Exhibit 10.5

Execution Copy

INTERCREDITOR AGREEMENT

This INTERCREDITOR AGREEMENT, dated as of December 22, 2011, and entered into by
and among: (i) DUNE ENERGY, INC., a Delaware corporation (the “Company”);
(ii) each direct and indirect Subsidiary of the Company (A) set forth on the
signature pages hereto or (B) that becomes an Obligor after the date hereof;
(iii) BANK OF MONTREAL (“BMO”), in its capacity as administrative agent under
the First-Lien Credit Documents (together with its successors and assigns in
such capacity from time to time, the “First-Lien Collateral Agent”); and
(iv) U.S. BANK NATIONAL ASSOCIATION (“U.S. Bank”), in its capacity as collateral
agent under the Second-Lien Notes Documents (together with its successors and
assigns in such capacity from time to time, the “Second-Lien Collateral Agent”).
Capitalized terms used herein but not otherwise defined herein have the meanings
set forth in Section 1 below.

R E C I T A L S:

WHEREAS, the Company, the First-Lien Lenders party thereto from time to time,
and BMO, as administrative agent for the First-Lien Lenders (in such capacity,
and together with any successors and assigns in such capacity, the “First-Lien
Administrative Agent”), are party to that certain Amended and Restated Credit
Agreement, dated as of December 22, 2011 (as amended, restated, supplemented,
modified and/or Refinanced from time to time, the “First-Lien Credit Agreement”)
providing for the making of revolving loans to the Company, and the issuance of,
and participation in, Letters of Credit for the account of the Company, all as
provided therein;

WHEREAS, the Company, the subsidiary guarantors party thereto and U.S. Bank, as
trustee and collateral agent (in such capacity and together with any successors
and assigns in such capacity, the “Second-Lien Notes Trustee”) are party to that
certain Indenture (as amended, restated, supplemented, modified and/or
Refinanced from time to time, the “Second-Lien Notes Indenture”), dated as of
December 22, 2011, pursuant to which the Company issued $49,503,991 of its
floating rate senior secured notes due 2016 (the “Second-Lien Notes”);

WHEREAS, the obligations of the Grantors under (a) the First-Lien Credit
Documents, and all Swap Agreements with one or more Secured Swap Providers and
(b) owing to Banking Services Providers for Banking Services will be secured by,
inter alia, Liens on the Equity Interests of each Obligor and mortgages on
certain Property of the Company and each Obligor pursuant to the terms of the
First-Lien Security Documents;

WHEREAS, the obligations of the Grantors under the Second-Lien Notes Documents
will be secured by, inter alia, Liens on the Equity Interests of each Obligor
and mortgages on certain Property of the Company and each Obligor pursuant to
the terms of the Second-Lien Security Documents;

WHEREAS, the First-Lien Lenders have authorized and directed the First-Lien
Collateral Agent pursuant to the terms of the First-Lien Credit Documents to
execute and deliver this Agreement and to enter into certain covenants contained
herein on behalf of such First-Lien Lenders and other First-Lien Creditors; and

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WHEREAS, the Second-Lien Noteholders have authorized and directed the
Second-Lien Collateral Agent pursuant to the terms of the Second-Lien Notes
Indenture to execute and deliver this Agreement and to enter into certain
covenants contained herein on behalf of such Second-Lien Noteholders and other
Second-Lien Creditors;

NOW, THEREFORE, in consideration of the foregoing, the mutual covenants and
obligations herein set forth and for other good and valuable consideration, the
sufficiency and receipt of which are hereby acknowledged, the parties hereto,
intending to be legally bound, hereby agree as follows:

SECTION 1.

DEFINITIONS.

1.1. Defined Terms. As used in this Agreement (including in the recitals
hereto), the following terms shall have the following meanings:

“Affiliate” means, with respect to a specified Person, another Person that
directly, or indirectly through one or more intermediaries, Controls or is
Controlled by or is under common Control with the Person specified.

“Agent” means the First-Lien Collateral Agent and/or the Second-Lien Collateral
Agent, as the context may require.

“Agreement” means this Intercreditor Agreement, as amended, restated, renewed,
extended, supplemented and/or otherwise modified from time to time in accordance
with the terms hereof.

“Banking Services” means the bank or cash management services provided by the
Banking Services Provider pursuant to the provisions of the Cash Management
Agreements (as such term is defined in the First-Lien Credit Agreement).

“Banking Services Provider” means each First Lien Lender or any of its
Affiliates who provides Banking Services.

“Bankruptcy Code” means Title 11 of the United States Code entitled
“Bankruptcy,” as now and hereafter in effect, or any successor statute.

“Bankruptcy Law” means the Bankruptcy Code and any similar federal, state or
foreign law for the relief of debtors.

“BMO” has the meaning set forth in the first paragraph of this Agreement.

“Business Day” means any day that is not a Saturday, Sunday or other day on
which commercial banks in Houston, Texas are authorized or required by law to
remain closed.

“Collateral” means all of the Property of any Grantor, whether real, personal or
mixed, constituting First-Lien Collateral and/or Second-Lien Collateral.

 

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“Collateral Agents” means, collectively, the First-Lien Collateral Agent and the
Second-Lien Collateral Agent.

“Company” has the meaning set forth in the first paragraph of this Agreement.

“Comparable Second-Lien Security Document” means, in relation to any Shared
Collateral, that Second-Lien Security Document which creates (or purports to
create) a Lien on such Shared Collateral.

“Control” means the possession, directly or indirectly, of the power to direct
or cause the direction of the management or policies of a Person, whether
through the ability to exercise voting power, by contract or otherwise. For the
purposes of this definition, and without limiting the generality of the
foregoing, any Person that owns directly or indirectly 20% or more of the Equity
Interests having ordinary voting power for the election of the directors or
other governing body of a Person (other than as a limited partner of such other
Person) will be deemed to “control” such other Person. “Controlling” and
“Controlled” have meanings correlative thereto.

“Creditors” means, collectively, the First-Lien Creditors and the Second-Lien
Creditors.

“DIP Financing” means any post-petition financing (including on a priming
basis), whether from the First-Lien Creditors or any other third party under
Section 364 of the Bankruptcy Code or any other Bankruptcy Law.

“Discharge of First-Lien Credit Agreement Obligations” means, except to the
extent otherwise provided in Section 5.6 hereof (and subject to Section 6.5
hereof), (a) payment in full in cash of the principal of and interest (including
any and all post-petition interest accruing on or after the commencement of any
Insolvency or Liquidation Proceeding at the rate provided for in the respective
First-Lien Credit Documents, whether or not such interest would be allowed in
any such Insolvency or Liquidation Proceeding) and premium, if any, on all
indebtedness outstanding under the First-Lien Credit Documents, (b) payment in
full in cash of all other First-Lien Obligations (other than Hedging Obligations
and Banking Services) that are due and payable or otherwise accrued and owing at
or prior to the time such principal, interest and premium are paid,
(c) termination (without any prior demand for payment thereunder having been
made or, if made, with such demand having been fully reimbursed in cash) or cash
collateralization (in an amount and manner, and on terms, reasonably
satisfactory to the First-Lien Collateral Agent) of all Letters of Credit, if
any, and (d) termination of all other commitments of the First-Lien Creditors
under the First-Lien Credit Documents.

“Discharge of First-Lien Obligations” means, except to the extent otherwise
provided in Section 5.6 hereof (and subject to Section 6.5 hereof), (a) payment
in full in cash of the principal of and interest (including any and all
post-petition interest accruing on or after the commencement of any Insolvency
or Liquidation Proceeding at the rate provided for in the respective First-Lien
Document, whether or not such interest would be allowed in any such Insolvency
or Liquidation Proceeding) and premium, if any, on all indebtedness outstanding
under the First-Lien Documents, (b) payment in full in cash of all other
First-Lien Obligations that are due and payable or otherwise accrued and owing
at or prior to the time such principal, interest and premium are paid,
(c) termination (without any prior demand for payment thereunder

 

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having been made or, if made, with such demand having been fully reimbursed in
cash) or cash collateralization (in an amount and manner, and on terms,
reasonably satisfactory to the First-Lien Collateral Agent) of all Letters of
Credit and Hedging Documents and (d) termination of all other commitments of the
First-Lien Creditors under the First-Lien Documents.

“Discharge of Second-Lien Obligations” means (a) payment in full in cash of the
principal of and interest (including post-petition interest accruing on or after
the commencement of any Insolvency or Liquidation Proceeding at the rate
provided for in the respective Second-Lien Notes Document, whether or not such
interest would be allowed in any such Insolvency or Liquidation Proceeding) and
premium, if any, on all indebtedness outstanding under the Second-Lien Notes
Documents and (b) payment in full in cash of all other Second-Lien Obligations
that are due and payable or otherwise accrued and owing at or prior to the time
such principal, interest and premium are paid.

“Equity Interests” means shares of capital stock, partnership interests,
membership interests in a limited liability company, beneficial interests in a
trust or other equity ownership interests in a Person, and any warrants, options
or other rights entitling the holder thereof to purchase or acquire any such
Equity Interest.

“Existing Secured Swap Provider” means any First-Lien Lender or any Affiliate of
a First-Lien Lender under any Swap Agreement between the Company or any
Subsidiary and such First-Lien Lender or Affiliate of a First-Lien Lender
entered into while such Person (or in the case of its Affiliate, the Person
affiliated therewith) is a First-Lien Lender under the First-Lien Credit
Agreement (after giving effect to all netting agreements relating to such Swap
Agreements).

“First-Lien Administrative Agent” has the meaning set forth in the recitals
hereto.

“First-Lien Collateral” means all of the Property of any Grantor with respect to
which a Lien is granted (or purported to be granted) as security for any
First-Lien Obligations pursuant to any First-Lien Security Document, including
all cash and cash equivalents at any time delivered as collateral under the
First-Lien Credit Agreement.

“First-Lien Collateral Agent” has the meaning provided in the first paragraph of
this Agreement.

“First-Lien Credit Agreement” has the meaning set forth in the recitals hereto.

“First-Lien Credit Documents” means the First-Lien Credit Agreement, the
First-Lien Security Documents and the other “Loan Documents” (as such term is
defined in the First-Lien Credit Agreement) and each of the other agreements,
documents and instruments providing for or evidencing any other First-Lien
Obligation and any other document or instrument executed or delivered at any
time in connection with any First-Lien Obligation (including any intercreditor
or joinder agreement among the First-Lien Creditors but excluding Swap
Agreements), to the extent such are effective at the relevant time, as each may
be amended, modified, restated, supplemented, replaced and/or Refinanced from
time to time.

 

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“First-Lien Creditors” means, at any time, the holders of First-Lien Obligations
at such time, including the First-Lien Lenders, the Secured Swap Providers, the
Banking Services Providers, the First-Lien Collateral Agent, the First-Lien
Administrative Agent and the other agents and arrangers under the First-Lien
Credit Agreement.

“First-Lien Documents” means, collectively, the First-Lien Credit Documents and
the Hedging Documents.

“First-Lien Lenders” means the “Lenders” as such term is defined in the
First-Lien Credit Agreement; provided that the term “First-Lien Lender” shall in
any event also include each issuer of Letters of Credit.

“First-Lien Majority Lenders” means the “Majority Lenders” as such term is
defined in the First-Lien Credit Agreement.

“First-Lien Mortgages” means, collectively, each mortgage, deed of trust and any
other document or instrument under which any Lien on any Oil and Gas Properties
owned by any Grantor is granted to secure any First-Lien Obligations or under
which rights or remedies with respect to any such Liens are governed, as the
same may be amended, supplemented, restated, modified and/or Refinanced from
time to time.

“First-Lien Obligations” means (i) all Obligations outstanding under the
First-Lien Credit Agreement and the other First-Lien Credit Documents, (ii) all
Hedging Obligations and (iii) all obligations owing to Banking Services
Providers for Banking Services. “First-Lien Obligations” shall in any event
include: (a) all post-petition interest accrued or accruing (or which would,
absent commencement of an Insolvency or Liquidation Proceeding (and the effect
of provisions such as Section 502(b)(2) of the Bankruptcy Code), accrue) on or
after the commencement of an Insolvency or Liquidation Proceeding in accordance
with the rate specified in the relevant First-Lien Document, whether or not the
claim for such interest is allowed as a claim in such Insolvency or Liquidation
Proceeding, (b) any and all reasonable fees and expenses (including attorneys’
and/or financial consultants’ fees and expenses) incurred by the First-Lien
Collateral Agent, the First-Lien Administrative Agent and the other First-Lien
Creditors on or after the commencement of an Insolvency or Liquidation
Proceeding, whether or not the claim for fees and expenses is allowed under
Section 506(b) of the Bankruptcy Code or any other provision of the Bankruptcy
Code or Bankruptcy Law as a claim in such Insolvency or Liquidation Proceeding,
and (c) all obligations and liabilities of each Grantor under each First-Lien
Document to which it is a party which, but for the automatic stay under
Section 362(a) of the Bankruptcy Code, would become due.

“First-Lien Collateral Agreements” means, collectively, each first-priority
collateral agreement and any other document or instrument under which any Lien
on any First-Lien Collateral is granted to secure any First-Lien Obligations or
under which rights or remedies with respect to any such Liens are governed, as
the same may be amended, supplemented, restated, modified and/or Refinanced from
time to time.

 

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“First-Lien Security Documents” means each First-Lien Mortgage, each First-Lien
Collateral Agreement and any other agreement, document, mortgage or instrument
pursuant to which a Lien is granted (or purported to be granted) by a Grantor
securing any First-Lien Obligations or under which rights or remedies with
respect to such Liens are governed, as the same may be amended, supplemented,
restated, modified and/or Refinanced from time to time.

