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Exhibit 10.3
 
Execution Version

SECOND LIEN CREDIT AGREEMENT

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BERRY PETROLEUM COMPANY

and

WELLS FARGO ENERGY CAPITAL, INC.
as Administrative Agent, Co-Lead Arranger and Co-Bookrunner,

THE ROYAL BANK OF SCOTLAND plc,
as Syndication Agent, Co-Lead Arranger and Co-Bookrunner,

CALYON NEW YORK BRANCH and SOCIETE GENERALE,
as Co-Documentation Agents, Co-Lead Arrangers and Co-Bookrunners,

UNIONBANCAL EQUITIES, INC.,
as Co-Lead Arranger and Co-Bookrunner

and

CERTAIN FINANCIAL INSTITUTIONS
as Lenders

 
 

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April 24, 2009

 

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SECOND LIEN TERM LOAN FACILITY OF UP TO $140,000,000
 

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TABLE OF CONTENTS

     
Page
       
ARTICLE I - - Definitions and References
1
 
Section 1.1.
Defined Terms
1
 
Section 1.2.
Exhibits and Schedules; Additional Definitions
23
 
Section 1.3.
Amendment of Defined Instruments
24
 
Section 1.4.
References and Titles
24
 
Section 1.5.
Calculations and Determinations
24
 
Section 1.6.
Joint Preparation; Construction of Indemnities and Releases
24
       
ARTICLE II - - The Loans
25
 
Section 2.1.
Commitments to Lend; Notes
25
 
Section 2.2.
Borrowing Notice
25
 
Section 2.3.
Continuations and Conversions of Loans
26
 
Section 2.4.
Use of Proceeds
27
 
Section 2.5.
Interest Rates and Fees
27
 
Section 2.6.
Optional Prepayments
28
 
Section 2.7.
Mandatory Termination of Commitments; Mandatory Prepayments;
28
 
Section 2.8.
Intentionally Omitted
28
 
Section 2.9.
Intentionally Omitted
28
 
Section 2.10.
Intentionally Omitted
28
 
Section 2.11.
Intentionally Omitted
28
 
Section 2.12.
Intentionally Omitted
28
 
Section 2.13.
Intentionally Omitted
28
 
Section 2.14.
Intentionally Omitted
29
 
Section 2.15.
Intentionally Omitted
29
 
Section 2.16.
Intentionally Omitted
29
 
Section 2.17.
Intentionally Omitted
29
 
Section 2.18.
Obligations of Lenders Several
29
       
ARTICLE III - - Payments to Lenders
29
 
Section 3.1.
General Procedures
29
 
Section 3.2.
Increased Costs
30
 
Section 3.3.
Illegality
31
 
Section 3.4.
Funding Losses
31
 
Section 3.5.
Taxes
32
 
Section 3.6.
Alternative Rate of Interest
33
 
Section 3.7.
Mitigation Obligations; Replacement of Lenders
34
       
ARTICLE IV - - Conditions Precedent to Lending
35
 
Section 4.1.
Documents to be Delivered
35
 
Section 4.2.
Intentionally Omitted
38
       
ARTICLE V - - Representations and Warranties
38
 
Section 5.1.
No Default
39
 
Section 5.2.
Organization and Good Standing
39

 
[Second Lien Credit Agreement]
 
 
 

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Section 5.3.
Authorization
39
 
Section 5.4.
No Conflicts or Consents
39
 
Section 5.5.
Enforceable Obligations
39
 
Section 5.6.
Initial Financial Statements
39
 
Section 5.7.
Other Obligations and Restrictions
40
 
Section 5.8.
Full Disclosure
40
 
Section 5.9.
Litigation
40
 
Section 5.10.
Labor Disputes and Acts of God
41
 
Section 5.11.
ERISA Plans and Liabilities
41
 
Section 5.12.
Environmental and Other Laws
41
 
Section 5.13.
Names and Places of Business
42
 
Section 5.14.
Borrower’s Subsidiaries
42
 
Section 5.15.
Government Regulation
42
 
Section 5.16.
Solvency
42
 
Section 5.17.
Title to Properties; Licenses
42
 
Section 5.18.
Leases and Contracts; Performance of Obligations
43
 
Section 5.19.
Gas Imbalances, Prepayments
44
 
Section 5.20.
Operation of Mineral Interests
44
 
Section 5.21.
Regulation U
45
 
Section 5.22.
Taxes; Tax Returns
45
 
Section 5.23.
Security Documents
45
       
ARTICLE VI - - Affirmative Covenants of Borrower
45
 
Section 6.1.
Payment and Performance
45
 
Section 6.2.
Books, Financial Statements and Reports
45
 
Section 6.3.
Other Information and Inspections
48
 
Section 6.4.
Notice of Material Events and Change of Address
48
 
Section 6.5.
Maintenance of Properties
49
 
Section 6.6.
Maintenance of Existence and Qualifications
49
 
Section 6.7.
Payment of Trade Liabilities, Taxes, etc
49
 
Section 6.8.
Insurance
49
 
Section 6.9.
Performance on Borrower’s Behalf
50
 
Section 6.10.
Interest
50
 
Section 6.11.
Compliance with Agreements and Law
50
 
Section 6.12.
Environmental Matters; Environmental Reviews
51
 
Section 6.13.
Evidence of Compliance
51
 
Section 6.14.
Bank Accounts; Offset
51
 
Section 6.15.
Guaranties of Borrower’s Subsidiaries
52
 
Section 6.16.
Pledge of Stock of Foreign Subsidiaries
52
 
Section 6.17.
Collateral
53
 
Section 6.18.
Agreement to Deliver Security Documents
53
 
Section 6.19.
Production Proceeds
54
 
Section 6.20.
Mortgaged Property Covenants
54
 
Section 6.21.
Intentionally Omitted
54
       
ARTICLE VII - - Negative Covenants of Borrower
54
 
Section 7.1.
Indebtedness
54

 
[Second Lien Credit Agreement]
 
 
ii

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Section 7.2.
Limitation on Liens
55
 
Section 7.3.
Hedging Contracts
56
 
Section 7.4.
Limitation on Mergers, Issuances of Securities
58
 
Section 7.5.
Limitation on Sales of Property
59
 
Section 7.6.
Limitation on Dividends, Stock Repurchases and Subordinated Debt
59
 
Section 7.7.
Limitation on Acquisitions, Investments; and New Businesses
60
 
Section 7.8.
Limitation on Credit Extensions
60
 
Section 7.9.
Transactions with Affiliates
60
 
Section 7.10.
Prohibited Contracts
60
 
Section 7.11.
Current Ratio
61
 
Section 7.12.
Total Funded Debt to EBITDAX Ratio
61
 
Section 7.13.
Senior Secured Debt to EBITDAX Ratio
62
 
Section 7.14.
Asset Coverage Test
62
 
Section 7.15.
Limitations on Layering, Etc.
62
       
ARTICLE VIII - - Events of Default and Remedies
63
 
Section 8.1.
Events of Default
63
 
Section 8.2.
Remedies
65
 
Section 8.3.
Application of Proceeds After Acceleration
65
       
ARTICLE IX - - Administrative Agent
66
 
Section 9.1.
Appointment and Authority
66
 
Section 9.2.
Exculpation Provisions
66
 
Section 9.3.
Reliance by Administrative Agent
67
 
Section 9.4.
Non-Reliance on Administrative Agent and Other Lenders
67
 
Section 9.5.
Rights as Lender
68
 
Section 9.6.
Sharing of Set-Offs and Other Payments
68
 
Section 9.7.
Investments
68
 
Section 9.8.
Resignation of Administrative Agent
69
 
Section 9.9.
Delegation of Duties
69
 
Section 9.10.
No Other Duties, etc
69
 
Section 9.11.
Administrative Agent May File Proofs of Claim
70
 
Section 9.12.
Guaranty Matters
70
 
Section 9.13.
Collateral Matters.
70
 
Section 9.14.
Intercreditor Agreement
72
       
ARTICLE X - - Miscellaneous
72
 
Section 10.1.
Waivers and Amendments; Acknowledgments
72
 
Section 10.2.
Survival of Agreements; Cumulative Nature
74
 
Section 10.3.
Notices; Effectiveness; Electronic Communication
74
 
Section 10.4.
Payment of Expenses; Indemnity
75
 
Section 10.5.
Successors and Assigns; Assignments
77
 
Section 10.6.
Confidentiality
79
 
Section 10.7.
Governing Law; Submission to Process
80
 
Section 10.8.
Limitation on Interest
80
 
Section 10.9.
Termination; Limited Survival
80
 
Section 10.10.
Severability
81

 
[Second Lien Credit Agreement]
 
 
iii

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Section 10.11.
Counterparts; Fax
81
 
SECTION 10.12.
WAIVER OF JURY TRIAL, PUNITIVE DAMAGES, ETC
81
 
Section 10.13.
Controlling Agreement
81
 
Section 10.14.
Disposition of Collateral
82
 
Section 10.15.
USA Patriot Act Notice
82

 
[Second Lien Credit Agreement]
 
 
iv

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Schedules and Exhibits:

Schedule 1           
-           Lenders Schedule

Schedule 2           
-           Insurance Schedule

Schedule 3           
-           Security Schedule

Schedule 4           
-           Post-Closing Obligations

Schedule 5           
-           Addresses of Lenders for Notices

Exhibit A           
-           Promissory Note

Exhibit B           
-           Borrowing Notice

Exhibit C           
-           Continuation/Conversion Notice

Exhibit D           
-           Certificate Accompanying Financial Statements

Exhibit E           
-           Opinion of Counsel for Restricted Persons

Exhibit F           
-           Assignment and Assumption Agreement

Exhibit G           
-           Disclosure Letter

 
[Second Lien Credit Agreement]
 
 
v

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SECOND LIEN CREDIT AGREEMENT

THIS SECOND LIEN CREDIT AGREEMENT is made as of April 24, 2009, by and among
BERRY PETROLEUM COMPANY, a Delaware corporation (herein called “Borrower”), each
lender that becomes a signatory hereto (individually, together with its
successors and assigns, a “Lender”, and collectively, together with their
respective successors and assigns, the “Lenders”), and WELLS FARGO ENERGY
CAPITAL, INC., as administrative agent for the Lenders (in such capacity,
together with its successors in such capacity pursuant to the terms hereof, the
“Administrative Agent”).

WHEREAS, Borrower, the lenders signatory thereto or later becoming bound thereby
(including Wells Fargo Bank, National Association (“Wells Fargo”) and certain of
the other lenders), and Wells Fargo, as administrative agent for such lenders
and the issuer of letters of credit thereunder, are parties to that certain
Amended and Restated Credit Agreement, dated as of July 15, 2008, as amended by
the First Amendment to Amended and Restated Credit Agreement dated as of October
17, 2008, the Second Amendment to Amended and Restated Credit Agreement dated as
of February 19, 2009, and the Third Amendment to the Amended and Restated Credit
Agreement dated as of the date hereof (as so amended, amended and restated,
supplemented or modified, the “First Lien Credit Agreement”);

WHEREAS, Borrower has requested that the Lenders make available to it a second
lien credit facility for the purposes set forth herein; and

WHEREAS, the Lenders have agreed to provide the requested second lien credit
facility to the Borrower on the terms, and subject to the conditions, set forth
herein.

ACCORDINGLY, in consideration of the mutual covenants and agreements herein
contained, the parties hereto covenant and agree as follows:

ARTICLE I -  - Definitions and References

Section 1.1.            Defined Terms.  As used in this Second Lien Credit
Agreement, each of the following terms has the meaning given to such term in
this Section 1.1 or in the sections and subsections referred to below:

“Adjusted Base Rate” means, for any day, the Base Rate plus the Base Rate Margin
for such day; provided that the Adjusted Base Rate charged by any Person shall
never exceed the Highest Lawful Rate.

“Adjusted EBITDAX” means, for any period, EBITDAX for such period adjusted (a)
as permitted and in accordance with Article 11 of Regulation S-X promulgated by
the SEC, and (b) to give effect to any acquisition or divestiture made by
Borrower or any of its Consolidated subsidiaries during such period as if such
transactions had occurred on the first day of such period, regardless of whether
the effect is positive or negative.

[Second Lien Credit Agreement]

 
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“Adjusted Eurodollar Rate” means, for any Eurodollar Loan for any day during any
Interest Period therefor, the rate per annum equal to the sum of (a) the
Eurodollar Margin for such day plus (b) the higher of (i) 3% per annum and (ii)
the rate per annum (rounded upwards, if necessary, to the nearest 1/100 of 1%)
determined by Administrative Agent to be equal to the quotient obtained by
dividing (A) the Eurodollar Rate for such Eurodollar Loan for such Interest
Period by (B) one minus the Reserve Requirement for such Eurodollar Loan for
such Interest Period; provided that no Adjusted Eurodollar Rate charged by any
Person shall ever exceed the Highest Lawful Rate.  The Adjusted Eurodollar Rate
for any Eurodollar Loan shall change whenever the Eurodollar Margin or the
Reserve Requirement changes.

“Administrative Agent” has the meaning given such term in the Preamble to this
Agreement.

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

“Affiliate” means, as to any Person, each other Person that directly or
indirectly (through one or more intermediaries or otherwise) controls, is
controlled by, or is under common control with, such Person.  A Person shall be
deemed to be “controlled by” any other Person if such other Person possesses,
directly or indirectly, the power:

(a)            to vote 10% or more of the Equity Interests in such Person (on a
fully diluted basis) having ordinary voting power for the election of directors
or similar managing group; or

(b)            to direct or cause the direction of the management and policies
of such Person whether by contract or otherwise.

“Aggregate Commitment” means the aggregate amount of the Commitments of the
Lenders; provided, that in no event shall the Aggregate Commitment exceed the
Maximum Credit Amount.

“Agreement” means this Second Lien Credit Agreement.

“Applicable Lending Office” means, with respect to each Lender, such Lender’s
Domestic Lending Office in the case of Base Rate Loans and such Lender’s
Eurodollar Lending Office in the case of Eurodollar Loans.

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

“Assignment and Assumption” means an assignment and assumption entered into by a
Lender and an Eligible Assignee (with the consent of any party whose consent is
required by Section 10.5), and accepted by Administrative Agent, in
substantially the form of Exhibit F or any other form approved by Administrative
Agent.

“Availability” means “Availability” as defined in the First Lien Credit
Agreement.

[Second Lien Credit Agreement]

 
2

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“Base Rate” means, for any day, the rate per annum equal to the highest of (a)
the Federal Funds Rate for such day plus one and one-half of one percent (1.5%),
(b) the Prime Rate for such day, (c) the One-Month Eurodollar Rate for such day
plus one and one-half percent (1.5%), or (d) four percent (4%).  Any change in
the Base Rate due to a change in the Prime Rate, the Federal Funds Rate or the
One-Month Eurodollar Rate shall be effective on the effective date of such
change in the Prime Rate or Federal Funds Rate or the One-Month Eurodollar
Rate.  As used in this definition, “Prime Rate” means, at any time, the per
annum rate of interest most recently announced within Wells Fargo at its
principal office in San Francisco as its Prime Rate, with the understanding that
Wells Fargo’s Prime Rate is one of its base rates and serves as the basis upon
which effective rates of interest are calculated for those loans making
reference thereto, and is evidenced by the recording thereof after its
announcement in such internal publication or publications as Wells Fargo may
designate.  Each change in the Prime Rate will be effective on the day the
change is announced within Wells Fargo.

“Base Rate Loan” means a Loan which does not bear interest at the Adjusted
Eurodollar Rate.

“Base Rate Margin” means, on any day, seven percent (7.00%) per annum.

“Borrowing Base” means “Borrowing Base” as defined in the First Lien Credit
Agreement.

“Borrowing Base Deficiency” means “Borrowing Base Deficiency” as defined in the
First Lien Credit Agreement.

“Borrowing Base Properties” means “Borrowing Base Properties” as defined in the
First Lien Credit Agreement.

“Borrowing Notice” means a written or telephonic request, or a written
confirmation, made by Borrower which meets the requirements of Section 2.2.

“Business Day” means a day, other than a Saturday or Sunday, on which commercial
banks are open for business with the public in Denver, Colorado.  Any Business
Day in any way relating to Eurodollar Loans (such as the day on which an
Interest Period begins or ends) must also be a day on which, in the judgment of
Administrative Agent, significant transactions in dollars are carried out in the
interbank eurocurrency market.

“Capital Lease” means a lease with respect to which the lessee is required
concurrently to recognize the acquisition of an asset and the incurrence of a
liability in accordance with GAAP.

“Capital Lease Obligation” means, with respect to any Person and a Capital
Lease, the amount of the obligation of such Person as the lessee under such
Capital Lease which should, in accordance with GAAP, appear as a liability on
the balance sheet of such Person.

“Cash Equivalents” means Investments in:

[Second Lien Credit Agreement]

 
3

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(a)            marketable obligations, maturing within twelve months after
acquisition thereof, issued or unconditionally guaranteed by the United States
of America or an instrumentality or agency thereof and entitled to the full
faith and credit of the United States of America;

(b)            demand deposits, and time deposits (including certificates of
deposit) maturing within twelve months from the date of deposit thereof, with
any office of any Lender or with a domestic office of any national or state bank
or trust company which is organized under the Laws of the United States of
America or any state therein, which has capital, surplus and undivided profits
of at least $500,000,000, and whose long term certificates of deposit are rated
at least A2 by Moody’s or A by S & P;

(c)            repurchase obligations with a term of not more than seven days
for underlying securities of the types described in subsection (a) above entered
into with any commercial bank meeting the specifications of subsection (b)
above;

(d)            open market commercial paper, maturing within 270 days after
acquisition thereof, which are rated at least P-1 by Moody’s or A-1 by S & P;
and

(e)            money market or other mutual funds substantially all of whose
assets comprise securities of the types described in subsections (a) through (d)
above.

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

“Change of Control” means the occurrence of either of the following events: (a)
any Person or two or more Persons acting as a group shall acquire beneficial
ownership (within the meaning of Rule 13d-3 of the SEC under the Securities Act
of 1934, as amended, and including holding proxies to vote for the election of
directors other than proxies held by Borrower’s management or their designees to
be voted in favor of Persons nominated by Borrower’s Board of Directors) of 30%
or more of the outstanding voting securities of Borrower, measured by voting
power (including both common stock and any preferred stock or other equity
securities entitling the holders thereof to vote with the holders of common
stock in elections for directors of Borrower) or (b) one-third or more of the
directors of Borrower shall consist of Persons not nominated by Borrower’s Board
of Directors (not including as Board nominees any directors which the Board is
obligated to nominate pursuant to shareholders agreements, voting trust
arrangements or similar arrangements).

“Closing Date” means the date on which all of the conditions precedent set forth
in Section 4.1 shall have been satisfied or waived.

“Collateral” means all property of any kind which is subject to a Lien in favor
of Lenders (or in favor of Administrative Agent for the benefit of Lenders) or
which, under the terms of any Security Document, is purported to be subject to
such a Lien, in each case that secures the Secured Obligations.

[Second Lien Credit Agreement]

 
4

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“Commitment” means, for each Lender, the obligation of such Lender to make Loans
to Borrower in an aggregate amount not exceeding the amount set forth on the
Lenders Schedule.

“Consolidated” refers to the consolidation of any Person, in accordance with
GAAP, with its properly consolidated subsidiaries.  References herein to a
Person’s Consolidated financial statements, financial position, financial
condition, liabilities, etc. refer to the consolidated financial statements,
financial position, financial condition, liabilities, etc. of such Person and
its properly consolidated subsidiaries.

“Continuation” shall refer to the continuation pursuant to Section 2.3 hereof of
a Eurodollar Loan as a Eurodollar Loan from one Interest Period to the next
Interest Period.

“Continuation/Conversion Notice” means a written or telephonic request, or a
written confirmation, made by Borrower which meets the requirements of Section
2.3.

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

“Conversion” shall refer to a conversion pursuant to Section 2.3 or Article III
of one Type of Loan into another Type of Loan.

“Core Acquisitions and Investments” means (i) acquisitions of Mineral Interests
and acquisitions of assets used in the producing, drilling, transportation,
processing, refining or marketing of petroleum products that are related to a
Restricted Person’s producing Mineral Interests, and (ii) acquisitions of or
Investments in Persons engaged primarily in the business of acquiring,
developing and producing Mineral Interests or transporting, processing, refining
or marketing petroleum products that are related to a Restricted Person’s
producing Mineral Interests; provided that with respect to any acquisition or
Investment described in this clause (ii), either (A) immediately after making
such acquisition or Investment, Borrower shall directly or indirectly own at
least fifty-one percent (51%) of the Equity Interests of such Person, measured
by voting power, or (B) such Person shall not be a publicly traded entity and
such acquisition or Investment shall be related to the business and operations
of Borrower or one of its Subsidiaries.

“Current Assets” means the sum of the current assets of Borrower and its
Consolidated Subsidiaries at such time, plus the Availability under the First
Lien Credit Agreement at such time, but excluding, for purposes of this
definition any non-cash gains for any Hedging Contract resulting from the
requirements at such time of SFAS 133 or any replacement accounting standard.

“Current Liabilities” means the current liabilities of Borrower and its
Consolidated Subsidiaries at such time, but excluding for purposes of this
definition, (i) any non-cash losses or charges on any Hedging Contract resulting
from the requirement at such time of SFAS 133 or any replacement accounting
standard and (ii) current maturities of the Obligations and First Lien
Obligations.

[Second Lien Credit Agreement]

 
5

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

“Default” means any Event of Default and any default, event or condition which
would, with the giving of any requisite notices and the passage of any requisite
periods of time, constitute an Event of Default.

“Default Rate” means, at the time in question (a) with respect to any Base Rate
Loan, the rate per annum equal to three percent (3%) above the Adjusted Base
Rate then in effect and (b) with respect to any Eurodollar Loan, the rate per
annum equal to three percent (3%) above the Adjusted Eurodollar Rate then in
effect for such Loan, provided in each case that no Default Rate charged by any
Person shall ever exceed the Highest Lawful Rate.

“Disclosure Letter” means the letter of even date with the Agreement from
Borrower to the Agent, attached hereto as Exhibit G.

“Disclosure Report” means either a notice given by Borrower under Section 6.4 or
a certificate given by Borrower’s Chief Financial Officer under Section 6.2(a).

“Dividend” means any dividend or other distribution made by a Restricted Person
on or in respect of any stock, partnership interest, or other equity interest in
such Restricted Person or any other Restricted Person (including any option or
warrant to buy such an equity interest), excluding Stock Repurchases.

“Domestic Lending Office” means, with respect to any Lender, the office of such
Lender specified as its “Domestic Lending Office” below its name on the Lenders
Schedule, or such other office as such Lender may from time to time specify to
Borrower and Administrative Agent; and, with respect to Administrative Agent,
the office, branch, or agency through which it administers this Agreement.

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

“EBITDAX” means, for any period, the sum of (without duplication, and without
giving effect to any extraordinary losses or gains during such period) the
following determined on a Consolidated basis (1) Net Income during such period,
plus (2) all interest paid or accrued during such period on Indebtedness
(including amortization of original issue discount and the interest component of
any deferred payment obligations and capital lease obligations) which was
deducted in determining such Net Income, plus (3) all income taxes which were
deducted in determining such Net Income, plus (4) all depreciation, amortization
(including amortization of goodwill and debt issue costs), depletion, accretion
and other non-cash charges (including any provision for the reduction in the
carrying value of assets recorded in accordance with GAAP) which were deducted
in determining such Net Income, plus (5) all exploration expenses which were
deducted in determining such Net Income, minus (6) all non-cash items of income
which were included in determining such Net Income.

[Second Lien Credit Agreement]

 
6

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

“Engineering Report” means the Initial Engineering Report and each engineering
report delivered pursuant to Section 6.2.

“Environmental Laws” means any and all Laws relating to the environment or to
emissions, discharges, releases or threatened releases of pollutants,
contaminants, chemicals, or industrial, toxic or hazardous substances or wastes
into the environment including ambient air, surface water, ground water, or
land, or otherwise relating to the manufacture, processing, distribution, use,
treatment, storage, disposal, transport, or handling of pollutants,
contaminants, chemicals, or industrial, toxic or hazardous substances or wastes.

“Equity Interest” means (i) with respect to any corporation, the capital stock
of such corporation, (ii) with respect to any limited liability company, the
membership interests in such limited liability company, (iii) with respect to
any partnership or joint venture, the partnership or joint venture interests
therein, and (iv) with respect to any other legal entity, the ownership
interests in such entity.

“ERISA” means the Employee Retirement Income Security Act of 1974, as amended
from time to time, and any successor statutes or statute, together with all
rules and regulations promulgated with respect thereto.

“ERISA Affiliate” means each Restricted Person and all members of a controlled
group of corporations and all trades or businesses (whether or not incorporated)
under common Control, that, together with such Restricted Person, are treated as
a single employer under Section 414 of the Internal Revenue Code.

“ERISA Plan” means any employee pension benefit plan subject to Title IV of
ERISA maintained by any ERISA Affiliate with respect to which any Restricted
Person has a fixed or contingent liability.

“Eurodollar Lending Office” means, with respect to any Lender, the office of
such Lender specified as its “Eurodollar Lending Office” below its name on the
Lenders Schedule (or, if no such office is specified, its Domestic Lending
Office), or such other office of such Lender as such Lender may from time to
time specify to Borrower and Administrative Agent.

“Eurodollar Loan” means a Loan that bears interest at the Adjusted Eurodollar
Rate.

“Eurodollar Margin” means, on any day, eight percent (8.00%) per annum.

“Eurodollar Rate” means, for any Eurodollar Loan and with respect to the related
Interest Period therefor, (a) the interest rate per annum (carried out to the
fifth decimal place) equal to the applicable London interbank offered rate for
deposits in the requested currency appearing on the Reuters Reference LIBOR01
page for such currency as of 11:00 a.m. (London time) two Business Days prior to
the first day of such Interest Period, or (b) in the event the rate referenced
in the preceding subsection (a) does not appear on such page or service or such
page or service shall cease to be available, the rate per annum (carried out to
the fifth decimal place) equal to the rate determined by Administrative Agent to
be the offered rate on Page BBAM of the Bloomberg Financial Market Information
Service as of 11:00 a.m. (London time) two Business Days prior to the first day
of such Interest Period, or (c) in the event the rates referenced in the
preceding subsections (a) and (b) are not available, the rate per annum
determined by Administrative Agent as the rate of interest at which deposits in
U.S. dollars (for delivery on the first day of such Interest Period) in same day
funds in the approximate amount of the applicable Eurodollar Loan and with a
term equivalent to such Interest Period would be offered by Wells Fargo or one
of its Affiliate banks to major banks in the London interbank market at their
request at approximately 11:00 a.m. (London time) two Business Days prior to the
first day of such Interest Period.

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“Event of Default” has the meaning given to such term in Section 8.1.

“Excluded Property” has the meaning given to such term in the Security
Documents.

“Excluded Taxes” means, with respect to Administrative Agent, any Lender or any
other recipient of any payment to be made by or on account of any obligation of
Borrower hereunder, (a) taxes imposed on or measured by its overall net income
(however denominated), and franchise taxes imposed on it (in lieu of net income
taxes), by the jurisdiction (or any political subdivision thereof) under the
laws of which such recipient is organized or in which its principal office is
located or, in the case of any Lender, in which its Applicable Lending Office is
located, (b) any branch profits taxes imposed by the United States of America or
any similar tax imposed by any other jurisdiction in which Borrower is located;
and (c) in the case of a Foreign Lender (other than an assignee pursuant to a
request by Borrower under Section 3.7(b), any withholding tax that is imposed on
amounts payable to such Foreign Lender at the time such Foreign Lender becomes a
party hereto (or designates a new lending office) or is attributable to such
Foreign Lender’s failure or inability (other than as a result of a Change in
Law) to comply with Section 3.5(e), except to the extent that such Foreign
Lender (or its assignor, if any) was entitled, at the time of designation of a
new lending office (or assignment), to receive additional amounts from Borrower
with respect to such withholding tax pursuant to Section 3.5(a).

“Federal Funds Rate” means, for any day, the rate per annum (rounded upwards, if
necessary, to the nearest 1/100th of one percent) equal to the weighted average
of the rates on overnight Federal funds transactions with members of the Federal
Reserve System arranged by Federal funds brokers on such day, as published by
the Federal Reserve Bank of New York on the Business Day next succeeding such
day; provided that (a) if the day for which such rate is to be determined is not
a Business Day, the Federal Funds Rate for such day shall be such rate on such
transactions on the next preceding Business Day as so published on the next
succeeding Business Day, and (b) if such rate is not so published for any day,
the Federal Funds Rate for such day shall be the average rate quoted to
Administrative Agent on such day on such transactions as determined by
Administrative Agent.

“Fee Letter” means that certain Fee Letter dated February 26, 2009 between
Administrative Agent and Borrower.

[Second Lien Credit Agreement]

 
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“First Lien Agent” means “Administrative Agent” as defined in the First Lien
Credit Agreement.

“First Lien Credit Agreement” has the meaning given to such term in the Recitals
to this Agreement.

“First Lien Lender Hedging Obligations” means “Lender Hedging Obligations” as
defined in the First Lien Credit Agreement.

“First Lien Lenders” means the syndicate of financial institutions that comprise
the “Lenders” as defined in the First Lien Credit Agreement; and “First Lien
Lender” means “Lender” as defined in the First Lien Credit Agreement.

“First Lien Loan Documents” means “Loan Documents” as defined in the First Lien
Credit Agreement.

“First Lien Loans” means “Loans” as defined in the First Lien Credit Agreement.

“First Lien Obligations” means “Obligations” as defined in the First Lien Credit
Agreement.

“First Lien Secured Obligations” means “Secured Obligations” as defined in the
First Lien Credit Agreement.

“First Lien Security Documents” means “Security Documents” as defined in the
First Lien Credit Agreement.

“Fiscal Quarter” means a three-month period ending on March 31, June 30,
September 30 or December 31 of any year.

“Fiscal Year” means a twelve-month period ending on December 31 of any year.

“Foreign Lender” means any Lender that is organized under the laws of a
jurisdiction other than that in which Borrower is resident for tax
purposes.  For purposes of this definition, the United States of America, each
State thereof and the District of Columbia shall be deemed to constitute a
single jurisdiction.

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

“Four-Quarter Period” means any period of four consecutive Fiscal Quarters.

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

“GAAP” means those generally accepted accounting principles and practices which
are recognized as such by the Financial Accounting Standards Board (or any
generally recognized successor) and which, in the case of Borrower and its
Consolidated Subsidiaries, are applied for all periods after the date hereof in
a manner consistent with the manner in which such principles and practices were
applied to the audited Initial Financial Statements.  If any change in any
accounting principle or practice is required by the Financial Accounting
Standards Board (or any such successor) in order for such principle or practice
to continue as a generally accepted accounting principle or practice, all
reports and financial statements required hereunder with respect to Borrower or
with respect to Borrower and its Consolidated Subsidiaries shall be prepared in
accordance with such change, which change shall be disclosed to Administrative
Agent on the next date on which financial statements are required to be
delivered to Lenders pursuant to Section 6.2(a); provided that, unless the
Majority Lenders shall otherwise agree in writing, no such change shall modify
or affect the manner in which compliance with the covenants contained in Article
VII are computed such that all such computations shall be conducted utilizing
financial information presented consistently with prior periods.

[Second Lien Credit Agreement]

 
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“Governmental Authority” means the government of the United States or any other
nation, or of any political subdivision thereof, whether state or local, and any
agency, authority, instrumentality, regulatory body, court, central bank or
other entity exercising executive, legislative, judicial, taxing, regulatory or
administrative powers or functions of or pertaining to government (including any
supra-national bodies such as the European Union or the European Central Bank).

