Exhibit 10.1

 

AMENDED AND RESTATED

CREDIT AGREEMENT

DATED AS OF NOVEMBER 19, 2007

AMONG

WARREN RESOURCES, INC.,

MERRILL LYNCH CAPITAL,
a Division of Merrill Lynch Business Financial Services Inc.,
as Administrative Agent, as a Lender and
as Sole Bookrunner and Sole Lead Arranger

AND

THE ADDITIONAL LENDERS
FROM TIME TO TIME PARTY HERETO

 

[g297351ke01i001.gif]

 

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

 

TABLE OF CONTENTS

 

 

Page

 

 

ARTICLE 1 DEFINITIONS

1

 

 

 

Section 1.1

Certain Defined Terms

1

 

Section 1.2

Accounting Terms and Determinations

22

 

Section 1.3

Other Definitional Provisions and References

23

 

 

ARTICLE 2 LOANS AND LETTERS OF CREDIT

23

 

 

 

Section 2.1

Revolving Loans and Borrowings

23

 

Section 2.2

Advancing Revolving Loans

24

 

Section 2.3

Mandatory Prepayments

24

 

Section 2.4

All Prepayments

26

 

Section 2.5

Optional Prepayments of Revolving Loans

26

 

Section 2.6

Termination or Reduction of Revolving Loan Commitment

26

 

Section 2.7

Interest, Interest Calculations and Certain Fees

27

 

Section 2.8

Notes

29

 

Section 2.9

Letters of Credit and Letter of Credit Fees

29

 

Section 2.10

General Provisions Regarding Payment

33

 

Section 2.11

Loan Account

33

 

Section 2.12

Maximum Interest

33

 

Section 2.13

Taxes

34

 

Section 2.14

Capital Adequacy

35

 

Section 2.15

Mitigation Obligations

36

 

Section 2.16

Borrowing Base

36

 

 

ARTICLE 3 REPRESENTATIONS AND WARRANTIES

38

 

 

 

Section 3.1

Existence and Power

39

 

Section 3.2

Organization and Governmental Authorization; No Contravention

39

 

Section 3.3

Binding Effect

39

 

Section 3.4

Capitalization

39

 

Section 3.5

Financial Information

40

 

Section 3.6

Litigation

40

 

Section 3.7

Ownership of Property

41

 

Section 3.8

No Default

41

 

Section 3.9

Labor Matters

41

 

Section 3.10

Regulated Entities

41

 

Section 3.11

Margin Regulations

41

 

Section 3.12

Compliance With Laws; Anti-Terrorism Laws

41

 

Section 3.13

Taxes

42

 

Section 3.14

Compliance with ERISA

42

 

Section 3.15

Brokers

43

 

Section 3.16

[Reserved]

43

 

Section 3.17

[Reserved]

43

 

Section 3.18

Environmental Compliance

43

 

Section 3.19

Intellectual Property

43

 

i

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

 

 

Section 3.20

[Reserved]

43

 

Section 3.21

Solvency

43

 

Section 3.22

Full Disclosure

43

 

Section 3.23

Reserve Reports, Imbalances, Marketing and Borrowing Base Matters

44

 

Section 3.24

Maintenance and Development of Properties

45

 

 

ARTICLE 4 AFFIRMATIVE COVENANTS

45

 

 

 

Section 4.1

Financial Statements and Other Reports

45

 

Section 4.2

Payment and Performance of Obligations

49

 

Section 4.3

Maintenance of Existence

49

 

Section 4.4

Maintenance of Property; Insurance

49

 

Section 4.5

Compliance with Laws

51

 

Section 4.6

Inspection of Property, Books and Records

51

 

Section 4.7

Use of Proceeds

51

 

Section 4.8

Lenders’ Meetings

52

 

Section 4.9

Hazardous Materials; Remediation

52

 

Section 4.10

Further Assurances

52

 

 

ARTICLE 5 NEGATIVE COVENANTS

55

 

 

 

Section 5.1

Debt

55

 

Section 5.2

Liens

56

 

Section 5.3

Contingent Obligations

57

 

Section 5.4

Restricted Payments

58

 

Section 5.5

Restrictive Agreements

58

 

Section 5.6

Swap Contracts

59

 

Section 5.7

Consolidations, Mergers and Sales of Assets

59

 

Section 5.8

Investments

60

 

Section 5.9

Transactions with Affiliates

62

 

Section 5.10

Modification of Organizational Documents

62

 

Section 5.11

[Reserved]

62

 

Section 5.12

Fiscal Year

62

 

Section 5.13

Conduct of Business

62

 

Section 5.14

[Reserved]

62

 

Section 5.15

Capital Stock

62

 

Section 5.16

Limitation on Sale and Leaseback Transactions

63

 

Section 5.17

Bank Accounts

63

 

Section 5.18

Compliance with Anti-Terrorism Laws

63

 

 

ARTICLE 6 FINANCIAL COVENANTS

64

 

 

 

Section 6.1

Interest Coverage Ratio

64

 

Section 6.2

Current Ratio

64

 

 

ARTICLE 7 CONDITIONS

64

 

 

 

Section 7.1

Conditions to Closing

64

 

Section 7.2

Conditions to Each Loan, Support Agreement and Lender Letter of Credit

64

 

 

ARTICLE 8 EVENTS OF DEFAULT

65

 

ii

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

 

 

Section 8.1

Events of Default

65

 

Section 8.2

Acceleration and Suspension or Termination of Revolving Loan Commitment

67

 

Section 8.3

Cash Collateral

68

 

Section 8.4

Default Rate of Interest and Suspension of LIBOR Rate Options

68

 

Section 8.5

Setoff Rights

68

 

Section 8.6

Application of Proceeds

68

 

 

ARTICLE 9 EXPENSES AND INDEMNITY

70

 

 

 

Section 9.1

Expenses

70

 

Section 9.2

Indemnity

70

 

 

ARTICLE 10 ADMINISTRATIVE AGENT

71

 

 

 

Section 10.1

Appointment and Authorization

71

 

Section 10.2

Administrative Agent and Affiliates

72

 

Section 10.3

Action by Administrative Agent

72

 

Section 10.4

Consultation with Experts

72

 

Section 10.5

Liability of Administrative Agent

72

 

Section 10.6

Indemnification

73

 

Section 10.7

Right to Request and Act on Instructions

73

 

Section 10.8

Credit Decision

73

 

Section 10.9

Collateral Matters

74

 

Section 10.10

Agency for Perfection

74

 

Section 10.11

Notice of Default

75

 

Section 10.12

Successor Administrative Agent

75

 

Section 10.13

Disbursements of Revolving Loans; Payment and Sharing of Payment

76

 

Section 10.14

Right to Perform, Preserve and Protect

79

 

Section 10.15

Additional Titled Agents

79

 

Section 10.16

Funding and Settlement Provisions Applicable When Non-Funding Lenders Exist

79

 

 

ARTICLE 11 MISCELLANEOUS

81

 

 

 

Section 11.1

Survival

81

 

Section 11.2

No Waivers

81

 

Section 11.3

Notices

81

 

Section 11.4

Severability

82

 

Section 11.5

Amendments and Waivers

82

 

Section 11.6

Assignments; Participations; Replacement of Lenders

83

 

Section 11.7

Headings

86

 

Section 11.8

Confidentiality

86

 

Section 11.9

Waiver of Consequential and Other Damages

86

 

Section 11.10

Marshaling; Payments Set Aside

87

 

Section 11.11

GOVERNING LAW; SUBMISSION TO JURISDICTION

87

 

Section 11.12

WAIVER OF JURY TRIAL

88

 

Section 11.13

Publication; Advertisement

88

 

Section 11.14

Counterparts; Integration

89

 

Section 11.15

No Strict Construction

89

 

iii

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

 

 

Section 11.16

USA PATRIOT Act Notification

89

 

Section 11.17

Amendment and Restatement

89

 

iv

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

 

ANNEXES, EXHIBITS AND SCHEDULES

 

ANNEXES

 

Annex A

–

Commitment Annex

Annex B

–

Closing Checklist

 

EXHIBITS

 

Exhibit A

–

Assignment Agreement

Exhibit B

–

Compliance Certificate

Exhibit C

–

Notice of Borrowing

Exhibit D

–

Payment Notification

 

SCHEDULES

 

Schedule 3.1

-

Existence, Organizational Identification Numbers, Foreign Qualification, Prior
Names

Schedule 3.4

-

Capitalization

Schedule 3.6

-

Litigation

Schedule 3.15

-

Brokers

Schedule 3.18

-

Environmental Compliance

Schedule 3.23

-

Reserve Reports

Schedule 3.24

-

Maintenance; Permits

Schedule 5.1

-

Debt

Schedule 5.2

-

Liens

Schedule 5.3

-

Contingent Obligations

Schedule 5.5

-

Restrictive Agreements

Schedule 5.9

-

Affiliate Transactions

Schedule 5.13

-

Business Description

 

v

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

 

AMENDED AND RESTATED
CREDIT AGREEMENT

 

AMENDED AND RESTATED CREDIT AGREEMENT dated as of November 19, 2007 among Warren
Resources, Inc, a Maryland corporation, as Borrower, the financial institutions
or other entities from time to time parties hereto, each as a Lender, and
MERRILL LYNCH CAPITAL, a division of Merrill Lynch Business Financial Services
Inc., individually as a Lender, as Administrative Agent, Sole Bookrunner and
Sole Lead Arranger.

 

RECITALS:

 

WHEREAS, Borrower desires that Lenders extend a revolving credit facility to
Borrower to provide funds for the purposes described herein; and

 

WHEREAS, Borrower desires to secure all of the Obligations by granting to
Administrative Agent, for the benefit of Administrative Agent and Lenders, a
first priority perfected Lien upon substantially all of its personal and real
property (subject to Permitted Liens), including without limitation all
outstanding Capital Stock of each Restricted Subsidiary; and

 

WHEREAS, subject to the limitations set forth herein, each Restricted Subsidiary
is willing to guaranty all of the Obligations, and to grant to Administrative
Agent, for the benefit of Administrative Agent and Secured Parties, a first
priority perfected Lien upon substantially all of its personal and real property
(subject to Permitted Liens);

 

NOW, THEREFORE, in consideration of the premises and the agreements, provisions
and covenants herein contained, Borrower, Lenders and Administrative Agent agree
as follows:

 

ARTICLE 1
DEFINITIONS

 

SECTION 1.1            CERTAIN DEFINED TERMS.

 

The following terms have the following meanings:

 

“Acceleration Event” means the occurrence of an Event of Default (i) in respect
of which Administrative Agent has declared all or any portion of the Obligations
to be immediately due and payable pursuant to Section 8.2, (ii) pursuant to
Section 8.1(a) in respect of which Administrative Agent has suspended or
terminated the Revolving Loan Commitment pursuant to Section 8.2 and/or (iii)
pursuant to either Section 8.1(f) and/or Section 8.1(g).

 

“Additional Titled Agents” has the meaning set forth in Section 10.15.

 

“Adjusted EBITDAX” has the meaning provided in the Compliance Certificate.

 

“Administrative Agent” means Merrill Lynch in its capacity as administrative
agent for itself and for Lenders hereunder, as such capacity is established in,
and subject to the provisions of, Article 10, and the successors of Merrill
Lynch in such capacity.

 

1

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

 

“Affected Lender” has the meaning set forth in Section 11.6(c).

 

“Affiliate” means with respect to any Person (i) any Person that directly or
indirectly controls such Person, (ii) any Person which is controlled by or is
under common control with such controlling Person and (iii) each of such
Person’s (other than, with respect to any Lender, any Lender’s) officers or
directors (or Persons functioning in substantially similar roles) and the
spouses, parents, descendants and siblings of such officers, directors or other
Persons. As used in this definition, the term “control” of a Person 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 majority voting power, by contract or otherwise.

 

“Agreement” means this Amended and Restated Credit Agreement, as the same may be
amended, supplemented, restated or otherwise modified from time to time.

 

“Anti-Terrorism Laws” means any Laws relating to terrorism or money laundering,
including Executive Order No. 13224 (effective September 24, 2001), the USA
PATRIOT Act, the Laws comprising or implementing the Bank Secrecy Act, and the
Laws administered by OFAC.

 

“Approved Fund” means any (i) investment company, fund, trust, securitization
vehicle or conduit 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 or (ii) any Person (other than a natural
person) which temporarily warehouses loans for any Lender or any entity
described in the preceding clause (i) and that, with respect to each of the
preceding clauses (i) and (ii), is administered or managed by (a) a Lender, (b)
an Affiliate of a Lender or (c) a Person (other than a natural person) or an
Affiliate of a Person (other than a natural person) that administers or manages
a Lender.

 

“Asset Disposition” means any sale, lease, license, transfer, assignment or
other consensual disposition by any Credit Party of any asset, but excluding (i)
dispositions of inventory or used, obsolete, worn-out or surplus equipment, all
in the Ordinary Course of Business, (ii) dispositions of Permitted Investments,
(iii) sales, transfers and other dispositions of accounts receivable in
connection with the compromise, settlement or collection thereof in the Ordinary
Course of Business, (iv) the lease, assignment, license, sub-license or
sub-lease of any real or personal property in the Ordinary Course of Business to
the extent the same does not materially interfere with the business of Borrower
or any Subsidiary; (v) any disposition of property or issuance of Capital Stock
by Borrower or any Domestic Subsidiary to Borrower or any other Domestic
Subsidiary; (vi) dispositions of equipment to the extent that (a) such equipment
is exchanged for credit against the purchase price of similar replacement
equipment or (b) within 180 days after such disposition the proceeds of such
disposition are applied to the purchase price of such replacement equipment;
(vii) the sale in the ordinary course of business of Hydrocarbons produced from
the Credit Parties’ Hydrocarbon Interests; (viii) a disposition between Credit
Parties; (ix) dispositions of Equity Interests in Unrestricted Subsidiaries; (x)
the creation of a Permitted Lien; (xi) the surrender or waiver of contract
rights or the disposition, settlement, release or surrender of contract, tort or
other claims of any kind; (xii) a Restricted Payment permitted by Section 5.4;
(xiii) dispositions permitted by Section 5.7(a); and (xiv) an Investment
permitted by Section 5.8.

 

2

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

 

“Assignment Agreement” means an agreement substantially in the form of Exhibit A
hereto, or in the event Administrative Agent institutes a Settlement Service
pursuant to Section 11.6(a)(v), such other agreement as may be prescribed by
such Settlement Service.

 

“Bankruptcy Code” means Title 11 of the United States Code entitled
“Bankruptcy”.

 

“Base Rate” means a variable per annum rate, as of any date of determination,
equal to the greater of (i) the Federal Funds Rate plus one-half of one percent
(0.50%) per annum and (ii) the rate of interest which is identified and normally
published by Bloomberg Professional Service Page Prime as the “Prime Rate” (or,
if more than one rate is published as the Prime Rate, then the highest of such
rates). Any change in the Base Rate will become effective as of the date the
rate of interest which is so identified as the “Prime Rate” is different from
that published on the preceding Business Day. If Bloomberg Professional Service
no longer reports the Prime Rate, or if such Page Prime no longer exists, or
Administrative Agent determines in good faith that the rate so reported no
longer accurately reflects an accurate determination of the prevailing Prime
Rate, Administrative Agent may select a reasonably comparable index or source to
use as the basis for the Base Rate.

 

“Base Rate Loans” means Loans which accrue interest by reference to the Base
Rate, in accordance with the terms of this Agreement.

 

“Base Rate Margin” means for any day, the applicable percent per annum set forth
in the Pricing Table corresponding to the Borrowing Base Usage as of the end of
such day.

 

“Blocked Person” means any Person:  (i) listed in the annex to, or is otherwise
subject to the provisions of, Executive Order No. 13224, (ii) owned or
controlled by, or acting for or on behalf of, any Person that is listed in the
annex to, or is otherwise subject to the provisions of, Executive Order No.
13224, (iii) with which any Lender is prohibited from dealing or otherwise
engaging in any transaction by any Anti-Terrorism Law, (iv) that commits,
threatens or conspires to commit or supports “terrorism” as defined in Executive
Order No. 13224; or (v) that is named a “specially designated national” or
“blocked person” on the most current list published by OFAC or other similar
list.

 

“Bond” means any completion bond, performance bond, bid bond, appeal bond,
surety bond, insurance obligation or bond or any similar bond or obligation, or
any letter of credit or guarantee functioning as or supporting any of the
foregoing bonds or obligations, incurred by Borrower or any Subsidiary in the
ordinary course of business.

 

“Borrower” means Warren Resources, Inc., a Maryland corporation.

 

“Borrower’s Account” means the account specified on the signature pages hereof
below Borrower’s name into which Loans shall, absent other instructions, be
made, or such other account as Borrower may specify by notice to Administrative
Agent.

 

“Borrowing Base” means, at any time, either the amount provided for in Section
2.16(a), or the amount determined in accordance with the provisions of Section
2.16(b) or (c), in each case, as reduced pursuant to Section 2.16(d).

 

3

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

 

“Borrowing Base Deficiency” means the amount by which the Revolving Loan
Outstandings exceeds the sum of (i) the Borrowing Base plus (ii) during the
Overadvance Period the Overadvance Amount.

 

“Borrowing Base Period” means the period commencing any Determination Date or
Special Determination Date and ending on the next succeeding Determination Date
or Special Determination Date.

 

“Borrowing Base Usage” means on any date the percentage, at the close of
business on such day, equivalent to the Revolving Loan Outstandings divided by
the Borrowing Base.

 

“Business Day” means any day except a Saturday, Sunday or other day on which
either the New York Stock Exchange is closed, or on which commercial banks in
Chicago and New York City are authorized by Law to close and, in the case of a
Business Day which relates to a LIBOR Loan, a day on which dealings are carried
on in the London interbank eurodollar market.

 

“Capital Lease” of any Person means any lease of any property by such Person as
lessee which would, in accordance with GAAP, be required to be accounted for as
a capital lease on the balance sheet of such Person.

 

“Capital Stock” means any and all shares, interests, participations or other
equivalents (however designated) of capital stock of a corporation, any and all
equivalent ownership interests in a Person (other than a corporation) and any
and all warrants, rights or options to purchase any of the foregoing.

 

“CERCLA” means the Comprehensive Environmental Response, Compensation and
Liability Act of 1980.

 

“Change in Control” means (a) the acquisition of ownership, directly or
indirectly, beneficially or of record, by any Person or group (within the
meaning of the Securities Exchange Act of 1934 and the rules of the Securities
and Exchange Commission thereunder as in effect on the date hereof), of Capital
Stock representing more than 50% of the aggregate ordinary voting power
represented by the issued and outstanding Capital Stock of Borrower; or (b)
occupation of a majority of the seats (other than vacant seats) on the board of
directors of Borrower by Persons who were neither (i) nominated by the board of
directors of Borrower, nor (ii) appointed by directors so nominated.

 

“Closing Checklist” means Annex B to this Agreement.

 

“Closing Date” means the date of this Agreement.

 

“Code” means the Internal Revenue Code of 1986.

 

“Collateral” means all property, now existing or hereafter acquired, mortgaged
or pledged to, or purported to be subjected to a Lien in favor of,
Administrative Agent, for the benefit of Administrative Agent, Lenders and
Eligible Swap Counterparties, pursuant to the Security Documents.

 

4

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

 

“Collateral Documents” means, collectively, the Deeds of Trust, any Guaranty,
and any Security Agreements, in each case executed pursuant to this Agreement,
and all financing statements filed in connection therewith.

 

“Commitment Annex” means Annex A to this Agreement.

 

“Commitment Expiry Date” means November 19, 2012.

 

“Compliance Certificate” means a certificate, duly executed by a Responsible
Officer, appropriately completed and substantially in the form of Exhibit B
hereto.

 

“Consolidated Current Assets” means the total of the consolidated current assets
of Borrower (excluding assets of Unrestricted Subsidiaries), plus the amount
available for borrowing under the Borrowing Base plus the Overadvance Amount, if
any; provided, however, that in determining consolidated current assets, such
determination shall not include the account included in such consolidated
current assets to the extent resulting from (i) any non-cash gains required
under SFAS 133 or under SFAS 143, or (ii)  any non-cash stock option accrual
under FAS Statement 123.

 

“Consolidated Current Liabilities” means the total of the consolidated current
liabilities of Borrower (excluding liabilities of Unrestricted Subsidiaries),
provided, however, that in determining consolidated current liabilities, such
determination shall not include the accounts included in such consolidated
current liabilities resulting from non-cash losses or charges required under
SFAS 133, under SFAS 143 or under FAS Statement 123.

 

“Consolidated Subsidiary” means at any date any Subsidiary the accounts of which
would be consolidated with those of Borrower (or any other Person, as the
context may require hereunder) in its consolidated financial statements if such
statements were prepared as of such date.

 

“Contingent Obligation” means, with respect to any Person, any direct or
indirect liability of such Person:  (i) with respect to any debt, lease,
dividend or other obligation of another Person if the purpose or intent of such
Person incurring such liability, or the effect thereof, is to provide assurance
to the obligee of such liability that such liability will be paid or discharged,
or that any agreement relating thereto will be complied with, or that any holder
of such liability will be protected, in whole or in part, against loss with
respect thereto, (ii) with respect to any undrawn portion of any letter of
credit issued for the account of such Person or as to which such Person is
otherwise liable for the reimbursement of any drawing, (iii) under any Swap
Contract, to the extent not yet due and payable, (iv) to make take-or-pay or
similar payments if required regardless of nonperformance by any other party or
parties to an agreement; or (v) for any obligations of another Person pursuant
to any agreement to purchase, repurchase or otherwise acquire any obligation or
any property constituting security therefor, to provide funds for the payment or
discharge of such obligation or to preserve the solvency, financial condition or
level of income of another Person. The amount of any Contingent Obligation shall
be equal to the amount of the obligation so guaranteed or otherwise supported
or, if not a fixed and determinable amount, the maximum amount so guaranteed or
otherwise supported.

 

5

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

 

“Credit Exposure” means any period of time during which the Revolving Loan
Commitment is outstanding or any Loan, Reimbursement Obligation or other
Obligation remains unpaid, or any Letter of Credit or Support Agreement not
supported with cash collateral required by this Agreement remains outstanding;
provided, that no Credit Exposure shall be deemed to exist solely due to the
existence of contingent indemnification liability, absent the assertion of a
claim, or the known existence of a claim reasonably likely to be asserted, with
respect thereto.

 

“Credit Party” means any of Borrower and each Restricted Subsidiary of Borrower,
whether now existing or hereafter acquired or formed; and “Credit Parties” means
all such Persons, collectively.

 

“Debt” of a Person means at any date, without duplication, (i) all obligations
of such Person for borrowed money, (ii) all obligations of such Person evidenced
by bonds, debentures, notes or other similar instruments, (iii) all obligations
of such Person to pay the deferred purchase price of property or services,
except trade accounts payable, accrued expenses and deferred compensation and
other pension benefit and welfare expenses, in each case arising in the Ordinary
Course of Business and not overdue by more than 60 days, (iv) all Capital Leases
of such Person, (v) all non contingent obligations of such Person to reimburse
any bank or other Person in respect of amounts paid under a letter of credit,
banker’s acceptance or similar instrument, (vi) all obligations of such Person
under conditional sale or other title retention agreements relating to property
acquired by such Person, (vii) all Debt secured by a Lien on any asset of such
Person, whether or not such Debt is otherwise Debt of such Person, and (vii) all
Debt of others Guaranteed by such Person. Without duplication of any of the
foregoing, Debt of Borrower shall include any and all Loans and Letter of Credit
Liabilities.

 

“Default” means any condition or event which with the giving of notice or lapse
of time or both would, unless cured or waived, become an Event of Default.

 

“Defaulted Lender” means, so long as such failure shall remain in existence and
uncured, any Lender which shall have failed to make any Loan or other credit
accommodation, disbursement, settlement or reimbursement required pursuant to
the terms of any Financing Document.

 

“Defensible Title” means, with respect to the assets of Borrower or any
Restricted Subsidiary (a) the title of Borrower or such Restricted Subsidiary to
such assets is free and clear of all Liens of any kind whatsoever (except
Permitted Liens, (b) with respect to the Mortgaged Properties, the title of
Borrower or such Restricted Subsidiary as is deducible from applicable public
records, and (c) with respect to the Mortgaged Properties, the representations
and warranties set forth in Section 3.23(a) are true and correct.

 

“Designated Title Exceptions” has the meaning assigned to such term in Section
3.23(a).

 

“Determination Date” has the meaning assigned to such term in Section 2.16(b).

 

“Domestic Subsidiary” means a Restricted Subsidiary organized, incorporated or
otherwise formed under the laws of the United States or any state thereof.

 

6

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

 

“Draw Limit” means the amount Borrower may elect to be available for Loans and
Letters of Credit hereunder, provided that the amount elected by Borrower shall
not, once so elected, be increased without the consent of Administrative Agent
in its sole discretion.

 

“EBITDAX” has the meaning provided in the Compliance Certificate.

 

“Eligible Assignee” means (i) a Lender, (ii) an Affiliate of a Lender, (iii) an
Approved Fund, and (iv) any other Person (other than a natural person) approved
by (A) Administrative Agent (such approval not to be unreasonably withheld) and
(B) unless an Event of Default has occurred and is continuing, Borrower (such
approval not to be unreasonably withheld, and shall be deemed provided unless
expressly withheld by Borrower within five (5) Business Days of request
therefor); provided that notwithstanding the foregoing, (x) Eligible Assignee
shall not include Borrower or any of Borrower’s Affiliates or Subsidiaries and
(y) no proposed assignee intending to assume all or any portion of the Revolving
Loan Commitment shall be an Eligible Assignee unless such proposed assignee
either already holds a portion of the Revolving Loan Commitment, or has been
approved as an Eligible Assignee by Administrative Agent.

 

“Eligible Swap Counterparty” means Administrative Agent, any Affiliate of
Administrative Agent, any Lender and/or any Affiliate of any Lender that (i)
either (A) is party to a Swap Contract permitted hereunder with Borrower or any
Subsidiary on the Closing Date or (B) at any time it occupies such role or
capacity (whether or not it remains in such capacity) enters into a Swap
Contract permitted hereunder with Borrower or any Subsidiary and (ii) in the
case of a Lender or an Affiliate of a Lender (other than an Affiliate of
Administrative Agent), maintains a reporting system acceptable to Administrative
Agent with respect to Swap Contract exposure and agrees with Administrative
Agent to provide regular reporting to Administrative Agent in form and substance
reasonably satisfactory to Administrative Agent, with respect to such exposure.
In addition thereto, any Affiliate of a Lender shall, upon Administrative
Agent’s request, execute and deliver to Administrative Agent a letter agreement
pursuant to which such Affiliate designates Administrative Agent as its agent
and agrees to share, pro rata, all expenses relating to liquidation of the
Collateral for the benefit of such Affiliate.

 

“Environmental Laws” means any and all Laws relating to the environment or the
effect of the environment on human health or to emissions, discharges or
releases of pollutants, contaminants, Hazardous Materials 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, Hazardous
Materials or wastes or the clean up or other remediation thereof.

 

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

 

7

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

 

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

 

“ERISA Affiliate” means any trade or business (whether or not incorporated)
that, together with Borrower, is treated as a single employer under Section
414(b) or (c) of the Code or, solely for purposes of Section 302 of ERISA and
Section 412 of the Code, is treated as a single employer under Section 414 of
the Code.

 

“ERISA Event” means (a) any “reportable event, as defined in Section 4043 of
ERISA or the regulations issued thereunder with respect to a Plan (other than an
event for which the 30-day notice period is waived); (b) the existence with
respect to any Plan of an “accumulated funding deficiency” (as defined in
Section 412 of the Code or Section 302 of ERISA), whether or not waived; (c) the
filing pursuant to Section 412(d) of the Code or Section 303(d) of ERISA of an
application for a waiver of the minimum funding standard with respect to any
Plan; (d) the incurrence by Borrower or any of its ERISA Affiliates of any
liability under Title IV of ERISA with respect to the termination of any Plan;
(e) the receipt by Borrower or any ERISA Affiliate from the PBGC or a plan
administrator of any notice relating to an intention to terminate any Plan or
Plans or to appoint a trustee to administer any Plan; (f) the incurrence by
Borrower or any of its ERISA Affiliates of any liability with respect to the
withdrawal or partial withdrawal from any Plan or Multiemployer Plan; or (g) the
receipt by Borrower or any ERISA Affiliate of any notice, or the receipt by any
Multiemployer Plan from Borrower or any ERISA Affiliate of any notice,
concerning the imposition of Withdrawal Liability or a determination that a
Multiemployer Plan is, or is expected to be, insolvent or in reorganization,
within the meaning of Title IV of ERISA.

 

“Event of Default” has the meaning set forth in Section 8.1.

 

“Existing Credit Facility” means that certain Credit Agreement dated November
16, 2006, among Borrower, the Lenders party hereto and JPMorgan Chase Bank, N.A.

 

“Existing Letters of Credit” means the letters of credit issued and outstanding
under the Existing Credit Facility on the Closing Date.

 

“Federal Funds Rate” means, for any day, the rate of interest per annum (rounded
upwards, if necessary, to the nearest whole multiple of 1/100 of 1%) 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 (i) if such day is not a Business Day,
the Federal Funds Rate for such day shall be such rate on such transactions on
the next preceding Business Day and (ii) if no such rate is so published on such
next preceding Business 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.

 

“Financing Documents” means this Agreement, any Notes, the Security Documents,
any fee letter between Merrill Lynch and Borrower relating to the transactions
contemplated hereby, any subordination or intercreditor agreement pursuant to
which any Debt and/or any Liens securing such Debt is subordinated to all or any
portion of the Obligations, and all other

 

8

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

 

documents, instruments and agreements (other than any Swap Contract)
contemplated herein or thereby and heretofore executed, executed concurrently
herewith or executed at any time and from time to time hereafter, as any or all
of the same may be amended, supplemented, restated or otherwise modified from
time to time.

 

“Fiscal Year” means a fiscal year of Borrower, ending on December 31 of each
calendar year.

 

“Foreign Lender” has the meaning set forth in Section 2.13(c).

 

“Foreign Subsidiary” means any Restricted Subsidiary other than a Domestic
Subsidiary.

 

“GAAP” means generally accepted accounting principles set forth from time to
time in the opinions and pronouncements of the Accounting Principles Board and
the American Institute of Certified Public Accountants and statements and
pronouncements of the Financial Accounting Standards Board (or agencies with
similar functions of comparable stature and authority within the United States
accounting profession), which are applicable to the circumstances as of the date
of determination.

 

“Governmental Authority” means any nation or government, any state or other
political subdivision thereof, and any agency, department or Person exercising
executive, legislative, judicial, regulatory or administrative functions of or
pertaining to government and any corporation or other Person owned or controlled
(through stock or capital ownership or otherwise) by any of the foregoing,
whether domestic or foreign.

 

“Guarantee” by any Person means any obligation, contingent or otherwise, of such
Person directly or indirectly guaranteeing any Debt or other obligation of any
other Person and, without limiting the generality of the foregoing, any
obligation, direct or indirect, contingent or otherwise, of such Person (i) to
purchase or pay (or advance or supply funds for the purchase or payment of) such
Debt or other obligation (whether arising by virtue of partnership arrangements,
by agreement to keep well, to purchase assets, goods, securities or services, to
take or pay, or to maintain financial statement conditions or otherwise) or (ii)
entered into for the purpose of assuring in any other manner the obligee of such
Debt or other obligation of the payment thereof or to protect such obligee
against loss in respect thereof (in whole or in part), provided that the term
Guarantee shall not include endorsements for collection or deposit in the
Ordinary Course of Business. The term “Guarantee” used as a verb has a
corresponding meaning.

 

“Guarantor”  means (i) initially, Warren Resources of California, Inc., a
California corporation, and Warren E&P, Inc., a New Mexico corporation, and (ii)
each other Restricted Subsidiary that hereafter executes and delivers to
Administrative Agent and the Lenders a Guaranty, in each case until such Person
ceases to be a Guarantor in accordance with the terms hereof.

 

“Hazardous Materials” means (i) any “hazardous substance” as defined in CERCLA,
(ii) any “hazardous waste” as defined by the Resource Conservation and Recovery
Act, (iii) asbestos, (iv) polychlorinated biphenyls, (v) petroleum, its
derivatives, by products and other

 

9

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

 

hydrocarbons, (vi) mold and (vii) any other pollutant, toxic, radioactive,
caustic or otherwise hazardous substance regulated under Environmental Laws.

 

“Hazardous Materials Contamination” means contamination (whether now existing or
hereafter occurring) of the improvements, buildings, facilities, personalty,
soil, groundwater, air or other elements on or of the relevant property by
Hazardous Materials, or any derivatives thereof, or on or of any other property
as a result of Hazardous Materials, or any derivatives thereof, generated on,
emanating from or disposed of in connection with the relevant property.

 

“Hydrocarbons” means oil, gas, casinghead gas, coalbed methane, drip gasoline,
natural gasoline, condensate, distillate, liquid hydrocarbons, gaseous
hydrocarbons and all products refined or separated therefrom and all other
minerals.

 

“Hydrocarbon Interests”  means all of Borrower’s and the Guarantors’ rights,
titles, interests and estates in and to oil and gas leases, oil, gas and mineral
leases, or other liquid or gaseous hydrocarbon leases, mineral fee interests,
overriding royalty and royalty interests, net profit interests and production
payment interests, including any reserved or residual interest of similar
nature, in and under the Oil and Gas Properties that are subject to Lenders
Liens.

 

“Indemnitees” has the meaning set forth in Section 9.2.

 

“Initial Reserve Report” “ means the reserve report dated September 14, 2007, as
of July 31, 2007, prepared by Williamson Petroleum Consultants, Inc., an
independent petroleum engineer, concerning the Oil and Gas Properties based on
reasonable assumptions specified by Administrative Agent and Borrower (including
discount rates and projected hydrocarbon price assumptions), a copy of which has
been delivered to each Lender.

 

“Intellectual Property” means, with respect to any Person, all patents,
trademarks, trade names, trade styles, trade dress, service marks, logos and
other business identifiers, copyrights, technology, know-how and processes,
computer hardware and software and all applications and licenses therefor, used
in or necessary for the conduct of business by such Person.

 

“Interest Coverage Ratio” has the meaning provided in the Compliance
Certificate.

 

“Interest Period” means, as to any LIBOR Loan, the period commencing on the date
such Loan is borrowed or continued as, or converted into, a LIBOR Loan and
ending on the date one (1), two (2), three (3), six (6) months or, if all
applicable Lenders are capable thereof, nine (9) or twelve (12) months
thereafter, as selected by Borrower pursuant to Section 2.7(e); provided, that: 
(i) if any Interest Period would otherwise end on a day that is not a Business
Day, such Interest Period shall be extended to the following Business Day unless
the result of such extension would be to carry such Interest Period into another
calendar month, in which event such Interest Period shall end on the preceding
Business Day, (ii) any Interest Period that begins on a day for which there is
no numerically corresponding day in the calendar month at the end of such
Interest Period shall end on the last Business Day of the calendar month at the
end of such Interest Period, and (iii) Borrower may not select any Interest
Period for a Revolving Loan which would extend beyond the Commitment Expiry
Date.

 

10

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

 

“Investment” means any investment in any Person, whether by means of acquiring
(whether for cash, property, services, Capital Stock or otherwise), making or
holding Debt securities, Capital Stock, capital contributions, loans, time
deposits, advances, Guarantees or otherwise. The amount of any Investment shall
be the original cost of such Investment plus the cost of all additions thereto,
without any adjustments for increases or decreases in value, or write-ups,
write-downs or write-offs with respect thereto.

 

“Laws” means any and all federal, state, local and foreign statutes, laws,
judicial decisions, regulations, guidances, guidelines, ordinances, rules,
judgments, orders, decrees, codes, plans, injunctions, permits, concessions,
grants, franchises, governmental agreements and governmental restrictions,
whether now or hereafter in effect.

 

“LC Issuer” means one or more banks, trust companies or other Persons in each
case expressly identified by Administrative Agent from time to time, in its sole
discretion, as an LC Issuer for purposes of issuing one or more Letters of
Credit hereunder. Without limitation of Administrative Agent’s discretion to
identify any Person as an LC Issuer, no Person shall be designated as an LC
Issuer unless such Person maintains reporting systems acceptable to
Administrative Agent with respect to letter of credit exposure and agrees to
provide regular reporting to Administrative Agent satisfactory to it with
respect to such exposure.

 

“Lender” means each of (i) Merrill Lynch, (ii) each other Person party hereto in
its capacity as a lender, (iii) each other Eligible Assignee that becomes a
party hereto pursuant to Section 11.6, (iv) Administrative Agent, to the extent
of any Revolving Loans made by Administrative Agent which have not been settled
among Lenders pursuant to Section 10.12, and (v) the respective successors of
all of the foregoing, and “Lenders” means all of the foregoing. In addition to
the foregoing, solely for the purpose of identifying the Persons entitled to
share in payments and collections from the Collateral as more fully set forth in
this Agreement and the Security Documents, the term “Lender” shall include
Eligible Swap Counterparties. In connection with any such distribution of
payments and collections, Administrative Agent shall be entitled to assume that
no amounts are due to any Eligible Swap Counterparty unless such Eligible Swap
Counterparty has notified Administrative Agent of the amount of any such
liability owed to it prior to such distribution.

 

“Lender Letter of Credit” means a Letter of Credit issued by an LC Issuer that
is also, at the time of issuance of such Letter of Credit, a Lender.

 

“Lender Liens” means the Liens granted in the Collateral in favor of
Administrative Agent for the ratable benefit of the Secured Parties or directly
for the benefit of any Secured Party pursuant to the Financing Documents.

 

“Letter of Credit” means a standby or documentary (trade) letter of credit
issued for the account of Borrower by an LC Issuer which expires by its terms
within one year after the date of issuance and in any event at least thirty (30)
days prior to the Commitment Expiry Date. Notwithstanding the foregoing, a
Letter of Credit may provide for automatic extensions of its expiry date for one
or more successive one (1) year periods provided that the LC Issuer that issued
such Letter of Credit has the right to terminate such Letter of Credit on each
such annual expiration date and no renewal term may extend the term of the
Letter of Credit to a date that is

 

11

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

 

later than the thirtieth (30th) day prior to the Commitment Expiry Date. Each
Letter of Credit shall be either a Lender Letter of Credit or a Supported Letter
of Credit.

 

“Letter of Credit Liabilities” means, at any time of calculation, the sum of (i)
without duplication, the amount then available for drawing under all outstanding
Lender Letters of Credit and all Supported Letters of Credit, in each case
without regard to whether any conditions to drawing thereunder can then be met
plus (ii) without duplication, the aggregate unpaid amount of all reimbursement
obligations in respect of previous drawings made under all such Lender Letters
of Credit and Supported Letters of Credit minus (iii) the amount of cash
collateral deposited pursuant to Sections 2.3 or 2.9.

 

“LIBOR” means, with respect to any LIBOR Loan for any Interest Period, a rate
per annum (rounded upwards, if necessary, to the nearest 1/100 of 1%) equal to
(i) the rate of interest which is identified and normally published by Bloomberg
Professional Service Page BBAM 1 as the offered rate for loans in United States
dollars for the applicable Interest Period under the caption British Bankers
Association LIBOR Rates as of 11:00 a.m. (London time), on the second full
Business Day next preceding the first day of such Interest Period (unless such
date is not a Business Day, in which event the next succeeding Business Day will
be used); divided by (ii) the sum of one minus the daily average during such
Interest Period of the aggregate maximum reserve requirement (expressed as a
decimal) then imposed under Regulation D of the Board of Governors of the
Federal Reserve System (or any successor thereto) for “Eurocurrency Liabilities”
(as defined therein). If Bloomberg Professional Service no longer reports the
LIBOR or Administrative Agent determines in good faith that the rate so reported
no longer accurately reflects the rate available to Administrative Agent in the
London Interbank Market or if such index no longer exists or if Page BBAM 1 no
longer exists or accurately reflects the rate available to Administrative Agent
in the London Interbank Market, Administrative Agent may select a replacement
index or replacement page, as the case may be.

 

“LIBOR Loans” means any Loans which accrue interest by reference to the LIBOR,
in accordance with the terms of this Agreement.

 

“LIBOR Margin” means for any day, the applicable percent per annum set forth in
the Pricing Table corresponding to the Borrowing Base Usage as of the end of
such day.

 

“Lien” means, with respect to any asset, any mortgage, lien, pledge, charge,
security interest or encumbrance of any kind, or any other type of preferential
arrangement that has the practical effect of creating a security interest, in
respect of such asset. For the purposes of this Agreement and the other
Financing Documents, Borrower or any Subsidiary shall be deemed to own subject
to a Lien any asset which it has acquired or holds subject to the interest of a
vendor or lessor under any conditional sale agreement, Capital Lease or other
title retention agreement relating to such asset.

 

“Litigation” means any action, suit or proceeding before any court, mediator,
arbitrator or Governmental Authority.

 

“Loan Account” has the meaning set forth in Section 2.11.

 

“Loans” means the Revolving Loans.

 

12

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

 

“Long Term Indebtedness” means, at any time, all consolidated Indebtedness of
Borrower that should be classified as “funded indebtedness” or “long term
indebtedness” on Borrower’s balance sheet as of such date, in accordance with
GAAP, excluding “funded indebtedness” or “long term indebtedness” of the
Unrestricted Subsidiaries.

 

“Major Casualty Proceeds” means (i) the aggregate insurance proceeds received in
connection with one or more related events under any Property Insurance Policy
or (ii) any award or other compensation with respect to any eminent domain,
condemnation of property or similar proceedings (or any transfer or disposition
of property in lieu of condemnation).

 

“Margin Stock” has the meaning assigned thereto in Regulation U of the Federal
Reserve Board.

 

“Material Adverse Effect” means, with respect to any event, act, condition or
occurrence of whatever nature (including any adverse determination in any
litigation, arbitration, or governmental investigation or proceeding), whether
singly or in conjunction with any other event or events, act or acts, condition
or conditions, occurrence or occurrences, whether or not related, a material
adverse change in, or a material adverse effect upon, any of (i) the business,
assets, properties, liabilities (actual or contingent), operations, or financial
condition of Borrower and its Subsidiaries taken as a whole, (ii) the rights and
remedies of Administrative Agent or Lenders under any Financing Document, or the
ability of any Credit Party to perform any of its obligations under any
Financing Document to which it is a party, (iii) the legality, validity or
enforceability of any Financing Document, or (iv) the existence, perfection or
priority of any security interest granted in any Financing Document or the value
of any material Collateral.

 

 “Maximum Lawful Rate” has the meaning set forth in Section 2.12(b).

 

“Merrill Lynch” means Merrill Lynch Capital, a division of Merrill Lynch
Business Financial Services Inc., and its successors.

 

“Mortgage Properties” means the Oil and Gas Properties described in one or more
duly executed, delivered and filed Mortgages evidencing a first and prior Lender
Lien in favor of Administrative Agent for the benefit of the Secured Parties and
subject only to the Permitted Liens.

 

“Mortgages” means each Deed of Trust, Mortgage, Line of Credit Mortgage,
Assignment, Security Agreement, Fixture Filing and Financing Statement executed
by Borrower or any Guarantor in favor of Administrative Agent, for the ratable
benefit of the Secured Parties, as it may be amended or modified and in effect
from time to time.

 

“Multiemployer Plan” means a multiemployer plan, as defined in
Section 4001(a)(3) of ERISA.

 

“Net Cash Proceeds” means, with respect to any transaction or event, an amount
equal to the cash proceeds received by any Credit Party from or in respect of
such transaction or event (including proceeds of any non-cash proceeds of such
transaction), less (i) any underwriting discounts and out-of-pocket expenses
paid to a Person that are reasonably incurred by such Credit Party in connection
therewith and (ii) in the case of an Asset Disposition, the amount of

 

13

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

 

any Debt secured by a Lien on the related asset and discharged from the proceeds
of such Asset Disposition and any taxes paid or reasonably estimated by the
applicable Credit Party to be payable by such Person in respect of such Asset
Disposition (provided, that if the actual amount of taxes paid is less than the
estimated amount, the difference shall immediately constitute Net Cash
Proceeds).

 

“Net Borrowing Availability” means, as of any date of calculation, the total
amount of Revolving Loans available to be borrowed by Borrower in accordance
with the terms of this Agreement, excluding any and all outstanding Revolving
Loans on such date of calculation.

 

“Non-Funding Lender” has the meaning set forth in Section 10.16.

 

“Non-Recourse Debt” mean Debt of an Unrestricted Subsidiary for which no Credit
Party is liable for payment, and which is not secured by any property of any
Credit Party, other than the Capital Stock of such Unrestricted Subsidiary.

 

“Note” has the meaning set forth in Section 2.8.

 

“Notice of Borrowing” means a notice of a Responsible Officer, appropriately
completed and substantially in the form of Exhibit C hereto.

 

“Notice of LC Credit Event” means a notice from a Responsible Officer to
Administrative Agent with respect to any issuance, increase or extension of a
Letter of Credit specifying (i) the date of issuance or increase of a Letter of
Credit, (ii) the identity of LC Issuer with respect to such Letter of Credit,
(iii) the expiry date of such Letter of Credit, (iv) the proposed terms of such
Letter of Credit, including the face amount; and (v) the transactions that are
to be supported or financed with such Letter of Credit or increase thereof.