“Grantors” means, collectively, the Company and each Obligor.

“Hedging Documents” means each Swap Agreement between a Grantor and a Secured
Swap Provider and each other agreement, document or instrument that provides for
or evidences any of the Hedging Obligations, as each may be amended, modified,
restated, supplemented, replaced and/or Refinanced from time to time.

“Hedging Obligations” means (i) the full and prompt payment when due (whether at
the stated maturity, by acceleration or otherwise) of all obligations (including
obligations which, but for the automatic stay under Section 362(a) of the
Bankruptcy Code, would become due) and liabilities (including indemnities, fees
and interest thereon and all post-petition interest and fees that accrue on or
after the commencement of any Insolvency or Liquidation Proceeding at the rate
provided for in the respective Swap Agreement, whether or not a claim for
post-petition interest or fees is allowed in any such Insolvency or Liquidation
Proceeding) of each Grantor owing to the Secured Swap Providers, now existing or
hereafter incurred under, arising out of or in connection with each Swap
Agreement to which a Secured Swap Provider is party (including all such
obligations and indebtedness under any guarantee of any such Swap Agreement to
which each Grantor is a party, but excluding any additional transactions or
confirmations entered into (i) after such Secured Swap Provider ceases to be a
First-Lien Lender or an Affiliate of a First-Lien Lender or (ii) after
assignment by a Secured Swap Provider to another Secured Swap Provider that is
not a First-Lien Lender or an Affiliate of a First-Lien Lender) and (ii) the due
performance and compliance by each Grantor with the terms, conditions and
agreements of each Swap Agreement to which a Secured Swap Provider is party.

“Insolvency or Liquidation Proceeding” means (a) any voluntary or involuntary
case or proceeding under the Bankruptcy Code with respect to any Grantor,
(b) any other voluntary or involuntary insolvency, reorganization or bankruptcy
case or proceeding, or any receivership, liquidation, reorganization or other
similar case or proceeding with respect to any Grantor or with respect to a
material portion of its respective assets, (c) any liquidation, dissolution,
reorganization or winding up of any Grantor whether voluntary or involuntary and
whether or not involving insolvency or bankruptcy or (d) any assignment for the
benefit of creditors or any other marshalling of assets and liabilities of any
Grantor.

“Letters of Credit” means “Letters of Credit” as such term is defined in the
First-Lien Credit Agreement.

“Lien” means any interest in Property securing an obligation owed to, or a claim
by, a Person other than the owner of the Property, whether such interest is
based on the common law, statute or contract, and whether such obligation or
claim is fixed or contingent, and including but not limited to (a) the lien or
security interest arising from a mortgage, encumbrance, pledge, security
agreement, conditional sale or trust receipt or a lease, consignment or bailment
for security purposes or (b) royalties, production payments and the like payable
out of Oil and Gas Properties. The term “Lien” shall include easements,
restrictions, servitudes, permits,

 

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conditions, covenants, encroachments, exceptions or reservations. For the
purposes of this Agreement, each Grantor shall be deemed to be the owner of any
Property which it has acquired or holds subject to a conditional sale agreement,
or leases under a financing lease or other arrangement pursuant to which title
to the Property has been retained by or vested in some other Person in a
transaction intended to create a financing.

“New Agent” has the meaning set forth in Section 5.6 hereof.

“Obligations” means any and all obligations (including guaranty obligations)
with respect to the payment and performance of (a) any principal of or interest
or premium on any indebtedness, including any reimbursement obligation in
respect of any letter of credit, or any other liability, including post-petition
interest or premium that accrues on or after the commencement of any Insolvency
or Liquidation Proceeding of any Grantor at the rate provided for in the
respective documentation, whether or not a claim for post-petition interest or
premium is allowed in any such Insolvency or Liquidation Proceeding, (b) any
fees, indemnification obligations, expense reimbursement obligations or other
liabilities payable under the documentation governing any indebtedness
(including obligations incurred in connection with the retaking, holding,
selling or otherwise disposing of or realizing on the Collateral), (c) any
obligation to post cash collateral in respect of letters of credit or any other
obligations, and (d) all performance obligations under the documentation
governing any indebtedness.

“Obligor” means each Subsidiary of the Company which is or becomes liable for
any First-Lien Obligations or Second-Lien Obligations, whether directly, by
guaranty, by grant of a Lien, or otherwise.

“Oil and Gas Properties” has the meaning set forth in the First-Lien Credit
Agreement.

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

“Post-Petition Financing” has the meaning set forth in Section 6.1(a) hereof.

“Priority Lien” has the meaning set forth in Section 5.1(c) hereof.

“Property” means any interest in any kind of property or asset, whether real,
personal or mixed, or tangible or intangible, including, without limitation,
cash, securities, accounts, contract rights.

“Recovery” has the meaning set forth in Section 6.5 hereof.

“Refinance” means, in respect of any indebtedness, to refinance, extend, renew,
defease, restructure, replace, refund or repay, or to issue other indebtedness,
in exchange or replacement for, such indebtedness, whether with the same or
different lenders, agents or arrangers. “Refinanced” and “Refinancing” shall
have correlative meanings; provided that if such refinancing indebtedness is
secured, the holders of such refinancing indebtedness, or a duly authorized
agent on their behalf, agree in writing to be bound by terms of this Agreement.

“Remedial Action” has the meaning set forth in Section 5.1(a)(i) hereof.

 

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“Required First-Lien Creditors” means (i) at all times prior to the occurrence
of the Discharge of First-Lien Credit Agreement Obligations, the First-Lien
Majority Lenders (or, to the extent required by the First-Lien Credit Agreement,
a larger quantum of the First-Lien Lenders), and (ii) at all times after the
occurrence of the Discharge of First-Lien Credit Agreement Obligations, the
Secured Swap Providers holding at least the majority of the then outstanding
Hedging Obligations (determined by the First-Lien Collateral Agent in such
reasonable manner as is acceptable to it).

“Second-Lien Collateral” means all of the Property of any Grantor with respect
to which a Lien is granted (or purported to be granted) as security for any
Second-Lien Obligations pursuant to any Second-Lien Security Document, including
all cash and cash equivalents at any time delivered as collateral under the
Second-Lien Notes Indenture.

“Second-Lien Collateral Agent” has the meaning set forth in the first paragraph
of this Agreement.

“Second-Lien Collateral Agreements” means, collectively, each second-priority
collateral agreement and any other document or instrument under which any Lien
on any Second-Lien Collateral is granted to secure any Second-Lien Obligations
or under which rights or remedies with respect to any such Liens are governed,
as the same may be amended, supplemented, restated, modified and/or Refinanced
from time to time.

“Second-Lien Creditors” means, at any time, the holders of Second-Lien
Obligations at such time, including the Second-Lien Noteholders, the Second-Lien
Collateral Agent and the Second-Lien Notes Trustee.

“Second-Lien Mortgages” means, collectively, each mortgage, deed of trust and
any other document or instrument under which any Lien on any Oil and Gas
Properties owned by any Grantor is granted to secure any Second-Lien Obligations
or under which rights or remedies with respect to any such Liens are governed,
as the same may be amended, supplemented, restated, modified and/or Refinanced
from time to time.

“Second-Lien Notes” has the meaning set forth in the recitals hereto.

“Second-Lien Notes Documents” means the Second-Lien Notes Indenture, the
Second-Lien Notes, the Second-Lien Security Documents, each of the other
agreements, documents and instruments providing for or evidencing any other
Second-Lien Obligation, any other document or instrument executed or delivered
at any time in connection with any Second-Lien Obligation, and any agreement,
document or instrument identified as a “Second-Lien Notes Document” in the
Second-Lien Notes Indenture, as the same may be amended, restated, supplemented,
modified and/or Refinanced from time to time.

“Second-Lien Noteholders” means the “Holders” as such term is defined in the
Second-Lien Notes Indenture.

“Second-Lien Notes Indenture” has the meaning set forth in the recitals hereto.

“Second-Lien Notes Trustee” has the meaning set forth in the recitals hereto.

 

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“Second-Lien Obligations” means all Obligations outstanding under the
Second-Lien Notes Indenture and the other Second-Lien Notes Documents.
“Second-Lien Obligations” shall in any event include: (a) all interest accrued
or accruing (or which would, absent commencement of an Insolvency or Liquidation
Proceeding (and the effect of provisions such as Section 502(b)(2) of the
Bankruptcy Code), accrue) on or after commencement of an Insolvency or
Liquidation Proceeding in accordance with the rate specified in the relevant
Second-Lien Notes Document whether or not the claim for such interest is allowed
as a claim in such Insolvency or Liquidation Proceeding, (b) any and all fees
and expenses (including attorneys’ and/or financial consultants’ fees and
expenses) incurred by the Second-Lien Collateral Agent and the Second-Lien
Creditors on or after the commencement of an Insolvency or Liquidation
Proceeding, whether or not the claim for fees and expenses is allowed under
Section 506(b) of the Bankruptcy Code or any other provision of the Bankruptcy
Code or Bankruptcy Law as a claim in such Insolvency or Liquidation Proceeding,
and (c) all obligations and liabilities of each Grantor under each Second-Lien
Notes Document to which it is a party which, but for the automatic stay under
Section 362(a) of the Bankruptcy Code, would become due.

“Second-Lien Release” has the meaning set forth in Section 5.1(a) hereof.

“Second-Lien Security Documents” means the Second-Lien Mortgages, the
Second-Lien Collateral Agreements and any other agreement, document, mortgage or
instrument pursuant to which a Lien is granted (or purported to be granted) by a
Grantor securing any Second-Lien Obligations or under which rights or remedies
with respect to such Liens are governed, as the same may be amended, restated,
supplemented, modified and/or Refinanced from time to time.

“Secured Swap Provider” means (i) each Existing Secured Swap Provider, (ii) each
Person that is a party to a Swap Agreement with a Grantor that entered into such
Swap Agreement before or while such Person was a First-Lien Lender or an
Affiliate of a First-Lien Lender, whether or not such Person at any time ceases
to be a First-Lien Lender or an Affiliate of a First-Lien Lender, as the case
may be or (iii) assignee of any Person described in clauses (ii) or (iii) above
so long as such assignee is an Approved Counterparty (as such term is defined in
the First-Lien Credit Agreement).

“Security Documents” means, collectively, the First-Lien Security Documents and
the Second-Lien Security Documents.

“Shared Collateral” means all Property of the Grantors with respect to which a
Lien is granted (or purported to be granted) as security for both (i) the
First-Lien Obligations pursuant to any First-Lien Security Document and (ii) the
Second-Lien Obligations pursuant to any Second-Lien Security Document.

“Subsidiary” means with respect to any Person (the “parent”) at any date, any
other Person the accounts of which would be consolidated with those of the
parent in the parent’s consolidated financial statements if such financial
statements were prepared in accordance with GAAP as of such date, as well as any
other Person (a) of which Equity Interests representing more than 50% of the
equity or more than 50% of the ordinary voting power (irrespective of whether or
not at the time Equity Interests of any other class or classes of such Person
shall have or might have voting power by reason of the happening of any
contingency) or, in the case of a partnership, any general partnership interests
are, as of such date, owned, controlled or held, or (b) that is, as of such
date, otherwise Controlled, by the parent or one or more subsidiaries of the
parent or by the parent and one or more subsidiaries of the parent.

 

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“Swap Agreement” means any agreement with respect to any swap, forward, future
or derivative transaction or option or similar agreement, whether exchange
traded, “over-the-counter” or otherwise, involving, or settled by reference to,
one or more rates, currencies, commodities, equity or debt instruments or
securities, or economic, financial or pricing indices or measures of economic,
financial or pricing risk or value or any similar transaction or any combination
of these transactions.

“UCC” means the Uniform Commercial Code as from time to time in effect in any
relevant jurisdiction.

1.2. Terms Generally. The definitions of terms herein shall apply equally to the
singular and plural forms of the terms defined. Whenever the context may
require, any pronoun shall include the corresponding masculine, feminine and
neuter forms. The words “include”, “includes” and “including” shall be deemed to
be followed by the phrase “without limitation”. The word “will” shall be
construed to have the same meaning and effect as the word “shall”. Unless the
context requires otherwise (a) any definition of or reference to any agreement,
instrument or other document herein shall be construed as referring to such
agreement, instrument or other document as from time to time amended,
supplemented or otherwise modified (subject to any restrictions on such
amendments, supplements or modifications set forth herein), (b) any reference
herein to any law shall be construed as referring to such law as amended,
modified, codified or reenacted, in whole or in part, and in effect from time to
time, (c) any reference herein to any Person shall be construed to include such
Person’s successors and assigns (subject to the restrictions contained herein),
(d) the words “herein”, “hereof” and “hereunder”, and words of similar import,
shall be construed to refer to this Agreement in its entirety and not to any
particular provision hereof, (e) with respect to the determination of any time
period, the word “from” means “from and including” and the word “to” means “to
and including” and (f) any reference herein to Articles, Sections, Annexes,
Exhibits and Schedules shall be construed to refer to Articles and Sections of,
and Annexes, Exhibits and Schedules to, this Agreement. No provision of this
Agreement shall be interpreted or construed against any Person solely because
such Person or its legal representative drafted such provision

SECTION 2.

PRIORITY OF LIENS.