“Guarantor” means any Person who has guaranteed some or all of the Secured
Obligations pursuant to a guaranty listed on the Security Schedule or any other
Person who has guaranteed some or all of the Secured Obligations and who has
been accepted by Administrative Agent as a Guarantor or any Subsidiary of
Borrower which now or hereafter executes and delivers a guaranty to
Administrative Agent pursuant to Section 6.15.

“Hazardous Materials” means any substances regulated under any Environmental
Law, whether as pollutants, contaminants, or chemicals, or as industrial, toxic
or hazardous substances or wastes, or otherwise.

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

[Second Lien Credit Agreement]

 
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“Highest Lawful Rate” means, with respect to each Lender Party to whom
Obligations are owed, the maximum, nonusurious rate of interest that such Lender
Party is permitted under applicable Law to contract for, take, charge, or
receive with respect to such Obligations.  All determinations herein of the
Highest Lawful Rate, or of any interest rate determined by reference to the
Highest Lawful Rate, shall be made separately for each Lender Party as
appropriate to assure that the Loan Documents are not construed to obligate any
Person to pay interest to any Lender Party at a rate in excess of the Highest
Lawful Rate applicable to such Lender Party.

“Indebtedness” of any Person means Liabilities in any of the following
categories (without duplication):

(a)            Liabilities for borrowed money,

(b)            Liabilities constituting an obligation to pay the deferred
purchase price of property or services,

(c)            Liabilities evidenced by a bond, debenture, note or similar
instrument,

(d)            Liabilities which (i) would under GAAP be shown on such Person’s
balance sheet as a liability, and (ii) are payable more than one year from the
date of creation thereof (other than reserves for taxes and reserves for
contingent obligations),

(e)            Liabilities arising under Hedging Contracts,

(f)             Liabilities constituting principal under leases capitalized in
accordance with GAAP,

(g)            Liabilities arising under conditional sales or other title
retention agreements,

(h)            Liabilities owing under direct or indirect guaranties of
Liabilities of any other Person or otherwise constituting obligations to
purchase or acquire or to otherwise protect or insure a creditor against loss in
respect of Liabilities of any other Person (such as obligations under working
capital maintenance agreements, agreements to keep-well, or agreements to
purchase Liabilities, assets, goods, securities or services), but excluding
endorsements in the ordinary course of business of negotiable instruments in the
course of collection,

(i)             Liabilities (for example, repurchase agreements, mandatorily
redeemable preferred stock and sale/leaseback agreements) consisting of an
obligation to purchase or redeem securities or other property, if such
Liabilities arises out of or in connection with the sale or issuance of the same
or similar securities or property,

(j)             Liabilities with respect to letters of credit or applications or
reimbursement agreements therefor;

(k)            Liabilities with respect to payments received in consideration of
oil, gas, or other minerals yet to be acquired or produced at the time of
payment (including obligations under “take-or-pay” contracts to deliver gas in
return for payments already received and the undischarged balance of any
production payment created by such Person or for the creation of which such
Person directly or indirectly received payment),

[Second Lien Credit Agreement]

 
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(l)             Liabilities with respect to other obligations to deliver goods
or services in consideration of advance payments therefor; or

(m)           Liabilities with respect to bankers acceptances;

provided, however, that the “Indebtedness” of any Person shall not include
Liabilities that were incurred by such Person on ordinary trade terms to
vendors, suppliers, or other Persons providing goods and services for use by
such Person in the ordinary course of its business which are paid as required by
Section 6.7.

“Indemnified Taxes” means Taxes other than Excluded Taxes.

“Independent Engineers” means an independent petroleum engineering firm chosen
by Borrower and acceptable to Administrative Agent.

“Initial Engineering Report” means the engineering reports concerning the
Mineral Interests of the Restricted Persons prepared by Degolyer and MacNaughton
as of January 1, 2009.

“Initial Financial Statements” means the audited annual financial statements of
Borrower dated as of December 31, 2008.

“Insolvent” means with respect to any Person, that such Person (a) is insolvent
(as such term is defined in the United States Bankruptcy Code, Title 11 U.S.C.,
as amended (the “Bankruptcy Code”), and with all terms used in this Section that
are defined in the Bankruptcy Code having the meanings ascribed to those terms
in the text and interpretive case law applicable to the Bankruptcy Code), or (b)
the sum of such Person’s debts, including absolute and contingent liabilities,
the Obligations or guarantees thereof, exceeds the value of such Person’s
assets, at a fair valuation, and (c) such Person’s capital is unreasonably small
for the business in which such Person is engaged and intends to be
engaged.  Such Person has incurred (whether under the Loan Documents or
otherwise), or intends to incur debts which will be beyond its ability to pay as
such debts mature.  In determining whether a Person is “Insolvent” all rights of
contribution of each Restricted Party against other Restricted Parties under the
Guaranty, at law, in equity or otherwise shall be taken into account.

“Insurance Schedule” means Schedule 2 attached hereto.

“Intercreditor Agreement” means that certain Intercreditor Agreement, dated as
of the date hereof, among the Borrower, the Administrative Agent and the First
Lien Agent.

“Interest Payment Date” means (a) with respect to each Base Rate Loan, the last
day of each Fiscal Quarter, and (b) with respect to each Eurodollar Loan, the
last day of the Interest Period that is applicable thereto and, if such Interest
Period is six, nine or twelve months in length, each date specified by
Administrative Agent which is approximately three, six or nine months after such
Interest Period begins.

[Second Lien Credit Agreement]

 
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“Interest Period” means, with respect to each particular Eurodollar Loan, the
period specified in the Borrowing Notice or Continuation/Conversion Notice
applicable thereto, beginning on and including the date specified in such
Borrowing Notice or Continuation/Conversion Notice (which must be a Business
Day), and ending one, two, three, or six months and, if available, nine or
twelve months thereafter, as Borrower may elect in such notice; provided
that:  (a) any Interest Period which would otherwise end on a day which is not a
Business Day shall be extended to the next succeeding Business Day unless such
Business Day falls in another calendar month, in which case such Interest Period
shall end on the next preceding Business Day; (b) any Interest Period which
begins on the last Business Day in a calendar month (or on a day for which there
is no numerically corresponding day in the calendar month at the end of such
Interest Period) shall end on the last Business Day in a calendar month; and (c)
notwithstanding the foregoing, any Interest Period which would otherwise end
after the Maturity Date shall end on the Maturity Date (or, if the Maturity Date
is not a Business Day, on the first preceding Business Day).

“Internal Revenue Code” means the United States Internal Revenue Code of 1986,
as amended from time to time and any successor statute or statutes, together
with all rules and regulations promulgated with respect thereto.

“Investment” means any investment, made directly or indirectly, in any Person or
any property, whether by purchase, acquisition of shares of capital stock,
indebtedness or other obligations or securities or by loan, advance, capital
contribution or otherwise and whether made in cash, by the transfer of property,
or by any other means.

“Law” means any statute, law, regulation, ordinance, rule, treaty, judgment,
order, decree, permit, concession, franchise, license, agreement or other
governmental restriction of the United States or any state or political
subdivision thereof or of any foreign country or any department, province or
other political subdivision thereof.  Any reference to a Law includes any
amendment or modification to such Law, and all regulations, rulings, and other
Laws promulgated under such Law.

“Lender Parties” means Administrative Agent and all Lenders.

“Lenders” or “Lender” means each signatory hereto (other than Borrower and any
Restricted Person that is a party hereto), including WFEC in its capacity as a
Lender hereunder rather than as Administrative Agent, and the successors of each
such party as holder of a Note.

“Lenders Schedule” means Schedule 1 hereto.

“Liabilities” means, as to any Person, all indebtedness, liabilities and
obligations of such Person, whether matured or unmatured, liquidated or
unliquidated, primary or secondary, direct or indirect, absolute, fixed or
contingent, and whether or not required to be considered pursuant to GAAP.

“Lien” means, with respect to any property or assets, any right or interest
therein of a creditor to secure Liabilities owed to it or any other arrangement
with such creditor which provides for the payment of such Liabilities out of
such property or assets or which allows such creditor to have such Liabilities
satisfied out of such property or assets prior to the general creditors of any
owner thereof, including any lien, mortgage, security interest, pledge, deposit,
production payment, rights of a vendor under any title retention or conditional
sale agreement or lease substantially equivalent thereto, tax lien, mechanic’s
or materialman’s lien, or any other charge or encumbrance for security purposes,
whether arising by Law or agreement or otherwise, but excluding any right of
offset which arises without agreement in the ordinary course of
business.  “Lien” also means any filed financing statement, any registration of
a pledge (such as with an issuer of uncertificated securities), or any other
arrangement or action which would serve to perfect a Lien described in the
preceding sentence, regardless of whether such financing statement is filed,
such registration is made, or such arrangement or action is undertaken before or
after such Lien exists.

[Second Lien Credit Agreement]

 
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“Loan” has the meaning given to such term in Section 2.1.

“Loan Documents” means this Agreement, the Notes, the Intercreditor Agreement,
the Security Documents, and all other agreements, certificates, documents,
instruments and writings at any time delivered in connection herewith or
therewith (exclusive of term sheets and commitment letters).

“Majority Lenders” means two or more Lenders whose aggregate Percentage Shares
exceed fifty percent (50.0%).

“Material Adverse Change” means a material and adverse change, from the state of
affairs presented in the Initial Financial Statements or as represented or
warranted in any Loan Document, to (a) Borrower’s Consolidated financial
condition, (b) Borrower’s Consolidated operations, properties or prospects,
considered as a whole, (c) Borrower’s ability to timely pay the Obligations, (d)
the enforceability of the material terms of any Loan Documents, or (e) the
rights and remedies of Administrative Agent or Lenders under the Loan Documents.

“Material Hedging Modification” means any amendments, modifications, sales,
assignments, novations or terminations of any Hedging Contracts that, in the
aggregate, reduce by more than five percent (5%) the aggregate notional volume
of oil, gas and natural gas liquids subject to the Restricted Persons’ Hedging
Contracts in effect as of the most recent calculation of Total Proved PV10% to
Total Funded Debt pursuant to Section 7.14.

“Material Subsidiary” means a Subsidiary of Borrower that (a) owns assets
representing five percent (5%) of the market value of Borrower’s Consolidated
assets or (b) has EBITDAX for the Four-Quarter Period most recently ended that
equals or exceeds five percent (5%) of Borrower’s Consolidated EBITDAX for such
period.

“Maturity Date” means January16, 2013.

“Maximum Credit Amount” means $140,000,000.

“Mineral Interests” means rights, estates, titles, and interests in and to oil,
gas, sulfur, or other mineral leases and any mineral interests, royalty and
overriding royalty interest, production payment, net profits interests, mineral
fee interests, and other rights therein, including, without limitation, any
reversionary or carried interests relating to the foregoing, together with
rights, titles, and interests created by or arising under the terms of any
unitization, communization, and pooling agreements or arrangements, and all
properties, rights and interests covered thereby, whether arising by contract,
by order, or by operation of Law, which now or hereafter include all or any part
of the foregoing.

[Second Lien Credit Agreement]

 
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“Minimum Collateral Amount” means Mineral Interests representing eighty percent
(80%) of the Present Value of the Proved Reserves properly attributed to the
Borrowing Base Properties or such higher percentage of the Borrowing Base
Properties that may be designated by First Lien Agent.

“Money Market Facility” means a credit facility which (a) is evidenced by a
bond, debenture, note or similar instrument, (b) has financial covenants that
are not more restrictive with respect to the Restricted Persons than the
financial covenants under this Agreement and has other covenants and events of
default governing the Indebtedness evidenced by such credit facility that are
not materially more restrictive with respect to the Restricted Persons than the
covenants and Events of Default under this Agreement, and (c) the Indebtedness
of which is not subordinated to any other Indebtedness of the Restricted
Persons.

“Moody’s” means Moody’s Investors Service, Inc. or its successor.

“Net Income” means, for any period, the net income (or loss) of Borrower and its
properly consolidated Subsidiaries for such period, calculated on a consolidated
basis.

“Net Worth” of any Person means, as of any date, the remainder of all
Consolidated assets of such Person minus such Person's Consolidated liabilities,
each as determined by GAAP, but excluding, for purposes of this definition any
assets and liabilities for any Hedging Contract resulting from the requirements
of SFAS 133 at such time.

“Non-Core Acquisitions and Investments” means acquisitions and Investments that
are not Core Acquisitions and Investments.

“Note” has the meaning given to such term in Section 2.1.

“NYMEX” means the New York Mercantile Exchange.

“NYMEX Pricing” means, as of any date of determination with respect to a oil and
natural gas futures contract for any month, (a) for crude oil, the closing
settlement price for the Light, Sweet Crude Oil futures contract for such month,
and (b) for natural gas, the closing settlement price for the Henry Hub Natural
Gas futures contract for such month, in each case, as published by New York
Mercantile Exchange (NYMEX) on its website, currently located at www.nymex.com,
or any successor thereto (as such price may be corrected or revised from time to
time by the NYMEX in accordance with its rules and regulations).

“Obligations” means all Liabilities from time to time owing by any Restricted
Person to any Lender Party under or pursuant to any of the Loan
Documents.  “Obligation” means any part of the Obligations.

“One-Month Eurodollar Rate” means, for any day for any Base Rate Loan, (a) the
interest rate per annum (carried out to the fifth decimal place) equal to the
applicable London interbank offered rate for deposits in the requested currency
appearing on the Reuters Reference LIBOR01 page for such currency as of 11:00
a.m. (London time) on such day with a term equivalent to one month, or (b) in
the event the rate referenced in the preceding subsection (a) does not appear on
such page or service or such page or service shall cease to be available, the
rate per annum (carried out to the fifth decimal place) equal to the rate
determined by Administrative Agent to be the offered rate on Page BBAM of the
Bloomberg Financial Market Information Service as of 11:00 a.m. (London time) on
such day with a term equivalent to one month, or (c) in the event the rates
referenced in the preceding subsections (a) and (b) are not available, the rate
per annum determined by Administrative Agent using another comparable publicly
available service for displaying London inter-bank offered rates for deposits of
U.S. Dollars with a term equivalent to one month.

[Second Lien Credit Agreement]

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

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

“Participant” has the meaning given to such term in Section 10.5(d).

“Percentage Share” means, with respect to any Lender, the percentage set forth
below such Lender’s name on the Lenders Schedule or as set forth in any
Assignment and Assumption relating to any assignment that has become effective
pursuant to Section 10.5, as such amount may be modified from time to time
pursuant to the terms hereof.  Notwithstanding the foregoing, after the Loans
have been made, “Percentage Share” shall mean with respect to any Lender, the
percentage obtained by dividing (i) the unpaid principal balance of such
Lender’s Loans at the time in question by (ii) the aggregate unpaid principal
balance of all Loans at such time.

“Permitted Convertible Debt” means Permitted Unsecured Debt which is
convertible, in whole or in part, into common Equity Interests in Borrower;
provided that Permitted Convertible Debt shall not contain any put or mandatory
redemption provisions which may be exercised prior to January 15, 2013.

“Permitted Investments” means (a) Cash Equivalents, (b) property of the
Restricted Persons used in the ordinary course of business of the Restricted
Persons, (c) current assets arising from the sale or lease of goods and services
in the ordinary course of business by the Restricted Persons or from sales
permitted under Section 7.5, (d) investments, in an aggregate amount not to
exceed $4,000,000, in a Person engaged in the sole business of ownership and
operation of drilling rigs, and (e) sales or leases permitted under Section 7.5.

[Second Lien Credit Agreement]

 
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“Permitted Liens” means:

(a)            statutory Liens for taxes, assessments or other governmental
charges or levies which are not yet delinquent or which are being contested in
good faith by appropriate action and for which adequate reserves have been
maintained in accordance with GAAP;

(b)            landlords’, operators’, carriers’, warehousemen’s, repairmen’s,
mechanics’, materialmen’s, or other like Liens which do not secure Indebtedness,
in each case only to the extent arising in the ordinary course of business and
only to the extent securing obligations which are not delinquent or which are
being contested in good faith by appropriate proceedings and for which adequate
reserves have been maintained in accordance with GAAP;

(c)            minor defects and irregularities in title to any property, so
long as such defects and irregularities neither secure Indebtedness nor
materially impair the value of such property or the use of such property for the
purposes for which such property is held;

(d)            deposits of cash or securities to secure the performance of bids,
acquisition agreements, trade contracts, leases, statutory obligations and other
obligations of a like nature (excluding appeal bonds) incurred in the ordinary
course of business;

(e)            Liens under the Security Documents;

(f)            easements, restrictions, servitudes, permits, conditions,
covenants, exceptions or reservations in any property of Borrower or any of its
Subsidiaries for the purpose of roads, pipelines, transmission lines,
transportation lines, distribution lines for the removal of gas, oil, coal or
other minerals or timber, and other like purposes, or for the joint or common
use of real estate, rights of way, facilities and equipment, that do not secure
any monetary obligations and that do not materially interfere with the future
development of such property or with cash flow from such property as reflected
in the most recent Engineering Report;

(g)            Liens under joint operating agreements, pooling or unitization
agreements, partnership agreements, oil and gas leases, farm-out agreements,
division orders, contracts for the sale, purchase, transportation, processing or
exchange of oil, gas or other hydrocarbons, unitization and pooling declarations
and agreements, area of mutual interest agreements, development agreements,
joint ownership arrangements or similar contractual arrangements arising in the
ordinary course of the business of Borrower or its Subsidiaries to secure
amounts owing under such agreements and contracts, which amounts are not more
than 90 days past due or are being contested in good faith by appropriate
proceedings, if such reserve as may be required by GAAP shall have been made
therefor;

(h)           (i) Liens on fixed or capital assets acquired, constructed or
improved by Borrower or its Subsidiaries; provided, that (A) such Liens secure
Indebtedness permitted under Section 7.1, (B) such Liens and the Indebtedness
secured thereby are incurred substantially simultaneously with the acquisition,
construction or improvement of such fixed or capital assets or within 180 days
thereafter, (C) such Liens do not at any time encumber any property other than
the property financed by such Indebtedness and (D) the amount of Indebtedness
secured thereby is not more than 100% of the purchase price, and (ii) Liens in
the nature of precautionary financing statements filed against leased property
by lessors holding Capital Lease Obligations included in Indebtedness permitted
under Section 7.1;

[Second Lien Credit Agreement]

 
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(i)             all lessors’ royalties, overriding royalties, net profits
interests, carried interests, production payments that do not constitute
Indebtedness, reversionary interests and other burdens on or deductions from the
proceeds of production with respect to each Mineral Interest (in each case) that
do not operate to reduce the net revenue interest for such Mineral Interest (if
any) as reflected in any Security Document or Engineering Report or increase the
working interest for such Mineral Interest (if any) as reflected in any Security
Document or Engineering Report without a corresponding increase in the
corresponding net revenue interest; .

(j)             rights of first refusal, purchase options and similar rights
granted pursuant to joint operating agreements, joint ownership agreements,
stockholders agreements, organic documents and other similar agreements and
documents which are described in the Disclosure Letter;

(k)            pre-judgment Liens and judgment Liens; provided no Event of
Default has occurred under Section 8.1;

(l)             customary Liens for the fees, costs and expenses of trustees and
escrow agents pursuant to the indenture, escrow agreement or other similar
agreement establishing such trust or escrow arrangement;

(m)           Liens pursuant to merger agreements, stock purchase agreements,
asset sale agreements and similar agreements (i) limiting the transfer of
properties and assets pending consummation of the subject transaction and (ii)
in respect of earnest money deposits, good faith deposits, purchase price
adjustment escrows and similar deposits and escrow arrangements made or
established thereunder;

(n)           rights reserved to or vested in any municipality or governmental,
statutory or public authority by the terms of any right, power, franchise,
grant, license or permit, or by any provision of law, to terminate such right,
power, franchise, grant, license or permit or to purchase, condemn, expropriate
or recapture or to designate a purchaser of any of the property of such Person;
rights reserved to or vested in any municipality or governmental, statutory or
public authority to control or regulate any property of such Person, or to use
such property in a manner which does not materially impair the use of such
property for the purposes for which it is held by such Person; and any
obligation or duties affecting the property of such Person to any municipality
or governmental, statutory or public authority with respect to any franchise,
grant, license or permit; and

(o)           Liens created by or pursuant to the First Lien Loan Documents, so
long as such Liens created by or pursuant to the First Lien Loan Documents are
limited to assets constituting Collateral pursuant to the Security Documents and
are at all times subject to the terms provided in the Intercreditor Agreement.

“Permitted Subordinated Debt” means Indebtedness in respect of subordinated
notes issued by Borrower from time to time that complies with all of the
following requirements:

[Second Lien Credit Agreement]

 
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(a)            such Indebtedness is and shall remain unsecured at all times;

(b)            no payment of principal of such Indebtedness is due on or before
the Maturity Date as in effect on the date such Indebtedness is issued (in this
definition called the “Date of Issuance”);

(c)            the financial covenants are no more restrictive with respect to
the Restricted Persons than the financial covenants under this Agreement and all
of the covenants and events of default governing such Indebtedness are not,
taken as a whole, materially more restrictive with respect to the Restricted
Persons than the covenants and Events of Default under this Agreement;

(d)            on the Date of Issuance and after giving effect to such
Indebtedness (i) Borrower is in compliance on a pro forma basis with Section
7.11, Section 7.12, Section 7.13 and Section 7.14 of this Agreement, calculated
for the most recent Four-Quarter Period for which the financial statements
described in Section 6.2(b) are available to Lender;

(e)            no Default or Event of Default exists on the Date of Issuance or
will occur as a result of the issuance of the subordinated notes evidencing such
Indebtedness;

(f)             the payment of such Indebtedness is subordinated to payment of
the Obligations pursuant to a written agreement (whether contained in the
applicable indenture or a separate subordination agreement) in form and
substance acceptable to Administrative Agent, in its sole discretion; and

(g)            Borrower shall have delivered to Administrative Agent a
certificate in reasonable detail reflecting compliance with the foregoing
requirements.

“Permitted Unsecured Debt” means Indebtedness in respect of senior unsecured
notes (whether issued under a loan agreement or indenture) issued by Borrower
from time to time (including guarantees thereof by its Material Domestic
Subsidiaries), that complies with all of the following requirements:

(a)            such Indebtedness is and shall remain unsecured at all times;

(b)            no scheduled payment of principal, scheduled mandatory redemption
or scheduled sinking fund payment of such Indebtedness is due on or before July
15, 2013; provided that such Indebtedness may be prepaid in connection with a
refinancing thereof with other Indebtedness which is permitted by this
Agreement;

(c)            the financial covenants are no more restrictive with respect to
the Restricted Persons than the financial covenants under this Agreement and all
of the covenants and events of default governing such Indebtedness are not,
taken as a whole, materially more restrictive with respect to the Restricted
Persons than the covenants and Events of Default under this Agreement;

(d)            on each date on which such Indebtedness is issued (in this
definition defined as a “Date of Issuance”) and immediately after giving effect
to such Indebtedness Borrower is in compliance on a pro forma basis with Section
7.11, Section 7.12, Section 7.13 and Section 7.14 of this Agreement, calculated
for the most recent Four-Quarter Period for which the financial statements
described in Sections 6.2 (a) and (b) are available to Lender;

[Second Lien Credit Agreement]

 
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(e)            no Default or Event of Default exists on the Date of Issuance or
will occur as a result of the issuance of the notes evidencing such
Indebtedness;

(f)             such Indebtedness is not guaranteed by any Person which is not a
Guarantor of all of the Secured Obligations; and

(g)            Borrower shall have delivered to Administrative Agent a
certificate in reasonable detail reflecting compliance with the foregoing
requirements.

“Person” means an individual, corporation, partnership, limited liability
company, association, joint stock company, trust or trustee thereof, estate or
executor thereof, unincorporated organization or joint venture, Governmental
Authority or any other legally recognizable entity.

“Present Value” of any Mineral Interest means the present value of the future
net revenues attributed to such Mineral Interest in the most recent Engineering
Report using a discount rate of ten percent (10%).

“Projected Gas Production” means the projected production of gas (measured by
BTU equivalent, not sales price) for the term of the contracts or a particular
month, as applicable, from properties and interests owned by any Restricted
Person which are located in or offshore of the United States and which have
attributable to them Proved Developed Producing Reserves, as such production is
projected in the most recent report delivered pursuant to Section 6.2(d) or (e),
after deducting projected production from any properties or interests sold or
under contract for sale that had been included in such report and after adding
projected production from any properties or interests that had not been
reflected in such report but that are reflected in a separate or supplemental
report meeting the requirements of such Section 6.2(d) or (e) above and
otherwise are satisfactory to Administrative Agent.

“Projected NGL Production” means the projected production of natural gas liquids
(measured by volume unit, not sales price) for the term of the contracts or a
particular month, as applicable, from properties and interests owned by any
Restricted Person which are located in or offshore of the United States and
which have attributable to them Proved Developed Producing Reserves, as such
production is projected in the most recent report delivered pursuant to Section
6.2(d) or (e), after deducting projected production from any properties or
interests sold or under contract for sale that had been included in such report
and after adding projected production from any properties or interests that had
not been reflected in such report but that are reflected in a separate or
supplemental report meeting the requirements of such Section 6.2(d) or (e) above
and otherwise are satisfactory to Administrative Agent.

“Projected Oil Production” means the projected production of oil or gas
(measured by volume unit, not sales price) for the term of the contracts or a
particular month, as applicable, from properties and interests owned by any
Restricted Person which are located in or offshore of the United States and
which have attributable to them Proved Developed Producing Reserves, as such
production is projected in the most recent report delivered pursuant to Section
6.2(d) or (e), after deducting projected production from any properties or
interests sold or under contract for sale that had been included in such report
and after adding projected production from any properties or interests that had
not been reflected in such report but that are reflected in a separate or
supplemental report meeting the requirements of such Section 6.2(d) or (e) above
and otherwise are satisfactory to Administrative Agent.

[Second Lien Credit Agreement]

 
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“Proved Reserves” shall have the meaning set forth in the standards of the
Petroleum Resource Management System promulgated by the Society of Petroleum
Engineers (“SPE”), as may be modified by the adjustments and assumptions set
forth in clauses (a) and (b) of the definition of Proved Total PV10%, or any
successor standard of the SPE.

“Proved Developed Producing Reserves” means Proved Reserves, which are
categorized as both “Developed” and “Producing” in the Definitions for Oil and
Gas Reserves promulgated by the SPE as in effect at the time in question.

“Rating Agency” means either S & P or Moody’s.

“Regulation D” means Regulation D of the Board of Governors of the Federal
Reserve System as from time to time in effect.

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

“Required Lenders” means two or more Lenders whose aggregate Percentage Shares
equal or exceed sixty-six and two-thirds percent (66 2/3%).

“Reserve Requirement” means, at any time, the maximum rate at which reserves
(including any marginal, special, supplemental, or emergency reserves) are
required to be maintained under regulations issued from time to time by the
Board of Governors of the Federal Reserve System (or any successor) by member
banks of the Federal Reserve System against “Eurocurrency liabilities” (as such
term is used in Regulation D).  Without limiting the effect of the foregoing,
the Reserve Requirement shall reflect any other reserves required to be
maintained by such member banks with respect to (a) any category of liabilities
which includes deposits by reference to which the Adjusted Eurodollar Rate is to
be determined, or (b) any category of extensions of credit or other assets which
include Eurodollar Loans.

“Responsible Officer” means, with respect to Borrower, the Chief Executive
Officer, President, Chief Operating Officer, or Chief Financial Officer of
Borrower, and with respect to any other Restricted Person, if such Restricted
Person is a limited liability company, a Manager of such Restricted Person, and
if such Restricted Person is a corporation, the President or Chief Financial
Officer of such Restricted Person.

“Restricted Person” means any of Borrower and each Subsidiary of Borrower.

“S & P” means Standard & Poor’s Ratings Services (a division of The McGraw-Hill
Companies), or its successor.

[Second Lien Credit Agreement]

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

“Secured Obligations” means all Obligations.

“Security Documents” means all security agreements, deeds of trust, mortgages,
chattel mortgages, pledges, guaranties, financing statements, continuation
statements, extension agreements, subordination agreements, intercreditor
agreements, and other agreements or instruments now, heretofore, or hereafter
delivered by any Restricted Person to Administrative Agent in connection with
this Agreement or any transaction contemplated hereby to secure or guarantee the
payment of any part of the Secured Obligations.

“Security Schedule” means Schedule 3 hereto.

“SG” means Société Générale in its capacity as the lender under the SG Money
Market Facility and not as a Lender hereunder.

“SG Money Market Facility” means the Money Market Facility in the amount of
$30,000,000 made available to Borrowers by SG pursuant to a Letter Agreement
between Borrower and SG.

“Staff Engineers” means petroleum engineers who are employees of Borrower or of
a staffing company that provides its employees to Borrower.

“Stock Repurchase” means any payment made by a Restricted Person to purchase,
redeem, acquire or retire any Equity Interest in such Restricted Person or any
other Restricted Person (including any option or warrant to purchase such an
Equity Interest).

“Strip Price” means, at any time, (a) for the remainder of the current calendar
year, the average NYMEX Pricing for the remaining months of crude oil and
natural gas futures contracts in the current calendar year, (b) for each of the
succeeding two complete calendar years, the average NYMEX Pricing of the twelve
months crude oil and natural gas futures contracts in each such calendar year,
and (c) for the succeeding third complete calendar year, and for each calendar
year thereafter, the average NYMEX Pricing of the twelve months crude oil and
natural gas futures contracts in such third calendar year.

“Subsidiary” means, with respect to any Person, any corporation, association,
partnership, limited liability company, joint venture, or other business or
corporate entity, enterprise or organization which is directly or indirectly
(through one or more intermediaries) controlled by or owned fifty percent or
more by such Person; provided that associations, joint ventures or other
relationships (a) which are established pursuant to a standard form operating
agreement or similar agreement or which are partnerships for purposes of federal
income taxation only, (b) which are not corporations or partnerships (or subject
to the Uniform Partnership Act) under applicable state Law, and (c) whose
businesses are limited to the exploration, development and operation of oil, gas
or mineral properties and interests owned directly by the parties in such
associations, joint ventures or relationships, shall not be deemed to be
“Subsidiaries” of such Person.

[Second Lien Credit Agreement]

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

“Termination Event” means (a) the occurrence with respect to any ERISA Plan of
(i) a reportable event described in Section 4043(b)(5) or (6) of ERISA or (ii)
any other reportable event described in Section 4043(b) of ERISA other than a
reportable event not subject to the provision for 30-day notice to the Pension
Benefit Guaranty Corporation pursuant to a waiver by such corporation under
Section 4043(a) of ERISA, or (b) the withdrawal of any ERISA Affiliate from an
ERISA Plan during a plan year in which it was a “substantial employer” as
defined in Section 4001(a)(2) of ERISA, or (c) the filing of a notice of intent
to terminate any ERISA Plan or the treatment of any ERISA Plan amendment as a
termination under Section 4041 of ERISA, or (d) the institution of proceedings
to terminate any ERISA Plan by the Pension Benefit Guaranty Corporation under
Section 4042 of ERISA, or (e) any other event or condition which might
constitute grounds under Section 4042 of ERISA for the termination of, or the
appointment of a trustee to administer, any ERISA Plan.

“Total Funded Debt” means all Liabilities of the Restricted Persons of the types
described in clauses (a), (b), (c),(f), (h) and (j) of the definition of
Indebtedness.