 

“Obligations” means all obligations, liabilities and indebtedness (monetary
(including post-petition interest, whether or not allowed) or otherwise) of each
Credit Party under this Agreement or any other Financing Document, in each case
howsoever created, arising or evidenced, whether direct or indirect, absolute or
contingent, now or hereafter existing, or due or to become due. In addition to,
but without duplication of, the foregoing, the Obligations shall include,
without limitation, all obligations, liabilities and indebtedness arising from
or in connection with (i) all Support Agreements, (ii) all Lender Letters of
Credit and (iii) all Swap Contracts entered into with any Eligible Swap
Counterparty.

 

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

 

“OFAC Lists” means, collectively, the Specially Designated Nationals and Blocked
Persons List maintained by OFAC pursuant to Executive Order No. 13224, 66 Fed.
Reg. 49079 (Sept. 25, 2001) and/or any other list of terrorists or other
restricted Persons maintained pursuant to any of the rules and regulations of
OFAC or pursuant to any other applicable Executive Orders.

 

“Oil and Gas Properties” means all oil, gas and/or mineral leases, oil, gas or
mineral properties, mineral servitudes and/or mineral rights of any kind
(including, without limitation, mineral fee interests, lease interests, farmout
interests, overriding royalty and royalty interests,

 

14

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

 

net profits interests, oil payment interests, production payment interests and
other types of mineral interests), and all oil and gas gathering, treating,
storage, processing and handling assets.

 

“Ordinary Course of Business” means, in respect of any transaction involving any
Credit Party, the ordinary course of such Credit Party’s business, as conducted
by such Credit Party in accordance with past practices or which is customary in
the oil and gas business.

 

“Organizational Documents” means, with respect to any Person other than a
natural person, the documents by which such Person was organized (such as a
certificate of incorporation, certificate of limited partnership or articles of
organization, and including, without limitation, any certificates of designation
for preferred stock or other forms of preferred equity) and which relate to the
internal governance of such Person (such as by-laws, a partnership agreement or
an operating, limited liability company or members agreement).

 

“Overadvance” means the amount by which the Revolving Loan Outstandings exceed
the Overadvance Amount.

 

“Overadvance Amount” means $15,000,000, as such amount is redetermined from time
to time pursuant to Section 2.16(e) and as such amount may be reduced from time
to time pursuant to Section 2.3(d).

 

“Overadvance Period” means the period from the Closing Date to the earlier of
(i) May       , 2009 or (ii) the date that the Overadvance Amount has been
reduced to zero pursuant to Section 2.3(d) or 2.16(e).

 

“Participant” has the meaning set forth in Section 11.6(b).

 

“Payment Account” means the account specified on the signature pages hereof into
which all payments by or on behalf of Borrower to Administrative Agent under the
Financing Documents shall be made, or such other account as Administrative Agent
shall from time to time specify by notice to Borrower.

 

“Payment Notification” means a written notification substantially in the form of
Exhibit D hereto.

 

“PBGC” means the Pension Benefit Guaranty Corporation and any Person succeeding
to any or all of its functions under ERISA.

 

“Permits” has the meaning set forth in Section 3.1.

 

“Permitted Contest” means a contest maintained in good faith by appropriate
proceedings promptly instituted and diligently conducted and with respect to
which such reserve or other appropriate provision, if any, as shall be required
in conformity with GAAP shall have been made; provided that compliance with the
obligation that is the subject of such contest is effectively stayed during such
challenge.

 

“Permitted Encumbrances” means any or all of the following:

 

15

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

 

(a)           Liens imposed by law for taxes, assessments or other governmental
charges that are not yet due or are being contested in compliance with
Section 4.2;

 

(c)           Liens of landlords, vendors, carriers, warehousemen, mechanics,
materialmen, repairmen and other like Liens or charges imposed by law, or
otherwise, arising in the ordinary course of business for amounts not yet
delinquent (including any amounts being withheld) or securing obligations that
are not overdue by more than 90 days or are being contested in compliance with
Section 4.2;

 

(d)           pledges and deposits made in the ordinary course of business in
compliance with workers’ compensation, unemployment insurance and other social
security laws or regulations;

 

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

 

(f)            judgment liens in respect of judgments that do not constitute an
Event of Default under clause (i) of Section 8.1;

 

(g)           easements, zoning or other restrictions, rights-of-way, covenants,
conditions, servitudes, permits, authorizations, surface and use leases and
agreements, rights, obligations and similar encumbrances on real or personal
property imposed by law or arising in the ordinary course of business that: 
(i) are of record, (ii) are apparent from a physical inspection of the affected
properties, (iii) Borrower took subject to, (iv) do not secure any monetary
obligations, (v) do not materially detract from the value of the affected
property, and (vi) do not interfere with the ordinary conduct of business of
Borrower or any Subsidiary;

 

(h)           liens in favor of co-owner working interest owners under joint
operating agreements;

 

(i)            inchoate liens arising under ERISA to secure the contingent
liabilities, if any, permitted by this Agreement;

 

(j)            deposits, encumbrances or pledges to secure payments of workers
compensation insurance and related payments, public liability, unemployment and
other insurance, old-age pensions of other social security obligations, or the
performance of bids, tenders, leases, contracts (other than contracts for the
payment of money), public or statutory obligations, surety, stay or appeal
bonds, or other similar obligations arising in the ordinary course of business;

 

(k)           any Designated Title Exceptions which are incurred in the ordinary
course of business;

 

(l)            encumbrances arising out of judgments or awards in respect of
which Borrower shall in good faith be prosecuting an appeal or proceedings for
review; provided that Borrower shall have set aside on its books adequate
reserves, in accordance with GAAP, with respect to such judgment or award;

 

16

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

 

(m)          Liens securing Non-Recourse Debt affecting Borrower’s or any
Restricted Subsidiary’s Capital Stock in any Unrestricted Subsidiary;  provided
that the term “Permitted Encumbrances” shall not include any Lien securing Debt
(other than Bonds).

 

“Permitted Investments” means:

 

(a)           direct obligations of, or obligations the principal of and
interest on which are unconditionally guaranteed by, the United States of
America (or by any agency thereof to the extent such obligations are backed by
the full faith and credit of the United States of America), in each case
maturing within one year from the date of acquisition thereof;

 

(b)           investments in commercial paper maturing within 270 days after the
date of acquisition thereof and having, at such date of acquisition, one of the
two highest credit rating obtainable from S&P or from Moody’s;

 

(c)           investments in certificates of deposit, banker’s acceptances and
time deposits maturing within 365 days after the date of acquisition thereof
that are issued or guaranteed by or placed with, and money market deposit
accounts issued or offered by, any domestic office of any commercial bank
organized under the laws of the United States of America or any State thereof
which has a combined capital and surplus and undivided profits of not less than
$250,000,000;

 

(d)           fully collateralized repurchase agreements with a term of not more
than 30 days for securities described in clause (a) above and entered into with
a financial institution satisfying the criteria described in clause (c) above;
and

 

(e)           money market funds that (i) comply with the criteria set forth in
Securities and Exchange Commission Rule 2a-7 under the Investment Company Act of
1940, (ii) are rated AAA by S&P and Aaa by Moody’s and (iii) have portfolio
assets of at least $5,000,000,000

 

“Permitted Liens” means Liens permitted pursuant to Section 5.2.

 

“Permitted Securities” means publicly issued (or privately placed with rights to
exchange for publicly issued) subordinated unsecured notes or senior unsecured
notes issued by Borrower (including unsecured guaranties thereof by Restricted
Subsidiaries), including securities convertible into common stock, or preferred
Capital Stock issued by Borrower, in an aggregate amount (whether of principal
amount, face amount or liquidation preference amount) not in excess of
$150,000,000, which (i) by its terms (or the terms of any security into which it
is convertible or for which it is exchangeable) does not mature and is not
redeemable (whether mandatorily or otherwise) at the option of the holder
thereof nor convertible or exchangeable (other than for shares of common stock),
in each case prior to 12 months after the Commitment Expiry Date and (ii) in the
case of such notes is not subject to covenants or events of default (or other
provisions which have the same effect as covenants or events of default) at the
time of issuance which are materially more restrictive, taken as a whole, on
Borrower than those customarily required for publicly traded unsecured notes of
the same type issued by companies of a similar credit rating and in the same
industry of Borrower, as determined in the good faith judgment of the Board of
Directors, and (iii) does not provide for interest (in the case of notes) in
excess of 11% per annum nor dividends (in the case of preferred Capital Stock)
in excess of 11% per annum.

 

17

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

 

“Person” means any natural person, corporation, limited liability company,
professional association, limited partnership, general partnership, joint stock
company, joint venture, association, company, trust, bank, trust company, land
trust, business trust or other organization, whether or not a legal entity, and
any Governmental Authority.

 

“Pricing Table” means the following table:

 

Tier

 

Borrowing Base

 

Revolving Loans and all other
Obligations

 

 

 

Level

 

Utilization

 

LIBOR Margin

 

Base Rate Margin

 

Commitment Fee

 

1

 

Greater than or equal to 100%

 

2.50

%

1.25

%

0.500

%

2

 

Greater than or equal to 90%, but less than 100%

 

2.00

%

0.75

%

0.500

%

3

 

Greater than or equal to 75%, but less than 90%

 

1.75

%

0.50

%

0.375

%

4

 

Greater than or equal to 50%, but less than 75%

 

1.50

%

0.25

%

0.250

%

5

 

Less than 50%

 

1.25

%

0.00

%

0.200

%

 

“Production Proceeds” has the meaning set forth in Section 4.10(f).

 

“Projected Oil and Gas Production” means the projected production of oil or gas
(measured by volume unit or BTU equivalent, not sales price) for the term of any
Swap Contract or for a particular month, as applicable, from the interests in
Oil and Gas Properties owned by any Credit Party which are located in or
offshore of the United States to the extent then categorized as Proved Developed
Producing Reserves, as such production is projected in the most recent report
delivered pursuant to Section 4.1(i) or (j), 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 reports meeting the requirements of such
Section 4.1(i) or (j) and otherwise are satisfactory to Administrative Agent.

 

“Pro Rata Share” means (i) with respect to a Lender’s obligation to make
Revolving Loans, to purchase interests and participations in Letters of Credit
and related Support Agreement liabilities and obligations pursuant to Section
2.9(f), such Lender’s right to receive the unused line fee described in Section
2.7(b), and such Lender’s obligation to share in Letter of

 

18

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

 

Credit Liabilities and to receive the related Letter of Credit fee described in
Section 2.9(b), the Revolving Loan Commitment Percentage of such Lender, (ii)
with respect to a Lender’s right to receive payments of principal and interest
with respect to Revolving Loans, such Lender’s Revolving Loan Exposure with
respect thereto and (iii) for all other purposes (including without limitation
the indemnification obligations arising under Section 10.6) with respect to any
Lender, the percentage obtained by dividing (A) the Revolving Loan Commitment
Amount of such Lender (or, in the event the Revolving Loan Commitment shall have
been terminated, such Lender’s then existing Revolving Loan Outstandings), by
(B) the Revolving Loan Commitment (or, in the event the Revolving Loan
Commitment shall have been terminated, the then existing Revolving Loan
Outstandings) of all Lenders.

 

“Proved Reserves” means Proved Reserves as defined in Definitions for Oil and
Gas Reserves promulgated by the Society of Petroleum Engineers (or any generally
recognized successor) as in effect from time to time and “Proved Developed
Producing Reserves” means Proved Reserves, which are categorized as both
“Developed” and “Producing” in such Definitions..

 

“Reimbursement Obligations” means, at any date, the obligations of Borrower then
outstanding to reimburse (i) Administrative Agent for payments made by
Administrative Agent under a Support Agreement and/or (ii) any LC Issuer, for
payments made by such LC Issuer under a Lender Letter of Credit.

 

“Replacement Lender” has the meaning set forth in Section 11.6(c).

 

“Required Lenders” means, subject to the provisions of Section 10.12(d), at any
time Lenders holding (i) one hundred percent (100%) in case of a determination
that the Borrowing Base is to be increased above the Borrowing Base then in
effect, (ii) one hundred percent (100%) in case of a determination that the
Overadvance Amount is to be increased above the Overadvance Amount then in
effect and (ii) sixty-six and two thirds percent (66 2/3%) or more in all
instances other than clause (i) or (ii) above, in each case, of (A) the sum of
the Revolving Loan Commitment or (B) if the Revolving Loan Commitment has been
terminated, of the sum of the then aggregate outstanding principal balance of
the Loans plus the then aggregate amount of Letter of Credit Liabilities.

 

“Reserve Report” means the report regarding the Proved Reserves of the Credit
Parties, in form and scope reasonably acceptable to Administrative Agent,
provided pursuant to Section 4.1(i) or (j).

 

“Reserve Documents” has the meaning given in Section 6.1(e).

 

 “Responsible Officer” means any of the Chairman of the Board, Chief Executive
Officer, President, Chief Financial Officer, Treasurer, or any other officer of
Borrower or the Guarantor acceptable to Administrative Agent.

 

“Restricted Payment” means as to any Person (i) any dividend or other
distribution (whether in cash, Capital Stock or other property) on any equity
interest in such Person (except those payable solely in Capital Stock of the
same class), (ii) any payment by such Person on account of (A) the purchase,
redemption, retirement, defeasance, surrender, cancellation,

 

19

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

 

termination or acquisition of any Capital Stock in such Person or any claim
respecting the purchase or sale of any equity interest in such Person or (B) any
option, warrant or other right to acquire any Capital Stock in such Person, or
(iii) any optional or voluntary payment, purchase, redemption, retirement,
defeasance, surrender, cancellation, termination or acquisition of any Permitted
Securities.

 

“Restricted Subsidiary” means any Subsidiary that is not an Unrestricted
Subsidiary.

 

“Revolving Loan Borrowing” means a borrowing of a Revolving Loan.

 

“Revolving Loan Commitment” means, as of any date of determination, the
aggregate Revolving Loan Commitment Amounts of all Lenders as of such date.

 

“Revolving Loan Commitment Amount” means, as to any Lender, the dollar amount
set forth opposite such Lender’s name on the Commitment Annex under the column
“Revolving Loan Commitment Amount”, as such amount may be adjusted from time to
time by any “Amounts Assigned” pursuant to the terms of any and all effective
Assignment Agreements to which such Lender is a party.

 

“Revolving Loan Commitment Percentage” means, as to any Lender, (i) on the
Closing Date, the percentage set forth opposite such Lender’s name on the
Commitment Annex under the column “Revolving Loan Commitment Percentage” and
(ii) on any date following the Closing Date, the percentage equal to the
Revolving Loan Commitment Amount of such Lender on such date divided by the
aggregate Revolving Loan Commitment Amounts of all Lenders on such date.

 

“Revolving Loan Exposure” means, with respect to any Lender on any date of
determination, the percentage equal to the amount of such Lender’s Revolving
Loan Outstandings on such date divided by the aggregate Revolving Loan
Outstandings of all Lenders on such date.

 

“Revolving Loan Limit” means, at any time, the least of (i) the Revolving Loan
Commitment, (ii) the sum of the Borrowing Base plus, during the Overadvance
Period, the Overadvance Amount or (iii) the Draw Limit.

 

“Revolving Loan Outstandings” means at any time of calculation (i) the sum of
the then existing aggregate outstanding principal amount of Revolving Loans plus
the then existing Letter of Credit Liabilities and (ii) when used with reference
to any single Lender, the sum of the then existing outstanding principal amount
of Revolving Loans advanced by such Lender plus the then existing Letter of
Credit Liabilities for the account of such Lender.

 

“Revolving Loans” has the meaning set forth in Section 2.1.

 

“Secured Parties” means, collectively, Administrative Agent, the Lenders, the LC
Issuer, the Eligible Swap Counterparties, each co-agent or sub-agent appointed
by Administrative Agent from time to time pursuant to Section 10.1, and the
other Persons the Obligations owing to which are or are purported to be secured
by the Collateral under the terms of the Security Documents.

 

20

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

 

“Security Documents” means any agreement, document or instrument executed
concurrently herewith or at any time hereafter pursuant to which one or more
Credit Parties or any other Person either (i) Guarantees payment or performance
of all or any portion of the Obligations and/or (ii) provides, as security for
all or any portion of the Obligations, a Lien on any of its assets in favor of
Administrative Agent for its own benefit and the benefit of Secured Parties, as
any or all of the same may be amended, supplemented, restated or otherwise
modified from time to time.

 

“Settlement Date” has the meaning set forth in Section 10.12(a).

 

“Settlement Service” has the meaning set forth in Section 11.6(a).

 

“Solvent” means, with respect to any Person, that such Person (i) owns and will
own assets the fair saleable value of which are (A) greater than the total
amount of its liabilities (including Contingent Obligations) and (B) greater
than the amount that will be required to pay the probable liabilities of its
then existing debts as they become absolute and matured considering all
financing alternatives and potential asset sales reasonably available to it,
(ii) has capital that is not unreasonably small in relation to its business as
presently conducted or after giving effect to any contemplated transaction and
(iii) does not intend to incur and does not believe that it will incur debts
beyond its ability to pay such debts as they become due.

 

“Special Determination” has the meaning given in Section 2.16(c).

 

“Stated Rate” has the meaning set forth in Section 2.12(b).

 

“Subsidiary” means, with respect to any Person, (i) any corporation of which an
aggregate of more than 50% of the outstanding Capital Stock having ordinary
voting power to elect a majority of the board of directors of such corporation
(irrespective of whether, at the time, Capital Stock of any other class or
classes of such corporation shall have or might have voting power by reason of
the happening of any contingency) is at the time, directly or indirectly, owned
legally or beneficially by such Person or one or more Subsidiaries of such
Person, or with respect to which any such Person has the right to vote or
designate the vote of more than 50% of such Capital Stock whether by proxy,
agreement, operation of Law or otherwise, and (ii) any partnership or limited
liability company in which such Person and/or one or more Subsidiaries of such
Person shall have an interest (whether in the form of voting or participation in
profits or capital contribution) of more than 50% or of which any such Person is
a general partner or may exercise the powers of a general partner.  Unless the
context otherwise requires, each reference to a Subsidiary shall be a reference
to a Subsidiary of Borrower.

 

“Support Agreement” has the meaning set forth in Section 2.9(a).

 

“Supported Letter of Credit” means a Letter of Credit issued by an LC Issuer in
reliance on one or more Support Agreements.

 

“Swap Contract” means any “swap agreement”, as defined in Section 101 of the
Bankruptcy Code.

 

“Taxes” has the meaning set forth in Section 2.13.

 

21

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

 

“Termination Date” has the meaning set forth in Section 2.3.

 

“UCC” means the Uniform Commercial Code of the State of New York or of any other
state the Laws of which are required to be applied in connection with the
perfection of security interests in any Collateral.

 

“United States” means the United States of America.

 

“Unrestricted Subsidiary” means (i) any Subsidiary that at the time of
determination shall be designated an Unrestricted Subsidiary by the Board of
Directors of Borrower in the manner provided below, and (ii) any Subsidiary of
an Unrestricted Subsidiary.  Warren Energy Services, LLC is currently an
Unrestricted Subsidiary.  The Board of Directors of Borrower may, at any time
and from time to time, designate any Subsidiary (including any newly acquired or
newly formed Subsidiary, but excluding any Subsidiary that owns or operates Oil
and Gas Properties included in the Borrowing Base except to the extent Borrower
complies with clause (iii) of Section 10.9 in connection therewith) to be an
Unrestricted Subsidiary provided that (1) no Default or Event of Default has
occurred or is continuing at the time of such designation and after giving
effect to such designation, (2) immediately after such designation, neither for
Borrower nor any Guarantor has any obligation to pay any Debt of such Subsidiary
(excluding any contingent liability arising solely by virtue of such Person’s
general partnership interest so long as (A) such Unrestricted Subsidiary’s
charter documents prohibit it from incurring Debt, (B) such Unrestricted
Subsidiary has not incurred any Debt), has in any way guaranteed any Debt of
such Subsidiary, or has any assets or properties (excluding a pledge of the
Capital Stock in such Subsidiary) which are subject to any Lien securing any
Debt of such Subsidiary, and (C) notice of any such designation is promptly
given to Administrative Agent in writing.  The Board of Directors of Borrower
may, at any time and from time to time, designate any Unrestricted Subsidiary to
be a Restricted Subsidiary provided that (x) no Default or Event of Default has
occurred or is continuing at the time of such designation and after giving
effect to such designation, and (y) notice of any such designation is promptly
given to Administrative Agent in writing.

 

“Wholly-Owned Subsidiary” means, with respect to any Person, any Subsidiary of
such Person of which all of the Capital Stock (other than, in the case of a
corporation, directors’ qualifying shares, to the extent legally required) are
directly or indirectly owned and controlled by such Person or one or more
Wholly-Owned Subsidiaries of such Person.

 

SECTION 1.2            ACCOUNTING TERMS AND DETERMINATIONS.

 

Unless otherwise specified herein, all accounting terms used herein shall be
interpreted, all accounting determinations hereunder (including without
limitation determinations made pursuant to the exhibits hereto) shall be made,
and all financial statements required to be delivered hereunder shall be
prepared on a consolidated basis in accordance with GAAP applied on a basis
consistent with the most recent audited consolidated financial statements of
Borrower and its Consolidated Subsidiaries delivered to Administrative Agent and
Lenders.  If at any time any change in GAAP would affect the computation of any
financial ratio or financial requirement set forth in any Financing Document,
and either Borrower or Required Lenders shall so request, Administrative Agent,
Lenders and Borrower shall negotiate in good faith to amend

 

22

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

 

such ratio or requirement to preserve the original intent thereof in light of
such change in GAAP (subject to the approval of Required Lenders); provided
that, until so amended, (i) such ratio or requirement shall continue to be
computed in accordance with GAAP prior to such change therein and (ii) Borrower
shall provide to Administrative Agent and Lenders financial statements and other
documents required under this Agreement which include a reconciliation between
calculations of such ratio or requirement made before and after giving effect to
such change in GAAP.

 

SECTION 1.3            OTHER DEFINITIONAL PROVISIONS AND REFERENCES.

 

References in this Agreement to “Articles”, “Sections”, “Annexes”, “Exhibits” or
“Schedules” shall be to Articles, Sections, Annexes, Exhibits or Schedules of or
to this Agreement unless otherwise specifically provided.  Any term defined
herein may be used in the singular or plural.  “Include”, “includes” and
“including” shall be deemed to be followed by “without limitation”.  Except as
otherwise specified or limited herein, references to any Person include the
successors and assigns of such Person.  References “from” or “through” any date
mean, unless otherwise specified, “from and including” or “through and
including”, respectively.  The words “assets” and “property” shall be construed
to have the same meaning and to refer to any and all tangible and intangible
asset and properties any type.  Unless otherwise specified herein, the
settlement of all payments and fundings hereunder between or among the parties
hereto shall be made in lawful money of the United States and in immediately
available funds.  Time is of the essence in Borrower’s and each other Credit
Party’s performance under this Agreement and all other Financing Documents.  All
amounts used for purposes of financial calculations required to be made herein
shall be without duplication.  References to any statute or act shall include
all related current regulations and all amendments and any successor statutes,
acts and regulations.  References to any statute or act, without additional
reference, shall be deemed to refer to federal statutes and acts of the United
States.  References to any agreement, instrument or document shall include all
schedules, exhibits, annexes and other attachments thereto.

 

ARTICLE 2
LOANS AND LETTERS OF CREDIT

 

SECTION 2.1            REVOLVING LOANS AND BORROWINGS.

 

On the terms and subject to the conditions set forth herein, each Lender
severally agrees to make Loans to Borrower from time to time as set forth herein
(each a “Revolving Loan”, and collectively, “Revolving Loans”) equal to such
Lender’s Revolving Loan Commitment Percentage of Revolving Loans requested by
Borrower hereunder, provided that after giving effect thereto, the Revolving
Loan Outstandings shall not exceed the Revolving Loan Limit.  Within the
foregoing limits, Borrower may borrow under this Section 2.1, may prepay or
repay Revolving Loans from time to time and may reborrow Revolving Loans
pursuant to this Section 2.1.

 

23

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

 

SECTION 2.2            ADVANCING REVOLVING LOANS.

 

(A)           NOTICE OF BORROWING.  BORROWER SHALL DELIVER TO ADMINISTRATIVE
AGENT A NOTICE OF BORROWING WITH RESPECT TO EACH PROPOSED REVOLVING LOAN
BORROWING (OTHER THAN REVOLVING LOANS MADE PURSUANT TO SECTION 2.2(B) BELOW),
SUCH NOTICE OF BORROWING TO BE DELIVERED NO LATER THAN NOON (CHICAGO TIME) (I)
ON THE DAY OF SUCH PROPOSED BORROWING, IN THE CASE OF BASE RATE LOANS IN AN
AGGREGATE PRINCIPAL AMOUNT EQUAL TO OR LESS THAN $5,000,000, (II) ON THE
BUSINESS DAY PRIOR TO SUCH PROPOSED BORROWING, IN THE CASE OF BASE RATE LOANS IN
AN AGGREGATE PRINCIPAL AMOUNT GREATER THAN $5,000,000 AND (III) ON THE THIRD
(3RD) BUSINESS DAY PRIOR TO SUCH PROPOSED BORROWING, IN THE CASE OF ALL LIBOR
LOANS.  ONCE GIVEN, EXCEPT AS PROVIDED IN SECTION 2.7(E)(II), A NOTICE OF
BORROWING SHALL BE IRREVOCABLE AND BORROWER SHALL BE BOUND THEREBY.

 

(B)           AUTHORITY ON NOTICE. BORROWER HEREBY AUTHORIZES LENDERS AND
ADMINISTRATIVE AGENT TO MAKE REVOLVING LOANS (OTHER THAN LIBOR LOANS) BASED ON
TELEPHONIC NOTICES MADE BY ANY PERSON WHICH ADMINISTRATIVE AGENT, IN GOOD FAITH,
BELIEVES TO BE ACTING ON BEHALF OF BORROWER.  BORROWER AGREES TO PROMPTLY
DELIVER TO ADMINISTRATIVE AGENT A NOTICE OF BORROWING IN RESPECT OF EACH
REVOLVING LOAN REQUESTED BY TELEPHONE FOLLOWING SUCH REQUEST.  IF THE NOTICE OF
BORROWING DIFFERS IN ANY RESPECT FROM THE ACTION TAKEN BY ADMINISTRATIVE AGENT
AND LENDERS, THE RECORDS OF ADMINISTRATIVE AGENT AND LENDERS SHALL GOVERN ABSENT
MANIFEST ERROR.  BORROWER FURTHER HEREBY AUTHORIZES LENDERS AND ADMINISTRATIVE
AGENT TO MAKE REVOLVING LOANS BASED ON ELECTRONIC NOTICES MADE BY ANY PERSON
WHICH ADMINISTRATIVE AGENT, IN GOOD FAITH, BELIEVES TO BE ACTING ON BEHALF OF
BORROWER, BUT ONLY AFTER ADMINISTRATIVE AGENT SHALL HAVE ESTABLISHED PROCEDURES
ACCEPTABLE TO ADMINISTRATIVE AGENT FOR ACCEPTING ELECTRONIC NOTICES OF
BORROWING, AS INDICATED BY ADMINISTRATIVE AGENT’S WRITTEN CONFIRMATION THEREOF.

 

(C)           AUTHORITY TO ADVANCE REVOLVING LOANS.  BORROWER AND EACH LENDER
HEREBY AUTHORIZES ADMINISTRATIVE AGENT TO MAKE REVOLVING LOANS (WHICH SHALL BE
BASE RATE LOANS) ON BEHALF OF LENDERS, AT ANY TIME IN ITS SOLE DISCRETION, AS
PROVIDED IN SECTION 2.9(C), WITH RESPECT TO OBLIGATIONS ARISING UNDER SUPPORT
AGREEMENTS AND/OR LENDER LETTERS OF CREDIT, AND TO PAY INTEREST, FEES, EXPENSES
AND OTHER CHARGES PAYABLE BY ANY CREDIT PARTY FROM TIME TO TIME UNDER THIS
AGREEMENT OR ANY OTHER FINANCING DOCUMENT, SO LONG AS, IN EACH CASE, AFTER
GIVING EFFECT TO ANY SUCH REVOLVING LOANS PURSUANT TO THIS SECTION 2.2(C), THE
REVOLVING LOAN OUTSTANDINGS DO NOT EXCEED THE REVOLVING LOAN LIMIT; PROVIDED,
THAT ADMINISTRATIVE AGENT SHALL HAVE NO OBLIGATION AT ANY TIME TO MAKE ANY
REVOLVING LOAN PURSUANT TO THE PROVISIONS OF THIS SECTION 2.2(C). 
ADMINISTRATIVE AGENT SHALL HAVE THE RIGHT TO MAKE REVOLVING LOANS PURSUANT TO
THE PROVISIONS OF THIS SECTION 2.2(C) REGARDLESS OF WHETHER THE CONDITIONS
PRECEDENT SET FORTH IN SECTION 7.2 ARE THEN SATISFIED, INCLUDING THE EXISTENCE
OF ANY DEFAULT OR EVENT OF DEFAULT EITHER BEFORE OR AFTER GIVING EFFECT TO THE
MAKING OF SUCH REVOLVING LOANS.

 

SECTION 2.3            MANDATORY PREPAYMENTS.

 

(A)           TERMINATION DATE.  THE REVOLVING LOAN COMMITMENT SHALL TERMINATE
UPON THE EARLIEST TO OCCUR OF (I) THE COMMITMENT EXPIRY DATE, (II) ANY DATE ON
WHICH ADMINISTRATIVE AGENT OR REQUIRED LENDERS ELECT TO TERMINATE THE REVOLVING
LOAN COMMITMENT PURSUANT TO SECTION 8.2 AND (III) THE DATE BORROWER ELECTS TO
TERMINATE THE REVOLVING LOAN COMMITMENT PURSUANT TO SECTION 2.6 (SUCH EARLIEST
DATE BEING THE “TERMINATION DATE”).  ON THE TERMINATION DATE, THERE

 

24

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

 

SHALL BECOME DUE, AND BORROWER SHALL PAY THE ENTIRE OUTSTANDING PRINCIPAL AMOUNT
OF EACH REVOLVING LOAN, TOGETHER WITH ACCRUED AND UNPAID OBLIGATIONS PERTAINING
THERETO.

 

(B)           ASSET DISPOSITION.  UPON THE REDUCTION OF THE BORROWING BASE OR
OVERADVANCE AMOUNT PURSUANT TO SECTION 2.16(D), IN THE EVENT A BORROWING BASE
DEFICIENCY SHALL OCCUR AS A RESULT OF SUCH REDUCTION IN THE BORROWING BASE OR
OVERADVANCE AMOUNT, BORROWER SHALL IMMEDIATELY REPAY THE REVOLVING LOANS OR CASH
COLLATERALIZE LETTER OF CREDIT LIABILITIES IN THE MANNER SPECIFIED IN
SECTION 2.9(E) OR CANCEL OUTSTANDING LETTERS OF CREDIT, OR ANY COMBINATION OF
THE FOREGOING, IN AN AGGREGATE AMOUNT AT LEAST EQUAL TO THE BORROWING BASE
DEFICIENCY.

 

(C)           BORROWING BASE DEFICIENCY.  IF AT ANY TIME, OTHER THAN AS SET
FORTH IN SECTION 2.3(B) OR SECTION 2.3(E), A BORROWING BASE DEFICIENCY SHALL
OCCUR, THEN UPON NOTICE FROM ADMINISTRATIVE AGENT OF THE DEFICIENCY, BORROWER
SHALL EITHER:

 

(I)            REDUCE THE DEFICIENCY BY MAKING FOUR (4) MANDATORY PREPAYMENTS OF
PRINCIPAL ON THE REVOLVING LOANS (OR CASH COLLATERALIZE LETTER OF CREDIT
LIABILITIES IN THE MANNER SPECIFIED IN SECTION 2.9(E) OR CANCEL OUTSTANDING
LETTERS OF CREDIT, OR ANY COMBINATION OF THE FOREGOING), EACH BEING IS THE
AMOUNT OF 25% OF THE BORROWING BASE DEFICIENCY, SUCH INSTALLMENTS BEING DUE AND
PAYABLE OF THE 90TH, 120TH, 150TH AND 180TH DAYS AFTER SUCH NOTICE FROM
ADMINISTRATIVE AGENT, OR

 

(II)           PROVIDE ADMINISTRATIVE AGENT WITH ADDITIONAL SECURITY INCLUDING
DEEDS OF TRUST, MORTGAGES, CHATTEL MORTGAGES, SECURITY AGREEMENTS, FINANCING
STATEMENTS AND OTHER SECURITY DOCUMENTS IN FORM AND SUBSTANCE REASONABLY
SATISFACTORY TO ADMINISTRATIVE AGENT, GRANTING, CONFIRMING, AND PERFECTING FIRST
AND PRIOR LIENS OR SECURITY INTERESTS IN COLLATERAL (SUBJECT TO PERMITTED LIENS)
REASONABLY ACCEPTABLE TO REQUIRED LENDERS TO INCREASE THE BORROWING BASE (AS
DETERMINED IN THEIR REASONABLE DISCRETION CONSISTENT WITH PRUDENT OIL AND GAS
BANKING INDUSTRY LENDING STANDARDS AT THE TIME) TO AN AMOUNT THAT ELIMINATES
SUCH BORROWING BASE DEFICIENCY.

 

Borrower shall within 30 days after such notice from Administrative Agent notify
Administrative Agent whether it will reduce the Borrowing Base Deficiency
pursuant to clause (i) or (ii) or a combination thereof and, if applicable, the
proposed collateral under clause (ii).  If such proposed collateral is
acceptable to Required Lenders, Borrower shall provide such security documents
within thirty (30) days after such notice by Borrower.  If Required Lenders
determine in their reasonable discretion that the giving of such proposed
collateral will not serve to eliminate the Borrowing Base Deficiency, then
Borrower shall be required to make the prepayments specified in the preceding
subsection (i) of this subsection (c).

 

(D)           OVERADVANCE AMOUNT.  UNLESS THE REQUIRED LENDERS SHALL OTHERWISE
AGREE, DURING THE OVERADVANCE PERIOD, IF ANY DEBT FOR BORROWED MONEY SHALL BE
INCURRED BY BORROWER OR ITS RESTRICTED SUBSIDIARIES (OTHER THAN UNDER THE
FINANCING DOCUMENTS), THEN THE PRINCIPAL AMOUNT OF THE REVOLVING LOANS SHALL BE
PREPAID OR LETTER OF CREDIT LIABILITIES SHALL BE CASH COLLATERALIZED IN THE
MANNER SPECIFIED IN SECTION 2.9(E) BY AN AMOUNT EQUAL TO 75% OF THE AMOUNT OF
THE NET CASH PROCEEDS OF SUCH DEBT TO THE EXTENT NECESSARY TO ELIMINATE ANY
OVERADVANCE OUTSTANDING AT THE TIME OF SUCH INCURRENCE.  THE PROVISIONS OF THIS
SECTION 2.3(D) DO NOT CONSTITUTE A CONSENT TO THE INCURRENCE OF ANY DEBT BY
BORROWER OR ANY OF ITS SUBSIDIARIES NOT OTHERWISE PERMITTED BY THIS AGREEMENT. 
UNLESS THE REQUIRED LENDERS SHALL OTHERWISE AGREE, THE OVERADVANCE AMOUNT SHALL

 

25

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

 

BE REDUCED BY THE AMOUNT OF EACH PREPAYMENT OR CASH COLLATERALIZATION PURSUANT
TO THIS SECTION 2.3(D).

 

(E)           ISSUE OF PERMITTED SECURITIES.  UPON THE INCURRENCE OR ISSUANCE OF
PERMITTED SECURITIES, BORROWER SHALL MAKE A MANDATORY PREPAYMENT ON THE LOAN IN
AN AMOUNT, IF ANY, REQUIRED TO ELIMINATE ANY BORROWING BASE DEFICIENCY RESULTING
FROM THE DECREASE IN THE BORROWING BASE PURSUANT TO SECTION 2.16(F). 
NOTWITHSTANDING THE FOREGOING, IN THE EVENT A DEFAULT OR EVENT OF DEFAULT IS IN
EXISTENCE ON THE DATE OF THE INCURRENCE OR ISSUANCE OF PERMITTED SECURITIES, ALL
PROCEEDS FROM ANY SUCH PERMITTED SECURITIES SHALL BE APPLIED AS A MANDATORY
PREPAYMENT ON THE LOAN.

 

SECTION 2.4            ALL PREPAYMENTS.

 

Any prepayment of a LIBOR Loan on a day other than the last day of an Interest
Period therefor shall include interest on the principal amount being repaid and
shall be subject to Section 2.7(e)(iv).  All prepayments of a Loan shall be
applied first to that portion of such Loan comprised of Base Rate Loans and then
to that portion of such Loan comprised of LIBOR Loans, in direct order of
Interest Period maturities.

 

SECTION 2.5            OPTIONAL PREPAYMENTS OF REVOLVING LOANS.

 

Subject to the provisions Section 2.7(e)(iv), Borrower may from time to time
prepay the Revolving Loans in whole or in part; provided that any such partial
prepayment of the Revolving Loans shall be in an amount equal to $250,000 or a
higher integral multiple of $50,000.

 

SECTION 2.6            TERMINATION OR REDUCTION OF REVOLVING LOAN COMMITMENT.

 

Borrower may, upon notice to Administrative Agent, terminate the Revolving Loan
Commitment, or from time to time permanently reduce the Revolving Loan
Commitment, the then existing Borrowing Base or the then existing Overadvance
Amount; provided that (i) any such notice shall be received by Administrative
Agent not later than 11:00 a.m. five Business Days prior to the date of
termination or reduction, (ii) any such partial reduction shall be in an
aggregate amount of $5,000,000 or any whole multiple of $1,000,000 in excess
thereof, and (iii) Borrower shall not terminate or reduce the Revolving Loan
Commitment, the then existing Borrowing Base or the then existing Overadvance
Amount if, after giving effect thereto and to any concurrent prepayments
hereunder, the Revolving Loan Outstandings would exceed the resulting Revolving
Loan Commitment, Borrowing Base or Overadvance Amount.  Administrative Agent
will promptly notify the Lenders of any such notice of termination or reduction
of the Revolving Loan Commitment, the Borrowing Base or Overadvance Amount.  Any
reduction of the Revolving Loan Commitment, the Borrowing Base or the
Overadvance Amount shall be applied to each Lender according to its Revolving
Loan Commitment Percentage.  All fees accrued until the effective date of any
termination of the Revolving Loan Commitment, the Borrowing Base or the
Overadvance Amount shall be paid on the effective date of such termination.

 

26

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

 

SECTION 2.7            INTEREST, INTEREST CALCULATIONS AND CERTAIN FEES.

 

(A)           INTEREST.  FROM AND FOLLOWING THE CLOSING DATE, DEPENDING UPON
BORROWER’S ELECTION FROM TIME TO TIME, SUBJECT TO THE TERMS HEREOF, TO HAVE
PORTIONS OF THE LOANS ACCRUE INTEREST DETERMINED BY REFERENCE TO THE BASE RATE
OR THE LIBOR, THE LOANS AND THE OTHER OBLIGATIONS SHALL BEAR INTEREST AT THE
APPLICABLE RATES SET FORTH BELOW:

 

(I)            IF A BASE RATE LOAN, OR ANY OTHER OBLIGATION OTHER THAN A LIBOR
LOAN, THEN AT THE SUM OF THE BASE RATE PLUS THE APPLICABLE BASE RATE MARGIN.

 

(II)           IF A LIBOR LOAN, THEN AT THE SUM OF THE LIBOR PLUS THE APPLICABLE
LIBOR MARGIN.

 

(B)           UNUSED LINE FEE.  FROM AND FOLLOWING THE CLOSING DATE, BORROWER
SHALL PAY ADMINISTRATIVE AGENT, FOR THE BENEFIT OF ALL LENDERS COMMITTED TO MAKE
REVOLVING LOANS, IN ACCORDANCE WITH THEIR RESPECTIVE PRO RATA SHARES, A FEE IN
AN AMOUNT COMPUTED ON A DAILY BASIS EQUAL TO (I) THE REVOLVING LOAN LIMIT LESS
THE REVOLVING LOAN OUTSTANDINGS ON EACH DAY, MULTIPLIED BY THE APPLICABLE
PERCENTAGE SPECIFIED AS THE “COMMITMENT FEE” IN THE PRICING TABLE CORRESPONDING
TO THE BORROWING BASE USAGE AS OF THE END OF SUCH DAY.  SUCH FEE IS TO BE PAID
QUARTERLY IN ARREARS ON THE LAST DAY OF EACH QUARTER.

 

(C)           AGENT’S FEES.  BORROWER SHALL PAY TO ADMINISTRATIVE AGENT FEES IN
SUCH AMOUNTS AND AT SUCH TIMES AS SET FORTH IN THAT CERTAIN LETTER AGREEMENT
DATED OCTOBER 2, 2007 BETWEEN ADMINISTRATIVE AGENT AND BORROWER, AS AMENDED FROM
TIME TO TIME.

 

(D)           COMPUTATION OF INTEREST AND RELATED FEES.  OTHER THAN CALCULATIONS
IN RESPECT OF INTEREST AT THE BASE RATE (WHICH SHALL BE MADE ON THE ACTUAL
NUMBER OF DAYS ELAPSED IN A 365/366-DAY YEAR), ALL INTEREST AND FEES UNDER EACH
FINANCING DOCUMENT SHALL BE CALCULATED ON THE BASIS OF A 360-DAY YEAR FOR THE
ACTUAL NUMBER OF DAYS ELAPSED.  THE DATE OF FUNDING OF A BASE RATE LOAN AND THE
FIRST DAY OF AN INTEREST PERIOD WITH RESPECT TO A LIBOR LOAN SHALL BE INCLUDED
IN THE CALCULATION OF INTEREST.  THE DATE OF PAYMENT OF A BASE RATE LOAN AND THE
LAST DAY OF AN INTEREST PERIOD WITH RESPECT TO A LIBOR LOAN SHALL BE EXCLUDED
FROM THE CALCULATION OF INTEREST.  IF A LOAN IS REPAID ON THE SAME DAY THAT IT
IS MADE, ONE (1) DAY’S INTEREST SHALL BE CHARGED.  INTEREST ON ALL BASE RATE
LOANS IS PAYABLE IN ARREARS ON THE LAST DAY OF EACH CALENDAR QUARTER AND ON THE
MATURITY OF SUCH LOANS, WHETHER BY ACCELERATION OR OTHERWISE.  INTEREST ON LIBOR
LOANS SHALL BE PAYABLE ON THE LAST DAY OF THE APPLICABLE INTEREST PERIOD, UNLESS
THE INTEREST PERIOD IS GREATER THAN THREE (3) MONTHS, IN WHICH CASE INTEREST
WILL BE PAYABLE ON THE LAST DAY OF EACH THREE (3) MONTH INTERVAL.  IN ADDITION,
INTEREST ON LIBOR LOANS IS DUE ON THE MATURITY OF SUCH LOANS, WHETHER BY
ACCELERATION OR OTHERWISE.

 

(E)           LIBOR PROVISIONS.

 

(I)            LIBOR ELECTION.  SUBJECT TO THE PROVISIONS OF SECTION 8.4,
BORROWER MAY REQUEST THAT REVOLVING LOANS PERMITTED TO BE MADE HEREUNDER BE
LIBOR LOANS, THAT OUTSTANDING PORTIONS OF REVOLVING LOANS BE CONVERTED TO LIBOR
LOANS AND THAT ALL OR ANY PORTION OF A LIBOR LOAN BE CONTINUED AS A LIBOR LOAN
UPON EXPIRATION OF THE APPLICABLE INTEREST PERIOD.  ANY SUCH REQUEST WILL BE
MADE BY SUBMITTING A NOTICE OF BORROWING TO ADMINISTRATIVE AGENT.  ONCE GIVEN,
AND EXCEPT AS PROVIDED IN CLAUSE (II) BELOW, A NOTICE OF BORROWING SHALL BE

 

27

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

 

IRREVOCABLE AND BORROWER SHALL BE BOUND THEREBY.  UPON THE EXPIRATION OF AN
INTEREST PERIOD, IN THE ABSENCE OF A NEW NOTICE OF BORROWING SUBMITTED TO
ADMINISTRATIVE AGENT NOT LESS THAN THREE (3) BUSINESS DAYS PRIOR TO THE END OF
SUCH INTEREST PERIOD, THE LIBOR LOAN THEN MATURING SHALL BE AUTOMATICALLY
CONVERTED TO A BASE RATE LOAN.  THERE MAY BE NO MORE THAN SIX (6) LIBOR LOANS
OUTSTANDING AT ANY ONE TIME.  EACH REQUEST FOR A LIBOR LOAN, WHETHER BY ORIGINAL
ISSUANCE, CONVERSION OR CONTINUATION, SHALL BE IN A MINIMUM AMOUNT OF $250,000
AND, IF IN EXCESS OF SUCH AMOUNT, IN AN INTEGRAL MULTIPLE OF $50,000 IN EXCESS
OF SUCH AMOUNT.  LOANS WHICH ARE NOT REQUESTED AS LIBOR LOANS IN ACCORDANCE WITH
THIS SECTION 2.7(E)(I) SHALL BE BASE RATE LOANS.  ADMINISTRATIVE AGENT SHALL
NOTIFY LENDERS, BY TELEPHONIC OR FACSIMILE NOTICE, OF EACH NOTICE OF BORROWING
RECEIVED BY ADMINISTRATIVE AGENT NOT LESS THAN TWO (2) BUSINESS DAYS PRIOR TO
THE FIRST DAY OF THE INTEREST PERIOD OF THE LIBOR LOAN REQUESTED THEREBY.