2.1. Subordination; Etc. Notwithstanding the date, manner or order of grant,
attachment or perfection of any Liens securing the Second-Lien Obligations
granted on the Collateral or of any Liens securing the First-Lien Obligations
granted on the Collateral and notwithstanding any provision of the UCC, any
other applicable law, this Agreement, the First-Lien Documents or the
Second-Lien Notes Documents to the contrary, or any other circumstance
whatsoever (including any non-perfection of any Lien purporting to secure the
First-Lien Obligations and/or Second-Lien Obligations), the Second-Lien
Collateral Agent, on behalf of itself and the other Second-Lien Creditors (by
its acceptance of the benefits of the Second-Lien Notes Documents) hereby agrees
that: (a) any Lien on the Collateral securing any First-Lien

 

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Obligations now or hereafter held by or on behalf of the First-Lien Collateral
Agent or any other First-Lien Creditors or any agent or trustee therefor,
regardless of how acquired, whether by grant, possession, statute, operation of
law, subrogation or otherwise, shall be senior in all respects and prior to any
Lien on the Collateral securing any of the Second-Lien Obligations and (b) any
Lien on the Collateral now or hereafter held by or on behalf of the Second-Lien
Collateral Agent, any other Second-Lien Creditors or any agent or trustee
therefor regardless of how acquired, whether by grant, possession, statute,
operation of law, subrogation or otherwise, shall be junior and subordinate in
all respects to all Liens on the Collateral securing any First-Lien Obligations.
All Liens on the Collateral securing any First-Lien Obligations shall be and
remain senior in all respects and prior to all Liens on the Collateral securing
any Second-Lien Obligations for all purposes, whether or not such Liens securing
any First-Lien Obligations are subordinated to any Lien securing any other
obligation of the Company, any Grantor or any other Person. The parties hereto
acknowledge and agree that it is their intent that (i) the First-Lien
Obligations (and the security therefor) constitute a separate and distinct class
(and separate and distinct claims) from the Second-Lien Obligations (and the
security therefor) and (ii) the grant of Liens securing payment and performance
of the First-Lien Obligations and the grant of Liens securing payment and
performance of the Second-Lien Obligations create two separate and distinct
Liens with each such Lien securing only the corresponding Obligations.

2.2. Prohibition on Contesting Liens. Each of the Second-Lien Collateral Agent,
for itself and on behalf of each Second-Lien Creditor, and the First-Lien
Collateral Agent, for itself and on behalf of each First-Lien Creditor, agrees
that it shall not (and hereby waives any right to) contest or support any other
Person in contesting, in any proceeding (including any Insolvency or Liquidation
Proceeding), (i) the validity or enforceability of any Security Document or any
Obligation thereunder, (ii) the validity, perfection, priority or enforceability
of the Liens, mortgages, assignments and security interests granted pursuant to
the Security Documents with respect to the First-Lien Obligations or the
Second-Lien Obligations or (iii) the relative rights and duties of the
First-Lien Creditors and the Second-Lien Creditors granted and/or established in
this Agreement or any other Security Document with respect to such Liens,
mortgages, assignments, and security interests; provided that nothing in this
Agreement shall be construed to prevent or impair the rights of the First-Lien
Collateral Agent or any First-Lien Creditor or the Second-Lien Collateral Agent
or any Second-Lien Creditor to enforce this Agreement, including the First-Lien
Collateral Agent’s right to enforce the priority of the Liens securing the
First-Lien Obligations as provided in Section 2.1.

2.3. No New Liens. (a) So long as the Discharge of First-Lien Obligations has
not occurred, the parties hereto agree that the Grantors shall not, and the
Company shall not permit any Grantor to, grant or permit any additional Liens,
or take any action to perfect any additional Liens, on any Property to secure
any Second-Lien Obligation unless it has also granted or contemporaneously
grants a Lien on such Property to secure the First-Lien Obligations and has
taken all actions required to perfect such Liens. To the extent that the
foregoing provisions are not complied with for any reason, without limiting any
other rights and remedies available to the First-Lien Collateral Agent and/or
the other First-Lien Creditors, the Second-Lien Collateral Agent, on behalf of
itself and the other Second-Lien Creditors (by its acceptance of the benefits of
the Second-Lien Notes Documents), agrees that any amounts received by or
distributed to any of them pursuant to or as a result of Liens granted in
contravention of this Section 2.3 shall be subject to Section 4.2.

 

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(b) So long as the Discharge of Second-Lien Obligations has not occurred, the
parties hereto agree that the Grantors shall not, and shall not permit any
Grantor to, grant or permit any additional Liens, or take any action to perfect
any additional Liens, on any Property to secure any First-Lien Obligation unless
it has also granted or contemporaneously grants a Lien on such Property to
secure the Second-Lien Obligations and has taken all actions required to perfect
such Liens.

2.4. Similar Liens and Agreements. The parties hereto agree that it is their
intention that the Second-Lien Collateral shall not be more expansive than the
First-Lien Collateral. In furtherance of the foregoing and of Section 8.9
hereof, each Agent and each Creditor agrees, subject to the other provisions of
this Agreement:

(i) upon request by either Agent to the other Agent, to cooperate in good faith
(and to direct their counsel to cooperate in good faith) from time to time in
order to determine the specific items included in their respective Collateral
and the steps taken to perfect the Liens thereon and the identity of the
respective parties obligated under the First-Lien Documents and the Second-Lien
Notes Documents, respectively;

(ii) that the Second-Lien Security Documents creating Liens on the Shared
Collateral shall be in all material respects the same forms of documents as the
respective First-Lien Security Documents creating Liens on the Shared Collateral
other than (A) with respect to the priority nature of the Liens created
thereunder in such Shared Collateral, (B) such other modifications to such
Second-Lien Security Documents which are less restrictive than the corresponding
First-Lien Security Documents and (C) provisions in the Second-Lien Security
Documents which are solely applicable to the rights and duties of the
Second-Lien Collateral Agent and/or the Second-Lien Notes Trustee; and

(iii) that at no time shall there be any Obligor in respect of the Second-Lien
Obligations that is not also an Obligor in respect of the First-Lien
Obligations.

SECTION 3.

ENFORCEMENT.

3.1. Exercise of Remedies. (a) So long as the Discharge of First-Lien
Obligations has not occurred, whether or not any Insolvency or Liquidation
Proceeding has been commenced by or against the Company or any Grantor: (i) the
Second-Lien Collateral Agent and the other Second-Lien Creditors (v) will not
exercise or seek to exercise any rights or remedies (including setoff) with
respect to any Collateral (including the exercise of any right under any lockbox
agreement, control account agreement, landlord waiver or bailee’s letter or
similar agreement or arrangement to which the Second-Lien Collateral Agent or
any Second-Lien Creditor is a party) or institute or commence, or join with any
Person in commencing, any action or proceeding with respect to such rights or
remedies with respect to any Collateral (including any action of foreclosure,
enforcement, collection or execution and any Insolvency or Liquidation
Proceeding), (w) will not contest, protest or object to any foreclosure
proceeding or action brought by the First-Lien Collateral Agent or any other
First-Lien Creditor or any other exercise by the First-Lien Collateral Agent or
any other First-Lien Creditor of any rights and remedies

 

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relating to the Collateral under the First-Lien Credit Documents or otherwise,
(x) will not object to the forbearance by the First-Lien Collateral Agent or the
other First-Lien Creditors from bringing or pursuing any foreclosure proceeding
or action or any other exercise of any rights or remedies relating to the
Collateral, (y) will not institute any suit or other proceeding or assert in any
suit, Insolvency or Liquidation Proceeding or other proceeding any claim against
any First-Lien Creditor seeking damages from or other relief by way of specific
performance, instructions or otherwise, with respect to, and no First-Lien
Creditor shall be liable for, any action taken or omitted to be taken by any
First-Lien Creditor with respect to the Collateral or pursuant to the First-Lien
Documents and (z) will not make any judicial or nonjudicial claim or demand or
commence any judicial or non-judicial proceedings against any Obligor or any of
its Subsidiaries or Affiliates under or with respect to any Second-Lien Security
Document seeking payment or damages from or other relief by way of specific
performance, instructions or otherwise under or with respect to any Second-Lien
Security Document (other than filing a proof of claim as set forth below and in
Section 5.4) or exercise any right, remedy or power under or with respect to, or
otherwise take any action to enforce, other than filing a proof of claim as set
forth below and in Section 5.4, any Second-Lien Security Document; and (ii) the
First-Lien Collateral Agent shall have the exclusive right, and the Required
First-Lien Creditors shall have the exclusive right to instruct the First-Lien
Collateral Agent, to enforce rights, exercise remedies (including setoff and the
right to credit bid their debt) and make determinations regarding the release,
disposition, or restrictions with respect to the Collateral without any
consultation with, or the consent of, the Second-Lien Collateral Agent or any
other Second-Lien Creditor, all as though the Second-Lien Obligations did not
exist; provided that (A) such exclusive right, with respect to Second-Lien
Obligations, shall last for a period of 180 days (subject to extension for any
period during which the First-Lien Collateral Agent is diligently pursing
remedies against the Collateral or is prohibited by applicable law from pursuing
such remedies (the “Standstill Period”)) commencing on the later of (x) the
acceleration of Second-Lien Obligations and (y) the First-Lien Collateral Agent
receiving notice of acceleration from the Second-Lien Collateral Agent, (B) in
any Insolvency or Liquidation Proceeding commenced by or against the Company or
any Grantor, the Second-Lien Collateral Agent may file a claim or statement of
interest with respect to the Second-Lien Obligations, (C) the Second-Lien
Collateral Agent may take any action (not adverse to the prior Liens on the
Collateral securing the First-Lien Obligations, or the rights of the First-Lien
Collateral Agent or the other First-Lien Creditors to exercise remedies in
respect thereof) in order to preserve or protect its Lien on the Shared
Collateral in compliance with the terms of this Agreement and (D) the
Second-Lien Creditors shall be entitled to file any necessary responsive or
defensive pleading in opposition to any motion, claim, adversary proceeding or
other pleading made by any Person objecting to or otherwise seeking the
disallowance of the claims of the Second-Lien Creditors, including any claim
secured by the Shared Collateral, if any, in each case in compliance with the
terms of this Agreement. In exercising rights and remedies with respect to the
Collateral, the First-Lien Collateral Agent and the other First-Lien Creditors
may enforce the provisions of the First-Lien Credit Documents and exercise
remedies thereunder, all in such order and in such manner as they may determine
in the exercise of their sole discretion. Such exercise and enforcement by the
First-Lien Collateral Agent or First-Lien Creditors shall include the rights of
an agent appointed by them to sell or otherwise dispose of Collateral upon
foreclosure, to incur expenses in connection with such sale or disposition, and
to exercise all the rights and remedies of a secured creditor under the Uniform
Commercial Code of any applicable jurisdiction and of a secured creditor under
Bankruptcy Laws of any applicable jurisdiction.

 

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(b) The Second-Lien Collateral Agent, on behalf of itself and the Second-Lien
Creditors, agrees that it will not knowingly take or receive any Collateral or
any proceeds of Collateral in connection with the exercise of any right or
remedy (including setoff) with respect to any Collateral, unless and until the
Discharge of First-Lien Obligations has occurred. Without limiting the
generality of the foregoing, unless and until the Discharge of First-Lien
Obligations has occurred, the sole right of the Second-Lien Collateral Agent and
the other Second-Lien Creditors with respect to the Collateral is to hold a Lien
on the Shared Collateral pursuant to the Second-Lien Security Documents for the
period and to the extent granted therein and to receive a share of the proceeds
thereof, if any, after the Discharge of First-Lien Obligations has occurred in
accordance with the terms of the Second-Lien Notes Documents and applicable law.

(c) The Second-Lien Collateral Agent, for itself and on behalf of the
Second-Lien Creditors, and each other Second-Lien Creditor (by its acceptance of
the benefits of the Second-Lien Notes Documents), (i) agrees that the
Second-Lien Collateral Agent and the other Second-Lien Creditors will not (in
the case of the Second-Lien Collateral Agent, knowingly) take any action that
would hinder, delay, limit or prohibit any exercise of remedies under the
First-Lien Documents, including any collection, sale, lease, exchange, transfer
or other disposition of the Collateral, whether by foreclosure or otherwise, or
that would limit, invalidate, avoid or set aside any Lien or Security Document
or subordinate the priority of the First-Lien Obligations to the Second-Lien
Obligations or grant the Liens securing the Second-Lien Obligations equal
ranking to the Liens securing the First-Lien Obligations and (ii) hereby waives
any and all rights it or the Second-Lien Creditors may have as a junior lien
creditor or otherwise (whether arising under the UCC or under any other law) to
object to the manner in which the First-Lien Collateral Agent or the other
First-Lien Creditors seek to enforce or collect the First-Lien Obligations or
the Liens granted in any of the First-Lien Collateral (provided that such
actions are commercially reasonable), regardless of whether any action or
failure to act by or on behalf of the First-Lien Collateral Agent or First-Lien
Creditors is adverse to the interest of the Second-Lien Creditors.

(d) The Second-Lien Collateral Agent hereby acknowledges and agrees that no
covenant, agreement or restriction contained in the Second-Lien Security
Documents or any other Second-Lien Notes Document shall be deemed to restrict in
any way the rights and remedies of the First-Lien Collateral Agent or the other
First-Lien Creditors with respect to the Collateral as set forth in this
Agreement and the First-Lien Credit Documents.