“Total Proved PV10%” means, with respect to any Proved Reserves expected to be
produced from the Restricted Persons’ Mineral Interests, the net present value,
discounted at ten percent (10%) per annum, of the future net revenues expected
to accrue to the Borrower’s collective interests in such proved Mineral
Interests during the remaining expected economic lives of such reserves.  Each
calculation of such expected future net revenues shall be based on Proved
Reserves, provided, that in any event (a) appropriate deductions shall be made
for severance and ad valorem taxes, and for operating, gathering, transportation
and marketing costs required for the production and sale of such reserves
(operating expenses will not be escalated), (b) the revenue pricing assumptions
used in determining Total Proved PV10% and Proved Reserves shall be based upon
the Strip Price, as further modified by appropriate adjustments (i) for existing
Hedging Contracts with solvent counterparties and (ii) to account for historical
basis differentials, which in the case of clauses (i) and (ii) are made in a
manner acceptable to the Administrative Agent, and (c) that for purposes of this
calculation, the discounted value of future net revenues attributable to Proved
Reserves that are not Proved Developed Producing Reserves shall be limited to no
more than 40% of the Total Proved PV10%.

“Type” means, with respect to any Loans, the characterization of such Loans as
either Base Rate Loans or Eurodollar Loans.

“UCC” means the Uniform Commercial Code in effect in the State of California
from time to time.

“Wells Fargo” has the meaning given such term in the Recitals to this Agreement.

“WFEC” means Wells Fargo Energy Capital, Inc.

Section 1.2.            Exhibits and Schedules; Additional Definitions.  All
Exhibits and Schedules attached to this Agreement are a part hereof for all
purposes.  Reference is hereby made to the Security Schedule for the meaning of
certain terms defined therein and used but not defined herein, which definitions
are incorporated herein by reference.

[Second Lien Credit Agreement]

 
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Section 1.3.            Amendment of Defined Instruments.  Unless the context
otherwise requires or unless otherwise provided herein the terms defined in this
Agreement which refer to a particular agreement, instrument or document also
refer to and include all renewals, extensions, modifications, amendments and
restatements of such agreement, instrument or document; provided that nothing
contained in this section shall be construed to authorize any such renewal,
extension, modification, amendment or restatement.

Section 1.4.           References and Titles.  All references in this Agreement
to Exhibits, Schedules, articles, sections, subsections and other subdivisions
refer to the Exhibits, Schedules, articles, sections, subsections and other
subdivisions of this Agreement unless expressly provided otherwise.  Exhibits
and Schedules to any Loan Document shall be deemed incorporated by reference in
such Loan Document.  References to any document, instrument, or agreement (a)
shall include all exhibits, schedules, and other attachments thereto, and (b)
shall include all documents, instruments, or agreements issued or executed in
replacement thereof.  Titles appearing at the beginning of any subdivisions are
for convenience only and do not constitute any part of such subdivisions and
shall be disregarded in construing the language contained in such
subdivisions.  The words “this Agreement”, “this instrument”, “herein”,
“hereof”, “hereby”, “hereunder” and words of similar import refer to this
Agreement as a whole and not to any particular subdivision unless expressly so
limited.  The phrases “this section” and “this subsection” and similar phrases
refer only to the sections or subsections hereof in which such phrases
occur.  The word “or” is not exclusive, and the word “including” (in its various
forms) means “including without limitation”.  Pronouns in masculine, feminine
and neuter genders shall be construed to include any other gender, and words in
the singular form shall be construed to include the plural and vice versa,
unless the context otherwise requires.  Accounting terms have the meanings
assigned to them by GAAP, as applied by the accounting entity to which they
refer.  References to “days” shall mean calendar days, unless the term “Business
Day” is used.  Unless otherwise specified, references herein to any particular
Person also refer to its successors and permitted assigns.

Section 1.5.            Calculations and Determinations.  All calculations under
the Loan Documents shall be made on the basis of actual days elapsed (including
the first day but excluding the last) and a year of 360 days.  Each
determination by a Lender Party of amounts to be paid under Article III or any
other matters which are to be determined hereunder by a Lender Party (such as
any Eurodollar Rate, Adjusted Eurodollar Rate, Business Day, Interest Period, or
Reserve Requirement) shall, in the absence of manifest error, be conclusive and
binding.  Unless otherwise expressly provided herein or unless Majority Lenders
otherwise consent all financial statements and reports furnished to any Lender
Party hereunder shall be prepared and all financial computations and
determinations pursuant hereto shall be made in accordance with GAAP.

Section 1.6.            Joint Preparation; Construction of Indemnities and
Releases.  This Agreement and the other Loan Documents have been reviewed and
negotiated by sophisticated parties with access to legal counsel and no rule of
construction shall apply hereto or thereto which would require or allow any Loan
Document to be construed against any party because of its role in drafting such
Loan Document.  All indemnification and release provisions of this Agreement
shall be construed broadly (and not narrowly) in favor of the Persons receiving
indemnification or being released.

[Second Lien Credit Agreement]

 
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ARTICLE II - - The Loans

Section 2.1.            Commitments to Lend; Notes.  Subject to the terms and
conditions hereof, each Lender severally agrees to make a term loan or loans to
Borrower (each, a “Loan”, and together, the “Loans”) on the Closing Date in an
aggregate principal amount not to exceed the Commitment of such Lender.  The
obligation of Borrower to repay to each Lender the aggregate amount of all Loans
made by such Lender, together with interest accruing in connection therewith,
shall be evidenced by a single promissory note (herein called such Lender’s
“Note”) made by Borrower payable to the order of such Lender in the form of
Exhibit A with appropriate insertions.  The amount of principal owing on any
Lender’s Note at any given time shall be the aggregate amount of all Loans
theretofore made by such Lender minus all payments of principal theretofore
received by such Lender on such Note.  Interest on each Note shall accrue and be
due and payable as provided herein and therein.  Each Note shall be due and
payable as provided herein and therein, and shall be due and payable in full on
the Maturity Date.  Once repaid or prepaid, no Loan incurred hereunder may be
reborrowed.

Section 2.2.            Borrowing Notice.  Borrower must give to Administrative
Agent written or electronic notice (or telephonic notice promptly confirmed in
writing) of all requested Loans to be advanced by the Lenders hereunder on the
Closing Date.  Such notice constitutes a “Borrowing Notice” hereunder and must:

(a)            specify (i) the aggregate amount of any such Base Rate Loans to
be advanced, or (ii) the aggregate amount of any such Eurodollar Loans to be
advanced and the length of the applicable Interest Period; and

(b)            be received by Administrative Agent not later than 11:00 a.m.,
Denver, Colorado time on, (i) if the Borrower requests Base Rate Loans, the
Closing Date, or (ii) if the Borrower requests Eurodollar Loans, the third
Business Day preceding the Closing Date.

Such written request or confirmation must be made in the form and substance of
the “Borrowing Notice” attached hereto as Exhibit B, duly completed.  Such
telephonic request shall be deemed a representation, warranty, acknowledgment
and agreement by Borrower as to the matters which are required to be set out in
such written confirmation.  Upon receipt of the Borrowing Notice, Administrative
Agent shall give each Lender prompt notice of the terms thereof.  If all
conditions precedent to such Loans have been met, each Lender will on the date
requested promptly remit to Administrative Agent at Administrative Agent’s
office in Denver, Colorado the amount of such Lender’s Loan in immediately
available funds, and upon receipt of such funds, unless to its actual knowledge
any conditions precedent to such Loans have been neither met nor waived as
provided herein, Administrative Agent shall promptly make such Loans available
to Borrower.  Unless Administrative Agent shall have received prompt notice from
a Lender that such Lender will not make available to Administrative Agent such
Lender’s Loan, Administrative Agent may in its discretion assume that such
Lender has made such Loan available to Administrative Agent in accordance with
this section and Administrative Agent may if it chooses, in reliance upon such
assumption, make such Loan available to Borrower.  In such event, if a Lender
has not in fact made its Loan available to Administrative Agent, then the
applicable Lender and Borrower severally agree to pay to Administrative Agent
forthwith on demand such corresponding amount with interest thereon, for each
day from and including the date such amount is made available to Borrower to but
excluding the date of payment to Administrative Agent, at (i) in the case of a
payment to be made by such Lender, the greater of the Federal Funds Rate and a
rate determined by Administrative Agent in accordance with banking industry
rules on interbank compensation and (ii) in the case of a payment to be made by
Borrower, the interest rate applicable to Base Rate Loans.  If Borrower and such
Lender shall pay such interest to Administrative Agent for the same or an
overlapping period, Administrative Agent shall promptly remit to Borrower the
amount of such interest paid by Borrower for such period.  If such Lender pays
its Loan to Administrative Agent, then the amount so paid shall constitute such
Lender’s Loan.  Any payment by Borrower shall be without prejudice to any claim
Borrower may have against a Lender that shall have failed to make such payment
to Administrative Agent.

[Second Lien Credit Agreement]

 
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Section 2.3.            Continuations and Conversions of Loans.  Subject to the
provisions of this Agreement, prior to the Maturity Date, Borrower may make the
following elections with respect to Loans outstanding:  (A) convert Base Rate
Loans to Eurodollar Loans, (B) convert Eurodollar Loans to Base Rate Loans on
the last day of the Interest Period applicable thereto, and (C) to continue
Eurodollar Loans beyond the expiration of such Interest Period by designating a
new Interest Period to take effect at the time of such expiration; provided,
that Borrower may not have outstanding at any time Eurodollar Loans containing
more than five different Interest Periods.  To make any such election, Borrower
must give to Administrative Agent written notice (or telephonic notice promptly
confirmed in writing) of any such Conversion or Continuation of existing Loans
for each Loan converted or continued.  Each such notice constitutes a
“Continuation/Conversion Notice” hereunder and must:

(a)            specify the existing Loans which are to be continued or
converted;

(b)            specify (i) the aggregate amount of Base Rate Loans into which
such existing Loans are to be continued or converted and the date on which such
Continuation or Conversion is to occur, or (ii) the aggregate amount of
Eurodollar Loans into which such existing Loans are to be continued or
converted, the date on which such Continuation or Conversion is to occur (which
shall be the first day of the Interest Period which is to apply to such
Eurodollar Loans), and the length of the applicable Interest Period; and

(c)            be received by Administrative Agent not later than 11:00 a.m.,
Denver, Colorado time, on (i) the day on which any such Continuation or
Conversion to Base Rate Loans is to occur, or (ii) the third Business Day
preceding the day on which any such Continuation or Conversion to Eurodollar
Loans is to occur.

Each such written request or confirmation must be made in the form and substance
of the “Continuation/Conversion Notice” attached hereto as Exhibit C, duly
completed.  Each such telephonic request shall be deemed a representation,
warranty, acknowledgment and agreement by Borrower as to the matters which are
required to be set out in such written confirmation.  Upon receipt of any such
Continuation/Conversion Notice, Administrative Agent shall give each Lender
prompt notice of the terms thereof.  Each Continuation/Conversion Notice shall
be irrevocable and binding on Borrower.  During the continuance of any Default,
Borrower may not make any election to convert existing Loans into Eurodollar
Loans or continue existing Loans as Eurodollar Loans.  If (due to the existence
of a Default or for any other reason) Borrower fails to timely and properly give
any Continuation/Conversion Notice with respect to existing Eurodollar Loans at
least three days prior to the end of the Interest Period applicable thereto,
such Eurodollar Loans shall automatically be converted into Base Rate Loans at
the end of such Interest Period.  No new funds shall be repaid by Borrower or
advanced by any Lender in connection with any Continuation or Conversion of
existing Loans pursuant to this section, and no such Continuation or Conversion
shall be deemed to be a new advance of funds for any purpose; such Continuations
and Conversions merely constitute a change in the interest rate applicable to
already outstanding Loans.

[Second Lien Credit Agreement]

 
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Section 2.4.            Use of Proceeds.  The Loans shall be used to provide
working capital for operations and for other general business purposes of
Borrower and its Subsidiaries.  In no event shall the funds from any Loan be
used directly or indirectly by any Person for personal, family, household or
agricultural purposes or for the purpose, whether immediate, incidental or
ultimate, of purchasing, acquiring or carrying any “margin stock” (as such term
is defined in Regulation U promulgated by the Board of Governors of the Federal
Reserve System) or to extend credit to others directly or indirectly for the
purpose of purchasing or carrying any such margin stock.  Borrower represents
and warrants that Borrower is not engaged principally, or as one of Borrower’s
important activities, in the business of extending credit to others for the
purpose of purchasing or carrying such margin stock.

Section 2.5.            Interest Rates and Fees

(a)            Base Rate Loans.  So long as no Event of Default has occurred and
is continuing, all Base Rate Loans (exclusive of any past due principal or
interest) from time to time outstanding shall bear interest on each day
outstanding at the Adjusted Base Rate in effect on such day.  If an Event of
Default has occurred and is continuing, all Base Rate Loans (exclusive of any
past due principal or interest) from time to time outstanding shall bear
interest on each day outstanding at the applicable Default Rate in effect on
such day.  On each Interest Payment Date Borrower shall pay to the holder hereof
all unpaid interest which has accrued on the Base Rate Loans to but not
including such Interest Payment Date.

(b)            Eurodollar Loans.  So long as no Event of Default has occurred
and is continuing, each Eurodollar Loan (exclusive of any past due principal or
interest) shall bear interest on each day during the related Interest Period at
the related Adjusted Eurodollar Rate in effect on such day.  If an Event of
Default has occurred and is continuing, all Eurodollar Loans (exclusive of any
past due principal or interest) from time to time outstanding shall bear
interest on each day outstanding at the applicable Default Rate in effect on
such day.  On each Interest Payment Date relating to such Eurodollar Loan,
Borrower shall pay to the holder hereof all unpaid interest which has accrued on
such Eurodollar Loan to but not including such Interest Payment Date.

(c)            Intentionally Omitted.

[Second Lien Credit Agreement]

 
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(d)            Past Due Principal and Interest.  All past due principal of and
past due interest on the Loans shall bear interest on each day outstanding at
the Default Rate in effect on such day, and such interest shall be due and
payable daily as it accrues.

(e)            Intentionally Omitted.

(f)             Administrative Agent’s Fees.  In addition to all other amounts
due to Administrative Agent under the Loan Documents, Borrower will pay fees to
Administrative Agent as described in the Fee Letter.

Section 2.6.            Optional Prepayments.  Subject to the applicable
provisions of this Agreement and the Intercreditor Agreement, Borrower may from
time to time and without premium or penalty prepay the Notes, in whole or in
part, so long as the aggregate amount of Loans prepaid at any time must be equal
to $3,000,000 or any higher integral multiple of $1,000,000; provided, that if
Borrower prepays any Base Rate Loan, it shall give notice to Administrative
Agent at least one Business Day’s prior notice to the date such prepayment is
made and provided, further, that if Borrower prepays any Eurodollar Loan, it
shall give notice to Administrative Agent at least three Business Days’ prior to
the date such prepayment is made and pay to Lenders any amounts due under
Section 3.5.

Section 2.7.             Mandatory Termination of Commitments; Mandatory
Prepayments;.

(a)            The Commitments shall terminate in their entirety on the Closing
Date (after giving effect to the incurrence of Loans on such date).

(b)            All net proceeds of any Indebtedness under Section 7.1(g) and
Section 7.1(h) and any issuance of Equity Interests under Section 7.4(b), in
each case, after making any prepayment required by the First Lien Credit
Agreement, shall be used to prepay the principal of the Obligations.  Each
prepayment of principal under this section shall be accompanied by all interest
then accrued and unpaid on the principal so prepaid and any amounts due under
Section 3.4.  Any principal or interest prepaid pursuant to this section shall
be in addition to, and not in lieu of, all payments otherwise required to be
paid under the Loan Documents at the time of such prepayment

Section 2.8.             Intentionally Omitted

Section 2.9.             Intentionally Omitted

Section 2.10.           Intentionally Omitted

Section 2.11.           Intentionally Omitted

Section 2.12.           Intentionally Omitted

Section 2.13.           Intentionally Omitted

Section 2.14.           Intentionally Omitted

[Second Lien Credit Agreement]

 
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Section 2.15.           Intentionally Omitted

Section 2.16.           Intentionally Omitted

Section 2.17.           Intentionally Omitted

Section 2.18.          Obligations of Lenders Several. The obligations of the
Lenders hereunder to make Loans are several and not joint.  The failure of any
Lender to make any Loan or to make any payment under Section 10.4(b) on any date
required hereunder shall not relieve any other Lender of its corresponding
obligation to do so on such date, and no Lender shall be responsible for the
failure of any other Lender to so make its Loan or to make its payment under
Section 10.4(b).

ARTICLE III -  - Payments to Lenders

Section 3.1.            General Procedures.  Borrower will make each payment
which it owes under the Loan Documents to Administrative Agent for the account
of the Lender Party to whom such payment is owed, in lawful money of the United
States of America, without set-off, deduction or counterclaim, and in
immediately available funds.  Each such payment must be received by
Administrative Agent not later than 11:00 a.m., Denver, Colorado time, on the
date such payment becomes due and payable.  Any payment received by
Administrative Agent after such time will be deemed to have been made on the
next following Business Day.  Should any such payment become due and payable on
a day other than a Business Day, the maturity of such payment shall be extended
to the next succeeding Business Day, and, in the case of a payment of principal
or past due interest, interest shall accrue and be payable thereon for the
period of such extension as provided in the Loan Document under which such
payment is due.  Each payment under a Loan Document shall be due and payable at
the place set forth for Administrative Agent on the Lenders Schedule. When
Administrative Agent collects or receives money on account of the Obligations,
Administrative Agent shall distribute all money so collected or received, and
each Lender Party shall apply all such money so distributed, as follows (except
as otherwise provided in Section 8.3):

(a)             first, for the payment of all Obligations which are then due
(and if such money is insufficient to pay all such Obligations, first to any
reimbursements due to Administrative Agent under Section 6.9 or 10.4 and then to
the partial payment of all other Obligations then due in proportion to the
amounts thereof, or as the Lender Parties shall otherwise agree);

(b)            second, for the prepayment of amounts owing under the Loan
Documents (other than principal on the Notes) if so specified by Borrower;

(c)            third, for the prepayment of principal on the Notes, together
with accrued and unpaid interest on the principal so prepaid; and

(d)            last, for the payment or prepayment of any other Obligations.

All payments applied to principal or interest on any Note shall be applied first
to any interest then due and payable, then to principal then due and payable,
and last to any prepayment of principal and interest in compliance with Section
2.6.  All distributions of amounts described in any of subsections (b), (c) or
(d) above shall be made by Administrative Agent pro rata to each Lender Party
then owed Obligations described in such subsection in proportion to all amounts
owed to all Lender Parties which are described in such subsection; provided that
if any Lender then owes payments to Administrative Agent under Section 10.4(b),
any amounts otherwise distributable under this section to such Lender shall be
deemed to belong to Administrative Agent to the extent of such unpaid payments,
and Administrative Agent shall apply such amounts to make such unpaid payments
rather than distribute such amounts to such Lender.

[Second Lien Credit Agreement]

 
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Section 3.2.             Increased Costs.

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

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

(ii)            subject any Lender to any Tax of any kind whatsoever with
respect to this Agreement or any Eurodollar Loan made by it, or change the basis
of taxation of payments to such Lender in respect thereof (except for
Indemnified Taxes or Other Taxes covered by Section 3.5 and the imposition of,
or any change in the rate of, any Excluded Tax payable by such Lender); or

(iii)           impose on any Lender or the London interbank market any other
condition, cost or expense affecting this Agreement or Eurodollar Loans made by
such Lender;

and the result of any of the foregoing shall be to increase the cost to such
Lender of making or maintaining any Eurodollar Loan, or to reduce the amount of
any sum received or receivable by such Lender hereunder (whether of principal,
interest or any other amount) then, upon request of such Lender, Borrower will
pay to such Lender such additional amount or amounts as will compensate such
Lender for such additional costs incurred or reduction suffered.

(b)            Capital Requirements.  If any Lender determines that any Change
in Law affecting such Lender or any lending office of such Lender or such
Lender’s holding company, if any, regarding capital requirements has or would
have the effect of reducing the rate of return on such Lender’s capital or on
the capital of such Lender’s holding company, if any, as a consequence of this
Agreement, the Loans made by such Lender to a level below that which such Lender
or such Lender’s holding company could have achieved but for such Change in Law
(taking into consideration such Lender’s policies and the policies of such
Lender’s holding company with respect to capital adequacy), then from time to
time Borrower will pay to such Lender such additional amount or amounts as will
compensate such Lender or such Lender’s holding company for any such reduction
suffered.

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

[Second Lien Credit Agreement]

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

Section 3.3.            Illegality.  If any Change in Law after the date hereof
shall make it unlawful for any Lender Party to maintain Eurodollar Loans, then,
upon notice by such Lender Party to Borrower and Administrative Agent, (a)
Borrower’s right to elect (i) to convert Base Rate Loans to Eurodollar Loans or
(ii) to continue Eurodollar Loans as Eurodollar Loans from such Lender Party
shall be suspended to the extent and for the duration of such illegality, and
(b) all Eurodollar Loans of such Lender Party shall be converted automatically
to Base Rate Loans on the respective last days of the then current Interest
Periods with respect to such Loans or within such earlier period as required by
Law.  If any such Conversion of a Eurodollar Loan occurs on a day which is not
the last day of the then current Interest Period with respect thereto, Borrower
shall pay to such Lender Party such amounts, if any, as may be required pursuant
to Section 3.4.

Section 3.4.            Funding Losses.  In addition to its other obligations
hereunder, Borrower will indemnify each Lender Party against, and reimburse each
Lender Party on demand for, any loss or expense incurred or sustained by such
Lender Party (including any loss or expense incurred by reason of the
liquidation or reemployment of deposits or other funds acquired by a Lender
Party to fund or maintain Eurodollar Loans), as a result of (a) any payment or
prepayment (whether authorized or required hereunder or otherwise) of all or a
portion of a Eurodollar Loan on a day other than the day on which the applicable
Interest Period ends, (b) any payment or prepayment, whether required hereunder
or otherwise, of a Loan made after the delivery, but before the effective date,
of a Continuation/Conversion Notice requesting the Continuation of outstanding
Eurodollar Loans as, or the Conversion of outstanding Base Rate Loans to,
Eurodollar Loans, if such payment or prepayment prevents such Continuation/
Conversion Notice from becoming fully effective, (c) the failure of any Loan to
be made or of any Continuation/Conversion Notice requesting the Continuation of
outstanding Eurodollar Loans as, or the Conversion of outstanding Base Rate
Loans to, Eurodollar Loans to become effective due to any condition precedent
not being satisfied or due to any other action or inaction of any Restricted
Person, (d) any Conversion (whether authorized or required hereunder or
otherwise) of all or any portion of any Eurodollar Loan into a Base Rate Loan or
into a different Eurodollar Loan on a day other than the day on which the
applicable Interest Period ends, or (e) any assignment of a Eurodollar Loan on a
day other than the last day of the Interest Period therefor as a result of a
request by Borrower pursuant to Section 3.7(b).  Such indemnification shall be
on an after-tax basis.

[Second Lien Credit Agreement]

 
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Section 3.5.            Taxes.

(a)            Payment Free of Taxes.  Any and all payments by or on account of
any obligation of Borrower hereunder or under any other Loan Document shall be
made free and clear of and without reduction or withholding for any Indemnified
Taxes or Other Taxes; provided that if Borrower shall be required by applicable
law to deduct any Indemnified Taxes (including any Other Taxes) from such
payments, then (i) the sum payable shall be increased as necessary so that after
making all required deductions (including deductions applicable to additional
sums payable under this Section) Administrative Agent or Lender, as the case may
be, receives an amount equal to the sum it would have received had no such
deductions been made, (ii) Borrower shall make such deductions and (iii)
Borrower shall timely pay the full amount deducted to the relevant Governmental
Authority in accordance with applicable law.

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

(c)            Indemnification by Borrower.  Borrower shall indemnify
Administrative Agent and each Lender, within ten (10) days after demand
therefor, for the full amount of any Indemnified Taxes or Other Taxes (including
Indemnified Taxes or Other Taxes imposed or asserted on or attributable to
amounts payable under this Section) paid by Administrative Agent or such Lender,
as the case may be, and any penalties, interest and reasonable expenses arising
therefrom or with respect thereto, whether or not such Indemnified Taxes or
Other Taxes were correctly or legally imposed or asserted by the relevant
Governmental Authority.  A certificate as to the amount of such payment or
liability delivered to Borrower by a Lender (with a copy to Administrative
Agent), or by Administrative Agent on its own behalf or on behalf of a Lender,
shall be conclusive absent manifest error.

(d)            Evidence of Payments.  As soon as practicable after any payment
of Indemnified Taxes or Other Taxes by Borrower to a Governmental Authority,
Borrower shall deliver to Administrative Agent the original or a certified copy
of a receipt issued by such Governmental Authority evidencing such payment, a
copy of the return reporting such payment or other evidence of such payment
reasonably satisfactory to Administrative Agent.

(e)            Status of Lenders.  Any Foreign Lender that is entitled to an
exemption from or reduction of withholding tax under the law of the jurisdiction
in which Borrower is resident for tax purposes, or any treaty to which such
jurisdiction is a party, with respect to payments hereunder or under any other
Loan Document shall deliver to Borrower (with a copy to Administrative Agent),
at the time or times prescribed by applicable law or reasonably requested by
Borrower or Administrative Agent, such properly completed and executed
documentation prescribed by applicable law as will permit such payments to be
made without withholding or at a reduced rate of withholding.  In addition, any
Lender, if requested by Borrower or Administrative Agent, shall deliver such
other documentation prescribed by applicable law or reasonably requested by
Borrower or Administrative Agent as will enable Borrower or Administrative Agent
to determine whether or not such Lender is subject to backup withholding or
information reporting requirements.

[Second Lien Credit Agreement]

 
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Without limiting the generality of the foregoing, in the event that Borrower is
resident for tax purposes in the United States of America, any Foreign Lender
shall deliver to Borrower and Administrative Agent (in such number of copies as
shall be requested by the recipient) on or prior to the date on which such
Foreign Lender becomes a Lender under this Agreement (and from time to time
thereafter upon the request of Borrower or Administrative Agent, but only if
such Foreign Lender is legally entitled to do so), whichever of the following is
applicable:

(i)             duly completed copies of Internal Revenue Service Form W-8BEN
claiming eligibility for benefits of an income tax treaty to which the United
States of America is a party,

(ii)            duly completed copies of Internal Revenue Service Form W-8ECI,

(iii)           in the case of a Foreign Lender claiming the benefits of the
exemption for portfolio interest under section 881(c) of the Code, (x) a
certificate to the effect that such Foreign Lender is not (A) a “bank” within
the meaning of section 881(c)(3)(A) of the Internal Revenue Code, (B) a “10
percent shareholder” of Borrower within the meaning of section 881(c)(3)(B) of
the Internal Revenue Code, or (C) a “controlled foreign corporation” described
in section 881(c)(3)(C) of the Internal Revenue Code and (y) duly completed
copies of  Internal Revenue Service Form W-8BEN, or

(iv)           any other form prescribed by applicable law as a basis for
claiming exemption from or a reduction in United States Federal withholding tax
duly completed together with such supplementary documentation as may be
prescribed by applicable law to permit Borrower to determine the withholding or
deduction required to be made.

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

Section 3.6.             Alternative Rate of Interest.  If prior to the
commencement of any Interest Period for any Eurodollar Loans:

(a)            Administrative Agent determines that adequate and reasonable
means do not exist for ascertaining the Eurodollar Rate for such Interest Period
(any such determination shall be conclusive absent manifest error); or

[Second Lien Credit Agreement]

 
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(b)            Administrative Agent is advised by Required Lenders that the
Eurodollar Rate for such Interest Period will not adequately and fairly reflect
the cost to such Lenders of maintaining any Eurodollar Loans for such Interest
Period;

then Administrative Agent shall give notice thereof to Borrower and Lenders by
telephone or facsimile as promptly as practicable thereafter and, until
Administrative Agent notifies Borrower and Lenders that the circumstances giving
rise to such notice no longer exist, any Continuation/Conversion Notice that
requests the Conversion of any Base Rate Loans to Eurodollar Loans or the
Continuation of any Eurodollar Loans shall be ineffective and shall only be
deemed a request to continue such Loans as Base Rate Loans.  Upon receipt of
such notice, Borrower may revoke any pending request for the Conversion to or
Continuation of Eurodollar Loans.

Section 3.7.             Mitigation Obligations; Replacement of Lenders.

(a)            Designation of a Different Lending Office. If any Lender requests
compensation under Section 3.2, or requires Borrower to pay any additional
amount to any Lender or any Governmental Authority for the account of any Lender
pursuant to Section 3.5, then such Lender shall use reasonable efforts to
designate a different lending office for funding or booking its Loans hereunder
or to assign its rights and obligations hereunder to another of its offices,
branches or affiliates, if, in the judgment of such Lender, such designation or
assignment (i) would eliminate or reduce amounts payable pursuant to Section 3.2
or 3.5, as the case may be, in the future and (ii) would not subject such Lender
to any unreimbursed cost or expense and would not otherwise be disadvantageous
to such Lender.  Borrower hereby agrees to pay all reasonable costs and expenses
incurred by any Lender in connection with any such designation or assignment.

(b)            Replacement of Lenders.  If any Lender requests compensation
under Section 3.2, or if any Lender gives notice to Borrower under Section 3.3
that it is unlawful for such Lender to fund or maintain Eurodollar Loans, or if
Borrower is required to pay any additional amount to any Lender or any
Governmental Authority for the account of any Lender pursuant to Section 3.5, or
if any Lender defaults in its obligation to fund Loans hereunder, or if any
Lender has been deemed insolvent or becomes the subject of a bankruptcy or
insolvency proceeding, or if, in connection with any consent or approval of any
proposed amendment, modification, waiver, or consent that requires consent of
each Lender, the consent of Required Lenders shall have been obtained but any
Lender has not so consented or approved (any such Lender, a “Non-Consenting
Lender”), then Borrower may, at its sole expense and effort, upon notice to such
Lender and Administrative Agent, require such Lender to assign and delegate,
without recourse (in accordance with and subject to the restrictions contained
in, and consents required by, Section 10.5), all of its interests, rights and
obligations under this Agreement and the related Loan Documents to an assignee
that shall assume such obligations (which assignee may be another Lender, if a
Lender accepts such assignment); provided that:

(i)             Borrower shall have paid to Administrative Agent the assignment
fee specified in Section 10.5;

[Second Lien Credit Agreement]

 
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(ii)            such Lender shall have received payment of an amount equal to
the outstanding principal of its Loans, accrued interest thereon, accrued fees
and all other amounts payable to it hereunder and under the other Loan Documents
(including any amounts under Section 3.4) from the assignee (to the extent of
such outstanding principal and accrued interest and fees) or Borrower (in the
case of all other amounts);

(iii)           (A) in the case of any such assignment resulting from a Lender
becoming a Non-Consenting Lender, the applicable assignees shall have agreed to,
and shall be sufficient (together with all other consenting Lenders) to cause
the adoption of, the applicable departure, waiver or amendment of the Loan
Documents and (B) in the case of any such assignment resulting from a claim for
compensation under Section 3.2 or payments required to be made pursuant to
Section 3.5, such assignment will result in a reduction in such compensation or
payments thereafter and (C) in the case of any assignment due to illegality,
such assignee can fund and maintain Eurodollar Loans; and

(iv)           such assignment does not conflict with applicable law.

A Lender shall not be required to make any such assignment or delegation if,
prior thereto, as a result of a waiver by such Lender or otherwise, the
circumstances entitling Borrower to require such assignment and delegation cease
to apply.  In connection with any such replacement, if any such Lender does not
execute and deliver to Administrative Agent a duly executed assignment specified
in Section 10.5 reflecting such replacement within five Business Days of the
date on which the assignee Lender executes and delivers such assignment to such
Lender, then such Lender shall be deemed to have executed and delivered such
assignment without any action on the part of such Lender.