 

(II)           INABILITY TO DETERMINE LIBOR.  IN THE EVENT, PRIOR TO
COMMENCEMENT OF ANY INTEREST PERIOD RELATING TO A LIBOR LOAN, ADMINISTRATIVE
AGENT SHALL DETERMINE OR BE NOTIFIED BY REQUIRED LENDERS THAT ADEQUATE AND
REASONABLE METHODS DO NOT EXIST FOR ASCERTAINING LIBOR, ADMINISTRATIVE AGENT
SHALL PROMPTLY PROVIDE NOTICE OF SUCH DETERMINATION TO BORROWER AND LENDERS
(WHICH SHALL BE CONCLUSIVE AND BINDING ON BORROWER AND LENDERS).  IN SUCH EVENT
(A) ANY REQUEST FOR A LIBOR LOAN OR FOR A CONVERSION TO OR CONTINUATION OF A
LIBOR LOAN SHALL BE AUTOMATICALLY WITHDRAWN AND SHALL BE DEEMED A REQUEST FOR A
BASE RATE LOAN, (B) EACH LIBOR LOAN WILL AUTOMATICALLY, ON THE LAST DAY OF THE
THEN CURRENT INTEREST PERIOD RELATING THERETO, BECOME A BASE RATE LOAN AND (C)
THE OBLIGATIONS OF LENDERS TO MAKE LIBOR LOANS SHALL BE SUSPENDED UNTIL
ADMINISTRATIVE AGENT OR REQUIRED LENDERS DETERMINE THAT THE CIRCUMSTANCES GIVING
RISE TO SUCH SUSPENSION NO LONGER EXIST, IN WHICH EVENT ADMINISTRATIVE AGENT
SHALL SO NOTIFY BORROWER AND LENDERS.

 

(III)          ILLEGALITY.  NOTWITHSTANDING ANY OTHER PROVISIONS HEREOF, IF ANY
LAW SHALL MAKE IT UNLAWFUL FOR ANY LENDER TO MAKE, FUND OR MAINTAIN LIBOR LOANS,
SUCH LENDER SHALL PROMPTLY GIVE NOTICE OF SUCH CIRCUMSTANCES TO ADMINISTRATIVE
AGENT, BORROWER AND THE OTHER LENDERS.  IN SUCH AN EVENT, (A) THE COMMITMENT OF
SUCH LENDER TO MAKE LIBOR LOANS, CONTINUE LIBOR LOANS AS LIBOR LOANS OR CONVERT
BASE RATE LOANS TO LIBOR LOANS SHALL BE IMMEDIATELY SUSPENDED AND (B) SUCH
LENDER’S OUTSTANDING LIBOR LOANS SHALL BE CONVERTED AUTOMATICALLY TO BASE RATE
LOANS ON THE LAST DAY OF THE INTEREST PERIOD THEREOF OR AT SUCH EARLIER TIME AS
MAY BE REQUIRED BY LAW.

 

(IV)          LIBOR BREAKAGE FEE.  UPON (A) ANY DEFAULT BY BORROWER IN MAKING
ANY BORROWING OF, CONVERSION INTO OR CONTINUATION OF ANY LIBOR LOAN FOLLOWING
BORROWER’S DELIVERY TO ADMINISTRATIVE AGENT OF ANY APPLICABLE NOTICE OF
BORROWING OR (B) ANY PAYMENT OF A LIBOR LOAN ON ANY DAY THAT IS NOT THE LAST DAY
OF THE INTEREST PERIOD APPLICABLE THERETO (REGARDLESS OF THE SOURCE OF SUCH
PREPAYMENT AND WHETHER VOLUNTARY, BY ACCELERATION OR OTHERWISE), BORROWER SHALL
PROMPTLY PAY ADMINISTRATIVE AGENT, FOR THE BENEFIT OF ALL LENDERS THAT FUNDED OR
WERE PREPARED TO FUND ANY SUCH LIBOR LOAN, AN AMOUNT EQUAL TO THE AMOUNT OF ANY
LOSSES, EXPENSES AND LIABILITIES (INCLUDING, WITHOUT LIMITATION, ANY LOSS
(INCLUDING INTEREST PAID) IN CONNECTION WITH THE RE EMPLOYMENT OF SUCH FUNDS)
THAT ANY LENDER MAY SUSTAIN AS A RESULT OF SUCH DEFAULT OR SUCH PAYMENT.  FOR
PURPOSES OF CALCULATING AMOUNTS PAYABLE TO A LENDER UNDER THIS PARAGRAPH, EACH
LENDER SHALL BE DEEMED TO HAVE ACTUALLY FUNDED ITS RELEVANT LIBOR LOAN THROUGH
THE PURCHASE OF A DEPOSIT BEARING INTEREST AT LIBOR IN AN AMOUNT EQUAL TO THE
AMOUNT OF THAT LIBOR LOAN AND HAVING A MATURITY AND REPRICING CHARACTERISTICS
COMPARABLE TO THE RELEVANT

 

28

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

 

INTEREST PERIOD; PROVIDED, HOWEVER, THAT EACH LENDER MAY FUND EACH OF ITS LIBOR
LOANS IN ANY MANNER IT SEES FIT, AND THE FOREGOING ASSUMPTION SHALL BE UTILIZED
ONLY FOR THE CALCULATION OF AMOUNTS PAYABLE UNDER THIS SUBSECTION.  A
CERTIFICATE OF ANY LENDER SETTING FORTH ANY AMOUNT OR AMOUNTS THAT SUCH LENDER
IS ENTITLED TO RECEIVE PURSUANT TO THIS SECTION SHALL BE DELIVERED TO BORROWER
AND SHALL BE CONCLUSIVE ABSENT MANIFEST ERROR.  BORROWER SHALL PAY SUCH LENDER
THE AMOUNT SHOWN AS DUE ON ANY SUCH CERTIFICATE WITHIN 15 DAYS AFTER RECEIPT
THEREOF.

 

(V)           INCREASED COSTS.  IF, AFTER THE CLOSING DATE, THE ADOPTION OR
TAKING EFFECT OF, OR ANY CHANGE IN, ANY LAW, OR ANY CHANGE IN THE
INTERPRETATION, ADMINISTRATION OR APPLICATION OF ANY LAW BY ANY GOVERNMENTAL
AUTHORITY, CENTRAL BANK OR COMPARABLE AGENCY CHARGED WITH THE INTERPRETATION,
ADMINISTRATION OR APPLICATION THEREOF, OR COMPLIANCE BY ANY LENDER WITH ANY
REQUEST, GUIDELINE OR DIRECTIVE (WHETHER OR NOT HAVING THE FORCE OF LAW) OF ANY
SUCH AUTHORITY, CENTRAL BANK OR COMPARABLE AGENCY:  (A) SHALL IMPOSE, MODIFY OR
DEEM APPLICABLE ANY RESERVE (INCLUDING ANY RESERVE IMPOSED BY THE BOARD OF
GOVERNORS OF THE FEDERAL RESERVE SYSTEM, OR ANY SUCCESSOR THERETO, BUT EXCLUDING
ANY RESERVE INCLUDED IN THE DETERMINATION OF THE LIBOR PURSUANT TO THE
PROVISIONS OF THIS AGREEMENT), 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, OR (B) SHALL
IMPOSE ON ANY LENDER ANY OTHER CONDITION AFFECTING ITS LIBOR LOANS, ANY OF ITS
NOTES (IF ANY) OR ITS OBLIGATION TO MAKE LIBOR LOANS; AND THE RESULT OF ANYTHING
DESCRIBED IN CLAUSES (A) AND (B) ABOVE IS TO INCREASE THE COST TO (OR TO IMPOSE
A COST ON) SUCH LENDER OF MAKING OR MAINTAINING ANY LIBOR LOAN, OR TO REDUCE THE
AMOUNT OF ANY SUM RECEIVED OR RECEIVABLE BY SUCH LENDER UNDER THIS AGREEMENT OR
UNDER ANY OF ITS NOTES (IF ANY) WITH RESPECT THERETO, THEN WITHIN 15 DAYS AFTER
DEMAND BY SUCH LENDER (WHICH DEMAND SHALL BE ACCOMPANIED BY A STATEMENT SETTING
FORTH THE BASIS FOR SUCH DEMAND AND A CALCULATION OF THE AMOUNT THEREOF IN
REASONABLE DETAIL, A COPY OF WHICH SHALL BE FURNISHED TO ADMINISTRATIVE AGENT),
BORROWER SHALL PROMPTLY PAY DIRECTLY TO SUCH LENDER SUCH ADDITIONAL AMOUNT AS
WILL COMPENSATE SUCH LENDER FOR SUCH INCREASED COST OR SUCH REDUCTION, SO LONG
AS SUCH AMOUNTS HAVE ACCRUED ON OR AFTER THE DAY WHICH IS 180 DAYS PRIOR TO THE
DATE ON WHICH SUCH LENDER FIRST MADE DEMAND THEREFOR.

 

SECTION 2.8            NOTES.

 

The portion of the Revolving Loans made by each Lender shall be evidenced, if so
requested by such Lender, by a promissory note executed by Borrower (a “Note”)
in an original principal amount equal to such Lender’s Pro Rata Share of the
Revolving Loan Commitment.

 

SECTION 2.9            LETTERS OF CREDIT AND LETTER OF CREDIT FEES.

 

(A)           LETTER OF CREDIT.  ON THE TERMS AND SUBJECT TO THE CONDITIONS SET
FORTH HEREIN, THE REVOLVING LOAN COMMITMENT MAY BE USED BY BORROWER, IN ADDITION
TO THE MAKING OF REVOLVING LOANS HEREUNDER, PRIOR TO THE TERMINATION DATE, (X)
BY ANY LENDER SPECIFIED HEREIN AS AN LC ISSUER TO ISSUE OR INCREASE THE AMOUNT
OF, OR EXTEND THE EXPIRY DATE OF, ONE OR MORE LENDER LETTERS OF CREDIT OR (Y) BY
ADMINISTRATIVE AGENT FOR THE ISSUANCE OF LETTERS OF CREDIT, GUARANTEES OR OTHER
AGREEMENTS OR ARRANGEMENTS (EACH, A “SUPPORT AGREEMENT”) TO INDUCE AN LC ISSUER,
OTHER THAN SUCH A LENDER, TO ISSUE OR INCREASE THE AMOUNT OF, OR EXTEND THE
EXPIRY DATE OF, ONE OR MORE LETTERS OF CREDIT, SO LONG AS, IN EACH CASE:

 

29

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

 

(I)            ADMINISTRATIVE AGENT SHALL HAVE RECEIVED A NOTICE OF LC CREDIT
EVENT AT LEAST TWO (2) BUSINESS DAYS BEFORE THE RELEVANT DATE OF ISSUANCE,
INCREASE OR EXTENSION; AND

 

(II)           AFTER GIVING EFFECT TO SUCH ISSUANCE, INCREASE OR EXTENSION, (A)
THE AGGREGATE LETTER OF CREDIT LIABILITIES DOES NOT EXCEED 25% OF THE SUM OF (I)
EFFECTIVE BORROWING BASE PLUS (II) DURING THE OVERADVANCE PERIOD, THE
OVERADVANCE AMOUNT, AND (B) THE REVOLVING LOAN OUTSTANDINGS DO NOT EXCEED THE
REVOLVING LOAN LIMIT.

 

Nothing in this Agreement shall be construed to obligate any Lender to issue,
increase the amount of or extend the expiry date of any letter of credit, which
act or acts, if any, shall be subject to agreements to be entered into from time
to time between Borrower and such Lender.  Each Lender that is an LC Issuer
hereby agrees to give Administrative Agent prompt written notice of each
issuance of a Lender Letter of Credit by such Lender and each payment made by
such Lender in respect of Lender Letters of Credit issued by such Lender.

 

(B)           LETTER OF CREDIT FEE.  BORROWER SHALL PAY TO ADMINISTRATIVE AGENT,
FOR THE BENEFIT OF LENDERS, A LETTER OF CREDIT FEE WITH RESPECT TO THE LETTER OF
CREDIT LIABILITIES FOR EACH LETTER OF CREDIT, COMPUTED FOR EACH DAY FROM THE
DATE OF ISSUANCE OF SUCH LETTER OF CREDIT TO THE DATE THAT IS THE LAST DAY A
DRAWING IS AVAILABLE UNDER SUCH LETTER OF CREDIT, AT A RATE PER ANNUM EQUAL TO
THE LIBOR MARGIN THEN APPLICABLE TO REVOLVING LOANS.  SUCH FEE SHALL BE PAYABLE
IN ARREARS ON THE LAST DAY OF EACH CALENDAR QUARTER PRIOR TO THE TERMINATION
DATE AND ON SUCH DATE.  IN ADDITION, BORROWER AGREES TO PAY TO LC ISSUER,
QUARTERLY IN ARREARS, A FRONTING FEE IN CONNECTION WITH ANY LETTER OF CREDIT
EQUAL TO 0.125% PER ANNUM TIMES THE DAILY MAXIMUM AMOUNT AVAILABLE TO BE DRAWN
ON SUCH LETTER OF CREDIT.  BORROWER ALSO AGREES TO PAY TO THE LC ISSUER SUCH
OTHER USUAL AND CUSTOMARY FEES ASSOCIATED WITH ANY TRANSFERS, AMENDMENTS,
DRAWINGS, NEGOTIATIONS OR REISSUANCES OF ANY LETTERS OF CREDIT.

 

(C)           REIMBURSEMENT OBLIGATIONS OF BORROWER.  IF EITHER ADMINISTRATIVE
AGENT SHALL MAKE A PAYMENT TO AN LC ISSUER PURSUANT TO A SUPPORT AGREEMENT, OR
ANY LENDER SHALL NOTIFY ADMINISTRATIVE AGENT THAT IT HAS MADE PAYMENT IN RESPECT
OF A LENDER LETTER OF CREDIT, (I) BORROWER SHALL PROMPTLY REIMBURSE
ADMINISTRATIVE AGENT OR SUCH LENDER, AS APPLICABLE, FOR THE AMOUNT OF SUCH
PAYMENT AND (II) BORROWER SHALL BE DEEMED TO HAVE IMMEDIATELY REQUESTED THAT
LENDERS MAKE A REVOLVING LOAN, WHICH SHALL BE A BASE RATE LOAN, IN A PRINCIPAL
AMOUNT EQUAL TO THE AMOUNT OF SUCH PAYMENT (BUT SOLELY TO THE EXTENT BORROWER
SHALL HAVE FAILED TO DIRECTLY REIMBURSE ADMINISTRATIVE AGENT OR, WITH RESPECT TO
LENDER LETTERS OF CREDIT, THE APPLICABLE LC ISSUER, FOR THE AMOUNT OF SUCH
PAYMENT).  ADMINISTRATIVE AGENT SHALL PROMPTLY NOTIFY LENDERS OF ANY SUCH DEEMED
REQUEST AND EACH LENDER HEREBY AGREES TO MAKE AVAILABLE TO ADMINISTRATIVE AGENT
NOT LATER THAN NOON (CHICAGO TIME) ON THE BUSINESS DAY FOLLOWING SUCH
NOTIFICATION FROM ADMINISTRATIVE AGENT SUCH LENDER’S PRO RATA SHARE OF SUCH
REVOLVING LOAN.  EACH LENDER HEREBY ABSOLUTELY AND UNCONDITIONALLY AGREES TO
FUND SUCH LENDER’S PRO RATA SHARE OF THE LOAN DESCRIBED IN THE IMMEDIATELY
PRECEDING SENTENCE, UNAFFECTED BY ANY CIRCUMSTANCE WHATSOEVER, INCLUDING
(WITHOUT LIMITATION) (A) THE OCCURRENCE AND CONTINUANCE OF A DEFAULT OR EVENT OF
DEFAULT, (B) THE FACT THAT, WHETHER BEFORE OR AFTER GIVING EFFECT TO THE MAKING
OF ANY SUCH REVOLVING LOAN, THE REVOLVING LOAN OUTSTANDINGS EXCEED OR WILL
EXCEED THE REVOLVING LOAN LIMIT AND/OR (C) THE NON-SATISFACTION OF ANY
CONDITIONS SET FORTH IN SECTION 8.2.  ADMINISTRATIVE AGENT HEREBY AGREES TO
APPLY THE GROSS PROCEEDS OF EACH REVOLVING LOAN DEEMED MADE PURSUANT TO THIS
SECTION 2.9(C) IN SATISFACTION OF BORROWER’S REIMBURSEMENT OBLIGATIONS ARISING
PURSUANT TO

 

30

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

 

THIS SECTION 2.9(C).  BORROWER SHALL PAY INTEREST, ON DEMAND, ON ALL AMOUNTS SO
PAID BY ADMINISTRATIVE AGENT FOR EACH DAY UNTIL BORROWER REIMBURSES
ADMINISTRATIVE AGENT THEREFOR AT A RATE PER ANNUM EQUAL TO THE THEN CURRENT
INTEREST RATE APPLICABLE TO REVOLVING LOANS (WHICH ARE BASE RATE LOANS) FOR SUCH
DAY.

 

(D)           REIMBURSEMENT AND OTHER PAYMENTS BY BORROWER.  THE OBLIGATIONS OF
BORROWER TO REIMBURSE ADMINISTRATIVE AGENT AND/OR THE APPLICABLE LC ISSUER
PURSUANT TO SECTION 2.9(C) SHALL BE ABSOLUTE, UNCONDITIONAL AND IRREVOCABLE, AND
SHALL BE PERFORMED STRICTLY IN ACCORDANCE WITH THE TERMS OF THIS AGREEMENT,
UNDER ALL CIRCUMSTANCES WHATSOEVER, INCLUDING THE FOLLOWING:

 

(I)            ANY LACK OF VALIDITY OR ENFORCEABILITY OF, OR ANY AMENDMENT OR
WAIVER OF OR ANY CONSENT TO DEPARTURE FROM, ANY LETTER OF CREDIT OR ANY RELATED
DOCUMENT;

 

(II)           THE EXISTENCE OF ANY CLAIM, SET-OFF, DEFENSE OR OTHER RIGHT WHICH
BORROWER MAY HAVE AT ANY TIME AGAINST THE BENEFICIARY OF ANY LETTER OF CREDIT,
LC ISSUER (INCLUDING ANY CLAIM FOR IMPROPER PAYMENT), ADMINISTRATIVE AGENT, ANY
LENDER OR ANY OTHER PERSON, WHETHER IN CONNECTION WITH ANY FINANCING DOCUMENT OR
ANY UNRELATED TRANSACTION, PROVIDED THAT NOTHING HEREIN SHALL PREVENT THE
ASSERTION OF ANY SUCH CLAIM BY SEPARATE SUIT OR COMPULSORY COUNTERCLAIM;

 

(III)          ANY STATEMENT OR ANY OTHER DOCUMENT PRESENTED UNDER ANY LETTER OF
CREDIT PROVING TO BE FORGED, FRAUDULENT, INVALID OR INSUFFICIENT IN ANY RESPECT
OR ANY STATEMENT THEREIN BEING UNTRUE OR INACCURATE IN ANY RESPECT WHATSOEVER;

 

(IV)          ANY AFFILIATION BETWEEN LC ISSUER AND ADMINISTRATIVE AGENT; OR

 

(V)           TO THE EXTENT PERMITTED UNDER APPLICABLE LAW, ANY OTHER
CIRCUMSTANCE OR HAPPENING WHATSOEVER, WHETHER OR NOT SIMILAR TO ANY OF THE
FOREGOING;

 

provided that the foregoing shall not be construed to excuse the LC Issuer from
liability to Borrower to the extent of any direct damages (as opposed to
consequential damages, claims in respect of which are hereby waived by Borrower
to the extent permitted by applicable law) suffered by Borrower that are caused
by the LC Issuer’s failure to exercise care when determining whether drafts and
other documents presented under a Letter of Credit comply with the terms
thereof.  The Parties expressly agree that, in the absence of gross negligence
or willful misconduct on the part of the LC Issuer (as finally determined by a
court of competent jurisdiction), the LC Issuer shall be deemed to have
exercised care in each such determination.  In furtherance of the foregoing and
without limiting the generality thereof, the parties agree that, with respect to
documents presented which appear on their face to be in substantial compliance
with the terms of a Letter of Credit, the Issuing Bank may, in its sole
discretion, either accept and make payment upon such documents without
responsibility for further investigation, regardless of any notice or
information to the contrary, or refuse to accept and make payment upon such
documents if such documents are not in strict compliance with the terms of such
Letter of Credit.

 

(E)           DEPOSIT OBLIGATIONS OF BORROWER.  IN THE EVENT ANY LETTERS OF
CREDIT ARE OUTSTANDING AT THE TIME THAT BORROWER PREPAYS OR IS REQUIRED TO REPAY
THE OBLIGATIONS OR THE REVOLVING LOAN COMMITMENT IS TERMINATED, BORROWER SHALL
(I) DEPOSIT WITH ADMINISTRATIVE AGENT FOR THE BENEFIT OF ALL LENDERS CASH IN AN
AMOUNT EQUAL TO ONE HUNDRED FIVE PERCENT (105%) OF THE AGGREGATE OUTSTANDING
LETTER OF CREDIT LIABILITIES TO BE AVAILABLE TO ADMINISTRATIVE AGENT,

 

31

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

 

FOR ITS BENEFIT AND THE BENEFIT OF ISSUERS OF LENDER LETTERS OF CREDIT, TO
REIMBURSE PAYMENTS OF DRAFTS DRAWN UNDER SUCH LETTERS OF CREDIT AND PAY ANY FEES
AND EXPENSES RELATED THERETO AND (II) PREPAY THE FEE PAYABLE UNDER SECTION
2.9(B) WITH RESPECT TO SUCH LETTERS OF CREDIT FOR THE FULL REMAINING TERMS OF
SUCH LETTERS OF CREDIT.  UPON TERMINATION OF ANY SUCH LETTER OF CREDIT AND
PROVIDED NO EVENT OF DEFAULT THEN EXISTS, THE UNEARNED PORTION OF SUCH PREPAID
FEE ATTRIBUTABLE TO SUCH LETTER OF CREDIT SHALL BE REFUNDED TO BORROWER,
TOGETHER WITH THE DEPOSIT DESCRIBED IN THE PRECEDING CLAUSE (I) ATTRIBUTABLE TO
SUCH LETTER OF CREDIT, BUT ONLY TO THE EXTENT NOT PREVIOUSLY APPLIED BY
ADMINISTRATIVE AGENT IN THE MANNER DESCRIBED HEREIN.

 

(F)            PARTICIPATIONS IN SUPPORT AGREEMENTS AND LENDER LETTERS OF
CREDIT.

 

(I)            CONCURRENTLY WITH THE ISSUANCE OF EACH SUPPORTED LETTER OF
CREDIT, ADMINISTRATIVE AGENT SHALL BE DEEMED TO HAVE SOLD AND TRANSFERRED TO
EACH LENDER, AND EACH SUCH LENDER SHALL BE DEEMED IRREVOCABLY AND IMMEDIATELY TO
HAVE PURCHASED AND RECEIVED FROM ADMINISTRATIVE AGENT, WITHOUT RECOURSE OR
WARRANTY, AN UNDIVIDED INTEREST AND PARTICIPATION IN, TO THE EXTENT OF SUCH
LENDER’S PRO RATA SHARE, ADMINISTRATIVE AGENT’S SUPPORT AGREEMENT LIABILITIES
AND OBLIGATIONS IN RESPECT OF SUCH LETTERS OF CREDIT AND BORROWER’S
REIMBURSEMENT OBLIGATIONS WITH RESPECT THERETO.

 

(II)           CONCURRENTLY WITH THE ISSUANCE OF EACH LENDER LETTER OF CREDIT,
THE LC ISSUER IN RESPECT THEREOF SHALL BE DEEMED TO HAVE SOLD AND TRANSFERRED TO
EACH LENDER, AND EACH SUCH LENDER SHALL BE DEEMED IRREVOCABLY AND IMMEDIATELY TO
HAVE PURCHASED AND RECEIVED FROM SUCH LC ISSUER, WITHOUT RECOURSE OR WARRANTY,
AN UNDIVIDED INTEREST AND PARTICIPATION IN, TO THE EXTENT OF SUCH LENDER’S PRO
RATA SHARE, SUCH LENDER LETTER OF CREDIT AND BORROWER’S REIMBURSEMENT
OBLIGATIONS WITH RESPECT THERETO.  ANY PURCHASE OBLIGATION ARISING PURSUANT TO
THE IMMEDIATELY TWO PRECEDING SENTENCES SHALL BE ABSOLUTE AND UNCONDITIONAL AND
SHALL NOT BE AFFECTED BY ANY CIRCUMSTANCES WHATSOEVER.

 

(III)          IF EITHER (A) ADMINISTRATIVE AGENT MAKES ANY PAYMENT OR
DISBURSEMENT UNDER ANY SUPPORT AGREEMENT AND/OR (B) AN LC ISSUER MAKES ANY
PAYMENT OR DISBURSEMENT UNDER ANY LENDER LETTER OF CREDIT, AND BORROWER HAS NOT
REIMBURSED ADMINISTRATIVE AGENT OR, AS APPLICABLE, THE APPLICABLE LC ISSUER WITH
RESPECT TO ANY LENDER LETTER OF CREDIT IN FULL FOR SUCH PAYMENT OR DISBURSEMENT
IN ACCORDANCE WITH SECTION 2.9(C), OR (C) ANY REIMBURSEMENT RECEIVED BY
ADMINISTRATIVE AGENT OR ANY LC ISSUER FROM ANY CREDIT PARTY IS OR MUST BE
RETURNED OR RESCINDED UPON OR DURING ANY BANKRUPTCY OR REORGANIZATION OF ANY
CREDIT PARTY OR OTHERWISE, EACH LENDER SHALL BE IRREVOCABLY AND UNCONDITIONALLY
OBLIGATED TO PAY TO ADMINISTRATIVE AGENT, OR THE APPLICABLE LC ISSUER, AS
APPLICABLE, ITS PRO RATA SHARE OF SUCH PAYMENT OR DISBURSEMENT (BUT NO SUCH
PAYMENT SHALL DIMINISH THE OBLIGATIONS OF BORROWER UNDER SECTION 2.9(C)).  TO
THE EXTENT ANY SUCH LENDER SHALL NOT HAVE MADE SUCH AMOUNT AVAILABLE TO
ADMINISTRATIVE AGENT, OR THE APPLICABLE LC ISSUER, AS APPLICABLE, BY NOON
(CHICAGO TIME) ON THE BUSINESS DAY ON WHICH SUCH LENDER RECEIVES NOTICE FROM
ADMINISTRATIVE AGENT, OR THE APPLICABLE LC ISSUER, AS APPLICABLE, OF SUCH
PAYMENT OR DISBURSEMENT, SUCH LENDER AGREES TO PAY INTEREST ON SUCH AMOUNT TO
ADMINISTRATIVE AGENT, OR THE APPLICABLE LC ISSUER, AS APPLICABLE, FORTHWITH ON
DEMAND ACCRUING DAILY AT THE FEDERAL FUNDS RATE, FOR THE FIRST THREE (3) DAYS
FOLLOWING SUCH LENDER’S RECEIPT OF SUCH NOTICE, AND THEREAFTER AT THE BASE RATE
PLUS THE BASE RATE MARGIN IN RESPECT OF REVOLVING LOANS.  ANY SUCH LENDER’S
FAILURE TO MAKE AVAILABLE TO ADMINISTRATIVE AGENT OR THE APPLICABLE LC ISSUER,
AS APPLICABLE, ITS PRO RATA SHARE OF ANY SUCH PAYMENT OR DISBURSEMENT

 

32

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

 

SHALL NOT RELIEVE ANY OTHER LENDER OF ITS OBLIGATION HEREUNDER TO MAKE AVAILABLE
SUCH OTHER LENDER’S PRO RATA SHARE OF SUCH PAYMENT, BUT NO LENDER SHALL BE
RESPONSIBLE FOR THE FAILURE OF ANY OTHER LENDER TO MAKE AVAILABLE SUCH OTHER
LENDER’S PRO RATA SHARE OF ANY SUCH PAYMENT OR DISBURSEMENT.

 

SECTION 2.10         GENERAL PROVISIONS REGARDING PAYMENT.

 

All payments to be made by Borrower under any Financing Document, including
payments of principal and interest made hereunder and pursuant to any other
Financing Document, and all fees, expenses, indemnities and reimbursements,
shall be made without set off or counterclaim.  If any payment hereunder becomes
due and payable on a day other than a Business Day, such payment shall be
extended to the next succeeding Business Day and, with respect to payments of
principal, interest thereon shall be payable at the then applicable rate during
such extension (it being understood and agreed that, solely for purposes of
calculating financial covenants and computations contained herein and
determining compliance therewith, if payment is made, in full, on any such
extended due date, such payment shall be deemed to have been paid on the
original due date without giving effect to any extension thereto).  Any payments
received in the Payment Account before noon (Chicago time) on any date shall be
deemed received by Administrative Agent on such date, and any payments received
in the Payment Account after noon (Chicago time) on any date shall be deemed
received by Administrative Agent on the next succeeding Business Day.

 

SECTION 2.11         LOAN ACCOUNT.

 

Administrative Agent shall maintain a loan account (the “Loan Account”) on its
books to record Loans and other extensions of credit made by Lenders hereunder
or under any other Financing Document, and all payments thereon made by
Borrower.  All entries in the Loan Account shall be made in accordance with
Administrative Agent’s customary accounting practices as in effect from time to
time.  The balance in the Loan Account, as recorded on Administrative Agent’s
most recent printout or other written statement delivered to Borrower, shall be
conclusive and binding evidence of the amounts due and owing to Administrative
Agent by Borrower absent clear and convincing evidence to the contrary; provided
that any failure to so record or any error in so recording shall not limit or
otherwise affect Borrower’s duty to pay all amounts owing hereunder or under any
other Financing Document.  Unless Borrower notifies Administrative Agent of any
objection to any such printout or statement (specifically describing the basis
for such objection) within thirty (30) days after the date of receipt thereof,
it shall be deemed final, binding and conclusive upon Borrower in all respects
as to all matters reflected therein.

 

SECTION 2.12         MAXIMUM INTEREST.

 

(A)           APPLICABLE LIMIT.  IN NO EVENT SHALL THE INTEREST CHARGED WITH
RESPECT TO THE NOTES (IF ANY) OR ANY OTHER OBLIGATIONS OF BORROWER UNDER ANY
FINANCING DOCUMENT EXCEED THE MAXIMUM AMOUNT PERMITTED UNDER THE LAWS OF THE
STATE OF NEW YORK OR OF ANY OTHER APPLICABLE JURISDICTION.

 

33

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

 

(B)           MAXIMUM LAWFUL RATE.  NOTWITHSTANDING ANYTHING TO THE CONTRARY
HEREIN OR ELSEWHERE, IF AT ANY TIME THE RATE OF INTEREST PAYABLE HEREUNDER OR
UNDER ANY NOTE OR OTHER FINANCING DOCUMENT (THE “STATED RATE”) WOULD EXCEED THE
HIGHEST RATE OF INTEREST PERMITTED UNDER ANY APPLICABLE LAW TO BE CHARGED (THE
“MAXIMUM LAWFUL RATE”), THEN FOR SO LONG AS THE MAXIMUM LAWFUL RATE WOULD BE SO
EXCEEDED, THE RATE OF INTEREST PAYABLE SHALL BE EQUAL TO THE MAXIMUM LAWFUL
RATE; PROVIDED, THAT IF AT ANY TIME THEREAFTER THE STATED RATE IS LESS THAN THE
MAXIMUM LAWFUL RATE, BORROWER SHALL, TO THE EXTENT PERMITTED BY LAW, CONTINUE TO
PAY INTEREST AT THE MAXIMUM LAWFUL RATE UNTIL SUCH TIME AS THE TOTAL INTEREST
RECEIVED IS EQUAL TO THE TOTAL INTEREST WHICH WOULD HAVE BEEN RECEIVED HAD THE
STATED RATE BEEN (BUT FOR THE OPERATION OF THIS PROVISION) THE INTEREST RATE
PAYABLE.  THEREAFTER, THE INTEREST RATE PAYABLE SHALL BE THE STATED RATE UNLESS
AND UNTIL THE STATED RATE AGAIN WOULD EXCEED THE MAXIMUM LAWFUL RATE, IN WHICH
EVENT THIS PROVISION SHALL AGAIN APPLY.

 

(C)           APPLICATION OF EXCESS INTEREST.  IN NO EVENT SHALL THE TOTAL
INTEREST RECEIVED BY ANY LENDER EXCEED THE AMOUNT WHICH IT COULD LAWFULLY HAVE
RECEIVED HAD THE INTEREST BEEN CALCULATED FOR THE FULL TERM HEREOF AT THE
MAXIMUM LAWFUL RATE. IF, NOTWITHSTANDING THE PRIOR SENTENCE, ANY LENDER HAS
RECEIVED INTEREST HEREUNDER IN EXCESS OF THE MAXIMUM LAWFUL RATE, SUCH EXCESS
AMOUNT SHALL BE APPLIED TO THE REDUCTION OF THE PRINCIPAL BALANCE OF THE LOANS
OR TO OTHER AMOUNTS (OTHER THAN INTEREST) PAYABLE HEREUNDER, AND IF NO SUCH
PRINCIPAL OR OTHER AMOUNTS ARE THEN OUTSTANDING, SUCH EXCESS OR PART THEREOF
REMAINING SHALL BE PAID TO BORROWER.  IN COMPUTING INTEREST PAYABLE WITH
REFERENCE TO THE MAXIMUM LAWFUL RATE APPLICABLE TO ANY LENDER, SUCH INTEREST
SHALL BE CALCULATED AT A DAILY RATE EQUAL TO THE MAXIMUM LAWFUL RATE DIVIDED BY
THE NUMBER OF DAYS IN THE YEAR IN WHICH SUCH CALCULATION IS MADE.

 

SECTION 2.13         TAXES.

 

(A)           GROSS UP FOR TAXES.  ALL PAYMENTS OF PRINCIPAL AND INTEREST ON THE
LOANS AND ALL OTHER AMOUNTS PAYABLE HEREUNDER SHALL BE MADE FREE AND CLEAR OF
AND WITHOUT DEDUCTION FOR ANY PRESENT OR FUTURE INCOME, EXCISE, STAMP,
DOCUMENTARY, PROPERTY OR FRANCHISE TAXES AND OTHER TAXES, FEES, DUTIES, LEVIES,
ASSESSMENTS, WITHHOLDINGS OR OTHER CHARGES OF ANY NATURE WHATSOEVER (INCLUDING
INTEREST AND PENALTIES THEREON) IMPOSED BY ANY TAXING AUTHORITY, EXCLUDING TAXES
IMPOSED ON OR MEASURED BY ADMINISTRATIVE AGENT’S OR ANY LENDER’S NET INCOME BY
THE JURISDICTION UNDER WHICH ADMINISTRATIVE AGENT OR SUCH LENDER IS ORGANIZED OR
CONDUCTS BUSINESS (OTHER THAN SOLELY AS THE RESULT OF ENTERING INTO ANY OF THE
FINANCING DOCUMENTS OR TAKING ANY ACTION THEREUNDER) (ALL NON-EXCLUDED ITEMS
BEING CALLED “TAXES”).  IF ANY WITHHOLDING OR DEDUCTION FROM ANY PAYMENT TO BE
MADE BY BORROWER HEREUNDER IS REQUIRED IN RESPECT OF ANY TAXES PURSUANT TO ANY
APPLICABLE LAW, THEN BORROWER WILL (I) PAY DIRECTLY TO THE RELEVANT AUTHORITY
THE FULL AMOUNT REQUIRED TO BE SO WITHHELD OR DEDUCTED, (II) PROMPTLY FORWARD TO
ADMINISTRATIVE AGENT AN OFFICIAL RECEIPT OR OTHER DOCUMENTATION REASONABLY
SATISFACTORY TO ADMINISTRATIVE AGENT EVIDENCING SUCH PAYMENT TO SUCH AUTHORITY,
AND (III) PAY TO ADMINISTRATIVE AGENT FOR THE ACCOUNT OF ADMINISTRATIVE AGENT
AND LENDERS SUCH ADDITIONAL AMOUNT OR AMOUNTS AS IS NECESSARY TO ENSURE THAT THE
NET AMOUNT ACTUALLY RECEIVED BY ADMINISTRATIVE AGENT AND EACH LENDER WILL EQUAL
THE FULL AMOUNT ADMINISTRATIVE AGENT AND SUCH LENDER WOULD HAVE RECEIVED HAD NO
SUCH WITHHOLDING OR DEDUCTION BEEN REQUIRED.  IF ANY TAXES ARE DIRECTLY ASSERTED
AGAINST ADMINISTRATIVE AGENT OR ANY LENDER WITH RESPECT TO ANY PAYMENT RECEIVED
BY ADMINISTRATIVE AGENT OR SUCH LENDER HEREUNDER, ADMINISTRATIVE AGENT OR SUCH
LENDER MAY PAY SUCH TAXES AND BORROWER WILL PROMPTLY PAY SUCH ADDITIONAL AMOUNTS
(INCLUDING ANY PENALTY, INTEREST OR EXPENSE)

 

34

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

 

AS IS NECESSARY IN ORDER THAT THE NET AMOUNT RECEIVED BY SUCH PERSON AFTER THE
PAYMENT OF SUCH TAXES (INCLUDING ANY TAXES ON SUCH ADDITIONAL AMOUNT) SHALL
EQUAL THE AMOUNT SUCH PERSON WOULD HAVE RECEIVED HAD SUCH TAXES NOT BEEN
ASSERTED SO LONG AS SUCH AMOUNTS HAVE ACCRUED ON OR AFTER THE DAY WHICH IS TWO
HUNDRED SEVENTY (270) DAYS PRIOR TO THE DATE ON WHICH ADMINISTRATIVE AGENT OR
SUCH LENDER FIRST MADE DEMAND THEREFOR.

 

(B)           INTEREST AND PENALTIES.  IF BORROWER FAILS TO PAY ANY TAXES WHEN
DUE TO THE APPROPRIATE TAXING AUTHORITY OR FAILS TO REMIT TO ADMINISTRATIVE
AGENT, FOR THE ACCOUNT OF ADMINISTRATIVE AGENT AND THE RESPECTIVE LENDERS, THE
REQUIRED RECEIPTS OR OTHER REQUIRED DOCUMENTARY EVIDENCE, BORROWER SHALL
INDEMNIFY ADMINISTRATIVE AGENT AND LENDERS FOR ANY INCREMENTAL TAXES, INTEREST
OR PENALTIES THAT MAY BECOME PAYABLE BY ADMINISTRATIVE AGENT OR ANY LENDER AS A
RESULT OF ANY SUCH FAILURE.

 

(C)           FOREIGN LENDERS.  EACH LENDER THAT IS ORGANIZED UNDER THE LAWS OF
A JURISDICTION OTHER THAN THE UNITED STATES AND IS A PARTY HERETO ON THE CLOSING
DATE OR PURPORTS TO BECOME AN ASSIGNEE OF AN INTEREST PURSUANT TO SECTION
11.6(A) AFTER THE CLOSING DATE (UNLESS SUCH LENDER WAS ALREADY A LENDER
HEREUNDER IMMEDIATELY PRIOR TO SUCH ASSIGNMENT) (EACH SUCH LENDER A “FOREIGN
LENDER”) SHALL EXECUTE AND DELIVER TO EACH OF BORROWER AND ADMINISTRATIVE AGENT
ONE OR MORE (AS BORROWER OR ADMINISTRATIVE AGENT MAY REASONABLY REQUEST) UNITED
STATES INTERNAL REVENUE SERVICE FORMS W 8ECI, W 8BEN, W-8IMY (AS APPLICABLE) AND
OTHER APPLICABLE FORMS, CERTIFICATES OR DOCUMENTS PRESCRIBED BY THE UNITED
STATES INTERNAL REVENUE SERVICE OR REASONABLY REQUESTED BY ADMINISTRATIVE AGENT
CERTIFYING AS TO SUCH LENDER’S ENTITLEMENT TO A COMPLETE EXEMPTION FROM OR
REDUCTION OF WITHHOLDING OR DEDUCTION OF TAXES.  BORROWER SHALL NOT BE REQUIRED
TO PAY ADDITIONAL AMOUNTS TO ANY LENDER PURSUANT TO THIS SECTION 2.13 WITH
RESPECT TO UNITED STATES WITHHOLDING AND INCOME TAXES TO THE EXTENT THAT THE
OBLIGATION TO PAY SUCH ADDITIONAL AMOUNTS WOULD NOT HAVE ARISEN BUT FOR THE
FAILURE OF SUCH LENDER TO COMPLY WITH THIS PARAGRAPH OTHER THAN AS A RESULT OF A
CHANGE IN LAW.

 

(D)           REFUNDS.  IF ADMINISTRATIVE AGENT OR A LENDER DETERMINES, IN ITS
SOLE DISCRETION, THAT IT HAS RECEIVED A REFUND OF ANY TAXES AS TO WHICH IT HAS
BEEN INDEMNIFIED BY BORROWER OR WITH RESPECT TO WHICH BORROWER HAS PAID
ADDITIONAL AMOUNTS PURSUANT TO THIS SECTION 2.13, IT SHALL PAY OVER SUCH REFUND
TO BORROWER (BUT ONLY TO THE EXTENT OF INDEMNITY PAYMENTS MADE, OR ADDITIONAL
AMOUNTS PAID, BY BORROWER UNDER THIS SECTION 2.13 WITH RESPECT TO THE TAXES
GIVING RISE TO SUCH REFUND), NET OF ALL OUT-OF-POCKET EXPENSES OF ADMINISTRATIVE
AGENT OR SUCH LENDER AND WITHOUT INTEREST (OTHER THAN ANY INTEREST PAID BY THE
RELEVANT GOVERNMENTAL AUTHORITY WITH RESPECT TO SUCH REFUND); PROVIDED, THAT
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 SECTION 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 WHICH IT DEEMS
CONFIDENTIAL) TO BORROWER OR ANY OTHER PERSON.

 

SECTION 2.14         CAPITAL ADEQUACY.

 

If any Lender shall reasonably determine that the adoption or taking effect of,
or any change in, any applicable Law regarding capital adequacy, in each
instance, after the Closing

 

35

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

 

Date, or any change after the Closing Date in the interpretation, administration
or application thereof by any Governmental Authority, central bank or comparable
agency charged with the interpretation, administration or application thereof,
or the compliance by any Lender or any Person controlling such Lender with any
request, guideline or directive regarding capital adequacy (whether or not
having the force of Law) of any such Governmental Authority, central bank or
comparable agency adopted or otherwise taking effect after the Closing Date, has
or would have the effect of reducing the rate of return on such Lender’s or such
controlling Person’s capital as a consequence of such Lender’s obligations
hereunder or under any Support Agreement or Lender Letter of Credit to a level
below that which such Lender or such controlling Person could have achieved but
for such adoption, taking effect, change, interpretation, administration,
application or compliance (taking into consideration such Lender’s or such
controlling Person’s policies with respect to capital adequacy) then from time
to time, within 15 days after demand by such Lender (which demand shall be
accompanied by a statement setting forth the basis for such demand and a
calculation of the amount thereof in reasonable detail, a copy of which shall be
furnished to Administrative Agent), Borrower shall promptly pay to such Lender
such additional amount as will compensate such Lender or such controlling Person
for such reduction, so long as such amounts have accrued on or after the day
which is 180 days prior to the date on which such Lender first made demand
therefor.

 

SECTION 2.15         MITIGATION OBLIGATIONS.

 

If any Lender requests compensation under either Section 2.7(e)(v) or Section
2.14, or requires Borrower to pay any additional amount to any Lender or any
Governmental Authority for the account of any Lender pursuant to Section 2.13,
then, upon the written request of Borrower, 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 (subject to the
provisions of Section 11.6) to another of its offices, branches or affiliates,
if, in the judgment of such Lender, such designation or assignment (i) would
eliminate or materially reduce amounts payable pursuant to any such Section, as
the case may be, in the future, (ii) would not subject such Lender to any
unreimbursed cost or expense and (iii) would not otherwise be disadvantageous to
such Lender (as determined in its sole discretion).  Without limitation of the
provisions of Section 9.1, Borrower hereby agrees to pay all reasonable costs
and expenses incurred by any Lender in connection with any such designation or
assignment.

 

SECTION 2.16         BORROWING BASE.

 

(A)           INITIAL BORROWING BASE.  THE BORROWING BASE SHALL BE $110,000,000
DURING THE PERIOD FROM THE CLOSING DATE UNTIL THE FIRST DETERMINATION DATE UNDER
SECTION 2.16(B) UNLESS THE BORROWING BASE IS OTHERWISE SUBJECT TO A SPECIAL
DETERMINATION UNDER SECTION 2.16(C).

