;

(l) Dispositions of Investments in the Designated Investment Entities to the
extent required by, or made pursuant to buy/sell arrangements between joint
venture parties set forth in, joint venture arrangements and similar binding
agreements;

(m) Dispositions of overdue accounts receivable arising in the ordinary course
of business, but only in connection with the collection or compromise thereof;

(n) Dispositions of cash equivalent Investments in the ordinary course of
business;

(o) Dispositions of oil and gas properties not covered in the most recent
Reserve Report furnished to Agent; or

(p) voluntary terminations of Swap Contracts and Forward Sales Contracts,
subject to the provisions of Section 4.03(b);

provided, however, that (1) any Disposition pursuant to clauses (e), (g), (h),
(n) and (o) shall be for fair market value, and (2) no Disposition pursuant to
clauses (d), (f), (g), (h), (l) and (o) may be made if a Default shall exist or
would result from such Disposition.

 

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8.06. Restricted Payments. Declare or make, directly or indirectly, any
Restricted Payment, or incur any obligation (contingent or otherwise) to do so,
except that, so long as no Default shall have occurred and be continuing at the
time of any action described below or would result therefrom:

(a) each Subsidiary may make Restricted Payments to Borrower and Guarantors;

(b) Borrower and each Subsidiary may declare and make dividend payments or other
distributions payable solely in the common stock or other common Equity
Interests of such Person;

(c) Borrower and each Subsidiary may purchase, redeem or otherwise acquire
Equity Interests issued by it with the proceeds received from the substantially
concurrent issue of new shares of its common stock or other common Equity
Interests;

(d) cashless exercise of existing warrants in an amount not to exceed $50,000;

(e) each Subsidiary may issue Equity Interests to Borrower or another Subsidiary
provided the parties comply with Section 2.13(d) and (e), as applicable; and

(f) any Subsidiary may issue and sell directors’ qualifying shares and shares
required by applicable Law to be held by a Person other than Borrower or a
Guarantor.

8.07. Change of Operator. Cease for any reason to be the operator of (i)any of
the Mortgaged Properties which it is operating as of the Closing Date, and
(ii) any properties that it subsequently acquires and takes over operations.

8.08. Forward Sales Contracts. Enter into any Forward Sales Contract, except a
Forward Sales Contract which meets the following parameters: (1) no such
contract has a term of more than 36 months; (2) the aggregate monthly production
covered by all such contracts for any single month, plus the aggregate of
production under all Swap Contracts for any single month, do not in the
aggregate exceed 75% of the aggregate Projected Oil and Gas Production of
Borrower and its Subsidiaries anticipated to be sold in the ordinary course of
business for such month; (3) no such contract requires Borrower to put up any
money, assets, or other security against the event of its nonperformance prior
to actual default by Borrower in performing its obligations thereunder; (4) no
such contract (other than a Lender Forward Sales Contract)shall be secured, and
(5) each such contract is with (i) a Lender or an Affiliate of a Lender or
(ii) an unsecured counterparty who at the time of the contract maintains a
minimum debt rating of BBB or Baa2 as determined either by Standard & Poor’s
Corporation or Moody’s Investors Service, Inc. and is otherwise acceptable to
Agent.

8.09. Swap Contracts. Enter into any Swap Contract, except:

(a) Commodity Contracts. Contracts entered into with the purpose and effect of
fixing prices on oil and gas expected to be produced by Borrower, provided that
at all times (1) no such contract fixes a price for a term of more than 36
months; (2) the aggregate monthly production covered by all such contracts (as
determined, in the case of contracts that are not settled on a monthly basis, by
a monthly proration acceptable to Lender) for any single month, plus the
aggregate of production covered by all Forward Sales Contracts for any single
month, do not in the aggregate exceed 75% of Borrower’s aggregate Projected Oil
and Gas Production anticipated to be sold in the ordinary course of Borrower’s
business for such month; (3) no such contract (other than a Lender Swap
Contract) requires Borrower to put up money, assets, or other security against
the event of its nonperformance prior to actual default by Borrower in
performing its obligations thereunder; and (4) each such contract is with (i) a
Lender or an Affiliate of a Lender or (ii) an unsecured counterparty who at the
time of the contract maintains a minimum debt rating of BBB or Baa2 as
determined either by Standard & Poor’s Corporation or Moody’s Investors Service,
Inc. and is otherwise acceptable to Agent.

 

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(b) Interest Rate Contracts. Contracts entered into by Borrower with the purpose
and effect of fixing interest rates on a principal amount of indebtedness of
Borrower that is accruing interest at a variable rate, provided that (1) the
term does not extend past the Maturity Date, (2) the aggregate notional amount
of such contracts never exceeds 75% of the anticipated outstanding principal
balance of the indebtedness to be hedged by such contracts or an average of such
principal balances calculated by using a generally accepted method of matching
interest swap contracts to declining principal balances, (3) the floating rate
index of each such contract generally matches the index used to determine the
floating rates of interest on the corresponding indebtedness to be hedged by
such contract, (4) no such contract (other than a Lender Swap Contract) requires
Borrower to put up money, assets, or other security against the event of its
nonperformance prior to actual default by Borrower in performing its obligations
thereunder, and (5) each such contract is with (i) a Lender or an Affiliate of a
Lender or (ii) an unsecured counterparty who at the time of the contract
maintains a minimum debt rating of BBB or Baa2 as determined either by
Standard & Poor’s Corporation or Moody’s Investors Service, Inc. and is
otherwise acceptable to Agent.

(c) Currency Swaps. Contracts entered into by Borrower with the purpose and
effect of fixing the rate of exchange between two currencies with respect to the
amount of the payments to be made or received by Borrower or a Subsidiary in one
of such currencies pursuant to an agreement, provided that (1) the term does not
extend past the Maturity Date, (2) no such contract (other than a Lender Swap
Contract) requires Borrower to put up money, assets, or other security against
the event of its nonperformance prior to actual default by Borrower in
performing its obligations thereunder, and (3) each such contract is with (i) a
Lender or an Affiliate of a Lender or (ii) an unsecured counterparty who at the
time of the contract maintains a minimum debt rating of BBB or Baa2 as
determined either by Standard & Poor’s Corporation or Moody’s Investors Service,
Inc. or is otherwise acceptable to Agent.

8.10. Change in Nature of Business. Engage in any material line of business
substantially different from those lines of business conducted by Borrower and
its Subsidiaries on the date hereof or any business substantially related or
incidental thereto.

8.11. Transactions with Affiliates. Enter into any transaction of any kind with
any Affiliate of Borrower (other than Borrower or any wholly-owned Subsidiary of
Borrower), whether or not in the ordinary course of business, other than on fair
and reasonable terms that are substantially as favorable to Borrower or such
Subsidiary as would be obtainable by Borrower or such Subsidiary at the time in
a comparable arm’s length transaction with a Person other than an Affiliate.

8.12. Burdensome Agreements. Enter into any Contractual Obligation (other than
this Agreement or any other Loan Document) that limits the ability (i) of any
Domestic Subsidiary to make Restricted Payments to Borrower or any Guarantor, or
(ii) of any Domestic Subsidiary to Guarantee the Indebtedness of Borrower, in
each case other than any such Contractual Obligation relating to, or arising or
existing by reason of, (a) provisions in corporate charters, bylaws,
stockholders agreements, partnership agreements, limited liability agreement,
and similar agreements, (b) applicable Law or any applicable rule, regulation or
order, (c) encumbrances and restrictions contained in contracts entered into in
the ordinary course of business, not relating to any Indebtedness, and that do
not, individually or in the aggregate, detract from the value of property or
assets of Borrower or any Guarantor or the ability of Borrower or such Guarantor
to realize such value, or to make any distributions relating to such property or
assets in each case in any material respect, or (d) as required by any
regulatory authority having jurisdiction over Borrower or any Domestic
Subsidiary or any of the their businesses.

 

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8.13. Use of Proceeds. Use the proceeds of any Credit Extension, whether
directly or indirectly, and whether immediately, incidentally or ultimately, to
purchase or carry margin stock (within the meaning of Regulation U of the FRB)
or to extend credit to others for the purpose of purchasing or carrying margin
stock or to refund indebtedness originally incurred for such purpose.

8.14. Gas Balancing Agreements and Advance Payment Contracts. (a) Incur, become
or remain liable for, or permit any other Loan Party to incur, become or remain
liable for, (i) any Material Gas Imbalance, or (ii) Advance Payments under
Advance Payment Contracts which are to be satisfied by delivery of production in
excess of $100,000 in the aggregate, or (b) include any production sold pursuant
to an Advance Payment Contract in any Reserve Report furnished to Agent.

8.15. Accounting Changes. Make or permit any material change in its accounting
policies or reporting practices, except as may be required or permitted by GAAP.

ARTICLE IX. EVENTS OF DEFAULT AND REMEDIES

9.01. Events of Default. Any of the following shall constitute an Event of
Default:

(a) Non-Payment. Borrower or any other Loan Party fails to pay (i) when and as
required to be paid herein, any amount of principal of any Loan or any L/C
Obligation, or (ii) within three Business Days after the same becomes due, any
interest on any Loan or on any L/C Obligation, or any fee due hereunder, or
(iii) within five Business Days after the same becomes due, any other amount
payable hereunder or under any other Loan Document; or

(b) Specific Covenants. Borrower fails to perform or observe any term, covenant
or agreement contained in any of Section 7.01, 7.02(b), 7.03, 7.05, 7.10, 7.11
or 7.12 or Article VIII; or

(c) Other Defaults. (i) Any Loan Party fails to perform or observe any other
covenant or agreement (not specified in subsection (a) or (b) above) contained
in this Agreement on its part to be performed or observed and such failure
continues unremedied for thirty (30) days after notice thereof from Agent or
Agent is notified of such Default or should have been so notified pursuant to
the provisions of Section 7.03(a), whichever is earlier; or (ii) any Loan Party
fails to perform or observe any other covenant or agreement (not specified in
subsection (a) or (b) above or in the preceding clause (i) of this subsection
(c)) contained in any other Loan Document on its part to be performed or
observed and such failure continues unremedied beyond any grace or cure period
therein provided; or

(d) Representations and Warranties. Any representation, warranty, certification
or statement of fact made or deemed made by or on behalf of Borrower or any
other Loan Party herein, in any other Loan Document, or in any document
delivered in connection herewith or therewith shall be materially incorrect or
misleading when made or deemed made; or

(e) Cross-Default. Borrower or any Subsidiary (A) fails to make any payment when
due (whether by scheduled maturity, required prepayment, acceleration, demand,
or otherwise) in respect of any Indebtedness or Guarantee (other than
Indebtedness hereunder and Indebtedness under Swap Contracts and Forward Sales
Contracts) having an aggregate principal amount (including undrawn committed or
available amounts and including amounts owing to all creditors under any
combined or syndicated credit arrangement) of more than $3,000,000, or (B) fails
to observe or perform any other agreement or condition relating to any such
Indebtedness or Guarantee or contained in any instrument or agreement
evidencing, securing or relating thereto, or any other event occurs, the effect
of which default or other event is to cause, or to permit the holder or holders
of such Indebtedness or the beneficiary or beneficiaries of such Guarantee (or a
trustee or agent on behalf of such holder or holders or beneficiary or
beneficiaries) to cause, with the giving of notice if required, such
Indebtedness to be demanded or to become due or to be repurchased, prepaid,
defeased or redeemed (automatically or otherwise), or an offer to repurchase,
prepay, defease or redeem such Indebtedness to be made, prior to its stated
maturity, or such Guarantee to become payable or cash collateral in respect
thereof to be demanded; or

 