ARTICLE IV - - Conditions Precedent to Lending

Section 4.1.            Documents to be Delivered.  No Lender has any obligation
to make its Loan under this Agreement unless Administrative Agent shall have
received all of the following, at Administrative Agent’s office in Denver,
Colorado, duly executed and delivered and in form, substance and date
satisfactory to Administrative Agent:

(a)            Loan Documents.  Administrative Agent shall have received
counterparts of each Loan Document originally executed and delivered by each
applicable Restricted Person and Lender and any other party thereto, and in such
numbers as Administrative Agent or its counsel may reasonably request.

(b)            Organizational Documents; Incumbency.  Administrative Agent shall
have received (i) copies of each Organizational Document executed and delivered
by each Restricted Person, as applicable, and, to the extent applicable,
certified as of a recent date by the appropriate governmental official, each
dated the Closing Date or a recent date prior thereto; (ii) signature and
incumbency certificates of the officers of such Person executing the Loan
Documents to which it is a party; (iii) resolutions of the Board of Directors or
similar governing body of each Restricted Person approving and authorizing the
execution, delivery and performance of this Agreement and the other Loan
Documents to which it is a party or by which it or its assets may be bound as of
the Closing Date, certified as of the Closing Date by a Responsible Officer as
being in full force and effect without modification or amendment; (iv) an
existence and good standing certificate from the applicable Governmental
Authority of each Restricted Person’s jurisdiction of incorporation,
organization or formation and in each jurisdiction in which it owns real
property Collateral, each dated a recent date prior to the Closing Date; and (v)
such other documents as Administrative Agent may reasonably request.

[Second Lien Credit Agreement]

 
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(c)            Closing Certificate.  Administrative Agent shall have received a
“Closing Certificate” of a Responsible Officer of Borrower, of even date with
this Agreement, in which such officer certifies to the satisfaction of each of
the conditions set out in Section 4.1.

(d)            Governmental Authorizations and Consents.  Each Restricted Person
shall have obtained all Governmental Authorizations and all consents of other
Persons, in each case that are necessary or advisable in connection with the
transactions contemplated by the Loan Documents and each of the foregoing shall
be in full force and effect and in form and substance reasonably satisfactory to
Administrative Agent.  All applicable waiting periods shall have expired without
any action being taken or threatened by any competent authority which would
restrain, prevent or otherwise impose adverse conditions on the transactions
contemplated by the Loan Documents or the financing thereof and no action,
request for stay, petition for review or rehearing, reconsideration, or appeal
with respect to any of the foregoing shall be pending, and the time for any
applicable agency to take action to set aside its consent on its own motion
shall have expired.

(e)            Environmental Reports.  Administrative Agent shall have received
reports and other information, in form, scope and substance reasonably
satisfactory to Administrative Agent, regarding environmental matters relating
to Borrower’s material real property assets.

(f)             Evidence of Insurance.  Administrative Agent shall have received
a certificate from Borrower’s insurance broker or other evidence reasonably
satisfactory to it that all insurance required to be maintained pursuant to
Section 6.8 is in full force and effect and that Administrative Agent had been
named as additional insured and loss payee thereunder as its interests may
appear and to the extent required under Section 6.8.

(g)            Opinions of Counsel.  Administrative Agent shall have received
originally executed copies of the favorable written opinions of Musick, Peeler &
Garrett LLP, counsel to Restricted Persons, in the form of Exhibit E and opining
as to such other matters as Administrative Agent may reasonably request at least
three days prior to the Closing Date, dated as of the Closing Date and otherwise
in form and substance reasonably satisfactory to Administrative Agent (and each
Restricted Person hereby instructs such counsel to deliver such opinions to
Administrative Agent and Lenders).

(h)            Fees.  Administrative Agent shall have received all commitment,
facility, agency, recording, filing, and other fees required to be paid to
Administrative Agent or any Lender pursuant to any Loan Documents, the Fee
Letter or any commitment agreement heretofore entered into.

(i)             Financial Statements.  Lenders shall have received the Initial
Financial Statements, which shall be in form and substance reasonably
satisfactory to Administrative Agent, together with a certificate by a
Responsible Officer certifying the Initial Financial Statements.

[Second Lien Credit Agreement]

 
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(j)             Initial Engineering Report.  Lenders shall have received the
Initial Engineering Report, which shall be in form and substance reasonably
satisfactory to Administrative Agent.

(k)            Title.  Administrative Agent shall have received title reports,
title opinions and other title information in form, substance and authorship
reasonably satisfactory to Administrative Agent, with respect to the Borrowing
Base Properties that are subject to the Security Documents on the Closing Date.

(l)             Intentionally Omitted.

(m)           No Litigation.  There shall not exist any action, suit,
investigation, litigation or proceeding or other legal or regulatory
developments, pending or threatened in any court or before any arbitrator or
Governmental Authority that, in the reasonable opinion of Administrative Agent,
singly or in the aggregate, materially impairs the financing hereunder or any of
the other transactions contemplated by the Loan Documents, or that could
reasonably be expected to cause a Material Adverse Change.

(n)            Completion of Proceedings.  All partnership, corporate and other
proceedings taken or to be taken in connection with the transactions
contemplated hereby and all documents incidental thereto not previously found
acceptable by Administrative Agent and its counsel shall be reasonably
satisfactory in form and substance to Administrative Agent and such counsel, and
Administrative Agent and such counsel shall have received all such counterpart
originals or certified copies of such documents as Administrative Agent may
reasonably request.

(o)            Material Adverse Change.  No event or circumstance shall have
occurred or be continuing since the date of the Initial Financial Statements
that has had, or could be reasonably expected to cause, either individually or
in the aggregate, a Material Adverse Change.

(p)            Due Diligence.  Administrative Agent and Lenders shall have
completed satisfactory due diligence review of the assets, liabilities,
business, operations, condition (financial or otherwise) and key officers of the
Restricted Persons, including, a review of their Mineral Interests and all
legal, financial, accounting, governmental, environmental, tax and regulatory
matters, and fiduciary aspects of the proposed financing.

(q)            First Lien Loan Documents.  Administrative Agent shall have
received (i) copies of all of the First Lien Loan Documents and all amendments
thereto and (ii) evidence that the First Lien Credit Agreement is in full force
and effect as of the Closing Date.

(r)            Solvency Certificate.  Administrative Agent shall have received,
in form and substance satisfactory to the Administrative Agent, a certificate
from the Chief Financial Officer of the Borrower certifying that, as of the
Closing Date, the representations and warranties contained in Section 5.16 are
true and correct.

(s)            UCC Searches.  Administrative Agent shall have received, and be
satisfied with, results of searches of the UCC Records of the Secretary of State
of the States of California, Delaware, Texas and Utah, and such other states as
the Administrative Agent deems necessary in its sole discretion, each search
report to be from a source or sources acceptable to the Administrative Agent and
reflecting no Liens, other than Permitted Liens and other Liens acceptable to
Administrative Agent, against any assets of the Borrower or any of the
Guarantors, as the case may be, as to which perfection of a Lien is accomplished
by the filing of a financing statement.

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(t)             Other Documentation.  Administrative Agent shall have received
all documents and instruments which Administrative Agent has then reasonably
requested, in addition to those described in this Section 4.1.  All such
additional documents and instruments shall be reasonably satisfactory to
Administrative Agent in form, substance and date.  For purposes of determining
compliance with the conditions specified in this Section 4.1, each Lender that
has executed and delivered this Agreement shall be deemed to have consented to,
approved or accepted or to be satisfied with, each document or other matter
required thereunder to be consented to or approved by or acceptable or
satisfactory to a Lender unless the Administrative Agent shall have received
notice from such Lender prior to the proposed Closing Date specifying its
objection thereto

(u)            Representations and Warranties True and Correct.  All
representations and warranties made by any Restricted Person in any Loan
Document shall be true and correct in all material respects on and as of the
date of such Loan as if such representations and warranties had been made as of
the date of such Loan, except to the extent that such representation or warranty
was made as of a specific date or updated, modified or supplemented as of a
subsequent date with the consent of Required Lenders and Administrative Agent,
in which cases such representations and warranties shall have been true and
correct in all material respects on and of such earlier date.

(v)            No Defaults.  No Default shall exist at the date of such Loan.

(w)           Conditions Satisfied.  Each Restricted Person shall have performed
and complied with all agreements and conditions required in the Loan Documents
to be performed or complied with by it on or prior to the date of such Loan.

(x)             Not Prohibited by Law.  The making of such Loan shall not be
prohibited by any Law and shall not subject any Lender to any penalty or other
onerous condition under or pursuant to any such Law.

Section 4.2.             Intentionally Omitted.

ARTICLE V - - Representations and Warranties

To confirm each Lender’s understanding concerning Restricted Persons and
Restricted Persons’ businesses, properties and obligations and to induce each
Lender to enter into this Agreement and to extend credit hereunder, Borrower
represents and warrants to each Lender that:

Section 5.1.             No Default.  No event has occurred and is continuing
which constitutes a Default.

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Section 5.2.            Organization and Good Standing.  Each Restricted Person
is duly organized, validly existing and in good standing under the Laws of its
jurisdiction of organization, having all powers required to carry on its
business and enter into and carry out the transactions contemplated
hereby.  Each Restricted Person is duly qualified, in good standing, and
authorized to do business in all other jurisdictions within the United States
wherein the character of the properties owned or held by it or the nature of the
business transacted by it makes such qualification necessary.  Each Restricted
Person has taken all actions and procedures customarily taken in order to enter,
for the purpose of conducting business or owning property, each jurisdiction
outside the United States wherein the character of the properties owned or held
by it or the nature of the business transacted by it makes such actions and
procedures desirable.

Section 5.3.            Authorization.  Each Restricted Person has duly taken
all action necessary to authorize the execution and delivery by it of the Loan
Documents to which it is a party and to authorize the consummation of the
transactions contemplated thereby and the performance of its obligations
thereunder.  Borrower is duly authorized to borrow funds hereunder.

Section 5.4.            No Conflicts or Consents.  The execution and delivery by
the various Restricted Persons of the Loan Documents to which each is a party,
the performance by each of its obligations under such Loan Documents, and the
consummation of the transactions contemplated by the various Loan Documents, do
not and will not (a) conflict with any provision of (i) any Law, (ii) the
Organizational Documents of any Restricted Person, or (iii) any agreement,
judgment, license, order or permit applicable to or binding upon any Restricted
Person in any material respect, (b) result in the acceleration of any
Indebtedness owed by any Restricted Person, or (c) result in or require the
creation of any Lien upon any assets or properties of any Restricted Person
except as expressly contemplated or permitted in the Loan Documents.  Except as
expressly contemplated in the Loan Documents no consent, approval, authorization
or order of, and no notice to or filing with, any Governmental Authority or
third party is required in connection with the execution, delivery or
performance by any Restricted Person of any Loan Document or to consummate any
transactions contemplated by the Loan Documents.

Section 5.5.            Enforceable Obligations.  This Agreement is, and the
other Loan Documents when duly executed and delivered will be, legal, valid and
binding obligations of each Restricted Person which is a party hereto or
thereto, enforceable in accordance with their terms except as such enforcement
may be limited by bankruptcy, insolvency or similar Laws of general application
relating to the enforcement of creditors’ rights.

Section 5.6.            Initial Financial Statements.  Borrower has heretofore
delivered to each Lender true, correct and complete copies of the Initial
Financial Statements.  The Initial Financial Statements fairly present
Borrower’s Consolidated financial position at the respective dates thereof and
the Consolidated results of Borrower’s operations and Borrower’s Consolidated
cash flows for the respective periods thereof.  Since the date of the annual
Initial Financial Statements no Material Adverse Change has occurred, except as
reflected in the quarterly Initial Financial Statements or in Section 5.6 of the
Disclosure Letter.  All Initial Financial Statements were prepared in accordance
with GAAP.

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Section 5.7.            Other Obligations and Restrictions.  No Restricted
Person has any outstanding Liabilities of any kind (including contingent
obligations, tax assessments, and unusual forward or long-term commitments)
which are, in the aggregate, material to Borrower or material with respect to
Borrower’s Consolidated financial condition and not shown in the Initial
Financial Statements or disclosed in Section 5.7 of the Disclosure Letter or a
Disclosure Report.  Except as shown in the Initial Financial Statements or
disclosed in Section 5.7 of the Disclosure Letter or a Disclosure Report, no
Restricted Person is subject to or restricted by any franchise, contract, deed,
charter restriction, or other instrument or restriction which could reasonably
be expected to cause a Material Adverse Change.

Section 5.8.            Full Disclosure.  No certificate, statement or other
information delivered herewith or heretofore by any Restricted Person to any
Lender in connection with the negotiation of this Agreement or in connection
with any transaction contemplated hereby (excluding projections, estimates and
Engineering Reports) contains any untrue statement of a material fact or omits
to state any material fact known to any Restricted Person (other than
industry-wide risks normally associated with the types of businesses conducted
by Restricted Persons) necessary to make the statements contained herein or
therein not misleading as of the date made or deemed made; provided that, with
respect to the estimates, projections and pro forma financial information
contained in the materials referenced above, Borrower only represents that they
are based upon good faith estimates and assumptions believed by management of
Borrower to be reasonable at the time made, it being recognized by the Lenders
that such financial information as it relates to future events is not to be
viewed as fact and that actual results during the period or periods covered by
such financial information may differ from the projected results set forth
therein by a material amount.  There is no fact known to any Restricted Person
(other than industry-wide risks normally associated with the types of businesses
conducted by Restricted Persons) that has not been disclosed to each Lender in
writing which could reasonably be expected to cause a Material Adverse
Change.  There are no statements or conclusions in any Engineering Report which
are based upon or include misleading information or fail to take into account
material information regarding the matters reported therein, it being understood
that each Engineering Report is necessarily based upon professional opinions,
estimates and projections and that Borrower does not warrant that such opinions,
estimates and projections will ultimately prove to have been accurate. Borrower
has heretofore delivered to each Lender true, correct and complete copies of the
Initial Engineering Report.

Section 5.9.            Litigation.  Except as disclosed in the Initial
Financial Statements or in Section 5.9 of the Disclosure Letter:  (a) there are
no actions, suits or legal, equitable, arbitrative or administrative proceedings
pending, or to the knowledge of any Restricted Person threatened, against any
Restricted Person or affecting any Collateral (including any which challenge or
otherwise pertain to any Restricted Person’s title to any Collateral) before any
Governmental Authority which could reasonably be expected to cause a Material
Adverse Change, (b) there are no outstanding judgments, injunctions, writs,
rulings or orders by any such Governmental Authority against any Restricted
Person or any Restricted Person’s stockholders, partners, directors or officers
or affecting any Collateral or any of its material assets or property which
could reasonably be expected to cause a Material Adverse Change, and (c) there
are no cease and desist, noncompliance orders or notices from the California
Division of Oil, Gas and Geothermal Resources or other Governmental Authorities
which could reasonably be expected to cause a Material Adverse Change.

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Section 5.10.          Labor Disputes and Acts of God.  Except as disclosed in
Section 5.10 of the Disclosure Letter or a Disclosure Report, neither the
business nor the properties of any Restricted Person has been affected by any
fire, explosion, accident, strike, lockout or other labor dispute, drought,
storm, hail, earthquake, embargo, act of God or of the public enemy or other
casualty (whether or not covered by insurance), which could reasonably be
expected to cause a Material Adverse Change.

Section 5.11.          ERISA Plans and Liabilities.  All currently existing
ERISA Plans are listed in Section 5.11 of the Disclosure Letter or a Disclosure
Report.  Except as disclosed in the Initial Financial Statements or in Section
5.11 of the Disclosure Letter or a Disclosure Report, no Termination Event has
occurred with respect to any ERISA Plan and all ERISA Affiliates are in
compliance with ERISA in all material respects.  No ERISA Affiliate is required
to contribute to, or has any other absolute or contingent liability in respect
of, any “multiemployer plan” as defined in Section 4001 of ERISA.  Except as set
forth in Section 5.11 of the Disclosure Letter or a Disclosure Report:  (a) no
“accumulated funding deficiency” (as defined in Section 412(a) of the Internal
Revenue Code) exists with respect to any ERISA Plan, whether or not waived by
the Secretary of the Treasury or his delegate, and (b) the current value of each
ERISA Plan’s benefits does not exceed the current value of such ERISA Plan’s
assets available for the payment of such benefits by more than $500,000.

Section 5.12.          Environmental and Other Laws.  Except as disclosed in
Section 5.12 of the Disclosure Letter or a Disclosure Report: (a) Restricted
Persons are conducting their businesses in material compliance with all
applicable Laws, including Environmental Laws, and have and are in compliance
with all material licenses, permits and bonds required under any such Laws; (b)
none of the operations or properties of any Restricted Person is the subject of
federal, state or local investigation evaluating whether any material remedial
action is needed to respond to a release of any Hazardous Materials into the
environment or to the improper storage or disposal (including storage or
disposal at offsite locations) of any Hazardous Materials; (c) no Restricted
Person (and to the best knowledge of Borrower, no other Person) has filed any
notice under any Law indicating that any Restricted Person is responsible for
the improper release into the environment, or the improper storage or disposal,
of any material amount of any Hazardous Materials or that any Hazardous
Materials have been improperly released, or are improperly stored or disposed
of, upon any property of any Restricted Person; (d) no Restricted Person has
transported or arranged for the transportation of any Hazardous Material to any
location which is (i) listed on the National Priorities List under the
Comprehensive Environmental Response, Compensation and Liability Act of 1980, as
amended, listed for possible inclusion on such National Priorities List by the
Environmental Protection Agency in its Comprehensive Environmental Response,
Compensation and Liability Information System List, or listed on any similar
state list or (ii) the subject of federal, state or local enforcement actions or
other investigations which may lead to claims against any Restricted Person for
clean-up costs, remedial work, damages to natural resources or for personal
injury claims (whether under Environmental Laws or otherwise); and (e) no
Restricted Person otherwise has any known material contingent liability under
any Environmental Laws or in connection with the release into the environment,
or the storage or disposal, of any Hazardous Materials.  Each Restricted Person
undertook, at the time of its acquisition of each of its material properties,
all appropriate inquiry into the previous ownership and uses of the Property and
any potential environmental liabilities associated therewith.

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Section 5.13.          Names and Places of Business.  No Restricted Person has,
during the preceding five years, had, been known by, or used any other trade or
fictitious name, except as disclosed in Section 5.13 of the Disclosure Letter or
a Disclosure Report.  Except as otherwise indicated in Section 5.13 of the
Disclosure Letter or a Disclosure Report, the chief executive office and
principal place of business of each Restricted Person are (and for the preceding
five years have been) located at the address of Borrower set out on the
signature pages hereto.  Except as indicated in Section 5.13 of the Disclosure
Letter or a Disclosure Report, no Restricted Person has any other office or
place of business.

Section 5.14.          Borrower’s Subsidiaries.  Borrower does not presently
have any Subsidiary or own any stock in any other corporation or association
except those listed in Section 5.14 of the Disclosure Letter or a Disclosure
Report.  Neither Borrower nor any Restricted Person is a member of any general
or limited partnership, joint venture or association of any type whatsoever
except those listed in Section 5.14 of the Disclosure Letter or a Disclosure
Report, and associations, joint ventures or other relationships (a) which are
established pursuant to a standard form operating agreement or similar agreement
or which are partnerships for purposes of federal income taxation only, (b)
which are not corporations or partnerships (or subject to the Uniform
Partnership Act) under applicable state Law, and (c) whose businesses are
limited to the exploration, development and operation of oil, gas or mineral
properties and interests owned directly by the parties in such associations,
joint ventures or relationships.  Except as otherwise revealed in a Disclosure
Report, Borrower owns, directly or indirectly, the Equity Interest in each of
its Subsidiaries which is indicated in Section 5.14 of the Disclosure Letter.

Section 5.15.          Government Regulation.  Neither Borrower nor any other
Restricted Person owing Obligations is subject to regulation under the Federal
Power Act, the Investment Company Act of 1940 (as any of the preceding acts have
been amended) or any other Law which regulates the incurring by such Person of
Indebtedness, including Laws relating to common contract carriers or the sale of
electricity, gas, steam, water or other public utility services.

Section 5.16.          Solvency.  Upon giving effect to the issuance of the
Notes, the execution of the Loan Documents by Borrower and each Guarantor and
the consummation of the transactions contemplated hereby, no Restricted Person
will be Insolvent.

Section 5.17.          Title to Properties; Licenses.  Except for those Mineral
Interests disposed of in accordance with this Agreement and oil and gas leases
that have expired in accordance with their terms, each Restricted Person has (a)
good and defensible title to, or valid leasehold interests in, all of the
Mineral Interests covered by the most recently delivered Engineering Report,
free and clear of all Liens, encumbrances, or adverse claims other than
Permitted Liens; and (b) good and valid title to, or valid leasehold interests
in, licenses of, or rights to use, all other Collateral owned or leased by such
Restricted Person, free and clear of all Liens, encumbrances, or adverse claims
other than Permitted Liens, except in the case of clauses (a) and (b) of this
section, defects in title or adverse claims which could not reasonably be
expected to cause a Material Adverse Change; provided that no representation or
warranty is made in this section with respect to any Mineral Interest to which
no Proved Reserves are properly attributed.  Other than changes which arise
pursuant to non-consent provisions of operating agreements or other agreements
(if any) described in the exhibits to any Security Document and except for
properties disposed of in compliance with this Agreement or leases that have
expired in accordance with their terms:  (x) each Restricted Person owns the net
interests in production attributable to the wells and units of such Restricted
Person evaluated in the most recently delivered Engineering Report, subject only
to Permitted Liens, and (y) the ownership of such properties does not in the
aggregate in any material respect obligate such Restricted Person to bear the
costs and expenses relating to the maintenance, development and operations of
such properties in an amount materially in excess of the working interest of
such properties set forth in such Engineering Report.  Upon delivery of each
Engineering Report furnished to the Lenders pursuant to Sections 6.2(d) and (f),
the statements made in the preceding sentences of this section and in Section
5.8 shall be true with respect to such Engineering Report.  Each Restricted
Person possesses all licenses, permits, franchises, or otherwise has valid
rights, rights to use all patents, copyrights, trademarks and trade names, and
other intellectual property (or otherwise possesses the right to use such
intellectual property without violation of the rights of any other Person) which
are necessary to carry out its business as presently conducted and as presently
proposed to be conducted hereafter, and no Restricted Person is in violation in
any material respect of the terms under which it possesses such intellectual
property or the right to use such intellectual property.

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Section 5.18.          Leases and Contracts; Performance of Obligations.  Except
for those Mineral Interests disposed of in accordance with this Agreement and
oil and gas leases that have expired in accordance with their terms, the leases,
contracts, servitudes and other agreements forming a part of the Mineral
Interests of the Restricted Persons covered by the most recently delivered
Engineering Report are in full force and effect unless (a) disputed in good
faith by appropriate proceedings and for which adequate reserves have been
maintained in accordance with GAAP, or (b) the failure to be in full force and
effect could not reasonably be expected to cause a Material Adverse Change.  All
rents, royalties and other payments due and payable under such leases,
contracts, servitudes and other agreements, or under any Permitted Liens, or
otherwise attendant to the ownership or operation of any Mineral Interests
covered by the most recently delivered Engineering Report, have been properly
and timely paid or will be paid prior to delinquency unless (i) disputed in good
faith by appropriate proceedings and for which adequate reserves have been
maintained in accordance with GAAP or (ii) the failure to pay could not
reasonably be expected to cause a Material Adverse Change.  No Restricted Person
is in default with respect to its obligations (and no Restricted Person is aware
of any default by any third party with respect to such third party’s
obligations) under any such leases, contracts, servitudes and other agreements,
or under any Permitted Liens, or otherwise attendant to the ownership or
operation of any part of the Mineral Interests covered by the Engineering
Report, where such failure could reasonably be expected to cause a Material
Adverse Change.  No Restricted Person is currently accounting for any royalties,
or overriding royalties or other payments out of production, on a basis (other
than delivery in kind) less favorable to such Restricted Person than proceeds
received by such Restricted Person (calculated at the well) from sale of
production, and no Restricted Person has any liability (or alleged liability) to
account for the same on any such less favorable basis.

Section 5.19.          Gas Imbalances, Prepayments.  Except as listed on the
Disclosure Letter, on a net basis there are no gas imbalances, take or pay or
other prepayments (excluding firm transportation contracts entered into in the
ordinary course of business) which would require any Restricted Person to
deliver Mineral Interests produced from its oil and gas properties at some
future time without then or thereafter receiving full payment therefor exceeding
1 Bcf of gas or the energy equivalent for oil in the aggregate.  Except for
contracts listed in the Disclosure Letter or included in the most recently
delivered Engineering Report (with respect to all of which contracts the
Borrower represents that it or its Subsidiaries are receiving a price for all
production sold thereunder which is computed substantially in accordance with
the terms of the relevant contract and are not having deliveries curtailed
substantially below the subject property’s delivery capacity except as disclosed
in the Disclosure Letter or the most recently delivered Engineering Report), no
material agreements exist which are not cancelable on 120 days notice or less
without penalty or detriment for the sale of production from the Borrower’s or
its Subsidiaries’ Mineral Interests (including, without limitation, calls on or
other rights to purchase, production, whether or not the same are currently
being exercised) that (a) pertain to the sale of production at a fixed price and
(b) have a maturity or expiry date of longer than six (6) months.

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Section 5.20.          Operation of Mineral Interests.  Except for those Mineral
Interests disposed of in accordance with this Agreement and oil and gas leases
that have expired in accordance with their terms, the Mineral Interests covered
by the most recently delivered Engineering Report (and all properties unitized
therewith) are being (and, to the extent the same could adversely affect the
ownership or operation of the Mineral Interests covered by the most recently
delivered Engineering Report after the date hereof, have in the past been)
maintained, operated and developed in a good and workmanlike manner, in
accordance with prudent industry standards and in conformity with all applicable
Laws and in conformity with all oil, gas or other mineral leases and other
contracts and agreements forming a part of the Mineral Interest covered by the
most recently delivered Engineering Report and in conformity with the Permitted
Liens except where the failure to do so could not reasonably be expect to have a
Material Adverse Change.  No Mineral Interest covered by the most recently
delivered Engineering Report is subject to having allowable production after the
date hereof reduced below the full and regular allowable (including the maximum
permissible tolerance) because of any overproduction (whether or not the same
was permissible at the time) prior to the date hereof and none of the wells
located on the Mineral Interests covered by the most recently delivered
Engineering Report (or properties unitized therewith) are or will be deviated
from the vertical more than the maximum permitted by applicable laws,
regulations, rules and orders, and such wells are bottomed under and producing
from, with the well bores wholly within, the Mineral Interests covered by the
most recently delivered Engineering Report (or, in the case of wells located on
properties unitized therewith, such unitized properties) except where such
matter could not reasonably be expect to have a Material Adverse Change.  Each
Restricted Person has all governmental licenses, permits and bonds necessary or
appropriate to own and operate its Mineral Interests covered by the most
recently delivered Engineering Report, and no Restricted Person has received
notice of any violations in respect of any such licenses or permits, except
where the failure to do, or any such violation, so could not reasonably be
expect to have a Material Adverse Change.

Section 5.21.          Regulation U.  Neither Borrower nor any of its
Subsidiaries are engaged in the business of extending credit for the purpose of
purchasing or carrying margin stock, and no proceeds of any Loans will be used
for a purpose which violates Regulation U.

Section 5.22.          Taxes; Tax Returns.  Each Restricted Person has duly and
properly filed its United States income tax returns and all other tax returns
which are required to be filed and has paid all taxes shown as due from it
thereon, except such as are being contested in good faith and as to which
adequate provisions and disclosures have been made.  The respective charges and
reserves on its books with respect to taxes and other governmental charges are
adequate.

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Section 5.23.          Security Documents.  The provisions of each Security
Document executed by the Borrower are effective to create, in favor of the
Administrative Agent, a legal, valid and enforceable Lien in all of any
Restricted Person’s right, title, and interest in the Collateral described
therein, which Lien, assuming the accomplishment of recording and filing in
accordance with applicable Laws prior to the intervention of rights of other
Persons, constitutes a fully perfected second-priority Lien (subject only to
Permitted Liens) on all of any Restricted Person’s right, title, and interest in
the Collateral described therein.

ARTICLE VI - - Affirmative Covenants of Borrower

To conform with the terms and conditions under which each Lender is willing to
have credit outstanding to Borrower, and to induce each Lender to enter into
this Agreement and extend credit hereunder, Borrower warrants, covenants and
agrees that until the full and final payment of the Obligations and the
termination of this Agreement, unless Majority Lenders have previously agreed
otherwise:

Section 6.1.            Payment and Performance.  Borrower will pay all amounts
due under the Loan Documents in accordance with the terms thereof and will
observe, perform and comply with every covenant, term and condition expressed or
implied in the Loan Documents.  Borrower will cause each other Restricted Person
to observe, perform and comply with every such term, covenant and condition in
any Loan Document.

Section 6.2.            Books, Financial Statements and Reports.  Each
Restricted Person will at all times maintain full and accurate books of account
and records.  Borrower will maintain and will cause its Subsidiaries to maintain
a standard system of accounting, will maintain its Fiscal Year, and will furnish
the following statements and reports to each Lender Party at Borrower’s expense:

(a)            Annual Financial Statements.  As soon as available, and in any
event within 90 days after the end of each Fiscal Year, complete Consolidated
and consolidating financial statements of Borrower together with all notes
thereto, prepared in reasonable detail in accordance with GAAP, together with an
unqualified opinion, based on an audit using generally accepted auditing
standards, by independent certified public accountants selected by Borrower and
acceptable to Majority Lenders, stating that such Consolidated financial
statements have been so prepared.  These financial statements shall contain a
Consolidated and consolidating balance sheet as of the end of such Fiscal Year
and Consolidated and consolidating statements of earnings, of cash flows, and of
changes in owners’ equity for such Fiscal Year, each setting forth in
comparative form the corresponding figures for the preceding Fiscal Year.

(b)            Quarterly Financial Statements.  As soon as available, and in any
event within 45 days after the end of each of the first three Fiscal Quarters in
each Fiscal Year, Borrower’s Consolidated and consolidating balance sheet as of
the end of such Fiscal Quarter and Consolidated and consolidating statements of
Borrower’s earnings and cash flows for the period from the beginning of the then
current Fiscal Year to the end of such Fiscal Quarter, all in reasonable detail
and prepared in accordance with GAAP, subject to changes resulting from normal
year-end adjustments.  In addition Borrower will, together with each set of
financial statements furnished under Section 6.2(a) and this Section 6.2(b),
furnish a certificate in the form of Exhibit D signed by the Chief Financial
Officer or the Treasurer of Borrower stating that such financial statements are
accurate and complete (subject to normal year-end adjustments), stating that he
has reviewed the Loan Documents, containing calculations showing compliance (or
non-compliance) at the end of such Fiscal Quarter with the requirements of
Section 7.11, Section 7.12, Section 7.13 and Section 7.14 and stating that no
Default exists at the end of such Fiscal Quarter or at the time of such
certificate or specifying the nature and period of existence of any such
Default.