 

(B)           SCHEDULED DETERMINATIONS OF BORROWING BASE.  PRIOR TO MARCH 1 AND
SEPTEMBER 1 OF EACH YEAR, BEGINNING MARCH 1, 2008, BORROWER SHALL FURNISH TO
ADMINISTRATIVE AGENT ALL INFORMATION, REPORTS AND DATA REQUESTED BY
ADMINISTRATIVE AGENT CONCERNING CREDIT PARTIES’ BUSINESSES AND PROPERTIES
(INCLUDING THEIR OIL AND GAS PROPERTIES AND THE RESERVES AND PRODUCTION RELATING
THERETO), TOGETHER WITH, AS APPLICABLE, THE MOST RECENT RESERVE REPORT DELIVERED
PURSUANT TO SECTION 4.1(I) OR (J).  WITHIN 30 DAYS, OR AS SOON THEREAFTER AS IS
REASONABLY PRACTICAL, THE BORROWING BASE SHALL BE REDETERMINED AS PROVIDED
HEREIN.  PROMPTLY AFTER RECEIVING SUCH

 

36

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

 

INFORMATION, REPORTS AND DATA, ADMINISTRATIVE AGENT SHALL DETERMINE AND DELIVER
TO EACH LENDER THE PROPOSED BORROWING BASE FOR THE NEXT BORROWING BASE PERIOD. 
PROMPTLY AFTER LENDERS RECEIPT THEREOF EACH LENDER SHALL NOTIFY ADMINISTRATIVE
AGENT WHETHER OR NOT IT AGREES WITH SUCH PROPOSED BORROWING BASE. IF REQUIRED
LENDERS HAVE NOT APPROVED THE PROPOSED BORROWING BASE, ADMINISTRATIVE AGENT
SHALL POLL LENDERS TO ASCERTAIN THE HIGHEST BORROWING BASE ACCEPTABLE TO
REQUIRED LENDERS WHICH AMOUNT SHALL THEN BECOME THE BORROWING BASE. 
ADMINISTRATIVE AGENT SHALL BY NOTICE TO BORROWER DESIGNATE SUCH AMOUNT AS THE
NEW BORROWING BASE AVAILABLE TO BORROWER HEREUNDER, WHICH DESIGNATION SHALL TAKE
EFFECT ON THE DATE SUCH NOTICE IS SENT (HEREIN CALLED A “DETERMINATION DATE”)
AND SHALL REMAIN IN EFFECT UNTIL THE NEXT DETERMINATION DATE.  THE BORROWING
BASE SHALL BE DETERMINED BASED UPON THE LOAN COLLATERAL VALUE WHICH
ADMINISTRATIVE AGENT AND REQUIRED LENDERS IN THEIR DISCRETION ASSIGN TO THE
DISCOUNTED NET PRESENT VALUE OF THE VARIOUS OIL AND GAS PROPERTIES INCLUDED IN
THE COLLATERAL AT THE TIME OF DETERMINATION AND BASED UPON SUCH OTHER CREDIT
FACTORS (INCLUDING WITHOUT LIMITATION THE ASSETS, LIABILITIES, CASH FLOW, HEDGED
AND UNHEDGED EXPOSURE TO PRICE, FOREIGN EXCHANGE RATE, AND INTEREST RATE
CHANGES, BUSINESS, PROPERTIES, PROSPECTS, MANAGEMENT AND OWNERSHIP OF CREDIT
PARTIES AND THEIR AFFILIATES) AS THEY IN THEIR REASONABLE DISCRETION DEEM
APPROPRIATE.  IT IS EXPRESSLY UNDERSTOOD THAT LENDERS AND ADMINISTRATIVE AGENT
HAVE NO OBLIGATION TO AGREE UPON OR DESIGNATE THE BORROWING BASE AT ANY
PARTICULAR AMOUNT, WHETHER IN RELATION TO THE REVOLVING LOAN COMMITMENT OR
OTHERWISE, AND THAT LENDERS’ COMMITMENTS TO ADVANCE FUNDS HEREUNDER IS
DETERMINED BY REFERENCE TO THE BORROWING BASE FROM TIME TO TIME IN EFFECT, WHICH
BORROWING BASE SHALL BE USED FOR CALCULATING FEES UNDER SECTION 2.7 AND, TO THE
EXTENT PERMITTED BY LAW AND REGULATORY AUTHORITIES, FOR THE PURPOSES OF CAPITAL
ADEQUACY DETERMINATION AND REIMBURSEMENTS UNDER SECTION 2.14.  IF BORROWER DOES
NOT FURNISH ALL SUCH INFORMATION, REPORTS AND DATA BY THE DATE SPECIFIED IN THE
FIRST SENTENCE OF THIS SECTION 2.16(B), ADMINISTRATIVE AGENT AND REQUIRED
LENDERS MAY NONETHELESS DETERMINE THE BORROWING BASE AS PROVIDED ABOVE IN THIS
SECTION 2.16(B) WITHOUT SUCH INFORMATION, BUT BASED UPON SUCH INFORMATION OR
ASSUMPTIONS AS THEY MAY ELECT (AND MAY DETERMINE THE BORROWING BASE FROM TIME TO
TIME THEREAFTER BASED UPON SUCH INFORMATION AND ASSUMPTIONS) UNTIL BORROWER SO
FURNISHES ALL SUCH INFORMATION, REPORTS AND DATA, WHEREUPON ADMINISTRATIVE AGENT
AND REQUIRED LENDERS SHALL DETERMINE THE BORROWING BASE USING THE PROCEDURE
OUTLINED ABOVE UTILIZING SUCH INFORMATION, REPORTS AND DATA FURNISHED BY
BORROWER.

 

(C)           SPECIAL DETERMINATIONS OF BORROWING BASE.  IN ADDITION TO THE
DETERMINATIONS OF THE BORROWING BASE PURSUANT TO SECTIONS 2.16 (B), BORROWER AND
ADMINISTRATIVE AGENT OR ADMINISTRATIVE AGENT AT THE REQUEST OF REQUIRED LENDERS)
MAY EACH REQUEST ADDITIONAL DETERMINATIONS (“SPECIAL DETERMINATION”) OF THE
BORROWING BASE FROM TIME TO TIME; PROVIDED, THAT BORROWER MAY REQUEST NO MORE
THAN ONE (1) SPECIAL DETERMINATION IN ANY CALENDAR YEAR AND ADMINISTRATIVE AGENT
(OR ADMINISTRATIVE AGENT AT THE REQUEST OF REQUIRED LENDERS) MAY REQUEST NO MORE
THAN ONE (1) SPECIAL DETERMINATION IN ANY CALENDAR YEAR.  IN THE EVENT
ADMINISTRATIVE AGENT (OR ADMINISTRATIVE AGENT AT THE REQUEST OF REQUIRED
LENDERS) REQUESTS A SPECIAL DETERMINATION, ADMINISTRATIVE AGENT SHALL PROMPTLY
DELIVER NOTICE OF SUCH REQUEST TO BORROWER AND BORROWER SHALL, WITHIN TWENTY
(20) CALENDAR DAYS FOLLOWING THE DATE OF SUCH REQUEST, DELIVER TO LENDERS A
RESERVE REPORT PREPARED BY PETROLEUM ENGINEERS WHO ARE EMPLOYEES OF BORROWER AS
OF THE LAST DAY OF THE CALENDAR MONTH PRECEDING THE DATE OF SUCH REQUEST AND
SUCH OTHER

 

37

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

 

INFORMATION WHICH ADMINISTRATIVE AGENT SHALL HAVE REASONABLY REQUESTED.  IN THE
EVENT BORROWER REQUESTS A SPECIAL DETERMINATION, BORROWER SHALL DELIVER WRITTEN
NOTICE OF SUCH REQUEST TO ADMINISTRATIVE AGENT WHICH SHALL INCLUDE (I) A RESERVE
REPORT PREPARED AS OF A DATE NOT MORE THAN THIRTY (30) DAYS PRIOR TO THE DATE OF
SUCH REQUEST (OR, IN THE CASE OF A REQUEST MADE ON THE 31ST DAY OF ANY CALENDAR
MONTH, THIRTY-ONE (31) DAYS), (II) THE AMOUNT OF THE BORROWING BASE REQUESTED BY
BORROWER AND TO BECOME EFFECTIVE ON THE DETERMINATION DATE APPLICABLE TO SUCH
SPECIAL DETERMINATION AND (III) SUCH OTHER INFORMATION WHICH ADMINISTRATIVE
AGENT SHALL HAVE REASONABLY REQUESTED.  UPON RECEIPT OF SUCH RESERVE REPORT AND
OTHER INFORMATION, ADMINISTRATIVE AGENT AND REQUIRED LENDERS SHALL DETERMINE THE
BORROWING BASE IN ACCORDANCE WITH THE PROCEDURE SET FORTH IN SECTION 2.16(B),
WHICH BORROWING BASE SHALL BECOME EFFECTIVE ON THE DETERMINATION DATE.

 

(D)           DISPOSITION OF OIL AND GAS PROPERTY.  IF ANY CREDIT PARTY INTENDS
TO SELL OR OTHERWISE DISPOSE OF ANY OIL AND GAS PROPERTY OR ANY INTEREST THEREIN
THAT WAS INCLUDED IN THE DETERMINATION OF THE BORROWING BASE THEN IN EFFECT
(OTHER THAN A DISPOSITION OF THE TYPE IDENTIFIED AS ITEM (VII) OR (VIII) OF THE
DEFINITION OF ASSET DISPOSITION), BORROWER SHALL GIVE ADMINISTRATIVE AGENT
PROMPT NOTICE THEREOF.  IN THE EVENT THAT THE BORROWING BASE VALUE OF ALL OIL
AND GAS PROPERTIES OR INTEREST THEREIN (AS DETERMINED BY ADMINISTRATIVE AGENT),
SUBJECT TO AN ASSET DISPOSITION SINCE THE BEGINNING OF THE THEN CURRENT
BORROWING BASE PERIOD EXCEEDS FIVE PERCENT (5%) OF THE BORROWING BASE IN EFFECT
AT THE BEGINNING OF THE THEN CURRENT BORROWING BASE PERIOD, THEN WITHIN ONE (1)
BUSINESS DAY OF THE CONSUMMATION OF SUCH SALE OR DISPOSITION, (I)  THE BORROWING
BASE SHALL BE REDUCED BY THE BORROWING BASE VALUE (AS DETERMINED BY
ADMINISTRATIVE AGENT) OF SUCH OIL AND GAS PROPERTIES, AND (II) DURING THE
OVERADVANCE PERIOD, THE OVERADVANCE AMOUNT SHALL BE REDUCED BY THE AMOUNT BY
WHICH THE NET CASH PROCEEDS OF SUCH SALE OR DISPOSITIONS OF OIL AND GAS
PROPERTIES EXCEEDS THE REDUCTION IN THE BORROWING BASE PURSUANT TO THE PRECEDING
CLAUSE (I).

 

(E)           OVERADVANCE PERIOD.  DURING THE OVERADVANCE PERIOD, AT THE TIME OF
EACH DETERMINATION OF THE BORROWING BASE UNDER SECTION 2.16 (B) OR (C),
ADMINISTRATIVE AGENT AND REQUIRED LENDERS SHALL DETERMINE THE OVERADVANCE AMOUNT
IN THEIR DISCRETION.  THE REDETERMINED OVERADVANCE AMOUNT SHALL BE EFFECTIVE ON
SAME DATE AS THE REDETERMINED BORROWING BASE SHALL BECOME EFFECTIVE.

 

(F)            PERMITTED SECURITIES.  IN ADDITION TO EACH OF THE DETERMINATIONS
OF THE BORROWING BASE SET FORTH IN THIS AGREEMENT, TO THE EXTENT FROM TIME TO
TIME ANY PERMITTED SECURITIES ARE OUTSTANDING, THE BORROWING BASE OTHERWISE
DETERMINED PURSUANT TO THE TERMS OF THIS SECTION 2.16 SHALL BE REDUCED BY TWENTY
FIVE PERCENT (25%) OF THE AMOUNT (WHETHER OF PRINCIPAL AMOUNT, FACE AMOUNT OR
LIQUIDATION PREFERENCE AMOUNT) OF SUCH PERMITTED SECURITIES.

 

ARTICLE 3
REPRESENTATIONS AND WARRANTIES

 

To induce Administrative Agent and Lenders to enter into this Agreement and to
make the Loans and other credit accommodations contemplated hereby, Borrower
hereby represents and warrants to Administrative Agent and each Lender that:

 

38

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

 

SECTION 3.1            EXISTENCE AND POWER.

 

Each Credit Party is an entity as specified on Schedule 3.1 (or, as to those
Persons becoming a Credit Party after the Closing Date, as notified to
Administrative Agent), is duly organized, validly existing and in good standing
under the laws of the jurisdiction specified on Schedule 3.1 (or, as to those
Persons becoming a Credit Party after the Closing Date, as notified to
Administrative Agent), has the same legal name as it appears in such Credit
Party’s Organizational Documents and an organizational identification number (if
any), in each case as specified on Schedule 3.1 (or, as to those Persons
becoming a Credit Party after the Closing Date, as notified to Administrative
Agent), and has all powers and all governmental licenses, authorizations,
registrations, permits, consents and approvals required under all applicable
Laws and required in order to carry on its business as now conducted
(collectively, “Permits”), except where the failure to have such Permits could
not reasonably be expected to have a Material Adverse Effect. Each Credit Party
is qualified to do business as a foreign entity in each jurisdiction in which it
is required to be so qualified, which jurisdictions as of the Closing Date are
specified on Schedule 3.1, except where the failure to be so qualified could not
reasonably be expected to have a Material Adverse Effect. Except as set forth on
Schedule 3.1 (or, as to those Persons becoming a Credit Party after the Closing
Date, as notified to Administrative Agent), no Credit Party has had, over the
five (5) year period preceding the Closing Date, any name other than its current
name or was incorporated or organized under the laws of any jurisdiction other
than its current jurisdiction of incorporation or organization.

 

SECTION 3.2            ORGANIZATION AND GOVERNMENTAL AUTHORIZATION; NO
CONTRAVENTION.

 

The execution, delivery and performance by each Credit Party of the Financing
Documents to which it is a party are within its powers, have been duly
authorized by all necessary action pursuant to its Organizational Documents,
require no further action by or in respect of, or filing with, any Governmental
Authority (except the filing of the Mortgages and financing statements) and do
not violate, conflict with or cause a breach or a default under (i) any Law or
any of the Organizational Documents of any Credit Party or (ii) any agreement or
instrument binding upon it, except for such violations, conflicts, breaches or
defaults as could not, with respect to this clause (ii) reasonably be expected
to have a Material Adverse Effect.

 

SECTION 3.3            BINDING EFFECT.

 

Each of the Financing Documents to which any Credit Party is a party constitutes
a valid and binding agreement or instrument of such Credit Party, enforceable
against such Credit Party in accordance with its respective terms, except as the
enforceability thereof may be limited by bankruptcy, insolvency or other similar
laws relating to the enforcement of creditors’ rights generally and by general
equitable principles.

 

SECTION 3.4            CAPITALIZATION.

 

The authorized Capital Stock of each of the Credit Parties as of the Closing
Date is as set forth on Schedule 3.4. All issued and outstanding Capital Stock
of each of the Credit Parties are duly authorized and validly issued, fully
paid, non-assessable, free and clear of all Liens other than those in favor of
Administrative Agent for the benefit of Administrative Agent and Lenders,

 

39

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

 

and such Capital Stock were issued in compliance with all applicable Laws. The
identity of the holders of the Capital Stock of each of the Credit Parties
(other than Borrower) and the percentage of their fully diluted ownership of the
Capital Stock of each of the Credit Parties (other than Borrower) as of the
Closing Date is set forth on Schedule 3.4. No shares of the Capital Stock of any
Credit Party (other than Borrower), other than those described above, are issued
and outstanding as of the Closing Date. Except as set forth on Schedule 3.4, as
of the Closing Date there are no preemptive or other outstanding rights,
options, warrants, conversion rights or similar agreements or understandings for
the purchase or acquisition from any Credit Party of any Capital Stock of any
such entity.

 

SECTION 3.5            FINANCIAL INFORMATION.

 

(A)           AUDITED STATEMENTS. THE CONSOLIDATED BALANCE SHEET OF BORROWER AND
ITS CONSOLIDATED SUBSIDIARIES AS OF DECEMBER 31, 2006, AND THE RELATED
CONSOLIDATED STATEMENTS OF OPERATIONS, STOCKHOLDERS’ EQUITY (OR COMPARABLE
CALCULATION, IF SUCH PERSON IS NOT A CORPORATION) AND CASH FLOWS FOR THE FISCAL
YEAR THEN ENDED, REPORTED ON BY GRANT THORNTON LLP, COPIES OF WHICH HAVE BEEN
DELIVERED TO ADMINISTRATIVE AGENT, FAIRLY PRESENT IN ALL MATERIAL RESPECTS, IN
CONFORMITY WITH GAAP, THE CONSOLIDATED FINANCIAL POSITION OF BORROWER AND ITS
CONSOLIDATED SUBSIDIARIES AS OF SUCH DATE AND THEIR CONSOLIDATED RESULTS OF
OPERATIONS, CHANGES IN STOCKHOLDERS’ EQUITY (OR COMPARABLE CALCULATION) AND CASH
FLOWS FOR SUCH PERIOD.

 

(B)           UNAUDITED STATEMENTS. THE UNAUDITED CONSOLIDATED BALANCE SHEET OF
BORROWER AND ITS CONSOLIDATED SUBSIDIARIES AS OF SEPTEMBER 30, 2007 AND THE
RELATED UNAUDITED CONSOLIDATED STATEMENTS OF OPERATIONS AND CASH FLOWS FOR THE
NINE (9) MONTHS THEN ENDED, COPIES OF WHICH HAVE BEEN DELIVERED TO
ADMINISTRATIVE AGENT, FAIRLY PRESENT IN ALL MATERIAL RESPECTS, IN CONFORMITY
WITH GAAP APPLIED ON A BASIS CONSISTENT WITH THE FINANCIAL STATEMENTS REFERRED
TO IN SECTION 3.5(A), THE CONSOLIDATED FINANCIAL POSITION OF BORROWER AND ITS
CONSOLIDATED SUBSIDIARIES AS OF SUCH DATE AND THEIR CONSOLIDATED RESULTS OF
OPERATIONS AND CASH FLOWS FOR THE NINE (9) MONTHS THEN ENDED (SUBJECT TO NORMAL
YEAR END ADJUSTMENTS AND THE ABSENCE OF FOOTNOTE DISCLOSURES).

 

(C)           NO MATERIAL ADVERSE CHANGE. AS OF THE DATE HEREOF, SINCE
SEPTEMBER 30, 2007, THERE HAS BEEN NO MATERIAL ADVERSE CHANGE IN THE BUSINESS,
ASSETS, OPERATIONS OR CONDITION, FINANCIAL OR OTHERWISE, OF BORROWER AND ITS
RESTRICTED SUBSIDIARIES, TAKEN AS A WHOLE. AS OF THE DATE OF DELIVERY OF EACH
FINANCIAL STATEMENT REQUIRED BY SECTION 4.1(B) (THE “CURRENT FINANCIAL
STATEMENT”), SINCE THE DELIVERY OF THE FINANCIAL STATEMENTS IMMEDIATELY
PRECEDING THE CURRENT FINANCIAL STATEMENT, THERE HAS BEEN NO MATERIAL ADVERSE
CHANGE IN THE BUSINESS, ASSETS, OPERATIONS OR CONDITION, FINANCIAL OR OTHERWISE,
OF BORROWER AND ITS RESTRICTED SUBSIDIARIES, TAKEN AS A WHOLE.

 

SECTION 3.6            LITIGATION.

 

Except as set forth on Schedule 3.6, there is no Litigation pending or to the
knowledge of Borrower threatened against or affecting Borrower or any of it
Subsidiaries (i) as to which there is a reasonable possibility of an adverse
decision and that, if adversely decided, could reasonably be expected to have a
Material Adverse Effect or (ii) which in any manner draws into question the
validity of any of the Financing Documents.

 

40

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

 

SECTION 3.7            OWNERSHIP OF PROPERTY.

 

Each Credit Party is the lawful owner of, has Defensible Title to and is in
lawful possession of, or has valid leasehold interests in, all material
properties and other assets (real or personal, tangible, intangible or mixed)
purported or reported to be owned or leased (as the case may be) by such Person,
except as may have been disposed of in the Ordinary Course of Business or
otherwise in compliance with the terms hereof.

 

SECTION 3.8            NO DEFAULT.

 

No Default or Event of Default has occurred and is continuing. No Credit Party
is in breach or default under or with respect to any contract, agreement, lease
or other instrument to which it is a party or by which its property is bound or
affected, which breach or default could reasonably be expected to have a
Material Adverse Effect.

 

SECTION 3.9            LABOR MATTERS.

 

As of the Closing Date, there are no strikes or other labor disputes pending or,
to Borrower’s knowledge, threatened against any Credit Party. Hours worked and
payments made to the employees of the Credit Parties have not been in violation
of the Fair Labor Standards Act or any other applicable Law dealing with such
matters. All payments due from the Credit Parties, or for which any claim may be
made against any of them, on account of wages and employee and retiree health
and welfare insurance and other benefits have been paid or accrued as a
liability on their books, as the case may be. The consummation of the
transactions contemplated by the Financing Documents and the other Financing
Documents will not give rise to a right of termination or right of renegotiation
on the part of any union under any collective bargaining agreement to which it
is a party or by which it is bound.

 

SECTION 3.10         REGULATED ENTITIES.

 

No Credit Party is an “investment company” or a company “controlled” by an
“investment company” or a “subsidiary” of an “investment company,” all within
the meaning of the Investment Company Act of 1940.

 

SECTION 3.11         MARGIN REGULATIONS.

 

None of the proceeds from the Loans have been or will be used, directly or
indirectly, for the purpose of purchasing or carrying any Margin Stock, for the
purpose of reducing or retiring any indebtedness which was originally incurred
to purchase or carry any Margin Stock or for any other purpose which might cause
any of the Loans to be considered a “purpose credit” within the meaning of
Regulation T, U or X of the Federal Reserve Board.

 

SECTION 3.12         COMPLIANCE WITH LAWS; ANTI-TERRORISM LAWS.

 

(A)           LAWS GENERALLY. EACH CREDIT PARTY IS IN COMPLIANCE WITH THE
REQUIREMENTS OF ALL APPLICABLE LAWS, EXCEPT FOR SUCH LAWS THE NONCOMPLIANCE WITH
WHICH COULD NOT REASONABLY BE EXPECTED TO HAVE A MATERIAL ADVERSE EFFECT.

 

41

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

 

(B)           ANTI-TERRORISM LAWS. NONE OF THE CREDIT PARTIES AND, TO THE
KNOWLEDGE OF THE CREDIT PARTIES, NONE OF THEIR AFFILIATES (I) IS IN VIOLATION OF
ANY ANTI-TERRORISM LAW, (II) ENGAGES IN OR CONSPIRES TO ENGAGE IN ANY
TRANSACTION THAT EVADES OR AVOIDS, OR HAS THE PURPOSE OF EVADING OR AVOIDING, OR
ATTEMPTS TO VIOLATE, ANY OF THE PROHIBITIONS SET FORTH IN ANY ANTI-TERRORISM
LAW, (III) IS A BLOCKED PERSON, OR IS CONTROLLED BY A BLOCKED PERSON, (IV) IS
ACTING OR WILL ACT FOR OR ON BEHALF OF A BLOCKED PERSON, (V) IS ASSOCIATED WITH,
OR WILL BECOME ASSOCIATED WITH, A BLOCKED PERSON OR (VI) IS PROVIDING, OR WILL
PROVIDE, MATERIAL, FINANCIAL OR TECHNICAL SUPPORT OR OTHER SERVICES TO OR IN
SUPPORT OF ACTS OF TERRORISM OF A BLOCKED PERSON. NO CREDIT PARTY NOR, TO THE
KNOWLEDGE OF ANY CREDIT PARTY, ANY OF ITS AFFILIATES OR AGENTS ACTING OR
BENEFITING IN ANY CAPACITY IN CONNECTION WITH THE TRANSACTIONS CONTEMPLATED BY
THIS AGREEMENT, (A) CONDUCTS ANY BUSINESS OR ENGAGES IN MAKING OR RECEIVING ANY
CONTRIBUTION OF FUNDS, GOODS OR SERVICES TO OR FOR THE BENEFIT OF ANY BLOCKED
PERSON, OR (B) DEALS IN, OR OTHERWISE ENGAGES IN ANY TRANSACTION RELATING TO,
ANY PROPERTY OR INTEREST IN PROPERTY BLOCKED PURSUANT TO EXECUTIVE ORDER NO.
13224, ANY SIMILAR EXECUTIVE ORDER OR OTHER ANTI-TERRORISM LAW.

 

SECTION 3.13         TAXES.

 

Except subject to a Permitted Contest or where the failure to do so could not
reasonably be expected to have a Material Adverse Effect:  (i) all Federal,
state and local tax returns, reports and statements required to be filed by or
on behalf of each Credit Party have been filed with the appropriate Governmental
Authorities in all jurisdictions in which such returns, reports and statements
are required to be filed and, all Taxes (including real property Taxes) and
other charges shown to be due and payable in respect thereof have been timely
paid prior to the date on which any fine, penalty, interest, late charge or loss
may be added thereto for nonpayment thereof; (ii) all state and local sales and
use Taxes required to be paid by each Credit Party have been paid; and (iii) all
Federal and state returns have been filed by each Credit Party for all periods
for which returns were due with respect to employee income tax withholding,
social security and unemployment taxes, and the amounts shown thereon to be due
and payable have been paid in full or adequate provisions therefor have been
made.

 

SECTION 3.14         COMPLIANCE WITH ERISA.

 

No ERISA Event has occurred or is reasonably expected to occur that, when taken
together with all other such ERISA Events for which liability is reasonably
expected to occur, could reasonably be expected to result in a Material Adverse
Effect. The present value of all accumulated benefit obligations under each Plan
(based on the assumptions used for purposes of Statement of Financial Accounting
Standards No. 87) did not, as of the date of the most recent financial
statements reflecting such amounts, exceed by more than $100,000 the fair market
value of the assets of such Plan, and the present value of all accumulated
benefit obligations of all underfunded Plans (based on the assumptions used for
purposes of Statement of Financial Accounting Standards No. 87) did not, as of
the date of the most recent financial statements reflecting such amounts, exceed
by more than $100,000 the fair market value of the assets of all such
underfunded Plans.

 

42

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

 

SECTION 3.15         BROKERS.

 

Except as set forth on Schedule 3.15, and except for fees payable to
Administrative Agent and/or Lenders, no broker, finder or other intermediary has
brought about the obtaining, making or closing of the transactions contemplated
by the Financing Documents, and no Credit Party has or will have any obligation
to any Person in respect of any finder’s or brokerage fees in connection
herewith or therewith.

 

SECTION 3.16         [RESERVED].

 

SECTION 3.17         [RESERVED].

 

SECTION 3.18         ENVIRONMENTAL COMPLIANCE.

 

Except as set forth in Schedule 3.18, and except with respect to any other
matters that, individually or in the aggregate, could not reasonably be expected
to result in a Material Adverse Effect, neither Borrower nor any of its
Subsidiaries (i) has failed to comply with any Environmental Law or to obtain,
maintain or comply with any permit, license or other approval required under any
Environmental Law, (ii) has become subject to any Environmental Liability,
(iii) has received notice of any claim with respect to any Environmental
Liability or (iv) knows of any basis for any Environmental Liability.

 

SECTION 3.19         INTELLECTUAL PROPERTY.

 

Each Credit Party owns, is licensed to use or otherwise has the right to use,
all Intellectual Property that is material to the condition (financial or
other), business or operations of such Credit Party. To Borrower’s knowledge,
each Credit Party conducts its business without infringement or claim of
infringement of any Intellectual Property rights of others and there is no
infringement or claim of infringement by others of any Intellectual Property
rights of any Credit Party, which infringement or claim of infringement could
reasonably be expected to have a Material Adverse Effect.

 

SECTION 3.20         [RESERVED].

 

SECTION 3.21         SOLVENCY.

 

Borrower and each additional Credit Party is Solvent.

 

SECTION 3.22         FULL DISCLOSURE.

 

None of the written information (financial or otherwise) furnished by or on
behalf of any Credit Party to Administrative Agent or any Lender in connection
with the consummation of the transactions contemplated by the Financing
Documents (excluding projections, estimates, and engineering reports), contains
any untrue statement of a material fact or omits to state a material fact
necessary to make the statements contained herein or therein not misleading on
the date such information is dated or certified in light of the circumstances
under which such statements were made. To the best knowledge of Borrower, the
engineering reports delivered to Administrative Agent and/or the Lenders in
connection with this Agreement do not contain any material

 

43

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

 

inaccuracies and/or omissions. The said engineering reports, however, are based
upon professional opinions, estimates and projections and Borrower does not
warrant that such opinions, estimates and projections will ultimately prove to
have been accurate. All other financial projections delivered to Administrative
Agent and Lenders have been prepared on the basis of the assumptions stated
therein. Such projections represent as of such time Borrower’s best estimate of
Borrower’s future financial performance and such assumptions were as of such
time believed by Borrower to be fair and reasonable in light of then current
business conditions; provided that Borrower can give no assurance that such
projections will be attained.

 

SECTION 3.23         RESERVE REPORTS, IMBALANCES, MARKETING AND BORROWING BASE
MATTERS.

 

(A)           EXCEPT AS SET FORTH ON SCHEDULE 3.23, BORROWER AND EACH GUARANTOR
HAS DEFENSIBLE TITLE TO EACH MORTGAGED PROPERTY HAVING A BOOK COST IN EXCESS OF
$200,000 (EXCEPT TO THE EXTENT THAT (1) SUCH ASSETS HAVE THEREAFTER BEEN
DISPOSED OF IN COMPLIANCE WITH THIS AGREEMENT OR (2) LEASES FOR SUCH PROPERTY
HAVE EXPIRED PURSUANT TO THEIR TERMS), IN EACH CASE FREE AND CLEAR OF ALL LIENS,
EXCEPT (I) PERMITTED LIENS, (II) OBLIGATIONS OR DUTIES TO ANY MUNICIPALITY OR
PUBLIC AUTHORITY WITH RESPECT TO ANY FRANCHISE, GRANT, LICENSE OR PERMIT AND ALL
APPLICABLE LAWS, RULES, REGULATIONS AND ORDERS OF ANY GOVERNMENTAL AUTHORITY,
(III) ALL LESSORS’ ROYALTIES, OVERRIDING ROYALTIES, NET PROFITS INTERESTS,
PRODUCTION PAYMENTS, CARRIED INTERESTS, REVERSIONARY INTERESTS AND OTHER BURDENS
ON OR DEDUCTIONS FROM THE PROCEEDS OF PRODUCTION, (IV) THE TERMS AND CONDITIONS
OF JOINT OPERATING AGREEMENTS AND OTHER OIL AND GAS CONTRACTS, (V) ALL RIGHTS TO
CONSENT BY REQUIRED NOTICES TO, AND FILING WITH OR OTHER ACTIONS BY GOVERNMENTAL
OR TRIBAL ENTITIES, IF ANY, IN CONNECTION WITH THE CHANGE OF OWNERSHIP OR
CONTROL OF AN INTEREST IN FEDERAL, STATE, TRIBAL OR OTHER DOMESTIC GOVERNMENTAL
OIL AND GAS LEASES, IF THE SAME ARE CUSTOMARILY OBTAINED IN CONNECTION WITH SUCH
CHANGE OF OWNERSHIP OR CONTROL, BUT ONLY INSOFAR AS SUCH CONSENTS, NOTICES,
FILINGS AND OTHER ACTIONS RELATE TO THE TRANSACTIONS PERMITTED BY THIS
AGREEMENT, (VI) ANY PREFERENTIAL PURCHASE RIGHTS, (VII) REQUIRED THIRD PARTY
CONSENTS TO ASSIGNMENT, (VIII) CONVENTIONAL RIGHTS OF REASSIGNMENT PRIOR TO
ABANDONMENT AND (IX) THE TERMS AND PROVISIONS OF OIL AND GAS LEASES, UNIT
AGREEMENTS, POOLING AGREEMENTS, AND OTHER DOCUMENTS CREATING INTERESTS
COMPRISING THE OIL AND GAS PROPERTIES, HYDROCARBONS AND HYDROCARBON INTERESTS;
PROVIDED, HOWEVER, THE EXCEPTIONS DESCRIBED IN CLAUSES (I) THROUGH (VIII)
INCLUSIVE ABOVE ARE QUALIFIED TO INCLUDE ONLY THOSE EXCEPTIONS IN EACH CASE
WHICH DO NOT OPERATE TO (A) REDUCE THE NET REVENUE INTEREST OF BORROWER OR ANY
GUARANTOR BELOW THAT SET FORTH IN THE RESERVE REPORT, (B) INCREASE THE
PROPORTIONATE SHARE OF COSTS AND EXPENSES OF LEASEHOLD OPERATIONS ATTRIBUTABLE
TO OR TO BE BORNE BY THE WORKING INTEREST OF BORROWER OR ANY GUARANTOR ABOVE
THAT SET FORTH IN THE RESERVE REPORT WITHOUT A PROPORTIONATE INCREASE IN THE NET
REVENUE INTEREST OF BORROWER OR SUCH GUARANTOR OR (C) INCREASE THE WORKING
INTEREST OF BORROWER OR ANY GUARANTOR ABOVE THAT SET FORTH IN THE RESERVE REPORT
WITHOUT A PROPORTIONATE INCREASE IN THE NET REVENUE INTEREST OF BORROWER OR SUCH
GUARANTOR, AND. PROVIDED FURTHER THAT THE FOREGOING DEFECTS, LIMITATIONS, LIENS
AND ENCUMBRANCES, WHETHER INDIVIDUALLY MATERIAL OR NOT, DO NOT IN THE AGGREGATE
CREATE A MATERIAL ADVERSE EFFECT (THE CATEGORIES OF EXCEPTIONS IN CLAUSES (I)
THROUGH (VIII), AS SO QUALIFIED AND AS ANY SUCH EXCEPTIONS MAY EXIST FROM TIME
TO TIME, BEING REFERRED TO AS THE “DESIGNATED TITLE EXCEPTIONS”).

 

(B)           AFTER GIVING FULL EFFECT TO THE PERMITTED LIENS, EXCEPT AS SET
FORTH ON SCHEDULE 5.2, THE CREDIT PARTIES OWN THE NET INTERESTS IN PRODUCTION
ATTRIBUTABLE TO THE WELLS AND UNITS EVALUATED IN THE INITIAL RESERVE REPORT OR
THE MOST RECENT RESERVE REPORT FURNISHED TO THE LENDERS PURSUANT TO SECTION 4.1
(I) AND (J) OR EXCEPT TO THE EXTENT THAT (I) SUCH ASSETS HAVE THEREAFTER BEEN
DISPOSED

 

44

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

 

OF INCOMPLIANCE WITH THIS AGREEMENT OR (II) LEASES FOR SUCH PROPERTY HAVE
EXPIRED PURSUANT TO THEIR TERMS. EXCEPT AS PROVIDED IN PARAGRAPH (A) ABOVE, THE
OWNERSHIP OF SUCH OIL AND GAS PROPERTIES SHALL NOT IN ANY MATERIAL RESPECT
OBLIGATE THE CREDIT PARTIES TO BEAR THE COSTS AND EXPENSES RELATING TO THE
MAINTENANCE, DEVELOPMENT AND OPERATIONS OF EACH SUCH OIL AND GAS PROPERTY IN ANY
AMOUNT IN EXCESS OF THE WORKING INTEREST OF EACH OIL AND GAS PROPERTY SET FORTH
IN THE INITIAL RESERVE REPORT OR THE MOST RECENT RESERVE REPORT FURNISHED TO THE
LENDERS PURSUANT TO SECTION 4.1 (I) AND (J). THE CREDIT PARTIES HAVE PAID ALL
ROYALTIES PAYABLE UNDER THE OIL AND GAS LEASES TO WHICH THEY ARE OPERATOR,
EXCEPT THOSE NOT YET DUE OR CONTESTED IN ACCORDANCE WITH THE TERMS OF THE
APPLICABLE JOINT OPERATING AGREEMENT OR OTHERWISE CONTESTED IN GOOD FAITH BY
APPROPRIATE PROCEEDINGS OR WHERE FAILURE TO SO PAY COULD NOT REASONABLY BE
EXPECTED TO HAVE A MATERIAL ADVERSE EFFECT. UPON THE DELIVERY OF EACH RESERVE
REPORT FURNISHED TO THE LENDERS PURSUANT TO SECTION 4.1 (I) AND (J), THE
STATEMENTS MADE IN THE PRECEDING SENTENCES OF THIS SECTION SHALL, AS OF THE DATE
OF SUCH RESERVE REPORT, BE TRUE IN ALL MATERIAL RESPECTS WITH RESPECT TO SUCH
RESERVE REPORTS.

 

SECTION 3.24         MAINTENANCE AND DEVELOPMENT OF PROPERTIES.

 

Except as set forth on Schedule 3.24, as of the effective date of each Reserve
Report with respect to the Oil and Gas Properties reflected in such Reserve
Report:, the Oil and Gas Properties (and all properties unitized therewith) are
being maintained, operated and developed in a good and workmanlike manner, in
accordance with prudent industry standards and in conformity with (i) all
applicable Laws, (ii) all oil, gas or other mineral leases and other contracts
and agreements forming a part of such Oil and Gas Properties and (iii) with any
Permitted Liens burdening such Oil and Gas Properties, except to the extent the
failure to so comply would not reasonably be expected to have a Material Adverse
Effect. Except as set forth on Schedule 3.18, each Credit Party has all
governmental licenses and permits necessary or appropriate to own and operate
the Oil and Gas Property, except where a failure to have such licenses or
permits could not reasonably be expected to have a Material Adverse Effect, and
no Credit Party has received notice of any violations in respect of any such
licenses or permits which violation could reasonably be expected to have a
Material Adverse Effect.

 

ARTICLE 4
AFFIRMATIVE COVENANTS

 

Borrower agrees that, so long as any Credit Exposure exists:

 

SECTION 4.1            FINANCIAL STATEMENTS AND OTHER REPORTS.

 

Borrower will maintain and will cause each Credit Party to maintain a system of
accounting established and administered in accordance with sound business
practices to permit preparation of financial statements in accordance with GAAP
and to provide the information required to be delivered to Administrative Agent
and Lenders hereunder, and will deliver to Administrative Agent and each Lender
all of the following deliveries:

 

(A)           QUARTERLY FINANCIAL STATEMENTS. AS SOON AS PRACTICABLE AND IN ANY
EVENT WITHIN FORTY-FIVE (45) DAYS AFTER THE END OF THE FIRST THREE FISCAL
QUARTERS, A CONSOLIDATED BALANCE SHEET OF BORROWER AND ITS CONSOLIDATED
SUBSIDIARIES AS OF AND AT THE END OF SUCH QUARTER AND THE RELATED

 

45

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

 

CONSOLIDATED STATEMENTS OF OPERATIONS AND CASH FLOWS FOR SUCH QUARTER, AND FOR
THE PORTION OF THE FISCAL YEAR ENDED AT THE END OF SUCH QUARTER SETTING FORTH IN
EACH CASE IN COMPARATIVE FORM THE FIGURES FOR THE CORRESPONDING PERIODS OF THE
PREVIOUS FISCAL YEAR AND THE FIGURES FOR SUCH QUARTER AND FOR SUCH PORTION OF
THE FISCAL YEAR ENDED AT THE END OF SUCH QUARTER, ALL IN REASONABLE DETAIL AND
CERTIFIED BY A RESPONSIBLE OFFICER AS FAIRLY PRESENTING IN ALL MATERIAL RESPECTS
THE FINANCIAL CONDITION AND RESULTS OF OPERATIONS OF BORROWER AND ITS
CONSOLIDATED SUBSIDIARIES AND AS HAVING BEEN PREPARED IN ACCORDANCE WITH GAAP
APPLIED ON A BASIS CONSISTENT WITH THE AUDITED FINANCIAL STATEMENTS OF BORROWER,
SUBJECT TO CHANGES RESULTING FROM AUDIT AND NORMAL YEAR END ADJUSTMENTS AND THE
ABSENCE OF FOOTNOTE DISCLOSURES.

 

(B)           ANNUAL FINANCIAL STATEMENTS. AS SOON AS AVAILABLE AND IN ANY EVENT
WITHIN NINETY (90) DAYS AFTER THE END OF EACH FISCAL YEAR, A CONSOLIDATED
BALANCE SHEET OF BORROWER AND ITS CONSOLIDATED SUBSIDIARIES AS OF THE END OF
SUCH FISCAL YEAR AND THE RELATED CONSOLIDATED STATEMENTS OF OPERATIONS,
STOCKHOLDERS’ EQUITY (OR THE COMPARABLE ITEM, IF BORROWER IS NOT A CORPORATION)
AND CASH FLOWS FOR SUCH FISCAL YEAR, SETTING FORTH IN EACH CASE IN COMPARATIVE
FORM THE FIGURES FOR THE PREVIOUS FISCAL YEAR, WITHOUT QUALIFICATION (INCLUDING
WITH RESPECT TO THE SCOPE OF AUDIT) OR EXCEPTION BY INDEPENDENT PUBLIC
ACCOUNTANTS OF NATIONALLY RECOGNIZED STANDING AND ACCEPTABLE TO ADMINISTRATIVE
AGENT.

 

(C)           COMPLIANCE CERTIFICATES. TOGETHER WITH EACH DELIVERY OF FINANCIAL
STATEMENTS PURSUANT TO SECTIONS 4.1(A) AND 4.1(B), (I) A COMPLIANCE CERTIFICATE
AND (II) IF BORROWER IS NO LONGER SUBJECT TO THE PUBLIC REPORTING REQUIREMENTS
UNDER THE RULES OF THE SECURITIES AND EXCHANGE COMMISSION, A MANAGEMENT REPORT
(A) DESCRIBING THE OPERATIONS AND FINANCIAL CONDITION OF BORROWER AND ITS
CONSOLIDATED SUBSIDIARIES FOR THE FISCAL PERIOD COVERED BY SUCH FINANCIAL
STATEMENTS AND THE PORTION OF THE CURRENT FISCAL YEAR THEN ELAPSED (OR FOR THE
FISCAL YEAR THEN ENDED IN THE CASE OF YEAR-END FINANCIALS) AND (B) DISCUSSING
THE REASONS FOR ANY SIGNIFICANT VARIATIONS AS BETWEEN THE FISCAL PERIOD COVERED
AND THE PORTION OF THE FISCAL YEAR THEN ELAPSED, AS BETWEEN SUCH PERIODS AND THE
SAME PERIODS DURING THE IMMEDIATELY PRECEDING FISCAL YEAR, AND AS BETWEEN SUCH
PERIODS AND THE SAME PERIODS INCLUDED IN THE PROJECTIONS AND FORECASTS DELIVERED
PURSUANT TO SECTION 4.1(H), ALL SUCH INFORMATION TO BE PRESENTED IN REASONABLE
DETAIL AND TO BE CERTIFIED BY A RESPONSIBLE OFFICER TO THE EFFECT THAT SUCH
INFORMATION FAIRLY PRESENTS, IN ALL MATERIAL RESPECTS, THE RESULTS OF OPERATIONS
AND FINANCIAL CONDITION OF BORROWER AND ITS CONSOLIDATED SUBSIDIARIES AS AT THE
DATES AND FOR THE PERIODS INDICATED.

 

(D)           REGULATORY FILING INFORMATION. PROMPTLY UPON THEIR BECOMING
PUBLICLY AVAILABLE, COPIES OF (I) ALL FINANCIAL STATEMENTS, REPORTS, NOTICES AND
PROXY STATEMENTS SENT OR MADE AVAILABLE GENERALLY BY ANY CREDIT PARTY TO ITS
SECURITY HOLDERS, (II) ALL REGULAR AND PERIODIC REPORTS AND ALL REGISTRATION
STATEMENTS AND PROSPECTUSES FILED BY ANY CREDIT PARTY WITH ANY SECURITIES
EXCHANGE OR WITH THE SECURITIES AND EXCHANGE COMMISSION OR ANY SUCCESSOR, (III)
ALL PRESS RELEASES AND OTHER STATEMENTS MADE AVAILABLE GENERALLY BY ANY CREDIT
PARTY CONCERNING MATERIAL DEVELOPMENTS IN THE BUSINESS OF ANY CREDIT PARTY AND
(IV) ALL SWAP CONTRACTS ENTERED INTO BY ANY CREDIT PARTY.