(e) The Second-Lien Collateral Agent, for itself and on behalf of the other
Second-Lien Creditors (by its acceptance of the benefits of the Second-Lien
Notes Documents) agrees that the Second-Lien Collateral Agent and the other
Second-Lien Creditors will not, without the prior written consent of the
Required First-Lien Creditors (or the First-Lien Collateral Agent at their
direction or with their consent), issue any payment blockage or similar notice
with respect to any obligations that are subordinated in right of payment to any
First-Lien Obligations before the Discharge of First-Lien Obligations has
occurred.

 

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3.2. Actions Upon Breach. (a) If any Second-Lien Creditor, contrary to this
Agreement, commences or participates in any action or proceeding against any
Grantor or the Collateral, such Grantor, with the prior written consent of the
First-Lien Collateral Agent, may interpose as a defense or dilatory plea the
making of this Agreement, and any First-Lien Creditor may intervene and
interpose such defense or plea in its or their name or in the name of such
Grantor.

(b) Should any Second-Lien Creditor, contrary to this Agreement, in any way
take, attempt to or threaten to take any action with respect to the Collateral
(including any attempt to realize upon or enforce any remedy with respect to
this Agreement), or take any other action in violation of this Agreement or fail
to take any action required by this Agreement, the First-Lien Collateral Agent
or any other First-Lien Creditor (in its own name or in the name of the relevant
Grantor) or the relevant Grantor, with the prior written consent of the
First-Lien Collateral Agent, (i) may obtain relief against such Second-Lien
Creditor by injunction, specific performance and/or other appropriate equitable
relief, it being understood and agreed by the Second-Lien Collateral Agent on
behalf of each Second-Lien Creditor that (x) the First-Lien Creditors’ damages
from its actions may at that time be difficult to ascertain and may be
irreparable, and (y) each Second-Lien Creditor waives any defense that the
Grantors and/or the First-Lien Creditors cannot demonstrate damage and/or be
made whole by the awarding of damages, and (ii) shall be entitled to damages, as
well as reimbursement for all reasonable costs and expenses incurred in
connection with any action to enforce the provisions of this Agreement.

SECTION 4.

PAYMENTS.

4.1. Application of Proceeds. So long as the Discharge of First-Lien Obligations
has not occurred, any proceeds of any Shared Collateral pursuant to the
enforcement of any Security Document or the exercise of any remedial provision
thereunder, together with all other proceeds of Collateral received by any
Creditor (including all funds received in respect of post-petition interest or
fees and expenses) as a result of any such enforcement or the exercise of any
such remedial provision or as a result of any distribution of or in respect of
any Shared Collateral (whether or not expressly characterized as such) upon or
in any Insolvency or Liquidation Proceeding with respect to any Grantor, or the
application of any Shared Collateral (or proceeds thereof) to the payment
thereof or any distribution of Shared Collateral (or proceeds thereof) upon the
liquidation or dissolution of any Grantor, shall be applied by the First-Lien
Collateral Agent to the First-Lien Obligations in such order as specified in the
relevant First-Lien Security Document. Upon the Discharge of First-Lien
Obligations, the First-Lien Collateral Agent shall deliver to the Second-Lien
Collateral Agent any proceeds of Shared Collateral held by it in the same form
as received, with any necessary endorsements or as a court of competent
jurisdiction may otherwise direct, to be applied by the Second-Lien Collateral
Agent to the Second-Lien Obligations in such order as specified in the
Second-Lien Security Documents. To the extent that the foregoing provisions are
not complied with for any reason, without limiting any other rights and remedies
available to the First-Lien Collateral Agent and/or the other First-Lien
Creditors, the Second-Lien Collateral Agent, on behalf of itself and the other
Second-Lien Creditors (by its acceptance of the benefits of the Second-Lien
Notes Documents), agrees that any amounts received by or distributed to any of
them in contravention of this Section 4.1 shall be subject to Section 4.2
hereof.

 

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4.2. Payments Over. Until such time as the Discharge of First-Lien Obligations
has occurred, any Shared Collateral or proceeds thereof (together with assets or
proceeds subject to Liens referred to in the final sentence of Section 2.3
hereof) (or any distribution in respect of the Collateral, whether or not
expressly characterized as such) received by the Second-Lien Collateral Agent or
any other Second-Lien Creditors in connection with the exercise of any right or
remedy (including setoff) relating to the Shared Collateral or that is otherwise
inconsistent with this Agreement shall be segregated and held in trust and
forthwith paid over to the First-Lien Collateral Agent for the benefit of the
First-Lien Creditors in the same form as received, with any necessary
endorsements or as a court of competent jurisdiction may otherwise direct. The
First-Lien Collateral Agent is hereby authorized to make any such endorsements
as agent for the Second-Lien Collateral Agent or any such other Second-Lien
Creditors. This authorization is coupled with an interest and is irrevocable
until such time as this Agreement is terminated in accordance with its terms.

SECTION 5.

OTHER AGREEMENTS.

5.1. Releases.

(a) If, in connection with:

(i) the exercise of the First-Lien Collateral Agent’s remedies in respect of the
Collateral provided for in Section 3.1 hereof, including any sale, lease,
exchange, transfer or other disposition (including, but not limited to, a sale
under Section 363 of the Bankruptcy Code) of any such Collateral (any of the
foregoing, a “Remedial Action”);

(ii) any sale (including, but not limited to, a sale under Section 363 of the
Bankruptcy Code), lease, exchange, transfer or other disposition of any
Collateral permitted under the terms of the First-Lien Documents and not
expressly prohibited by the Second-Lien Notes Documents (whether or not an
“event of default” thereunder or under any Second-Lien Notes Document has
occurred and is continuing); or

(iii) any agreement (not contravening the First-Lien Documents or the
Second-Lien Notes Documents) between the First-Lien Collateral Agent and the
Company or any Grantor (x) to release the First-Lien Collateral Agent’s Lien on
any portion of the Collateral (other than in connection with, or in anticipation
of, a Discharge of First-Lien Obligations) or (y) to release any Grantor from
its obligations under its guaranty of the First-Lien Obligations (other than in
connection with, or in anticipation of, a Discharge of First-Lien Obligations);

there occurs the release by the First-Lien Collateral Agent, acting on its own
or at the direction of the Required First-Lien Creditors, of any of its Liens on
any part of the Collateral, or of any Grantor from its obligations under its
guaranty of the First-Lien Obligations, then the Liens, if any, of the
Second-Lien Collateral Agent, for itself and for the benefit of the other
Second-Lien Creditors, on such Collateral, and the obligations of such Grantor
under its guaranty of the Second-Lien Obligations, shall be automatically,
unconditionally and simultaneously released (the “Second-Lien Release”), and the
Second-Lien Collateral Agent, on behalf of the

 

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Second-Lien Creditors, promptly shall execute and deliver to the First-Lien
Collateral Agent or such Grantor such termination statements, releases and other
documents as the First-Lien Collateral Agent or such Grantor may request to
effectively confirm such release; provided, however, that the Second-Lien
Release shall not occur without the consent of the Second-Lien Collateral Agent
in the case of the exercise of remedies as to any Shared Collateral the proceeds
of which will not be applied to repay the First-Lien Obligations; provided,
further, that if an “event of default” then exists under the Second-Lien Notes
Indenture and the Discharge of First-Lien Obligations occurs concurrently with
or as a result of any such release, the Second-Lien Collateral Agent (on behalf
of the Second-Lien Creditors) shall be entitled to receive the residual cash or
other proceeds (if any) remaining after giving effect to such release and the
Discharge of First-Lien Obligations to the extent required pursuant to the terms
of the Second-Lien Notes Documents.

(b) Until the Discharge of First-Lien Obligations occurs, the Second-Lien
Collateral Agent, for itself and on behalf of the Second-Lien Creditors, hereby
irrevocably constitutes and appoints the First-Lien Collateral Agent and any
officer or agent of the First-Lien Collateral Agent, with full power of
substitution, as its true and lawful attorney in fact with full irrevocable
power and authority in the place and stead of the Second-Lien Collateral Agent
or such other Second-Lien Creditor or in the First-Lien Collateral Agent’s own
name, from time to time in the First-Lien Collateral Agent’s discretion, for the
purpose of carrying out the terms of this Section 5.1 at any time that the
Second-Lien Collateral Agent fails to act as required by this Section 5.1, to
take any and all appropriate action and to execute any and all documents and
instruments which may be necessary or desirable to accomplish the purposes of
this Section 5.1, including any endorsements or other instruments of transfer or
release.

(c) If, prior to the Discharge of First-Lien Obligations, a subordination of the
First-Lien Collateral Agent’s Lien on any Shared Collateral is permitted (or in
good faith believed by the First-Lien Collateral Agent to be permitted) under
the First-Lien Credit Agreement to another Lien permitted under the First-Lien
Credit Agreement (a “Priority Lien”), then the First-Lien Collateral Agent is
authorized to execute and deliver a subordination agreement with respect thereto
in form and substance satisfactory to it, and the Second-Lien Collateral Agent,
for itself and on behalf of the Second-Lien Creditors, shall promptly execute
and deliver to the First-Lien Collateral Agent or the relevant Grantor an
identical subordination agreement, modified as deemed necessary by the
First-Lien Collateral Agent to give effect to this Agreement, subordinating the
Liens of the Second-Lien Collateral Agent for the benefit of the Second-Lien
Creditors to such Priority Lien.

5.2. Inspection; Repossession; Insurance. Any First-Lien Creditor and its
representatives and invitees may at any time inspect, repossess, remove and
otherwise deal with the Collateral, and the First-Lien Collateral Agent may
advertise and conduct public auctions or private sales of the Collateral, in
each case without notice to, the involvement of or interference by any
Second-Lien Creditor or liability to any Second-Lien Creditor. Unless and until
the Discharge of First-Lien Obligations has occurred, the First-Lien Collateral
Agent (acting at the direction of the Required First-Lien Creditors) shall have
the sole and exclusive right, subject to the rights of the Grantors under the
First-Lien Credit Documents, to adjust settlement for any insurance policy
covering the Collateral in the event of any loss thereunder and to approve any
award granted in any condemnation or similar proceeding (or any deed in lieu of
condemnation)

 

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affecting the Collateral. Unless and until the Discharge of First-Lien
Obligations has occurred, and subject to the rights of the Grantors under the
First-Lien Security Documents, all proceeds of any such policy and any such
award (or any payments with respect to a deed in lieu of condemnation) in
respect to the Collateral shall be paid to the First-Lien Collateral Agent for
the benefit of the First-Lien Creditors pursuant to the terms of the First-Lien
Documents (including for purposes of cash collateralization of commitments,
letters of credit and Swap Agreements) and, after the Discharge of First-Lien
Obligations has occurred, to the Second-Lien Collateral Agent for the benefit of
the Second-Lien Creditors (in respect of any Shared Collateral) to the extent
required under the Second-Lien Security Documents and then, to the extent no
Second-Lien Obligations are outstanding, to the owner of the subject Property,
to such other Person as may be entitled thereto or as a court of competent
jurisdiction may otherwise direct. If the Second-Lien Collateral Agent or any
other Second-Lien Creditor shall, at any time, receive any proceeds of any such
insurance policy or any such award or payment in contravention of this
Agreement, it shall pay such proceeds over to the First-Lien Collateral Agent in
accordance with the terms of Section 4.2 hereof. In addition, if by virtue of
being named as an additional insured or loss payee of any insurance policy of
any Grantor covering any of the Collateral, the Second-Lien Collateral Agent or
any other Second-Lien Creditor shall have the right to adjust or settle any
claim under any such insurance policy, then unless and until the Discharge of
First-Lien Obligations has occurred, the Second-Lien Collateral Agent and any
such Second-Lien Creditor shall follow the instructions of the First-Lien
Collateral Agent (acting at the direction of the Required First-Lien Creditors)
with respect to such adjustment or settlement.

5.3. Amendments to and Other Restrictions on Second-Lien Security Documents.

(a) Without the prior written consent of the First-Lien Collateral Agent (acting
at the direction of the Required First-Lien Creditors), no Second-Lien Notes
Document may be amended, supplemented, restated or otherwise modified and/or
Refinanced or entered into to the extent such amendment, supplement, restatement
or other modification and/or Refinancing, or the terms of any new Second-Lien
Notes Document, would contravene the provisions of this Agreement, the
First-Lien Credit Agreement or any other First-Lien Document. Each Grantor and
the Second-Lien Collateral Agent agree that each Second-Lien Security Document
shall include the following language (or language to similar effect approved by
the First-Lien Collateral Agent):

“Notwithstanding anything herein to the contrary, the lien and security interest
granted to the Second-Lien Collateral Agent pursuant to this Agreement and the
exercise of any right or remedy by the Second-Lien Collateral Agent hereunder
are subject to the provisions of the Intercreditor Agreement, dated as of
December 22, 2011 (as amended, restated, supplemented or otherwise modified from
time to time in accordance with the terms thereof, the “Intercreditor
Agreement”), among Dune Energy, Inc., the other obligors from time to time party
thereto, Bank of Montreal, in its capacity as the initial First-Lien Collateral
Agent thereunder, and U.S. Bank National Association, as trustee, in its
capacity as the initial Second-Lien Collateral Agent thereunder. In the event of
any conflict between the terms of the Intercreditor Agreement and this
Agreement, the terms of the Intercreditor Agreement shall govern and control.”

 

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In addition, each Grantor and the Second-Lien Collateral Agent, on behalf of the
Second-Lien Creditors, each agree that each Second-Lien Mortgage covering any
Shared Collateral shall contain such other language as the First-Lien Collateral
Agent may reasonably request to reflect the subordination of such Second-Lien
Mortgage to the First-Lien Security Document covering such Shared Collateral.