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(c)            Stockholder Documents; Filings.  As soon as available, and in any
event within 15 days after the date required to be delivered to the SEC,
Borrower will deliver copies of all financial statements, reports, notices and
proxy statements sent by any Restricted Person to its stockholders and all
registration statements, periodic reports and other statements and schedules
filed by any Restricted Person with any securities exchange, the SEC or any
similar governmental authority.  Documents required to be delivered pursuant to
Section 6.2(a), (b) or (c) (to the extent any such documents are included in
materials otherwise filed with the SEC) may be delivered electronically and if
so delivered, shall be deemed to have been delivered on the date (i) on which
Borrower posts such documents, or provides a link thereto, on Borrower’s website
on the Internet at the website address listed in the Disclosure Letter; or (ii)
on which such documents are posted on Borrower’s behalf on IntraLinks /
IntraAgency or another relevant website, if any, including, but not limited to
any filings made on EDGAR to which each Lender and Administrative Agent have
access (whether a commercial, third-party website or whether sponsored by
Administrative Agent); provided that: (A) Borrower shall deliver paper copies of
such documents to Administrative Agent or any Lender that requests Borrower to
deliver such paper copies until a written request to cease delivering paper
copies is given by Administrative Agent or such Lender and (B) Borrower shall
notify (which may be by facsimile or electronic mail) Administrative Agent and
each Lender of the posting of any such documents and provide to Administrative
Agent by electronic mail electronic versions (i.e., soft copies) of such
documents.  Notwithstanding anything contained herein, in every instance
Borrower shall be required to provide paper copies of the certificates required
by Section 6.2(b) to Administrative Agent and each of the Lenders.  Except for
such certificates, Administrative Agent shall have no obligation to request the
delivery or to maintain copies of the documents referred to above, and in any
event shall have no responsibility to monitor compliance by Borrower with any
such request for delivery, and each Lender shall be solely responsible for
requesting delivery to it or maintaining its copies of such documents.

(d)            Engineering Reports.  By March 1 of each year, Borrower will
deliver an Engineering Report prepared by the Independent Engineers, dated as of
January 1 of such year, concerning all oil and gas properties and interests
owned by any Restricted Person which are located in or offshore of the United
States and which have attributable to them Proved Reserves.  This report shall
be satisfactory to Administrative Agent, shall contain sufficient information to
enable Borrower to meet the reporting requirements concerning oil and gas
reserves contained in Regulations S-K and S-X promulgated by the SEC and shall
contain information and analysis comparable in scope to that contained in the
Initial Engineering Report.  This report shall distinguish (or shall be
delivered together with a certificate from an appropriate officer of Borrower
which distinguishes) those properties treated in the report which are Collateral
from those properties treated in the report which are not Collateral.

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(e)            Additional Engineering Reports.  (i) By September 1 of each year
and (ii) promptly following notice of any unscheduled redeterminations of the
Borrowing Base under Section 2.9(b) and Section 2.9(d) of the First Lien Credit
Agreement, Borrower will deliver an Engineering Report prepared by Staff
Engineers consistent in form and scope of the Engineering Reports described in
Section 6.2(d) above and dated as of the date specified in Section 2.9(c) of the
First Lien Credit Agreement.

(f)             Lease Operating Statements.  Together with each Engineering
Report required under Section 6.2(d) and Section 6.2(e), Borrower will furnish
lease operating statements for the twelve consecutive calendar months then
ended, which include lease operating statements for such period and for each
month during such period, for properties covered by such Engineering Report.

(g)            Hedging Reports.  Together with each set of financial statements
furnished under Section 6.2(a) and Section 6.2(b), Borrower will furnish a
report (in form reasonably satisfactory to Administrative Agent) of all Hedging
Contracts of Borrower and each of its Subsidiaries, setting forth the type,
term, effective date, termination date and notional amounts or volumes and the
counterparty to each such agreement.

(h)            Production Reports.  As soon as available, and in any event
within 45 days after the end of each calendar quarter, Borrower will deliver a
report describing by lease or unit the gross volume of production and sales
attributable to production during such quarter from the properties described in
the most recent Engineering Report and describing the related severance taxes,
other taxes, leasehold operating expenses and capital costs attributable thereto
and incurred during such quarter.

(i)             Asset Acquisition Pro Forma Financial Statements.  When any
Restricted Person acquires assets during any Four-Quarter Period and such assets
are included in the calculation of Adjusted EBITDAX for such Four-Quarter
Period, Borrower shall deliver to Administrative Agent and Lenders, together
with the financial statements described in Section 6.2(b), pro forma financial
statements of Borrower for such period prepared on a Consolidated basis as if
such assets had been acquired by Borrower or such Subsidiary on the first day of
such Four-Quarter Period.

(j)             Imbalance Reports.  Concurrently with the reports referred to in
Section 6.2(d), Borrower will deliver a report describing material gas
imbalances and curtailments of production for the Collateral.

(k)            Total Proved PV10% Reports.  Concurrently with (i) the delivery
of Engineering Reports under Section 6.2(d) and Section 6.2(e), (ii) any
material acquisition or divestiture of oil and gas properties by any Restricted
Person, and (iii) any Material Hedging Modification, Borrower will deliver (A) a
report, in form and substance reasonably satisfactory to Administrative Agent,
prepared by the Staff Engineers (or Independent Engineers with respect to
reports delivered concurrently with Engineering Reports provided under Section
6.2(d)), which report shall set forth, as of the effective date of the
applicable Engineering Report, the date of such material acquisition or
divestiture, or the date of such Material Hedging Modification, as the case may
be, the calculation of the Total Proved PV10% attributable to all of the
Borrower’s Mineral Interests, based on the parameters set forth in the
definition of “Total Proved PV10%”, and (B) a certificate of a Responsible
Officer of the Borrower showing, in reasonable detail, the compliance by the
Borrower with Section 7.14.

[Second Lien Credit Agreement]

 
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Section 6.3.            Other Information and Inspections.  Each Restricted
Person will furnish to each Lender any information which Administrative Agent
may from time to time reasonably request concerning any provision of the Loan
Documents, any Collateral, or any matter in connection with Restricted Persons’
businesses, properties, prospects, financial condition and operations.  Each
Restricted Person will permit representatives appointed by Administrative Agent
(including independent accountants, auditors, Administrative Agents, attorneys,
appraisers and any other Persons) to visit and inspect during normal business
hours any of such Restricted Person’s property, including its books of account,
other books and records, and any facilities or other business assets, and to
make extra copies therefrom and photocopies and photographs thereof, and to
write down and record any information such representatives obtain, and each
Restricted Person shall permit Administrative Agent or its representatives to
investigate and verify the accuracy of the information furnished to
Administrative Agent or any Lender in connection with the Loan Documents and to
discuss all such matters with its officers, employees and representatives.

Section 6.4.             Notice of Material Events and Change of
Address.  Borrower will promptly notify each Lender in writing, stating that
such notice is being given pursuant to this Agreement, of:

(a)            occurrence of any Material Adverse Change,

(b)            the occurrence of any Default,

(c)            the acceleration of the maturity of any Indebtedness owed by any
Restricted Person or of any default by any Restricted Person under any
indenture, mortgage, agreement, contract or other instrument to which any of
them is a party or by which any of them or any of their properties is bound, if
such acceleration or default could cause a Material Adverse Change,

(d)            the occurrence of any Termination Event,

(e)            any claim of $10,000,000 or more, any notice of potential
liability under any Environmental Laws which might exceed such amount, or any
other material adverse claim asserted against any Restricted Person or with
respect to any Restricted Person’s properties, and

(f)             the filing of any suit or proceeding against any Restricted
Person in which an adverse decision could reasonably be expected to cause a
Material Adverse Change.

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Upon the occurrence of any of the foregoing Restricted Persons will take all
necessary or appropriate steps to remedy promptly any such Material Adverse
Change, Default, acceleration, default or Termination Event, to protect against
any such adverse claim, to defend any such suit or proceeding, and to resolve
all controversies on account of any of the foregoing.  Borrower will also notify
Administrative Agent and Administrative Agent’s counsel in writing at least 20
Business Days prior to the date that any Restricted Person changes its name or
the location of its chief executive office or principal place of business or the
place where it keeps its books and records, furnishing with such notice any
necessary financing statement amendments or requesting Administrative Agent and
its counsel to prepare the same.

Section 6.5.            Maintenance of Properties.  Each Restricted Person will
maintain, preserve, protect, and keep all Collateral and all other property used
or useful in the conduct of its business in good condition and in compliance
with all applicable Laws in all material respects, and will from time to time
make all repairs, renewals and replacements needed to enable the business and
operations carried on in connection therewith to be promptly and advantageously
conducted at all times.

Section 6.6.            Maintenance of Existence and Qualifications.  Each
Restricted Person will maintain and preserve its existence and its rights and
franchises in full force and effect and will qualify to do business in all
states or jurisdictions where required by applicable Law, except where the
failure so to qualify will not cause a Material Adverse Change.  The foregoing
shall not restrict (a) any merger or consolidation permitted by Section 7.4 or
(b) the liquidation or dissolution of any Subsidiary if Borrower determines in
good faith that such liquidation or dissolution is in the best interests of
Borrower and is not materially disadvantageous to the Lenders.

Section 6.7.            Payment of Trade Liabilities, Taxes, etc.  Each
Restricted Person will (a) timely file all required tax returns; (b) timely pay
all taxes, assessments, and other governmental charges or levies imposed upon it
or upon its income, profits or property; (c) pay all Liabilities owed by it on
ordinary trade terms to vendors, suppliers and other Persons providing goods and
services used by it in the ordinary course of its business within a period of
time after the invoice date that is customary in the oil and gas industry; (d)
pay and discharge when due all other Liabilities now or hereafter owed by it;
and (e) maintain appropriate accruals and reserves for all of the foregoing in
accordance with GAAP.  Each Restricted Person may, however, delay paying or
discharging any of the foregoing so long as (i) it is in good faith contesting
the validity thereof by appropriate proceedings and has set aside on its books
adequate reserves therefor or (ii) the nonpayment or nondischarge could not
reasonably be expected to cause a Material Adverse Change.

Section 6.8.            Insurance.

(a)            Each Restricted Person shall at all times maintain (at its own
expense) insurance for its property in accordance with the Insurance Schedule in
at least such amounts, with at least such limitations on deductibles, and
against such risks, in such form and with such financially sound and reputable
insurers as shall be reasonably satisfactory to Administrative Agent from time
to time. Each Restricted Person shall at all times maintain insurance against
its liability for injury to persons or property in accordance with the Insurance
Schedule, which insurance shall be by financially sound and reputable insurers.

[Second Lien Credit Agreement]

 
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(b)            All insurance policies shall be modified or endorsed as necessary
to (A) name the Administrative Agent as loss payee on policies insuring loss or
damage of Collateral and as additional insured on policies insuring against
liability for injury to persons or property, and (B) prevent any expiration, or
cancellation of the coverage provided by such policies without at least thirty
(30) days prior written notice to Administrative Agent by the insurer.  Each
Restricted Person shall, if so requested by Administrative Agent, deliver to
Administrative Agent original or duplicate policies of such insurance and, as
often as Administrative Agent may reasonably request, a report of a reputable
insurance broker with respect to such insurance.  Administrative Agent shall,
upon the occurrence and during the continuance of an Event of Default, have the
right to collect and Borrower hereby assigns to Administrative Agent for the
benefit of Lenders (and hereby agrees to cause each other Restricted Person to
assign), any and all moneys that may become payable under any such policies of
insurance by reason of damage, loss or destruction of any of the Collateral or
any part thereof and to apply such moneys to the payment of the Obligations as
herein provided.  Reimbursement under any liability insurance maintained by
Restricted Persons pursuant to this Section 6.8 may be paid directly to the
Person who has incurred the liability covered by such insurance.

Section 6.9.            Performance on Borrower’s Behalf.  If any Restricted
Person fails to pay any taxes, insurance premiums, expenses, attorneys’ fees or
other amounts it is required to pay under any Loan Document, Administrative
Agent may pay the same.  Borrower shall immediately reimburse Administrative
Agent for any such payments and each amount paid by Administrative Agent shall
constitute an Obligation owed hereunder which is due and payable on the date
such amount is paid by Administrative Agent.

Section 6.10.           Interest.  Borrower hereby promises to each Lender Party
to pay interest at the Default Rate applicable to Base Rate Loans on all
Obligations (including Obligations to pay fees or to reimburse or indemnify any
Lender) which Borrower has in this Agreement promised to pay to such Lender
Party and which are not paid when due.  Such interest shall accrue from the date
such Obligations become due until they are paid.

Section 6.11.          Compliance with Agreements and Law.  Each Restricted
Person will perform all material obligations it is required to perform under the
terms of each indenture, mortgage, deed of trust, security agreement, lease,
franchise, agreement, contract or other instrument or obligation to which it is
a party or by which it or any of its properties is bound, except when failure to
do so could not reasonably be expected to cause a Material Adverse Change.  Each
Restricted Person will conduct its business and affairs in compliance with all
Laws applicable thereto and will maintain in good standing all licenses that may
be necessary or appropriate to carry on its business.

Section 6.12.           Environmental Matters; Environmental Reviews.

(a)            Except in each case where failure to do so could not reasonably
be expected to cause a Material Adverse Change, each Restricted Person will
comply in all material respects with all Environmental Laws now or hereafter
applicable to such Restricted Person, as well as all contractual obligations and
agreements with respect to environmental remediation or other environmental
matters, and shall obtain, at or prior to the time required by applicable
Environmental Laws, all environmental, health and safety permits, licenses and
other authorizations necessary for its operations and will maintain such
authorizations in full force and effect.  Except in each case where failure to
do so could not reasonably be expected to cause a Material Adverse Change, no
Restricted Person will do anything or permit anything to be done which will
subject any of its properties to any remedial obligations under, or result in
noncompliance with applicable permits and licenses issued under, any applicable
Environmental Laws, assuming disclosure to the applicable governmental
authorities of all relevant facts, conditions and circumstances.  Upon
Administrative Agent’s reasonable request, at any time and from time to time,
Borrower will provide at its own expense an environmental inspection of any of
the Restricted Persons’ material real properties and audit of their
environmental compliance procedures and practices, in each case from an
engineering or consulting firm reasonably acceptable to Administrative
Agent.  Administrative Agent and Lenders will use their best efforts to protect
any attorney client privilege that exists with respect to reports or audits
prepared by such engineers or consultants.

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(b)            Borrower will promptly furnish to Administrative Agent all
written notices of violation, orders, claims, citations, complaints, penalty
assessments, suits or other proceedings received by any Restricted Person, or of
which Borrower otherwise has notice, pending or threatened against any
Restricted Person by any Governmental Authority with respect to any alleged
violation of or non-compliance with any Environmental Laws or relating to
potential responsibility with respect to any investigation or clean-up of
Hazardous Material at any location, in each case which involves a claim or
liability in excess of $10,000,000.

Section 6.13.          Evidence of Compliance.  Each Restricted Person will
furnish to each Lender at such Restricted Person’s or Borrower’s expense all
evidence which Administrative Agent from time to time reasonably requests in
writing as to the accuracy and validity of or compliance with all
representations, warranties and covenants made by any Restricted Person in the
Loan Documents, the satisfaction of all conditions contained therein, and all
other matters pertaining thereto.

Section 6.14.          Bank Accounts; Offset.  To secure the repayment of the
Obligations Borrower hereby grants to each Lender a security interest, a lien,
and a right of offset, each of which shall be in addition to all other
interests, liens, and rights of any Lender at common Law, under the Loan
Documents, or otherwise, and each of which shall be upon and against (a) any and
all moneys, securities or other property (and the proceeds therefrom) of
Borrower now or hereafter held or received by or in transit to any Lender from
or for the account of Borrower, whether for safekeeping, custody, pledge,
transmission, collection or otherwise, (b) any and all deposits (general or
special, time or demand, provisional or final) of Borrower with any Lender, and
(c) any other credits and claims of Borrower at any time existing against any
Lender, including claims under certificates of deposit.  At any time and from
time to time after the occurrence of any Default, each Lender is hereby
authorized to foreclose upon, or to offset against the Obligations then due and
payable (in either case without notice to Borrower), any and all items
hereinabove referred to.  The remedies of foreclosure and offset are separate
and cumulative, and either may be exercised independently of the other without
regard to procedures or restrictions applicable to the other.

[Second Lien Credit Agreement]

 
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Section 6.15.          Guaranties of Borrower’s Subsidiaries.  Each Domestic
Subsidiary of Borrower that is a Material Subsidiary now existing or created,
acquired or coming into existence after the date hereof shall, promptly upon
request by Administrative Agent, execute and deliver to Administrative Agent an
absolute and unconditional guaranty of the timely repayment of the Obligations
and the due and punctual performance of the obligations of Borrower hereunder,
which guaranty shall be satisfactory to Administrative Agent in form and
substance.  Each such Domestic Subsidiary of Borrower that is a Material
Subsidiary existing on the date hereof shall duly execute and deliver such a
guaranty prior to the making of any Loan hereunder.  Borrower will cause each
such Domestic Subsidiary to deliver to Administrative Agent, simultaneously with
its delivery of such a guaranty, written evidence satisfactory to Administrative
Agent and its counsel that such Domestic Subsidiary has taken all company action
necessary to duly approve and authorize its execution, delivery and performance
of such guaranty and any other documents which it is required to execute.

Section 6.16.          Pledge of Stock of Foreign Subsidiaries.  Borrower shall
execute and deliver to Administrative Agent (and shall cause each Restricted
Person to execute and deliver to Administrative Agent) a pledge agreement
covering sixty-six percent (66%) of its Equity Interest in each Foreign
Subsidiary of Borrower that is a Material Subsidiary now existing or created,
acquired or coming into existence after the date hereof and securing the
Obligations, in form and substance acceptable to Administrative Agent.  Borrower
shall also deliver to Administrative Agent all certificates (or other evidence
acceptable to Administrative Agent) evidencing Borrower’s Equity Interest in
such Foreign Subsidiary which shall be duly endorsed or accompanied by stock
powers executed in blank (as applicable) as Administrative Agent shall deem
necessary or appropriate to grant, evidence and perfect a first priority Lien in
Borrower’s Equity Interest in such Foreign Subsidiary.

Section 6.17.           Collateral.

(a)            At all times the Secured Obligations shall be secured by first
and prior Liens (subject only to Permitted Liens) covering and encumbering (i)
not less than the Minimum Collateral Amount (but in no event less or more than
the amount of Mineral Interests covered by the First Lien Security Documents),
and all cogeneration facilities and transportation and gathering systems owned
by any Restricted Person used in connection with the production and development
of the Mineral Interests included therein, and (ii) all of the issued and
outstanding Equity Interest of each Subsidiary of Borrower owned by any
Restricted Person subject to the limitation with respect to Foreign Subsidiaries
set forth in Section 6.16, and (iii) all other personal property of the
Restricted Persons that can be perfected by the filing of a financing statement
under the UCC (excluding filings in the real property records), except for the
Excluded Property.  On the Closing Date, Borrower and its Subsidiaries shall
deliver to Administrative Agent for the ratable benefit of each Lender, Security
Documents covering the foregoing, each in form and substance acceptable to
Administrative Agent.

(b)            To the extent necessary to comply with the first sentence of
Section 6.17(a), (i) within 30 days after each redetermination of the Borrowing
Base under Section 2.9(a) of the First Lien Credit Agreement, Borrower and its
Subsidiaries shall execute and deliver to Administrative Agent, for the ratable
benefit of each Lender, deeds of trust, mortgages, chattel mortgages, security
agreements and financing statements in form and substance acceptable to
Administrative Agent and duly executed by Borrower and any such Subsidiary (as
applicable) together with such other assignments, conveyances, amendments,
agreements and other writings (each duly authorized and executed) as
Administrative Agent shall deem necessary or appropriate to grant, evidence and
perfect the Liens required by this Section 6.17.

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(c)            Borrower also agrees to deliver favorable title information,
title opinions or updates of title opinions in form, substance and authorship
reasonable satisfactory to Administrative Agent with respect to the properties
described in subsection (b) immediately above and confirming that such
Restricted Person has good and defensible title to such properties and
interests, free and clear of all Liens other than Permitted Liens.

Section 6.18.          Agreement to Deliver Security Documents.  Borrower agrees
to deliver and to cause each other Restricted Person to deliver to further
secure the Secured Obligations, whenever requested by Administrative Agent in
its reasonable discretion, deeds of trust, mortgages, chattel mortgages,
security agreements, financing statements and other Security Documents in form
and substance satisfactory to Administrative Agent for the purpose of (i)
granting, confirming, and perfecting first and prior liens or security interests
(subject to Permitted Liens) in any real or personal property which is at such
time Collateral or which was required or intended to be Collateral pursuant to
this Agreement or any Security Document previously executed and not then
released by Administrative Agent, and (ii) maintaining compliance with all
applicable Laws, including those of any applicable Indian tribe, the Bureau of
Indian Affairs, and the U.S. Bureau of Land Management.  Each Restricted Person
hereby authorizes Administrative Agent to file one or more financing or
continuation statements, and amendments thereto, relative to all or any part of
the collateral describing the Collateral as “all assets” without the signature
of any Restricted Person.  Furthermore, Borrower agrees to deliver and to cause
each other Restricted Person to deliver, whenever requested by Administrative
Agent upon the occurrence and during the continuance of an Event of Default,
transfer orders or letters in lieu thereof with respect to the production and
proceeds of production from the Collateral, in form and substance satisfactory
to Administrative Agent.

Section 6.19.          Production Proceeds.  Notwithstanding that, by the terms
of the various Security Documents, the Restricted Persons are and will be
assigning to Administrative Agent and Lenders all of the “Production Proceeds”
(as defined therein) accruing to the property covered thereby, so long as no
Event of Default has occurred, the Restricted Persons may continue to receive
from the purchasers of production all such Production Proceeds, subject,
however, to the Liens created under the Security Documents, which Liens are
hereby affirmed and ratified.  Upon the occurrence of an Event of Default,
Administrative Agent and Lenders may exercise all rights and remedies granted
under the Security Documents subject to the terms thereof, including the right
to obtain possession of all Production Proceeds then held by Restricted Persons
or to receive directly from the purchasers of production all other Production
Proceeds.  In no case shall any failure, whether intentioned or inadvertent, by
Administrative Agent or Lenders to collect directly any such Production Proceeds
constitute in any way a waiver, remission or release of any of their rights
under the Security Documents, nor shall any release of any Production Proceeds
by Administrative Agent or Lenders to Restricted Persons constitute a waiver,
remission, or release of any other Production Proceeds or of any rights of
Administrative Agent or Lenders to collect other Production Proceeds thereafter.

[Second Lien Credit Agreement]

 
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Section 6.20.          Mortgaged Property Covenants.  Each Restricted Person
will carry out its sales of production, will operate the Mineral Interests, and
will otherwise deal with the Mineral Interests and the production therefrom, in
such a way that the representations and warranties in Section 5.18 through 5.20
remain true and correct at, and as of, all times that this Agreement is in
effect (and not just at, and as of, the times such representations and
warranties are made).

Section 6.21.           Intentionally Omitted.

ARTICLE VII - - Negative Covenants of Borrower

To conform with the terms and conditions under which each Lender is willing to
have credit outstanding to Borrower, and to induce each Lender to enter into
this Agreement and make the Loans, Borrower warrants, covenants and agrees that
until the full and final payment of the Obligations and the termination of this
Agreement, unless Majority Lenders have previously agreed otherwise:

Section 7.1.             Indebtedness.  No Restricted Person will in any manner
owe or be liable for Indebtedness except:

(a)            the Obligations;

(b)            Liabilities for taxes and governmental assessments in the
ordinary course of business that are not yet due;

(c)            Indebtedness arising under Hedging Contracts permitted under
Section 7.3;

(d)            Liability for that certain royalty associated with production
from Borrower’s Formax properties;

(e)            intercompany Indebtedness arising from loans made by (i) Borrower
to its wholly-owned Subsidiaries that are Guarantors,  or (ii) any Subsidiary of
Borrower to Borrower; provided, however, that upon the request of Administrative
Agent at any time, any such Indebtedness shall be evidenced by promissory notes
having terms reasonably satisfactory to Administrative Agent, and the sole
originally executed counterparts of which shall be pledged and delivered to
Administrative Agent, for the benefit of Administrative Agent and Lenders, as
security for the Obligations;

(f)             Intentionally Omitted;

(g)            Permitted Subordinated Debt; provided, that if a Borrowing Base
Deficiency exists upon the date of issuance thereof, the net proceeds from such
issuance shall be applied (i) first, to the prepayment of such Borrowing Base
Deficiency, (ii) second, to any other prepayment required by the First Lien
Credit Agreement, and (iii) third, to the prepayment of the Notes in accordance
with Section 2.7(b); and provided further, that if no Borrowing Base Deficiency
exists upon the date of issuance thereof, the net proceeds from such issuance
shall be applied (x) first, to any prepayment required by the First Lien Credit
Agreement and (y) second, to the prepayment of the Notes in accordance with
Section 2.7(b);

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(h)            Permitted Unsecured Debt and Permitted Convertible Debt;
provided, that the issuance thereof shall be subject to the provisions of
Sections 2.9(b) and 2.9(c) of the First Lien Credit Agreement; provided further,
that if a Borrowing Base Deficiency exists upon the date of issuance thereof,
the net proceeds from such issuance shall be applied (i) first, to the
prepayment of such Borrowing Base Deficiency, (ii) second, to any other
prepayment required by the First Lien Credit Agreement, and (iii) third, to the
prepayment of the Notes in accordance with Section 2.7(b); and provided further,
that if no Borrowing Base Deficiency exists upon the date of issuance thereof,
the net proceeds from such issuance shall be applied (x) first, to any
prepayment required by the First Lien Credit Agreement and (y) second, to the
prepayment of the Notes in accordance with Section 2.7(b);

(i)             Intentionally Omitted;

(j)             Indebtedness pursuant to the First Lien Loan Documents, in a
principal amount not to exceed $1,500,000,000; and

(k)            miscellaneous items of Indebtedness not described in subsections
(a) through (j) of this section, the outstanding amount of which does not in the
aggregate (taking into account all such Indebtedness of all Restricted Persons)
exceed at any one time an amount equal to five percent (5%) of the Net Worth of
Borrower at such time.

Section 7.2.             Limitation on Liens.  Except for Permitted Liens, no
Restricted Person will create, assume or permit to exist any Lien upon any of
the properties or assets which it now owns or hereafter acquires.

Section 7.3.             Hedging Contracts.  No Restricted Person will be a
party to or in any manner be liable on any Hedging Contract except:

(a)            Oil.  Contracts entered into with the purpose and effect of
fixing prices on oil expected to be produced, sold or transported by Restricted
Persons from its oil and gas properties, provided that at all times: (i) no such
contract fixes a price for a term of more than 60 months except (x) contracts
that are directly hedged to offset a longer term fixed rate contract and (y)
contracts covering oil and gas properties in the Midway-Sunset Field which have
a term not to exceed 84 months; (ii) the aggregate monthly production covered by
all such contracts (determined, in the case of contracts that are not settled on
a monthly basis, by a monthly proration acceptable to the Administrative Agent
and the First Lien Agent) for any single month does not in the aggregate exceed
90% of the Restricted Persons’ aggregate Projected Oil Production anticipated to
be sold in the ordinary course of the Restricted Persons’ businesses for such
month, and the aggregate monthly production covered by all such contracts having
a term of more than 60 months but not more than 84 months shall not in the
aggregate exceed 60% of the Restricted Persons’ aggregate Projected Oil
Production from the Midway-Sunset Field anticipated to be sold in the ordinary
course of such Persons’ business for such month, (iii) except for letters of
credit and the Collateral under the First Lien Security Documents with respect
to First Lien Lender Hedging Obligations, no such contract requires any
Restricted Person to put up money, assets or other security against the event of
its nonperformance prior to actual default by such Restricted Person in
performing its obligations thereunder, and (iv) each such contract is with a
counterparty or has a guarantor of the obligation of the counterparty who
(unless such counterparty is a Lender or one of its Affiliates) at the time the
contract is made has long-term obligations rated A1 by Moody’s or A+ by S & P,
or better, respectively, by either Rating Agency.

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(b)            Gas.  Contracts entered into with the purpose and effect of
fixing prices on gas expected to be produced, sold or transported by Restricted
Persons from its oil and gas properties or gas expected to be purchased by
Restricted Persons for use in oil production by such Restricted Persons,
provided that at all times: (i) no such contract fixes a price for a term of
more than 60 months except contracts that are directly hedged to offset a longer
term fixed rate contract; (ii) the aggregate monthly production or purchase
volume, respectively, covered by all such contracts (determined, in the case of
contracts that are not settled on a monthly basis, by a monthly proration
acceptable to the Administrative Agent and the First Lien Agent) for any single
month does not exceed 90% of Restricted Persons’ aggregate Projected Gas
Production anticipated to be sold in the case of contracts on gas sales volumes,
or 90% of Restricted Persons’ aggregate volume of projected gas purchases
anticipated in the ordinary course of Restricted Persons’ businesses for such
month, (iii) except for letters of credit and the Collateral under the First
Lien Security Documents with respect to First Lien Lender Hedging Obligations,
no such contract requires any Restricted Person to put up money, assets or other
security against the event of its nonperformance prior to actual default by such
Restricted Person in performing its obligations thereunder, and (iv) each such
contract is with a counterparty or has a guarantor of the obligation of the
counterparty who (unless such counterparty is a Lender or one of its Affiliates)
at the time the contract is made has long-term obligations rated A1 by Moody’s
or A+ by S & P, or better, respectively, by either Rating Agency.

(c)            NGL.  Contracts entered into with the purpose and effect of
fixing prices on natural gas liquids expected to be produced, sold or
transported by Restricted Persons from its oil and gas properties, provided that
at all times: (i) no such contract fixes a price for a term of more than 60
months except contracts that are directly hedged to offset a longer term fixed
rate contract; (ii) the aggregate monthly production covered by all such
contracts (determined, in the case of contracts that are not settled on a
monthly basis, by a monthly proration acceptable to the Administrative Agent and
the First Lien Agent) for any single month does not in the aggregate exceed 90%
of Restricted Persons’ aggregate Projected NGL Production anticipated to be sold
in the ordinary course of Restricted Persons’ businesses for such month, (iii)
except for letters of credit and the Collateral under the First Lien Security
Documents with respect to First Lien Lender Hedging Obligations, no such
contract requires any Restricted Person to put up money, assets or other
security against the event of its nonperformance prior to actual default by such
Restricted Person in performing its obligations thereunder, and (iv) each such
contract is with a counterparty or has a guarantor of the obligation of the
counterparty who (unless such counterparty is a Lender or one of its Affiliates)
at the time the contract is made has long-term obligations rated A1 by Moody’s
or A+ by S & P, or better, respectively, by either Rating Agency.

(d)            Interest Rates.  Contracts entered into by a Restricted Person
with the purpose and effect of fixing or capping interest rates on a principal
amount of indebtedness of such Restricted Person that is accruing interest at a
variable rate, provided that (i) the aggregate notional amount of such contracts
never exceeds eighty percent (80%) of the anticipated outstanding principal
balance of the indebtedness to be hedged by such contracts or an average of such
principal balances calculated using a generally accepted method of matching
interest hedging contracts to declining principal balances, (ii) the floating
rate index of each such contract generally matches the index used to determine
the floating rates of interest on the corresponding indebtedness to be hedged by
such contract, (iii) except for letters of credit and the Collateral under the
First Lien Security Documents with respect to First Lien Lender Hedging
Obligations, no such contract requires any Restricted Person to put up money,
assets or other security against the event of its nonperformance prior to actual
default by such Restricted Person in performing its obligations thereunder, and
(iv) each such contract is with a counterparty or has a guarantor of the
obligation of the counterparty who (unless such counterparty is a Lender or one
of its Affiliates) at the time the contract is made has long-term obligations
rated A1 by Moody’s or A+ by S & P, or better.