 

(E)           NOTICES OF MATERIAL EVENTS. PROMPTLY UPON ANY RESPONSIBLE OFFICER
OF ANY CREDIT PARTY OBTAINING KNOWLEDGE (I) OF THE EXISTENCE OF ANY EVENT OF
DEFAULT OR DEFAULT, OR BECOMING AWARE THAT THE HOLDER OF ANY DEBT OF ANY CREDIT
PARTY IN EXCESS OF $2,000,000 HAS GIVEN ANY NOTICE OR TAKEN ANY OTHER ACTION
WITH RESPECT TO A CLAIMED DEFAULT THEREUNDER, (II) OF THE INSTITUTION OF ANY
LITIGATION SEEKING EQUITABLE RELIEF OR INVOLVING AN ALLEGED LIABILITY OF ANY
CREDIT

 

46

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

 

PARTY EQUAL TO OR GREATER THAN $2,000,000 ABOVE INSURANCE COVERAGE OR ANY
ADVERSE DETERMINATION IN ANY LITIGATION INVOLVING EQUITABLE RELIEF OR A
POTENTIAL LIABILITY OF ANY CREDIT PARTY EQUAL TO OR GREATER THAN $2,000,000
ABOVE INSURANCE COVERAGE, (III) OF THE INSTITUTION OF ANY DISPUTE, LITIGATION,
INVESTIGATION, PROCEEDING OR SUSPENSION BY ANY GOVERNMENTAL AUTHORITY IN RESPECT
OF ANY CREDIT PARTY OR ANY PROPERTY OF ANY CREDIT PARTY THAT, IF ADVERSELY
DETERMINED, COULD REASONABLY BE EXPECTED TO HAVE A MATERIAL ADVERSE EFFECT, (IV)
ANY LOSS, DAMAGE OR DESTRUCTION OF ANY COLLATERAL HAVING A FAIR MARKET VALUE IN
EXCESS OF $2,000,000, WHETHER OR NOT COVERED BY INSURANCE, OR (V) ANY OTHER
DEVELOPMENT THAT RESULTS IN OR COULD REASONABLY BE EXPECTED TO HAVE A MATERIAL
ADVERSE EFFECT, A CERTIFICATE OF A RESPONSIBLE OFFICER SPECIFYING THE NATURE AND
PERIOD OF EXISTENCE OF ANY SUCH CONDITION OR EVENT, OR SPECIFYING THE NOTICE
GIVEN OR ACTION TAKEN BY SUCH HOLDER OR PERSON AND THE NATURE OF SUCH CLAIMED
DEFAULT (INCLUDING ANY EVENT OF DEFAULT OR DEFAULT), EVENT OR CONDITION, AND
WHAT ACTION THE APPLICABLE CREDIT PARTY HAS TAKEN, IS TAKING OR PROPOSES TO TAKE
WITH RESPECT THERETO.

 

(F)            ERISA NOTICES. PROMPTLY UPON ANY RESPONSIBLE OFFICER OF ANY
CREDIT PARTY OBTAINING KNOWLEDGE OF THE OCCURRENCE OF ANY ERISA EVENT THAT,
ALONE OR TOGETHER WITH ANY OTHER ERISA EVENTS THAT HAVE OCCURRED, COULD
REASONABLY BE EXPECTED TO RESULT IN LIABILITY OF BORROWER AND ITS SUBSIDIARIES
IN AN AGGREGATE AMOUNT EXCEEDING $2,000,000.

 

(G)           ENVIRONMENTAL NOTICES. PROMPTLY UPON ANY RESPONSIBLE OFFICER OF
ANY CREDIT PARTY OBTAINING KNOWLEDGE OF ANY WRITTEN COMPLAINT, ORDER, CITATION,
NOTICE OR OTHER WRITTEN COMMUNICATION FROM ANY PERSON DELIVERED TO ANY CREDIT
PARTY WITH RESPECT TO, OR IF ANY RESPONSIBLE OFFICER OF ANY CREDIT PARTY BECOMES
AWARE OF (I) THE EXISTENCE OR ALLEGED EXISTENCE OF A VIOLATION BY ANY CREDIT
PARTY OF ANY APPLICABLE ENVIRONMENTAL LAW, WHICH COULD REASONABLY BE EXPECTED TO
HAVE A MATERIAL ADVERSE EFFECT, (II) ANY RELEASE BY ANY CREDIT PARTY OF ANY
HAZARDOUS MATERIALS INTO THE ENVIRONMENT WHICH COULD REASONABLY BE EXPECTED TO
HAVE A MATERIAL ADVERSE EFFECT, (III) THE COMMENCEMENT BY ANY CREDIT PARTY OF
ANY CLEANUP OF ANY HAZARDOUS MATERIALS, WHICH COULD REASONABLY BE EXPECTED TO
RESULT IN COSTS TO A CREDIT PARTY IN EXCESS OF $2,000,000 ABOVE INSURANCE
COVERAGE, (IV) ANY PENDING LEGISLATIVE OR THREATENED GOVERNMENTAL PROCEEDING FOR
THE TERMINATION, SUSPENSION OR NON-RENEWAL OF ANY PERMIT OF ANY CREDIT PARTY
REQUIRED UNDER ANY APPLICABLE ENVIRONMENTAL LAW, WHICH TERMINATION, SUSPENSION
OR NON-RENEWAL COULD REASONABLY BE EXPECTED TO HAVE A MATERIAL ADVERSE EFFECT,
OR (V) ANY PROPERTY OF ANY CREDIT PARTY THAT IS OR WILL BE SUBJECT TO A LIEN
IMPOSED PURSUANT TO ANY ENVIRONMENTAL LAW, A CERTIFICATE OF A RESPONSIBLE
OFFICER SPECIFYING THE NATURE AND PERIOD OF EXISTENCE OF ANY SUCH CONDITION OR
EVENT, OR SPECIFYING THE NOTICE GIVEN OR ACTION TAKEN BY SUCH HOLDER OR PERSON,
AND WHAT ACTION THE APPLICABLE CREDIT PARTY HAS TAKEN, IS TAKING OR PROPOSES TO
TAKE WITH RESPECT THERETO

 

(H)           BUDGET. WITHIN SIXTY (60) DAYS AFTER THE CONCLUSION OF EACH FISCAL
YEAR, BORROWER’S ANNUAL OPERATING AND CAPITAL EXPENDITURE BUDGETS, AND FINANCIAL
FORECASTS, INCLUDING CASH FLOW PROJECTIONS COVERING PROPOSED FUNDINGS,
REPAYMENTS, ADDITIONAL ADVANCES, INVESTMENTS AND OTHER CASH RECEIPTS AND
DISBURSEMENTS, EACH FOR THE FOLLOWING FISCAL YEAR IN A FORMAT REASONABLY
CONSISTENT WITH PROJECTIONS, BUDGETS AND FORECASTS THERETOFORE PROVIDED TO
LENDERS, AND PROMPTLY FOLLOWING THE PREPARATION THEREOF, MATERIAL UPDATES TO ANY
OF THE FOREGOING FROM TIME TO TIME PREPARED BY MANAGEMENT OF BORROWER;

 

47

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

 

(I)            ANNUAL RESERVE REPORT. PRIOR TO APRIL 1 OF EACH YEAR, COMMENCING
THE FIRST SUCH DAY AFTER THE CLOSING DATE, A RESERVE REPORT EFFECTIVE AS OF
DECEMBER 31 OF THE PRECEDING YEAR, PREPARED BY INDEPENDENT PETROLEUM ENGINEERS
CHOSEN BY BORROWER AND REASONABLY ACCEPTABLE TO ADMINISTRATIVE AGENT, CONCERNING
ALL OIL AND GAS PROPERTIES OWNED BY ANY CREDIT PARTY WHICH ARE LOCATED IN THE
UNITED STATES AND WHICH HAVE ATTRIBUTABLE TO THEM PROVED RESERVES. THE REPORT
SHALL (I) BE IN FORM REASONABLY SATISFACTORY TO ADMINISTRATIVE AGENT, (II) TAKE
INTO ACCOUNT ANY “OVER-PRODUCED” STATUS UNDER GAS BALANCING ARRANGEMENTS, (III)
CONTAIN INFORMATION AND ANALYSIS SUFFICIENT TO ENABLE BORROWER TO MEET THE
REPORTING REQUIREMENTS CONCERNING OIL AND GAS RESERVES CONTAINED IN REGULATIONS
S-K AND SX PROMULGATED BY THE SECURITIES AND EXCHANGE COMMISSION AND (IV)
DISTINGUISH (OR BE DELIVERED TOGETHER WITH A CERTIFICATE FROM AN APPROPRIATE
OFFICER OF BORROWER WHICH DISTINGUISHES) THOSE OIL AND GAS PROPERTIES TREATED IN
THE REPORT THAT ARE COLLATERAL FROM THOSE OIL AND GAS PROPERTIES IN THE REPORT
THAT ARE NOT, WHICH REPORT SHALL BE ACCOMPANIED BY A REPORT DETAILING THE SWAP
CONTRACTS OF THE CREDIT PARTIES RELATING TO COMMODITY PRICES THAT ARE THEN
CURRENTLY IN EFFECT;

 

(J)            INTERIM RESERVE REPORT. (I) PRIOR TO OCTOBER 1 OF EACH YEAR,
COMMENCING THE FIRST SUCH DAY AFTER THE CLOSING DATE, A RESERVE REPORT EFFECTIVE
AS OF THE PRECEDING JUNE 30, AND (II) AT THE TIME SPECIFIED IN SECTION 2.16(C)
IN CONNECTION WITH ANY SPECIAL DETERMINATION, A RESERVE REPORT EFFECTIVE AT THE
TIME SPECIFIED IN SECTION 2.16(C), IN EACH CASE BY PETROLEUM ENGINEERS WHO ARE
EMPLOYEES OF BORROWER (OR, AT BORROWER’S OPTION, BY AN INDEPENDENT ENGINEERS AS
SPECIFIED ABOVE), IN THE SAME FORM AND SCOPE AS THE REPORT IN SECTION 4.1(I),
WHICH REPORT SHALL BE ACCOMPANIED BY UPDATES, IF ANY, TO THE MOST RECENT REPORTS
SPECIFIED IN SECTION 4.1(I) TO THE EXTENT NECESSARY FOR SUCH REPORTS TO BE
ACCURATE IN ALL MATERIAL RESPECTS ON THE DATE OF THE APPLICABLE RESERVE REPORT
PROVIDED PURSUANT TO THIS SECTION 4.1(J);

 

(K)           RESERVE DOCUMENTS. AT THE TIME OF DELIVERY OF ANY REPORT PURSUANT
TO SECTION 4.1(I) OR (J): (I) A REPORT DETAILING BY LEASE OR UNIT THE GROSS
VOLUME OF PRODUCTION AND SALES ATTRIBUTABLE TO PRODUCTION OF HYDROCARBONS FROM
THE OIL AND GAS PROPERTIES DESCRIBED IN THE MOST RECENT RESERVE REPORT FOR THE
MONTH MOST RECENTLY AVAILABLE AND FOR EACH PRIOR MONTH SINCE THE LAST REPORT
DELIVERED PURSUANT TO THIS SUBSECTION AND DESCRIBING THE RELATED SEVERANCE
TAXES, OTHER TAXES, AND LEASEHOLD OPERATING EXPENSES ATTRIBUTABLE TO EACH LEASE
OR UNIT AND INCURRED DURING EACH SUCH MONTH, (II) A LIST OF PERSONS PURCHASING
ANY MATERIAL PRODUCTION OF HYDROCARBONS FROM THE OIL AND GAS PROPERTIES, AND
(III) SUCH OTHER REPORTS, DATA AND SUPPLEMENTAL INFORMATION NECESSARY TO CAUSE
THE REPRESENTATIONS AND WARRANTIES CONTAINED IN SECTION 3.23 AND SECTION 3.24 TO
BE TRUE AND CORRECT AND SUCH OTHER INFORMATION AS MAY BE REASONABLY REQUESTED BY
ADMINISTRATIVE AGENT OR REQUIRED LENDERS IN CONNECTION WITH A DETERMINATION OF
THE BORROWING BASE (THE RESERVE REPORT, SUCH CERTIFICATE AND SUCH REPORTS, DATA
AND SUPPLEMENTAL INFORMATION, THE “RESERVE DOCUMENTS”);

 

(L)            CREDIT PARTY INFORMATION. WITH REASONABLE PROMPTNESS, SUCH OTHER
INFORMATION AND DATA WITH RESPECT TO ANY CREDIT PARTY AS FROM TIME TO TIME MAY
BE REASONABLY REQUESTED BY ADMINISTRATIVE AGENT OR ANY LENDER.

 

Documents required to be delivered pursuant to Section 4.1(a), Section 4.1(b) or
Section 4.1(e) (to the extent any such documents are included in materials
otherwise filed with the Securities and Exchange Commission) may be delivered
electronically and if so delivered, shall be deemed to have been delivered on
the date on which Borrower posts such documents, or provides a link

 

48

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

 

thereto on Borrower’s website on the Internet at http://www.warrenresources.com;
or (ii) on which such documents are posted on Borrower’s behalf on an Internet
or intranet website reasonably acceptable to Administrative Agent to which each
Lender and Administrative Agent have access; provided that Borrower shall notify
Administrative Agent and each Lender (by telecopier or electronic mail) of the
posting of any such documents, and Borrower shall 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 compliance certificate required
by Section 4.1(c) to Administrative Agent, which shall then promptly furnish
such compliance certificate to the Lenders. Except for such compliance
certificates, Administrative Agent shall have no obligation to request the
deliver 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.

 

SECTION 4.2            PAYMENT AND PERFORMANCE OF OBLIGATIONS.

 

Borrower (i) will pay and discharge, and cause each other Credit Party to pay
and discharge, at or before maturity, all of their respective obligations and
liabilities, including tax liabilities, except for such obligations and/or
liabilities (A) that may be the subject of a Permitted Contest and (B) the
nonpayment or nondischarge of which could not reasonably be expected to have a
Material Adverse Effect, (ii) will maintain, and cause each other Credit Party
to maintain, in accordance with GAAP, appropriate reserves for the accrual of
all of their respective obligations and liabilities and (iii) will not breach or
permit any other Credit Party to breach, or permit to exist any default under,
the terms of any lease, commitment, contract, instrument or obligation to which
it is a party, or by which its properties or assets are bound, except for such
breaches or defaults which could not reasonably be expected to have a Material
Adverse Effect.

 

SECTION 4.3            MAINTENANCE OF EXISTENCE.

 

Borrower will, and will cause each of its Restricted Subsidiaries to, do or
cause to be done all things necessary to preserve, renew and keep in full force
and effect (a) its legal existence and (b) except where the failure to do so
could not reasonably be excepted to result in a Material Adverse Effect, the
rights, licenses, permits, privileges and franchises material to the conduct of
its business; provided that the foregoing shall not prohibit any merger,
consolidation, liquidation or dissolution permitted under Section 5.17.

 

SECTION 4.4            MAINTENANCE OF PROPERTY; INSURANCE.

 

(A)           MAINTENANCE OF PROPERTY AND INSURANCE. BORROWER WILL, AND WILL
CAUSE EACH OF ITS RESTRICTED SUBSIDIARIES TO, (A) KEEP AND MAINTAIN ALL
OPERATING EQUIPMENT MATERIAL TO THE CONDUCT OF ITS BUSINESS IN GOOD WORKING
ORDER AND CONDITION, ORDINARY WEAR AND TEAR EXCEPTED, AND (B) MAINTAIN, WITH
FINANCIALLY SOUND AND REPUTABLE INSURANCE COMPANIES, INSURANCE IN SUCH AMOUNTS
AND AGAINST SUCH RISKS AS ARE CUSTOMARILY MAINTAINED BY COMPANIES ENGAGED IN THE
SAME OR SIMILAR BUSINESSES OPERATING IN THE SAME OR SIMILAR LOCATIONS. ALL SUCH
INSURANCE SHALL BE PROVIDED BY INSURERS HAVING AN A.M. BEST POLICYHOLDERS RATING
REASONABLY ACCEPTABLE TO ADMINISTRATIVE AGENT. BORROWER WILL NOT, AND WILL NOT
PERMIT ANY OTHER CREDIT PARTY TO, BRING OR

 

49

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

 

KEEP ANY ARTICLE ON ANY BUSINESS LOCATION OF ANY CREDIT PARTY, OR CAUSE OR ALLOW
ANY CONDITION TO EXIST, IF THE PRESENCE OF SUCH ARTICLE OR THE OCCURRENCE OF
SUCH CONDITION COULD REASONABLY CAUSE THE INVALIDATION OF ANY INSURANCE REQUIRED
BY THIS SECTION 4.4(B), OR WOULD OTHERWISE BE PROHIBITED BY THE TERMS THEREOF.

 

(B)           EVIDENCE OF INSURANCE COVERAGE. ON OR PRIOR TO THE CLOSING DATE,
AND AT ALL TIMES THEREAFTER, BORROWER WILL CAUSE ADMINISTRATIVE AGENT TO BE
NAMED AS AN ADDITIONAL INSURED, ASSIGNEE AND LOSS PAYEE (WHICH SHALL INCLUDE, AS
APPLICABLE, IDENTIFICATION AS MORTGAGEE), AS APPLICABLE, ON EACH INSURANCE
POLICY REQUIRED TO BE MAINTAINED PURSUANT TO THIS SECTION 4.4 PURSUANT TO
ENDORSEMENTS IN FORM AND SUBSTANCE REASONABLY ACCEPTABLE TO ADMINISTRATIVE
AGENT. BORROWER WILL DELIVER TO ADMINISTRATIVE AGENT AND LENDERS (I) ON THE
CLOSING DATE, A CERTIFICATE FROM BORROWER’S INSURANCE BROKER DATED SUCH DATE
SHOWING THE AMOUNT OF COVERAGE AS OF SUCH DATE, AND THAT SUCH POLICIES WILL
INCLUDE EFFECTIVE WAIVERS OF APPLICABLE RIGHTS OF SUBROGATION AGAINST LOSS
PAYEES AND ADDITIONAL INSUREDS, AND THAT IF ALL OR ANY PART OF SUCH POLICY IS
CANCELED, TERMINATED OR EXPIRES, THE INSURER WILL ENDEAVOR TO GIVE NOTICE
THEREOF TO EACH ADDITIONAL INSURED, ASSIGNEE AND LOSS PAYEE AT LEAST THIRTY (30)
DAYS PRIOR THERETO, (II) ON AN ANNUAL BASIS, AND UPON THE REQUEST OF ANY LENDER
THROUGH ADMINISTRATIVE AGENT FROM TIME TO TIME FULL INFORMATION AS TO THE
INSURANCE CARRIED, (III) WITHIN FIVE (5) BUSINESS DAYS OF RECEIPT OF NOTICE FROM
ANY INSURER, A COPY OF ANY NOTICE OF CANCELLATION, NONRENEWAL OR MATERIAL CHANGE
IN COVERAGE FROM THAT EXISTING ON THE DATE OF THIS AGREEMENT AND (IV) FORTHWITH,
NOTICE OF ANY CANCELLATION OR NONRENEWAL OF COVERAGE BY BORROWER.

 

(C)           RIGHT TO PURCHASE INSURANCE. DURING THE EXISTENCE OF AN EVENT OF
DEFAULT, IN THE EVENT BORROWER FAILS TO PROVIDE ADMINISTRATIVE AGENT WITH
EVIDENCE OF THE INSURANCE COVERAGE REQUIRED BY THIS AGREEMENT WITHIN THREE (3)
BUSINESS DAYS AFTER REQUEST THEREFOR, ADMINISTRATIVE AGENT MAY PURCHASE
INSURANCE AT BORROWER’S EXPENSE TO PROTECT ADMINISTRATIVE AGENT’S INTERESTS IN
THE COLLATERAL. THIS INSURANCE MAY, BUT NEED NOT, PROTECT BORROWER’S INTERESTS.
THE COVERAGE PURCHASED BY ADMINISTRATIVE AGENT MAY NOT PAY ANY CLAIM MADE BY
BORROWER OR ANY CLAIM THAT IS MADE AGAINST BORROWER IN CONNECTION WITH THE
COLLATERAL. BORROWER MAY LATER CANCEL ANY INSURANCE PURCHASED BY ADMINISTRATIVE
AGENT, BUT ONLY AFTER PROVIDING ADMINISTRATIVE AGENT WITH EVIDENCE THAT BORROWER
HAS OBTAINED INSURANCE AS REQUIRED BY THIS AGREEMENT. IF ADMINISTRATIVE AGENT
PURCHASES INSURANCE FOR THE COLLATERAL, BORROWER WILL BE RESPONSIBLE FOR THE
COSTS OF THAT INSURANCE TO THE FULLEST EXTENT PROVIDED BY LAW INCLUDING INTEREST
AND OTHER CHARGES IMPOSED BY ADMINISTRATIVE AGENT IN CONNECTION WITH THE
PLACEMENT OF THE INSURANCE, UNTIL THE EFFECTIVE DATE OF THE CANCELLATION OR
EXPIRATION OF THE INSURANCE. THE COSTS OF THE INSURANCE MAY BE ADDED TO THE
OBLIGATIONS. THE COSTS OF THE INSURANCE MAY BE MORE THAN THE COST OF INSURANCE
BORROWER IS ABLE TO OBTAIN ON ITS OWN.

 

50

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

 

SECTION 4.5            COMPLIANCE WITH LAWS.

 

Borrower will comply, and cause each other Credit Party to comply, with the
requirements of all applicable Laws, except to the extent that failure to so
comply could not reasonably be expected to have a Material Adverse Effect or
result in any Lien upon a material portion of the assets of any such Person in
favor of any Governmental Authority.

 

SECTION 4.6            INSPECTION OF PROPERTY, BOOKS AND RECORDS.

 

Borrower will keep, and will cause each other Credit Party to keep, proper books
of record and account in accordance with GAAP; and will permit, and will cause
each other Credit Party to permit, at the sole cost of Borrower or any
applicable other Credit Party, representatives of Administrative Agent and of
any Lender (but at such Lender’s expense unless such visit or inspection is made
concurrently with Administrative Agent) or is made during the existence and
continuance of an Event of Default to visit and inspect any of their respective
properties, to examine and make abstracts or copies from any of their respective
books and records, to conduct a collateral audit and analysis of their
respective inventory and accounts and to discuss their respective affairs,
finances and accounts with their respective officers, as often as may reasonably
be desired, subject in all cases to any confidentiality restrictions that may be
applicable to Borrower and its Subsidiaries and to any confidentiality
restrictions that Borrower reasonably imposes on the Persons receiving such
information; provided, however, that neither Borrower nor any of its
Subsidiaries shall be required to disclose to Administrative Agent or any agents
or representatives thereof any information which is the subject of
attorney-client privilege or attorney’s work product privilege properly asserted
by the applicable Person to prevent the loss of such privilege in connection
with such information; and provided, further, that Borrower will use
commercially reasonable efforts to furnish such information (excluding
information covered by confidentiality restrictions in agreements relating to
seismic, geologic or geophysical data or similar technical and business matters
relating to the exploration for oil and gas), which requirement shall be
satisfied if Administrative Agent is offered the opportunity to review such
confidential information by executing or otherwise becoming a party to the
confidentiality restrictions on substantially the same terms (including any
standstill provisions) as are applicable to Borrower. In the absence of an Event
of Default, Administrative Agent or any Lender exercising any rights pursuant to
this Section 4.6 shall give Borrower or any applicable other Credit Party
commercially reasonable prior written notice of such exercise. No notice shall
be required during the existence and continuance of any Event of Default.

 

SECTION 4.7            USE OF PROCEEDS.

 

Borrower will use the proceeds of the Revolving Loans on the Closing Date solely
for payment of amounts due under the Existing Credit Agreement and for payment
of transaction fees and expenses incurred in connection with the Financing
Documents. The proceeds of Revolving Loans after the Closing Date shall be used
by Borrower solely for lawful corporate purposes, including to finance corporate
and capital expenditures and permitted acquisitions of Oil and Gas Properties
and other assets related to the exploration, production, development,
processing, gathering, storage and transportation of Hydrocarbons and for
working capital needs of Credit Parties.

 

51

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

 

SECTION 4.8            LENDERS’ MEETINGS.

 

Promptly after the delivery to Administrative Agent and Lenders of Reserve
Reports pursuant to Section 4.1(i) or (j), Borrower will, in each case to the
extent reasonably requested by either Administrative Agent or Required Lenders,
conduct a meeting of Administrative Agent and Lenders to discuss the most
recently reported financial results and the financial condition and engineering
projections of Borrower and its Subsidiaries, at which shall be present a
Responsible Officer and such other officers of the Credit Parties as may be
reasonably requested to attend by Administrative Agent or Required Lenders, such
request or requests to be made within a reasonable time prior to the scheduled
date of such meeting. Such meetings shall be held at a time and place convenient
to Lenders and to Borrower.

 

SECTION 4.9            HAZARDOUS MATERIALS; REMEDIATION.

 

If any release or disposal of Hazardous Materials shall occur or shall have
occurred on any real property or any other assets of Borrower or any other
Credit Party, which could reasonably be expected to have a Material Adverse
Effect, Borrower will cause, or direct the applicable Credit Party to cause, the
prompt containment and removal of such Hazardous Materials and the remediation
of such real property or other assets as is necessary to comply with all
Environmental Laws and to preserve the value of such real property or other
assets. Without limiting the generality of the foregoing, Borrower shall, and
shall cause each other Credit Party to, comply with each Environmental Law
requiring the performance at any real property by Borrower or any other Credit
Party of activities in response to the release or threatened release of a
Hazardous Material, except where the failure to so comply could not reasonably
be expected to have a Material Adverse Effect.

 

SECTION 4.10         FURTHER ASSURANCES.

 

(A)           GENERAL. BORROWER WILL, AND WILL CAUSE EACH OTHER CREDIT PARTY, AT
ITS OWN COST AND EXPENSE, TO PROMPTLY AND DULY TAKE, EXECUTE, ACKNOWLEDGE AND
DELIVER ALL SUCH FURTHER ACTS, DOCUMENTS AND ASSURANCES AS ADMINISTRATIVE AGENT
OR REQUIRED LENDERS MAY FROM TIME TO TIME REASONABLY REQUEST IN ORDER TO CARRY
OUT THE INTENT AND PURPOSES OF THE FINANCING DOCUMENTS AND THE TRANSACTIONS
CONTEMPLATED THEREBY, INCLUDING ALL SUCH ACTIONS TO ESTABLISH, CREATE, PRESERVE,
PROTECT AND PERFECT A FIRST PRIORITY LIEN (SUBJECT ONLY TO PERMITTED LIENS) IN
FAVOR OF ADMINISTRATIVE AGENT FOR ITSELF AND FOR THE BENEFIT LENDERS ON THE
COLLATERAL (INCLUDING COLLATERAL ACQUIRED AFTER THE DATE HEREOF), INCLUDING ON
ANY AND ALL ASSETS OF EACH CREDIT PARTY, WHETHER NOW OWNED OR HEREAFTER
ACQUIRED.

 

(B)           NEW SUBSIDIARIES. WITHOUT LIMITING THE GENERALITY OF THE
FOREGOING, IN THE EVENT BORROWER OR ANY OF ITS RESTRICTED SUBSIDIARIES SHALL
FORM ANY NEW RESTRICTED SUBSIDIARY AFTER THE DATE HEREOF, BORROWER OR THE
RESPECTIVE RESTRICTED SUBSIDIARY WILL CAUSE SUCH NEW RESTRICTED SUBSIDIARY,
PROMPTLY FOLLOWING SUCH FORMATION (EXCLUDING ANY FOREIGN SUBSIDIARY WHOSE
GUARANTEE OR GRANT OF A LIEN WOULD RESULT IN MATERIAL ADVERSE TAX CONSEQUENCES
TO BORROWER UNDER SECTION 956 OF THE INTERNAL REVENUE CODE), (I) TO EXECUTE A
GUARANTEE (IN FORM AND SUBSTANCE REASONABLY ACCEPTABLE TO ADMINISTRATIVE AGENT)
GUARANTEEING PAYMENT AND PERFORMANCE OF ALL OF THE OBLIGATIONS AND TO TAKE SUCH
OTHER ACTION (INCLUDING, WITHOUT LIMITATION, AUTHORIZING THE FILING OF SUCH UCC
FINANCING STATEMENTS AND DELIVERING CERTIFICATES IN RESPECT OF THE CAPITAL STOCK
OF SUCH RESTRICTED SUBSIDIARY) AS SHALL BE NECESSARY OR APPROPRIATE TO
ESTABLISH, CREATE, PRESERVE, PROTECT AND PERFECT A FIRST PRIORITY LIEN (SUBJECT
ONLY TO PERMITTED LIENS) IN FAVOR

 

52

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

 

OF ADMINISTRATIVE AGENT FOR THE BENEFIT OF ADMINISTRATIVE AGENT AND LENDERS TO
THE EXTENT REQUIRED BY SECTION 4.10(E), (II) TO EXECUTE SUCH OTHER SECURITY
DOCUMENTS, IN FORM AND SUBSTANCE REASONABLY ACCEPTABLE TO ADMINISTRATIVE AGENT,
AS MAY BE REQUIRED OR REQUESTED BY ADMINISTRATIVE AGENT IN CONNECTION WITH THE
ACTIONS CONTEMPLATED HEREBY AND (III) TO DELIVER SUCH PROOF OF CORPORATE (OR
COMPARABLE) ACTION, INCUMBENCY OF OFFICERS, OPINIONS OF COUNSEL AND OTHER
DOCUMENTS AS ADMINISTRATIVE AGENT SHALL HAVE REASONABLY REQUIRED OR REQUESTED.
UNTIL SUCH TIME THAT ANY RESTRICTED SUBSIDIARY SHALL HAVE FULLY COMPLIED WITH
THE PROVISIONS OF THIS PARAGRAPH, AND WITHOUT LIMITATION OF ANY RIGHTS AND
REMEDIES AVAILABLE TO ADMINISTRATIVE AGENT AND LENDERS AS A RESULT THEREOF, THE
OPERATING RESULTS OF SUCH RESTRICTED SUBSIDIARY SHALL BE DISREGARDED IN THE
CALCULATION OF EBITDAX FOR ANY MEASUREMENT PERIOD.

 

(C)           CAPITAL STOCK. BORROWER WILL, AND WILL CAUSE EACH OF ITS
RESTRICTED SUBSIDIARIES, TO TAKE SUCH ACTION FROM TIME TO TIME AS SHALL BE
NECESSARY TO ENSURE THAT EACH OF ITS RESTRICTED SUBSIDIARIES IS A WHOLLY-OWNED
SUBSIDIARY AND THAT ADMINISTRATIVE AGENT SHALL HAVE, FOR THE BENEFIT OF
ADMINISTRATIVE AGENT AND LENDERS, A FIRST PRIORITY LIEN ON ALL CAPITAL STOCK OF
EACH RESTRICTED SUBSIDIARY, PROVIDED THAT NEITHER BORROWER NOR ANY FOREIGN
SUBSIDIARY SHALL BE REQUIRED TO PLEDGE MORE THAN 65% OF THE CAPITAL STOCK OF ANY
SUCH FOREIGN SUBSIDIARY TO THE EXTENT SUCH GRANT AND/OR PLEDGE WOULD RESULT IN
MATERIAL ADVERSE TAX CONSEQUENCES TO BORROWER UNDER SECTION 956 OF THE INTERNAL
REVENUE CODE AS DETERMINED BY ADMINISTRATIVE AGENT). IN THE EVENT THAT ANY
ADDITIONAL CAPITAL STOCK SHALL BE ISSUED BY ANY RESTRICTED SUBSIDIARY, BORROWER
SHALL OR SHALL CAUSE EACH OF ITS RESTRICTED SUBSIDIARIES TO, PROMPTLY FOLLOWING
SUCH ISSUANCE, DELIVER TO ADMINISTRATIVE AGENT TO THE EXTENT REQUIRED BY THE
APPLICABLE FINANCING DOCUMENTS THE CERTIFICATES EVIDENCING SUCH CAPITAL STOCK,
ACCOMPANIED BY UNDATED POWERS EXECUTED IN BLANK AND TO TAKE SUCH OTHER ACTION AS
ADMINISTRATIVE AGENT SHALL REQUEST TO PERFECT THE SECURITY INTEREST CREATED
THEREIN PURSUANT TO SUCH FINANCING DOCUMENTS.

 

(D)           MORTGAGE OF OIL AND GAS PROPERTY. PRIOR TO EACH DETERMINATION
DATE, BORROWER SHALL REVIEW THE RESERVE REPORT AND THE LIST OF CURRENT MORTGAGED
PROPERTIES TO ASCERTAIN WHETHER THE MORTGAGED PROPERTIES REPRESENT AT LEAST 80%
OF THE TOTAL PV-10 VALUE OF PROVED RESERVES ATTRIBUTABLE TO THE OIL AND GAS
PROPERTIES EVALUATED IN THE MOST RECENTLY COMPLETED RESERVE REPORT AFTER GIVING
EFFECT TO ANY EXPLORATION AND PRODUCTION ACTIVITIES, ACQUISITIONS, DISPOSITIONS
AND PRODUCTION. IN THE EVENT THAT THE MORTGAGED PROPERTIES DO NOT REPRESENT AT
LEAST 80% OF SUCH TOTAL PV-10 VALUE, THEN ON OR PRIOR TO SUCH DETERMINATION
DATE, BORROWER SHALL, AND SHALL CAUSE ITS RESTRICTED SUBSIDIARIES TO, GRANT TO
ADMINISTRATIVE AGENT AS SECURITY FOR THE DEBT A FIRST-PRIORITY LIEN (SUBJECT
ONLY TO PERMITTED LIENS) UNDER THE MORTGAGES ON ADDITIONAL OIL AND GAS
PROPERTIES NOT ALREADY SUBJECT TO SUCH A LIEN UNDER THE MORTGAGES SUCH THAT
AFTER GIVING EFFECT THERETO, THE MORTGAGED PROPERTIES WILL REPRESENT AT LEAST
80% OF THE TOTAL PV-10 VALUE OF PROVED RESERVES ATTRIBUTABLE TO THE OIL AND GAS
PROPERTIES EVALUATED BY THE RELEVANT RESERVE REPORT.

 

(E)           OTHER COLLATERAL. UPON ADMINISTRATIVE AGENT’S REQUEST, BORROWER
WILL AND WILL CAUSE ITS RESTRICTED SUBSIDIARIES TO GRANT LIENS AS SECURITY FOR
THE DEBT ON (I) ASSETS AND INTERESTS RELATED TO THE MORTGAGED PROPERTIES,
INCLUDING RELATED OPERATING EQUIPMENT, ACCOUNTS, INVENTORY, CONTRACT RIGHTS AND
ALL PRODUCTS, PROCEEDS AND OTHER INTERESTS RELATED TO THE OWNERSHIP, OPERATION
AND OR PRODUCTION OF THE MORTGAGED PROPERTIES AND (II) ALL OTHER MATERIAL
FACILITIES (INCLUDING GATHERING, TRANSPORTATION, COMPRESSION, PROCESSING,
TREATING AND STORAGE FACILITIES) AND OTHER MATERIAL REAL AND PERSONAL PROPERTY
OWNED BY IT FROM TIME TO TIME (EXCLUDING ANY INTEREST IN ANY UNRESTRICTED
SUBSIDIARIES AND ANY EXCLUDED PROPERTY (AS DEFINED IN THE MORTGAGES).

 

53

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

 

(F)            PRODUCTION PROCEEDS. NOTWITHSTANDING THAT, BY THE TERMS OF THE
MORTGAGES, CREDIT PARTIES 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, CREDIT
PARTIES MAY CONTINUE TO RECEIVE FROM THE PURCHASERS OF PRODUCTION ALL SUCH
PRODUCTION PROCEEDS, SUBJECT, HOWEVER, TO THE LIENS CREATED UNDER THE MORTGAGES.
UPON THE OCCURRENCE OF AN EVENT OF DEFAULT, ADMINISTRATIVE AGENT MAY EXERCISE
ALL RIGHTS AND REMEDIES GRANTED UNDER THE MORTGAGES, INCLUDING THE RIGHT TO
OBTAIN POSSESSION OF ALL PRODUCTION PROCEEDS THEN HELD BY CREDIT PARTIES OR TO
RECEIVE DIRECTLY FROM THE PURCHASERS OF PRODUCTION ALL OTHER PRODUCTION
PROCEEDS. IN NO CASE SHALL ANY FAILURE, WHETHER INTENTIONAL 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 CREDIT PARTIES 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.

 

(G)           TITLE INFORMATION. PROMPTLY UPON REQUEST OF ADMINISTRATIVE AGENT,
BORROWER WILL DELIVER TITLE INFORMATION IN FORM AND SUBSTANCE REASONABLY
ACCEPTABLE TO ADMINISTRATIVE AGENT COVERING ENOUGH OF THE OIL AND GAS PROPERTIES
EVALUATED IN THE MOST RECENTLY DELIVERED RESERVE REPORT, SO THAT ADMINISTRATIVE
AGENT SHALL HAVE RECEIVED, TOGETHER WITH TITLE INFORMATION PREVIOUSLY DELIVERED
TO ADMINISTRATIVE AGENT IN CONNECTION WITH PREVIOUS RESERVE REPORTS OR
OTHERWISE, TITLE INFORMATION EVIDENCING THE CREDIT PARTIES HAVE DEFEASIBLE TITLE
ON AT LEAST 70% OF THE TOTAL PV-10 VALUE OF PROVED RESERVES ATTRIBUTABLE TO THE
OIL AND GAS PROPERTIES EVALUATED BY SUCH RESERVE REPORT. IF BORROWER HAS
PROVIDED TITLE INFORMATION FOR OIL AND GAS PROPERTIES UNDER THE PRECEDING
SENTENCE, BORROWER SHALL, WITHIN 60 DAYS OF NOTICE FROM ADMINISTRATIVE AGENT OR
REQUIRED LENDERS THAT MATERIAL TITLE DEFECTS OR EXCEPTIONS EXIST WITH RESPECT TO
SUCH OIL AND GAS PROPERTIES SUCH THAT THE CREDIT PARTIES DO NOT HAVE DEFEASIBLE
TITLE TO 70% OF THE PV-10 VALUE OF SUCH PROPERTIES, EITHER (1) CURE ANY SUCH
MATERIAL TITLE DEFECTS OR EXCEPTIONS (INCLUDING DEFECTS OR EXCEPTIONS AS TO
PRIORITY) RAISED BY SUCH INFORMATION, OR (2) DELIVER TITLE INFORMATION IN FORM
AND SUBSTANCE ACCEPTABLE TO ADMINISTRATIVE AGENT OR REQUIRED LENDERS SO THAT
ADMINISTRATIVE AGENT SHALL HAVE RECEIVED, TOGETHER WITH TITLE INFORMATION
PREVIOUSLY DELIVERED TO ADMINISTRATIVE AGENT, TITLE INFORMATION EVIDENCING THE
CREDIT PARTIES HAVE DEFEASIBLE TITLE ON AT LEAST 70% OF THE PV-10 VALUE OF
PROVED RESERVES ATTRIBUTABLE TO THE OIL AND GAS PROPERTIES EVALUATED BY SUCH
RESERVE REPORT. IF BORROWER IS UNABLE TO CURE ANY MATERIAL TITLE DEFECT
REQUESTED BY ADMINISTRATIVE AGENT OR THE REQUIRED LENDERS TO BE CURED WITHIN THE
60-DAY PERIOD OR BORROWER DOES NOT COMPLY WITH THE REQUIREMENTS TO PROVIDE TITLE
INFORMATION EVIDENCING THE CREDIT PARTIES HAVE DEFEASIBLE TITLE COVERING 70% OF
THE PV-10 VALUE OF PROVED RESERVES ATTRIBUTABLE TO THE OIL AND GAS PROPERTIES
EVALUATED IN THE MOST RECENT RESERVE REPORT, SUCH INABILITY TO CURE SHALL NOT BE
A DEFAULT, BUT ADMINISTRATIVE AGENT MAY, OR SHALL UPON REQUEST BY REQUIRED
LENDERS, PROPOSE A REDUCED BORROWING BASE (AND OVERADVANCE AMOUNT DURING THE
OVERADVANCE PERIOD), AND REQUIRED LENDERS SHALL APPROVE SUCH BORROWING BASE,
EACH IN THE MANNER PROVIDED IN SECTION 2.16(B) AND ADMINISTRATIVE AGENT SHALL
SEND A NOTICE TO BORROWER OF SUCH NEW BORROWING BASE (AND NEW OVERADVANCE AMOUNT
DURING THE OVERADVANCE PERIOD), THAT WILL CAUSE BORROWER TO BE IN COMPLIANCE
WITH THE REQUIREMENT TO PROVIDE TITLE INFORMATION EVIDENCING THE CREDIT PARTIES
HAVE DEFEASIBLE TITLE ON 70% OF THE PV-10 VALUE OF PROVED RESERVES ATTRIBUTABLE
TO THE OIL AND GAS PROPERTIES. THIS NEW BORROWING BASE SHALL BECOME EFFECTIVE
IMMEDIATELY AFTER RECEIPT OF SUCH NOTICE. ANY FAILURE TO GIVE SUCH NOTICE SHALL
NOT BE A

 

54

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

 

WAIVER AS TO FUTURE EXERCISE OF THE RIGHT TO SO REDUCE THE BORROWING BASE BY
ADMINISTRATIVE AGENT OR THE REQUIRED LENDERS.

 

(H)           BORROWER WILL, AND WILL CAUSE EACH OTHER CREDIT PARTY TO DEAL WITH
THE OIL AND GAS PROPERTIES AND THE PRODUCTION, IN SUCH A WAY THAT THE
REPRESENTATIONS AND WARRANTIES IN SECTIONS 3.23 AND 3.24 REMAIN TRUE AND CORRECT
AT ALL TIMES DURING THE TERM OF THIS AGREEMENT.

 

ARTICLE 5
NEGATIVE COVENANTS

 

Borrower agrees that, so long as any Credit Exposure exists:

 

SECTION 5.1            DEBT.

 

Borrower will not, and will not permit any other Credit Party to, directly or
indirectly, create, incur, assume, guarantee or otherwise become or remain
directly or indirectly liable with respect to, any Debt, except for:

 

(A)           DEBT UNDER THE FINANCING DOCUMENTS AND LETTER OF CREDIT
LIABILITIES;

 

(B)           DEBT OUTSTANDING ON THE DATE OF THIS AGREEMENT AND SET FORTH ON
SCHEDULE 5.1 AND ANY EXTENSIONS, RENEWALS OR REPLACEMENTS OF ANY SUCH DEBT,
PROVIDED THAT SUCH EXTENSION, RENEWAL OR REPLACEMENT DOES NOT INCREASE THE
OUTSTANDING PRINCIPAL AMOUNT THEREOF;

 

(C)           INTERCOMPANY DEBT ARISING FROM LOANS MADE BY (I) BORROWER TO ITS
RESTRICTED SUBSIDIARIES THAT ARE WHOLLY-OWNED SUBSIDIARIES TO FUND WORKING
CAPITAL REQUIREMENTS OF SUCH RESTRICTED SUBSIDIARIES IN THE ORDINARY COURSE OF
BUSINESS, OR (II) ANY RESTRICTED SUBSIDIARY THAT IS A WHOLLY-OWNED SUBSIDIARY OF
BORROWER TO BORROWER; PROVIDED, HOWEVER, THAT UPON THE REQUEST OF ADMINISTRATIVE
AGENT AT ANY TIME, ANY SUCH DEBT 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;

 

(D)           GUARANTEES BY BORROWER OF DEBT OF ANY RESTRICTED SUBSIDIARY
PERMITTED HEREUNDER AND BY ANY RESTRICTED SUBSIDIARY OF DEBT OF BORROWER OR ANY
OTHER RESTRICTED SUBSIDIARY PERMITTED HEREUNDER;

 

(E)           DEBT OF BORROWER OR ANY SUBSIDIARY INCURRED TO FINANCE THE
ACQUISITION, CONSTRUCTION OR IMPROVEMENT OF ANY FIXED OR CAPITAL ASSETS,
INCLUDING CAPITAL LEASE OBLIGATIONS AND ANY DEBT ASSUMED IN CONNECTION WITH THE
ACQUISITION OF ANY SUCH ASSETS OR SECURED BY A LIEN ON ANY SUCH ASSETS PRIOR TO
THE ACQUISITION THEREOF, AND EXTENSIONS, RENEWALS AND REPLACEMENTS OF ANY SUCH
DEBT THAT DO NOT INCREASE THE OUTSTANDING PRINCIPAL AMOUNT THEREOF; PROVIDED
THAT THE AGGREGATE PRINCIPAL AMOUNT OF DEBT PERMITTED BY THIS CLAUSE (E) SHALL
NOT EXCEED $5,000,000 AT ANY TIME OUTSTANDING;

 

(F)            DEBT, IF ANY, ARISING UNDER SWAP CONTRACTS, TO THE EXTENT
PERMITTED UNDER SECTION 5.6;

 

55

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

 

(G)           NON-RECOURSE DEBT IN AN AGGREGATE PRINCIPAL AMOUNT NOT TO EXCEED
$25,000,000 AT ANY TIME OUTSTANDING; PROVIDED THAT BORROWER SHALL NOT INCUR ANY
NON-RECOURSE DEBT AFTER THE CLOSING DATE WITHOUT ADMINISTRATIVE AGENT’S PRIOR
WRITTEN CONSENT TO THE RELEVANT DOCUMENTATION ESTABLISHING OR EVIDENCING THE
NON-RECOURSE NATURE AND AMOUNT OF SUCH NON-RECOURSE DEBT, WHICH CONSENT SHALL
NOT BE UNREASONABLY WITHHELD;

 

(H)           DEBT OF ANY PERSON THAT BECOMES A SUBSIDIARY AFTER THE CLOSING
DATE; PROVIDED THAT SUCH DEBT EXISTS AT THE TIME SUCH PERSON BECOMES A
SUBSIDIARY AND IS NOT CREATED IN CONTEMPLATION OF OR IN CONNECTION WITH SUCH
PERSON BECOMING A SUBSIDIARY;

 

(I)            PERMITTED SECURITIES;

 

(J)            DEBT INCURRED TO FINANCE THE ACQUISITION OF EQUIPMENT, PROVIDED
THAT THE AMOUNT OF SUCH DEBT DOES NOT EXCEED THE PURCHASE PRICE OF SUCH
EQUIPMENT; AND

 

(K)           OTHER UNSECURED DEBT IN AN AGGREGATE PRINCIPAL AMOUNT NOT
EXCEEDING $3,000,000 AT ANY TIME OUTSTANDING;

 

(L)            ANY CONTINGENT OBLIGATION PERMITTED BY SECTION 5.3; AND

 

(M)          DEBT INCURRED UNDER BONDS.