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(f) Insolvency Proceedings, Etc. Any Loan Party or any of its Subsidiaries
institutes or consents to the institution of any proceeding under any Debtor
Relief Law, or makes an assignment for the benefit of creditors; or applies for
or consents to the appointment of any receiver, trustee, custodian, conservator,
liquidator, rehabilitator or similar officer for it or for all or any material
part of its property; or any receiver, trustee, custodian, conservator,
liquidator, rehabilitator or similar officer is appointed without the
application or consent of such Person and the appointment continues undischarged
or unstayed for sixty (60) calendar days; or any proceeding under any Debtor
Relief Law relating to any such Person or to all or any material part of its
property is instituted without the consent of such Person and continues
undismissed or unstayed for sixty (60) calendar days, or an order for relief is
entered in any such proceeding; or

(g) Inability to Pay Debts; Attachment. (i) Borrower or any Subsidiary becomes
unable or admits in writing its inability or fails generally to pay its debts as
they become due, or (ii) any writ or warrant of attachment or execution or
similar process is issued or levied against all or any material part of the
property of any such Person and is not released, vacated or fully bonded within
thirty (30) days after its issue or levy; or

(h) Judgments. There is entered against Borrower or any Subsidiary (i) one or
more final judgments or orders for the payment of money in an aggregate amount
exceeding $3,000,000 (to the extent not covered by independent third-party
insurance as to which the insurer does not dispute coverage), or (ii) any one or
more non-monetary final judgments that have, or could reasonably be expected to
have, individually or in the aggregate, a Material Adverse Effect and, in either
case, (A) enforcement proceedings are commenced by any creditor upon such
judgment or order, or (B) there is a period of 10 consecutive days during which
a stay of enforcement of such judgment, by reason of a pending appeal or
otherwise, is not in effect; or

(i) ERISA. (i) An ERISA Event occurs with respect to a Pension Plan or
Multiemployer Plan which has resulted or could reasonably be expected to result
in liability of Borrower under Title IV of ERISA to the Pension Plan,
Multiemployer Plan or the PBGC in an aggregate amount in excess of $3,000,000,
or (ii) Borrower or any ERISA Affiliate fails to pay when due, after the
expiration of any applicable grace period, any installment payment with respect
to its withdrawal liability under Section 4201 of ERISA under a Multiemployer
Plan in an aggregate amount in excess of $3,000,000; or

(j) Invalidity of Loan Documents. Any Loan Document or any provision thereof, at
any time after its execution and delivery and for any reason other than as
expressly permitted hereunder or thereunder or satisfaction in full of all the
Obligations, ceases to be in full force and effect; or any Loan Party contests
in any manner the validity or enforceability of any Loan Document or any
provision thereof (other than manifest error); or any Loan Party denies that it
has any or further liability or obligation under any Loan Document, or purports
to revoke, terminate or rescind any Loan Document or any provision thereof; or

(k) Swap Contracts. There shall occur under any Swap Contract an Early
Termination Date (as defined in such Swap Contract) resulting from (1) any event
of default under such Swap Contract to which Borrower or any Subsidiary is the
Defaulting Party (as defined in such Swap Contract), or (2) any Termination
Event (as so defined) under such Swap Contract as to which Borrower or any
Subsidiary is an Affected Party (as so defined) and, in either event, the Swap
Termination Value owed by Borrower or such Subsidiary as a result thereof
exceeds $3,000,000;

 

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(l) Forward Sales Contracts. Any Loan Party shall default under the performance
of any Lender Forward Sales Contract and the obligation owed by such Loan Party
as a result thereof exceeds $3,000,000; or

(m) Change of Control. There occurs any Change of Control with respect to any
Loan Party.

9.02. Remedies Upon Event of Default. If any Event of Default occurs and is
continuing, Agent shall, at the request of, or may, with the consent of, the
Required Lenders, take any or all of the following actions:

(a) declare the commitment of each Lender to make Loans and any obligation of
the L/C Issuer to make L/C Credit Extensions to be terminated, whereupon such
commitments and obligation shall be terminated;

(b) declare the unpaid principal amount of all outstanding Loans, all interest
accrued and unpaid thereon, and all other amounts owing or payable hereunder
(other than Indebtedness outstanding under Swap Contracts and Forward Sales
Contracts) or under any other Loan Document to be immediately due and payable,
without presentment, demand, protest or other notice of any kind, all of which
are hereby expressly waived by Borrower;

(c) require that Borrower Cash Collateralize the L/C Obligations (in an amount
equal to the then Outstanding Amount thereof); and

(d) exercise on behalf of itself and the Lenders all rights and remedies
available to it and the Lenders under the Loan Documents;

provided, however, that upon the occurrence of an actual or deemed entry of an
order for relief with respect to Borrower under the Bankruptcy Code of the
United States, the obligation of each Lender to make Loans and any obligation of
the L/C Issuer to make L/C Credit Extensions shall automatically terminate, the
unpaid principal amount of all outstanding Loans and all interest and other
amounts as aforesaid (other than Indebtedness outstanding under Swap Contracts
and Forward Sales Contracts) shall automatically become due and payable, and the
obligation of Borrower to Cash Collateralize the L/C Obligations as aforesaid
shall automatically become effective, in each case without further act of Agent
or any Lender.

9.03. Application of Funds. After the exercise of remedies provided for in
Section 9.02 (or after the Loans have automatically become immediately due and
payable and the L/C Obligations have automatically been required to be Cash
Collateralized as set forth in the proviso to Section 9.02), any amounts
received on account of the Obligations shall be applied by Agent in the
following order:

First, to payment of that portion of the Obligations constituting fees,
indemnities, expenses and other amounts (including fees, charges and
disbursements of counsel to Agent (including fees and time charges for attorneys
who may be employees of Agent) and amounts payable under Article III) payable to
Agent in its capacity as such;

Second, to payment of that portion of the Obligations constituting fees,
indemnities and other amounts (other than principal, interest and L/C Fees)
payable to Lenders and the L/C Issuer (including fees, charges and disbursements
of counsel to the respective Lenders and the L/C Issuer (including fees and time
charges for attorneys who may be employees of any Lender or the L/C Issuer) and
amounts payable under Article III), ratably among them in proportion to the
respective amounts described in this clause Second payable to them;

 

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Third, to payment of that portion of the Obligations constituting accrued and
unpaid L/C Fees and interest on the Loans, L/C Borrowings and other Obligations,
ratably among Lenders and the L/C Issuer in proportion to the respective amounts
described in this clause Third payable to them;

Fourth, to payment of that portion of the Obligations constituting unpaid
principal of the Loans and L/C Borrowings, including Obligations related to any
Lender Swap Contract, Lender Forward Sales Contracts or Secured Cash Management
Agreement, ratably among Lenders, the L/C Issuer, and any Lender or its
Affiliate that is a party to a Lender Swap Contract, Lender Forward Sales
Contracts and any Cash Management Party, in proportion to the respective amounts
described in this clause Fourth held by them;

Fifth, to Agent for the account of the L/C Issuer, to Cash Collateralize that
portion of L/C Obligations comprised of the aggregate undrawn amount of Letters
of Credit; and

Last, the balance, if any, after all of the Obligations have been indefeasibly
paid in full, to Borrower or as otherwise required by Law.

Subject to Section 2.03(c), amounts used to Cash Collateralize the aggregate
undrawn amount of Letters of Credit pursuant to clause Fifth above shall be
applied to satisfy drawings under such Letters of Credit as they occur. If any
amount remains on deposit as Cash Collateral after all Letters of Credit have
either been fully drawn or expired, such remaining amount shall be applied in
the order set forth above.

ARTICLE X. ADMINISTRATIVE AGENT

10.01. Appointment and Authorization of Administrative Agent. Each of the
Lenders and the L/C issuer hereby irrevocably appoints Scotia Capital to act on
its behalf as Administrative Agent hereunder and under the other Loan Documents
and authorizes Agent to take such actions on its behalf and to exercise such
powers as are delegated to Agent by the terms hereof and thereof, together with
such actions and powers as are reasonably incidental thereto. Other than the
rights of the Loan Parties under Section 10.06, (i) the provisions of this
Article are solely for the benefit of Agent, the Lenders and the L/C Issuer, and
(ii) neither the Borrower nor any other Loan Party shall have rights as a third
party beneficiary of any of such provisions. All benefits and amenities provided
to Agent in this Article shall also apply to Arranger in its capacity as sole
arranger and sole book runner.

10.02. Rights as a Lender. The Person serving as 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 Agent and the term “Lender” or “Lenders”
shall, unless otherwise expressly indicated or unless the context otherwise
requires, include the Person serving as Agent hereunder in its individual
capacity. Such Person and its Affiliates may accept deposits from, lend money
to, act as the financial advisor or in any other advisory capacity for and
generally engage in any kind of business with the Borrower or any Subsidiary or
other Affiliate thereof as if such Person were not Agent hereunder and without
any duty to account therefor to Lenders.

10.03. Exculpatory Provisions. Agent shall not have any duties or obligations
except those expressly set forth herein and in the other Loan Documents. Without
limiting the generality of the foregoing, Agent:

(a) shall not be subject to any fiduciary or other implied duties, regardless of
whether a Default has occurred and is continuing;

 

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(b) shall not have any 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 Agent is required to
exercise as directed in writing by the Required Lenders (or such other number or
percentage of the Lenders as shall be expressly provided for herein or in the
other Loan Documents), provided that Agent shall not be required to take any
action that, in its opinion or the opinion of its counsel, may expose Agent to
liability or that is contrary to any Loan Document or applicable Law; and

(c) shall not, except as expressly set forth herein and in the other Loan
Documents, have any duty to disclose, and shall not be liable for the failure to
disclose, any information relating to Borrower or any of its Affiliates that is
communicated to or obtained by the Person serving as Agent or any of its
Affiliates in any capacity.

Agent shall not be liable for any action taken or not taken by it (i) with the
consent or at the request of the Required Lenders (or such other number or
percentage of the Lenders as shall be necessary, or as Agent shall believe in
good faith shall be necessary, under the circumstances as provided in
Sections 9.02 and 11.01) or (ii) in the absence of its own gross negligence or
willful misconduct. Agent shall be deemed not to have knowledge of any Default
unless and until written notice describing such Default is given to Agent by
Borrower, a Lender or the L/C Issuer.

Agent 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 thereunder 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 therein
or the occurrence of any Default, (iv) the validity, enforceability,
effectiveness or genuineness of this Agreement, any other Loan Document or any
other agreement, instrument or document or (v) the satisfaction of any condition
set forth in Article V or elsewhere herein, other than to confirm receipt of
items expressly required to be delivered to Agent.

10.04. Reliance by Administrative Agent. 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
(including any electronic message, Internet or intranet website posting or other
distribution) believed by it to be genuine and to have been signed, sent or
otherwise authenticated by the proper Person. Agent also may rely upon any
statement made to it orally or by telephone and believed by it to have been made
by the proper Person, and shall not incur any liability for relying thereon. In
determining compliance with any condition hereunder to the making of a Loan, or
the issuance of a Letter of Credit, that by its terms must be fulfilled to the
satisfaction of a Lender or the L/C Issuer, Agent may presume that such
condition is satisfactory to such Lender or the L/C Issuer unless Agent shall
have received notice to the contrary from such Lender or the L/C Issuer prior to
the making of such Loan or the issuance of such Letter of Credit. Agent may
consult with legal counsel (who may be counsel for 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.

10.05. Delegation of Duties. Agent may perform any and all of its duties and
exercise its rights and powers hereunder or under any other Loan Document by or
through any one or more sub agents appointed by Agent. Agent and any such sub
agent may perform any and all of its duties and exercise its rights and powers
by or through their respective Related Parties. The exculpatory provisions of
this Article shall apply to any such sub agent and to the Related Parties of
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 Agent.