[Second Lien Credit Agreement]

 
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(e)            Electricity.  Contracts entered into with the purpose and effect
of fixing prices on electricity expected to be produced or sold by Restricted
Persons, provided that at all times:  (i) no such contract fixes a price for a
term of more than sixty (60) months, (ii) the aggregate monthly production
covered by all such contracts (determined, in the case of contracts that are not
settled on a monthly basis, by a monthly proration acceptable to the
Administrative Agent and the First Lien Agent) for any single month does not in
the aggregate exceed ninety percent (90%) of Restricted Persons’ aggregate
Projected Electricity Production anticipated to be sold in the ordinary course
of Restricted Persons’ businesses for such month, (iii) except for letters of
credit and Collateral under the First Lien Security Documents with respect to
First Lien Lender Hedging Obligations, no such contract requires any Restricted
Person to put up money, assets or other security against the event of its
nonperformance prior to actual default by such Restricted Person in performing
its obligations thereunder, and (iv) each such contract is with a counterparty
or has a guarantor of the obligation of the counterparty who (unless such
counterparty is a Lender or one of its Affiliates) at the time the contract is
made has long-term obligations rated A1 by Moody’s or A+ by S&P, or better,
respectively, by either Rating Agency.  As used in this subsection, the term
“Projected Electricity Production” means the projected production of electricity
(measured by volume unit or megawatt per hour equivalent, not sales price) for
the term of the contracts or a particular month, as applicable, from generating
facilities owned by any Restricted Person which are located in the United States
and projected by Restricted Persons.

(f)             Put Options; Cap Transactions.  Notwithstanding the foregoing
provisions of this Section 7.3, there shall be no limitations on the purchase by
the Restricted Persons of put options or floor transactions with respect to oil,
gas, natural gas liquids or electricity produced by, call options or cap
transactions with respect to gas expected to be purchased by, or cap
transactions with respect to principal balances of indebtedness of, the
Restricted Person; provided, however, that any such put or call options or cap
or floor transactions shall be solely for hedging, and not for speculative
purposes, and the Restricted Person shall have no obligations thereunder other
than payment of the applicable premium for any such put or call options or cap
or floor transactions.

(g)            Modifications.  Except as set forth in Section 7.3(g) of the
First Lien Credit Agreement, the Restricted Persons shall maintain in effect for
its full term and shall not amend, modify, cancel, sell, assign, novate or
terminate any Hedging Contract on which the First Lien Agent and the First Lien
Lenders have relied in determining the Borrowing Base under the First Lien
Credit Agreement.

[Second Lien Credit Agreement]

 
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Section 7.4.             Limitation on Mergers, Issuances of Securities.

(a)             No Restricted Person will merge or consolidate with or into any
other Person; provided that so long as no Default has occurred and is continuing
or will occur as a result thereof (i) Borrower may merge or consolidate with
another Person so long as Borrower is the surviving business entity, (ii) any
wholly-owned Subsidiary of Borrower may be merged into or consolidated with
another Person so long as Borrower or a wholly-owned Subsidiary of Borrower is
the surviving business entity, and (iii) any Subsidiary of Borrower may merge or
consolidate with another Person so long as Borrower or a Subsidiary of Borrower
is the surviving business entity.

(b)            Borrower will not issue any Equity Interests other than (i)
shares of Borrower’s common stock and any options or warrants giving the holders
thereof only the right to acquire such shares of common stock, and (ii) shares
of Borrower’s preferred stock, which are not treated as Indebtedness under GAAP,
which cannot be redeemed for cash (whether such redemption is mandatory or
contingent) prior to the Maturity Date, and which cannot be converted into any
debt instrument prior to such date.

(c)            No Subsidiary of Borrower will issue any additional shares of its
capital stock or other Equity Interests or any options, warrants or other rights
to acquire such additional shares or other Equity Interests except to Borrower
and only to the extent not otherwise forbidden under the terms hereof.

Section 7.5.            Limitation on Sales of Property.  No Restricted Person
will sell, transfer, lease, exchange, alienate or dispose of any of its material
assets or properties or any material interest therein or portions thereof, or
discount, sell, pledge or assign any notes payable to it, accounts receivable or
future income, except, to the extent not otherwise forbidden under the Security
Documents:

(a)            equipment which is worthless or obsolete or which is replaced by
equipment of equal suitability and value;

(b)            inventory (including oil and gas sold as produced and seismic
data) which is sold in the ordinary course of business on ordinary trade terms;

(c)            capital stock of any of Borrower’s Subsidiaries which is
transferred to Borrower or a wholly owned Subsidiary of Borrower;

(d)            interests in oil and gas properties or portions thereof, to which
no Proved Reserves of oil, gas or other liquid or gaseous hydrocarbons are
properly attributed;

(e)            leases of drilling rigs in the ordinary course of business and
sales of drilling rigs which are described in Schedule 4;

(f)             gathering pipelines and compression and dehydration equipment
located in the Piceance Basin in Colorado and the Darko and Oakes Field in East
Texas;

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(g)            exchanges of (i) Restricted Persons’ oil and gas leasehold
interests in non-producing zones, to which no Proved Reserves of oil, gas or
other liquid or gaseous hydrocarbons are properly attributed, whether or not
such interests are subject to Liens in favor of Administrative Agent, for (ii)
other oil and gas leasehold interests in producing or non-producing zones owned
by other Persons;

(h)            transfers among Borrower and Guarantors; and

(i)             sales and dispositions of other property for a purchase price
paid in cash or Mineral Interests in an amount at least equal to the fair market
value thereof; provided that if the aggregate sales price for all such property
sold during any period between any two sequential calculations of Total Proved
PV10% exceeds five percent (5%) of the then effective Total Proved PV10%, the
Total Proved PV10% shall be reduced effective immediately upon such sale or
disposition by an amount equal to the value assigned to such property in the
most recent calculation of Total Proved PV10%.

Section 7.6.             Limitation on Dividends, Stock Repurchases and
Subordinated Debt.

(a)            No Restricted Person will declare or make any Dividends or Stock
Repurchases other than (i) Dividends payable to Borrower or Subsidiaries of
Borrower, (ii) so long as no Default has occurred and is continuing or will
occur as a result thereof, (A) Dividends payable to Borrower’s shareholders and
(B) Stock Repurchases, to the extent that the aggregate value of all such
Dividends and Stock Repurchases made during any Four-Quarter Period does not
exceed the greater of $20,000,000 or seventy-five percent (75%) of Net Income
for such Four-Quarter Period, and (iii) Dividends made with the net cash
proceeds received from a substantially concurrent issue of new shares of its
common stock or other common Equity Interests.

(b)            No Restricted Person shall make any payment of principal,
interest or fees on Permitted Subordinated Debt, except to the extent expressly
permitted by the applicable subordination agreement with Administrative Agent.

Section 7.7.            Limitation on Acquisitions, Investments; and New
Businesses.  Except as expressly permitted by this section, no Restricted Person
will make any acquisitions of, or capital contributions to, or other Investments
in any Person or property; provided that the Restricted Persons (i) may make
Permitted Investments and Core Acquisitions and Investments without limitation,
and (ii) may make Non-Core Acquisitions and Investments so long as the aggregate
amount expended on Non-Core Acquisitions and Investments during the period from
the date hereof until the Maturity Date never exceeds 10% of Borrower’s Net
Worth at any time during such period.  No Restricted Person will engage directly
or indirectly in any business or conduct any operations except in connection
with or incidental to its present businesses and operations, and (iii)
transactions permitted by Section 7.8.

Section 7.8.            Limitation on Credit Extensions.  Except for Permitted
Investments, no Restricted Person will extend credit, make advances or make
loans other than (a) normal and prudent extensions of credit to customers buying
goods and services in the ordinary course of business, which extensions shall
not be for longer periods than those extended by similar businesses operated in
a normal and prudent manner and (b) seller financing for the sale of the
drilling rigs described in Section 7.5(e) of this Agreement.

[Second Lien Credit Agreement]

 
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Section 7.9.            Transactions with Affiliates.  Neither Borrower nor any
of its Subsidiaries nor any Guarantor will engage in any material transaction
with any of its Affiliates on terms which are less favorable to it than those
which would have been obtainable at the time in arm’s-length dealing with
Persons other than such Affiliates; provided that such restriction shall not
apply to transactions among Borrower and its wholly owned Subsidiaries.

Section 7.10.          Prohibited Contracts.

(a)            Except as expressly provided for in the Loan Documents, no
Restricted Person will, directly or indirectly, enter into, create, or otherwise
allow to exist any contract or other consensual restriction on (i) the ability
of any Subsidiary of Borrower to (1) pay dividends or make other distributions
to Borrower, (2) to redeem Equity Interests held in it by Borrower, (3) to repay
loans and other indebtedness owing by it to Borrower, or (4) to transfer any of
its assets to Borrower or (ii) on the ability of any Restricted Person to grant
to Administrative Agent and the Lenders Liens on its assets, except:

(A)      any customary encumbrance or restriction with respect to a Subsidiary
imposed pursuant to a merger agreement or an agreement entered into for the sale
or disposition of all or substantially all the capital stock or assets of such
Subsidiary pending the closing of such sale or disposition; and

(B)       with respect to the above clauses (i)(4) and (ii) above only,

(i)             any such encumbrance or restriction consisting of customary
non-assignment provisions (including provisions forbidding subletting or
sublicensing) in agreements, leases governing leasehold interests and licenses
to the extent such provisions restrict the transfer of the agreement, lease or
license or the property leased, or licensed thereunder;

(ii)            customary restrictions contained in asset sale agreements
limiting the transfer of such assets pending the closing of such sale;

(iii)           restrictions in the instruments creating Permitted Liens
described in clause (d) or (h) of the definition of Permitted Liens, limiting
Liens on the property subject to such Permitted Liens;

(iv)           restrictions on Equity Interests constituting minority
Investments permitted by Section 7.7;

(v)            existing restrictions with respect to a Person acquired by
Borrower or any of its Subsidiaries (except to the extent such restrictions were
put in place in connection with or in contemplation of such acquisition), which
restrictions are not applicable to any Person, or the properties or assets of
any Person other than the Person, or the property or assets of the Person, so
acquired; and

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(vi)           customary supermajority voting provisions and other customary
provisions with respect to the disposition or distribution of assets, each
contained in corporate charters, bylaws, stockholders’ agreements, limited
liability company agreements, partnership agreements, joint venture agreements
and other similar agreements entered into in the ordinary course of business of
Borrower and its Subsidiaries.

(b)            Except as permitted by Section 5.19, no Restricted Person will
enter into any “take-or-pay” contract or other contract or arrangement for the
purchase of goods or services which obligates it to pay for such goods or
services regardless of whether they are delivered or furnished to it, excluding
firm transportation contracts entered into in the ordinary course of
business.  No Restricted Person will amend or permit any amendment to any
contract or lease which releases, qualifies, limits, makes contingent or
otherwise detrimentally affects the rights and benefits of Administrative Agent
or any Lender under or acquired pursuant to any Security Documents.  No ERISA
Affiliate will incur any obligation to contribute to any “multiemployer plan” as
defined in Section 4001 of ERISA.

Section 7.11.          Current Ratio.  Beginning with the Fiscal Quarter ending
June 30, 2009, the ratio of Borrower’s Current Assets to Borrower’s Current
Liabilities will never be less than 1.0 to 1.0.

Section 7.12.          Total Funded Debt to EBITDAX Ratio.  As of the end of
each Fiscal Quarter beginning with the Fiscal Quarter ending June 30, 2009, the
ratio of (a) Total Funded Debt to (b) Adjusted EBITDAX for the Four-Quarter
Period then ended, will not be greater than the amount set forth below with
respect to such Fiscal Quarter:

 
Fiscal Quarter ended June 30, 2009
5.45 to 1.0

through Fiscal Quarter ended December 31, 2009

 
Fiscal Quarter ended March 31, 2010
5.15 to 1.0

through Fiscal Quarter ended December 31, 2010

 
Fiscal Quarter ended March 31, 2011
4.60 to 1.0

and each Fiscal Quarter thereafter

Borrower will report for the fourth quarter of 2008 a $38,500,000 bad debt
expense (in this Section defined as the “Bad Debt Expense”) arising from its
sales of production to Big West Oil, which has filed for bankruptcy
protection.  For purposes of the calculation of the financial ratios described
in Sections 7.12 and 7.13, EBITDAX shall be calculated treating the Bad Debt
Expense as an extraordinary loss and any recovery with respect to the Bad Debt
Expense as an extraordinary gain.

Section 7.13.          Senior Secured Debt to EBITDAX Ratio.  As of the end of
each Fiscal Quarter beginning June 30, 2009, the ratio of (a) the First Lien
Obligations then outstanding to (b) Adjusted EBITDAX for the Four-Quarter Period
then ended, will not be greater than the amount set forth below with respect to
such Fiscal Quarter:

[Second Lien Credit Agreement]

 
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Fiscal Quarter ended June 30, 2009
4.30 to 1.0

through Fiscal Quarter ended September 30, 2010

 
Fiscal Quarter ended December 31, 2010
4.00 to 1.0

and Fiscal Quarter ended March 31, 2011

 
Fiscal Quarter ended June 30, 2011
3.70 to 1.0

and Fiscal Quarter ended September 30, 2011

 
Fiscal Quarter ended December 31, 2011
3.45 to 1.0

and each Fiscal Quarter thereafter

Section 7.14.           Asset Coverage Test.  As of (a) each March 1 and
September 1 of each year, beginning on September 1, 2009, (b) each material
acquisition or divestiture of any Restricted Person’s oil and gas properties,
and (c) each Material Hedging Modification, the Borrower will maintain a ratio
of Total Proved PV10% to Total Funded Debt of not less than 1.5 to 1.0.

Section 7.15.           Limitations on Layering, Etc..  No Restricted Person
will, except as otherwise permitted herein or in the Intercreditor Agreement:

(a)            directly or indirectly, incur any Indebtedness that is or
purports to be by its terms (or by the terms of any agreement governing such
Indebtedness) contractually subordinated and/or junior in right of payment to
any Indebtedness of the Borrower or any of the Guarantors, unless such
Indebtedness is contractually subordinated and/or junior in right of payment to
the Loans and the other Obligations under the Loan Documents at least to the
same extent as contractually subordinated or junior in right of payment to such
other Indebtedness; or

(b)            directly or indirectly, create, incur, assume or suffer to exist
any Lien that secures obligations under any Indebtedness on any asset or
property of the Borrower or any of the Guarantors (other than obligations under
the First Lien Loan Documents or as otherwise permitted by the Intercreditor
Agreement) on a basis that is senior to the Liens securing the Obligations under
this Agreement, unless such Liens are permitted under Section 7.2 and are also
senior to the Liens securing the First Lien Secured Obligations.

ARTICLE VIII - - Events of Default and Remedies

Section 8.1.             Events of Default.  Each of the following events
constitutes an Event of Default under this Agreement:

(a)            Any Restricted Person fails to pay any principal component of any
Obligation when due and payable, whether at a date for the payment of a fixed
installment or as a contingent or other payment becomes due and payable or as a
result of acceleration or otherwise;

(b)            Any Restricted Person fails to pay any Obligation (other than the
Obligations in subsection (a) above) when due and payable, whether at a date for
the payment of a fixed installment or as a contingent or other payment becomes
due and payable or as a result of acceleration or otherwise, within three
Business Days after the same becomes due;

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(c)            Any “default” or “event of default” occurs under any Loan
Document which defines either such term, and the same is not remedied within the
applicable period of grace (if any) provided in such Loan Document;

(d)            Any Restricted Person fails to duly observe, perform or comply
with any covenant, agreement or provision of Section 6.4 or Article VII;

(e)            Any Restricted Person fails (other than as referred to in
subsections (a), (b), (c) or (d) above) to duly observe, perform or comply with
any covenant, agreement, condition or provision of any Loan Document, and such
failure remains unremedied for a period of 30 days after notice of such failure
is given by Administrative Agent to Borrower;

(f)             Any representation or warranty previously, presently or
hereafter made in writing by or on behalf of any Restricted Person in connection
with any Loan Document shall prove to have been false or incorrect in any
material respect on any date on or as of which made, or any Loan Document at any
time ceases to be valid, binding and enforceable as warranted in Section 5.5 for
any reason other than its release or subordination by Administrative Agent;

(g)            Any Restricted Person (i) fails to pay any portion, when such
portion is due, (A) of any Permitted Subordinated Debt, Permitted Unsecured
Debt, Permitted Second Lien Debt or Permitted Convertible Debt, or (B) of any of
its other Indebtedness in excess of $25,000,000, or (ii) breaches or defaults in
the performance of any agreement or instrument by which the Permitted
Subordinated Debt, the Permitted Unsecured Debt, the Permitted Second Lien Debt,
the Permitted Convertible Debt or any such other Indebtedness in excess of
$25,000,000 is issued, evidenced, governed, or secured, and any such failure,
breach or default continues beyond any applicable period of grace provided
thereof;

(h)            Either (i) any “accumulated funding deficiency” (as defined in
Section 412(a) of the Internal Revenue Code) in excess of $5,000,000 exists with
respect to any ERISA Plan, whether or not waived by the Secretary of the
Treasury or his delegate, or (ii) any Termination Event occurs with respect to
any ERISA Plan and the then current value of such ERISA Plan’s benefit
liabilities exceeds the then current value of such ERISA Plan’s assets available
for the payment of such benefit liabilities by more than $5,000,000 (or in the
case of a Termination Event involving the withdrawal of a substantial employer,
the withdrawing employer’s proportionate share of such excess exceeds such
amount);

(i)             Any Change of Control occurs;

(j)             Any Restricted Person:

(i)             suffers the entry against it of a judgment, decree or order for
relief by a Governmental Authority of competent jurisdiction in an involuntary
proceeding commenced under any applicable bankruptcy, insolvency or other
similar Law of any jurisdiction now or hereafter in effect, including the
federal Bankruptcy Code, as from time to time amended, or has any such
proceeding commenced against it which remains undismissed for a period of sixty
days; or

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(ii)            commences a voluntary case under any applicable bankruptcy,
insolvency or similar Law now or hereafter in effect, including the federal
Bankruptcy Code, as from time to time amended; or applies for or consents to the
entry of an order for relief in an involuntary case under any such Law; or makes
a general assignment for the benefit of creditors; or fails generally to pay (or
admits in writing its inability to pay) its debts as such debts become due; or
takes corporate or other action to authorize any of the foregoing; or

(iii)           suffers the appointment of or taking possession by a receiver,
liquidator, assignee, custodian, trustee, sequestrator or similar official of
all or a substantial part of its assets in a proceeding brought against or
initiated by it, and such appointment or taking possession is neither made
ineffective nor discharged within sixty days after the making thereof, or such
appointment or taking possession is at any time consented to, requested by, or
acquiesced to by it; or

(iv)           suffers the entry against it of a final judgment for the payment
of money in excess of $5,000,000 (not covered by insurance satisfactory to
Administrative Agent in its discretion), unless the same is discharged within
sixty days after the date of entry thereof or an appeal or appropriate
proceeding for review thereof is taken within such period and a stay of
execution pending such appeal is obtained; or

(v)           suffers a writ or warrant of attachment or any similar process to
be issued by any Governmental Authority against all or any substantial part of
its assets, and such writ or warrant of attachment or any similar process is not
stayed or released within sixty days after the entry or levy thereof or after
any stay is vacated or set aside;

(k)            Any “Event of Default” occurs under the First Lien Credit
Agreement that is not remedied within any applicable grace period contained in
the First Lien Credit Agreement; and

(l)             The Intercreditor Agreement or any material provision thereof
shall cease to be in full force and effect (other than (i) as a result of any
action by Administrative Agent or the First Lien Agent or (ii) in accordance
with the terms thereof); and

(m)           Any Indebtedness is incurred under the SG Money Market Facility.

Upon the occurrence of an Event of Default described in subsection (j)(i),
(j)(ii) or (j)(iii) of this section with respect to Borrower, all of the
Obligations shall thereupon be immediately due and payable, without demand,
presentment, notice of demand or of dishonor and nonpayment, protest, notice of
protest, notice of intention to accelerate, declaration or notice of
acceleration, or any other notice or declaration of any kind, all of which are
hereby expressly waived by Borrower and each Restricted Person who at any time
ratifies or approves this Agreement.  Upon any such acceleration, any obligation
of any Lender to make any further Loans hereunder shall be permanently
terminated.  During the continuance of any other Event of Default,
Administrative Agent at any time and from time to time may (and upon written
instructions from Majority Lenders, Administrative Agent shall), without notice
to Borrower or any other Restricted Person, do either or both of the
following:  (1) terminate any obligation of Lenders to make Loans hereunder, and
(2) declare any or all of the Obligations immediately due and payable, and all
such Obligations shall thereupon be immediately due and payable, without demand,
presentment, notice of demand or of dishonor and nonpayment, protest, notice of
protest, notice of intention to accelerate, declaration or notice of
acceleration, or any other notice or declaration of any kind, all of which are
hereby expressly waived by Borrower and each Restricted Person who at any time
ratifies or approves this Agreement.

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Section 8.2.            Remedies.  If any Default shall occur and be continuing,
each Lender Party may protect and enforce its rights under the Loan Documents by
any appropriate proceedings, including proceedings for specific performance of
any covenant or agreement contained in any Loan Document, and each Lender Party
may enforce the payment of any Obligations due it or enforce any other legal or
equitable right which it may have.  All rights, remedies and powers conferred
upon Lender Parties under the Loan Documents shall be deemed cumulative and not
exclusive of any other rights, remedies or powers available under the Loan
Documents or at Law or in equity.

Section 8.3.            Application of Proceeds After Acceleration.  After the
exercise of remedies provided for in Section 8.2 (or after the Loans have
automatically become immediately due and payable), any amounts received on
account of the Secured Obligations shall be applied by Administrative Agent in
the following order:

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

Second, to payment of that portion of the Secured Obligations constituting fees,
indemnities and other amounts (other than principal and interest) payable to the
Lenders (including fees, charges and disbursements of counsel to the respective
Lenders and amounts payable under Article III), ratably among them in proportion
to the respective amounts described in this clause Second payable to them;

Third, to payment of that portion of the Secured Obligations constituting
accrued and unpaid interest on the Loans, ratably among Lenders in proportion to
the respective amounts described in this clause Third payable to them;

Fourth, to payment of that portion of the Secured Obligations constituting
unpaid principal of the Loans, ratably among Lenders in proportion to the
respective amounts described in this clause Fourth held by them; and

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

ARTICLE IX - - Administrative Agent

Section 9.1.            Appointment and Authority.  Each of the Lenders hereby
irrevocably appoints WFEC to act on its behalf as Administrative Agent hereunder
and under the other Loan Documents and authorizes Administrative Agent to take
such actions on its behalf and to exercise such powers as are delegated to
Administrative Agent by the terms hereof or thereof, together with such actions
and powers as are reasonably incidental thereto.  The provisions of this Article
are solely for the benefit of Administrative Agent and the Lenders and neither
Borrower nor any other Restricted Person shall have rights as a third party
beneficiary of any of such provisions.

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Section 9.2.            Exculpation Provisions.  Administrative Agent shall not
have any duties or obligations except those expressly set forth herein and in
the other Loan Documents.  Without limiting the generality of the foregoing,
Administrative Agent:

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

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

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

(d)            Administrative Agent shall not be liable for any action taken or
not taken by it (i) with the consent or at the request of Required Lenders (or
such other number or percentage of the Lenders as shall be necessary, or as
Administrative Agent shall believe in good faith shall be necessary, under the
circumstances as provided in Sections 10.1 and 8.2) or (ii) in the absence of
its own gross negligence or willful misconduct.  Administrative Agent shall be
deemed not to have knowledge of any Default unless and until notice describing
such Default is given to Administrative Agent by Borrower or a Lender.

(e)            Administrative Agent shall not be responsible for or have any
duty to ascertain or inquire into (i) any statement, warranty or representation
made in or in connection with this Agreement or any other Loan Document, (ii)
the contents of any certificate, report or other document delivered hereunder or
thereunder or in connection herewith or therewith, (iii) the performance or
observance of any of the covenants, agreements or other terms or conditions set
forth herein or therein or the occurrence of any Default, (iv) the validity,
enforceability, effectiveness or genuineness of this Agreement, any other Loan
Document or any other agreement, instrument or document, or (v) the satisfaction
of any condition set forth in Article IV or elsewhere herein, other than to
confirm receipt of items expressly required to be delivered to Administrative
Agent.

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Section 9.3.            Reliance by Administrative Agent.  Administrative Agent
shall be entitled to rely upon, and shall not incur any liability for relying
upon, any notice, request, certificate, consent, statement, instrument, document
or other writing (including any electronic message, Internet or intranet website
posting or other distribution) believed by it to be genuine and to have been
signed, sent or otherwise authenticated by the proper Person.  Administrative
Agent also may rely upon any statement made to it orally or by telephone and
believed by it to have been made by the proper Person, and shall not incur any
liability for relying thereon.  In determining compliance with any condition
hereunder to the making of a Loan that by its terms must be fulfilled to the
satisfaction of a Lender, Administrative Agent may presume that such condition
is satisfactory to such Lender unless Administrative Agent shall have received
notice to the contrary from such Lender prior to the making of such
Loan.  Administrative Agent may consult with legal counsel (who may be counsel
for Borrower), independent accountants and other experts selected by it, and
shall not be liable for any action taken or not taken by it in accordance with
the advice of any such counsel, accountants or experts.

Section 9.4.            Non-Reliance on Administrative Agent and Other
Lenders. Each Lender acknowledges that it has, independently and without
reliance upon Administrative Agent or any other Lender or any of their Related
Parties and based on such documents and information as it has deemed
appropriate, made its own credit analysis and decision to enter into this
Agreement.  Each Lender also acknowledges that it will, independently and
without reliance upon Administrative Agent or any other Lender or any of their
Related Parties and based on such documents and information as it shall from
time to time deem appropriate, continue to make its own decisions in taking or
not taking action under or based upon this Agreement, any other Loan Document or
any related agreement or any document furnished hereunder or thereunder.

Section 9.5.            Rights as Lender.  The Person serving as Administrative
Agent hereunder shall have the same rights and powers in its capacity as a
Lender as any other Lender and may exercise the same as though it were not
Administrative Agent and the term “Lender” or “Lenders” shall, unless otherwise
expressly indicated or unless the context otherwise requires, include the Person
serving as Administrative Agent hereunder in its individual capacity.  Such
Person and its Affiliates may accept deposits from, lend money to, act as the
financial advisor or in any other advisory capacity for and generally engage in
any kind of business with Borrower or any Subsidiary or other Affiliate thereof
as if such Person were not Administrative Agent hereunder and without any duty
to account therefor to the Lenders.

Section 9.6.            Sharing of Set-Offs and Other Payments.  Each Lender
Party agrees that if it shall, whether through the exercise of rights under
Security Documents or rights of banker’s lien, set off, or counterclaim against
Borrower or otherwise, obtain payment of a portion of the aggregate Obligations
owed to it, taking into account all distributions made by Administrative Agent
under Section 3.1, and such payment causes such Lender Party to have received
more than it would have received had such payment been received by
Administrative Agent and distributed pursuant to Section 3.1, then (a) it shall
be deemed to have simultaneously purchased and shall be obligated to purchase
interests in the Obligations as necessary to cause all Lender Parties to share
all payments as provided for in Section 3.1, and (b) such other adjustments
shall be made from time to time as shall be equitable to ensure that
Administrative Agent and all Lender Parties share all payments of Obligations as
provided in Section 3.1; provided, however, that nothing herein contained shall
in any way affect the right of any Lender Party to obtain payment (whether by
exercise of rights of banker’s lien, set-off or counterclaim or otherwise) of
indebtedness other than the Obligations.  Borrower expressly consents to the
foregoing arrangements and agrees that any holder of any such interest or other
participation in the Obligations, whether or not acquired pursuant to the
foregoing arrangements, may to the fullest extent permitted by Law exercise any
and all rights of banker’s lien, set-off, or counterclaim as fully as if such
holder were a holder of the Obligations in the amount of such interest or other
participation.  If all or any part of any funds transferred pursuant to this
section is thereafter recovered from the seller under this section which
received the same, the purchase provided for in this section shall be deemed to
have been rescinded to the extent of such recovery, together with interest, if
any, if interest is required pursuant to the order of a Governmental Authority
order to be paid on account of the possession of such funds prior to such
recovery.

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Section 9.7.            Investments.  Whenever Administrative Agent in good
faith determines that it is uncertain about how to distribute to Lender Parties
any funds which it has received, or whenever Administrative Agent in good faith
determines that there is any dispute among Lender Parties about how such funds
should be distributed, Administrative Agent may choose to defer distribution of
the funds which are the subject of such uncertainty or dispute.  If
Administrative Agent in good faith believes that the uncertainty or dispute will
not be promptly resolved, or if Administrative Agent is otherwise required to
invest funds pending distribution to Lender Parties, Administrative Agent shall
invest such funds pending distribution; all interest on any such Investment
shall be distributed upon the distribution of such Investment and in the same
proportion and to the same Persons as such Investment.  All moneys received by
Administrative Agent for distribution to Lender Parties (other than to the
Person who is Administrative Agent in its separate capacity as a Lender Party)
shall be held by Administrative Agent pending such distribution solely as
Administrative Agent for such Lender Parties, and Administrative Agent shall
have no equitable title to any portion thereof.

Section 9.8.            Resignation of Administrative Agent.  Administrative
Agent may at any time give notice of its resignation to the Lenders and
Borrower.  Upon receipt of any such notice of resignation, Required Lenders
shall have the right, in consultation with Borrower, to appoint a successor,
which shall be a bank with an office in the United States, or an Affiliate of
any such bank with an office in the United States.  If no such successor shall
have been so appointed by Required Lenders and shall have accepted such
appointment within 30 days after the retiring Administrative Agent gives notice
of its resignation, then the retiring Administrative Agent may on behalf of the
Lenders, appoint a successor Administrative Agent meeting the qualifications set
forth above; provided that if Administrative Agent shall notify Borrower and the
Lenders that no qualifying Person has accepted such appointment, then such
resignation shall nonetheless become effective in accordance with such notice
and (a) the retiring Administrative Agent shall be discharged from its duties
and obligations hereunder and under the other Loan Documents (except that in the
case of any Collateral held by Administrative Agent on behalf of the Lenders
under any of the Loan Documents, the retiring Administrative Agent shall
continue to hold such Collateral until such time as a successor Administrative
Agent is appointed) and (b) all payments, communications and determinations
provided to be made by, to or through Administrative Agent shall instead be made
by or to each Lender directly, until such time as Required Lenders appoint a
successor Administrative Agent as provided for above in this Section.  Upon the
acceptance of a successor’s appointment as Administrative Agent hereunder, such
successor shall succeed to and become vested with all of the rights, powers,
privileges and duties of the retiring (or retired) Administrative Agent, and the
retiring Administrative Agent shall be discharged from all of its duties and
obligations hereunder or under the other Loan Documents (if not already
discharged therefrom as provided above in this Section).  The fees payable by
Borrower to a successor Administrative Agent shall be the same as those payable
to its predecessor unless otherwise agreed between Borrower and such
successor.  After the retiring Administrative Agent’s resignation hereunder and
under the other Loan Documents, the provisions of this Article and Section 10.4
shall continue in effect for the benefit of such retiring Administrative Agent,
its sub-agents and their respective Related Parties in respect of any actions
taken or omitted to be taken by any of them while the retiring Administrative
Agent was acting as Administrative Agent.

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Section 9.9.            Delegation of Duties.  Administrative Agent may perform
any and all of its duties and exercise its rights and powers hereunder or under
any other Loan Document by or through any one or more sub-agents appointed by
Administrative Agent.  Administrative Agent and any such sub-agent may perform
any and all of its duties and exercise its rights and powers by or through their
respective Related Parties.  The exculpatory provisions of this Article shall
apply to any such sub-agent and to the Related Parties of Administrative Agent
and any such sub-agent, and shall apply to their respective activities in
connection with the syndication of the credit facilities provided for herein as
well as activities as Administrative Agent

Section 9.10.          No Other Duties, etc.  Anything herein to the contrary
notwithstanding, none of the Co-Bookrunners, the Syndication Agent, the
Co-Documentation Agents, or the Co-Lead Arrangers listed on the cover page
hereof shall have any powers, duties or responsibilities under this Agreement or
any of the other Loan Documents, except in its capacity, as applicable, as
Administrative Agent or a Lender hereunder.