 

SECTION 5.2            LIENS.

 

Borrower will not, and will not permit any other Credit Party to, directly or
indirectly, create, assume or suffer to exist any Lien on any asset now owned or
hereafter acquired by it, except:

 

(A)           LIENS CREATED BY THE SECURITY DOCUMENTS;

 

(B)           PERMITTED ENCUMBRANCES;

 

(C)           ANY LIEN ON ANY PROPERTY OF BORROWER OR ANY RESTRICTED SUBSIDIARY
EXISTING ON THE DATE HEREOF AND SET FORTH IN SCHEDULE 5.2; PROVIDED THAT (I)
SUCH LIEN SHALL NOT APPLY TO ANY OTHER PROPERTY OF BORROWER OR ANY SUBSIDIARY
AND (II) SUCH LIEN SHALL SECURE ONLY THOSE OBLIGATIONS WHICH IT SECURES ON THE
DATE HEREOF AND EXTENSIONS, RENEWALS OR REPLACEMENTS THEREOF THAT DO NOT
INCREASE THE OUTSTANDING PRINCIPAL AMOUNT THEREOF;

 

(D)           ANY LIEN EXISTING ON ANY PROPERTY (TOGETHER WITH RECEIVABLES,
INTANGIBLES AND PROCEEDS THEREOF) PRIOR TO THE ACQUISITION THEREOF BY BORROWER
OR ANY SUBSIDIARY OR EXISTING ON ANY PROPERTY OF ANY PERSON THAT BECOMES A
SUBSIDIARY AFTER THE DATE HEREOF PRIOR TO THE TIME SUCH PERSON BECOMES A
SUBSIDIARY; PROVIDED THAT (I) SUCH LIEN IS NOT CREATED IN CONTEMPLATION OF OR IN
CONNECTION WITH SUCH ACQUISITION OR SUCH PERSON BECOMING A SUBSIDIARY, AS THE
CASE MAY BE, (II) SUCH LIEN SHALL NOT APPLY TO ANY OTHER PROPERTY OF BORROWER OR
ANY SUBSIDIARY AND (III) SUCH LIEN SHALL SECURE ONLY THOSE OBLIGATIONS WHICH IT
SECURES ON THE DATE OF SUCH ACQUISITION OR THE DATE SUCH PERSON BECOMES A
SUBSIDIARY, AS THE CASE MAY BE AND EXTENSIONS, RENEWALS OR REPLACEMENTS THEREOF
THAT DO NOT INCREASE THE OUTSTANDING PRINCIPAL AMOUNT THEREOF;

 

56

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

 

(E)           LIENS ON FIXED OR CAPITAL ASSETS (TOGETHER WITH RECEIVABLES,
INTANGIBLES AND PROCEEDS THEREOF) ACQUIRED, CONSTRUCTED OR IMPROVED BY BORROWER
OR ANY SUBSIDIARY; PROVIDED THAT (I) SUCH SECURITY INTERESTS SECURE DEBT
PERMITTED BY SECTION 5.1(E), (II) SUCH SECURITY INTERESTS AND THE DEBT SECURED
THEREBY ARE INCURRED PRIOR TO OR WITHIN 180 DAYS AFTER SUCH ACQUISITION OR THE
COMPLETION OF SUCH CONSTRUCTION OR IMPROVEMENT, (III) THE DEBT SECURED THEREBY
DOES NOT EXCEED THE COST OF ACQUIRING, CONSTRUCTING OR IMPROVING SUCH FIXED OR
CAPITAL ASSETS AND (IV) SUCH SECURITY INTERESTS SHALL NOT APPLY TO ANY OTHER
PROPERTY OF BORROWER OR ANY SUBSIDIARY;

 

(F)            LIENS SECURING OBLIGATIONS AND LIABILITIES OF BORROWER AND ANY
RESTRICTED SUBSIDIARY UNDER SWAP AGREEMENTS TO THE EXTENT PERMITTED HEREUNDER;
AND

 

(G)           LIENS GRANTED TO SECURE NON-RECOURSE DEBT PERMITTED UNDER SECTION
5.1(G).

 

SECTION 5.3            CONTINGENT OBLIGATIONS.

 

Borrower will not, and will not permit any other Credit Party to, directly or
indirectly, create, assume, incur or suffer to exist any Contingent Obligations,
except for:

 

(A)           CONTINGENT OBLIGATIONS ARISING IN RESPECT OF THE DEBT UNDER THE
FINANCING DOCUMENTS AND LETTER OF CREDIT LIABILITIES;

 

(B)           CONTINGENT OBLIGATIONS RESULTING FROM ENDORSEMENTS FOR COLLECTION
OR DEPOSIT IN THE ORDINARY COURSE OF BUSINESS;

 

(C)           CONTINGENT OBLIGATIONS EXISTING OR ARISING UNDER ANY SWAP
CONTRACT, PROVIDED THAT (I) SO LONG AS THERE EXISTS NO EVENT OF DEFAULT BOTH
IMMEDIATELY BEFORE AND IMMEDIATELY AFTER GIVING EFFECT TO ANY SUCH TRANSACTION
AND (II) SUCH OBLIGATIONS ARE (OR WERE) ENTERED INTO BY BORROWER OR ANOTHER
CREDIT PARTY IN THE ORDINARY COURSE OF BUSINESS FOR THE PURPOSE OF DIRECTLY
MITIGATING RISKS ASSOCIATED WITH LIABILITIES, COMMITMENTS, INVESTMENTS, ASSETS,
OR PROPERTY HELD OR REASONABLY ANTICIPATED BY SUCH PERSON AND NOT FOR PURPOSES
OF SPECULATION;

 

(D)           CONTINGENT OBLIGATIONS OUTSTANDING ON THE DATE OF THIS AGREEMENT
AND SET FORTH ON SCHEDULE 5.3 AND CONTINGENT OBLIGATIONS WITH RESPECT TO DEBT
PERMITTED UNDER SECTION 5.1;

 

(E)           CONTINGENT OBLIGATIONS INCURRED IN THE ORDINARY COURSE OF BUSINESS
WITH RESPECT TO BONDS;

 

(F)            CONTINGENT OBLIGATIONS ARISING UNDER INDEMNITY AGREEMENTS IN
CONNECTION WITH MORTGAGEE TITLE INSURANCE POLICIES;

 

(G)           CONTINGENT OBLIGATIONS ARISING WITH RESPECT TO CUSTOMARY
INDEMNIFICATION OBLIGATIONS IN FAVOR OF PURCHASERS IN CONNECTION WITH
DISPOSITIONS PERMITTED UNDER SECTION 5.7;

 

(H)           CONTINGENT OBLIGATIONS IN FAVOR OF CREDIT PARTIES; AND

 

(I)            CONTINGENT OBLIGATIONS TO THE EXTENT CONSTITUTING A PERMITTED
LIEN.

 

57

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

 

SECTION 5.4            RESTRICTED PAYMENTS.

 

Borrower will not, and will not permit any other Credit Party to, directly or
indirectly, declare, order, pay, make or set apart any sum for any Restricted
Payment; provided that the foregoing shall not restrict or prohibit (a)
dividends or distributions made by any Restricted Subsidiary, directly or
indirectly, to Borrower or to any Restricted Subsidiary that is a Wholly-Owned
Subsidiary of Borrower, (b) (i) dividends by Borrower in cash on its 8%
Convertible Preferred Stock outstanding on the Closing Date and (ii) dividends
by Borrower in cash on outstanding Permitted Securities, provided that in either
case no Default or Event of Default exists at the time of such payment and such
payment will not cause a Default or Event of Default, (c) Subsidiaries may
declare and pay dividends ratably with respect to their Capital Stock (or on a
basis more favorable to Borrower and its Subsidiaries), (d) Borrower may make
Restricted Payments pursuant to and in accordance with stock option plans or
other benefit plans for management or employees of Borrower and its
Subsidiaries, (e) Borrower may make cash payments in lieu of issuing fractional
shares in an aggregate amount not exceeding $200,000 during the term of this
Agreement, provided that no Default or Event of Default exists at the time of
such payment, such payment will not cause a Default or Event of Default and such
payment is made only in respect of Borrower’s 8% Convertible Preferred Stock
outstanding on the Closing Date, (f) Borrower may declare and pay distributions
effecting “poison pill” rights plans provided that any securities or rights so
distributed have a nominal fair market value at the time of declaration, (g)
Borrower or any Restricted Subsidiary may make any Restricted Payments in
exchange for or out of the net cash proceeds from the sale of Capital Stock of
Borrower (other than Permitted Securities), and (h) any Restricted Payment of
Permitted Securities in exchange for or out of net cash proceeds from the sale
of Permitted Securities; provided that in no event shall a Credit Party make any
payment in respect of any Debt which by its terms is subordinated to the
Obligations which payment is prohibited by the subordinated provisions governing
such Debt. Borrower will not, and will not permit any other Credit Party to
issue preferred Capital Stock providing for Restricted Payments not permitted by
this Section 5.4.

 

SECTION 5.5            RESTRICTIVE AGREEMENTS.

 

Borrower will not, and will not permit any of its Restricted Subsidiaries to,
directly or indirectly, enter into, incur or permit to exist any agreement or
other arrangement that prohibits, restricts or imposes any condition upon (a)
the ability of Borrower or any Restricted Subsidiary to create, incur or permit
to exist any Lien upon any of its property or assets (other than (1) Capital
Stock in any Unrestricted Subsidiary, (2) other investments in Capital Stock of
joint ventures permitted under Section 5.8, (3) investments permitted under
Section 5.8(j) if such restriction or conditions apply only to the property or
assets that are the subject of such investment), or (b) the ability of any
Subsidiary to pay dividends or other distributions with respect to any shares of
its capital stock or to make or repay loans or advances to Borrower or any other
Restricted Subsidiary or to Guarantee Debt of Borrower or any other Restricted
Subsidiary; provided that (i) the foregoing shall not apply to restrictions and
conditions imposed by law or by this Agreement, (ii) the foregoing shall not
apply to restrictions and conditions existing on the date hereof identified on
Schedule 5.5 (but shall apply to any extension or renewal of, or any amendment
or modification expanding the scope of, any such restriction or condition),
(iii) the foregoing shall not apply to customary restrictions and conditions
contained in agreements relating to the sale of a Subsidiary or other assets
pending such sale, provided such

 

58

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

 

restrictions and conditions apply only to the Subsidiary or other assets that is
to be sold and such sale is permitted hereunder, (iv) paragraph (a) of the
foregoing shall not apply to restrictions or conditions imposed by any agreement
relating to secured Debt permitted by this Agreement if such restrictions or
conditions apply only to the property or assets securing such Debt, (v)
paragraph (a) of the foregoing shall not apply to customary provisions in leases
and other contracts restricting the assignment thereof (vi) existing
restrictions with respect to a Person acquired by Borrower or any of its
Restricted 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 (vii) 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 Restricted Subsidiaries.

 

SECTION 5.6            SWAP CONTRACTS.

 

Borrower will not, and will not permit any other Credit Party to enter into any
Swap Contracts other than Swap Contracts in respect of commodities (i) with
Eligible Swap Counterparties. (ii) with durations not to exceed 60 months at any
time, and (iii) the notional volumes for which (when aggregated with other
commodity Swap Contracts then in effect other than basis differential swaps on
volumes already hedged pursuant to other Swap Contracts) do not exceed, as of
the date such Swap Contract is executed, 85% of the Projected Oil and Gas
Production from Proved Developed Producing Reserves attributable to the Oil and
Gas Properties for each month during the period during which such Swap Contract
is in effect for each of crude oil and natural gas, calculated separately;
provided that such limitation in clause (iii) of this Section 5.6 shall not
apply to Swap Contracts in respect of commodities that are floor prices or puts
for which no further payment obligation is owed by such Credit Party and not in
excess of 100% of Proved Developed Producing Reserves attributable to the Oil
and Gas Properties for each month during the period during which such Swap
Contract is in effect for each of crude oil and natural gas, calculated
separately. Not later than 30 days after consummation of an Asset Disposition in
respect of Oil and Gas Properties which, together with any other Asset
Dispositions of Oil and Gas Properties not theretofore taken into account in
connection with this sentence, reduces by more than 5% the Credit Parties’
aggregate Projected Oil and Gas Production from Proved Developed Producing
Reserves, Borrower will cause the notional volumes of Swap Contracts maintained
by Borrower and other Credit Parties in respect of commodities not to exceed in
the aggregate the amounts that would be permitted under clause (iii) of the
preceding sentence if such Swap Contracts were entered into immediately after
giving effect to such Asset Disposition.

 

SECTION 5.7            CONSOLIDATIONS, MERGERS AND SALES OF ASSETS.

 

(A)           BORROWER WILL NOT, AND WILL NOT PERMIT ANY OTHER CREDIT PARTY TO,
DIRECTLY OR INDIRECTLY CONSOLIDATE OR MERGE WITH OR INTO ANY OTHER PERSON OTHER
THAN (I) MERGERS OF ANY RESTRICTED SUBSIDIARY WITH AND INTO BORROWER OR ANOTHER
RESTRICTED SUBSIDIARY, (II) MERGERS OF ANY RESTRICTED SUBSIDIARIES WITH AND INTO
BORROWER (WITH BORROWER AS THE SURVIVING ENTITY OF

 

59

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

 

SUCH MERGER) AND (III) MERGERS OR CONSOLIDATIONS WITH OR INTO ANY PERSON SO LONG
AS BORROWER OR A WHOLLY-OWNED RESTRICTED SUBSIDIARY IS THE SURVIVING ENTITY;
PROVIDED THAT ANY SUCH MERGER INVOLVING A PERSON THAT IS NOT A WHOLLY-OWNED
SUBSIDIARY IMMEDIATELY PRIOR TO SUCH MERGER SHALL NOT BE PERMITTED UNLESS ALSO
PERMITTED BY SECTION 5.8. ANY RESTRICTED SUBSIDIARY MAY LIQUIDATE OR DISSOLVE 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.

 

(B)           BORROWER WILL NOT, AND WILL NOT PERMIT ANY OTHER CREDIT PARTY TO,
DIRECTLY OR INDIRECTLY, CONSUMMATE ANY ASSET DISPOSITIONS OTHER THAN, SO LONG AS
NO DEFAULT OR EVENT OF DEFAULT THEN EXISTS OR WOULD RESULT FROM ANY SUCH
DISPOSITION (I) DISPOSITIONS OF EQUIPMENT FOR CASH AND FAIR VALUE THAT BORROWER
DETERMINES IN GOOD FAITH IS NO LONGER USED OR USEFUL IN THE BUSINESS OF BORROWER
AND ITS RESTRICTED SUBSIDIARIES IF DURING THE OVERADVANCE PERIOD, 100% OF THE
NET CASH PROCEEDS OF ANY SUCH DISPOSITION ARE APPLIED TO PERMANENTLY REDUCE THE
OVERADVANCE AMOUNT AND (II) DISPOSITIONS OF ANY OIL AND GAS PROPERTY OR ANY
INTEREST THEREIN IF (A) THE CONSIDERATION RECEIVED IN RESPECT OF SUCH SALE OR
OTHER DISPOSITION SHALL BE EQUAL TO OR GREATER THAN THE FAIR MARKET VALUE OF
SUCH OIL AND GAS PROPERTY OR INTEREST THEREIN (AS REASONABLY DETERMINED BY
BORROWER), AND (B) IF SUCH OIL AND GAS PROPERTIES WERE INCLUDED IN THE
DETERMINATION OF THE BORROWING BASE THEN IN EFFECT THE PREPAYMENT, IF ANY,
REQUIRED UNDER SECTION 2.3(B) SHALL HAVE BEEN MADE. FOR PURPOSES OF THIS SECTION
5.7(B) AND SECTION 2.3(B), PROCEEDS OF ANY CASUALTY EVENT IN RESPECT OF OIL AND
GAS PROPERTIES INCLUDED IN THE MOST RECENT DETERMINATION OF THE BORROWING BASE
AND WITH RESPECT TO WHICH A DETERMINATION IS MADE THAT SUCH PROCEEDS WILL NOT BE
APPLIED TO REPAIR OR REPLACEMENT THEREOF WILL BE CONSIDERED AN ASSET DISPOSITION
UNDER CLAUSE (II)(B) WITH THE AMOUNT OF SUCH PROCEEDS BEING AGGREGATED WITH
OTHER ASSET DISPOSITIONS FOR PURPOSES OF CLAUSE (II)(B) OF THIS SECTION 5.7(B)
AND SECTION 2.3(B).

 

SECTION 5.8            INVESTMENTS.

 

Borrower will not, and will not permit any of its Restricted Subsidiaries to,
purchase, hold or acquire (including pursuant to any merger with any Person that
was not a wholly owned Subsidiary prior to such merger) any capital stock,
evidences of indebtedness or other securities (including any option, warrant or
other right to acquire any of the foregoing) of, make or permit to exist any
loans or advances to, Guarantee any obligations of, or make or permit to exist
any investment or any other interest in, any other Person, or purchase or
otherwise acquire (in one transaction or a series of transactions) any assets of
any other Person constituting a business unit, except:

 

(A)           PERMITTED INVESTMENTS;

 

(B)           INVESTMENTS BY BORROWER AND ITS SUBSIDIARIES IN THE CAPITAL STOCK
OF ITS RESTRICTED SUBSIDIARIES;

 

(C)           LOANS OR ADVANCES MADE BY BORROWER TO ANY RESTRICTED SUBSIDIARY
AND MADE BY ANY SUBSIDIARY TO BORROWER OR ANY OTHER RESTRICTED SUBSIDIARY; AND

 

(D)           GUARANTEES CONSTITUTING DEBT PERMITTED BY SECTION 5.1;

 

(E)           INVESTMENTS CONSISTING OF SWAP CONTRACTS TO THE EXTENT PERMITTED
UNDER SECTION 5.6;

 

60

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

 

(F)            LOANS OR ADVANCES TO EMPLOYEES IN THE ORDINARY COURSE OF BUSINESS
IN AN AGGREGATE AMOUNT FOR ALL EMPLOYEES OF BORROWER AND ITS SUBSIDIARIES NOT IN
EXCESS OF $750,000 AT ANYONE TIME OUTSTANDING;

 

(G)           TRADE CREDITS AND ACCOUNTS ARISING IN THE ORDINARY COURSE OF
BUSINESS;

 

(H)           INVESTMENTS MADE AS A RESULT OF THE RECEIPT OF NON CASH
CONSIDERATIONS FROM A DISPOSITION THAT WAS MADE PURSUANT TO AND IN COMPLIANCE
WITH THIS AGREEMENT;

 

(I)            INVESTMENTS MADE IN ANY DEBTOR OF BORROWER OR ANY RESTRICTED
SUBSIDIARY AS A RESULT OF THE RECEIPT OF STOCK, OBLIGATIONS OR SECURITIES IN
SETTLEMENT OF DEBTS CREATED IN THE ORDINARY COURSE OF BUSINESS AND OWING TO
BORROWER OR ANY RESTRICTED SUBSIDIARY;

 

(J)            INVESTMENTS MADE PURSUANT TO THE REQUIREMENTS OF FARM-OUT, FARM
IN, UNIT, JOINT OPERATING, UNIT OPERATING, JOINT VENTURE, AREA OF MUTUAL
INTEREST AND OTHER OIL AND GAS AGREEMENTS, GATHERING SYSTEMS, PIPELINES OR OTHER
SIMILAR OR CUSTOMARY ARRANGEMENTS ENTERED INTO THE ORDINARY COURSE OF BUSINESS
(INCLUDING ADVANCES TO OPERATORS UNDER OPERATING AGREEMENTS ENTERED INTO BY
BORROWER OR ANY SUBSIDIARY IN THE ORDINARY COURSE OF BUSINESS); PROVIDED THAT
ANY SUCH SINGLE INVESTMENT IN EXCESS OF $5,000,000 SHALL BE APPROVED BY THE
BOARD OF DIRECTORS OF BORROWER;

 

(K)           INVESTMENTS MADE IN CONNECTION WITH THE PURCHASE, LEASE, OR OTHER
ACQUISITION OF TANGIBLE ASSETS OF ANY PERSON AND INVESTMENTS MADE IN CONNECTION
WITH THE PURCHASE, LEASE OR OTHER ACQUISITION OF ALL OR SUBSTANTIALLY ALL OF THE
BUSINESS, OF ANY PERSON, OR ALL OF THE CAPITAL STOCK OR OTHER EQUITY INTERESTS
OF ANY PERSON, OR ANY DIVISION, LINE OF BUSINESS OR BUSINESS UNIT OF ANY PERSON
(INCLUDING (I) BY THE MERGER OR CONSOLIDATION OF SUCH PERSON INTO BORROWER OR
ANY RESTRICTED SUBSIDIARY OR BY THE MERGER OF A RESTRICTED SUBSIDIARY INTO SUCH
PERSON AND (II) THE PURCHASE OF PROVED RESERVES);

 

(L)            REPURCHASE OF CAPITAL STOCK DEEMED TO OCCUR UPON EXERCISE OF
STOCK OPTIONS OR WARRANTS IF SUCH CAPITAL STOCK REPRESENTS A PORTION OF THE
EXERCISE PRICE OR SUCH OPTIONS OR WARRANTS OR THE PAYMENT OF WITHHOLDING TAXES
THROUGH THE ISSUANCE OF CAPITAL STOCK;

 

(M)          THE PURCHASE OF FRACTIONAL SHARES ARISING OUT OF STOCK DIVIDENDS,
SPLITS OR COMBINATIONS OR BUSINESS COMBINATIONS;

 

(N)           ANY OTHER INVESTMENTS IN ANY PERSON HAVING AN AGGREGATE FAIR
MARKET VALUE (MEASURED ON THE DATE EACH SUCH INVESTMENT WAS MADE AND WITHOUT
GIVING EFFECT TO SUBSEQUENT CHANGES IN VALUE), WHEN TAKEN TOGETHER WILL ALL
OTHER INVESTMENTS MADE PURSUANT TO THIS CLAUSE (N) DO NOT EXCEED $3,000,000
OUTSTANDING AT ANY TIME;

 

(O)           INVESTMENTS OUTSTANDING AS OF THE CLOSING DATE IN UNRESTRICTED
SUBSIDIARIES;

 

(P)           INVESTMENTS, LOANS, ADVANCES AND ACQUISITIONS IN EXCHANGE FOR, OR
OUT OF THE NET CASH PROCEEDS FROM THE SALE OF, CAPITAL STOCK OF BORROWER (OTHER
THAN PERMITTED SECURITIES) ISSUED AFTER THE CLOSING DATE; AND

 

(Q)           INVESTMENTS IN WARREN ENERGY SERVICES, LLC AFTER THE CLOSING DATE
(MEASURED ON THE DATE EACH SUCH INVESTMENT WAS MADE AND WITHOUT GIVING EFFECT TO
SUBSEQUENT CHANGES IN

 

61

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

 

VALUE), WHEN TAKEN TOGETHER WILL ALL OTHER INVESTMENTS MADE PURSUANT TO THIS
CLAUSE (Q) DO NOT EXCEED $10,000,000 OUTSTANDING AT ANY TIME.

 

SECTION 5.9            TRANSACTIONS WITH AFFILIATES.

 

Except (i) as expressly permitted by this Agreement, (ii) as otherwise disclosed
on Schedule 5.9, and (iii) for transactions which contain terms that are no less
favorable to Borrower or any other Credit Party, as the case may be, than those
which might be obtained from a third party not an Affiliate of any Credit Party,
Borrower will not, and will not permit any other Credit Party to, directly or
indirectly, enter into or permit to exist any transaction (including the
purchase, sale, lease or exchange of any property or the rendering of any
service) with any Affiliate of Borrower, and (iii) any Restricted Payment
permitted by Section 5.4, and (d) with respect to any Person serving as an
officer, director, employee or consultant of Borrower or any Restricted
Subsidiary, (1) the payment of reasonable compensation, benefits or
indemnification liabilities in connection with his or her services in such
capacity provided that the payment of any such compensation, benefits or
indemnification liabilities are approved by a majority of the disinterested
members of the Board of Directors of Borrower or by the compensation committee
of Borrower, (2) the making of advances for travel or other business expenses in
the ordinary course of business or (3) such Person’s participation in any
benefit or compensation.

 

SECTION 5.10         MODIFICATION OF ORGANIZATIONAL DOCUMENTS.

 

Borrower will not, directly or indirectly, amend or otherwise modify any
Organizational Documents of Borrower, except for such amendments or other
modifications required by Law or which are not adverse to the interests of
Administrative Agent or any Lender and which, in each instance, are fully
disclosed to Administrative Agent.

 

SECTION 5.11         [RESERVED]

 

SECTION 5.12         FISCAL YEAR.

 

Borrower will not, and will not permit any other Credit Party to, change its
Fiscal Year.

 

SECTION 5.13         CONDUCT OF BUSINESS.

 

Borrower will not, and will not permit any other Credit Party to, directly or
indirectly, engage in any line of business other than those businesses engaged
in on the Closing Date and described on Schedule 5.13 and businesses reasonably
related thereto.

 

SECTION 5.14         [RESERVED]

 

SECTION 5.15         CAPITAL STOCK.

 

Borrower will not, nor cause or permit any Restricted Subsidiary to, permit a
Lien (other than a Lien created under a Financing Document) to be placed on any
of the Capital Stock owned by Borrower or such Restricted Subsidiary in any
other Person; provided that Liens against Capital Stock in an Unrestricted
Subsidiary shall be permitted to the extent such Lien is granted to secure
Non-Recourse Debt.

 

62

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

 

SECTION 5.16         LIMITATION ON SALE AND LEASEBACK TRANSACTIONS.

 

Borrower will not, and will not permit any other Credit Party to, directly or
indirectly, enter into any arrangement with any Person whereby in a
substantially contemporaneous transaction Borrower or any of its Subsidiaries
sells or transfers all or substantially all of its right, title and interest in
an asset and, in connection therewith, acquires or leases back the right to use
such asset; provided this Section 5.16 shall not prohibit any sale-leaseback
resulting from the incurrence of any lease of any capital asset entered into
within 180 days of the acquisition of such capital asset for the purpose of
providing permanent financing of such asset, provided that the Debt related
thereto is permitted by Section 5.1.

 

SECTION 5.17         BANK ACCOUNTS.

 

Borrower will not, and will not permit any other Credit Party to, directly or
indirectly, establish any new bank account (excluding any account established
after notice to Administrative Agent exclusively for payroll or petty cash)
without the prior written consent of Administrative Agent, and provided that in
each case, Administrative Agent, Borrower or such other Credit Party and the
bank at which the account is to be opened enter into a control agreement
regarding such bank account pursuant to which such bank acknowledges the
security interest of Administrative Agent in such bank account, agrees to comply
with instructions originated by Administrative Agent directing disposition of
the funds in such bank account without further consent from Borrower, and agrees
to subordinate and limit any security interest such bank may have in such bank
account on terms satisfactory to Administrative Agent.

 

SECTION 5.18         COMPLIANCE WITH ANTI-TERRORISM LAWS.

 

(A)           BORROWER WILL NOT, AND WILL NOT PERMIT ANY OTHER CREDIT PARTY TO,
DIRECTLY OR INDIRECTLY, KNOWINGLY ENTER INTO ANY FINANCING DOCUMENTS OR MATERIAL
AGREEMENT WITH ANY PERSON LISTED ON THE OFAC LISTS. BORROWER SHALL IMMEDIATELY
NOTIFY ADMINISTRATIVE AGENT IF BORROWER HAS KNOWLEDGE THAT BORROWER, ANY
ADDITIONAL CREDIT PARTY OR ANY OF THEIR RESPECTIVE AFFILIATES OR AGENTS ACTING
OR BENEFITING IN ANY CAPACITY IN CONNECTION WITH THE TRANSACTIONS CONTEMPLATED
BY THIS AGREEMENT IS OR BECOMES A BLOCKED PERSON OR (I) IS CONVICTED ON, (II)
PLEADS NOLO CONTENDERE TO, (III) IS INDICTED ON OR (IV) IS ARRAIGNED AND HELD
OVER ON CHARGES INVOLVING MONEY LAUNDERING OR PREDICATE CRIMES TO MONEY
LAUNDERING. BORROWER WILL NOT, AND WILL NOT PERMIT ANY OTHER CREDIT PARTY TO,
DIRECTLY OR INDIRECTLY, (I) CONDUCT ANY BUSINESS OR ENGAGE IN ANY TRANSACTION OR
DEALING WITH ANY BLOCKED PERSON, INCLUDING, WITHOUT LIMITATION, THE MAKING OR
RECEIVING OF ANY CONTRIBUTION OF FUNDS, GOODS OR SERVICES TO OR FOR THE BENEFIT
OF ANY BLOCKED PERSON, (II) DEAL IN, OR OTHERWISE ENGAGE IN ANY TRANSACTION
RELATING TO, ANY PROPERTY OR INTERESTS IN PROPERTY BLOCKED PURSUANT TO EXECUTIVE
ORDER NO. 13224, ANY SIMILAR EXECUTIVE ORDER OR OTHER ANTI-TERRORISM LAW, OR
(III) ENGAGE IN OR CONSPIRE TO ENGAGE IN ANY TRANSACTION THAT EVADES OR AVOIDS,
OR HAS THE PURPOSE OF EVADING OR AVOIDING, OR ATTEMPTS TO VIOLATE, ANY OF THE
PROHIBITIONS SET FORTH IN EXECUTIVE ORDER NO. 13224 OR OTHER ANTI-TERRORISM LAW.

 

63

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

 

ARTICLE 6
FINANCIAL COVENANTS

 

SECTION 6.1            INTEREST COVERAGE RATIO.

 

Borrower will not permit the Interest Coverage Ratio for any period of four
consecutive fiscal quarters to be less than 2.5 to 1.0, determined as of the
last day of each fiscal quarter.

 

SECTION 6.2            CURRENT RATIO.

 

Borrower will not permit the ratio on the last day of any fiscal quarter of (i)
Consolidated Current Assets to (ii) Consolidated Current Liabilities, other than
that portion of Long Term Indebtedness that is included in such Consolidated
Current Liabilities, to be less than 1.0 to 1.0.

 

ARTICLE 7
CONDITIONS

 

SECTION 7.1            CONDITIONS TO CLOSING.

 

The obligation of each Lender to make the initial Loans, of Administrative Agent
to issue any Support Agreements on the Closing Date and of any LC Issuer to
issue any Lender Letter of Credit on the Closing Date shall be subject to the
receipt by Administrative Agent of each agreement, document and instrument set
forth on the Closing Checklist, each in form and substance reasonably
satisfactory to Administrative Agent, and to the satisfaction of the following
conditions precedent, each to the satisfaction of Administrative Agent and
Lenders in their sole discretion:

 

(A)           THE PAYMENT OF ALL FEES, EXPENSES AND OTHER AMOUNTS DUE AND
PAYABLE UNDER EACH FINANCING DOCUMENT;

 

(B)           THE ABSENCE, SINCE SEPTEMBER 30, 2007, OF ANY MATERIAL ADVERSE
CHANGE IN ANY ASPECT OF THE BUSINESS, OPERATIONS, PROPERTIES, LIABILITIES
(ACTUAL OR CONTINGENT), OR FINANCIAL CONDITION OF BORROWER AND RESTRICTED
SUBSIDIARIES, TAKEN AS A WHOLE;

 

(C)           RECEIPT BY ADMINISTRATIVE AGENT OF SUCH OTHER DOCUMENTS,
INSTRUMENTS AND/OR AGREEMENTS AS ADMINISTRATIVE AGENT MAY REASONABLY REQUEST.

 

Each Lender, by delivering its signature page to this Agreement, shall be deemed
to have acknowledged receipt of, and consented to and approved, each Financing
Document, each additional Financing Document and each other document, agreement
and/or instrument required to be approved by Administrative Agent, Required
Lenders or Lenders, as applicable, on the Closing Date.

 

SECTION 7.2            CONDITIONS TO EACH LOAN, SUPPORT AGREEMENT AND LENDER
LETTER OF CREDIT.

 

The obligation of Lenders to make a Loan (other than Revolving Loans made
pursuant to Section 2.9(c)), of Administrative Agent to issue any Support
Agreement or of any LC Issuer to

 

64

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

 

issue any Lender Letter of Credit (including, in each case, on the Closing Date)
is subject to the satisfaction of the following additional conditions:

 

(A)           IN THE CASE OF A REVOLVING LOAN BORROWING, RECEIPT BY
ADMINISTRATIVE AGENT OF A NOTICE OF BORROWING (OR TELEPHONIC OR ELECTRONIC
NOTICE, AS PERMITTED BY SECTION 2.2(B)) IN ACCORDANCE WITH SECTION 2.2(B) AND,
IN THE CASE OF ANY SUPPORT AGREEMENT OR LENDER LETTER OF CREDIT, RECEIPT BY
ADMINISTRATIVE AGENT OF A NOTICE OF LC CREDIT EVENT IN ACCORDANCE WITH SECTION
2.9;

 

(B)           THE FACT THAT, IMMEDIATELY AFTER SUCH BORROWING AND AFTER
APPLICATION OF THE PROCEEDS THEREOF OR AFTER SUCH ISSUANCE, THE REVOLVING LOAN
OUTSTANDINGS WILL NOT EXCEED THE REVOLVING LOAN LIMIT;

 

(C)           THE FACT THAT, IMMEDIATELY BEFORE AND AFTER SUCH BORROWING OR
ISSUANCE, NO DEFAULT OR EVENT OF DEFAULT SHALL HAVE OCCURRED AND BE CONTINUING;
AND

 

(D)           THE FACT THAT THE REPRESENTATIONS AND WARRANTIES OF EACH CREDIT
PARTY CONTAINED IN THE FINANCING DOCUMENTS SHALL BE TRUE, CORRECT AND COMPLETE
IN ALL MATERIAL RESPECTS ON AND AS OF THE DATE OF SUCH BORROWING OR ISSUANCE,
EXCEPT TO THE EXTENT THAT ANY SUCH REPRESENTATION OR WARRANTY RELATES TO A
SPECIFIC DATE IN WHICH CASE SUCH REPRESENTATION OR WARRANTY SHALL BE TRUE AND
CORRECT AS OF SUCH EARLIER DATE.

 

Each giving of a Notice of LC Credit Event hereunder, each giving of a Notice of
Borrowing which requests the making of a Loan hereunder and each acceptance by
Borrower of the proceeds of any Loan made hereunder shall, except as set forth
in the Notice of LC Credit Event or Notice of Borrowing, be deemed to be a
representation and warranty by Borrower on the date of such notice or acceptance
as to the facts specified in Sections 7.2(b), 7.2(c) and 7.2(d).

 

ARTICLE 8
EVENTS OF DEFAULT

 

SECTION 8.1            EVENTS OF DEFAULT.

 

For purposes of the Financing Documents, the occurrence of any of the following
conditions and/or events, whether voluntary or involuntary, by operation of Law
or otherwise, shall constitute an “Event of Default”:

 

(A)           BORROWER SHALL FAIL TO PAY WHEN DUE ANY PRINCIPAL, INTEREST,
PREMIUM OR FEE UNDER ANY FINANCING DOCUMENT OR ANY OTHER AMOUNT PAYABLE UNDER
ANY FINANCING DOCUMENT AND, IN THE CASE OF ANY SUCH PAYMENT (OTHER THAN ANY
PRINCIPAL PAYMENT OR REIMBURSEMENT OBLIGATION WITH RESPECT OF ANY LETTER OF
CREDIT), SUCH FAILURE SHALL CONTINUE UNREMEDIED FOR A PERIOD OF THREE BUSINESS
DAYS;

 

(B)           BORROWER SHALL FAIL TO OBSERVE OR PERFORM ANY COVENANT CONTAINED
IN SECTION 4.1, SECTION 4.3, SECTION 4.6, SECTION 4.7, SECTION 4.9, SECTION
4.10, ARTICLE 5, OR ARTICLE 6;

 

65

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

 

(C)           ANY CREDIT PARTY DEFAULTS IN THE PERFORMANCE OF OR COMPLIANCE WITH
ANY TERM CONTAINED IN THIS AGREEMENT OR IN ANY OTHER FINANCING DOCUMENT (OTHER
THAN OCCURRENCES DESCRIBED IN OTHER PROVISIONS OF THIS SECTION 8.1 FOR WHICH A
DIFFERENT GRACE OR CURE PERIOD IS SPECIFIED OR FOR WHICH NO GRACE OR CURE PERIOD
IS SPECIFIED AND THEREBY CONSTITUTE IMMEDIATE EVENTS OF DEFAULT) AND SUCH
DEFAULT IS NOT REMEDIED OR WAIVED WITHIN THIRTY (30) DAYS AFTER THE EARLIER OF
(I) RECEIPT BY BORROWER OF NOTICE FROM ADMINISTRATIVE AGENT OR REQUIRED LENDERS
OF SUCH DEFAULT OR (II) ACTUAL KNOWLEDGE OF BORROWER OR ANY OTHER CREDIT PARTY
OF SUCH DEFAULT;

 

(D)           ANY REPRESENTATION, WARRANTY, CERTIFICATION OR STATEMENT MADE BY
ANY CREDIT PARTY IN ANY FINANCING DOCUMENT OR IN ANY CERTIFICATE, FINANCIAL
STATEMENT OR OTHER DOCUMENT DELIVERED PURSUANT TO ANY FINANCING DOCUMENT IS
INCORRECT IN ANY MATERIAL RESPECT WHEN MADE (OR DEEMED MADE);

 

(E)           (I) FAILURE OF ANY CREDIT PARTY TO PAY WHEN DUE OR WITHIN ANY
APPLICABLE GRACE PERIOD ANY PRINCIPAL, INTEREST OR OTHER AMOUNT ON DEBT (OTHER
THAN THE LOANS) OR PERMITTED SECURITIES OR IN RESPECT OF ANY SWAP CONTRACT, OR
THE OCCURRENCE OF ANY BREACH, DEFAULT, CONDITION OR EVENT WITH RESPECT TO ANY
DEBT (OTHER THAN THE LOANS) OR IN RESPECT OF ANY PERMITTED SECURITIES OR IN
RESPECT OF ANY SWAP CONTRACT IF THE EFFECT OF SUCH OCCURRENCE IS (A) TO CAUSE OR
TO PERMIT THE HOLDER OR HOLDERS OF ANY SUCH DEBT OR PERMITTED SECURITIES, OR THE
COUNTERPARTY UNDER ANY SUCH SWAP CONTRACT, TO CAUSE DEBT, PERMITTED SECURITIES
OR OTHER LIABILITIES TO BECOME OR BE DECLARED IMMEDIATELY DUE AND PAYABLE OR (B)
TO REQUIRE ANY MANDATORY PAYMENT, PURCHASE, REDEMPTION, RETIREMENT, DEFEASANCE,
SURRENDER, CANCELLATION OR ACQUISITION OF DEBT OR PERMITTED SECURITIES OR TO
REQUIRE ANY CREDIT PARTY TO OFFER TO PAY, PURCHASE, REDEEM, RETIRE, DEFEASE,
SURRENDER, CANCEL OR ACQUIRE DEBT OR PERMITTED SECURITIES, IN THE CASE OF ANY OR
ALL OF THE FOREGOING UNDER THIS CLAUSE (I) IN RESPECT OF DEBT, PERMITTED
SECURITIES OR SWAP CONTRACTS HAVING AN INDIVIDUAL PRINCIPAL AMOUNT IN EXCESS OF
$2,000,000 (OR ANY AMOUNT, SOLELY WITH RESPECT TO SWAP CONTRACTS) OR HAVING AN
AGGREGATE PRINCIPAL AMOUNT IN EXCESS OF $2,000,000 (OR ANY AMOUNT, SOLELY WITH
RESPECT TO SWAP CONTRACTS); PROVIDED THAT THIS PARAGRAPH (E) SHALL NOT APPLY TO
(X) SECURED INDEBTEDNESS THAT BECOMES DUE AS A RESULT OF THE VOLUNTARY SALE OR
TRANSFER OF THE PROPERTY OR ASSETS SECURING SUCH INDEBTEDNESS OR (Y) ANY
PAYMENT, PURCHASE, REDEMPTION, RETIREMENT, DEFEASANCE, SURRENDER, CANCELLATION
OR ACQUISITION OF DEBT OR PERMITTED SECURITIES SATISFIED BY THE CONVERSION,
EXCHANGE OR ISSUANCE OF CAPITAL STOCK PERMITTED TO BE ISSUED HEREUNDER; OR (II)
THE OCCURRENCE OF ANY EVENT REQUIRING THE PREPAYMENT OF ANY SUBORDINATED DEBT
PRIOR TO THE REPAYMENT OF THE OBLIGATIONS;

 

(F)            BORROWER OR ANY CREDIT PARTY SHALL COMMENCE A VOLUNTARY CASE OR
OTHER PROCEEDING SEEKING LIQUIDATION, REORGANIZATION OR OTHER RELIEF WITH
RESPECT TO ITSELF OR ITS DEBTS UNDER ANY BANKRUPTCY, INSOLVENCY OR OTHER SIMILAR
LAW NOW OR HEREAFTER IN EFFECT OR SEEKING THE APPOINTMENT OF A TRUSTEE,
RECEIVER, LIQUIDATOR, CUSTODIAN OR OTHER SIMILAR OFFICIAL OF IT OR ANY
SUBSTANTIAL PART OF ITS PROPERTY, OR SHALL CONSENT TO ANY SUCH RELIEF OR TO THE
APPOINTMENT OF OR TAKING POSSESSION BY ANY SUCH OFFICIAL IN AN INVOLUNTARY CASE
OR OTHER PROCEEDING COMMENCED AGAINST IT, OR SHALL MAKE A GENERAL ASSIGNMENT FOR
THE BENEFIT OF CREDITORS, OR SHALL FAIL GENERALLY TO PAY ITS DEBTS AS THEY
BECOME DUE, OR SHALL TAKE ANY CORPORATE ACTION TO AUTHORIZE ANY OF THE
FOREGOING;

 

(G)           AN INVOLUNTARY CASE OR OTHER PROCEEDING SHALL BE COMMENCED AGAINST
BORROWER OR ANY CREDIT PARTY SEEKING LIQUIDATION, REORGANIZATION OR OTHER RELIEF
WITH RESPECT TO IT OR ITS DEBTS

 

66

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

 

UNDER ANY BANKRUPTCY, INSOLVENCY OR OTHER SIMILAR LAW NOW OR HEREAFTER IN EFFECT
OR SEEKING THE APPOINTMENT OF A TRUSTEE, RECEIVER, LIQUIDATOR, CUSTODIAN OR
OTHER SIMILAR OFFICIAL OF IT OR ANY SUBSTANTIAL PART OF ITS PROPERTY, AND SUCH
INVOLUNTARY CASE OR OTHER PROCEEDING SHALL REMAIN UNDISMISSED AND UNSTAYED FOR A
PERIOD OF FORTY-FIVE (45) DAYS; OR AN ORDER FOR RELIEF SHALL BE ENTERED AGAINST
BORROWER OR ANY CREDIT PARTY UNDER THE FEDERAL BANKRUPTCY LAWS AS NOW OR
HEREAFTER IN EFFECT;

 

(H)           AN ERISA EVENT SHALL HAVE OCCURRED THAT, IN THE OPINION OF THE
REQUIRED LENDERS, WHEN TAKEN TOGETHER WITH ALL OTHER ERISA EVENTS THAT HAVE
OCCURRED, COULD REASONABLY BE EXPECTED TO RESULT IN A MATERIAL ADVERSE EFFECT;

 

(I)            ONE OR MORE JUDGMENTS OR ORDERS FOR THE PAYMENT OF MONEY (NOT
PAID OR FULLY COVERED BY INSURANCE MAINTAINED IN ACCORDANCE WITH THE
REQUIREMENTS OF THIS AGREEMENT AND AS TO WHICH THE RELEVANT INSURANCE COMPANY
HAS NOT DENIED COVERAGE) AGGREGATING IN EXCESS OF $5,000,000 SHALL BE RENDERED
AGAINST BORROWER OR ANY OR ALL CREDIT PARTIES AND EITHER (I) ENFORCEMENT
PROCEEDINGS SHALL HAVE BEEN COMMENCED BY ANY CREDITOR UPON ANY SUCH JUDGMENTS OR
ORDERS OR (II) THERE SHALL BE ANY PERIOD OF 30 CONSECUTIVE DAYS DURING WHICH A
STAY OF ENFORCEMENT OF ANY SUCH JUDGMENTS OR ORDERS, BY REASON OF A PENDING
APPEAL, BOND OR OTHERWISE, SHALL NOT BE IN EFFECT;

 

(J)            A CHANGE OF CONTROL SHALL OCCUR;

 

(K)           ANY LIEN CREATED BY ANY OF THE SECURITY DOCUMENTS SHALL AT ANY
TIME FAIL TO CONSTITUTE A VALID AND (TO THE EXTENT PERFECTION IS OBTAINED BY
FILING) PERFECTED LIEN ON A MATERIAL PORTION OF THE COLLATERAL PURPORTED TO BE
SECURED THEREBY, SUBJECT TO NO PRIOR OR EQUAL LIEN EXCEPT PERMITTED LIENS, OR
ANY CREDIT PARTY SHALL SO ASSERT; OR

 

(L)            ANY OF THE FINANCING DOCUMENTS SHALL FOR ANY REASON FAIL TO
CONSTITUTE THE VALID AND BINDING AGREEMENT OF ANY PARTY THERETO, OR ANY CREDIT
PARTY SHALL SO ASSERT.