(b) In the event the First-Lien Collateral Agent or the other First-Lien
Creditors and the relevant Grantor(s) enter into any amendment, restatement,
waiver or consent in respect of any of the First-Lien Security Documents for the
purpose of adding to, or deleting from, or waiving or consenting to any
departures from any provisions of, any First-Lien Security Document or changing
in any manner the rights of the First-Lien Collateral Agent, the other
First-Lien Creditors, or any Grantor thereunder, then such amendment,
restatement, waiver or consent shall apply automatically to any comparable
provision of the Second-Lien Notes Indenture and the Comparable Second-Lien
Security Document without the consent of the Second-Lien Collateral Agent or the
other Second-Lien Creditors and without any action by the Second-Lien Collateral
Agent, the Company or any Grantor, provided that (A) no such amendment,
restatement, waiver or consent shall have the effect of (i) removing assets
subject to the Lien of the Second-Lien Security Documents, except to the extent
that a release of such Lien is permitted or required by Section 5.1 of this
Agreement and provided that there is a corresponding release of the Lien
securing the First-Lien Obligations, (ii) imposing additional duties on, or
expanding the obligations of, the Second-Lien Collateral Agent or the
Second-Lien Creditors without its consent or (iii) permitting other Liens on the
Shared Collateral not permitted under the terms of the Second-Lien Notes
Documents or under Section 6 hereof and (B) written notice of such amendment,
restatement, waiver or consent shall have been given to the Second-Lien
Collateral Agent (although the failure to give any such notice shall in no way
affect the effectiveness of any such amendment, waiver or consent).

5.4. Rights As Unsecured Creditors. Except as otherwise set forth in this
Agreement, the Second-Lien Collateral Agent and the other Second-Lien Creditors
may exercise rights and remedies as unsecured creditors against any Grantor in
accordance with the terms of the Second-Lien Notes Documents and applicable law.
Except as otherwise set forth in this Agreement, nothing in this Agreement shall
prohibit the receipt by the Second-Lien Collateral Agent or any other
Second-Lien Creditor of the required payments of interest, premium and principal
on the Second-Lien Obligations so long as such receipt is not the direct or
indirect result of the exercise by the Second-Lien Collateral Agent or any other
Second-Lien Creditor of rights or remedies as a secured creditor (including
setoff) or enforcement in contravention of this Agreement of any Lien held by
any of them. In the event the Second-Lien Collateral Agent or any other
Second-Lien Creditor becomes a judgment lien creditor in respect of Collateral
as a result of its enforcement of its rights as an unsecured creditor, such
judgment lien shall be subordinated to the Liens securing First-Lien Obligations
on the same basis as the other Liens securing the Second-Lien Obligations are so
subordinated to such Liens securing First-Lien Obligations under this Agreement.
Nothing in this Section 5.4 impairs or otherwise adversely affects any rights or
remedies the First-Lien Collateral Agent or the other First-Lien Creditors may
have with respect to the First-Lien Collateral.

 

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5.5. Bailee for Perfection. (a) The First-Lien Collateral Agent agrees to hold
that part of the Shared Collateral that is in its possession or control (or in
the possession or control of its agents or bailees), to the extent that
possession thereof is taken to perfect a Lien thereon under the Uniform
Commercial Code (such Collateral being the “Pledged Collateral”) for the benefit
of and on behalf of the First-Lien Creditors, the Second-Lien Collateral Agent
and the Second-Lien Creditors and any assignee solely for the purpose of
perfecting the security interest granted under the First-Lien Credit Documents
and the Second-Lien Notes Documents, subject to the terms and conditions of this
Section 5.5. The Second-Lien Collateral Agent hereby appoints the First-Lien
Collateral Agent to act as its agent under all control agreements solely for the
purposes of perfecting the security interests granted under the Second-Lien
Security Documents, subject to the terms and conditions of this Section 5.5, and
the First-Lien Collateral Agent accepts such appointment. In furtherance of the
foregoing, the Grantors hereby grant to the First-Lien Collateral Agent for the
benefit of the Second-Lien Collateral Agent and the Second-Lien Creditors a
security interest in all of Grantors’ right, title and interest in all Pledged
Collateral.

(b) Subject to the terms of this Agreement, until the Discharge of First-Lien
Obligations has occurred, the First-Lien Collateral Agent shall be entitled to
deal with the Pledged Collateral in accordance with the terms of the First-Lien
Credit Documents as if the Liens of the Second-Lien Collateral Agent under the
Second-Lien Security Documents did not exist. The rights of the Second-Lien
Collateral Agent shall at all times be subject to the terms of this Agreement
and to the First-Lien Collateral Agent’s rights under the First-Lien Credit
Documents.

(c) The First-Lien Collateral Agent shall have no obligation whatsoever to the
First-Lien Creditors and the Second-Lien Collateral Agent or any Second-Lien
Creditor to ensure that the Pledged Collateral is genuine or owned by any of the
Grantors or to preserve the rights or benefits of any Person except as expressly
set forth in this Section 5.5. The duties or responsibilities of the First-Lien
Collateral Agent under this Section 5.5 shall be limited solely to holding the
Pledged Collateral for the benefit of and on behalf of the First-Lien Creditors
and the Second-Lien Collateral Agent and any permitted assignee in accordance
with this Section 5.5.

(d) The First-Lien Collateral Agent acting pursuant to this Section 5.5 shall
not have by reason of the First-Lien Security Documents, the Second-Lien
Security Documents, this Agreement or any other document or theory a fiduciary
relationship in respect of the First-Lien Creditors, the Second-Lien Collateral
Agent or any Second-Lien Creditor.

(e) Upon the Discharge of First-Lien Obligations under the First-Lien Credit
Documents to which the First-Lien Collateral Agent is a party, the First-Lien
Collateral Agent shall deliver the remaining Pledged Collateral (if any)
together with any necessary endorsements, first, to the Second-Lien Collateral
Agent to the extent Second-Lien Obligations remain outstanding, and second, to
the Borrower to the extent no First-Lien Obligations or Second-Lien Obligations
remain outstanding (in each case, so as to allow such Person to obtain control
of such Pledged Collateral). The First-Lien Collateral Agent further agrees to
take all other action reasonably requested by such Person in connection with
such Person obtaining a first priority interest in the Pledged Collateral or as
a court of competent jurisdiction may otherwise direct. Notwithstanding the
first-in-time filing of the First-Lien Collateral Agent’s Liens upon the Pledged
Collateral and notwithstanding anything in Section 7.3 to the contrary (but
subject to Section 5.6 and Section 6.5), after the Discharge of First-Lien
Obligations, the First-Lien Collateral Agent agrees that the Second-Lien
Collateral Agent’s Liens upon the Pledged

 

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Collateral shall rank pari passu with the First-Lien Collateral Agent’s Liens on
the Pledged Collateral to the extent the First-Lien Collateral Agent’s Liens
remain in effect to secure any First-Lien Obligations still in effect after the
Discharge of First-Lien Obligations. After the Discharge of First-Lien
Obligations, subject to Section 5.6 and Section 6.5, any remaining First-Lien
Obligations shall not be entitled to any benefits under this Agreement other
than the right to be secured on a pari passu basis with the Second-Lien
Obligations on terms no more disadvantageous than those of any other Second-Lien
Obligations.

5.6. When Discharge of First-Lien Obligations Deemed to Not Have Occurred. If at
any time after the Discharge of First-Lien Obligations has occurred, the Company
contemporaneously therewith enters into any Refinancing of any First-Lien Credit
Document evidencing a First-Lien Obligation, then such Discharge of First-Lien
Obligations shall automatically be deemed not to have occurred for all purposes
of this Agreement, and the obligations under such Refinancing First-Lien Credit
Document shall automatically be treated as First-Lien Obligations for all
purposes of this Agreement, including for purposes of the Lien priorities and
rights in respect of Collateral set forth herein, and the first-lien collateral
agent under such First-Lien Credit Documents shall be the First-Lien Collateral
Agent for all purposes of this Agreement. Upon receipt of a notice stating that
the Company has entered into a new First-Lien Credit Document (which notice
shall include the identity of the new agent, such agent, the “New Agent”), the
Second-Lien Collateral Agent shall promptly enter into such documents and
agreements (including amendments or supplements to this Agreement) as the
Grantors or such New Agent may reasonably request in order to provide to the New
Agent the rights contemplated hereby, in each case identical in all material
respects with the terms of this Agreement.

SECTION 6.

INSOLVENCY OR LIQUIDATION PROCEEDINGS.

6.1. Finance and Sale Issues. (a) If any Grantor shall be subject to any
Insolvency or Liquidation Proceeding and the First-Lien Collateral Agent (acting
at the direction of the Required First-Lien Creditors) shall desire to permit
the use of Cash Collateral (as defined in Section 363(a) of the Bankruptcy Code)
on which the First-Lien Collateral Agent or any other creditor of any Grantor
has a Lien or to permit any Grantor to obtain financing (including on a priming
basis), whether from the First-Lien Creditors or any other third party under
Section 362, 363 or 364 of the Bankruptcy Code or any other Bankruptcy Law
(each, including any such financing (x) which represents an advance by some or
all of the First-Lien Creditors following repayment of amounts of First-Lien
Obligations with cash collateral or (y) the proceeds of which are used, in whole
or in part, to repay First-Lien Obligations owed to some or all of the
First-Lien Creditors, a “Post-Petition Financing”), then the Second-Lien
Collateral Agent, on behalf of itself and the Second-Lien Creditors, and each
other Second-Lien Creditor (by its acceptance of the benefits of the Second-Lien
Notes Documents), agrees that it will not oppose or raise any objection to or
contest (or join with or support any third party opposing, objecting to or
contesting), such use of Cash Collateral or Post-Petition Financing and will not
request adequate protection or any other relief in connection therewith (except
as expressly agreed in writing by the First-Lien Collateral Agent or to the
extent otherwise permitted by Section 6.3 hereof) and, to the extent the Liens
securing the First-Lien Obligations are subordinated to or pari passu with such
Post-Petition Financing, the Liens of the Second-Lien Creditors on the
Collateral shall be

 

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deemed to be subordinated, without any further action on the part of any person
or entity, to the Liens securing such Post-Petition Financing (and all
Obligations relating thereto), and the Liens securing the Second-Lien
Obligations shall have the same priority with respect to the Collateral relative
to the Liens securing the First-Lien Obligations as if such Post-Petition
Financing had not occurred. Without the consent of the First-Lien Collateral
Agent, no Second-Lien Creditor shall propose, support or enter into any
Post-Petition Financing, if the effect of such Post-Petition Financing would be
that the Second-Lien Obligations would no longer be subordinated to the
First-Lien Obligations in the manner set forth in this Agreement, or the
Second-Lien Creditors would recover any payments they are not otherwise entitled
to under this Agreement, including by way of adequate protection.

(b) The Second-Lien Collateral Agent, on behalf of itself and the other
Second-Lien Creditors, and each other Second-Lien Creditor (by its acceptance of
the benefits of the Second-Lien Notes Documents), agrees that it will raise no
objection to, oppose or contest (or join with or support any third party
opposing, objecting to or contesting), a sale or other disposition of any
Collateral free and clear of its Liens or other claims under Section 363 of the
Bankruptcy Code if the First-Lien Creditors have consented to such sale or
disposition of such assets. Notwithstanding the foregoing, the Second-Lien
Collateral Agent on behalf of itself and the other Second-Lien Creditors shall
be entitled to object to any sale or other disposition to the extent that the
terms of any proposed order approving such transaction do not provide for the
interests of the Second-Lien Creditors to attach to the proceeds of the Shared
Collateral (if sufficient to satisfy the First-Lien Obligations), subject to the
terms of this Agreement and shall be entitled to assert its rights (if any)
under Section 363(k) of the Bankruptcy Code, subject to the terms of this
Agreement. Notwithstanding the foregoing, the Second-Lien Agent, on behalf of
itself and the other Second-Lien Creditors, may raise objections to any such
sale or other disposition of Shared Collateral that could be raised by any
creditor of the Grantors whose claims were not secured by any Liens on the
Collateral so long as such objections are not based on the Second-Lien
Creditors’ status as secured creditors.

6.2. Relief from the Automatic Stay. Until the Discharge of First-Lien
Obligations has occurred, the Second-Lien Collateral Agent, on behalf of itself
and the other Second-Lien Creditors, and each other Second-Lien Creditor (by its
acceptance of the benefits of the Second-Lien Notes Documents), agrees that none
of them shall seek relief, pursuant to Section 362(d) of the Bankruptcy Code or
otherwise, from the automatic stay of Section 362(a) of the Bankruptcy Code or
from any other stay in any Insolvency or Liquidation Proceeding in respect of
the Collateral, without the prior written consent of the First-Lien Collateral
Agent.