Section 9.11.          Administrative Agent May File Proofs of Claim.  In case
of the pendency of any receivership, insolvency, liquidation, bankruptcy,
reorganization, arrangement, adjustment, composition or other judicial
proceeding relative to any Restricted Person, Administrative Agent (irrespective
of whether the principal of any Loan shall then be due and payable as herein
expressed or by declaration or otherwise and irrespective of whether
Administrative Agent shall have made any demand on Borrower) shall be entitled
and empowered, by intervention in such proceeding or otherwise:

(a)            to file and prove a claim for the whole amount of the principal
and interest owing and unpaid in respect of the Loans and all other Obligations
that are owing and unpaid and to file such other documents as may be necessary
or advisable in order to have the claims of Lenders and Administrative Agent
(including any claim for the reasonable compensation, expenses, disbursements
and advances of Lenders and Administrative Agent and their respective agents and
counsel and all other amounts due Lenders and Administrative Agent under Section
2.5 and 10.4) allowed in such judicial proceeding; and

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

and any custodian, receiver, assignee, trustee, liquidator, sequestrator or
other similar official in any such judicial proceeding is hereby authorized by
each Lender to make such payments to Administrative Agent and, in the event that
Administrative Agent shall consent to the making of such payments directly to
Lenders, to pay to Administrative Agent any amount due for the reasonable
compensation, expenses, disbursements and advances of Administrative Agent and
its agents and counsel, and any other amounts due Administrative Agent under
Sections 2.5 and 10.4.  Nothing contained herein shall be deemed to authorize
Administrative Agent to authorize or consent to or accept or adopt on behalf of
any Lender any plan of reorganization, arrangement, adjustment or composition
affecting the Obligations or the rights of any Lender or to authorize
Administrative Agent to vote in respect of the claim of any Lender in any such
proceeding.

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Section 9.12.          Guaranty Matters.  Each Lender hereby irrevocably
authorizes Administrative Agent, at its option and in its discretion, to release
any Guarantor from its obligations under any guaranty made by it in connection
with this Agreement if such Person ceases to be a Subsidiary as a result of a
transaction permitted hereunder.  Upon request by Administrative Agent at any
time, each Lender will confirm in writing Administrative Agent’s authority to
release any Guarantor from its obligations under any guaranty made by it in
connection with this Agreement pursuant to this Section 9.12.

Section 9.13.          Collateral Matters.

(a)            Each Lender hereby irrevocably authorizes and directs
Administrative Agent to enter into the Security Documents for the benefit of
such Lender.  Each Lender hereby agrees, and each holder of any Note by the
acceptance thereof will be deemed to agree, that, except as otherwise set forth
in Section 10.1, any action taken by the Required Lenders, in accordance with
the provisions of this Agreement or the Security Documents, and the exercise by
the Required Lenders of the powers set forth herein or therein, together with
such other powers as are reasonably incidental thereto, shall be authorized and
binding upon all of Lenders.  Administrative Agent is hereby authorized (but not
obligated) on behalf of all of Lenders, without the necessity of any notice to
or further consent from any Lender, from time to time prior to an Event of
Default, to take any action with respect to any Collateral or Security Documents
which may be necessary to perfect and maintain perfected the Liens upon the
Collateral granted pursuant to the Security Documents.

(b)            Each Lender hereby irrevocably authorize Administrative Agent, at
its option and in its discretion,

(i)             to release any Lien on any property granted to or held by
Administrative Agent under any Loan Document (A) upon payment in full of all
Obligations (other than contingent indemnification obligations), except as
otherwise provided in the Security Documents, (B) that is sold or to be sold as
part of or in connection with any sale permitted hereunder or under any other
Loan Document, (C) subject to Section 10.1, if approved, authorized or ratified
in writing by the Required Lenders, or (D) in connection with any foreclosure
sale or other disposition of Collateral after the occurrence of an Event of
Default; and

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

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Upon request by Administrative Agent at any time, each Lender will confirm in
writing Administrative Agent’s authority to release or subordinate its interest
in particular types or items of Collateral pursuant to this Section 9.13.

(c)            Subject to Section 9.13(b), Administrative Agent shall and is
hereby irrevocably authorized by each Lender to execute such documents as may be
necessary to evidence the release or subordination of the Liens granted to
Administrative Agent for the benefit of Administrative Agent and Lenders herein
or pursuant hereto upon the applicable Collateral; provided that (i)
Administrative Agent shall not be required to execute any such document on terms
which, in Administrative Agent’s opinion, would expose Administrative Agent to
or create any liability or entail any consequence other than the release or
subordination of such Liens without recourse or warranty and (ii) such release
or subordination shall not in any manner discharge, affect or impair the
Obligations or any Liens upon (or obligations of Borrower or any other
Restricted Person in respect of) all interests retained by Borrower or any other
Restricted Person, including the proceeds of the sale, all of which shall
continue to constitute part of the Collateral.  In the event of any sale or
transfer of Collateral, or any foreclosure with respect to any of the
Collateral, Administrative Agent shall be authorized to deduct all expenses
reasonably incurred by Administrative Agent from the proceeds of any such sale,
transfer or foreclosure.

(d)            Administrative Agent shall have no obligation whatsoever to any
Lender or any other Person to assure that the Collateral exists or is owned by
Borrower or any other Restricted Person or is cared for, protected or insured or
that the Liens granted to Administrative Agent herein or in any of the Security
Documents or pursuant hereto or thereto have been properly or sufficiently or
lawfully created, perfected, protected or enforced or are entitled to any
particular priority, or to exercise or to continue exercising at all or in any
manner or under any duty of care, disclosure or fidelity any of the rights,
authorities and powers granted or available to Administrative Agent in this
Section 9.13 or in any of the Security Documents, it being understood and agreed
that in respect of the Collateral, or any act, omission or event related
thereto, Administrative Agent may act in any manner it may deem appropriate, in
its sole discretion, given Administrative Agent’s own interest in the Collateral
as one of Lenders and that Administrative Agent shall have no duty or liability
whatsoever to the Lenders.

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

Section 9.14.          Intercreditor Agreement.  Each Lender hereby irrevocably
authorizes Administrative Agent to execute and, by such execution, to bind such
Lender to the terms of the Intercreditor Agreement and to take all actions (and
execute all documents) required (or deemed advisable) by the Administrative
Agent in accordance with the terms of the Intercreditor Agreement, and each of
the Lenders agrees to be bound by the terms of the Intercreditor Agreement as
fully as if a signatory thereto.

ARTICLE X - - Miscellaneous

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Section 10.1.           Waivers and Amendments; Acknowledgments.

(a)            Waivers and Amendments.  No failure or delay (whether by course
of conduct or otherwise) by any Lender in exercising any right, power or remedy
which such Lender Party may have under any of the Loan Documents shall operate
as a waiver thereof or of any other right, power or remedy, nor shall any single
or partial exercise by any Lender Party of any such right, power or remedy
preclude any other or further exercise thereof or of any other right, power or
remedy.  No waiver of any provision of any Loan Document and no consent to any
departure therefrom shall ever be effective unless it is in writing and signed
as provided below in this section, and then such waiver or consent shall be
effective only in the specific instances and for the purposes for which given
and to the extent specified in such writing.  No notice to or demand on any
Restricted Person shall in any case of itself entitle any Restricted Person to
any other or further notice or demand in similar or other circumstances.  This
Agreement and the other Loan Documents set forth the entire understanding
between the parties hereto with respect to the transactions contemplated herein
and therein and supersede all prior discussions and understandings with respect
to the subject matter hereof and thereof, and no waiver, consent, release,
modification or amendment of or supplement to this Agreement or the other Loan
Documents shall be valid or effective against any party hereto unless the same
is in writing and signed by (i) if such party is Borrower, by Borrower, (ii) if
such party is Administrative Agent, by such party, and (iii) if such party is a
Lender, by such Lender or by Administrative Agent on behalf of Lenders with the
written consent of Majority Lenders (which consent has already been given as to
the termination of the Loan Documents as provided in Section
10.9).  Notwithstanding the foregoing or anything to the contrary herein,
Administrative Agent shall not, without the prior consent of each individual
Lender, execute and deliver on behalf of such Lender any waiver or amendment
which would:  (1) waive any of the conditions specified in Section 4.1 (provided
that Administrative Agent may in its discretion withdraw any request it has made
under Section 4.1(a)), (2) increase the maximum amount which such Lender is
committed hereunder to lend, (3) reduce any fees payable to such Lender
hereunder, or the principal of, or interest on, such Lender’s Note, (4) postpone
any date fixed for any payment of any such fees, principal or interest, (5)
amend the definition herein of “Majority Lenders” or “Required Lenders” or
otherwise change the aggregate amount of Percentage Shares which is required for
Administrative Agent, Lenders or any of them to take any particular action under
the Loan Documents, (6) amend the definition of “Maximum Credit Amount” to mean
an amount higher than $140,000,000, (7) release Borrower from its obligation to
pay such Lender’s Note, or any Guarantor from its guaranty of such payment, (8)
release all or substantially all of the Collateral, except for such releases
relating to sales or dispositions of property permitted by the Loan Documents,
or (9) amend this Section 10.1(a).

(b)            Acknowledgments and Admissions.  Borrower hereby represents,
warrants, acknowledges and admits that (i) it has been advised by counsel in the
negotiation, execution and delivery of the Loan Documents to which it is a
party, (ii) it has made an independent decision to enter into this Agreement and
the other Loan Documents to which it is a party, without reliance on any
representation, warranty, covenant or undertaking by Administrative Agent or any
Lender, whether written, oral or implicit, other than as expressly set out in
this Agreement or in another Loan Document delivered on or after the date
hereof, (iii) there are no representations, warranties, covenants, undertakings
or agreements by any Lender as to the Loan Documents except as expressly set out
in this Agreement or in another Loan Document delivered on or after the date
hereof, (iv) no Lender has any fiduciary obligation toward Borrower with respect
to any Loan Document or the transactions contemplated thereby, (v) the
relationship pursuant to the Loan Documents between Borrower and the other
Restricted Persons, on one hand, and each Lender, on the other hand, is and
shall be solely that of debtor and creditor, respectively, (vi) no partnership
or joint venture exists with respect to the Loan Documents between any
Restricted Person and any Lender, (vii) Administrative Agent is not Borrower’s
Administrative Agent, but Administrative Agent for Lenders, (viii) should a
Default occur or exist, each Lender will determine in its sole discretion and
for its own reasons what remedies and actions it will or will not exercise or
take at that time, (ix) without limiting any of the foregoing, Borrower is not
relying upon any representation or covenant by any Lender, or any representative
thereof, and no such representation or covenant has been made, that any Lender
will, at the time of a Default, or at any other time, waive, negotiate, discuss,
or take or refrain from taking any action permitted under the Loan Documents
with respect to any such Default or any other provision of the Loan Documents,
and (x) all Lender Parties have relied upon the truthfulness of the
acknowledgments in this section in deciding to execute and deliver this
Agreement and to become obligated hereunder.

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(c)            Joint Acknowledgment.  This written Agreement and the other Loan
Documents represent the final agreement between the parties and may not be
contradicted by evidence of prior, contemporaneous, or subsequent oral
agreements of the parties.

There are no unwritten oral agreements between the parties.

Section 10.2.          Survival of Agreements; Cumulative Nature.  All
Restricted Persons’ various representations, warranties, covenants and
agreements in the Loan Documents shall survive the execution and delivery of
this Agreement and the other Loan Documents and the performance hereof and
thereof, including the making or granting of the Loans and the delivery of the
Notes and the other Loan Documents, and shall further survive until all of the
Obligations are paid in full to each Lender Party and all of Lender Parties’
obligations to Borrower are terminated.  All statements and agreements contained
in any certificate or other instrument delivered by any Restricted Person to any
Lender Party under any Loan Document shall be deemed representations and
warranties by Borrower or agreements and covenants of Borrower under this
Agreement.  The representations, warranties, indemnities, and covenants made by
Restricted Persons in the Loan Documents, and the rights, powers, and privileges
granted to Lender Parties in the Loan Documents, are cumulative, and, except for
expressly specified waivers and consents, no Loan Document shall be construed in
the context of another to diminish, nullify, or otherwise reduce the benefit to
any Lender Party of any such representation, warranty, indemnity, covenant,
right, power or privilege.  In particular and without limitation, no exception
set out in this Agreement to any representation, warranty, indemnity, or
covenant herein contained shall apply to any similar representation, warranty,
indemnity, or covenant contained in any other Loan Document, and each such
similar representation, warranty, indemnity, or covenant shall be subject only
to those exceptions which are expressly made applicable to it by the terms of
the various Loan Documents.

Section 10.3.          Notices; Effectiveness; Electronic Communication.

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(a)            Notices Generally.  Except in the case of notices and other
communications expressly permitted to be given by telephone (and except as
provided in subsection (b) below), all notices and other communications provided
for herein shall be in writing and shall be delivered by hand or overnight
courier service, mailed by certified or registered mail or sent by facsimile as
follows and all notices and other communications expressly permitted hereunder
to be given by telephone shall be made to the applicable telephone number, as
follows and all notices and other communications expressly permitted hereunder
to be given by telephone shall be made to the applicable telephone number, as
follows:

(i)             if to Borrower or any other Restricted Person or Administrative
Agent; to the address, facsimile number, electronic mail address or telephone
number specified for such person on the signature pages hereto;

(ii)            if to any other Lender Party, to it at its address, facsimile
number, electronic mail address or telephone number as specified on the Lenders
Schedule.

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

(b)            Electronic Communications.

(i)             Notices and other communications to the Lenders hereunder may be
delivered or furnished by electronic communication (including e-mail and
Internet or intranet websites) pursuant to procedures approved by Administrative
Agent, provided that the foregoing shall not apply to notices to any Lender
pursuant to Article II if such Lender has notified Administrative Agent that it
is incapable of receiving notices under such Article by electronic
communication.  Administrative Agent or Borrower or any other Restricted Person
may, in its discretion, agree to accept notices and other communications to it
hereunder by electronic communications pursuant to procedures approved by it;
provided that approval of such procedures may be limited to particular notices
or communications.

(ii)            Unless Administrative Agent otherwise prescribes, (A) notices
and other communications sent to an e-mail address shall be deemed received upon
the sender’s receipt of an acknowledgement from the intended recipient (such as
by the “return receipt requested” function, as available, return e-mail or other
written acknowledgement); provided that if such notice or other communication is
not sent during the normal business hours of the recipient, such notice or
communication shall be deemed to have been sent at the opening of business on
the next business day for the recipient, and (B) notices or communications
posted to an Internet or intranet website shall be deemed received upon the
deemed receipt by the intended recipient at its e-mail address as described in
the foregoing clause (A) of notification that such notice or communication is
available and identifying the website address therefor.

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(c)            Change of Address, Etc.  Each of Borrower, any other Restricted
Person and Administrative Agent may change its address, facsimile or telephone
number for notices and other communications hereunder by notice to the other
parties hereto.  Each other Lender Party may change its address, facsimile or
telephone number for notices and other communications hereunder by notice to
Borrower and Administrative Agent.

Section 10.4.          Payment of Expenses; Indemnity.

(a)            Payment of Expenses.  Whether or not the transactions
contemplated by this Agreement are consummated, Borrower will promptly (and in
any event, within 30 days after any invoice or other statement or notice) pay:
(i) all transfer, stamp, documentary or other similar taxes, assessments or
charges levied by any governmental or revenue authority in respect of this
Agreement or any of the other Loan Documents or any other document or
transaction referred to herein or therein, (ii) all reasonable costs and
expenses incurred by or on behalf of Administrative Agent (including without
limitation attorneys’ fees and engineering fees, travel costs and miscellaneous
expenses) in connection with (1) the negotiation, preparation, execution and
delivery of the Loan Documents, and any and all consents, waivers or other
documents or instruments relating thereto, (2) the borrowings hereunder and
other action reasonably required in the course of administration hereof, (3)
monitoring or confirming (or preparation or negotiation of any document related
to) any Restricted Person’s compliance with any covenants or conditions
contained in this Agreement or in any Loan Document, and (iii) all reasonable
costs and expenses incurred by or on behalf of any Lender Party (including
without limitation attorneys’ fees, consultants’ fees and accounting fees) in
connection with the preservation of any rights under the Loan Documents or the
defense or enforcement of any of the Loan Documents (including this section),
any attempt to cure any breach thereunder by any Restricted Person, or the
defense of any Lender Party’s exercise of its rights thereunder.  In addition to
the foregoing, until all Obligations have been paid in full, Borrower will also
pay or reimburse Administrative Agent for all reasonable out-of-pocket costs and
expenses of Administrative Agent or its Administrative Agents or employees in
connection with the continuing administration of the Loans and the related due
diligence of Administrative Agent, including reasonable travel and miscellaneous
expenses and fees and expenses of Administrative Agent’s outside counsel,
reserve engineers and consultants engaged in connection with the Loan Documents.

(b)            Reimbursement by Lenders.  To the extent that Borrower for any
reason fails to indefeasibly pay any amount required under paragraph (a) or (b)
of this Section to be paid by it to Administrative Agent (or any sub-agent
thereof) or any Related Party of any of the foregoing, each Lender severally
agrees to pay to Administrative Agent (or any such sub-agent) or such Related
Party, as the case may be, such Lender’s Percentage Share (determined as of the
time that the applicable unreimbursed expense or indemnity payment is sought) of
such unpaid amount; provided that the unreimbursed expense or indemnified loss,
claim, damage, liability or related expense, as the case may be, was incurred by
or asserted against Administrative Agent (or any such sub-agent) in its capacity
as such, or against any Related Party of any of the foregoing acting for
Administrative Agent (or any such sub-agent) in connection with such
capacity.  The obligations of the Lenders under this paragraph (c) are subject
to the provisions of Section 2.18.

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(c)            Indemnity.  Borrower agrees to indemnify each Lender Party, upon
demand, from and against any and all liabilities, obligations, broker’s fees,
claims, losses, damages, penalties, fines, actions, judgments, suits,
settlements, costs, expenses or disbursements (including reasonable fees of
attorneys, accountants, experts and advisors) of any kind or nature whatsoever
(in this section collectively called “liabilities and costs”) which to any
extent (in whole or in part) may be imposed on, incurred by, or asserted against
such Lender Party growing out of, resulting from or in any other way associated
with the Loan Documents and the transactions and events (including the
enforcement or defense thereof) at any time associated therewith or contemplated
therein (whether arising in contract or in tort or otherwise).  Among other
things, the foregoing indemnification covers all liabilities and costs incurred
by any Lender Party related to any breach of a Loan Document by a Restricted
Person, any bodily injury to any Person or damage to any Person’s property, or
any violation or noncompliance with any Environmental Laws by any Lender Party
or any other Person or any liabilities or duties of any Lender Party or any
other Person with respect to Hazardous Materials found in or released into the
environment.

The foregoing indemnification shall apply whether or not such liabilities and
costs are in any way or to any extent owed, in whole or in part, under any claim
or theory of strict liability or caused, in whole or in part by any negligent
act or omission of any kind by any Lender Party;

provided only that no Lender Party shall be entitled under this section to
receive indemnification for that portion, if any, of any liabilities and costs
which is proximately caused by its own individual gross negligence or willful
misconduct, as determined in a final judgment.  If any Person (including
Borrower or any of its Affiliates) ever alleges such gross negligence or willful
misconduct by any Lender Party, the indemnification provided for in this section
shall nonetheless be paid upon demand, subject to later adjustment or
reimbursement, until such time as a court of competent jurisdiction enters a
final judgment as to the extent and effect of the alleged gross negligence or
willful misconduct.  As used in this section the term “Lender Party” shall refer
not only to each Person designated as such in Section 1.1 but also to each
director, officer, Administrative Agent, agent, advisor, trustee, attorney,
employee, representative and Affiliate of or for such Person.

Section 10.5.           Successors and Assigns; Assignments.

(a)            Successors and Assigns Generally.  The provisions of this
Agreement shall be binding upon and inure to the benefit of the parties hereto
and their respective successors and assigns permitted hereby, except that
neither Borrower nor any other Restricted Person may assign or otherwise
transfer any of its rights or obligations hereunder without the prior written
consent of Administrative Agent and each Lender, and no Lender may assign or
otherwise transfer any of its rights or obligations hereunder except (i) to an
Eligible Assignee in accordance with the provisions of paragraph (b) of this
Section, (ii) by way of participation in accordance with the provisions of
paragraph (d) of this Section or (iii) by way of pledge or assignment of a
security interest subject to the restrictions of paragraph (f) of this Section
(and any other attempted assignment or transfer by any party hereto shall be
null and void).  Nothing in this Agreement, expressed or implied, shall be
construed to confer upon any Person (other than the parties hereto, their
respective successors and assigns permitted hereby, Participants to the extent
provided in paragraph (d) of this Section and, to the extent expressly
contemplated hereby, the Related Parties of each of Administrative Agent and the
Lenders) any legal or equitable right, remedy or claim under or by reason of
this Agreement.

[Second Lien Credit Agreement]

 
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(b)            Assignments by Lenders.  Any Lender may at any time assign to one
or more Eligible Assignees all or a portion of its rights and obligations under
this Agreement (including all or a portion of the Loans at the time owing to
it); provided that:

(i)             except in the case of an assignment of the entire remaining
amount of the assigning Lender’s Loans at the time owing to it or in the case of
an assignment to a Lender or an Affiliate of a Lender or an Approved Fund with
respect to a Lender, the principal outstanding balance of the Loans of the
assigning Lender subject to each such assignment (determined as of the date the
Assignment and Assumption with respect to such assignment is delivered to
Administrative Agent or, if “Trade Date” is specified in the Assignment and
Assumption, as of the Trade Date) shall not be less than $1,000,000;

(ii)            each partial assignment shall be made as an assignment of a
proportionate part of all the assigning Lender’s rights and obligations under
this Agreement with respect to the portion of the Loan assigned;

(iii)           any assignment of a Loan (or portion of a Loan) must be approved
by Administrative Agent (such approval not to be unreasonably withheld or
delayed), unless the Person that is the proposed assignee is itself a Lender
with Loans outstanding under this Agreement (whether or not the proposed
assignee would otherwise qualify as an Eligible Assignee);

(iv)           any assignment of a Loan (or portion of a Loan) must be approved
by the Borrower (such approval not to be unreasonably withheld or delayed)
unless an Event of Default exists at such time;

(v)            the parties to each assignment shall execute and deliver to
Administrative Agent an Assignment and Assumption, together with a processing
and recordation fee of $3,000, and the Eligible Assignee, if it shall not be a
Lender, shall deliver to Administrative Agent an Administrative Questionnaire.

Subject to acceptance and recording thereof by Administrative Agent pursuant to
paragraph (c) of this Section, from and after the effective date specified in
each Assignment and Assumption, the Eligible Assignee thereunder shall be a
party to this Agreement and, to the extent of the interest assigned by such
Assignment and Assumption, have the rights and obligations of a Lender under
this Agreement, and the assigning Lender thereunder shall, to the extent of the
interest assigned by such Assignment and Assumption, be released from its
obligations under this Agreement (and, in the case of an Assignment and
Assumption covering all of the assigning Lender’s rights and obligations under
this Agreement, such Lender shall cease to be a party hereto) but shall continue
to be entitled to the benefits of Article III and Section 10.4 and Section 10.12
with respect to facts and circumstances occurring prior to the effective date of
such assignment.  Any assignment or transfer by a Lender of rights or
obligations under this Agreement that does not comply with this paragraph shall
be treated for purposes of this Agreement as a sale by such Lender of a
participation in such rights and obligations in accordance with paragraph (d) of
this Section.

[Second Lien Credit Agreement]

 
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(c)            Register.  Administrative Agent, acting solely for this purpose
as an agent of Borrower, shall maintain at one of its offices a copy of each
Assignment and Assumption delivered to it and a register for the recordation of
the names and addresses of the Lenders and the and principal amounts of the
Loans owing to each Lender pursuant to the terms hereof from time to time (the
“Register”).  The entries in the Register shall be conclusive, and Borrower,
Administrative Agent and the Lenders may treat each Person whose name is
recorded in the Register pursuant to the terms hereof as a Lender hereunder for
all purposes of this Agreement, notwithstanding notice to the contrary.  The
Register shall be available for inspection by Borrower and any Lender, at any
reasonable time and from time to time upon reasonable prior notice.

(d)            Participations.  Any Lender may at any time, without the consent
of, or notice to, Borrower or Administrative Agent, sell participations to any
Person (other than a natural person or Borrower or any of Borrower’s Affiliates
or Subsidiaries) (each, a “Participant”) in all or a portion of such Lender’s
rights and/or obligations under this Agreement (including all or a portion of
the Loans owing to it); provided that (i) such Lender’s obligations under this
Agreement shall remain unchanged, (ii) such Lender shall remain solely
responsible to the other parties hereto for the performance of such obligations
and (iii) Borrower, Administrative Agent and the Lenders shall continue to deal
solely and directly with such Lender in connection with such Lender’s rights and
obligations under this Agreement.

Any agreement or instrument pursuant to which a Lender sells such a
participation shall provide that such Lender shall retain the sole right to
enforce this Agreement and to approve any amendment, modification or waiver of
any provision of this Agreement; provided that such agreement or instrument may
provide that such Lender will not, without the consent of the Participant, agree
to any amendment, modification or waiver described in the fifth sentence of
Section 10.1(a) that affects such Participant.  Subject to paragraph (e) of this
Section, Borrower agrees that each Participant shall be entitled to the benefits
of Article III to the same extent as if it were a Lender and had acquired its
interest by assignment pursuant to paragraph (b) of this Section.  To the extent
permitted by law, each Participant also shall be entitled to the benefits of
Section 6.14 as though it were a Lender, provided such Participant agrees to be
subject to Section 9.6 as though it were a Lender.

(e)            Limitations upon Participant Rights.  A Participant shall not be
entitled to receive any greater payment under Article III than the applicable
Lender would have been entitled to receive with respect to the participation
sold to such Participant, unless the sale of the participation to such
Participant is made with Borrower’s prior written consent.  A Participant that
would be a Foreign Lender if it were a Lender shall not be entitled to the
benefits of Section 3.5 unless Borrower is notified of the participation sold to
such Participant and such Participant agrees, for the benefit of Borrower, to
comply with Section 3.5(e) as though it were a Lender.

[Second Lien Credit Agreement]

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

Section 10.6.          Confidentiality.  Each Lender Party agrees to keep
confidential any information furnished or made available to it by any Restricted
Person pursuant to this Agreement that is marked confidential; provided that
nothing herein shall prevent any Lender Party from disclosing such information
(a) to any other Lender Party or any Affiliate of any Lender Party, or any
officer, director, employee, Administrative Agent, or advisor of any Lender
Party or Affiliate of any Lender Party, (b) to any other Person if reasonably
incidental to the administration of the credit facility provided herein, (c) as
required by any Law, (d) upon the order of any court or administrative agency,
(e) upon the request or demand of any Governmental Authority, (f) that is or
becomes available to the public or that is or becomes available to any Lender
Party other than as a result of a disclosure by any Lender Party prohibited by
this Agreement, (g) in connection with any litigation to which such Lender Party
or any of its Affiliates may be a party; provided that such Lender Party makes
reasonable efforts to obtain from the applicable court protective orders or
similar confidential procedures protecting such confidential information, (h) to
the extent necessary in connection with the exercise of any right or remedy
under this Agreement or any other Loan Document, and (i) subject to provisions
substantially similar to those contained in this section, to (1) any actual or
proposed participant or assignee or (2) any actual or prospective counterparty
(or its advisors) to any swap or derivative transaction relating to Borrower and
its obligations.

Section 10.7.          Governing Law; Submission to Process.  Except to the
extent that the law of another jurisdiction is expressly elected in a Loan
Document, the Loan Documents shall be deemed contracts and instruments made
under the laws of the State of California and shall be construed and enforced in
accordance with and governed by the laws of the State of California and the laws
of the United States of America, without regard to principles of conflicts of
law.  Borrower hereby irrevocably submits itself to the non-exclusive
jurisdiction of the state and federal courts sitting in the Northern District of
California for the United States District Court and agrees and consents that
service of process may be made upon it in any legal proceeding relating to the
Loan Documents or the Obligations by any means allowed under California or
federal law.

Section 10.8.          Limitation on Interest.  Lender Parties, Restricted
Persons and the other parties to the Loan Documents intend to contract in strict
compliance with applicable usury Law from time to time in effect.  In
furtherance thereof such persons stipulate and agree that none of the terms and
provisions contained in the Loan Documents shall ever be construed to provide
for interest in excess of the maximum amount of interest permitted to be
contracted for, charged, or received by applicable Law from time to time in
effect.  Neither any Restricted Person nor any present or future guarantors,
endorsers, or other Persons hereafter becoming liable for payment of any
Obligation shall ever be liable for unearned interest thereon or shall ever be
required to pay interest thereon in excess of the maximum amount that may be
lawfully contracted for, charged, or received under applicable Law from time to
time in effect, and the provisions of this section shall control over all other
provisions of the Loan Documents which may be in conflict or apparent conflict
herewith.

[Second Lien Credit Agreement]

 
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Section 10.9.          Termination; Limited Survival.  In its sole and absolute
discretion Borrower may, at any time that no Obligations are owing, elect in a
written notice delivered to Administrative Agent to terminate this
Agreement.  Upon receipt by Administrative Agent of such a notice, if no
Obligations are then owing, this Agreement and all other Loan Documents shall
thereupon be terminated and the parties thereto released from all prospective
obligations thereunder, except as otherwise provided in such Loan
Documents.  Notwithstanding the foregoing or anything herein to the contrary,
any waivers or admissions made by any Restricted Person in any Loan Document,
any Obligations under Sections 3.2 through Section 3.5, any obligations which
any Person may have to indemnify or compensate any Lender Party and the
provisions of Article IX and Section 10.1(a) with respect to any Security
Documents which remain in effect after the termination of this Agreement, shall
survive any termination of this Agreement or any other Loan Document.  At the
request and expense of Borrower, Administrative Agent shall prepare and execute
all necessary instruments to reflect and effect such termination of the Loan
Documents.  Administrative Agent is hereby authorized to execute all such
instruments on behalf of all Lenders, without the joinder of or further action
by any Lender.

Section 10.10.         Severability.  If any term or provision of any Loan
Document shall be determined to be illegal or unenforceable all other terms and
provisions of the Loan Documents shall nevertheless remain effective and shall
be enforced to the fullest extent permitted by applicable Law.

Section 10.11.        Counterparts; Fax.  This Agreement may be separately
executed in any number of counterparts and by different parties hereto in
separate counterparts, each of which when so executed shall be deemed to
constitute one and the same Agreement.  This Agreement and the Loan Documents
may be validly executed and delivered by facsimile or other electronic
transmission.