 

SECTION 8.2            ACCELERATION AND SUSPENSION OR TERMINATION OF REVOLVING
LOAN COMMITMENT.

 

Upon the occurrence and during the continuance of an Event of Default,
Administrative Agent may, and shall, if so requested by Required Lenders, (i) by
notice to Borrower suspend or terminate the Revolving Loan Commitment and the
obligations of Administrative Agent and Lenders with respect thereto, in whole
or in part (and, if in part, such reduction shall be pro rata among Lenders
having a Revolving Loan Commitment Percentage) and/or (ii) by notice to Borrower
declare all or any portion of the Obligations to be, and such Obligations shall
thereupon become, immediately due and payable, with accrued interest thereon,
without presentment, demand, protest or other notice of any kind, all of which
are hereby waived by Borrower and Borrower will pay the same; provided that in
the case of any of the Events of Default specified in Section 8.1(f) or 8.1(g)
above, without any notice to Borrower or any other act by Administrative Agent
or Lenders, the Revolving Loan Commitment and the obligations of Administrative
Agent and Lenders with respect thereto shall thereupon terminate and all of the
Obligations shall become immediately due and payable without presentment,
demand, protest or

 

67

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

 

other notice of any kind, all of which are hereby waived by Borrower and
Borrower will pay the same.

 

SECTION 8.3            CASH COLLATERAL.

 

If an Acceleration Event shall have occurred, and so long as it continues, then
without any request or the taking of any other action by Administrative Agent or
Lenders, Borrower shall immediately comply with the provisions of Section 2.9(e)
with respect to the deposit of cash collateral to secure the existing Letter of
Credit Liabilities and future payment of related fees.

 

SECTION 8.4            DEFAULT RATE OF INTEREST AND SUSPENSION OF LIBOR RATE
OPTIONS.

 

At the election of Administrative Agent or Required Lenders, after the
occurrence of an Event of Default and for so long as it continues, (i) the Loans
and other Obligations shall bear interest at rates that are two percent (2.0%)
in excess of the rates otherwise payable under this Agreement, (ii) the fee
described in Section 2.9(b) shall increase by a rate that is two percent (2.0%)
in excess of the rate otherwise payable under such Section,  (iii) as the
Interest Periods for LIBOR Loans then in effect expire, such Loans shall be
converted into Base Rate Loans and (iv) the LIBOR election will not be available
to Borrower and (v) no Interest Period commencing during such period shall have
a term of nine (9) or twelve (12) months.

 

SECTION 8.5            SETOFF RIGHTS.

 

During the continuance of any Event of Default, each Lender is hereby authorized
by Borrower at any time or from time to time, with reasonably prompt subsequent
notice to Borrower (any prior or contemporaneous notice being hereby expressly
waived) to set off and to appropriate and to apply any and all (i) balances held
by such Lender or any of such Lender’s Affiliates at any of its offices for the
account of Borrower or any of its Restricted Subsidiaries (regardless of whether
such balances are then due to Borrower or its Restricted Subsidiaries), and (ii)
other property at any time held or owing by such Lender to or for the credit or
for the account of Borrower or any of its Restricted Subsidiaries, against and
on account of any of the Obligations; except that no Lender shall exercise any
such right without the prior written consent of Administrative Agent. Any Lender
exercising a right to set off shall purchase for cash (and the other Lenders
shall sell) interests in each of such other Lender’s Pro Rata Share of the
Obligations as would be necessary to cause all Lenders to share the amount so
set off with each other Lender in accordance with their respective Pro Rata
Share of the Obligations. Borrower agrees, to the fullest extent permitted by
Law, that any Lender or any of such Lender’s Affiliates may exercise its right
to set off with respect to the Obligations as provided in this Section 8.5.

 

SECTION 8.6            APPLICATION OF PROCEEDS.

 

(A)           AS TO BORROWER. NOTWITHSTANDING ANYTHING TO THE CONTRARY CONTAINED
IN THIS AGREEMENT, UPON THE OCCURRENCE AND DURING THE CONTINUANCE OF AN EVENT OF
DEFAULT, BORROWER IRREVOCABLY WAIVES THE RIGHT TO DIRECT THE APPLICATION OF ANY
AND ALL PAYMENTS AT ANY TIME OR TIMES THEREAFTER RECEIVED BY ADMINISTRATIVE
AGENT FROM OR ON BEHALF OF BORROWER OR ANY GUARANTOR OF ALL OR ANY PART OF THE
OBLIGATIONS, AND, AS BETWEEN BORROWER ON THE ONE HAND AND ADMINISTRATIVE AGENT
AND LENDERS ON THE OTHER, ADMINISTRATIVE AGENT SHALL HAVE THE CONTINUING AND
EXCLUSIVE RIGHT TO APPLY AND TO REAPPLY ANY AND ALL PAYMENTS RECEIVED AGAINST
THE OBLIGATIONS IN SUCH

 

68

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

 

MANNER AS ADMINISTRATIVE AGENT MAY DEEM ADVISABLE NOTWITHSTANDING ANY PREVIOUS
APPLICATION BY ADMINISTRATIVE AGENT.

 

(B)           AFTER EVENT OF DEFAULT. FOLLOWING THE OCCURRENCE AND CONTINUANCE
OF AN EVENT OF DEFAULT, BUT ABSENT THE OCCURRENCE AND CONTINUANCE OF AN
ACCELERATION EVENT, ADMINISTRATIVE AGENT SHALL APPLY ANY AND ALL PAYMENTS
RECEIVED BY ADMINISTRATIVE AGENT IN RESPECT OF THE OBLIGATIONS, AND ANY AND ALL
PROCEEDS OF COLLATERAL RECEIVED BY ADMINISTRATIVE AGENT, IN SUCH ORDER AS
ADMINISTRATIVE AGENT MAY FROM TIME TO TIME ELECT. IN THE ABSENCE OF ANY SPECIFIC
ELECTION MADE BY ADMINISTRATIVE AGENT PURSUANT TO THIS CLAUSE (B), PAYMENTS AND
PROCEEDS RECEIVED BY ADMINISTRATIVE AGENT PURSUANT TO THIS CLAUSE (B) SHALL BE
APPLIED TO THE OBLIGATIONS IN THE FOLLOWING ORDER: FIRST, TO ALL FEES, COSTS,
INDEMNITIES, LIABILITIES, OBLIGATIONS AND EXPENSES INCURRED BY OR OWING TO
ADMINISTRATIVE AGENT WITH RESPECT TO THIS AGREEMENT, THE OTHER FINANCING
DOCUMENTS OR THE COLLATERAL, SECOND, TO ALL FEES, COSTS, INDEMNITIES AND
EXPENSES INCURRED BY OR OWING TO ANY LENDER WITH RESPECT TO THIS AGREEMENT, THE
OTHER FINANCING DOCUMENTS OR THE COLLATERAL, THIRD, TO ACCRUED AND UNPAID
INTEREST ON THE OBLIGATIONS, FOURTH, TO THE PRINCIPAL AMOUNT OF THE OBLIGATIONS
THEN DUE AND OWING, FIFTH, TO PROVIDE CASH COLLATERAL TO SECURE ANY THEN
OUTSTANDING LETTER OF CREDIT LIABILITIES AND PAYMENT OF RELATED FEES; SIXTH, TO
PROVIDE CASH COLLATERAL TO SECURE ANY OTHER THEN OUTSTANDING OBLIGATIONS,
INCLUDING OBLIGATIONS IN RESPECT OF SWAP CONTRACTS, AND SEVENTH, TO ANY OTHER
INDEBTEDNESS OR OBLIGATIONS OF BORROWER OWING TO ADMINISTRATIVE AGENT OR ANY
LENDER UNDER THE FINANCING DOCUMENTS.

 

(C)           AFTER ACCELERATION EVENT. NOTWITHSTANDING ANYTHING TO THE CONTRARY
CONTAINED IN THIS AGREEMENT, IF AN ACCELERATION EVENT SHALL HAVE OCCURRED, AND
SO LONG AS IT CONTINUES, ADMINISTRATIVE AGENT SHALL APPLY ANY AND ALL PAYMENTS
RECEIVED BY ADMINISTRATIVE AGENT IN RESPECT OF THE OBLIGATIONS, AND ANY AND ALL
PROCEEDS OF COLLATERAL RECEIVED BY ADMINISTRATIVE AGENT TO THE OBLIGATIONS, IN
THE FOLLOWING ORDER: FIRST, TO ALL FEES, COSTS, INDEMNITIES, AND EXPENSES
INCURRED BY OR OWING TO ADMINISTRATIVE AGENT WITH RESPECT TO THIS AGREEMENT, THE
OTHER FINANCING DOCUMENTS OR THE COLLATERAL; SECOND, TO ALL FEES, COSTS,
INDEMNITIES AND EXPENSES INCURRED BY OR OWING TO ANY LENDER WITH RESPECT TO THIS
AGREEMENT, THE OTHER FINANCING DOCUMENTS OR THE COLLATERAL; THIRD, TO ACCRUED
AND UNPAID INTEREST ON THE OBLIGATIONS (INCLUDING ANY INTEREST WHICH, BUT FOR
THE PROVISIONS OF THE BANKRUPTCY CODE, WOULD HAVE ACCRUED ON SUCH AMOUNTS);
FOURTH, TO THE PRINCIPAL AMOUNT OF THE OBLIGATIONS OUTSTANDING, AND TO THE
OBLIGATIONS OWING TO ANY ELIGIBLE SWAP COUNTERPARTY IN RESPECT OF ANY SWAP
CONTRACT; FIFTH, TO PROVIDE CASH COLLATERAL TO SECURE ANY AND ALL LETTER OF
CREDIT LIABILITIES AND FUTURE PAYMENT OF RELATED FEES, AS PROVIDED FOR IN
SECTION 2.9(E); AND SIXTH, TO ANY OTHER INDEBTEDNESS OR OBLIGATIONS OF BORROWER
OWING TO ADMINISTRATIVE AGENT OR ANY LENDER UNDER THE FINANCING DOCUMENTS.

 

(D)           RESIDUARY. ANY BALANCE REMAINING AFTER GIVING EFFECT TO THE
APPLICATIONS SET FORTH IN THIS SECTION 8.6 SHALL BE DELIVERED TO BORROWER OR TO
WHOEVER MAY BE LAWFULLY ENTITLED TO RECEIVE SUCH BALANCE OR AS A COURT OF
COMPETENT JURISDICTION MAY DIRECT. IN CARRYING OUT ANY OF THE APPLICATIONS SET
FORTH IN THIS SECTION 8.6, (I) AMOUNTS RECEIVED SHALL BE APPLIED IN THE
NUMERICAL ORDER PROVIDED UNTIL EXHAUSTED PRIOR TO THE APPLICATION TO THE NEXT
SUCCEEDING CATEGORY AND (II) EACH OF THE PERSONS ENTITLED TO RECEIVE A PAYMENT
OR CASH COLLATERAL IN ANY PARTICULAR CATEGORY SHALL RECEIVE AN AMOUNT EQUAL TO
ITS PRO RATA SHARE OF AMOUNTS AVAILABLE TO BE APPLIED PURSUANT THERETO FOR SUCH
CATEGORY.

 

69

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

 

ARTICLE 9
EXPENSES AND INDEMNITY

 

SECTION 9.1            EXPENSES.

 

Borrower hereby agrees to promptly pay (i) (x) all reasonable out-of-pocket
costs and expenses of Administrative Agent (including without limitation the
fees, costs and expenses of counsel to, and independent appraisers and
consultants retained by Administrative Agent) in connection with the
examination, review, due diligence investigation, documentation, negotiation,
closing and syndication of the transactions contemplated by the Financing
Documents, (y) costs and expenses of Administrative Agent (including without
limitation the fees, costs and expenses of counsel to, and independent
appraisers and consultants retained by Administrative Agent) in connection with
the performance by Administrative Agent of its rights and remedies under the
Financing Documents and in connection with the continued administration of the
Financing Documents including (A) any amendments, modifications, consents and
waivers to and/or under any and all Financing Documents and (B) any periodic
public record searches conducted by or at the request of Administrative Agent
(including, without limitation, title investigations, UCC searches, fixture
filing searches, judgment, pending litigation and tax lien searches and searches
of applicable corporate, limited liability,  partnership and related records
concerning the continued existence, organization and good standing of certain
Persons), (ii) without limitation of the preceding clause (i), all costs and
expenses of Administrative Agent in connection with the creation, perfection and
maintenance of Liens pursuant to the Financing Documents, (iii) without
limitation of the preceding clause (i), all costs and expenses of Administrative
Agent in connection with (A) protecting, storing, insuring, handling,
maintaining or selling any Collateral, (B) any litigation, dispute, suit or
proceeding relating to any Financing Document, and (C) any workout, collection,
bankruptcy, insolvency and other enforcement proceedings under any and all of
the Financing Documents, (iv) without limitation of the preceding clause (i),
all costs and expenses of Administrative Agent in connection with Administrative
Agent’s reservation of funds in anticipation of the funding of the initial Loans
to be made hereunder, provided that Borrower or any Affiliate has requested or
consented to such reservation of funds, and (v) all costs and expenses incurred
by Lenders in connection with any litigation, dispute, suit or proceeding
relating to any Financing Document and in connection with any workout,
collection, bankruptcy, insolvency and other enforcement proceedings under any
and all Financing Documents, provided, that to the extent that the costs and
expenses referred to in this clause (v) consist of fees, costs and expenses of
counsel, Borrower shall be obligated to pay such fees, costs and expenses for
counsel to Administrative Agent and for only one counsel acting for all Lenders
(other than Administrative Agent).

 

SECTION 9.2            INDEMNITY.

 

Borrower hereby agrees to indemnify, pay and hold harmless Administrative Agent
and Lenders and the officers, directors, employees, trustees, agents, investment
advisors, collateral managers, servicers, and counsel of Administrative Agent
and Lenders (collectively called the “Indemnitees”) from and against any and all
liabilities, obligations, losses, damages, penalties, actions, judgments, suits,
claims, costs, expenses and disbursements of any kind or nature whatsoever
(including the fees and disbursements of counsel for such Indemnitee) in
connection with any investigative, response, remedial, administrative or
judicial matter or proceeding,

 

70

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

 

whether or not such Indemnitee shall be designated a party thereto and including
any such proceeding initiated by or on behalf of a Credit Party, and the
reasonable expenses of investigation by engineers, environmental consultants and
similar technical personnel and any commission, fee or compensation claimed by
any broker (other than any broker retained by Administrative Agent or Lenders)
asserting any right to payment for the transactions contemplated hereby, which
may be imposed on, incurred by or asserted against such Indemnitee as a result
of or in connection with the transactions contemplated hereby or by the other
Financing Documents (including (i)(A) as a direct or indirect result of the
presence on or under, or escape, seepage, leakage, spillage, discharge, emission
or release from, any property now or previously owned, leased or operated by
Borrower, any other Credit Party or any other Person of any Hazardous Materials
or any Hazardous Materials Contamination, (B) arising out of or relating to the
offsite disposal of any materials generated or present on any such property or
(C) arising out of or resulting from the environmental condition of any such
property or the applicability of any governmental requirements relating to
Hazardous Materials, whether or not occasioned wholly or in part by any
condition, accident or event caused by any act or omission of Borrower or any
other Credit Party, and (ii) proposed and actual extensions of credit under this
Agreement) and the use or intended use of the proceeds of the Loans and Letters
of Credit, except that Borrower shall have no obligation hereunder to an
Indemnitee with respect to any liability resulting from the gross negligence or
willful misconduct of such Indemnitee, as determined by a final non-appealable
judgment of a court of competent jurisdiction. To the extent that the
undertaking set forth in the immediately preceding sentence may be
unenforceable, Borrower shall contribute the maximum portion which it is
permitted to pay and satisfy under applicable Law to the payment and
satisfaction of all such indemnified liabilities incurred by the Indemnitees or
any of them. The obligations to indemnify and hold harmless the Indemnitees
shall terminate on the date (the “Indemnity Expiration”) that is two calendar
years following the later of (i) the Termination Date, or (ii) the date all
obligations have been irrevocably paid in full; provided that any such
obligation to indemnify and hold harmless shall not terminate with respect to
any matter arising before the Indemnity Expiration so long as an Indemnitee
delivers notice of such matter prior to the Indemnity Expiration.

 

ARTICLE 10
ADMINISTRATIVE AGENT

 

SECTION 10.1         APPOINTMENT AND AUTHORIZATION.

 

Each Lender hereby irrevocably appoints and authorizes Administrative Agent to
enter into each of the Financing Documents to which it is a party (other than
this Agreement) on its behalf and to take such actions as Administrative Agent
on its behalf and to exercise such powers under the Financing Documents as are
delegated to Administrative Agent by the terms thereof, together with all such
powers as are reasonably incidental thereto. Subject to the terms of Section
11.5 and to the terms of the other Financing Documents, Administrative Agent is
authorized and empowered to amend, modify, or waive any provisions of this
Agreement or the other Financing Documents on behalf of Lenders. The provisions
of this Article 10 are solely for the benefit of Administrative Agent and
Lenders and neither Borrower nor any other Credit Party shall have any rights as
a third party beneficiary of any of the provisions hereof. In performing its
functions and duties under this Agreement, Administrative Agent shall act solely
as agent of Lenders and does not assume and shall not be deemed to have assumed
any obligation toward or

 

71

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

 

relationship of agency or trust with or for Borrower or any other Credit Party.
Administrative Agent may perform any of its duties hereunder, or under the
Financing Documents, by or through its own agents or employees. Administrative
Agent is authorized to appoint co-agents or sub-agents to act for it in
connection with any right or power under the Financing Documents as are
delegated to Administrative Agent by the terms thereof in respect of any
jurisdiction or any Collateral, and all provision hereof benefiting
Administrative Agent shall benefit such co-agents and sub-agents, including
provisions regarding indemnification.

 

SECTION 10.2         ADMINISTRATIVE AGENT AND AFFILIATES.

 

Administrative Agent shall have the same rights and powers under the Financing
Documents as any other Lender and may exercise or refrain from exercising the
same as though it were not Administrative Agent, and Administrative Agent and
its Affiliates may lend money to, invest in and generally engage in any kind of
business with each Credit Party or Affiliate of any Credit Party as if it were
not Administrative Agent hereunder.

 

SECTION 10.3         ACTION BY ADMINISTRATIVE AGENT.

 

The duties of Administrative Agent shall be mechanical and administrative in
nature. Administrative Agent shall not have by reason of this Agreement a
fiduciary relationship in respect of any Lender. Nothing in this Agreement or
any of the Financing Documents is intended to or shall be construed to impose
upon Administrative Agent any obligations in respect of this Agreement or any of
the Financing Documents except as expressly set forth herein or therein.

 

SECTION 10.4         CONSULTATION WITH EXPERTS.

 

Administrative Agent may consult with legal counsel, independent public
accountants and other experts selected by it and shall not be liable for any
action taken or omitted to be taken by it in good faith in accordance with the
advice of such counsel, accountants or experts.

 

SECTION 10.5         LIABILITY OF ADMINISTRATIVE AGENT.

 

Neither Administrative Agent nor any of its directors, officers, agents or
employees shall be liable to any Lender for any action taken or not taken by it
in connection with the Financing Documents, except that Administrative Agent
shall be liable with respect to its specific duties set forth hereunder, but
only to the extent of its own gross negligence or willful misconduct in the
discharge thereof as determined by a final non-appealable judgment of a court of
competent jurisdiction. Neither Administrative Agent nor any of its directors,
officers, agents or employees shall be responsible for or have any duty to
ascertain, inquire into or verify (i) any statement, warranty or representation
made in connection with any Financing Document or any borrowing hereunder, (ii)
the performance or observance of any of the covenants or agreements specified in
any Financing Document, (iii) the satisfaction of any condition specified in any
Financing Document, (iv) the validity, effectiveness, sufficiency or genuineness
of any Financing Document, any Lien purported to be created or perfected thereby
or any other instrument or writing furnished in connection therewith, (v) the
existence or non-existence of any Default or Event of Default; or (vi) the
financial condition of any Credit Party. Administrative Agent shall not incur
any liability by acting in reliance upon any notice, consent, certificate,
statement, or

 

72

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

 

other writing (which may be a bank wire, telex, facsimile or electronic
transmission or similar writing) believed by it to be genuine or to be signed by
the proper party or parties. Administrative Agent shall not be liable for any
apportionment or distribution of payments made by it in good faith and if any
such apportionment or distribution is subsequently determined to have been made
in error the sole recourse of any Lender to whom payment was due but not made,
shall be to recover from other Lenders any payment in excess of the amount to
which they are determined to be entitled (and such other Lenders hereby agree to
return to such Lender any such erroneous payments received by them).

 

SECTION 10.6         INDEMNIFICATION.

 

Each Lender shall, in accordance with its Pro Rata Share, indemnify
Administrative Agent (to the extent not reimbursed by Borrower) upon demand
against any cost, expense (including counsel fees and disbursements), claim,
demand, action, loss or liability (except such as result from Administrative
Agent’s gross negligence or willful misconduct as determined by a final
non-appealable judgment of a court of competent jurisdiction) that
Administrative Agent may suffer or incur in connection with the Financing
Documents or any action taken or omitted by Administrative Agent hereunder or
thereunder. If any indemnity furnished to Administrative Agent for any purpose
shall, in the opinion of Administrative Agent, be insufficient or become
impaired, Administrative Agent may call for additional indemnity and cease, or
not commence, to do the acts indemnified against even if so directed by Required
Lenders until such additional indemnity is furnished.

 

SECTION 10.7         RIGHT TO REQUEST AND ACT ON INSTRUCTIONS.

 

Administrative Agent may at any time request instructions from Lenders with
respect to any actions or approvals which by the terms of this Agreement or of
any of the Financing Documents Administrative Agent is permitted or desires to
take or to grant, and if such instructions are promptly requested,
Administrative Agent shall be absolutely entitled to refrain from taking any
action or to withhold any approval and shall not be under any liability
whatsoever to any Person for refraining from any action or withholding any
approval under any of the Financing Documents until it shall have received such
instructions from Required Lenders or all or such other portion of Lenders as
shall be prescribed by this Agreement. Without limiting the foregoing, no Lender
shall have any right of action whatsoever against Administrative Agent as a
result of Administrative Agent acting or refraining from acting under this
Agreement or any of the other Financing Documents in accordance with the
instructions of Required Lenders (or all or such other portion of Lenders as
shall be prescribed by this Agreement) and, notwithstanding the instructions of
Required Lenders (or such other applicable portion of Lenders), Administrative
Agent shall have no obligation to take any action if it believes, in good faith,
that such action would violate applicable Law or exposes Administrative Agent to
any liability for which it has not received satisfactory indemnification in
accordance with the provisions of Section 10.6.

 

SECTION 10.8         CREDIT DECISION.

 

Each Lender acknowledges that it has, independently and without reliance upon
Administrative Agent or any other Lender, and based on such documents and
information as it

 

73

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

 

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, 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 any action
under the Financing Documents.

 

SECTION 10.9         COLLATERAL MATTERS.

 

Lenders irrevocably authorize Administrative Agent, at its option and in its
discretion, to (i) release any Lien granted to or held by Administrative Agent
under any Security Document (A) upon termination of the Revolving Loan
Commitment and payment in full of all Obligations, the expiration, termination
or cash collateralization (to the satisfaction of Administrative Agent) of all
Letters of Credit and, to the extent required by Administrative Agent in its
sole discretion, the expiration, termination or cash collateralization (to the
satisfaction of Administrative Agent) of all Swap Contracts secured, in whole or
in part, by any Collateral, or (B) constituting property sold or disposed of as
part of or in connection with any disposition permitted under any Financing
Document (it being understood and agreed that Administrative Agent may
conclusively rely without further inquiry on a certificate of a Responsible
Officer as to the sale or other disposition of property being made in full
compliance with the provisions of the Financing Documents), (ii) release or
subordinate any Lien granted to or held by Administrative Agent under any
Security Document constituting property described in Section 5.2(d) (it being
understood and agreed that Administrative Agent may conclusively rely without
further inquiry on a certificate of a Responsible Officer as to the
identification of any property described in Section 5.2(d)), and (iii) the
Guaranty shall be terminated (and any Lenders Lien on the assets of such
Guarantor and the Equity Interests in such Guarantor shall be terminated) as to
any Guarantor at such time as such Guarantor shall have been designated an
Unrestricted Subsidiary pursuant to the Financing Documents or such Guarantor
shall be sold, merged, consolidated, dissolved or liquidated in accordance with
this Agreement. Upon request by Administrative Agent at any time, Lenders will
confirm Administrative Agent’s authority to release and/or subordinate
particular types or items of Collateral pursuant to this Section 10.9.

 

SECTION 10.10       AGENCY FOR PERFECTION.

 

Administrative Agent and each Lender hereby appoint each other Lender as agent
for the purpose of perfecting Administrative Agent’s security interest in assets
which, in accordance with the Uniform Commercial Code in any applicable
jurisdiction, can be perfected by possession or control. Should any Lender
(other than Administrative Agent) obtain possession or control of any such
assets, such Lender shall notify Administrative Agent thereof, and, promptly
upon Administrative Agent’s request therefor, shall deliver such assets to
Administrative Agent or in accordance with Administrative Agent’s instructions
or transfer control to Administrative Agent in accordance with Administrative
Agent’s instructions. Each Lender agrees that it will not have any right
individually to enforce or seek to enforce any Security Document or to realize
upon any Collateral for the Loans unless instructed to do so by Administrative
Agent (or consented to by Administrative Agent, as provided in Section 8.5), it
being understood and agreed that such rights and remedies may be exercised only
by Administrative Agent.

 

74

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

 

SECTION 10.11       NOTICE OF DEFAULT.

 

Administrative Agent shall not be deemed to have knowledge or notice of the
occurrence of any Default or Event of Default except with respect to defaults in
the payment of principal, interest and fees required to be paid to
Administrative Agent for the account of Lenders, unless Administrative Agent
shall have received written notice from a Lender or Borrower referring to this
Agreement, describing such Default or Event of Default and stating that such
notice is a “notice of default”. Administrative Agent will notify each Lender of
its receipt of any such notice. Administrative Agent shall take such action with
respect to such Default or Event of Default as may be requested by Required
Lenders, or Required Lenders (or all or such other portion of Lenders as shall
be prescribed by this Agreement) in accordance with the terms hereof. Unless and
until Administrative Agent has received any such request, Administrative Agent
may (but shall not be obligated to) take such action, or refrain from taking
such action, with respect to such Default or Event of Default as it shall deem
advisable or in the best interests of Lenders.

 

SECTION 10.12       SUCCESSOR ADMINISTRATIVE AGENT.

 

Administrative Agent may at any time give notice of its resignation to 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
Administrative Agent. Upon the acceptance of a successor’s appointment as
Administrative Agent hereunder and notice of such acceptance to the retiring
Administrative Agent, such successor shall succeed to and become vested with all
of the rights, powers, privileges and duties of the retiring (or retired)
Administrative Agent, the retiring Administrative Agent’s resignation shall
become immediately effective and the retiring Administrative Agent shall be
discharged from all of its duties and obligations hereunder and under the other
Financing Documents (if such resignation was not already effective and such
duties and obligations not already discharged, as provided below in this
paragraph). 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. If no such successor shall have been so
appointed by Required Lenders and shall have accepted such appointment within
thirty (30) days after the retiring Administrative Agent gives notice of its
resignation, then the retiring Administrative Agent may on behalf of Lenders
(but without any obligation) appoint a successor Administrative Agent. From and
following the expiration of such thirty (30) day period, Administrative Agent
shall have the exclusive right, upon one (1) Business Days’ notice to Borrower
and Lenders, to make its resignation effective immediately. From and following
the effectiveness of such notice, (i) the retiring Administrative Agent shall be
discharged from its duties and obligations hereunder and under the other
Financing Documents and (ii) 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 paragraph. The
provisions of this Agreement shall continue in effect for the benefit of any
retiring Administrative Agent and its sub-agents after the effectiveness of its
resignation hereunder and under the other Financing Documents in respect of any
actions taken or omitted to be taken by any of them while the retiring
Administrative Agent was acting or was continuing to act as Administrative
Agent.

 

75

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

 

SECTION 10.13       DISBURSEMENTS OF REVOLVING LOANS; PAYMENT AND SHARING OF
PAYMENT.

 

(A)           REVOLVING LOAN ADVANCES, PAYMENTS AND SETTLEMENTS; INTEREST AND
FEE PAYMENTS.

 

(I)            ADMINISTRATIVE AGENT SHALL HAVE THE RIGHT, ON BEHALF OF LENDERS
TO DISBURSE FUNDS TO BORROWER FOR ALL REVOLVING LOANS REQUESTED OR DEEMED
REQUESTED BY BORROWER PURSUANT TO THE TERMS OF THIS AGREEMENT REGARDLESS OF
WHETHER THE CONDITIONS PRECEDENT SET FORTH IN SECTION 7.2 ARE THEN SATISFIED,
INCLUDING THE EXISTENCE OF ANY DEFAULT OR EVENT OF DEFAULT EITHER BEFORE OR
AFTER GIVING EFFECT TO THE MAKING OF SUCH REVOLVING LOANS; PROVIDED, THAT
ADMINISTRATIVE AGENT SHALL NOT ADVANCE ANY REVOLVING LOAN PURSUANT TO THIS
CLAUSE (I) IF, TO THE KNOWLEDGE OF ADMINISTRATIVE AGENT, THE REVOLVING LOAN
OUTSTANDINGS EXCEED THE REVOLVING LOAN LIMIT, EITHER BEFORE OR AFTER GIVING
EFFECT TO THE MAKING OF ANY PROPOSED REVOLVING LOAN. ADMINISTRATIVE AGENT SHALL
BE CONCLUSIVELY ENTITLED TO ASSUME, FOR PURPOSES OF THE PRECEDING SENTENCE, THAT
EACH LENDER WILL FUND ITS PRO RATA SHARE OF ALL REVOLVING LOANS REQUESTED BY
BORROWER. EACH LENDER SHALL REIMBURSE ADMINISTRATIVE AGENT ON DEMAND, IN
ACCORDANCE WITH THE PROVISIONS OF THE IMMEDIATELY FOLLOWING PARAGRAPH, FOR ALL
FUNDS DISBURSED ON ITS BEHALF BY ADMINISTRATIVE AGENT PURSUANT TO THE FIRST
SENTENCE OF THIS CLAUSE (I), OR IF ADMINISTRATIVE AGENT SO REQUESTS, EACH LENDER
WILL REMIT TO ADMINISTRATIVE AGENT ITS PRO RATA SHARE OF ANY REVOLVING LOAN
BEFORE ADMINISTRATIVE AGENT DISBURSES THE SAME TO BORROWER. IF ADMINISTRATIVE
AGENT ELECTS TO REQUIRE THAT EACH LENDER MAKE FUNDS AVAILABLE TO ADMINISTRATIVE
AGENT, PRIOR TO A DISBURSEMENT BY ADMINISTRATIVE AGENT TO BORROWER,
ADMINISTRATIVE AGENT SHALL ADVISE EACH LENDER BY TELEPHONE, FACSIMILE OR E-MAIL
OF THE AMOUNT OF SUCH LENDER’S PRO RATA SHARE OF THE REVOLVING LOAN REQUESTED BY
BORROWER NO LATER THAN NOON (CHICAGO TIME) ON THE DATE OF FUNDING OF SUCH
REVOLVING LOAN, AND EACH SUCH LENDER SHALL PAY ADMINISTRATIVE AGENT ON SUCH DATE
SUCH LENDER’S PRO RATA SHARE OF SUCH REQUESTED REVOLVING LOAN, IN SAME DAY
FUNDS, BY WIRE TRANSFER TO THE PAYMENT ACCOUNT, OR SUCH OTHER ACCOUNT AS MAY BE
IDENTIFIED BY ADMINISTRATIVE AGENT TO LENDERS FROM TIME TO TIME. IF ANY LENDER
FAILS TO PAY THE AMOUNT OF ITS PRO RATA SHARE WITHIN ONE (1) BUSINESS DAY AFTER
ADMINISTRATIVE AGENT’S DEMAND, ADMINISTRATIVE AGENT SHALL PROMPTLY NOTIFY
BORROWER, AND BORROWER SHALL IMMEDIATELY REPAY SUCH AMOUNT TO ADMINISTRATIVE
AGENT. ANY REPAYMENT REQUIRED BY BORROWER PURSUANT TO THIS SECTION 10.13 SHALL
BE ACCOMPANIED BY ACCRUED INTEREST THEREON FROM AND INCLUDING THE DATE SUCH
AMOUNT IS MADE AVAILABLE TO BORROWER TO BUT EXCLUDING THE DATE OF PAYMENT AT THE
RATE OF INTEREST THEN APPLICABLE TO REVOLVING LOANS WHICH ARE BASE RATE LOANS.
NOTHING IN THIS SECTION 10.13 OR ELSEWHERE IN THIS AGREEMENT OR THE OTHER
FINANCING DOCUMENTS SHALL BE DEEMED TO REQUIRE ADMINISTRATIVE AGENT TO ADVANCE
FUNDS ON BEHALF OF ANY LENDER OR TO RELIEVE ANY LENDER FROM ITS OBLIGATION TO
FULFILL ITS COMMITMENTS HEREUNDER OR TO PREJUDICE ANY RIGHTS THAT ADMINISTRATIVE
AGENT OR BORROWER MAY HAVE AGAINST ANY LENDER AS A RESULT OF ANY DEFAULT BY SUCH
LENDER HEREUNDER.

 

(II)           ON A BUSINESS DAY OF EACH WEEK AS SELECTED FROM TIME TO TIME BY
ADMINISTRATIVE AGENT, OR MORE FREQUENTLY (INCLUDING DAILY), IF ADMINISTRATIVE
AGENT SO ELECTS (EACH SUCH DAY BEING A “SETTLEMENT DATE”), ADMINISTRATIVE AGENT
WILL ADVISE EACH LENDER BY TELEPHONE, FACSIMILE OR E-MAIL OF THE AMOUNT OF EACH
SUCH LENDER’S PERCENTAGE INTEREST OF THE REVOLVING LOAN BALANCE AS OF THE CLOSE
OF BUSINESS OF THE BUSINESS DAY IMMEDIATELY PRECEDING THE SETTLEMENT DATE. IN
THE EVENT THAT PAYMENTS ARE NECESSARY TO ADJUST THE AMOUNT OF SUCH LENDER’S
ACTUAL PERCENTAGE INTEREST OF THE REVOLVING LOAN BALANCE TO SUCH LENDER’S
REQUIRED PERCENTAGE INTEREST OF THE REVOLVING LOAN BALANCE AS OF ANY SETTLEMENT
DATE, THE PARTY FROM WHICH SUCH PAYMENT IS DUE SHALL PAY ADMINISTRATIVE AGENT,
WITHOUT SETOFF OR DISCOUNT, TO THE

 

76

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

 

PAYMENT ACCOUNT NOT LATER THAN NOON (CHICAGO TIME) ON THE BUSINESS DAY FOLLOWING
THE SETTLEMENT DATE THE FULL AMOUNT NECESSARY TO MAKE SUCH ADJUSTMENT. ANY
OBLIGATION ARISING PURSUANT TO THE IMMEDIATELY PRECEDING SENTENCE SHALL BE
ABSOLUTE AND UNCONDITIONAL AND SHALL NOT BE AFFECTED BY ANY CIRCUMSTANCE
WHATSOEVER. IN THE EVENT SETTLEMENT SHALL NOT HAVE OCCURRED BY THE DATE AND TIME
SPECIFIED IN THE SECOND PRECEDING SENTENCE, INTEREST SHALL ACCRUE ON THE
UNSETTLED AMOUNT AT THE FEDERAL FUNDS RATE, FOR THE FIRST THREE (3) DAYS
FOLLOWING THE SCHEDULED DATE OF SETTLEMENT, AND THEREAFTER AT THE BASE RATE PLUS
THE BASE RATE MARGIN APPLICABLE TO REVOLVING LOANS.

 

(III)          ON EACH SETTLEMENT DATE, ADMINISTRATIVE AGENT SHALL ADVISE EACH
LENDER BY TELEPHONE, FACSIMILE OR E-MAIL OF THE AMOUNT OF SUCH LENDER’S
PERCENTAGE INTEREST OF PRINCIPAL, INTEREST AND FEES PAID FOR THE BENEFIT OF
LENDERS WITH RESPECT TO EACH APPLICABLE REVOLVING LOAN, TO THE EXTENT OF SUCH
LENDER’S REVOLVING LOAN EXPOSURE WITH RESPECT THERETO, AND SHALL MAKE PAYMENT TO
SUCH LENDER NOT LATER THAN NOON (CHICAGO TIME) ON THE BUSINESS DAY FOLLOWING THE
SETTLEMENT DATE OF SUCH AMOUNTS IN ACCORDANCE WITH WIRE INSTRUCTIONS DELIVERED
BY SUCH LENDER TO ADMINISTRATIVE AGENT, AS THE SAME MAY BE MODIFIED FROM TIME TO
TIME BY WRITTEN NOTICE TO ADMINISTRATIVE AGENT; PROVIDED, THAT, IN THE CASE SUCH
LENDER IS A DEFAULTED LENDER, ADMINISTRATIVE AGENT SHALL BE ENTITLED TO SET OFF
THE FUNDING SHORT FALL AGAINST THAT DEFAULTED LENDER’S RESPECTIVE SHARE OF ALL
PAYMENTS RECEIVED FROM BORROWER.

 

(IV)          ON THE CLOSING DATE, ADMINISTRATIVE AGENT, ON BEHALF OF LENDERS,
MAY ELECT TO ADVANCE TO BORROWER THE FULL AMOUNT OF THE INITIAL LOANS TO BE MADE
ON THE CLOSING DATE PRIOR TO RECEIVING FUNDS FROM LENDERS, IN RELIANCE UPON EACH
LENDER’S COMMITMENT TO MAKE ITS PRO RATA SHARE OF SUCH LOANS TO BORROWER IN A
TIMELY MANNER ON SUCH DATE. IF ADMINISTRATIVE AGENT ELECTS TO ADVANCE THE
INITIAL LOANS TO BORROWER IN SUCH MANNER, ADMINISTRATIVE AGENT SHALL BE ENTITLED
TO RECEIVE ALL INTEREST THAT ACCRUES ON THE CLOSING DATE ON EACH LENDER’S PRO
RATA SHARE OF SUCH LOANS UNLESS ADMINISTRATIVE AGENT RECEIVES SUCH LENDER’S PRO
RATA SHARE OF SUCH LOANS BY 3:00 P.M. (CHICAGO TIME) ON THE CLOSING DATE.

 

(V)           THE PROVISIONS OF THIS SECTION 10.13(A) SHALL BE DEEMED TO BE
BINDING UPON ADMINISTRATIVE AGENT AND LENDERS NOTWITHSTANDING THE OCCURRENCE OF
ANY DEFAULT OR EVENT OF DEFAULT, OR ANY INSOLVENCY OR BANKRUPTCY PROCEEDING
PERTAINING TO BORROWER OR ANY OTHER CREDIT PARTY.

 

(B)           [RESERVED]

 

(C)           RETURN OF PAYMENTS.

 

(I)            IF ADMINISTRATIVE AGENT PAYS AN AMOUNT TO A LENDER UNDER THIS
AGREEMENT IN THE BELIEF OR EXPECTATION THAT A RELATED PAYMENT HAS BEEN OR WILL
BE RECEIVED BY ADMINISTRATIVE AGENT FROM BORROWER AND SUCH RELATED PAYMENT IS
NOT RECEIVED BY ADMINISTRATIVE AGENT, THEN ADMINISTRATIVE AGENT WILL BE ENTITLED
TO RECOVER SUCH AMOUNT FROM SUCH LENDER ON DEMAND WITHOUT SETOFF, COUNTERCLAIM
OR DEDUCTION OF ANY KIND, TOGETHER WITH INTEREST ACCRUING ON A DAILY BASIS AT
THE FEDERAL FUNDS RATE.

 

(II)           IF ADMINISTRATIVE AGENT DETERMINES AT ANY TIME THAT ANY AMOUNT
RECEIVED BY ADMINISTRATIVE AGENT UNDER THIS AGREEMENT MUST BE RETURNED TO
BORROWER OR PAID TO ANY

 

77

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

 

OTHER PERSON PURSUANT TO ANY INSOLVENCY LAW OR OTHERWISE, THEN, NOTWITHSTANDING
ANY OTHER TERM OR CONDITION OF THIS AGREEMENT OR ANY OTHER FINANCING DOCUMENT,
ADMINISTRATIVE AGENT WILL NOT BE REQUIRED TO DISTRIBUTE ANY PORTION THEREOF TO
ANY LENDER. IN ADDITION, EACH LENDER WILL REPAY TO ADMINISTRATIVE AGENT ON
DEMAND ANY PORTION OF SUCH AMOUNT THAT ADMINISTRATIVE AGENT HAS DISTRIBUTED TO
SUCH LENDER, TOGETHER WITH INTEREST AT SUCH RATE, IF ANY, AS ADMINISTRATIVE
AGENT IS REQUIRED TO PAY TO BORROWER OR SUCH OTHER PERSON, WITHOUT SETOFF,
COUNTERCLAIM OR DEDUCTION OF ANY KIND.

 

(D)           DEFAULTED LENDERS. THE FAILURE OF ANY DEFAULTED LENDER TO MAKE ANY
REVOLVING LOAN OR ANY PAYMENT REQUIRED BY IT HEREUNDER SHALL NOT RELIEVE ANY
OTHER LENDER OF ITS OBLIGATIONS TO MAKE SUCH REVOLVING LOAN OR PAYMENT, BUT
NEITHER ANY OTHER LENDER NOR ADMINISTRATIVE AGENT SHALL BE RESPONSIBLE FOR THE
FAILURE OF ANY DEFAULTED LENDER TO MAKE A REVOLVING LOAN OR MAKE ANY OTHER
PAYMENT REQUIRED HEREUNDER. NOTWITHSTANDING ANYTHING SET FORTH HEREIN TO THE
CONTRARY, A DEFAULTED LENDER SHALL NOT HAVE ANY VOTING OR CONSENT RIGHTS UNDER
OR WITH RESPECT TO ANY FINANCING DOCUMENT OR CONSTITUTE A “LENDER” (OR BE
INCLUDED IN THE CALCULATION OF “REQUIRED LENDERS” OR “REQUIRED LENDERS”
HEREUNDER) FOR ANY VOTING OR CONSENT RIGHTS UNDER OR WITH RESPECT TO ANY
FINANCING DOCUMENT.