 

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10.06. Resignation of Agent. Agent may at any time give notice of its
resignation to Lenders, the L/C Issuer and Borrower. Upon receipt of any such
notice of resignation, the Required Lenders shall have the right, subject to the
consent of Borrower (but no such consent shall be required if a Default is then
continuing), to appoint a successor, which shall be a bank with an office in the
United States, or an Affiliate of any such bank with an office in the United
States. If no such successor shall have been so appointed by the Required
Lenders and shall have accepted such appointment within 30 days after the
retiring Agent gives notice of its resignation, then the retiring Agent may on
behalf of Lenders and the L/C Issuer, appoint a successor Agent meeting the
qualifications set forth above; provided that if Agent shall notify the Borrower
and the Lenders that no qualifying Person has accepted such appointment, then
such resignation shall nonetheless become effective in accordance with such
notice and (1) the retiring Agent shall be discharged from its duties and
obligations hereunder and under the other Loan Documents (except that in the
case of any collateral security held by Agent on behalf of the Lenders or the
L/C Issuer under any of the Loan Documents, the retiring Agent shall continue to
hold such collateral security until such time as a successor Agent is appointed)
and (2) all payments, communications and determinations provided to be made by,
to or through Agent shall instead be made by or to each Lender and the L/C
Issuer directly, until such time as the Required Lenders and Borrower, if
applicable, appoint a successor Agent as provided for above in this Section.
Upon the acceptance of a successor’s appointment as Agent hereunder, such
successor shall succeed to and become vested with all of the rights, powers,
privileges and duties of the retiring (or retired) Agent, and the retiring Agent
shall be discharged from all of its duties and obligations hereunder or under
the other Loan Documents (if not already discharged therefrom as provided above
in this Section). The fees payable by Borrower to a successor Agent shall be the
same as those payable to its predecessor unless otherwise agreed between
Borrower and such successor. After the retiring Agent’s resignation hereunder
and under the other Loan Documents, the provisions of this Article and
Section 11.04 shall continue in effect for the benefit of such retiring Agent,
its sub agents and their respective Related Parties in respect of any actions
taken or omitted to be taken by any of them while the retiring Administrative
Agent was acting as Administrative Agent.

Any resignation by Scotia Capital as Agent pursuant to this Section shall also
constitute its resignation as L/C Issuer. Upon the acceptance of a successor’s
appointment as Agent hereunder, (a) such successor shall succeed to and become
vested with all of the rights, powers, privileges and duties of the retiring L/C
Issuer, (b) the retiring L/C Issuer shall be discharged from all of its
respective duties and obligations hereunder or under the other Loan Documents,
and (c) the successor L/C Issuer shall issue letters of credit in substitution
for the Letters of Credit, if any, outstanding at the time of such succession or
make other arrangements satisfactory to the retiring L/C Issuer to effectively
assume the obligations of the retiring L/C Issuer with respect to such Letters
of Credit.

10.07. Non-Reliance on Agent and Other Lenders. Each Lender and the L/C Issuer
acknowledges that it has, independently and without reliance upon Agent or any
other Lender or any of their Related Parties and based on such documents and
information as it has deemed appropriate, made its own credit analysis and
decision to enter into this Agreement. Each Lender and the L/C Issuer also
acknowledges that it will, independently and without reliance upon Agent or any
other Lender or any of their Related Parties and based on such documents and
information as it shall from time to time deem appropriate, continue to make its
own decisions in taking or not taking action under or based upon this Agreement,
any other Loan Document or any related agreement or any document furnished
hereunder or thereunder.

10.08. No Other Duties, Etc. Anything herein to the contrary notwithstanding, no
Bookrunner, Arranger or other Lender holding a title listed on the cover page
hereof shall have any powers, duties or responsibilities under this Agreement or
any of the other Loan Documents, except in its capacity, as applicable, as
Agent, a Lender or the L/C Issuer hereunder.

 

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10.09. Administrative Agent May File Proofs of Claim. In case of the pendency of
any Debtor Relief Law or other judicial proceeding relative to any Loan Party,
Agent (irrespective of whether the principal of any Loan or L/C Obligation shall
then be due and payable as herein expressed or by declaration or otherwise and
irrespective of whether Agent shall have made any demand on Borrower) shall be
entitled and empowered, by intervention in such proceeding or otherwise

(a) to file and prove a claim for the whole amount of the principal and interest
owing and unpaid in respect of the Loans, L/C Obligations and all other
Obligations that are owing and unpaid and to file such other documents as may be
necessary or advisable in order to have the claims of Lenders, the L/C Issuer
and Agent (including any claim for the reasonable compensation, expenses,
disbursements and advances of Lenders, the L/C Issuer and Agent and their
respective agents and counsel and all other amounts due Lenders, the L/C Issuer
and Agent under Sections 2.03(i) and (j), 2.08 and 11.04) allowed in such
judicial proceeding; and

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

and any custodian, receiver, assignee, trustee, liquidator, sequestrator or
other similar official in any such judicial proceeding is hereby authorized by
each Lender and the L/C Issuer to make such payments to Agent and, in the event
that Agent shall consent to the making of such payments directly to Lenders and
the L/C Issuer, to pay to Agent any amount due for the reasonable compensation,
expenses, disbursements and advances of Agent and its agents and counsel, and
any other amounts due Agent under Sections 2.09 and 11.04.

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

10.10. Collateral and Guarantor Matters.

(a) Each Lender and the L/C Issuer hereby irrevocably authorizes and directs
Agent to enter into the Collateral Documents for the benefit of such Lender and
the L/C Issuer. Each Lender and the L/C Issuer hereby agrees, and each holder of
any Note by the acceptance thereof will be deemed to agree, that, except as
otherwise set forth in Section 11.01, any action taken by the Required Lenders,
in accordance with the provisions of this Agreement or the Collateral Documents,
and the exercise by the Required Lenders of the powers set forth herein or
therein, together with such other powers as are reasonably incidental thereto,
shall be authorized and binding upon all of the Lenders and the L/C Issuer.
Agent is hereby authorized (but not obligated) on behalf of all of the Lenders
and the L/C Issuer, without the necessity of any notice to or further consent
from any Lender or the L/C Issuer from time to time prior to, an Event of
Default, to take any action with respect to any Collateral or Collateral
Documents which may be necessary to perfect and maintain perfected the Liens
upon the Collateral granted pursuant to the Collateral Documents.

(b) Each Lender and the L/C issuer hereby irrevocably authorize Agent, at its
option and in its discretion,

 

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(i) to release any Lien on any property granted to or held by Agent under any
Loan Document (A) upon (w) termination of the Aggregate Commitments and
(x) payment in full of all Obligations (other than contingent indemnification
obligations), (y) the expiration or termination of all Letters of Credit (other
than Letters of Credit as to which other arrangements satisfactory to Agent and
the L/C Issuer shall have been made) and (z) the termination or unwinding of, or
the novation to a financial institution which is not a Lender of, all then
existing Lender Swap Contracts and Lender Forward Sales Contracts, (B) that is
sold or to be sold as part of or in connection with any sale permitted hereunder
or under any other Loan Document, (C) subject to Section 11.01, if approved,
authorized or ratified in writing by the Required Lenders, or (D) in connection
with any foreclosure sale or other disposition of Collateral after the
occurrence of an Event of Default; and

(ii) to subordinate any Lien on any property granted to or held by Agent under
any Loan Document to the holder of any Lien on such property that is permitted
by this Agreement or any other Loan Document; and

(iii) to release any Guarantor from its obligation under any Guaranty of such
Person if such Person ceases to be a Subsidiary as a result of a transaction
permitted hereunder.

Upon request by Agent at any time, each Lender and the L/C Issuer will confirm
in writing Agent’s authority to release or subordinate its interest in
particular types or items of Collateral pursuant to this Section 10.10.

(c) Subject to (b) above, Agent shall (and is hereby irrevocably authorized by
each Lender and the L/C Issuer to) execute such documents as may be necessary to
evidence the release or subordination of the Liens granted to Agent for the
benefit of Agent and Lenders and the L/C Issuer herein or pursuant hereto upon
the applicable Collateral; provided that (i) Agent shall not be required to
execute any such document on terms which, in Agent’s opinion, would expose Agent
to or create any liability or entail any consequence other than the release or
subordination of such Liens without recourse or warranty and (ii) such release
or subordination shall not in any manner discharge, affect or impair the
Obligations or any Liens upon (or obligations of Borrower or any other Loan
Party in respect of) all interests retained by Borrower or any other Loan Party,
including the proceeds of the sale, all of which shall continue to constitute
part of the Collateral. In the event of any sale or transfer of Collateral, or
any foreclosure with respect to any of the Collateral, Agent shall be authorized
to deduct all expenses reasonably incurred by Agent from the proceeds of any
such sale, transfer or foreclosure.

(d) Agent shall have no obligation whatsoever to any Lender, the L/C Issuer or
any other Person to assure that the Collateral exists or is owned by Borrower or
any other Loan Party or is cared for, protected or insured or that the Liens
granted to Agent herein or in any of the Collateral Documents or pursuant hereto
or thereto have been properly or sufficiently or lawfully created, perfected,
protected or enforced or are entitled to any particular priority, or to exercise
or to continue exercising at all or in any manner or under any duty of care,
disclosure or fidelity any of the rights, authorities and powers granted or
available to Agent in this Section 10.10 or in any of the Collateral Documents,
it being understood and agreed that in respect of the Collateral, or any act,
omission or event related thereto, Agent may act in any manner it may deem
appropriate, in its sole discretion, given Agent’s own interest in the
Collateral as one of Lenders and that Agent shall have no duty or liability
whatsoever to Lenders or the L/C Issuer.

(e) Each Lender and the L/C Issuer hereby appoints each other Lender as agent
for the purpose of perfecting Lenders’ and the L/C Issuer’s security interest in
assets which, in accordance with Article 9 of the UCC can be perfected only by
possession. Should any Lender or the L/C Issuer (other than Agent) obtain
possession of any such Collateral, such Lender or the L/C Issuer shall notify
Agent thereof, and, promptly upon Agent’s request therefor shall deliver such
Collateral to Agent or in accordance with Agent’s instructions.

 

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ARTICLE XI. MISCELLANEOUS

11.01. Amendments, Etc. No amendment or waiver of any provision of this
Agreement or any other Loan Document, and no consent to any departure by
Borrower or any other Loan Party therefrom, shall be effective unless in writing
signed by the Required Lenders and Borrower or the applicable Loan Party, as the
case may be, and acknowledged by Agent, and each such waiver or consent shall be
effective only in the specific instance and for the specific purpose for which
given; provided, however, that no such amendment, waiver or consent shall:

(a) waive any condition set forth in Section 5.01(a) without the written consent
of each Lender; provided, however, in the sole discretion of Agent, only a
waiver by Agent shall be required with respect to immaterial matters or items
specified in Section 5.01(a) (iii) or (iv) or (xii) with respect to which
Borrower has given assurances satisfactory to Agent that such items shall be
delivered promptly following the Closing Date;

(b) extend or increase the Commitment of any Lender (or reinstate any Commitment
terminated pursuant to Section 9.02) without the written consent of such Lender;

(c) postpone any date fixed by this Agreement or any other Loan Document for any
payment (excluding mandatory prepayments) of principal, interest, fees or other
amounts due to Lenders (or any of them) hereunder or under any other Loan
Document without the written consent of each Lender directly affected thereby;

(d) reduce the principal of, or the rate of interest specified herein on, any
Loan or L/C Borrowing, or (subject to clause (iv) of the second proviso to this
Section 11.01) any fees or other amounts payable hereunder or under any other
Loan Document, without the written consent of each Lender directly affected
thereby; provided, however, that only the consent of the Required Lenders shall
be necessary (i) to amend the definition of “Default Rate” or to waive any
obligation of Borrower to pay interest or L/C Fees at the Default Rate or
(ii) to amend any financial covenant hereunder (or any defined term used
therein) even if the effect of such amendment would be to reduce the rate of
interest on any Loan or L/C Borrowing or to reduce any fee payable hereunder;

(e) change Section 2.12 or Section 9.03 in a manner that would alter the pro
rata sharing of payments required thereby without the written consent of each
Lender;

(f) change any provision of this Section or the definition of “Required Lenders”
or any other provision hereof specifying the number or percentage of Lenders
required to amend, waive or otherwise modify any rights hereunder or make any
determination or grant any consent hereunder, without the written consent of
each Lender; or

(g) release any Guarantor from any Guaranty or release the Liens on all or
substantially all of the Collateral in any transaction or series of related
transactions except in accordance with the terms of any Loan Document, without
the written consent of each Lender;

and, provided further, that (i) no amendment, waiver or consent shall, unless in
writing and signed by the L/C Issuer in addition to the Lenders required above,
affect the rights or duties of the L/C Issuer under this Agreement or any Issuer
Document relating to any Letter of Credit issued or to be issued by it; (ii) no
amendment, waiver or consent shall, unless in writing and signed by Agent in
addition to the Lenders required above, affect the rights or duties of Agent
under this Agreement or any other Loan Document; (iii) the Fee Letter may be
amended, or rights or privileges thereunder waived, in a writing executed only
by the parties thereto; and (iv) nothing contained in this Section 11.01 shall
cause any waiver, amendment, modification or consent to any Lender Swap
Contract, Lender Forward Sales Contract or Secured Cash Management Agreement to
require the consent of the Required Lenders. Notwithstanding anything to the
contrary herein, no Defaulting Lender shall have any right to approve or
disapprove any amendment, waiver or consent hereunder, except that the
Commitment of such Lender may not be increased or extended without the consent
of such Lender.