SECTION 10.12.    WAIVER OF JURY TRIAL, PUNITIVE DAMAGES, ETC.  BORROWER AND
EACH LENDER PARTY HEREBY KNOWINGLY, VOLUNTARILY, INTENTIONALLY, AND IRREVOCABLY
(A) WAIVES, TO THE MAXIMUM EXTENT NOT PROHIBITED BY LAW, ANY RIGHT IT MAY HAVE
TO A TRIAL BY JURY IN RESPECT OF ANY LITIGATION BASED HEREON, OR DIRECTLY OR
INDIRECTLY AT ANY TIME ARISING OUT OF, UNDER OR IN CONNECTION WITH THE LOAN
DOCUMENTS OR ANY TRANSACTION CONTEMPLATED THEREBY OR ASSOCIATED THEREWITH,
BEFORE OR AFTER MATURITY; (B) WAIVES, TO THE MAXIMUM EXTENT NOT PROHIBITED BY
LAW, ANY RIGHT IT MAY HAVE TO CLAIM OR RECOVER IN ANY SUCH LITIGATION ANY
“SPECIAL DAMAGES”, AS DEFINED BELOW, (C) CERTIFIES THAT NO PARTY HERETO NOR ANY
REPRESENTATIVE OR ADMINISTRATIVE AGENT OR COUNSEL FOR ANY PARTY HERETO HAS
REPRESENTED, EXPRESSLY OR OTHERWISE, OR IMPLIED THAT SUCH PARTY WOULD NOT, IN
THE EVENT OF LITIGATION, SEEK TO ENFORCE THE FOREGOING WAIVERS, AND (D)
ACKNOWLEDGES THAT IT HAS BEEN INDUCED TO ENTER INTO THIS AGREEMENT, THE OTHER
LOAN DOCUMENTS AND THE TRANSACTIONS CONTEMPLATED HEREBY AND THEREBY BY, AMONG
OTHER THINGS, THE MUTUAL WAIVERS AND CERTIFICATIONS CONTAINED IN THIS
SECTION.  AS USED IN THIS SECTION, “SPECIAL DAMAGES” INCLUDES ALL SPECIAL,
CONSEQUENTIAL, EXEMPLARY, OR PUNITIVE DAMAGES (REGARDLESS OF HOW NAMED), BUT
DOES NOT INCLUDE ANY PAYMENTS OR FUNDS WHICH ANY PARTY HERETO HAS EXPRESSLY
PROMISED TO PAY OR DELIVER TO ANY OTHER PARTY HERETO.  NO “ADMINISTRATIVE AGENT”
REFERRED TO IN 10.4 ABOVE, AND NO “LENDER PARTY” REFERRED TO IN SECTION 10.4
ABOVE, SHALL BE LIABLE FOR ANY DAMAGES ARISING FROM THE USE BY UNINTENDED
RECIPIENTS OF ANY INFORMATION OR OTHER MATERIALS DISTRIBUTED BY IT THROUGH
TELECOMMUNICATIONS, ELECTRONIC OR OTHER INFORMATION TRANSMISSION SYSTEMS IN
CONNECTION WITH THIS AGREEMENT OR THE OTHER LOAN DOCUMENTS OR THE TRANSACTIONS
CONTEMPLATED HEREBY OR THEREBY.

[Second Lien Credit Agreement]

 
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Section 10.13.        Controlling Agreement.  In the event of a conflict between
the provisions of this Agreement and those of any other Loan Document (other
than the Intercreditor Agreement), the provisions of this Agreement shall
control.  Each Lender acknowledges that the Intercreditor Agreement provides
certain rights to the First Lien Agent and the First Lien Lenders and agrees
that in the event of any conflict between the provisions of this Agreement and
the Security Documents on the one hand and the Intercreditor Agreement on the
other hand, the Intercreditor Agreement shall control.

Section 10.14.        Disposition of Collateral.  Notwithstanding any term or
provision, express or implied, in any of the Security Documents, but subject to
applicable provisions of this Agreement and the Intercreditor Agreement, the
realization, liquidation, foreclosure, or any other disposition on or of any or
all of the Collateral shall be in the order and manner and determined in the
sole discretion of the Administrative Agent; provided, however, that in no event
shall the Administrative Agent violate applicable Law or exercise rights and
remedies other than those provided in such Security Documents or otherwise
existing at Law or in equity.

Section 10.15.        USA Patriot Act Notice.  Each Lender hereby notifies the
Borrower that pursuant to the requirements of the USA Patriot Act (Title III of
Pub. L. 107-56 (signed into law October 26, 2001)) (as used in this section, the
“USA Patriot Act”), it is required to obtain, verify and record information that
identifies the Borrower and its Subsidiaries, which information includes the
name and address of the Borrower and its Subsidiaries and other information that
will allow such Lender to identify the Borrower and its Subsidiaries in
accordance with the USA Patriot Act.

[Signatures Pages Follow]

[Second Lien Credit Agreement]

 
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IN WITNESS WHEREOF, this Agreement is executed as of the date first written
above.

 
BERRY PETROLEUM COMPANY,
 
Borrower
                 
By:
/s/ David D. Wolf    
David D. Wolf
   
Executive Vice President and
   
Chief Financial Officer
                 
Address:
                 
1999 Broadway, Suite 3700
 
Denver, Colorado 80202
 
Attention:
David D. Wolf
                 
Telephone:   
(303) 999-4400
 
Fax:
(303) 999-4401
 
Email:
ddw@bry.com

[Signature Page to Second Lien Credit Agreement]

 

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WELLS FARGO ENERGY CAPITAL, INC., as Administrative Agent and Lender
                 
By:
  /s/ Michael Nepveux    
Michael Nepveux
   
Senior Vice President
                 
Address:
                 
1000 Louisiana St., 9th Floor
 
Houston, TX  77002
 
Attention:
Bryan McDavid
                 
Telephone:   
(713) 319-1611
 
Fax:
(713) 652-5874
 
Email:
Bryan.M.McDavid@wellsfargo.com

[Signature Page to Second Lien Credit Agreement]

 

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THE ROYAL BANK OF SCOTLAND plc, Lender
             
By:
  /s/ Lucy Walker    
Name: Lucy Walker
   
Title: Vice President

[Signature Page to Second Lien Credit Agreement]

 

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CALYON NEW YORK BRANCH, Lender
             
By:
  /s/ Dennis E. Petito    
Name: Dennis E. Petito
   
Title: Managing Director
             
By:
  /s/ Tom Byargeon    
Name: Tom Byargeon
   
Title: Managing Director

[Signature Page to Second Lien Credit Agreement]

 

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SOCIÉTÉ GÉNÉRALE, Lender
             
By:
  /s/ Stephen D. Warfel    
Name: Stephen D. Warfel
   
Title: Managing Director

[Signature Page to Second Lien Credit Agreement]

 

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UNIONBANCAL EQUITIES, INC., Lender
             
By:
  /s/ Ted McNulty    
Name: Ted McNulty
   
Title: Senior Vice President
             
By:
  /s/ John W. Schmidt    
Name: John W. Schmidt
   
Title: Vice President

[Signature Page to Second Lien Credit Agreement]

 

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SCHEDULE 1

LENDERS SCHEDULE

LENDER
PERCENTAGE SHARE
COMMITMENT
Wells Fargo Energy Capital, Inc.
28.57%
$40,000,000
The Royal Bank of Scotland, plc
28.57%
$40,000,000
Calyon New York Branch
17.86%
$25,000,000
Societe Generale
14.29%
$20,000,000
UnionBanCal Equities, Inc.
10.71%
$15,000,000
TOTAL
100.00%
$140,000,000

[Lender Schedule to Second Lien Credit Agreement]

 

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SCHEDULE 2

INSURANCE SCHEDULE

See attached.

[Insurance Schedule to Second Lien Credit Agreement]

 

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SCHEDULE 3

SECURITY SCHEDULE

1.             Security Agreement of even date herewith from Borrower to
Administrative Agent for the benefit of Lenders (the “Security Agreement”).

2.             Deed of Trust Assignment, Security Agreement, Fixture Filing and
Financing Statement of even date herewith from Borrower to Administrative Agent
for the benefit of Lenders covering properties located in California (the
“California Deed of Trust”).

3.             Deed of Trust Assignment, Security Agreement, Fixture Filing and
Financing Statement of even date herewith from Borrower to Administrative Agent
for the benefit of Lenders covering properties located in Texas (the “Texas Deed
of Trust”).

4.             Deed of Trust Assignment, Security Agreement, Fixture Filing and
Financing Statement of even date herewith from Borrower to Administrative Agent
for the benefit of Lenders covering properties located in Utah (the “Utah Deed
of Trust”).

[Security Schedule to Second Lien Credit Agreement]

 

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SCHEDULE 4

DRILLING RIGS PERMITTED TO BE SOLD

UNDER SECTION 7.5(e)

RIG 1

MAST: Lee C. Moore 127’H x 13’6”W Cantilever Mast 236,000#  Hook Load Capacity
SUBSTRUCTURE: Gee Bee Welding 12’ 6”H x 38’L Box Type Sub 250,000#  Setback
DRAWWORKS:  Superior 400 HP Drawworks, Lebus 1 1/8” Line, TSM 22S Water Brake,
Crown-O-Matic Hydraulic Catheads.
ENGINE: (New) Detroit Series 60 450 HP Diesel Engine.
MUD PUMPS: (2) Gardner Denver PZ8 Triplex Pumps p/b (New) Detroit Series 2000
Engines
GENERATORS: (2) Caterpillar SR-4 210 KW p/b (1) Caterpillar 3306 and (1)
Caterpillar  3406 Diesel Engines
BLOCK / HOOK: Sowa Model 0636-4 150-Ton w/ (4) 36” Sheaves
ROTARY TABLE: National C-175, 17 1/2"
SWIVEL: Ideco TL200
BOP RAMS: (New) Townsend 11" Double 3,000 PSI
BOP ANNULAR: (New) Townsend 11” 3,000 Type 90 Annular
CHOKE MANIFOLD: (New) 3,000#
CLOSING UNIT: Mayco Electric 5-Station
MUD PIT: (New) 6’ 6”H x 11'W x 45’L  570 BBL (5) Compartments, Swaco Linear
Motion Shaker (2) Mission Magnum Mixing Pumps, 7.5 HP Mud Agitator, Degasser,
Mud Hopper Mud Guns, Walkways and Rails.
FUEL TANK: 5,000 Gallons
WATER TANK: 400 BBL
DOGHOUSE: 9'W x 16'L
DRILL PIPE: 8,000 FT (New) 4.5" E 16.60#
DRILL COLLARS: (26) (New)  6 1/2" (12) (New)  8"
SPINNERS:    (New) Graychain Hyd Drill Pipe Spinner, Foster Kelly Spinner

RIG 5

DRAWWORKS: One (1) Cooper LTO-550 Single Drum
CARRIER: Cooper LTO-550 Self Propelled
ENGINE: One (1) Detroit Series 60
MAST:  One (1) Premco 112’, 300,000# Static Hook Load Mast w/(6) Sheave Crown
and Racking Board,
SUBSTRUCTURE:  One (1) 10’H Box Type Substucture w/ Mud Boat Ramp 5’H x 30’L
V-Door, Stairs & Safety Rails
MUD PUMPS: Two (2) Gardner-Denver PZ-8 Triplex
ENGINES: Two (2) (New) Detroit Series 60
GENERATORS: One (2) Detroit Series 60 Diesel Engines w/Marathon 350KW
BLOCK / HOOK: One (1) McKissick 150-Ton
ROTARY TABLE: One (1) Cooper 27-1/2” Rotary Table w/Master Bushing,
SWIVEL: One (1) Gardner-Denver SW-200 200-Ton
BOP RAMS: One (1) Townsend 11’ 3000 PSI Double
BOP ANNULAR: One (1) Townsend 11” 3,000 PSI
CHOKE MANIFOLD: 3,000 PSI
MUD PITS: (New) 800 BBL
SHALE SHAKER: (New) Derrick Linear Motion Shaker
DESANDER: One (1) Mud Cleaner c/w 8 each Desilter Cones
FUEL TANK:  One (1) 6000 gallon
WATER TANK: One (1) 280 bbl

[Schedule 4 to Second Lien Credit Agreement]

 

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DOGHOUSE: One (1) Dog House 8' x 8' x 16'
DRILL PIPE:  6000 FT 4” E 14.40#
DRILL COLLARS:  (16) 6 1/2"
MISCELLANEOUS: Pipe Spinner, Kelly Spinner, and Miscellaneous Handling Tools

RIG 9

DRAWWORKS: Gardner Denver 1000 HP Electric Drawworks w/ (2) 600 HP Electric
Motors.
MAST: Partec 136’ Boot Strap, Rated 480,000# Static Hook Load Capacity.
SUBSTRUCTURE: Partec 21’ Box Substructure w/ 4’ Skid Structure, 80’ Long.
GENERATORS: (3) (New) Detroit Series 2000 Diesel Engines w/600 Volt Generators
for SCR.
SCR: (1) (New) Omron 3x3
TOP DRIVE: (New) Tesco 250T A/C Drive
MUD PUMPS: (2) (New) 1300 HP China F1300 Triplex, Belt Driven w/ (2) GE 752 Hi
torque motors.
ROTARY TABLE: Rebuilt National 23”
SWIVEL: Rebuilt Gardner Denver 300 Ton
BLOCK/HOOK: Rebuilt Gardner Denver 300 Ton unitized
BOP RAMS: (New) China 11’ 5000# Double Ram BOP
BOP ANNULAR: (New) China 11’ 5000# Annular
CHOKE MANIFOLD: 5000# Choke Manifold
CLOSING UNIT: (New) 5 Station 110 Gallon Closing Unit
MUD SYSTEM: (New) 800 BBL Mud System w/ 6 x 8 centrifugal mixing pumps, low
pressure mixing guns, shaker, agitators.
SHALE SHAKER: (2) (New) Derrick Linear Motion Shale Shaker
FUEL TANK: (New) 12,000 gallon
WATER TANK: (New) 500 BBL
DOGHOUSE: (New) 10' x 8' x 30'
DRILL PIPE: 13,000’ (New) 4.5” G105 16.60#
DRILL COLLARS: (21) New 6.5"
MISCELLANEOUS: Toolpusher’s quarters, Catwalk, Six (6) Pipe Racks, Pipe Spinner,
Kelly Spinner, and Miscellaneous Handling Tools.

[Schedule 4 to Second Lien Credit Agreement]

 

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SCHEDULE 5

ADDRESSES OF LENDERS FOR NOTICES

WELLS FARGO ENERGY CAPITAL, INC.
1000 Louisiana St., 9th Floor
Houston, TX  77002
Attention:
Bryan McDavid

Tel:
713-319-1611

Fax:
713-652-5874

Email:
Bryan.M.McDavid@wellsfargo.com

THE ROYAL BANK OF SCOTLAND plc
101 Park Avenue – 6th Floor
New York, New York 10178
Attention:
Claudio R. Truglia

Tel:
203.971.7658

Fax:
212.401.1494

Email:
claudio.truglia@rbs.com

600 Travis Street, Suite 6500
Houston, TX 77002
Attention:
Mark Lumpkin, Jr.

Tel:
713.221.2419

Fax:
713.221.2428

Email:
mark.lumpkin@RBS.com

CALYON NEW YORK BRANCH
1301 Travis Suite 2100
Houston, TX  77002
Attention:
Mark Roche

Tel:
713-890-8617

Fax:
713-890-8668

Email:
mark.roche@us.calyon.com

1301 Avenue of the Americas
New York, NY  10019
Attention:
 Gener David

Tel:
212-261-7741

Fax:
917-849-5440

Email:
gener.david@us.calyon.com

[Schedule 5 to Second Lien Credit Agreement]

 

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SOCIÉTÉ GÉNÉRALE
1111 Bagby, Suite 2020
Houston, Texas  77002
Attention: 
Josh Rogers

Tel: 
713.759.6315

Fax: 
713.650.0824

Email: 
josh.rogers@us.socgen.com

UNIONBANCAL EQUITIES, INC.
445 S. Figueroa Street, 21st Floor
Los Angeles, CA  90071
Attention:
Ted McNulty

Tel:
213-236-4224

Fax:
213-236-7619

Email:
ted.mcnulty@uboc.com

[Schedule 5 to Second Lien Credit Agreement]

 

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EXHIBIT A

PROMISSORY NOTE

[_______________], 2009

FOR VALUE RECEIVED, the undersigned, Berry Petroleum Company, a Delaware
corporation (herein called “Borrower”), hereby promises to pay to the order of
[________________________________________________] (herein called “Lender”), the
principal sum equal to the amount of such Lender’s Commitment, or, if less, the
aggregate unpaid principal amount of the Loans made under this Note by Lender to
Borrower pursuant to the terms of the Credit Agreement (as hereinafter defined),
together with interest on the unpaid principal balance thereof as hereinafter
set forth, both principal and interest payable as herein provided in lawful
money of the United States of America at the offices of Administrative Agent
under the Credit Agreement, 1740 Broadway, 4th Floor, Denver, Colorado  80274,
or at such other place as from time to time may be designated by the holder of
this Note.

This Note (a) is issued and delivered under that certain Second Lien Credit
Agreement of even date herewith among Borrower, Wells Fargo Energy Capital,
Inc., as Administrative Agent, and the lenders (including Lender) referred to
therein (herein, as from time to time supplemented, amended or restated, called
the “Credit Agreement”), and is a “Note” as defined therein, (b) is subject to
the terms and provisions of the Credit Agreement, which contains provisions for
payments and prepayments hereunder and acceleration of the maturity hereof upon
the happening of certain stated events, and (c) is secured by and entitled to
the benefits of certain Security Documents (as identified and defined in the
Credit Agreement).  Payments of principal and interest on this Note shall be
made and applied as provided herein and in the Credit Agreement.  Reference is
hereby made to the Credit Agreement for a description of certain rights,
limitations of rights, obligations and duties of the parties hereto and for the
meanings assigned to terms used and not defined herein and to the Security
Documents for a description of the nature and extent of the security thereby
provided and the rights of the parties thereto.

The principal amount of this Note, together with all interest accrued hereon,
shall be due and payable in full on the Maturity Date.

If this Note is placed in the hands of an attorney for collection after default,
or if all or any part of the indebtedness represented hereby is proved,
established or collected in any court or in any bankruptcy, receivership, debtor
relief, probate or other court proceedings, Borrower and all endorsers, sureties
and guarantors of this Note jointly and severally agree to pay reasonable
attorneys’ fees and collection costs to the holder hereof in addition to the
principal and interest payable hereunder.

Borrower and all endorsers, sureties and guarantors of this Note hereby
severally waive demand, presentment, notice of demand and of dishonor and
nonpayment of this Note, protest, notice of protest, notice of intention to
accelerate the maturity of this Note, declaration or notice of acceleration of
the maturity of this Note, diligence in collecting, the bringing of any suit
against any party and any notice of or defense on account of any extensions,
renewals, partial payments or changes in any manner of or in this Note or in any
of its terms, provisions and covenants, or any releases or substitutions of any
security, or any delay, indulgence or other act of any trustee or any holder
hereof, whether before or after maturity.

[Exhibit A to Second Lien Credit Agreement]

 

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This Note and the rights and duties of the parties hereto shall be governed by
the Laws of the State of California (without regard to principles of conflicts
of law), except to the extent the same are governed by applicable federal Law.

 
BERRY PETROLEUM COMPANY
             
By:
     
Name:
   
Title:

[Exhibit A to Second Lien Credit Agreement]

 

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EXHIBIT B

BORROWING NOTICE

Reference is made to that certain Second Lien Credit Agreement dated as of
[_______________], 2009 (as from time to time amended, the “Agreement”), by and
among Berry Petroleum Company (“Borrower”), Wells Fargo Energy Capital, Inc., as
Administrative Agent, and certain financial institutions (“Lenders”).  Terms
which are defined in the Agreement are used herein with the meanings given them
in the Agreement.  Pursuant to the terms of the Agreement, Borrower hereby
requests a borrowing of Loans to be advanced pursuant to Section 2.2 of the
Agreement as follows:

Aggregate amount of borrowing:
$_______________________
   
Type of Loans in borrowing:
________________________
   
Date on which Loans are to be advanced:
________________________
   
Length of Interest Period for Eurodollar Loans (1, 2, 3, 6, 9 or 12 months):
__________________months

To induce Lenders to make such Loans, Borrower hereby represents, warrants,
acknowledges, and agrees to and with Administrative Agent and each Lender that:

(a)            The officer of Borrower signing this instrument is the duly
elected, qualified and acting officer of Borrower as indicated below such
officer’s signature hereto having all necessary authority to act for Borrower in
making the request herein contained.

(b)            The representations and warranties of Borrower set forth in the
Agreement and the other Loan Documents are true and correct in all material
respects on and as of the date hereof  as if such representations and warranties
have been made as of the date hereof, except to the extent that such
representations or warranties were made as of a specific date or updated,
modified or supplemented as of a subsequent date with the consent of Required
Lenders and Administrative Agent, in which case such representations and
warranties shall have been true and correct in all material respects on and of
such date.

(c)            There does not exist on the date hereof any condition or event
which constitutes a Default which has not been waived in writing as provided in
Section 10.1(a) of the Agreement; nor will any such Default exist upon
Borrower’s receipt and application of the Loans requested hereby.  Borrower will
use the Loans hereby requested in compliance with Section 2.4 of the Agreement.

(d)            Except to the extent waived in writing as provided in Section
10.1(a) of the Agreement, Borrower has performed and complied with all
agreements and conditions in the Agreement required to be performed or complied
with by Borrower on or prior to the date hereof, and each of the conditions
precedent to Loans contained in the Agreement remains satisfied.

[Exhibit B to Second Lien Credit Agreement]

 

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(e)            The Loans requested hereby are not in excess of the Aggregate
Commitments.

(f)            The Loan Documents have not been modified, amended or
supplemented by any unwritten representations or promises, by any course of
dealing, or by any other means not provided for in Section 10.1(a) of the
Agreement.  The Agreement and the other Loan Documents are hereby ratified,
approved, and confirmed in all respects.

The officer of Borrower signing this instrument hereby certifies that, to the
best of his knowledge after due inquiry, the above representations, warranties,
acknowledgments, and agreements of Borrower are true, correct and complete.

IN WITNESS WHEREOF, this instrument is executed as of [____________], 2009.

 
BERRY PETROLEUM COMPANY
             
By:
     
Name:
   
Title:

Exhibit B – Page 2

[Exhibit B to Second Lien Credit Agreement]

 

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EXHIBIT C

CONTINUATION/CONVERSION NOTICE

Reference is made to that certain Second Lien Credit Agreement dated as of
[_________________], 2009 (as from time to time amended, the “Agreement”), by
and among Berry Petroleum Company (“Borrower”), Wells Fargo Energy Capital,
Inc., as Administrative Agent, and the lenders referred to therein
(“Lenders”).  Terms which are defined in the Agreement are used herein with the
meanings given them in the Agreement.

Borrower hereby requests a Conversion or Continuation of existing Loans pursuant
to Section 2.3 of the Agreement as follows:

Existing Loan(s) to be continued or converted:

$____________ of Eurodollar Loans with Interest Period ending
_____________

$____________ of Base Rate Loans

Aggregate amount of borrowing:
$_______________________
   
Type of Loans in new borrowing:
________________________
   
Date of Continuation or Conversion:
________________________
   
Length of Interest Period for Eurodollar Loans (1, 2, 3, 6, 9 or 12 months):
__________________months

To meet the conditions set out in the Agreement for such
Conversion/Continuation, Borrower hereby represents, warrants, acknowledges, and
agrees to and with Administrative Agent and each Lender that:

(a)            The officer of Borrower signing this instrument is the duly
elected, qualified and acting officer of Borrower as indicated below such
officer’s signature hereto having all necessary authority to act for Borrower in
making the request herein contained.

(b)            There does not exist on the date hereof any condition or event
which constitutes a Default which has not been waived in writing as provided in
Section 10.1(a) of the Agreement.

(c)            The Loan Documents have not been modified, amended or
supplemented by any unwritten representations or promises, by any course of
dealing, or by any other means not provided for in Section 10.1(a) of the
Agreement.  The Agreement and the other Loan Documents are hereby ratified,
approved, and confirmed in all respects.

[Exhibit C to Second Lien Credit Agreement]

 

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The officer of Borrower signing this instrument hereby certifies that, to the
best of his knowledge after due inquiry, the above representations, warranties,
acknowledgments, and agreements of Borrower are true, correct and complete.

IN WITNESS WHEREOF this instrument is executed as of [_____________], 20__.

 
BERRY PETROLEUM COMPANY
             
By:
     
Name:
   
Title:

Exhibit C – Page 2

[Exhibit C to Second Lien Credit Agreement]

 

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EXHIBIT D

CERTIFICATE ACCOMPANYING
FINANCIAL STATEMENTS

Reference is made to that certain Second Lien Credit Agreement dated as of
[_____________], 2009 (as from time to time amended, the “Agreement”), by and
among Berry Petroleum Company (“Borrower”), Wells Fargo Energy Capital, Inc., as
Administrative Agent, and certain financial institutions (“Lenders”), which
Agreement is in full force and effect on the date hereof.  Terms which are
defined in the Agreement are used herein with the meanings given them in the
Agreement.

This Certificate is furnished pursuant to Section 6.2(b) of the
Agreement.  Together herewith Borrower is furnishing to Administrative Agent and
each Lender Borrower’s *[audited/unaudited] financial statements (the “Financial
Statements”) as at ____________ (the “Reporting Date”).  Borrower hereby
represents, warrants, and acknowledges to Administrative Agent and each Lender
that:

(a)            the officer of Borrower signing this instrument is the duly
elected, qualified and acting ____________ of Borrower and as such is Borrower’s
Chief Financial Officer;

(b)            the Financial Statements are accurate and complete and satisfy
the requirements of the Agreement;

(c)            attached hereto is a schedule of calculations showing Borrower’s
compliance as of the Reporting Date with the requirements of Section 7.11,
Section 7.12, Section 7.13 and Section 7.14 of the Agreement *[and Borrower’s
non-compliance as of such date with the requirements of Section(s) ____________
of the Agreement];

(d)            on the Reporting Date Borrower was, and on the date hereof
Borrower is, in full compliance with the disclosure requirements of Section 6.4
of the Agreement, and no Default otherwise existed on the Reporting Date or
otherwise exists on the date of this instrument *[except for Default(s) under
Section(s) ____________ of the Agreement, which *[is/are] more fully described
on a schedule attached hereto].

(e)            *[Unless otherwise disclosed on a schedule attached hereto,] The
representations and warranties of Borrower set forth in the Agreement and the
other Loan Documents are true and correct in all material respects on and as of
the date hereof as if such representations and warranties have been made as of
the date hereof, except to the extent that such representations or warranties
were made as of a specific date or updated, modified or supplemented as of a
subsequent date with the consent of Required Lenders and Administrative Agent,
in which case such representations and warranties shall have been true and
correct in all material respects on and of such date.

The officer of Borrower signing this instrument hereby certifies that he has
reviewed the Loan Documents and the Financial Statements and has otherwise
undertaken such inquiry as is in his opinion necessary to enable him to express
an informed opinion with respect to the above representations, warranties and
acknowledgments of Borrower and, to the best of his knowledge, such
representations, warranties, and acknowledgments are true, correct and complete.

[Exhibit D to Second Lien Credit Agreement]

 

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IN WITNESS WHEREOF, this instrument is executed as of ____________, 20__.

 
BERRY PETROLEUM COMPANY
             
By:
     
Name:
   
Title:

Exhibit D – Page 2

[Exhibit D to Second Lien Credit Agreement]

 

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EXHIBIT E

OPINION OF COUNSEL FOR RESTRICTED PERSONS

[Exhibit E to Second Lien Credit Agreement]

 

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EXHIBIT F

ASSIGNMENT AND ASSUMPTION

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

For an agreed consideration, the Assignor hereby irrevocably sells and assigns
to the Assignee, and the Assignee hereby irrevocably purchases and assumes from
the Assignor, subject to and in accordance with the Standard Terms and
Conditions attached hereto as Annex 1 and the Credit Agreement, as of the
Effective Date inserted by Administrative Agent as contemplated below (i) all of
the Assignor's rights and obligations in its capacity as a Lender under the
Credit Agreement and any other documents or instruments delivered pursuant
thereto to the extent related to the amount and percentage interest identified
below of all of such outstanding rights and obligations of the Assignor under
the respective facilities identified below (including, without limitation, the
Letters of Credit or guarantees included in such facilities) and (ii) to the
extent permitted to be assigned under applicable law, all claims, suits, causes
of action and any other right of the Assignor (in its capacity as a Lender)
against any Person, whether known or unknown, arising under or in connection
with the Credit Agreement, any other documents or instruments delivered pursuant
thereto or the loan transactions governed thereby or in any way based on or
related to any of the foregoing, including, but not limited to, contract claims,
tort claims, malpractice claims, statutory claims and all other claims at law or
in equity related to the rights and obligations sold and assigned pursuant to
clause (i) above (the rights and obligations sold and assigned pursuant to
clauses (i) and (ii) above being referred to herein collectively as, the
“Assigned Interest”).  Such sale and assignment is without recourse to the
Assignor and, except as expressly provided in this Assignment and Assumption,
without representation or warranty by the Assignor.

1.
Assignor:           ______________________________

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

3.
Borrower:           Berry Petroleum Company

4.
Administrative Agent: Wells Fargo Energy Capital, Inc., as Administrative Agent
under the Credit Agreement

[Exhibit F to Second Lien Credit Agreement]

 

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5.
Credit Agreement:           Second Lien Credit Agreement dated as of
[____________], 2009, by and among Borrower, Administrative Agent, and certain
financial institutions (“Lenders”)

6.
Assigned Interest:

Aggregate Amount of Commitment/Loans for all Lenders*
Amount of Commitment/Loans Assigned
Percentage Assigned of Commitment/Loans
     
$________________
$________________
______________%
$________________
$________________
______________%
$________________
$________________
______________%

[7.
Trade Date:           __________________]

8.             Intercreditor Agreement:           Intercreditor Agreement, dated
as of [____________], 2009, by and among Administrative Agent and Wells Fargo
Bank, National Association, as administrative agent under the First Lien Credit
Agreement.

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

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

 
ASSIGNOR
 
[NAME OF ASSIGNOR]
       
By:
     
Name:
   
Title:
       
ASSIGNEE
 
[NAME OF ASSIGNEE]
       
By:
     
Name:
   
Title:

[Exhibit F to Second Lien Credit Agreement]

 

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[Consented to and] Accepted:

WELLS FARGO ENERGY CAPITAL, INC.,
as Administrative Agent
     
By:
     
Name:
   
Title:
       
[Consented to:]
     
By:
     
Name:
   
Title:
 

[Exhibit F to Second Lien Credit Agreement]

 

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ANNEX 1 TO ASSIGNMENT AND ASSUMPTION

STANDARD TERMS AND CONDITIONS FOR

ASSIGNMENT AND ASSUMPTION

1.                 Representations and Warranties.

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

1.2.              Assignee.  The Assignee (a) represents and warrants that (i)
it has full power and authority, and has taken all action necessary, to execute
and deliver this Assignment and Assumption and to consummate the transactions
contemplated hereby and to become a Lender under the Credit Agreement, (ii) it
meets all requirements of an Eligible Assignee under the Credit Agreement
(subject to receipt of such consents as may be required under the Credit
Agreement), (iii) from and after the Effective Date, it shall be bound by the
provisions of the Credit Agreement as a Lender thereunder and, to the extent of
the Assigned Interest, shall have the obligations of a Lender thereunder, (iv)
it has received a copy of the Credit Agreement, together with copies of the most
recent financial statements delivered pursuant to Section 6.2(a) and (b)
thereof, as applicable, and such other documents and information as it has
deemed appropriate to make its own credit analysis and decision to enter into
this Assignment and Assumption and to purchase the Assigned Interest on the
basis of which it has made such analysis and decision independently and without
reliance on Administrative Agent or any other Lender, and (v) if it is a Foreign
Lender, attached to the Assignment and Assumption is any documentation required
to be delivered by it pursuant to the terms of the Credit Agreement, duly
completed and executed by the Assignee; and (b) agrees that (i) it will,
independently and without reliance on Administrative Agent, the Assignor or any
other Lender, and based on such documents and information as it shall deem
appropriate at the time, continue to make its own credit decisions in taking or
not taking action under the Loan Documents, and (ii) it will perform in
accordance with their terms all of the obligations which by the terms of the
Loan Documents are required to be performed by it as a Lender.

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

[Exhibit F to Second Lien Credit Agreement]

 

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

[Exhibit F to Second Lien Credit Agreement]

 

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EXHIBIT G

DISCLOSURE LETTER

[Exhibit G to Second Lien Credit Agreement]
 
 

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