6.3. Adequate Protection. The Second-Lien Collateral Agent, on behalf of itself
and the other Second-Lien Creditors, and each other Second-Lien Creditor (by its
acceptance of the benefits of the Second-Lien Notes Documents), agrees that none
of them shall (i) oppose, object to or contest (or join with or support any
third party opposing, objecting to or contesting) (a) any request by the
First-Lien Collateral Agent or the other First-Lien Creditors for adequate
protection in any Insolvency or Liquidation Proceeding (or any granting of such
request), (b) any objection by the First-Lien Collateral Agent or the other
First-Lien Creditors to any motion, relief, action or proceeding based on the
First-Lien Collateral Agent or the other First-Lien Creditors claiming a lack of
adequate protection or (c) the payment of interest, fees, expenses or other
amounts to the First-Lien Collateral Agent or any other First-Lien Creditor
under Section

 

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506(b) or 506(c) of the Bankruptcy Code or otherwise or (ii) seek or request any
form of adequate protection under any of Sections 362, 363 and/or 364 of the
Bankruptcy Code with respect to the Collateral, except to the extent that, in
the sole discretion of the First-Lien Creditors, the receipt by the Second-Lien
Creditors of any such adequate protection would not reduce (or would not have
the effect of reducing) or adversely affect the adequate protection that the
First-Lien Creditors otherwise would be entitled to receive (it being understood
that, in any event, any such adequate protection is in the form of a replacement
or additional Lien on the Grantors’ assets or such other form of adequate
protection (including payments of interest, fees, charges or other amounts) as
may be agreed to in writing by the First-Lien Collateral Agent, which, in the
case of a replacement or additional Lien, will be subordinated to the Liens
securing the First-Lien Obligations (including any replacement or additional
Liens granted in respect of the First-Lien Obligations) and any Post-Petition
Financing (and all Obligations relating thereto) on the same basis as the other
Liens securing the Second-Lien Obligations are so subordinated to the First-Lien
Obligations under this Agreement). Notwithstanding the foregoing provisions in
this Section 6.3, in any Insolvency or Liquidation Proceeding, if the First-Lien
Creditors (or any subset thereof) are granted adequate protection in the form of
additional collateral or replacement Liens in connection with any DIP Financing,
then the Second-Lien Collateral Agent, on behalf of itself or any of the
Second-Lien Creditors, may seek or request adequate protection in the form of a
Lien on such additional collateral or replacement Liens, which Liens, in either
case, will be subordinated to the Liens securing the First-Lien Obligations and
such DIP Financing (and all obligations relating thereto) on the same basis as
the other Liens securing the Second-Lien Obligations are so subordinated to the
First-Lien Obligations under this Agreement.

6.4. No Waiver; Voting Rights. Except as otherwise set forth in Section 6.3,
nothing contained herein shall prohibit or in any way limit the First-Lien
Collateral Agent or any First-Lien Creditor from objecting on any basis in any
Insolvency or Liquidation Proceeding or otherwise to any action taken by the
Second-Lien Collateral Agent or any other Second-Lien Creditor, including the
seeking by the Second-Lien Collateral Agent or any other Second-Lien Creditor of
adequate protection or the assertion by the Second-Lien Collateral Agent or any
other Second-Lien Creditor of any of its rights and remedies under the
Second-Lien Notes Documents or otherwise. In any Insolvency or Liquidation
Proceeding, neither the Second-Lien Collateral Agent nor any other Second-Lien
Creditor shall (i) oppose, object to, or vote against any plan of reorganization
or disclosure statement, or join with or support any third party in doing so, to
the extent the terms of such plan or disclosure statement comply with the
following clause (ii) and are otherwise consistent with the rights of the
First-Lien Creditors under this Agreement or (ii) support or vote for any plan
of reorganization or disclosure statement of any Grantor unless (x) such plan is
accepted by the class of First-Lien Creditors in accordance with Section 1126(c)
of the Bankruptcy Code or otherwise provides for the payment in full in cash of
all First-Lien Obligations (including all post-petition interest, fees and
expenses as provided in Section 6.6 hereof) on the effective date of such plan
of reorganization, or (y) such plan provides on account of the First-Lien
Obligations for the retention by the First-Lien Collateral Agent, for the
benefit of the First-Lien Creditors, of the Liens on the Collateral securing the
First-Lien Obligations, and on all proceeds thereof, and such plan also provides
that any Liens retained by, or granted to, the Second-Lien Collateral Agent are
only on Property securing the First-Lien Obligations and shall have the same
relative priority with respect to the Collateral or other Property,
respectively, as provided in this Agreement with respect to the Collateral, and
to the extent such plan provides for deferred cash payments, or for the
distribution of any other Property of any kind or nature, on

 

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account of the First-Lien Obligations or the Second-Lien Obligations, such plan
provides that any such deferred cash payments or other distributions in respect
of the Second-Lien Obligations shall be delivered to the First-Lien Collateral
Agent and distributed in accordance with the priorities provided in
Section 4.1(a) hereof. Except as provided in this Section 6, the Second-Lien
Creditors shall remain entitled to vote their claims in any such Insolvency or
Liquidation Proceeding.

6.5. Preference Issues. If any First-Lien Creditor is required in any Insolvency
or Liquidation Proceeding or otherwise to turn over or otherwise pay to the
estate of any Grantor any amount (a “Recovery”), then the First-Lien Obligations
shall be reinstated to the extent of such Recovery and the First-Lien Creditors
shall be entitled to a reinstatement of First-Lien Obligations with respect to
all such recovered amounts. If this Agreement shall have been terminated prior
to such Recovery, this Agreement shall be reinstated in full force and effect,
and such prior termination shall not diminish, release, discharge, impair or
otherwise affect the obligations of the parties hereto from such date of
reinstatement. Any amounts received by the Second-Lien Collateral Agent or any
Second-Lien Creditor on account of the Second-Lien Obligations after the
termination of this Agreement shall, in the event of a reinstatement of this
Agreement pursuant to this Section 6.5, be held in trust for and paid over to
the First-Lien Collateral Agent for the benefit of the First-Lien Creditors, for
application to the reinstated First-Lien Obligations until the discharge
thereof. This Section 6.5 shall survive termination of this Agreement.

6.6. Post-Petition Interest. (a) Neither the Second-Lien Collateral Agent nor
any other Second-Lien Creditor shall oppose or seek to challenge any claim by
the First-Lien Collateral Agent or any other First-Lien Creditor for allowance
or payment in any Insolvency or Liquidation Proceeding of First-Lien Obligations
consisting of post-petition interest, fees or expenses. Regardless of whether
any such claim for post-petition interest, fees or expenses is allowed or
allowable, and without limiting the generality of the other provisions of this
Agreement, this Agreement is expressly intended to include and does include the
“rule of explicitness” in that this Agreement expressly entitles the First-Lien
Creditors, and is intended to provide the First-Lien Creditors with the right,
to receive payment of all post-petition interest, fees or expenses through
distributions made pursuant to the provisions of this Agreement even though such
interest, fees and expenses are not allowed or allowable against the bankruptcy
estate of the Company or any Grantor under Section 502(b)(2) or Section 506(b)
of the Bankruptcy Code or under any other provision of the Bankruptcy Code or
any other Bankruptcy Law

(b) Neither the First-Lien Collateral Agent nor any other First-Lien Creditor
shall oppose or seek to challenge any claim by the Second-Lien Collateral Agent
or any Second-Lien Creditor for allowance (but not payment until the Discharge
of First Lien Obligations has occurred) in any Insolvency or Liquidation
Proceeding of Second-Lien Obligations consisting of post-petition interest, fees
or expenses to the extent of the value of the Lien of the Second-Lien Collateral
Agent on behalf of the Second-Lien Creditors on the Shared Collateral (after
taking into account the First-Lien Collateral).

 

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6.7. Waiver. The Second-Lien Collateral Agent, for itself and on behalf of the
other Second-Lien Creditors, waives any claim it may hereafter have against any
First-Lien Creditor arising out of the election by any First-Lien Creditor of
the application to the claims of any First-Lien Creditor of Section 1111(b)(2)
of the Bankruptcy Code, and/or out of any Cash Collateral or Post-Petition
Financing arrangement or out of any grant of a security interest in connection
with the Collateral in any Insolvency or Liquidation Proceeding.

6.8. Limitations. So long as the Discharge of First-Lien Obligations has not
occurred, without the express written consent of the First-Lien Collateral
Agent, none of the Second-Lien Creditors shall (or shall join with or support
any third party making, opposing, objecting or contesting, as the case may be),
in any Insolvency or Liquidation Proceeding involving any Grantor, (i) make an
election for application to its claims of Section 1111(b)(2) of the Bankruptcy
Code, (ii) oppose, object to or contest the determination of the extent of any
Liens held by any of the First-Lien Creditors or the value of any claims of
First-Lien Creditors under Section 506(a) of the Bankruptcy Code or
(iii) oppose, object to or contest the payment to the First-Lien Creditors of
interest, fees or expenses under Section 506(b) of the Bankruptcy Code.

SECTION 7.

RELIANCE; WAIVERS; ETC.

7.1. Reliance. Other than any reliance on the terms of this Agreement, the
First-Lien Collateral Agent, on behalf of itself and the First-Lien Creditors
under the First-Lien Documents, acknowledges that it and the other First-Lien
Creditors have, independently and without reliance on the Second-Lien Collateral
Agent or any other Second-Lien Creditors, and based on documents and information
deemed by them appropriate, made their own credit analysis and decision to enter
into such First-Lien Documents and be bound by the terms of this Agreement and
they will continue to make their own credit decision in taking or not taking any
action under any First-Lien Document or this Agreement. The Second-Lien
Collateral Agent, on behalf of itself and the other Second-Lien Creditors,
acknowledges that it and the other Second-Lien Creditors have, independently and
without reliance on the First-Lien Collateral Agent or any other First-Lien
Creditor, and based on documents and information deemed by them appropriate,
made their own credit analysis and decision to enter into each of the
Second-Lien Notes Documents and be bound by the terms of this Agreement and each
Second-Lien Creditor (other than the Second-Lien Notes Trustee and Second-Lien
Collateral Agent) will continue to make their own credit decision in taking or
not taking any action under the Second-Lien Notes Documents or this Agreement.

7.2. No Warranties or Liability. The First-Lien Collateral Agent, on behalf of
itself and the First-Lien Creditors under the First-Lien Documents, acknowledges
and agrees that each of the Second-Lien Collateral Agent and the other
Second-Lien Creditors have made no express or implied representation or
warranty, including with respect to the execution, validity, legality,
completeness, collectibility or enforceability of any of the Second-Lien Notes
Documents, the ownership of any Shared Collateral or the perfection or priority
of any Liens thereon. Subject to the terms of this Agreement, the Second-Lien
Creditors will be entitled to manage and supervise their respective loans and
extensions of credit under the Second-Lien Notes Documents in accordance with
law and as they may otherwise, in their sole discretion, deem appropriate. The
Second-Lien Collateral Agent, on behalf of itself and the Second-Lien Creditors,
acknowledges and agrees that each of the First-Lien Collateral Agent and the
First-Lien Creditors have made no express or implied representation or warranty,
including with respect to the execution, validity,

 

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legality, completeness, collectibility or enforceability of any of the
First-Lien Documents, the ownership of any Collateral or the perfection or
priority of any Liens thereon. The First-Lien Creditors will be entitled to
manage and supervise their respective loans and extensions of credit under their
respective First-Lien Documents in accordance with law and as they may
otherwise, in their sole discretion, deem appropriate. The First-Lien Collateral
Agent and the First-Lien Creditors shall have no duty to the Second-Lien
Collateral Agent or any of the Second-Lien Creditors, to act or refrain from
acting in a manner which allows, or results in, the occurrence or continuance of
an event of default or default under any agreements with any Grantor (including
under the First-Lien Documents), regardless of any knowledge thereof which they
may have or be charged with.

7.3. No Waiver of Lien Priorities. (a) No right of the First-Lien Creditors, the
First-Lien Collateral Agent or any of them to enforce any provision of this
Agreement or any First-Lien Document shall at any time in any way be prejudiced
or impaired by any act or failure to act on the part of any Grantor or by any
act or failure to act by any First-Lien Creditor or the First-Lien Collateral
Agent, or by any noncompliance by any Person with the terms, provisions and
covenants of this Agreement, any of the First-Lien Documents or any of the
Second-Lien Notes Documents, regardless of any knowledge thereof which the
First-Lien Collateral Agent or the First-Lien Creditors, or any of them, may
have or be otherwise charged with.

(b) Without in any way limiting the generality of the foregoing paragraph (but
subject to the rights of the Grantors under the First-Lien Documents), the
First-Lien Creditors, the First-Lien Collateral Agent and any of them may, at
any time and from time to time in accordance with the First-Lien Documents
and/or applicable law, without the consent of, or notice to, the Second-Lien
Collateral Agent or any other Second-Lien Creditor, without incurring any
liabilities to the Second-Lien Collateral Agent or any other Second-Lien
Creditor and without impairing or releasing the Lien priorities and other
benefits provided in this Agreement (even if any right of subrogation or other
right or remedy of the Second-Lien Collateral Agent or any Second-Lien Creditors
is affected, impaired or extinguished thereby) do any one or more of the
following:

(i) make loans and advances to any Grantor or issue, guaranty or obtain letters
of credit for account of any Grantor or otherwise extend credit to any Grantor,
in any amount and on any terms, whether pursuant to a commitment or as a
discretionary advance and whether or not any default or event of default or
failure of condition is then continuing;

(ii) change the manner, place or terms of payment or change or extend the time
of payment of, or amend, renew, exchange, increase or alter, the terms of any of
the First-Lien Obligations or any Lien on any First-Lien Collateral or guaranty
thereof or any liability of any Grantor, or any liability incurred directly or
indirectly in respect thereof (including any increase in or extension of the
First-Lien Obligations, without any restriction as to the amount, tenor or terms
of any such increase or extension) or otherwise amend, renew, exchange, extend,
modify or supplement in any manner any Liens held by the First-Lien Collateral
Agent or any of the First-Lien Creditors, the First-Lien Obligations or any of
the First-Lien Documents;

 

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(iii) sell, exchange, release, surrender, realize upon, enforce or otherwise
deal with in any commercially reasonable manner and in any order any part of the
First-Lien Collateral or any liability of any Grantor to the First-Lien
Creditors or the First-Lien Collateral Agent, or any liability incurred directly
or indirectly in respect thereof;

(iv) settle or compromise any First-Lien Obligation or any other liability of
any Grantor or any security therefor or any liability incurred directly or
indirectly in respect thereof and apply any sums by whomsoever paid and however
realized to any liability (including the First-Lien Obligations) in any manner
or order;

(v) without limiting the rights of the Second-Lien Creditors after the
Standstill Period, exercise or delay in or refrain from exercising any right or
remedy against any Grantor or any other Person or with respect to any security,
elect any remedy and otherwise deal freely with any Grantor or any First-Lien
Collateral and any security and any guarantor or any liability of any Grantor to
the First-Lien Creditors or any liability incurred directly or indirectly in
respect thereof; and

(vi) release or discharge any First-Lien Obligation or any guaranty thereof or
any agreement or obligation of any Grantor or any other person or entity with
respect thereto.