 

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11.02. Notices; Effectiveness; Electronic Communications.

(a) Notices Generally. Except in the case of notices and other communications
expressly permitted to be given by telephone (and except as provided in
subsection (b) below), 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 telecopier as follows, and all
notices and other communications expressly permitted hereunder to be given by
telephone shall be made to the applicable telephone number, as follows:

(i) if to Borrower, Agent or the L/C Issuer, to the address, telecopier number,
electronic mail address or telephone number specified for such Person on
Schedule 11.02; and

(ii) if to any other Lender, to the address, telecopier number, electronic mail
address or telephone number specified in its Administrative Questionnaire.

Notices and other communications sent by hand or overnight courier service, or
mailed by certified or registered mail, shall be deemed to have been given when
received; notices and other communications sent by telecopier shall be deemed to
have been given when sent (except that, if not given during normal business
hours for the recipient, shall be deemed to have been given at the opening of
business on the next Business Day for the recipient). Notices and other
communications delivered through electronic communications to the extent
provided in subsection (b) below, shall be effective as provided in such
subsection (b).

(b) Electronic Communications. Notices and other communications to Lenders and
the L/C Issuer hereunder may be delivered or furnished by electronic
communication (including e-mail and Internet or intranet websites) pursuant to
procedures approved by Agent, provided that the foregoing shall not apply to
notices to any Lender or the L/C Issuer pursuant to Article II if such Lender or
the L/C Issuer, as applicable has notified the Agent that it is incapable of
receiving notices under such Article by electronic communication. Agent or
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. Unless Agent otherwise
prescribes, (i) notices and other communications sent to an e-mail address shall
be deemed received upon the sender’s receipt of an acknowledgement from the
intended recipient (such as by the “return receipt requested” function, as
available, return e-mail or other written acknowledgement), provided that if
such notice or other communication is not sent during the normal business hours
of the recipient, such notice or communication shall be deemed to have been sent
at the opening of business on the next Business Day for the recipient, and
(ii) notices or communications posted to an Internet or intranet website shall
be deemed received upon the deemed receipt by the intended recipient at its
e-mail address as described in the foregoing clause (i) of notification that
such notice or communication is available and identifying the website address
therefor.

 

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(c) The Platform. THE PLATFORM IS PROVIDED “AS IS” AND “AS AVAILABLE.” THE AGENT
PARTIES (AS DEFINED BELOW) DO NOT WARRANT THE ACCURACY OR COMPLETENESS OF THE
BORROWER MATERIALS OR THE ADEQUACY OF THE PLATFORM, AND EXPRESSLY DISCLAIM
LIABILITY FOR ERRORS IN OR OMISSIONS FROM THE BORROWER MATERIALS. NO WARRANTY OF
ANY KIND, EXPRESS, IMPLIED OR STATUTORY, INCLUDING ANY WARRANTY OF
MERCHANTABILITY, FITNESS FOR A PARTICULAR PURPOSE, NON-INFRINGEMENT OF THIRD
PARTY RIGHTS OR FREEDOM FROM VIRUSES OR OTHER CODE DEFECTS, IS MADE BY ANY AGENT
PARTY IN CONNECTION WITH THE BORROWER MATERIALS OR THE PLATFORM. In no event
shall Agent or any of its Related Parties (collectively, the “Agent Parties”)
have any liability to Borrower, any Lender, the L/C Issuer or any other Person
for losses, claims, damages, liabilities or expenses of any kind (whether in
tort, contract or otherwise) arising out of Borrower’s or Agent’s transmission
of Borrower Materials through the Internet, except to the extent that such
losses, claims, damages, liabilities or expenses are determined by a court of
competent jurisdiction by a final and nonappealable judgment to have resulted
from the gross negligence or willful misconduct of such Agent Party; provided,
however, that in no event shall any Agent Party have any liability to Borrower,
any Lender, the L/C Issuer or any other Person for indirect, special,
incidental, consequential or punitive damages (as opposed to direct or actual
damages).

(d) Change of Address, Etc. Each of the Borrower, Agent and the L/C Issuer may
change its address, telecopier or telephone number for notices and other
communications hereunder by notice to the other parties hereto. Each other
Lender may change its address, telecopier or telephone number for notices and
other communications hereunder by notice to Borrower, Agent and the L/C Issuer.
In addition, each Lender agrees to notify Agent from time to time to ensure that
Agent has on record (i) an effective address, contact name, telephone number,
telecopier number and electronic mail address to which notices and other
communications may be sent and (ii) accurate wire instructions for such Lender.
Furthermore, each Public Lender agrees to cause at least one individual at or on
behalf of such Public Lender to at all times have selected the “Private Side
Information” or similar designation on the content declaration screen of the
Platform in order to enable such Public Lender or its delegate, in accordance
with such Public Lender’s compliance procedures and applicable Law, including
United States Federal and state securities Laws, to make reference to Borrower
Materials that are not made available through the “Public Side Information”
portion of the Platform and that may contain material non-public information
with respect to the Borrower or its securities for purposes of United States
Federal or state securities Laws.

(e) Reliance by Agent. L/C Issuer and Lenders. Agent, the L/C Issuer and Lenders
shall be entitled to rely and act upon any notices (including telephonic Loan
Notices) purportedly given by or on behalf of Borrower even if (i) such notices
were not made in a manner specified herein, were incomplete or were not preceded
or followed by any other form of notice specified herein, or (ii) the terms
thereof, as understood by the recipient, varied from any confirmation thereof.
Borrower shall indemnify Agent, the L/C Issuer, each Lender and the Related
Parties of each of them from all losses, costs, expenses and liabilities
resulting from the reliance by such Person on each notice purportedly given by
or on behalf of Borrower. All telephonic notices to and other telephonic
communications with Agent may be recorded by Agent, and each of the parties
hereto hereby consents to such recording.

11.03. No Waiver; Cumulative Remedies; Enforcement. No failure by any Lender,
the L/C Issuer or Agent to exercise, and no delay by any such Person in
exercising, any right, remedy, power or privilege hereunder shall operate as a
waiver thereof; nor shall any single or partial exercise of any right, remedy,
power or privilege hereunder preclude any other or further exercise thereof or
the exercise of any other right, remedy, power or privilege. The rights,
remedies, powers and privileges herein provided are cumulative and not exclusive
of any rights, remedies, powers and privileges provided by Law.

 

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Notwithstanding anything to the contrary contained herein or in any other Loan
Document, the authority to enforce rights and remedies hereunder and under the
other Loan Documents against the Loan Parties or any of them shall be vested
exclusively in, and all actions and proceedings at law in connection with such
enforcement shall be instituted and maintained exclusively by, Agent in
accordance with Section 9.02 for the benefit of all the Lenders and the L/C
Issuer; provided, however, that the foregoing shall not prohibit (a) Agent from
exercising on its own behalf the rights and remedies that inure to its benefit
(solely in its capacity as Agent) hereunder and under the other Loan Documents,
(b) the L/C Issuer from exercising the rights and remedies that inure to its
benefit (solely in its capacity as L/C Issuer) hereunder and under the other
Loan Documents, (c) any Lender from exercising setoff rights in accordance with
Section 11.08 (subject to the terms of Section 2.12), or (d) any Lender from
filing proofs of claim or appearing and filing pleadings on its own behalf
during the pendency of a proceeding relative to any Loan Party under any Debtor
Relief Law; and provided, further, that if at any time there is no Person acting
as Agent hereunder and under the other Loan Documents, then (i) the Required
Lenders shall have the rights otherwise ascribed to Agent pursuant to
Section 9.02 and (ii) in addition to the matters set forth in clauses (b),
(c) and (d) of the preceding proviso and subject to Section 2.12, any Lender
may, with the consent of the Required Lenders, enforce any rights and remedies
available to it and as authorized by the Required Lenders.

11.04. Expenses; Indemnity; Damage Waiver.

(a) Costs and Expenses. Borrower shall pay (i) all out of pocket expenses
incurred by Agent, Arranger and their Affiliates (including the reasonable fees,
charges and disbursements of counsel for Agent and Arranger), in connection with
the syndication of the credit facilities provided for herein, the preparation,
negotiation, execution, delivery and administration of this Agreement and the
other Loan Documents or any amendments, modifications or waivers of the
provisions hereof or thereof (whether or not the transactions contemplated
hereby or thereby shall be consummated), (ii) all reasonable out of pocket
expenses incurred by the L/C Issuer in connection with the issuance, amendment,
renewal or extension of any Letter of Credit or any demand for payment
thereunder and (iii) all out-of-pocket expenses incurred by Agent, Arranger, any
Lender or the L/C Issuer (including engineering charges and the fees, charges
and disbursements of any counsel for Agent, Arranger, any Lender or the L/C
Issuer), and shall pay all fees and time charges for attorneys who may be
employees of Agent, Arranger, any Lender or the L/C Issuer, in connection with
the enforcement or protection of its rights (A) in connection with this
Agreement and the other Loan Documents, including its rights under this Section,
or (B) in connection with the Loans made or Letters of Credit issued hereunder,
including all such out-of-pocket expenses incurred during any workout,
restructuring or negotiations in respect of such Loans or Letters of Credit.

(b) Indemnification by the Borrower. Borrower shall indemnify Agent (and any
sub-agent thereof), Arranger, each Lender and the L/C Issuer, and each Related
Party of any of the foregoing Persons (each such Person being called an
“Indemnitee”) against, and hold each Indemnitee harmless from, any and all
losses, claims, damages, liabilities and related expenses (including the fees,
charges and disbursements of any counsel for any Indemnitee), and shall
indemnify and hold harmless each Indemnitee from all fees and time charges and
disbursements for attorneys who may be employees of any Indemnitee, incurred by
any Indemnitee or asserted against any Indemnitee by any third party or by
Borrower or any other Loan Party arising out of, in connection with, or as a
result of (i) the execution or delivery of this Agreement, any other Loan
Document or any agreement or instrument contemplated hereby or thereby, the
performance by the parties hereto of their respective obligations hereunder or
thereunder, or the consummation of the transactions contemplated hereby or
thereby, or, in the case of Agent (and any sub-agent thereof) and its Related
Parties only, the administration of this Agreement and the other Loan Documents
(including in respect of any matters addressed in Section 3.01), (ii) any Loan
or Letter of Credit or the use or proposed use of the proceeds therefrom
(including any refusal by the L/C Issuer 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), (iii) 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, or any
Environmental Liability related in any way to the Borrower or any of its
Subsidiaries, or (iv) any actual or prospective claim, litigation, investigation
or proceeding relating to any of the foregoing, whether based on contract, tort
or any other theory, whether brought by a third party or by the Borrower or any
other Loan Party, and regardless of whether any Indemnitee is a party thereto,
IN ALL CASES, WHETHER OR NOT CAUSED BY OR ARISING, IN WHOLE OR IN PART, OUT OF
THE COMPARATIVE, CONTRIBUTORY OR SOLE NEGLIGENCE OF THE INDEMNITEE; provided
that such indemnity shall not, as to any Indemnitee, be available to the extent
that such losses, claims, damages, liabilities or related expenses (x) are
determined by a court of competent jurisdiction by final and nonappealable
judgment to have resulted from the gross negligence or willful misconduct of
such Indemnitee or (y) result from a claim brought by Borrower or any other Loan
Party against an Indemnitee for breach in bad faith of such Indemnitee’s
obligations hereunder or under any other Loan Document, if Borrower or such Loan
Party has obtained a final and nonappealable judgment in its favor on such claim
as determined by a court of competent jurisdiction. Borrower shall also pay any
civil penalty or fine assessed by OFAC against, and all costs and expenses
(including counsel fees and disbursements) incurred in connection with defense
thereof, by Agent and/or the Lenders as a result of conduct by Borrower that
violated a sanction enforced by OFAC.

 

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(c) Reimbursement by Lenders. To the extent that Borrower for any reason fails
to indefeasibly pay any amount required under subsection (a) or (b) of this
Section to be paid by it to Agent (or any sub-agent thereof), Arranger, the L/C
Issuer or any Related Party of any of the foregoing, each Lender severally
agrees to pay to Agent (or any such sub-agent), Arranger, the L/C Issuer or such
Related Party, 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 Agent (or any such sub-agent),
Arranger or the L/C Issuer in its capacity as such, or against any Related Party
of any of the foregoing acting for Agent (or any such sub-agent) or L/C Issuer
in connection with such capacity. The obligations of the Lenders under this
subsection (c) are subject to the provisions of Section 2.11(c).

(d) Waiver of Consequential Damages, Etc. To the fullest extent permitted by
applicable law, 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, the transactions contemplated
hereby or thereby, any Loan or Letter of Credit or the use of the proceeds
thereof. No Indemnitee referred to in subsection (b) above shall be liable for
any damages arising from the use by unintended recipients of any information or
other materials distributed to such unintended recipients by such Indemnitee
through telecommunications, electronic or other information transmission systems
in connection with this Agreement or the other Loan Documents or the
transactions contemplated hereby or thereby other than for direct or actual
damages resulting from the gross negligence or willful misconduct of such
Indemnitee as determined by a final and nonappealable judgment of a court of
competent jurisdiction.

(e) Payments. All amounts due under this Section shall be payable not later than
ten Business Days after demand therefor.

(f) Survival. The agreements in this Section shall survive the resignation of
Agent and the L/C Issuer, the replacement of any Lender, the termination of the
Aggregate Commitments and the repayment, satisfaction or discharge of all the
other Obligations.

 

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11.05. Payments Set Aside. To the extent that any payment by or on behalf of
Borrower is made to Agent, the L/C Issuer or any Lender, or Agent, the L/C
Issuer or any Lender exercises its right of setoff, and such payment or the
proceeds of such setoff or any part thereof is subsequently invalidated,
declared to be fraudulent or preferential, set aside or required (including
pursuant to any settlement entered into by Agent, the L/C Issuer or such Lender
in its discretion) to be repaid to a trustee, receiver or any other party, in
connection with any proceeding under any Debtor Relief Law or otherwise, then
(a) to the extent of such recovery, the obligation or part thereof originally
intended to be satisfied shall be revived and continued in full force and effect
as if such payment had not been made or such setoff had not occurred, and
(b) each Lender and the L/C Issuer severally agrees to pay to Agent upon demand
its applicable share (without duplication) of any amount so recovered from or
repaid by Agent, plus interest thereon from the date of such demand to the date
such payment is made at a rate per annum equal to the Federal Funds Rate from
time to time in effect. The obligations of the Lenders and the L/C Issuer under
clause (b) of the preceding sentence shall survive the payment in full of the
Obligations and the termination of this Agreement.

11.06. Successors and Assigns.

(a) Successors and Assigns Generally. 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, except that the Borrower may not assign
or otherwise transfer any of its rights or obligations hereunder without the
prior written consent of the Agent and each Lender and no Lender may assign or
otherwise transfer any of its rights or obligations hereunder except (i) to an
Eligible Assignee in accordance with the provisions of subsection (b) of this
Section, (ii) by way of participation in accordance with the provisions of
subsection (d) of this Section, or (iii) by way of pledge or assignment of a
security interest subject to the restrictions of subsection (f) of this Section
(and any other attempted assignment or transfer by any party hereto shall be
null and void). 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, Participants to the extent
provided in subsection (d) of this Section and, to the extent expressly
contemplated hereby, the Related Parties of each of the Agent, the L/C Issuer
and the Lenders) any legal or equitable right, remedy or claim under or by
reason of this Agreement.

(b) Assignments by Lenders. Any Lender may at any time 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 (including for
purposes of this subsection (b), participations in L/C Obligations) at the time
owing to it); provided that any such assignment shall be subject to the
following conditions:

(i) Minimum Amounts.

(A) in the case of an assignment of the entire remaining amount of the assigning
Lender’s Commitment and the Loans at the time owing to it or in the case of an
assignment to a Lender, an Affiliate of a Lender or an Approved Fund, no minimum
amount need be assigned; and

(B) in any case not described in subsection (b)(i)(A) of this Section, the
aggregate amount of the Commitment (which for this purpose includes Loans
outstanding thereunder) or, if the Commitment is not then in effect, the
principal outstanding balance of the Loans of the assigning Lender subject to
each such assignment, determined as of the date the Assignment and Assumption
with respect to such assignment is delivered to Agent or, if “Trade Date” is
specified in the Assignment and Assumption, as of the Trade Date, shall not be
less than $5,000,000 unless each of Agent and, so long as no Event of Default
has occurred and is continuing, Borrower otherwise consents (each such consent
not to be unreasonably withheld or delayed); provided, however, that concurrent
assignments to members of an Assignee Group and concurrent assignments from
members of an Assignee Group to a single assignee (or to an assignee and members
of its Assignee Group) will be treated as a single assignment for purposes of
determining whether such minimum amount has been met.

 

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(ii) Proportionate Amounts. 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 with respect to the Loans or the Commitment
assigned;

(iii) Required Consents. No consent shall be required for any assignment except
to the extent required by subsection (b)(i)(B) of this Section and, in addition:

(A) the consent of Borrower shall be required unless (1) an Event of Default has
occurred and is continuing at the time of such assignment or (2) such assignment
is to a Lender, an Affiliate of a Lender or an Approved Fund (Borrower shall be
deemed to have consented to such assignment unless it shall object thereto by
written notice to Agent within ten (10) Business Days after having received
notice thereof);

(B) the consent of Agent shall be required if such assignment is to a Person
that is not a Lender, an Affiliate of such Lender or an Approved Fund with
respect to such Lender; and

(C) the consent of the L/C Issuer shall be required for any assignment that
increases the obligation of the assignee to participate in exposure under one or
more Letters of Credit (whether or not then outstanding);

(iv) Assignment and Assumption. The parties to each assignment shall execute and
deliver to Agent an Assignment and Assumption, together with a processing and
recordation fee in the amount of $3,500; provided, however, that Agent may, in
its sole discretion, elect to waive such processing and recordation fee in the
case of any assignment. The assignee, if it is not a Lender, shall deliver to
Agent an Administrative Questionnaire.

(v) No Assignment to Borrower. No such assignment shall be made to Borrower or
any of Borrower’s Affiliates or Subsidiaries.

(vi) No Assignment to Natural Persons. No such assignment shall be made to a
natural person.

Subject to acceptance and recording thereof by the Agent pursuant to subsection
(c) of this Section, from and after the effective date specified in each
Assignment and Assumption, the Eligible Assignee thereunder shall be a party to
this Agreement 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 Sections 3.01, 3.04, 3.05, and 11.04 with
respect to facts and circumstances occurring prior to the effective date of such
assignment. Upon request, the Borrower (at its expense) shall execute and
deliver a Note to the assignee Lender. Any assignment or transfer by a Lender of
rights or obligations under this Agreement that does not comply with this
subsection 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
subsection (d) of this Section.

 

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(c) Register. The Agent, acting solely for this purpose as an agent of the
Borrower, shall maintain at the Agent’s Office 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 Commitments of, and principal amounts of the
Loans and L/C Obligations 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 Agent and the Lenders may treat each Person
whose name is recorded in the Register pursuant to the terms hereof as a Lender
hereunder for all purposes of this Agreement, notwithstanding notice to the
contrary. The Register shall be available for inspection by each of the Borrower
and any Lender at any reasonable time and from time to time upon reasonable
prior notice.

(d) Participations. Any Lender may at any time, without the consent of, or
notice to, the Borrower or the Agent, sell participations to any Person (other
than a natural person or the Borrower or any of the Borrower’s Affiliates or
Subsidiaries) (each, a “Participant”) in all or a portion of such Lender’s
rights and/or obligations under this Agreement (including all or a portion of
its Commitment and/or the Loans (including such Lender’s participations in L/C
Obligations) owing to it); provided that (i) such Lender’s obligations under
this Agreement shall remain unchanged, (ii) such Lender shall remain solely
responsible to the other parties hereto for the performance of such obligations
and (iii) the Borrower, the Agent, the Lenders and the L/C Issuer 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, waiver or other modification described in the first proviso to
Section 11.01 that affects such Participant. Subject to subsection (e) of this
Section, the Borrower agrees that each Participant shall be entitled to the
benefits of Sections 3.01, 3.04 and 3.05 to the same extent as if it were a
Lender and had acquired its interest by assignment pursuant to subsection (b) of
this Section and shall be subject to Section 11.07. To the extent permitted by
law, each Participant also shall be entitled to the benefits of Section 11.08 as
though it were a Lender, provided such Participant agrees to be subject to
Section 2.12 as though it were a Lender.

(e) Limitations upon Participant Rights. A Participant shall not be entitled to
receive any greater payment under Section 3.01 or 3.04 than the applicable
Lender would have been entitled to receive with respect to the participation
sold to such Participant, unless the sale of the participation to such
Participant is made with the Borrower’s prior written consent. A Participant
that would be a Foreign Lender if it were a Lender shall not be entitled to the
benefits of Section 3.01 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 3.01(e) as though it were a Lender.

(f) Certain Pledges. Any Lender may at any time pledge or assign a security
interest in all or any portion of its rights under this Agreement (including
under its Note, if any) to secure obligations of such Lender, including any
pledge or assignment to secure obligations to a Federal Reserve Bank; provided
that no such pledge or assignment shall release such Lender from any of its
obligations hereunder or substitute any such pledgee or assignee for such Lender
as a party hereto.

(g) Deemed Consent of Borrower. If the consent of Borrower to an assignment to
an Eligible Assignee is required hereunder (including a consent to an assignment
which does not meet the minimum assignment threshold specified in clause (i) of
the proviso to the first sentence of Section 11.06(b)), Borrower shall be deemed
to have given its consent ten (10) Business Days after the date notice thereof
has been delivered to Borrower by the assigning Lender (through Agent) unless
such consent is expressly refused by Borrower prior to such tenth Business Day.

 

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(h) Resignation as L/C Issuer after Assignment. Notwithstanding anything to the
contrary contained herein, if at any time Scotia Capital assigns all of its
Commitment and Loans pursuant to subsection (b) above, Scotia Capital may, upon
thirty (30) days’ notice to the Borrower and the Lenders, resign as L/C Issuer.
In the event of any such resignation as L/C Issuer, the Borrower shall be
entitled to appoint from among the Lenders a successor L/C Issuer hereunder;
provided, however, that no failure by the Borrower to appoint any such successor
shall affect the resignation of Scotia Capital as L/C Issuer. If Scotia Capital
resigns as L/C Issuer, it shall retain all the rights, powers, privileges and
duties of the L/C Issuer hereunder with respect to all Letters of Credit
outstanding as of the effective date of its resignation as L/C Issuer and all
L/C Obligations with respect thereto (including the right to require the Lenders
to make Base Rate Loans or fund risk participations in Unreimbursed Amounts
pursuant to Section 2.03(c)). Upon the appointment of a successor L/C Issuer,
(a) such successor shall succeed to and become vested with all of the rights,
powers, privileges and duties of the retiring L/C Issuer, and (b) the successor
L/C Issuer shall issue letters of credit in substitution for the Letters of
Credit, if any, outstanding at the time of such succession or make other
arrangements satisfactory to Scotia Capital to effectively assume the
obligations of Scotia Capital with respect to such Letters of Credit.