(c) Until the end of the Standstill Period, the Second-Lien Collateral Agent, on
behalf of itself and the Second-Lien Creditors, and each other Second-Lien
Creditor (by its acceptance of the benefits of the Second-Lien Notes Documents),
agrees not to assert and hereby waives, to the fullest extent permitted by law,
any right to demand, request, plead or otherwise assert or otherwise claim the
benefit of, any marshalling, appraisal, valuation or other similar right that
may otherwise be available under applicable law with respect to the Collateral
or any other similar rights a junior secured creditor may have under applicable
law.

7.4. Waiver of Liability; Indemnity. (a) The Second-Lien Collateral Agent, on
behalf of itself and the Second-Lien Creditors, agrees that the First-Lien
Creditors and the First-Lien Collateral Agent shall have no liability to the
Second-Lien Collateral Agent or any other Second-Lien Creditors, and the
Second-Lien Collateral Agent, on behalf of itself and the Second-Lien Creditors,
hereby waives any claim against any First-Lien Creditor or the First-Lien
Collateral Agent, arising out of any and all actions which the First-Lien
Creditors or the First-Lien Collateral Agent may take or permit or omit to take
in accordance with applicable laws and the terms of this Agreement with respect
to: (i) the First-Lien Documents (including any failure to perfect or obtain
perfected security interests in the First-Lien Collateral), (ii) the collection
of the First-Lien Obligations or (iii) the foreclosure upon, or sale,
liquidation or other disposition of, any First-Lien Collateral. The Second-Lien
Collateral Agent, on behalf of itself and the Second-Lien Creditors, agrees that
the First-Lien Creditors and the First-Lien Collateral Agent have no duty,
express or implied, fiduciary or otherwise, to them in respect of the
maintenance or preservation of the First-Lien Collateral, the First-Lien
Obligations or otherwise. Neither the First-Lien Collateral Agent nor any other
First-Lien Creditor nor any of their respective directors, officers, employees
or agents will be liable for failure to demand, collect or realize upon any of
the Collateral or for any delay in doing so, or will be under any obligation to
sell or otherwise dispose of any Collateral upon the request of any Grantor or
upon the request of the

 

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Second-Lien Collateral Agent, any other holder of Second-Lien Obligations or any
other Person or to take any other action whatsoever with regard to the
Collateral or any part thereof except as expressly provided in Section 4.1.
Without limiting the foregoing, each Second-Lien Creditor by accepting the
benefits of the Second-Lien Notes Documents agrees that neither the First-Lien
Collateral Agents nor any other First-Lien Creditor (in directing the Collateral
Agent to take any action with respect to the Collateral) shall have any duty or
obligation to realize first upon any type of Collateral or to sell, dispose of
or otherwise liquidate all or any portion of the Collateral in any manner,
including as a result of the application of the principles of marshaling or
otherwise, that would maximize the return to any class of Creditors holding
Obligations of any type (whether First-Lien Obligations or Second-Lien
Obligations), notwithstanding that the order and timing of any such realization,
sale, disposition or liquidation may affect the amount of proceeds actually
received by such class of Creditors from such realization, sale, disposition or
liquidation.

(b) With respect to its share of the Obligations, BMO shall have and may
exercise the same rights and powers hereunder as, and shall be subject to the
same obligations and liabilities as and to the extent set forth herein for, any
other Creditor, all as if BMO were not the First-Lien Collateral Agent. The term
“Creditors” or any similar term shall, unless the context clearly otherwise
indicates, include BMO in its individual capacity as a Creditor. BMO and its
Affiliates may lend money to, and generally engage in any kind of business with,
the Grantors or any of their Affiliates as if BMO were not acting as the
First-Lien Collateral Agent and without any duty to account therefor to any
other Creditor.

7.5. Obligations Unconditional. All rights, interests, agreements and
obligations of the First-Lien Collateral Agent and the other First-Lien
Creditors and the Second-Lien Collateral Agent and the other Second-Lien
Creditors, respectively, hereunder (including the Lien priorities established
hereby) shall remain in full force and effect irrespective of:

(a) any lack of validity or enforceability of any First-Lien Document or any
Second-Lien Notes Document;

(b) any change in the time, manner or place of payment of, or in any other terms
of, all or any of the First-Lien Obligations or Second-Lien Obligations, or any
amendment or waiver or other modification, including any increase in the amount
thereof, whether by course of conduct or otherwise, of the terms of any
First-Lien Document or any Second-Lien Notes Document;

(c) any exchange of any security interest in any Collateral or any other
collateral, or any amendment, waiver or other modification, whether in writing
or by course of conduct or otherwise, of all or any of the First-Lien
Obligations or Second-Lien Obligations or any guarantee thereof;

(d) the commencement of any Insolvency or Liquidation Proceeding in respect of
the Company or any Grantor; or

 

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(e) any other circumstances which otherwise might constitute a defense available
to, or a discharge of, the Company or any Grantor in respect of the First-Lien
Obligations, or of the Second-Lien Collateral Agent or any Second-Lien Creditor
in respect of this Agreement.

SECTION 8.

MISCELLANEOUS.

8.1. Conflicts. In the event of any conflict between the provisions of this
Agreement and the provisions of the First-Lien Documents or the Second-Lien
Notes Documents, the provisions of this Agreement shall govern and control.

8.2. Effectiveness; Continuing Nature of this Agreement; Severability. This
Agreement shall become effective when executed and delivered by the parties
hereto. This is a continuing agreement of lien subordination and the First-Lien
Creditors may continue, at any time and without notice to the Second-Lien
Collateral Agent or any other Second-Lien Creditor, to extend credit and other
financial accommodations and lend monies to or for the benefit of any Grantor
constituting First-Lien Obligations in reliance hereon. Each First-Lien and
Second-Lien Collateral Agent, on behalf of itself and the First-Lien and
Second-Lien Creditors, respectively, hereby agrees that it will not attempt,
directly or indirectly, whether by judicial proceedings or otherwise, to
challenge the enforceability of any provision of this Agreement, and waives any
right it may have under applicable law to revoke this Agreement or any of the
provisions of this Agreement. The terms of this Agreement shall survive, and
shall continue in full force and effect, in any Insolvency or Liquidation
Proceeding. Without limiting the generality of the foregoing, this Agreement is
intended to constitute and shall be deemed to constitute a “subordination
agreement” within the meaning of Section 510(a) of the Bankruptcy Code and is
intended to be and shall be interpreted to be enforceable to the maximum extent
permitted pursuant to applicable non-bankruptcy law. Any provision of this
Agreement which is prohibited or unenforceable in any jurisdiction shall not
invalidate the remaining provisions hereof, and any such prohibition or
unenforceability in any jurisdiction shall not invalidate or render
unenforceable such provision in any other jurisdiction. All references to any
Grantor shall include such Grantor as debtor and debtor in possession and any
receiver or trustee for any Grantor (as the case may be) in any Insolvency or
Liquidation Proceeding. This Agreement shall terminate and be of no further
force and effect, (i) with respect to the Second-Lien Collateral Agent, the
other Second-Lien Creditors and the Second-Lien Obligations, the date of the
Discharge of Second-Lien Obligations and (ii) with respect to the First-Lien
Collateral Agent, the other First-Lien Creditors and the First-Lien Obligations,
the date of the Discharge of First-Lien Obligations, subject to the rights of
the First-Lien Creditors under Section 6.5 hereof.

8.3. Amendments; Waivers. No amendment, modification or waiver of any of the
provisions of this Agreement by the Second-Lien Collateral Agent or the
First-Lien Collateral Agent shall be made unless the same shall be in writing
signed on behalf of each party hereto; provided that (x) the First-Lien
Collateral Agent (at the direction of the Required First-Lien Creditors) may,
without the written consent of any other Creditor, agree to modifications of
this Agreement for the purpose of securing additional extensions of credit
pursuant to the First-Lien Credit Agreement or any Refinancing thereof and
adding new creditors as “First-Lien Creditors” and “Creditors” hereunder, so
long as such extensions (and resulting additions) do not otherwise give rise to
a violation of the express terms of the First-Lien Credit Agreement or the
Second-

 

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Lien Notes Indenture provided that a written notice of such amendment shall be
given to the Second-Lien Collateral Agent (although the failure to give any such
notice shall in no way affect the effectiveness of any such modification) and
(y) additional Grantors may be added as parties hereto in accordance with the
provisions of Section 8.18 of this Agreement. Each waiver of the terms of this
Agreement, if any, shall be a waiver only with respect to the specific instance
involved and shall not impair the rights of the parties making such waiver or
the obligations of the other parties to such party in any other respect or at
any other time. Notwithstanding the foregoing, no Grantor shall have any right
to consent to or approve any amendment, modification or waiver of any provision
of this Agreement except to the extent its rights, interests, liabilities or
privileges are directly affected or imposes additional obligations on a Grantor.

8.4. Information Concerning Financial Condition of the Grantors and their
Subsidiaries. The First-Lien Collateral Agent and the other First-Lien
Creditors, on the one hand, and the Second-Lien Collateral Agent and the other
Second-Lien Creditors, on the other hand, shall each be responsible for keeping
themselves informed of (a) the financial condition of the Grantors and their
Subsidiaries and all endorsers and/or guarantors of the First-Lien Obligations
or the Second-Lien Obligations and (b) all other circumstances bearing upon the
risk of nonpayment of the First-Lien Obligations or the Second-Lien Obligations.
The First-Lien Collateral Agent and the other First-Lien Creditors shall have no
duty to advise the Second-Lien Collateral Agent or any other Second-Lien
Creditor of information known to it or them regarding such condition or any such
circumstances or otherwise. In the event the First-Lien Collateral Agent or any
of the other First-Lien Creditors, in its or their sole discretion, undertakes
at any time or from time to time to provide any such information to the
Second-Lien Collateral Agent or any other Second-Lien Creditor, it or they shall
be under no obligation (w) to make, and the First-Lien Collateral Agent and the
other First-Lien Creditors shall not make, any express or implied representation
or warranty, including with respect to the accuracy, completeness, truthfulness
or validity of any such information so provided, (x) to provide any additional
information or to provide any such information on any subsequent occasion,
(y) to undertake any investigation or (z) to disclose any information which,
pursuant to accepted or reasonable commercial finance practices, such party
wishes to maintain confidential or is otherwise required to maintain
confidential. In the event the Second-Lien Collateral Agent or any of the other
Second-Lien Creditor, in its or their sole discretion, undertakes at any time or
from time to time to provide any such information to the First-Lien Collateral
Agent or any other First-Lien Creditors, it or they shall be under no obligation
(w) to make, and the Second-Lien Collateral Agent and the other Second-Lien
Creditors shall not make, any express or implied representation or warranty,
including with respect to the accuracy, completeness, truthfulness or validity
of any such information so provided, (x) to provide any additional information
or to provide any such information on any subsequent occasion, (y) to undertake
any investigation or (z) to disclose any information which, pursuant to accepted
or reasonable commercial finance practices, such party wishes to maintain
confidential or is otherwise required to maintain confidential.

8.5. Subrogation. Subject to the Discharge of First-Lien Obligations, with
respect to the value of any payments or distributions in cash or other Property
that the Second-Lien Creditors or Second-Lien Collateral Agent pay over to the
First-Lien Collateral Agent or any of the other First-Lien Creditors under the
terms of this Agreement, the Second-Lien Collateral Agent and the other
Second-Lien Creditors shall be subrogated to the rights of the First-Lien
Collateral Agent and such other First-Lien Creditors; provided that the
Second-Lien Collateral

 

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Agent, on behalf of itself and the Second-Lien Creditors, hereby agrees not to
assert or enforce all such rights of subrogation it may acquire as a result of
any payment hereunder until the Discharge of First-Lien Obligations has
occurred. Each Grantor acknowledges and agrees that, the value of any payments
or distributions in cash or other Property received by the Second-Lien
Collateral Agent or the other Second-Lien Creditors and paid over to the
First-Lien Collateral Agent or the other First-Lien Creditors pursuant to, and
applied in accordance with, this Agreement, shall not relieve or reduce any of
the Obligations owed by any Grantor under the Second-Lien Notes Documents.

8.6. Application of Payments. All payments received by the First-Lien Collateral
Agent or the other First-Lien Creditors may be applied, reversed and reapplied,
in whole or in part, to such part of the First-Lien Obligations as the
First-Lien Creditors, in their sole discretion, deem appropriate. The
Second-Lien Collateral Agent, on behalf of itself and the Second-Lien Creditors,
assents to any extension or postponement of the time of payment of the
First-Lien Obligations or any part thereof and to any other indulgence with
respect thereto, to any substitution, exchange or, subject to the terms of
Section 5.1(a) hereof, release of any security constituting Shared Collateral
which may at any time secure any part of the First-Lien Obligations and to the
addition or release of any other Person primarily or secondarily liable
therefor; provided that the parties hereto agree that (x) no Grantor shall, nor
shall any Grantor permit any Grantor to, substitute or exchange any security
constituting Shared Collateral under this Section 8.6, unless it has also
granted or contemporaneously grants a Lien on such substituted or exchanged
Property to secure the Second-Lien Obligations and has taken all actions to
perfect such new Liens, and (y) in furtherance of Section 2.4(iii) hereof, with
respect to any Person added or released as an Obligor pursuant to this
Section 8.6, the parties will enter into such documentation as is necessary to
ensure compliance with Section 2.4(iii) hereof.

8.7. SUBMISSION TO JURISDICTION; WAIVERS. (a) THE PARTIES HERETO IRREVOCABLY AND
UNCONDITIONALLY SUBMIT TO THE EXCLUSIVE JURISDICTION OF THE COURTS OF THE STATE
OF NEW YORK SITTING IN THE BOROUGH OF MANHATTAN, CITY OF NEW YORK AND OF THE
UNITED STATES DISTRICT COURT FOR THE SOUTHERN DISTRICT OF NEW YORK, AND ANY
APPELLATE COURT FROM ANY THEREOF, IN ANY ACTION OR PROCEEDING ARISING OUT OF OR
RELATING TO THIS AGREEMENT 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 NEW YORK 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.

(b) THE PARTIES HERETO IRREVOCABLY AND UNCONDITIONALLY WAIVE, TO THE FULLEST
EXTENT PERMITTED BY APPLICABLE LAW, ANY OBJECTION WHICH EACH MAY NOW OR
HEREAFTER HAVE TO THE LAYING OF VENUE OF ANY ACTION OR PROCEEDING ARISING OUT OF
OR RELATING TO THIS AGREEMENT IN ANY COURT REFERRED TO IN SECTION 8.7(a) HEREOF.
EACH OF

 

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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.

(c) 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 OF THE TRANSACTIONS CONTEMPLATED HEREBY (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, THE FIRST-LIEN DOCUMENTS AND THE
SECOND-LIEN NOTES DOCUMENTS BY, AMONG OTHER THINGS, THE MUTUAL WAIVERS AND
CERTIFICATIONS IN THIS SECTION.

8.8. Notices. All notices to the Second-Lien Creditors and the First-Lien
Creditors permitted or required under this Agreement may be sent to the
Second-Lien Collateral Agent and the First-Lien Collateral Agent, respectively.
Unless otherwise specifically provided herein, any notice or other communication
herein required or permitted to be given shall be in writing and may be
personally served, electronically mailed or sent by courier service or U.S. mail
and shall be deemed to have been given when delivered in person or by courier
service, upon receipt of electronic mail or four (4) Business Days after deposit
in the U.S. mail (registered or certified, with postage prepaid and properly
addressed). For the purposes hereof, the addresses of the parties hereto shall
be as set forth beside each party’s name on the signature pages hereto, or, as
to each party, at such other address as may be designated by such party in a
written notice to all of the other parties.

8.9. Further Assurances. Each of the First-Lien Collateral Agent, on behalf of
itself and the First-Lien Creditors under the First-Lien Documents, the
Second-Lien Collateral Agent, on behalf of itself and the Second-Lien Creditors
and each Grantor, agrees that each of them shall take such further action and
shall execute and deliver such additional documents and instruments (in
recordable form, if requested) as the First-Lien Collateral Agent or the
Second-Lien Collateral Agent may reasonably request to effectuate the terms of
and the lien priorities contemplated by this Agreement. Each Second-Lien
Creditor, by its acceptance of the benefits of the Second-Lien Notes Documents,
agrees to be bound by the agreements herein made by it and the Second-Lien
Collateral Agent, on its behalf.

8.10. APPLICABLE LAW. THIS AGREEMENT SHALL BE GOVERNED BY, AND SHALL BE
CONSTRUED AND ENFORCED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK.

 

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8.11. Binding on Successors and Assigns. This Agreement shall be binding upon
the First-Lien Collateral Agent, the other First-Lien Creditors, the Second-Lien
Collateral Agent, the other Second-Lien Creditors, the Grantors and their
respective successors and assigns; provided that no Grantor may assign any of
its rights or obligations under this Agreement without the prior written consent
of (a) the First-Lien Collateral Agent and (b) except as permitted under the
Second-Lien Notes Documents, the Second-Lien Collateral Agent.

8.12. Specific Performance. Each of the First-Lien Collateral Agent and the
Second-Lien Collateral Agent may demand specific performance of this Agreement.
Each of the First-Lien Collateral Agent, on behalf of itself and the First-Lien
Creditors under the First-Lien Documents, and the Second-Lien Collateral Agent,
on behalf of itself and the Second-Lien Creditors, hereby irrevocably waives any
defense based on the adequacy of a remedy at law and any other defense which
might be asserted to bar the remedy of specific performance in any action which
may be brought by the First-Lien Collateral Agent or the Second-Lien Collateral
Agent, as the case may be.

8.13. Headings. Section headings in this Agreement are included herein for
convenience of reference only and shall not constitute a part of this Agreement
for any other purpose or be given any substantive effect.

8.14. Counterparts. 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. Delivery of an executed counterpart of a signature page of this
Agreement or any document or instrument delivered in connection herewith by
telecopy shall be effective as delivery of a manually executed counterpart of
this Agreement or such other document or instrument, as applicable.

8.15. Authorization. By its signature, each Person executing this Agreement on
behalf of a party hereto represents and warrants to the other parties hereto
that it is duly authorized to execute this Agreement. Each Second-Lien Creditor,
by its acceptance of the benefits of the Second-Lien Notes Documents, agrees to
be bound by the agreements made herein.

8.16. No Third Party Beneficiaries; Effect of Agreement. This Agreement and the
rights and benefits hereof shall inure to the benefit of each of the First-Lien
Collateral Agent, the Second-Lien Collateral Agent and their respective
successors and permitted assigns and shall inure to the benefit of each of the
First-Lien Creditors and the Second-Lien Creditors. No other Person shall have
or be entitled to assert rights or benefits hereunder.

8.17. Provisions Solely to Define Relative Rights. The provisions of this
Agreement are and are intended solely for the purpose of defining the relative
rights of the First-Lien Creditors, on the one hand, and the Second-Lien
Creditors, on the other hand. Except as expressly set forth herein, no Grantor
or any other creditor thereof shall have any rights hereunder. Nothing in this
Agreement is intended to or shall impair the obligations of any Grantor, which
are absolute and unconditional, to pay the First-Lien Obligations and the
Second-Lien Obligations as and when the same shall become due and payable in
accordance with the terms of the First-Lien Documents and the Second-Lien Notes
Documents, respectively.

 

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8.18. Grantors; Additional Grantors. It is understood and agreed that each
Grantor on the date of this Agreement shall constitute the original Grantors
party hereto. The original Grantors hereby covenant and agree to cause each
Subsidiary of the Company which becomes an Obligor after the date hereof to
contemporaneously become a party hereto (as a Grantor) by executing and
delivering a counterpart hereof to the First-Lien Collateral Agent or by
executing and delivering a joinder or assumption agreement in form and substance
reasonably satisfactory to the First-Lien Collateral Agent. The parties hereto
further agree that, notwithstanding any failure to take the actions required by
the immediately preceding sentence, each Person which becomes an Obligor at any
time (and any security granted by any such Person) shall be subject to the
provisions hereof as fully as if same constituted a Grantor party hereto and had
complied with the requirements of the immediately preceding sentence.

8.19. The First-Lien Administrative Agent, the Second-Lien Notes Trustee, the
First-Lien Collateral Agent and the Second-Lien Collateral Agent. (a) The
Grantors hereby acknowledge that, solely as between the Grantors and the
First-Lien Administrative Agent and the First-Lien Collateral Agent, on the one
hand, and the Grantors and the Second-Lien Collateral Agent and the Second-Lien
Notes Trustee, on the other hand, all of the rights, privileges, protections,
indemnities and immunities afforded the (i) Second-Lien Notes Trustee and the
Second-Lien Collateral Agent under the Second-Lien Notes Indenture and the
Second-Lien Notes Documents and (ii) the First-Lien Administrative Agent and the
First-Lien Collateral Agent under the First-Lien Credit Agreement and the
First-Lien Documents, are hereby incorporated herein by reference as if set
forth herein in full.

(b) Each party hereto hereby acknowledges and agrees that each of the First-Lien
Collateral Agent and the Second-Lien Collateral Agent is entering into this
Agreement solely in its capacity under the First-Lien Credit Documents and the
Second-Lien Notes Documents, respectively, and not in its individual capacity.

(c) The First-Lien Administrative Agent and the First-Lien Collateral Agent
shall not be deemed to owe any fiduciary duty to the Second-Lien Collateral
Agent or the other Second-Lien Creditors, on the one hand, and the Second-Lien
Notes Trustee and the Second-Lien Collateral Agent shall not be deemed to owe
any fiduciary duty to the First-Lien Collateral Agent or the other First-Lien
Creditors, on the other hand. With respect to the Second-Lien Collateral Agent
and the other Second-Lien Creditors, each of the First-Lien Administrative Agent
and the First-Lien Collateral Agent undertakes to perform or to observe only
such of its covenants and obligations as are specifically set forth in this
Agreement and no implied covenants or obligations with respect to the
Second-Lien Collateral Agent or the other Second-Lien Creditors shall be read
into this Agreement against the First-Lien Administrative Agent or the
First-Lien Collateral Agent. With respect to the First-Lien Collateral Agent and
the other First-Lien Creditors, each of the Second-Lien Notes Trustee and the
Second-Lien Collateral Agent undertakes to perform or to observe only such of
its covenants and obligations as are specifically set forth in this Agreement
and no implied covenants or obligations with respect to the First-Lien
Collateral Agent or the other First-Lien Creditors shall be read into this
Agreement against the Second-Lien Notes Trustee or the Second-Lien Collateral
Agent.

(d) The provisions of this Section 8.19 shall survive the termination of this
Agreement.

 

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8.20. Relationship of Creditors. Nothing set forth herein shall create or
evidence a joint venture, partnership or an agency or fiduciary relationship
among the Creditors. None of the Creditors or any of their respective directors,
officers, agents or employees shall be responsible to any other Creditor or to
any other person or entity for any Grantor’s solvency, financial condition or
ability to repay the First-Lien Obligations or the Second-Lien Obligations, or
for statements of any Grantor, oral or written, or for the validity, sufficiency
or enforceability of the First-Lien Documents or the Second-Lien Notes
Documents, or any security interests granted by any Grantor to any Creditor in
connection therewith. Each Creditor has entered into its respective financing
agreements with the Grantors based upon its own independent investigation, and
neither the First-Lien Collateral Agent nor Second-Lien Collateral Agent makes
any warranty or representation to the other Collateral Agent or the Creditors
for which it acts as agent nor does it rely upon any representation of the other
collateral agent or the Creditors for which it acts as agent with respect to
matters identified or referred to in this Agreement.

*     *     *

 

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IN WITNESS WHEREOF, the parties hereto have executed this Intercreditor
Agreement as of the date first written above.

 

First-Lien Collateral Agent

Notice Address:

Bank of Montreal

700 Louisiana Street, Suite 2100

Houston, Texas 77002

Attention: Jim Ducote

Tel: 713-546-9760

Fax: 713-223-4007

 

BANK OF MONTREAL

in its capacity as First-Lien Collateral Agent

By:   /s/ James V. Ducote   Name: James V. Ducote   Title:   Director

With a copy to:

Bank of Montreal

700 Louisiana Street, Suite 2100

Houston, Texas 77002

Attention: Jim Ducote

Tel: 713-546-9760

Fax: 713-223-4007

 

Signature Page 1

to Intercreditor Agreement

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

Second-Lien Collateral Agent

Notice Address:

U.S. Bank National Association

Corporate Trust Services

5555 San Felipe Street, Suite 1150

Houston, Texas 77056

Facsimile No.: (713) 235-9213

Attention: Corporate Trust Officer

 

U.S. BANK NATIONAL ASSOCIATION

as trustee, in its capacity as Second-Lien Collateral Agent

U.S. BANK NATIONAL ASSOCIATION

 

By:   /s/ Mauri J. Cowen   Name: Mauri J. Cowen   Title:   Vice President

 

Grantors

Notice Address:

Dune Energy, Inc.

Two Shell Plaza

777 Walker Street, Suite 2300

Houston, Texas 77002

Attention of Richard H. Mourgalia

(Telecopy No. 713-229-6398)

 

DUNE ENERGY, INC. By:   /s/ James A. Watt Name:   James A. Watt Title:  
President and CEO

 

Signature Page 2

to Intercreditor Agreement

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

Notice Address:

Dune Operating Company

Two Shell Plaza

777 Walker Street, Suite 2300

Houston, Texas 77002

Attention of Richard H. Mourgalia

(Telecopy No. 713-229-6398)

 

DUNE OPERATING COMPANY By:   /s/ James A. Watt Name:   James A. Watt Title:  
President

Notice Address:

Dune Properties, Inc

Two Shell Plaza

777 Walker Street, Suite 2300

Houston, Texas 77002

Attention of Richard H. Mourgalia

(Telecopy No. 713-229-6398)

 

DUNE PROPERTIES, INC. By:   /s/ James A. Watt Name:   James A. Watt Title:  
President

 

Signature Page 3

to Intercreditor Agreement