11.07. Treatment of Certain Information; Confidentiality. Each of Agent, Lenders
and the L/C Issuer agrees to maintain the confidentiality of the Information (as
defined below), except that Information may be disclosed (a) to its Affiliates
and to its and its Affiliates’ respective partners, directors, officers,
employees, agents, advisors and representatives (it being understood that the
Persons to whom such disclosure is made will be informed of the confidential
nature of such Information and instructed to keep such Information
confidential), (b) to the extent requested by any regulatory authority,
purporting to have jurisdiction over it (including any self-regulatory
authority, such as the National Association of Insurance Commissioners), (c) to
the extent required by applicable Laws or regulations or by any subpoena or
similar legal process, (d) to any other party hereto, (e) in connection with the
exercise of any remedies hereunder or under any other Loan Document or any
action or proceeding relating to this Agreement or any other Loan Document or
the enforcement of rights hereunder or thereunder, (f) subject to an agreement
containing provisions substantially the same as those of this Section in favor
of Borrower, 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 or derivative transaction relating to Borrower and its obligations,
(g) with the consent of Borrower or (h) to the extent such Information
(x) becomes publicly available other than as a result of a breach of this
Section or (y) becomes available to Agent, any Lender, the L/C Issuer or any of
their respective Affiliates on a nonconfidential basis from a source other than
Borrower. For purposes of this Section, “Information” means all information
received from or on behalf of Borrower or any Subsidiary relating to Borrower or
any Subsidiary or any of their respective businesses, other than any such
information that is available to Agent, any Lender or the L/C Issuer on a
nonconfidential basis prior to disclosure by Borrower or any Subsidiary,
provided that, in the case of Information received after the date hereof, such
information is clearly identified at the time of delivery as confidential.
Notwithstanding the foregoing, “Information” shall not include, and Agent and
each Lender may disclose without limitation of any kind, any information with
respect to “tax treatment” and “tax structure” (in each case, within the meaning
of Treasury Regulations Section 1.6011-4) of the transactions contemplated
hereby and all materials of any kind (including opinions or other tax analyses)
that are provided to Agent or such Lender relating to such tax treatment and tax
structure; provided that with respect to any document or similar item that in
either case contains information concerning the tax treatment or tax structure
of the transaction as well as other information, this sentence shall apply only
to such portions of the document or similar item that relate to the tax
treatment or tax structure of the Loans, Letters of Credit and transactions
contemplated hereby. Any Person required to maintain the confidentiality of
Information as provided in this Section shall be considered to have complied
with its obligation to do so if such Person has exercised the same degree of
care to maintain the confidentiality of such Information as such Person would
accord to its own confidential information. Each of Agent, the Lenders and the
L/C Issuer acknowledges that (a) the Information may include material non-public
information concerning the Borrower or a Subsidiary, as the case may be, (b) it
has developed compliance procedures regarding the use of material non-public
information and (c) it will handle such material non-public information in
accordance with applicable Law, including Federal and state securities Laws.

 

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11.08. Right of Setoff. If an Event of Default shall have occurred and be
continuing, each Lender, the L/C Issuer and each of their respective Affiliates
is hereby authorized at any time and from time to time, after obtaining the
prior written consent of Agent, to the fullest extent permitted by applicable
Law, to set off and apply any and all deposits (general or special, time or
demand, provisional or final, in whatever currency, but excluding deposits held
in any account designated as a fiduciary account) at any time held and other
obligations (in whatever currency) at any time owing by such Lender, the L/C
Issuer or any such Affiliate to or for the credit or the account of Borrower or
any other Loan Party against any and all of the obligations of Borrower or such
Loan Party now or hereafter existing under this Agreement (including without
limitation obligations under Swap Contracts) or any other Loan Document to such
Lender or the L/C Issuer or any such Affiliate, irrespective of whether or not
such Lender or the L/C Issuer shall have made any demand under this Agreement or
any other Loan Document and although such obligations of Borrower or such Loan
Party may be contingent or unmatured or are owed to a branch or office of such
Lender or the L/C Issuer different from the branch or office holding such
deposit or obligated on such indebtedness. The rights of each Lender, the L/C
Issuer and their respective Affiliates under this Section are in addition to
other rights and remedies (including other rights of setoff) that such Lender,
the L/C Issuer or their respective Affiliates may have. Each Lender and the L/C
Issuer agrees to notify Borrower and Agent promptly after any such setoff and
application, provided that the failure to give such notice shall not affect the
validity of such setoff and application.

11.09. Interest Rate Limitation. It is the intention of the parties hereto to
conform strictly to Applicable Usury Laws regarding the use, forbearance or
detention of the indebtedness evidenced by this Agreement, the Notes and the
other Loan Documents, whether such Laws are now or hereafter in effect,
including the Laws of the United States of America or any other jurisdiction
whose Laws are applicable, and including any subsequent revisions to or judicial
interpretations of those Laws, in each case to the extent they are applicable to
this Agreement, the Notes and the other Loan Documents (the “Applicable Usury
Laws”). Accordingly, if any acceleration of the maturity of the Notes or any
payment by Borrower or any other Person produces a rate in excess of the Maximum
Amount or otherwise results in Borrower or such other Person being deemed to
have paid any interest in excess of the Maximum Amount, or if Agent or any of
the Lenders shall for any reason receive any unearned interest in violation of
any Applicable Usury Laws, or if any transaction contemplated hereby would
otherwise be usurious under any Applicable Usury Laws, then, in that event,
regardless of any provision contained in this Agreement or any other Loan
Document or other agreement or instrument executed or delivered in connection
herewith, the provisions of this Section 11.09 shall govern and control, and
neither Borrower nor any other Person shall be obligated to pay, or apply in any
manner to, any amount that would be excessive interest. Agent or the Lenders
shall never be deemed to have contracted for or be entitled to receive, collect,
charge, reserve or apply as interest on any Loan (whether termed interest
therein or deemed to be interest by judicial determination or operation of law),
any amount in excess of the Maximum Amount, and, in the event that Agent or any
of the Lenders ever receive, collect, or apply as interest any such excess, such
amount which would be excessive interest shall be applied as a partial
prepayment of principal and treated hereunder as such, and, if the principal
amount of the applicable Loans are paid in full, any remaining excess shall
forthwith be paid to Borrower. In determining whether or not the interest
contracted for, received, collected, charged reserved, paid or payable,
including under any specific contingency, exceeds the Maximum Amount, Borrower,
Agent and the Lenders shall, to the maximum extent permitted under applicable
law, (i) characterize any non principal payment (other than payments which are
expressly designated as interest payments hereunder) as an expense or fee rather
than as interest, (ii) exclude voluntary prepayments and the effect thereof, and
(iii) amortize and spread the total amount of interest throughout the entire
stated term of the Loans so that the interest rate is uniform throughout such
term; provided that if the Loans are paid in full prior to the end of the full
contemplated term hereof, and if the interest received for the actual period of
existence thereof exceeds the Maximum Amount, if any, then Agent or the Lenders
shall refund to Borrower the amount of such excess, or credit the amount of such
excess against the aggregate unpaid principal balance of all Loans made by Agent
or the Lenders. As used herein, the term “Maximum Amount” means the maximum
nonusurious amount of interest which may be lawfully contracted for, reserved,
charged, collected or received by Agent or such Lender in connection with the
indebtedness evidenced by this Agreement, the Notes and other Loan Documents
under all Applicable Usury Laws, and the term “Maximum Rate” has a corresponding
meaning. Texas Finance Code, Chapter 346, which regulates certain revolving loan
accounts and revolving tri-party accounts, shall not apply to any revolving loan
accounts created under, or apply in any manner to, the Notes, this Agreement or
the other Loan Documents.

 

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11.10. Counterparts ; Integration; Effectiveness. This Agreement may be executed
in counterparts (and by different parties hereto in different counterparts),
each of which shall constitute an original, but all of which when taken together
shall constitute a single contract. This Agreement and the other Loan Documents
constitute the entire contract among the parties relating to the subject matter
hereof and supersede any and all previous agreements and understandings, oral or
written, relating to the subject matter hereof. Except as provided in
Section 5.01, this Agreement shall become effective when it shall have been
executed by Agent and when Agent shall have received counterparts hereof that,
when taken together, bear the signatures of each of the other parties hereto.
Delivery of an executed counterpart of a signature page of this Agreement by
telecopy or other electronic imaging means shall be effective as delivery of a
manually executed counterpart of this Agreement.

11.11. Survival of Representations and Warranties. All representations and
warranties made hereunder and in any other Loan Document or other document
delivered pursuant hereto or thereto or in connection herewith or therewith
shall survive the execution and delivery hereof and thereof. Such
representations and warranties have been or will be relied upon by Agent and
each Lender, regardless of any investigation made by Agent or any Lender or on
their behalf and notwithstanding that Agent or any Lender may have had notice or
knowledge of any Default at the time of any Credit Extension, and shall continue
in full force and effect as long as any Loan or any other Obligation hereunder
shall remain unpaid or unsatisfied or any Letter of Credit shall remain
outstanding.

11.12. Severability. If any provision of this Agreement or the other Loan
Documents is held to be illegal, invalid or unenforceable, (a) the legality,
validity and enforceability of the remaining provisions of this Agreement and
the other Loan Documents shall not be affected or impaired thereby and (b) the
parties shall endeavor in good faith negotiations to replace the illegal,
invalid or unenforceable provisions with valid provisions the economic effect of
which comes as close as possible to that of the illegal, invalid or
unenforceable provisions. The invalidity of a provision in a particular
jurisdiction shall not invalidate or render unenforceable such provision in any
other jurisdiction.

11.13. Legal Representation of Agent. In connection with the negotiation,
drafting and execution of this Agreement and the other Loan Documents, or in
connection with future legal representation relating to loan administration,
amendments, modifications, waivers, or enforcement of remedies, Winstead PC only
has represented and only shall represent Scotia Capital in its capacity as Agent
and as a Lender. Each other Lender hereby acknowledges that Winstead PC does not
represent it in connection with any such matters.

 

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11.14. Replacement of Lenders. If any Lender or any Participant requests
compensation under Section 3.04, if Borrower is required to pay any additional
amount to any Lender or any Governmental Authority for the account of any Lender
or Participant pursuant to Section 3.01, if any Lender is a Defaulting Lender,
then Borrower may, at its sole expense and effort, upon notice to such Lender
and/or Participant and the Agent, require such Lender and/or Participant to
assign and delegate, without recourse (in accordance with and subject to the
restrictions contained in, and consents required by, Section 11.06), all of its
interests, rights and obligations under this Agreement and the related Loan
Documents to an assignee that shall assume such obligations (which assignee may
be another Lender, if a Lender accepts such assignment), provided that:

(a) Borrower shall have paid to the Agent the assignment fee specified in
Section 11.06(b);

(b) such Lender and/or Participant shall have received payment of an amount
equal to the outstanding principal of its Loans and L/C Advances, accrued
interest thereon, accrued fees and all other amounts payable to it hereunder and
under the other Loan Documents (including any amounts under Section 3.05) from
the assignee (to the extent of such outstanding principal and accrued interest
and fees) or Borrower (in the case of all other amounts);

(c) in the case of any such assignment resulting from a claim for compensation
under Section 3.04 or payments required to be made pursuant to Section 3.01,
such assignment will result in a reduction in such compensation or payments
thereafter; and

(d) such assignment does not conflict with applicable Laws.

A Lender or Participant shall not be required to make any such assignment or
delegation if, prior thereto, as a result of a waiver by such Lender or
Participant or otherwise, the circumstances entitling Borrower to require such
assignment and delegation cease to apply.

11.15. Governing Law; Jurisdiction; Etc.

(a) GOVERNING LAW. THIS AGREEMENT SHALL BE GOVERNED BY, AND CONSTRUED IN
ACCORDANCE WITH, THE LAW OF THE STATE OF TEXAS.

(b) SUBMISSION TO JURISDICTION. THE BORROWER AND EACH OTHER LOAN PARTY
IRREVOCABLY AND UNCONDITIONALLY SUBMITS, FOR ITSELF AND ITS PROPERTY, TO THE
NONEXCLUSIVE JURISDICTION OF THE COURTS OF THE STATE OF TEXAS SITTING IN HARRIS
COUNTY AND OF THE UNITED STATES DISTRICT COURT OF THE SOUTHERN DISTRICT, AND ANY
APPELLATE COURT FROM ANY THEREOF, IN ANY ACTION OR PROCEEDING ARISING OUT OF OR
RELATING TO THIS AGREEMENT OR ANY OTHER LOAN DOCUMENT, OR FOR RECOGNITION OR
ENFORCEMENT OF ANY JUDGMENT, AND EACH OF THE PARTIES HERETO IRREVOCABLY AND
UNCONDITIONALLY AGREES THAT ALL CLAIMS IN RESPECT OF ANY SUCH ACTION OR
PROCEEDING MAY BE HEARD AND DETERMINED IN SUCH TEXAS STATE COURT OR, TO THE
FULLEST EXTENT PERMITTED BY APPLICABLE LAW, IN SUCH FEDERAL COURT. EACH OF THE
PARTIES HERETO AGREES THAT A FINAL JUDGMENT IN ANY SUCH ACTION OR PROCEEDING
SHALL BE CONCLUSIVE AND MAY BE ENFORCED IN OTHER JURISDICTIONS BY SUIT ON THE
JUDGMENT OR IN ANY OTHER MANNER PROVIDED BY LAW. NOTHING IN THIS AGREEMENT OR IN
ANY OTHER LOAN DOCUMENT SHALL AFFECT ANY RIGHT THAT AGENT, ANY LENDER OR THE L/C
ISSUER MAY OTHERWISE HAVE TO BRING ANY ACTION OR PROCEEDING RELATING TO THIS
AGREEMENT OR ANY OTHER LOAN DOCUMENT AGAINST THE BORROWER OR ANY OTHER LOAN
PARTY OR ITS PROPERTIES IN THE COURTS OF ANY JURISDICTION.

 

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(c) WAIVER OF VENUE. THE BORROWER AND EACH OTHER LOAN PARTY IRREVOCABLY AND
UNCONDITIONALLY WAIVES, TO THE FULLEST EXTENT PERMITTED BY APPLICABLE LAW, ANY
OBJECTION THAT IT MAY NOW OR HEREAFTER HAVE TO THE LAYING OF VENUE OF ANY ACTION
OR PROCEEDING ARISING OUT OF OR RELATING TO THIS AGREEMENT OR ANY OTHER LOAN
DOCUMENT IN ANY COURT REFERRED TO IN PARAGRAPH (B) OF THIS SECTION. EACH OF THE
PARTIES HERETO HEREBY IRREVOCABLY WAIVES, TO THE FULLEST EXTENT PERMITTED BY
APPLICABLE LAW, THE DEFENSE OF AN INCONVENIENT FORUM TO THE MAINTENANCE OF SUCH
ACTION OR PROCEEDING IN ANY SUCH COURT.

(d) SERVICE OF PROCESS. EACH PARTY HERETO IRREVOCABLY CONSENTS TO SERVICE OF
PROCESS IN THE MANNER PROVIDED FOR NOTICES IN SECTION 11.02. NOTHING IN THIS
AGREEMENT WILL AFFECT THE RIGHT OF ANY PARTY HERETO TO SERVE PROCESS IN ANY
OTHER MANNER PERMITTED BY APPLICABLE LAW.

11.16. Waiver of Right to Trial by Jury. EACH PARTY HERETO HEREBY IRREVOCABLY
WAIVES, TO THE FULLEST EXTENT PERMITTED BY APPLICABLE LAW, ANY RIGHT IT MAY HAVE
TO A TRIAL BY JURY IN ANY LEGAL PROCEEDING DIRECTLY OR INDIRECTLY ARISING OUT OF
OR RELATING TO THIS AGREEMENT OR ANY OTHER LOAN DOCUMENT OR THE TRANSACTIONS
CONTEMPLATED HEREBY OR THEREBY (WHETHER BASED ON CONTRACT, TORT OR ANY OTHER
THEORY). EACH PARTY HERETO (A) CERTIFIES THAT NO REPRESENTATIVE, AGENT OR
ATTORNEY OF ANY OTHER PERSON HAS REPRESENTED, EXPRESSLY OR OTHERWISE, THAT SUCH
OTHER PERSON WOULD NOT, IN THE EVENT OF LITIGATION, SEEK TO ENFORCE THE
FOREGOING WAIVER AND (B) ACKNOWLEDGES THAT IT AND THE OTHER PARTIES HERETO HAVE
BEEN INDUCED TO ENTER INTO THIS AGREEMENT AND THE OTHER LOAN DOCUMENTS BY, AMONG
OTHER THINGS, THE MUTUAL WAIVERS AND CERTIFICATIONS IN THIS SECTION.

11.17. USA PATRIOT Act Notice. Each Lender that is subject to the Act (as
hereinafter defined) and Agent (for itself and not on behalf of any Lender)
hereby notifies Borrower that pursuant to the requirements of the USA Patriot
Act (Title III of Pub. L. 107-56 (signed into law October 26, 2001)) (the
“Act”), it is required to obtain, verify and record information that identifies
Borrower, which information includes the name and address of Borrower and other
information that will allow such Lender or Agent, as applicable, to identify
Borrower in accordance with the Act. Borrower shall, promptly following a
request by Agent or any Lender, provide all documentation and other information
that Agent or such Lender requests in order to comply with its ongoing
obligations under applicable “know your customer” and anti-money laundering
rules and regulations, including the Act.

11.18. No Advisory or Fiduciary Responsibility. In connection with all aspects
of each transaction contemplated hereby (including in connection with any
amendment, waiver or other modification hereof or of any other Loan Document),
Borrower and each other Loan Party acknowledges and agrees that: (i) (A) the
arranging and other services regarding this Agreement provided by Agent and the
Arranger, are arm’s-length commercial transactions between Borrower and each
other Loan Party, on the one hand, and Agent and the Arranger, on the other
hand, (B) each of Borrower and the other Loan Parties has consulted its own
legal, accounting, regulatory and tax advisors to the extent it has deemed
appropriate, and (C) Borrower and each other Loan Party is capable of
evaluating, and understands and accepts, the terms, risks and conditions of the
transactions contemplated hereby and by the other Loan Documents; (ii) (A) Agent
and the Arranger, each is and has been acting solely as a principal and, except
as expressly agreed in writing by the relevant parties, has not been, is not,
and will not be acting as an advisor, agent or fiduciary for Borrower, any other
Loan Party, or any other Person and (B) neither Agent nor the Arranger has any
obligation to Borrower and any other Loan Party with respect to the transactions
contemplated hereby except those obligations expressly set forth herein and in
the other Loan Documents; and (iii) Agent and the Arranger and their respective
Affiliates may be engaged in a broad range of transactions that involve
interests that differ from those of Borrower, the other Loan Parties, and
neither Agent nor the Arranger has any obligation to disclose any of such
interests to Borrower or any other Loan Party. To the fullest extent permitted
by law, each of Borrower and the other Loan Parties hereby waives and releases
any claims that it may have against Agent and the Arranger with respect to any
breach or alleged breach of agency or fiduciary duty in connection with any
aspect of any transaction contemplated hereby.

 

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11.19. Electronic Execution of Assignments. The words “execution,” “signed,”
“signature,” and words of like import in any Assignment and Assumption or in any
amendment or other modification hereof (including waivers and consents) shall be
deemed to include electronic signatures or the keeping of records in electronic
form, each of which shall be of the same legal effect, validity or
enforceability as a manually executed signature or the use of a paper-based
recordkeeping system, as the case may be, to the extent and as provided for in
any applicable Law, including the Federal Electronic Signatures in Global and
National Commerce Act, the New York State Electronic Signatures and Records Act,
or any other similar state Laws based on the Uniform Electronic Transactions
Act.

11.20. Concerning Swap Contracts and Lender Forward Sales Contracts. The benefit
of the Collateral Documents and of the provisions of this Agreement relating to
any collateral securing the Obligations shall also extend to and be available to
those Lenders or their Affiliates which are counterparties to any Lender Swap
Contract or Lender Forward Sales Contract on a pro rata basis in respect of any
obligations of Borrower or any of its Subsidiaries which arise under any such
Lender Swap Contract or Lender Forward Sales Contract while such Person or its
Affiliate is a Lender, and such benefits shall continue after such Person or its
Affiliate ceases to be a Lender; provided the benefits of this Agreement shall
not apply to, and the Collateral Documents shall not secure, trades,
confirmations and swap transactions which are entered into after such Lender
ceases to be a Lender or such Affiliate ceases to be an Affiliate of such Lender
under this Agreement. No Lender or any Affiliate of a Lender shall have any
voting rights under any Loan Document as a result of the existence of
obligations owed to it under any such Lender Swap Contract or Lender Forward
Sales Contract. All Lender Swap Contracts and Lender Forward Sales Contracts, if
any, are independent agreements governed by the written provisions of said
Lender Swap Contracts and Lender Forward Sales Contracts, which will remain in
full force and effect, unaffected by any repayment, prepayment, acceleration,
reduction, increase or change in the terms of the Loan or this Agreement, except
as otherwise expressly provided in said Lender Swap Contract or Lender Forward
Sales Contract, and any payoff statement from any Lender relating to this
Agreement shall not apply to said Lender Swap Contracts and Lender Forward Sales
Contracts except as otherwise expressly provided in such payoff statement.

11.21. Concerning Cash Management Agreements. The benefit of the Collateral
Documents and the provisions of this Agreement relating to any collateral
securing the Obligations shall also extend to and be available to any Cash
Management Party which is a party to a Secured Cash Management Agreement on a
pro rata basis in respect of any obligations of Borrower or any of its
Subsidiaries which may arise thereunder. The benefits of this Agreement shall
not apply to, and the Collateral Documents shall not secure, the Cash Management
Obligations of any Cash Management Party that ceases to be a Lender or an
Affiliate of a Lender under this Agreement. No Cash Management Party shall have
any voting rights under any Loan Document as a result of the existence of
obligations owed to it under any Secured Cash Management Agreement. All Secured
Cash Management Agreements, if any, are independent agreements governed by the
written provisions of said Secured Cash Management Agreement, which remain in
full force and effect, unaffected by any repayment, prepayment, acceleration,
reduction, increase or change in the terms of the Loan or this Agreement, except
as otherwise expressly provided in said Secured Cash Management Contract. Any
payoff statement from any Lender relating to this Agreement shall not apply to a
Secured Cash Management Contract, except as otherwise expressly provided in said
payoff statement.

 

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11.22. Time of the Essence. Time is of the essence of the Loan Documents.

 

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11.23. Entire Agreement. THIS AGREEMENT AND THE OTHER LOAN DOCUMENTS REPRESENT
THE FINAL AGREEMENT AMONG THE PARTIES AND MAY NOT BE CONTRADICTED BY EVIDENCE OF
PRIOR, CONTEMPORANEOUS, OR SUBSEQUENT ORAL AGREEMENTS OF THE PARTIES. THERE ARE
NO UNWRITTEN ORAL AGREEMENTS AMONG THE PARTIES.

[This space is left intentionally blank. Signature pages follow.]

 

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IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be duly
executed as of the date first above written.

 

GULFPORT ENERGY CORPORATION By:  

/s/ Michael G. Moore

Name:   Michael G. Moore Title:   Vice President and CFO

 

CREDIT AGREEMENT – Signature Page

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THE BANK OF NOVA SCOTIA as Administrative Agent By:  

/s/ J. Frazell

Name:   J. Frazell Title:   Director

THE BANK OF NOVA SCOTIA

as a Lender and L/C Issuer

By:  

/s/ J. Frazell

Name:   J. Frazell Title:   Director

 

CREDIT AGREEMENT – Signature Page

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AMEGY BANK NATIONAL ASSOCIATION By:  

/s/ Kenneth R. Batson, III

Name:   Kenneth R. Batson, III Title:   Vice President

 

CREDIT AGREEMENT – Signature Page

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EXHIBIT A

FORM OF LOAN NOTICE

Date:                     ,         

 

To: The Bank of Nova Scotia, as Agent

Ladies and Gentlemen:

Reference is made to that certain Credit Agreement, dated as of September 30,
2010 (as amended, restated, extended, supplemented or otherwise modified in
writing from time to time, the “Agreement;” the terms defined therein being used
herein as therein defined), among Gulfport Energy Corporation, a Delaware
corporation (the “Borrower”), the Lenders from time to time party thereto, and
The Bank of Nova Scotia, as Administrative Agent and L/C Issuer.

The undersigned hereby requests (select one):

¨ A Borrowing of Loans            ¨ A conversion or continuation of Loans

 

  1. On                                          
                                                                                
(a Business Day).

 

  2. In the amount of $                                         .

 

  3. Comprised of                                          
                                       .

                                       [Type of Loan requested]

 

  4. For Eurodollar Rate Loans: with an Interest Period of                     
months.

The Borrowing, if any, requested herein complies with the provisos to the first
sentence of Section 2.01 of the Agreement.

 

GULFPORT ENERGY CORPORATION By:  

 

Name:  

 

Title:  

 

 

EXHIBIT A, Form of Loan Notice – Solo Page

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EXHIBIT B

FORM OF NOTE

 

$                                                    

 

FOR VALUE RECEIVED, the undersigned (“Borrower”), hereby promises to pay to
                                              or registered assigns (“Lender”),
in accordance with the provisions of the Agreement (as hereinafter defined), the
principal amount of each Loan from time to time made by the Lender to Borrower
under that certain Credit Agreement, dated as of September 30, 2010 (as amended,
restated, extended, supplemented or otherwise modified in writing from time to
time, the “Agreement;” the terms defined therein being used herein as therein
defined), among Borrower, the Lenders from time to time party thereto, and The
Bank of Nova Scotia , as Administrative Agent and L/C Issuer.

Borrower promises to pay interest on the unpaid principal amount of each Loan
from the date of such Loan until such principal amount is paid in full, at such
interest rates and at such times as provided in the Agreement. All payments of
principal and interest shall be made to Agent for the account of the Lender in
Dollars in immediately available funds at the Administrative Agent’s Office. If
any amount is not paid in full when due hereunder, such unpaid amount shall bear
interest, to be paid upon demand, from the due date thereof until the date of
actual payment (and before as well as after judgment) computed at the per annum
rate set forth in the Agreement.

This Note is one of the Notes referred to in the Agreement, is entitled to the
benefits thereof and may be prepaid in whole or in part subject to the terms and
conditions provided therein. This Note is also entitled to the benefits of the
Guaranty and is secured by the Collateral. Upon the occurrence and continuation
of one or more of the Events of Default specified in the Agreement, all amounts
then remaining unpaid on this Note shall become, or may be declared to be,
immediately due and payable all as provided in the Agreement. Loans made by the
Lender shall be evidenced by one or more loan accounts or records maintained by
the Lender in the ordinary course of business. The Lender may also attach
schedules to this Note and endorse thereon the date, amount and maturity of its
Loans and payments with respect thereto.

Borrower, for itself, its successors and assigns, hereby waives diligence,
presentment, protest and demand and notice of protest, demand, dishonor and
non-payment of this Note.

THIS NOTE SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE
STATE OF TEXAS.

 

GULFPORT ENERGY CORPORATION By:  

 

Name:  

 

Title:  

 

 

EXHIBIT B, Form of Note – Solo Page

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EXHIBIT D

FORM OF

ASSIGNMENT AND ASSUMPTION

This Assignment and Assumption (this “Assignment and Assumption”) is dated as of
the Effective Date set forth below and is entered into by and between [Insert
name of Assignor] (the “Assignor”) and [Insert name of Assignee] (the
“Assignee”). Capitalized terms used but not defined herein shall have the
meanings given to them in the Credit Agreement identified below (the “Credit
Agreement”), receipt of a copy of which is hereby acknowledged by the Assignee.
The Standard Terms and Conditions set forth in Annex 1 attached hereto are
hereby agreed to and incorporated herein by reference and made a part of this
Assignment and Assumption as if set forth herein in full.

For an agreed consideration, the Assignor hereby irrevocably sells and assigns
to the Assignee, and the Assignee hereby irrevocably purchases and assumes from
the Assignor, subject to and in accordance with the Standard Terms and
Conditions and the Credit Agreement, as of the Effective Date inserted by Agent
as contemplated below (i) all of the Assignor’s rights and obligations as a
Lender under the Credit Agreement and any other documents or instruments
delivered pursuant thereto to the extent related to the amount and percentage
interest identified below of all of such outstanding rights and obligations of
the Assignor under the respective facilities identified below (including,
without limitation, the Letters of Credit included in such facilities) and
(ii) to the extent permitted to be assigned under applicable law, all claims,
suits, causes of action and any other right of the Assignor (in its capacity as
a Lender) against any Person, whether known or unknown, arising under or in
connection with the Credit Agreement, any other documents or instruments
delivered pursuant thereto or the loan transactions governed thereby or in any
way based on or related to any of the foregoing, including, but not limited to,
contract claims, tort claims, malpractice claims, statutory claims and all other
claims at law or in equity related to the rights and obligations sold and
assigned pursuant to clause (i) above (the rights and obligations sold and
assigned pursuant to clauses (i) and (ii) above being referred to herein
collectively as, the “Assigned Interest”). Such sale and assignment is without
recourse to the Assignor and, except as expressly provided in this Assignment
and Assumption, without representation or warranty by the Assignor.

 

1. Assignor:                                                  

 

2. Assignee:                                                   [and is an
Affiliate/Approved Fund of [identify Lender]]

 

3. Borrower(s):                                              

 

4. Administrative Agent: The Bank of Nova Scotia, as the administrative agent
under the Credit Agreement

 

5. Credit Agreement:         Credit Agreement, dated as of September 30, 2010,
among Gulfport Energy Corporation, the Lenders from time to time party thereto,
and The Bank of Nova Scotia, as Administrative Agent and L/C Issuer

 

EXHIBIT D, Form of Assignment and Assumption - Page 1

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

6. Assigned Interest:

 

Facility Assigned

 

Aggregate

Amount of

Commitment/Loans

for all Lenders*

 

Amount of

Commitment/Loans

Assigned*

 

Percentage

Assigned of

Commitment/Loans

_______________   $                                $                            
                               % _______________   $                            
  $                                                           % _______________
  $                               $                              
                            %

 

[7. Trade Date:                     ]

Effective Date:                     , 20         [TO BE INSERTED BY
ADMINISTRATIVE AGENT AND WHICH SHALL BE THE EFFECTIVE DATE OF RECORDATION OF
TRANSFER IN THE REGISTER THEREFOR.]

The terms set forth in this Assignment and Assumption are hereby agreed to:

 

ASSIGNOR

[NAME OF ASSIGNOR]

By:  

 

  Name:  

 

  Title:  

 

ASSIGNEE [NAME OF ASSIGNEE] By:  

 

  Name:  

 

  Title:  

 

 

EXHIBIT D, Form of Assignment and Assumption - Page 2

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[Consented to and] Accepted: The Bank of Nova Scotia, as Administrative Agent
By:  

 

  Name:  

 

  Title:  

 

[Consented to:] Gulfport Energy Corporation By:  

 

  Name:  

 

  Title:  

 

 

EXHIBIT D, Form of Assignment and Assumption - Page 3

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ANNEX 1 TO ASSIGNMENT AND ASSUMPTION

STANDARD TERMS AND CONDITIONS FOR

ASSIGNMENT AND ASSUMPTION

1. Representations and Warranties.

1.1. Assignor. The Assignor (a) represents and warrants that (i) it is the legal
and beneficial owner of the Assigned Interest, (ii) the Assigned Interest is
free and clear of any lien, encumbrance or other adverse claim and (iii) it has
full power and authority, and has taken all action necessary, to execute and
deliver this Assignment and Assumption and to consummate the transactions
contemplated hereby; and (b) assumes no responsibility with respect to (i) any
statements, warranties or representations made in or in connection with the
Credit Agreement or any other Loan Document, (ii) the execution, legality,
validity, enforceability, genuineness, sufficiency or value of the Loan
Documents or any collateral thereunder, (iii) the financial condition of
Borrower, any of its Subsidiaries or Affiliates or any other Person obligated in
respect of any Loan Document or (iv) the performance or observance by Borrower,
any of its Subsidiaries or Affiliates or any other Person of any of their
respective obligations under any Loan Document.

1.2 Assignee. The Assignee (a) represents and warrants that (i) it has full
power and authority, and has taken all action necessary, to execute and deliver
this Assignment and Assumption and to consummate the transactions contemplated
hereby and to become a Lender under the Credit Agreement, (ii) it meets all
requirements of Section 11.06(b) under the Credit Agreement (subject to receipt
of such consents as may be required under the Credit Agreement), (iii) from and
after the Effective Date, it shall be bound by the provisions of the Credit
Agreement as a Lender thereunder and, to the extent of the Assigned Interest,
shall have the obligations of a Lender thereunder, and (iv) it has received a
copy of the Credit Agreement and the most recent Reserve Report delivered
pursuant to Section 7.02 thereof, together with copies of the most recent
financial statements delivered pursuant to Section 7.01 thereof, as applicable,
and such title information and other documents and information as it has deemed
appropriate to make its own credit analysis and decision to enter into this
Assignment and Assumption and to purchase the Assigned Interest on the basis of
which it has made such analysis and decision independently and without reliance
on Agent or any other Lender; and (b) agrees that (i) it will, independently and
without reliance on Agent, the Assignor or any other Lender, and based on such
documents and information as it shall deem appropriate at the time, continue to
make its own credit decisions in taking or not taking action under the Loan
Documents, and (ii) it will perform in accordance with their terms all of the
obligations which by the terms of the Loan Documents are required to be
performed by it as a Lender; and (c) agrees to and accepts the amount of the
current Borrowing Base under the Credit Agreement as determined in accordance
with Article IV of the Credit Agreement based upon its review and acceptance of
certain projected rates of production and net operating income and is satisfied
with the title information with respect to the oil and gas reserves attributable
to the Mortgaged Properties.

2. Payments. From and after the Effective Date, Agent shall make all payments in
respect of the Assigned Interest (including payments of principal, interest,
fees and other amounts) to the Assignor for amounts which have accrued to but
excluding the Effective Date and to the Assignee for amounts which have accrued
from and after the Effective Date.

 

EXHIBIT D, Form of Assignment and Assumption - Page 4

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3. General Provisions. This Assignment and Assumption shall be binding upon, and
inure to the benefit of, the parties hereto and their respective successors and
assigns. This Assignment and Assumption may be executed in any number of
counterparts, which together shall constitute one instrument. Delivery of an
executed counterpart of a signature page of this Assignment and Assumption by
telecopy shall be effective as delivery of a manually executed counterpart of
this Assignment and Assumption. This Assignment and Assumption shall be governed
by, and construed in accordance with, the law of the State of Texas.

 

EXHIBIT D, Form of Assignment and Assumption - Page 5