 

(E)           SHARING OF PAYMENTS. IF ANY LENDER SHALL OBTAIN ANY PAYMENT OR
OTHER RECOVERY (WHETHER VOLUNTARY, INVOLUNTARY, BY APPLICATION OF SETOFF OR
OTHERWISE) ON ACCOUNT OF ANY LOAN (OTHER THAN PURSUANT TO THE TERMS OF SECTIONS
2.7(E)(V) OR SECTION 2.14) IN EXCESS OF ITS PRO RATA SHARE OF PAYMENTS ENTITLED
PURSUANT TO THE OTHER PROVISIONS OF THIS SECTION 10.13, SUCH LENDER SHALL
PURCHASE FROM THE OTHER LENDERS SUCH PARTICIPATIONS IN EXTENSIONS OF CREDIT MADE
BY SUCH OTHER LENDERS (WITHOUT RECOURSE, REPRESENTATION OR WARRANTY) AS SHALL BE
NECESSARY TO CAUSE SUCH PURCHASING LENDER TO SHARE THE EXCESS PAYMENT OR OTHER
RECOVERY RATABLY WITH EACH OF THEM; PROVIDED, HOWEVER, THAT IF ALL OR ANY
PORTION OF THE EXCESS PAYMENT OR OTHER RECOVERY IS THEREAFTER REQUIRED TO BE
RETURNED OR OTHERWISE RECOVERED FROM SUCH PURCHASING LENDER, SUCH PORTION OF
SUCH PURCHASE SHALL BE RESCINDED AND EACH LENDER WHICH HAS SOLD A PARTICIPATION
TO THE PURCHASING LENDER SHALL REPAY TO THE PURCHASING LENDER THE PURCHASE PRICE
TO THE RATABLE EXTENT OF SUCH RETURN OR RECOVERY, WITHOUT INTEREST. BORROWER
AGREES THAT ANY LENDER SO PURCHASING A PARTICIPATION FROM ANOTHER LENDER
PURSUANT TO THIS CLAUSE (E) MAY, TO THE FULLEST EXTENT PERMITTED BY LAW,
EXERCISE ALL ITS RIGHTS OF PAYMENT (INCLUDING PURSUANT TO SECTION 8.5) WITH
RESPECT TO SUCH PARTICIPATION AS FULLY AS IF SUCH LENDER WERE THE DIRECT
CREDITOR OF BORROWER IN THE AMOUNT OF SUCH PARTICIPATION. IF UNDER ANY
APPLICABLE BANKRUPTCY, INSOLVENCY OR OTHER SIMILAR LAW, ANY LENDER RECEIVES A
SECURED CLAIM IN LIEU OF A SETOFF TO WHICH THIS CLAUSE (E) APPLIES, SUCH LENDER
SHALL, TO THE EXTENT PRACTICABLE, EXERCISE ITS RIGHTS IN RESPECT OF SUCH SECURED
CLAIM IN A MANNER CONSISTENT WITH THE RIGHTS OF LENDERS ENTITLED UNDER THIS
CLAUSE (E) TO SHARE IN THE BENEFITS OF ANY RECOVERY ON SUCH SECURED CLAIM.

 

78

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

 

SECTION 10.14       RIGHT TO PERFORM, PRESERVE AND PROTECT.

 

If any Credit Party fails to perform any obligation hereunder or under any other
Financing Document, Administrative Agent itself may, but shall not be obligated
to, cause such obligation to be performed at Borrower’s expense. Administrative
Agent is further authorized by Borrower and Lenders to make expenditures from
time to time which Administrative Agent, in its reasonable business judgment,
deems necessary or desirable to (i) preserve or protect the business conducted
by Borrower, the Collateral, or any portion thereof and/or (ii) enhance the
likelihood of, or maximize the amount of, repayment of the Loans and other
Obligations. Borrower hereby agrees to reimburse Administrative Agent on demand
for any and all costs, liabilities and obligations incurred by Administrative
Agent pursuant to this Section 10.13. Each Lender hereby agrees to indemnify
Administrative Agent upon demand for any and all costs, liabilities and
obligations incurred by Administrative Agent pursuant to this Section 10.14, in
accordance with the provisions of Section 10.6.

 

SECTION 10.15       ADDITIONAL TITLED AGENTS.

 

Except for rights and powers, if any, expressly reserved under this Agreement to
any bookrunner, arranger or to any titled agent named on the cover page of this
Agreement, other than Administrative Agent (collectively, the “Additional Titled
Agents”), and except for obligations, liabilities, duties and responsibilities,
if any, expressly assumed under this Agreement by any Additional Titled Agent,
no Additional Titled Agent, in such capacity, has any rights, powers,
liabilities, duties or responsibilities hereunder or under any of the other
Financing Documents. Without limiting the foregoing, no Additional Titled Agent
shall have nor be deemed to have a fiduciary relationship with any Lender. At
any time that any Lender serving (or whose Affiliate is serving) as an
Additional Titled Agent shall have transferred to any other Person (other than
any Affiliates) all of its interests in the Loans and in the Revolving Loan
Commitment, such Person shall be deemed to have concurrently resigned as such
Additional Titled Agent.

 

SECTION 10.16       FUNDING AND SETTLEMENT PROVISIONS APPLICABLE WHEN
NON-FUNDING LENDERS EXIST.

 

So long as Required Lenders have not waived the conditions to the funding of
Revolving Loans set forth in Section 7.2 (nor waived an Event of Default for
purposes of satisfying such conditions), any Lender may deliver a notice to each
of Administrative Agent stating that such Lender shall cease making Revolving
Loans due to the non-satisfaction of one or more conditions to funding Revolving
Loans set forth in Section 7.2, and specifying any such non-satisfied
conditions. Any Lender delivering any such notice shall become a non-funding
Lender (a “Non-Funding Lender”) for purposes of this Agreement commencing on the
Business Day following receipt by Administrative Agent of such notice, and shall
cease to be a Non-Funding Lender on the date on which (i) such Lender has either
revoked the effectiveness of such notice or acknowledged in writing to each of
Administrative Agent the satisfaction of the condition(s) specified in such
notice, or (ii) Required Lenders waive the conditions to the funding of such
Revolving Loans set forth in Section 7.2 giving rise to such notice by
Non-Funding Lender. Each Non-Funding Lender shall remain a Lender for purposes
of this Agreement to the extent that such Non-Funding Lender has Revolving Loans
Outstanding in excess of zero; provided,

 

79

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

 

that during any period of time that any Non-Funding Lender exists, and
notwithstanding any provision to the contrary set forth herein, the following
provisions shall apply:

 

(A)           FOR PURPOSES OF DETERMINING THE PRO RATA SHARE OF EACH LENDER
UNDER CLAUSE (V) OF THE DEFINITION OF SUCH TERM, EACH NON-FUNDING LENDER SHALL
BE DEEMED TO HAVE A REVOLVING LOAN COMMITMENT AMOUNT AS IN EFFECT IMMEDIATELY
BEFORE SUCH LENDER BECAME A NON-FUNDING LENDER.

 

(B)           EXCEPT AS PROVIDED IN CLAUSE (A) ABOVE, THE REVOLVING LOAN
COMMITMENT AMOUNT OF EACH NON-FUNDING LENDER SHALL BE DEEMED TO BE ZERO.

 

(C)           THE REVOLVING LOAN COMMITMENT AT ANY DATE OF DETERMINATION DURING
SUCH PERIOD SHALL BE DEEMED TO BE EQUAL TO THE SUM OF (I) THE AGGREGATE
REVOLVING LOAN COMMITMENT AMOUNTS OF ALL LENDERS, OTHER THAN THE NON-FUNDING
LENDERS AS OF SUCH DATE, PLUS (II) THE AGGREGATE REVOLVING LOAN OUTSTANDINGS OF
ALL NON-FUNDING LENDERS AS OF SUCH DATE.

 

(D)           ADMINISTRATIVE AGENT SHALL HAVE NO RIGHT TO MAKE OR DISBURSE
REVOLVING LOANS FOR THE ACCOUNT OF ANY NON-FUNDING LENDER PURSUANT TO SECTION
10.12, OR TO ASSUME THAT ANY NON-FUNDING LENDER WILL FUND ITS PRO RATA SHARE OF
ANY REVOLVING LOANS REQUESTED BY BORROWER DURING SUCH PERIOD.

 

(E)           ADMINISTRATIVE AGENT SHALL HAVE NO RIGHT TO MAKE OR DISBURSE
REVOLVING LOANS FOR THE ACCOUNT OF ANY NON-FUNDING LENDER PURSUANT TO SECTION
2.2(C) TO PAY INTEREST, FEES, EXPENSES AND OTHER CHARGES OF ANY CREDIT PARTY,
OTHER THAN REIMBURSEMENT OBLIGATIONS THAT HAVE ARISEN PURSUANT TO SECTION 2.9(C)
IN RESPECT OF LETTERS OF CREDIT ISSUED AT THE TIME SUCH NON-FUNDING LENDER WAS
NOT THEN A NON-FUNDING LENDER.

 

(F)            [RESERVED].

 

(G)           ADMINISTRATIVE AGENT SHALL HAVE NO RIGHT TO (I) MAKE OR DISBURSE
REVOLVING LOANS AS PROVIDED IN SECTION 2.2(C) FOR THE ACCOUNT OF ANY LENDER THAT
WAS A NON-FUNDING LENDER AT THE TIME OF ISSUANCE OF ANY LETTER OF CREDIT FOR
WHICH FUNDING OR REIMBURSEMENT OBLIGATIONS HAVE ARISEN PURSUANT TO SECTION
2.9(C), OR (II) ASSUME THAT ANY LENDER THAT WAS A NON-FUNDING LENDER AT THE TIME
OF ISSUANCE OF SUCH LETTER OF CREDIT WILL FUND ANY PORTION OF THE REVOLVING
LOANS TO BE FUNDED PURSUANT TO SECTION 2.9(C) IN RESPECT OF SUCH LETTER OF
CREDIT. IN ADDITION, NO LENDER THAT WAS A NON-FUNDING LENDER AT THE TIME OF
ISSUANCE OF ANY LETTER OF CREDIT FOR WHICH FUNDING OR REIMBURSEMENT OBLIGATIONS
HAVE ARISEN PURSUANT TO SECTION 2.9(C), SHALL HAVE AN OBLIGATION TO FUND ANY
PORTION OF THE REVOLVING LOANS TO BE FUNDED PURSUANT TO SECTION 2.9(C) IN
RESPECT TO SUCH LETTER OF CREDIT, OR TO MAKE ANY PAYMENT TO ADMINISTRATIVE AGENT
OR THE L/C ISSUER, AS APPLICABLE, UNDER SECTION 2.9(F)(III) IN RESPECT OF SUCH
LETTER OF CREDIT, OR BE DEEMED TO HAVE PURCHASED ANY INTEREST OR PARTICIPATION
IN SUCH LETTER OF CREDIT FROM ADMINISTRATIVE AGENT OR THE L/C ISSUER, AS
APPLICABLE, UNDER SECTION 2.9(F)(I) OR (II).

 

(H)           TO THE EXTENT THAT ADMINISTRATIVE AGENT APPLIES PROCEEDS OF
COLLATERAL OR OTHER PAYMENTS RECEIVED BY ADMINISTRATIVE AGENT TO REPAYMENT OF
REVOLVING LOANS PURSUANT TO SECTION 8.6, SUCH PAYMENTS AND PROCEEDS SHALL BE
APPLIED FIRST IN RESPECT OF REVOLVING LOANS MADE AT THE TIME ANY NON-FUNDING
LENDERS EXIST, AND SECOND IN RESPECT OF ALL OTHER OUTSTANDING REVOLVING LOANS.

 

80

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

 

ARTICLE 11
MISCELLANEOUS

 

SECTION 11.1         SURVIVAL.

 

All agreements, representations and warranties made herein and in every other
Financing Document shall survive the execution and delivery of this Agreement
and the other Financing Documents and the other Financing Documents. The
provisions of Sections 2.13 and 2.14 and Articles 9, 10 and 11 shall survive the
payment of the Obligations (both with respect to any Lender and all Lenders
collectively) and any termination of this Agreement.

 

SECTION 11.2         NO WAIVERS.

 

No failure or delay by Administrative Agent or any Lender in exercising any
right, power or privilege under any Financing Document shall operate as a waiver
thereof nor shall any single or partial exercise thereof preclude any other or
further exercise thereof or the exercise of any other right, power or privilege.
The rights and remedies herein and therein provided shall be cumulative and not
exclusive of any rights or remedies provided by Law. Any reference in any
Financing Document to the “continuing” nature of any Event of Default shall not
be construed as establishing or otherwise indicating that Borrower or any other
Credit Party has the independent right to cure any such Event of Default, but is
rather presented merely for convenience should such Event of Default be waived
in accordance with the terms of the applicable Financing Documents.

 

SECTION 11.3         NOTICES.

 

(A)           ALL NOTICES, REQUESTS AND OTHER COMMUNICATIONS TO ANY PARTY
HEREUNDER SHALL BE IN WRITING (INCLUDING PREPAID OVERNIGHT COURIER, FACSIMILE
TRANSMISSION, E MAIL, ELECTRONIC SUBMISSIONS OR SIMILAR WRITING) AND SHALL BE
GIVEN TO SUCH PARTY AT ITS ADDRESS, FACSIMILE NUMBER OR E MAIL ADDRESS SET FORTH
ON THE SIGNATURE PAGES HEREOF (OR, IN THE CASE OF ANY SUCH LENDER WHO BECOMES A
LENDER AFTER THE DATE HEREOF, IN AN ASSIGNMENT AGREEMENT OR IN A NOTICE
DELIVERED TO BORROWER AND ADMINISTRATIVE AGENT BY THE ASSIGNEE LENDER FORTHWITH
UPON SUCH ASSIGNMENT) OR AT SUCH OTHER ADDRESS, FACSIMILE NUMBER OR E-MAIL
ADDRESS AS SUCH PARTY MAY HEREAFTER SPECIFY FOR THE PURPOSE BY NOTICE TO
ADMINISTRATIVE AGENT AND BORROWER; PROVIDED, THAT NOTICES, REQUESTS OR OTHER
COMMUNICATIONS SHALL BE PERMITTED BY E MAIL OR OTHER ELECTRONIC SUBMISSIONS ONLY
IN ACCORDANCE WITH THE PROVISIONS OF SECTION 11.3(B). EACH SUCH NOTICE, REQUEST
OR OTHER COMMUNICATION SHALL BE EFFECTIVE (I) IF GIVEN BY FACSIMILE, WHEN SUCH
NOTICE IS TRANSMITTED TO THE FACSIMILE NUMBER SPECIFIED BY THIS SECTION AND THE
SENDER RECEIVES A CONFIRMATION OF TRANSMISSION FROM THE SENDING FACSIMILE
MACHINE, (II) IF GIVEN BY E-MAIL OR OTHER ELECTRONIC SUBMISSIONS, AS SET FORTH
IN SECTION 11.3(C) OR (III) IF GIVEN BY MAIL, PREPAID OVERNIGHT COURIER OR ANY
OTHER MEANS, WHEN RECEIVED AT THE APPLICABLE ADDRESS SPECIFIED BY THIS SECTION.

 

(B)           NOTICES AND OTHER COMMUNICATIONS TO THE PARTIES HERETO MAY BE
DELIVERED OR FURNISHED BY ELECTRONIC COMMUNICATION (INCLUDING E-MAIL AND
INTERNET OR INTRANET WEBSITES) PROVIDED, THAT (I) THE FOREGOING SHALL NOT APPLY
TO NOTICES SENT DIRECTLY TO ANY PARTY HERETO IF SUCH PARTY HAS NOTIFIED
ADMINISTRATIVE AGENT THAT IT HAS ELECTED NOT TO RECEIVE NOTICES BY ELECTRONIC
COMMUNICATION (WHICH ELECTION MAY BE LIMITED TO PARTICULAR NOTICES) AND (II) NO
NOTICES OF

 

81

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

 

BORROWING, NOTICES OF LC CREDIT EVENT OR ANY NOTICES REGARDING REQUEST FOR
ADVANCES HEREUNDER SHALL BE PERMITTED TO BE DELIVERED OR FURNISHED BY BORROWER
BY ELECTRONIC COMMUNICATION UNLESS MADE IN ACCORDANCE WITH SPECIFIC PROCEDURES
APPROVED FROM TIME TO TIME BY ADMINISTRATIVE AGENT.

 

(C)           UNLESS ADMINISTRATIVE AGENT OTHERWISE PRESCRIBES, (I) NOTICES AND
OTHER COMMUNICATIONS SENT TO AN E-MAIL ADDRESS SHALL BE DEEMED RECEIVED UPON THE
SENDER’S RECEIPT OF AN ACKNOWLEDGMENT FROM THE INTENDED RECIPIENT (SUCH AS BY
THE “RETURN RECEIPT REQUESTED” FUNCTION, AS AVAILABLE, RETURN E-MAIL OR OTHER
WRITTEN ACKNOWLEDGMENT), AND (II) NOTICES OR COMMUNICATIONS POSTED TO AN
INTERNET OR INTRANET WEBSITE SHALL BE DEEMED RECEIVED UPON THE DEEMED RECEIPT BY
THE INTENDED RECIPIENT AT ITS E-MAIL ADDRESS AS DESCRIBED IN THE FOREGOING
CLAUSE (I) OF NOTIFICATION THAT SUCH NOTICE OR COMMUNICATION IS AVAILABLE AND
IDENTIFYING THE WEBSITE ADDRESS THEREFOR, PROVIDED, THAT IF ANY SUCH NOTICE OR
OTHER COMMUNICATION IS NOT SENT OR POSTED DURING NORMAL BUSINESS HOURS, SUCH
NOTICE OR COMMUNICATION SHALL BE DEEMED TO HAVE BEEN SENT AT THE OPENING OF
BUSINESS ON THE NEXT BUSINESS DAY.

 

SECTION 11.4         SEVERABILITY.

 

In case any provision of or obligation under this Agreement or any other
Financing Document shall be invalid, illegal or unenforceable in any
jurisdiction, the validity, legality and enforceability of the remaining
provisions or obligations, or of such provision or obligation in any other
jurisdiction, shall not in any way be affected or impaired thereby.

 

SECTION 11.5         AMENDMENTS AND WAIVERS.

 

(A)           GENERAL PROVISIONS. NO PROVISION OF THIS AGREEMENT OR ANY OTHER
FINANCING DOCUMENT MAY BE AMENDED, WAIVED OR OTHERWISE MODIFIED UNLESS SUCH
AMENDMENT, WAIVER OR OTHER MODIFICATION IS IN WRITING AND IS SIGNED OR OTHERWISE
APPROVED BY BORROWER AND REQUIRED LENDERS (AND, IF (I) ANY AMENDMENT, WAIVER OR
OTHER MODIFICATION WOULD EITHER INCREASE A LENDER’S REVOLVING LOAN COMMITMENT
AMOUNT, AND (II) THE RIGHTS OR DUTIES OF ADMINISTRATIVE AGENT AND/OR LC ISSUER
ARE AFFECTED THEREBY, BY ADMINISTRATIVE AGENT AND/OR LC ISSUER, AS THE CASE MAY
BE); PROVIDED THAT NO SUCH AMENDMENT, WAIVER OR OTHER MODIFICATION SHALL, UNLESS
SIGNED OR OTHERWISE APPROVED IN WRITING BY ALL LENDERS DIRECTLY AFFECTED
THEREBY, (A) REDUCE THE PRINCIPAL OF, RATE OF INTEREST ON OR ANY FEES WITH
RESPECT TO ANY LOAN OR REIMBURSEMENT OBLIGATION OR FORGIVE ANY PRINCIPAL,
INTEREST OR FEES WITH RESPECT TO ANY LOAN OR REIMBURSEMENT OBLIGATION, (B)
POSTPONE THE DATE FIXED FOR, OR WAIVE, ANY PAYMENT (OTHER THAN A PAYMENT
PURSUANT TO SECTION 2.3(B), (C) OR (D)) OF PRINCIPAL OF ANY LOAN, OR OF ANY
REIMBURSEMENT OBLIGATION OR OF INTEREST ON ANY LOAN OR ANY REIMBURSEMENT
OBLIGATION OR ANY FEES HEREUNDER OR POSTPONE THE DATE OF TERMINATION OF THE
COMMITMENT OF ANY LENDER HEREUNDER, (C) CHANGE THE DEFINITION OF THE TERM
REQUIRED LENDERS OR THE PERCENTAGE OF LENDERS WHICH SHALL BE REQUIRED FOR
LENDERS TO TAKE ANY ACTION HEREUNDER, (D) RELEASE ALL OR SUBSTANTIALLY ALL OF
THE COLLATERAL, AUTHORIZE BORROWER TO SELL OR OTHERWISE DISPOSE OF ALL OR
SUBSTANTIALLY ALL OF THE COLLATERAL OR RELEASE ANY GUARANTOR OF ALL OR ANY
PORTION OF THE OBLIGATIONS OF ITS GUARANTEE OBLIGATIONS WITH RESPECT THERETO,
EXCEPT, IN EACH CASE WITH RESPECT TO THIS CLAUSE (D), AS OTHERWISE MAY BE
PROVIDED IN THIS AGREEMENT OR THE OTHER FINANCING DOCUMENTS (INCLUDING IN
CONNECTION WITH ANY DISPOSITION PERMITTED HEREUNDER), (E) AMEND, WAIVE OR
OTHERWISE MODIFY THIS SECTION 11.5(A) OR THE DEFINITIONS OF THE TERMS USED IN
THIS SECTION 11.5(A) INSOFAR AS THE DEFINITIONS AFFECT THE

 

82

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

 

SUBSTANCE OF THIS SECTION 11.5(A); OR (F) CONSENT TO THE ASSIGNMENT, DELEGATION
OR OTHER TRANSFER BY ANY CREDIT PARTY OF ANY OF ITS RIGHTS AND OBLIGATIONS UNDER
ANY FINANCING DOCUMENT OR RELEASE BORROWER OF ITS PAYMENT OBLIGATIONS UNDER ANY
FINANCING DOCUMENT, EXCEPT, IN EACH CASE WITH RESPECT TO THIS CLAUSE (F),
PURSUANT TO A MERGER OR CONSOLIDATION PERMITTED PURSUANT TO THIS AGREEMENT. IT
IS HEREBY UNDERSTOOD AND AGREED THAT ALL LENDERS SHALL BE DEEMED DIRECTLY
AFFECTED BY AN AMENDMENT, WAIVER OR OTHER MODIFICATION OF THE TYPE DESCRIBED IN
THE PRECEDING CLAUSES (C), (D), (E) AND (F) OF THE PRECEDING SENTENCE.

 

(B)           ELIGIBLE SWAP COUNTERPARTY CONSENT RIGHTS. WITHOUT LIMITATION OF
THE PROVISIONS OF THE PRECEDING CLAUSE (A), NO WAIVER, AMENDMENT OR OTHER
MODIFICATION TO THIS AGREEMENT SHALL, UNLESS SIGNED BY EACH ELIGIBLE SWAP
COUNTERPARTY THEN IN EXISTENCE, MODIFY THE PROVISIONS OF SECTION 8.6 IN ANY
MANNER ADVERSE TO THE INTERESTS OF EACH SUCH ELIGIBLE SWAP COUNTERPARTY.

 

SECTION 11.6         ASSIGNMENTS; PARTICIPATIONS; REPLACEMENT OF LENDERS.

 

(A)           ASSIGNMENTS.

 

(I)            ANY LENDER MAY AT ANY TIME ASSIGN TO ONE OR MORE ELIGIBLE
ASSIGNEES ALL OR ANY PORTION OF SUCH LENDER’S LOANS AND INTEREST IN THE
REVOLVING LOAN COMMITMENT, TOGETHER WITH ALL RELATED OBLIGATIONS OF SUCH LENDER
HEREUNDER. EXCEPT AS ADMINISTRATIVE AGENT MAY OTHERWISE AGREE, THE AMOUNT OF ANY
SUCH ASSIGNMENT (DETERMINED AS OF THE DATE OF THE APPLICABLE ASSIGNMENT
AGREEMENT OR, IF A “TRADE DATE” IS SPECIFIED IN SUCH ASSIGNMENT AGREEMENT, AS OF
SUCH TRADE DATE) SHALL BE IN A MINIMUM AGGREGATE AMOUNT EQUAL TO $5,000,000 OR,
IF LESS, THE ASSIGNOR’S ENTIRE INTERESTS IN THE REVOLVING LOAN COMMITMENT AND
OUTSTANDING LOANS; PROVIDED, THAT, IN CONNECTION WITH SIMULTANEOUS ASSIGNMENTS
TO TWO OR MORE RELATED APPROVED FUNDS, SUCH APPROVED FUNDS SHALL BE TREATED AS
ONE ASSIGNEE FOR PURPOSES OF DETERMINING COMPLIANCE WITH THE MINIMUM ASSIGNMENT
SIZE REFERRED TO ABOVE. BORROWER AND ADMINISTRATIVE AGENT SHALL BE ENTITLED TO
CONTINUE TO DEAL SOLELY AND DIRECTLY WITH SUCH LENDER IN CONNECTION WITH THE
INTERESTS SO ASSIGNED TO AN ELIGIBLE ASSIGNEE UNTIL ADMINISTRATIVE AGENT SHALL
HAVE RECEIVED AND ACCEPTED AN EFFECTIVE ASSIGNMENT AGREEMENT EXECUTED, DELIVERED
AND FULLY COMPLETED BY THE APPLICABLE PARTIES THERETO, SUCH OTHER INFORMATION
REGARDING SUCH ELIGIBLE ASSIGNEE AS ADMINISTRATIVE AGENT REASONABLY SHALL
REQUIRE AND A PROCESSING FEE OF $3,500; PROVIDED, ONLY ONE PROCESSING FEE SHALL
BE PAYABLE IN CONNECTION WITH SIMULTANEOUS ASSIGNMENTS TO TWO OR MORE RELATED
APPROVED FUNDS.

 

(II)           FROM AND AFTER THE DATE ON WHICH THE CONDITIONS DESCRIBED ABOVE
HAVE BEEN MET, (A) SUCH ELIGIBLE ASSIGNEE SHALL BE DEEMED AUTOMATICALLY TO HAVE
BECOME A PARTY HERETO AND, TO THE EXTENT OF THE INTERESTS ASSIGNED TO SUCH
ELIGIBLE ASSIGNEE PURSUANT TO SUCH ASSIGNMENT AGREEMENT, SHALL HAVE THE RIGHTS
AND OBLIGATIONS OF A LENDER HEREUNDER AND (B) THE ASSIGNING LENDER, TO THE
EXTENT THAT RIGHTS AND OBLIGATIONS HEREUNDER HAVE BEEN ASSIGNED BY IT PURSUANT
TO SUCH ASSIGNMENT AGREEMENT, SHALL BE RELEASED FROM ITS RIGHTS AND OBLIGATIONS
HEREUNDER (OTHER THAN THOSE THAT SURVIVE TERMINATION PURSUANT TO SECTION 11.1).
UPON THE REQUEST OF THE ELIGIBLE ASSIGNEE (AND, AS APPLICABLE, THE ASSIGNING
LENDER) PURSUANT TO AN EFFECTIVE ASSIGNMENT AGREEMENT, BORROWER SHALL EXECUTE
AND DELIVER TO ADMINISTRATIVE AGENT FOR DELIVERY TO THE ELIGIBLE ASSIGNEE (AND,
AS APPLICABLE, THE ASSIGNING LENDER) NOTES IN THE AGGREGATE PRINCIPAL AMOUNT OF
THE ELIGIBLE ASSIGNEE’S PERCENTAGE INTEREST IN THE REVOLVING LOAN COMMITMENT
(AND, AS APPLICABLE, NOTES IN THE PRINCIPAL AMOUNT OF THAT PORTION OF THE
REVOLVING

 

83

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

 

LOAN COMMITMENT RETAINED BY THE ASSIGNING LENDER). UPON RECEIPT BY THE ASSIGNING
LENDER OF SUCH NOTE, THE ASSIGNING LENDER SHALL RETURN TO BORROWER ANY PRIOR
NOTE HELD BY IT.

 

(III)          ADMINISTRATIVE AGENT, ACTING SOLELY FOR THIS PURPOSE AS AN AGENT
OF BORROWER, SHALL MAINTAIN AT ITS OFFICES LOCATED IN CHICAGO, ILLINOIS A COPY
OF EACH ASSIGNMENT AGREEMENT DELIVERED TO IT AND A REGISTER FOR THE RECORDATION
OF THE NAMES AND ADDRESSES OF EACH LENDER, AND THE COMMITMENTS OF, AND PRINCIPAL
AMOUNT OF THE LOANS OWING TO, SUCH LENDER PURSUANT TO THE TERMS HEREOF. THE
ENTRIES IN SUCH REGISTER SHALL BE CONCLUSIVE, AND BORROWER, ADMINISTRATIVE AGENT
AND LENDERS MAY TREAT EACH PERSON WHOSE NAME IS RECORDED THEREIN PURSUANT TO THE
TERMS HEREOF AS A LENDER HEREUNDER FOR ALL PURPOSES OF THIS AGREEMENT,
NOTWITHSTANDING NOTICE TO THE CONTRARY. SUCH REGISTER SHALL BE AVAILABLE FOR
INSPECTION BY BORROWER AND ANY LENDER, AT ANY REASONABLE TIME UPON REASONABLE
PRIOR NOTICE TO ADMINISTRATIVE AGENT.

 

(IV)          NOTWITHSTANDING THE FOREGOING PROVISIONS OF THIS SECTION 11.6(A)
OR ANY OTHER PROVISION OF THIS AGREEMENT, 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.

 

(V)           NOTWITHSTANDING THE FOREGOING PROVISIONS OF THIS SECTION 11.6(A)
OR ANY OTHER PROVISION OF THIS AGREEMENT, ADMINISTRATIVE AGENT HAS THE RIGHT,
BUT NOT THE OBLIGATION, TO EFFECTUATE ASSIGNMENTS OF LOANS AND REVOLVING LOAN
COMMITMENTS VIA AN ELECTRONIC SETTLEMENT SYSTEM ACCEPTABLE TO ADMINISTRATIVE
AGENT AS DESIGNATED IN WRITING FROM TIME TO TIME TO LENDERS BY ADMINISTRATIVE
AGENT (THE “SETTLEMENT SERVICE”). AT ANY TIME WHEN ADMINISTRATIVE AGENT ELECTS,
IN ITS SOLE DISCRETION, TO IMPLEMENT SUCH SETTLEMENT SERVICE, EACH SUCH
ASSIGNMENT SHALL BE EFFECTED BY THE ASSIGNING LENDER AND PROPOSED ASSIGNEE
PURSUANT TO THE PROCEDURES THEN IN EFFECT UNDER THE SETTLEMENT SERVICE, WHICH
PROCEDURES SHALL BE CONSISTENT WITH THE OTHER PROVISIONS OF THIS SECTION
11.6(A). EACH ASSIGNING LENDER AND PROPOSED ELIGIBLE ASSIGNEE SHALL COMPLY WITH
THE REQUIREMENTS OF THE SETTLEMENT SERVICE IN CONNECTION WITH EFFECTING ANY
ASSIGNMENT OF LOANS AND REVOLVING LOAN COMMITMENTS PURSUANT TO THE SETTLEMENT
SERVICE. WITH THE PRIOR APPROVAL OF EACH OF ADMINISTRATIVE AGENT AND BORROWER,
AS APPLICABLE, ADMINISTRATIVE AGENT’S AND BORROWER’S APPROVAL OF SUCH ELIGIBLE
ASSIGNEE SHALL BE DEEMED TO HAVE BEEN AUTOMATICALLY GRANTED WITH RESPECT TO ANY
TRANSFER EFFECTED THROUGH THE SETTLEMENT SERVICE. ASSIGNMENTS AND ASSUMPTIONS OF
THE LOANS AND REVOLVING LOAN COMMITMENTS SHALL BE EFFECTED BY THE PROVISIONS
OTHERWISE SET FORTH HEREIN UNTIL ADMINISTRATIVE AGENT NOTIFIES LENDERS OF THE
SETTLEMENT SERVICE AS SET FORTH HEREIN.

 

(B)           PARTICIPATIONS.

 

Any Lender may at any time, without the consent of, or notice to, Borrower or
Administrative Agent, sell to one or more Persons participating interests in its
Loans, commitments or other interests hereunder (any such Person, a
“Participant”). In the event of a sale by a Lender of a participating interest
to a Participant, (i) such Lender’s obligations hereunder shall remain unchanged
for all purposes, (ii) Borrower and Administrative Agent shall continue to deal
solely and directly with such Lender in connection with such Lender’s rights

 

84

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

 

and obligations hereunder and (iii) all amounts payable by Borrower shall be
determined as if such Lender had not sold such participation and shall be paid
directly to such Lender. No Participant shall have any direct or indirect voting
rights hereunder except with respect to any event described in Section 11.5
expressly requiring the unanimous vote of all Lenders or, as applicable, all
affected Lenders. Borrower agrees that if amounts outstanding under this
Agreement are due and payable (as a result of acceleration or otherwise), each
Participant shall be deemed to have the right of set-off in respect of its
participating interest in amounts owing under this Agreement and with respect to
any Letter of Credit to the same extent as if the amount of its participating
interest were owing directly to it as a Lender under this Agreement; provided
that such right of set-off shall be subject to the obligation of each
Participant to share with Lenders, and Lenders agree to share with each
Participant, as provided in Section 8.5.

 

(C)           REPLACEMENT OF LENDERS.

 

Within thirty (30) days after(i) receipt by Administrative Agent of notice and
demand from any Lender for payment of additional costs as provided in Sections
2.7(e)(v) or Section 2.14, which demand shall not have been revoked,
(ii) Borrower is required to pay any additional amount to any Lender or any
Governmental Authority for the account of any Lender pursuant to Section 2.13,
(iii) any Lender is a Defaulted Lender, and the circumstances causing such
status shall not have been cured or waived; or (iv) any failure by any Lender to
consent to a requested amendment, waiver or modification to any Financing
Document in which Required Lenders have already consented to such amendment,
waiver or modification but the consent of each Lender, or each Lender affected
thereby, is required with respect thereto, (each relevant Lender in the
foregoing clauses (i) through (iv) being an “Affected Lender”) each of Borrower
and Administrative Agent may, at its option, notify such Affected Lender and, in
the case of Borrower election, Administrative Agent, of such Person’s intention
to obtain, at Borrower’s expense, a replacement Lender (“Replacement Lender”)
for such Lender, which Replacement Lender shall be an Eligible Assignee and, in
the event the Replacement Lender is to replace an Affected Lender described in
the preceding clause (iv), such Replacement Lender consents to the requested
amendment, waiver or modification making the replaced Lender an Affected Lender.
In the event Borrower or Administrative Agent, as applicable, obtains a
Replacement Lender within ninety (90) days following notice of its intention to
do so, the Affected Lender shall sell, at par, and assign all of its Loans and
funding commitments hereunder to such Replacement Lender in accordance with the
procedures set forth in Section 11.6(a); provided, that (A) Borrower shall have,
as applicable, reimbursed such Lender for its increased costs and additional
payments for which it is entitled to reimbursement under any of Sections
2.7(e)(v), 2.13 or Section 2.14, as applicable, of this Agreement through the
date of such sale and assignment and (B) Borrower shall pay to Administrative
Agent the $3,500 processing fee in respect of such assignment. In the event that
a replaced Lender does not execute an Assignment Agreement pursuant to Section
11.6(a) within five (5) Business Days after receipt by such replaced Lender of
notice of replacement pursuant to this Section 11.6(c) and presentation to such
replaced Lender of an Assignment Agreement evidencing an assignment pursuant to
this Section 11.6(c), such replaced Lender shall be deemed to have consented to
the terms of such Assignment Agreement, and any such Assignment Agreement
executed by Administrative Agent, the Replacement Lender and, to the extent
required pursuant to Section 11.6(a), Borrower, shall be effective for purposes
of this Section 11.6(c) and Section 11.6(a). Upon any such assignment and
payment, such replaced Lender shall no longer constitute a “Lender” for purposes
hereof, other

 

85

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

 

than with respect to such rights and obligations that survive termination as set
forth in Section 11.1.

 

(D)           CREDIT PARTY ASSIGNMENTS.

 

Except as provided in Section 11.5(a)(F), no Credit Party may assign, delegate
or otherwise transfer any of its rights or other obligations hereunder or under
any other Financing Document without the prior written consent of Administrative
Agent and each Lender.

 

SECTION 11.7         HEADINGS.

 

Headings and captions used in the Financing Documents (including the Exhibits,
Schedules and Annexes hereto and thereto) are included for convenience of
reference only and shall not be given any substantive effect.

 

SECTION 11.8         CONFIDENTIALITY.

 

Administrative Agent and each Lender shall hold all non-public information
regarding the Credit Parties and their respective businesses in accordance with
such Person’s customary procedures for handling information of such nature,
except that disclosure of such information may be made (i) to their respective
agents, employees, Subsidiaries, Affiliates, attorneys, auditors, professional
consultants, rating agencies, insurance industry associations and portfolio
management services, (ii) to prospective transferees or purchasers of any
interest in the Loans, and to prospective contractual counterparties (or the
professional advisors thereto) in Swap Contracts permitted hereby, provided that
any such Persons shall have agreed to be bound by the provisions of this Section
11.8, (iii) as required by Law, subpoena, judicial order or similar order and in
connection with any litigation, (iv) as may be required in connection with the
examination, audit or similar investigation of such Person and (v) to a Person
that is a trustee, investment advisor, collateral manager, servicer, noteholder
or secured party in a Securitization (as hereinafter defined) in connection with
the administration, servicing and reporting on the assets serving as collateral
for such Securitization. For the purposes of this Section, “Securitization”
shall mean a public or private offering by a Lender or any of its Affiliates or
their respective successors and assigns, of Capital Stock which represent an
interest in, or which are collateralized, in whole or in party, by the Loans.
Confidential information shall not include information that either (A) is in the
public domain, or becomes part of the public domain after disclosure to such
Person through no fault of such Person, or (B) is disclosed to such Person by a
Person other than a Credit Party, provided Administrative Agent does not have
actual knowledge that such Person is prohibited from disclosing such
information. The obligations of Administrative Agent and Lenders under this
Section 11.8 shall supersede and replace the obligations of Administrative Agent
and Lenders under any confidentiality agreement in respect of this financing
executed and delivered by Administrative Agent or any Lender prior to the date
hereof.

 

SECTION 11.9         WAIVER OF CONSEQUENTIAL AND OTHER DAMAGES.

 

To the fullest extent permitted by applicable Law, Borrower shall not assert,
and hereby waives, any claim against any Indemnitee, on any theory of liability,
for special, indirect, consequential or punitive damages (as opposed to direct
or actual damages) arising out of, in

 

86

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

 

connection with, or as a result of this Agreement, any other Financing Document
or any agreement or instrument contemplated hereby or thereby, the transactions
contemplated hereby or thereby, any Loan or Letter of Credit or the use of the
proceeds thereof. No Indemnitee 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 Financing Documents or
the transactions contemplated hereby or thereby.

 

SECTION 11.10       MARSHALING; PAYMENTS SET ASIDE.

 

Neither Administrative Agent nor any Lender shall be under any obligation to
marshal any assets in payment of any or all of the Obligations. To the extent
that Borrower makes any payment or Administrative Agent enforces its Liens or
Administrative Agent or any Lender exercises its right of set-off, and such
payment or the proceeds of such enforcement or set-off is subsequently
invalidated, declared to be fraudulent or preferential, set aside, or required
to be repaid by anyone, then to the extent of such recovery, the Obligations or
part thereof originally intended to be satisfied, and all Liens, rights and
remedies therefore, shall be revived and continued in full force and effect as
if such payment had not been made or such enforcement or set-off had not
occurred.

 

SECTION 11.11       GOVERNING LAW; SUBMISSION TO JURISDICTION.

 

EXCEPT AS OTHERWISE SET FORTH IN THE MORTGAGES, THE FIRST AMENDMENTS TO
MORTGAGES AND THE ASSIGNMENT OF NOTES AND LIENS, THIS AGREEMENT, EACH NOTE AND
EACH OTHER FINANCING DOCUMENT, AND ALL MATTERS RELATING HERETO OR THERETO OR
ARISING THEREFROM (WHETHER SOUNDING IN CONTRACT LAW, TORT LAW OR OTHERWISE),
SHALL BE GOVERNED BY, AND SHALL BE CONSTRUED AND ENFORCED IN ACCORDANCE WITH,
THE LAWS OF THE STATE OF NEW YORK, WITHOUT REGARD TO CONFLICTS OF LAWS
PRINCIPLES. BORROWER HEREBY CONSENTS TO THE JURISDICTION OF ANY STATE OR FEDERAL
COURT LOCATED WITHIN THE BOROUGH OF MANHATTAN, CITY OF NEW YORK, STATE OF NEW
YORK AND IRREVOCABLY AGREES THAT, SUBJECT TO ADMINISTRATIVE AGENT’S ELECTION,
ALL ACTIONS OR PROCEEDINGS ARISING OUT OF OR RELATING TO THIS AGREEMENT OR THE
OTHER FINANCING DOCUMENTS SHALL BE LITIGATED IN SUCH COURTS. BORROWER EXPRESSLY
SUBMITS AND CONSENTS TO THE JURISDICTION OF THE AFORESAID COURTS AND WAIVES ANY
DEFENSE OF FORUM NON CONVENIENS. BORROWER HEREBY WAIVES PERSONAL SERVICE OF ANY
AND ALL PROCESS AND AGREES THAT ALL SUCH SERVICE OF PROCESS MAY BE MADE UPON
BORROWER BY CERTIFIED OR REGISTERED MAIL, RETURN RECEIPT REQUESTED, ADDRESSED TO
BORROWER AT THE ADDRESS SET FORTH IN THIS AGREEMENT AND SERVICE SO MADE SHALL BE
COMPLETE TEN (10) DAYS AFTER THE SAME HAS BEEN POSTED.

 

87

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

 

SECTION 11.12       WAIVER OF JURY TRIAL.

 

EACH OF BORROWER, ADMINISTRATIVE AGENT AND LENDERS HEREBY IRREVOCABLY WAIVES ANY
AND ALL RIGHT TO TRIAL BY JURY IN ANY LEGAL ACTION OR PROCEEDING ARISING OUT OF
OR RELATING TO THE FINANCING DOCUMENTS OR THE TRANSACTIONS CONTEMPLATED THEREBY
AND AGREES THAT ANY SUCH ACTION OR PROCEEDING SHALL BE TRIED BEFORE A COURT AND
NOT BEFORE A JURY. EACH OF BORROWER, ADMINISTRATIVE AGENT AND EACH LENDER
ACKNOWLEDGES THAT THIS WAIVER IS A MATERIAL INDUCEMENT TO ENTER INTO A BUSINESS
RELATIONSHIP, THAT EACH HAS RELIED ON THE WAIVER IN ENTERING INTO THIS AGREEMENT
AND THE OTHER FINANCING DOCUMENTS, AND THAT EACH WILL CONTINUE TO RELY ON THIS
WAIVER IN THEIR RELATED FUTURE DEALINGS. EACH OF BORROWER, ADMINISTRATIVE AGENT
AND EACH LENDER WARRANTS AND REPRESENTS THAT EACH HAS HAD THE OPPORTUNITY OF
REVIEWING THIS JURY WAIVER WITH LEGAL COUNSEL, AND THAT EACH KNOWINGLY AND
VOLUNTARILY WAIVES ITS JURY TRIAL RIGHTS.

 

SECTION 11.13       PUBLICATION; ADVERTISEMENT.

 

(A)           PUBLICATION. NO CREDIT PARTY WILL DIRECTLY OR INDIRECTLY PUBLISH,
DISCLOSE OR OTHERWISE USE IN ANY PUBLIC DISCLOSURE, ADVERTISING MATERIAL,
PROMOTIONAL MATERIAL, PRESS RELEASE OR INTERVIEW, ANY REFERENCE TO THE NAME,
LOGO OR ANY TRADEMARK OF MERRILL LYNCH OR ANY OF ITS AFFILIATES OR ANY REFERENCE
TO THIS AGREEMENT OR THE FINANCING EVIDENCED HEREBY, IN ANY CASE EXCEPT (I) AS
REQUIRED BY LAW, SUBPOENA OR JUDICIAL OR SIMILAR ORDER, IN WHICH CASE THE
APPLICABLE CREDIT PARTY SHALL GIVE ADMINISTRATIVE AGENT PRIOR WRITTEN NOTICE OF
SUCH PUBLICATION OR OTHER DISCLOSURE OR (II) WITH MERRILL LYNCH’S PRIOR WRITTEN
CONSENT.

 

(B)           ADVERTISEMENT. EACH LENDER AND EACH CREDIT PARTY HEREBY AUTHORIZES
MERRILL LYNCH TO PUBLISH THE NAME OF SUCH LENDER AND CREDIT PARTY, THE EXISTENCE
OF THE FINANCING ARRANGEMENTS REFERENCED UNDER THIS AGREEMENT, THE PRIMARY
PURPOSE AND/OR STRUCTURE OF THOSE ARRANGEMENTS, THE AMOUNT OF CREDIT EXTENDED
UNDER EACH FACILITY, THE TITLE AND ROLE OF EACH PARTY TO THIS AGREEMENT, AND THE
TOTAL AMOUNT OF THE FINANCING EVIDENCED HEREBY IN ANY “TOMBSTONE”, COMPARABLE
ADVERTISEMENT OR PRESS RELEASE WHICH MERRILL LYNCH ELECTS TO SUBMIT FOR
PUBLICATION. IN ADDITION, EACH LENDER AND EACH CREDIT PARTY AGREES THAT MERRILL
LYNCH MAY PROVIDE LENDING INDUSTRY TRADE ORGANIZATIONS WITH INFORMATION
NECESSARY AND CUSTOMARY FOR INCLUSION IN LEAGUE TABLE MEASUREMENTS AFTER THE
CLOSING DATE. WITH RESPECT TO ANY OF THE FOREGOING, MERRILL LYNCH SHALL PROVIDE
BORROWER WITH AN OPPORTUNITY TO REVIEW AND CONFER WITH MERRILL LYNCH REGARDING
THE CONTENTS OF ANY SUCH TOMBSTONE, ADVERTISEMENT OR INFORMATION, AS APPLICABLE,
PRIOR TO ITS SUBMISSION FOR PUBLICATION AND, FOLLOWING SUCH REVIEW PERIOD,
MERRILL LYNCH MAY, FROM TIME TO TIME, PUBLISH SUCH INFORMATION IN ANY MEDIA FORM
DESIRED BY MERRILL LYNCH, UNTIL SUCH TIME THAT BORROWER SHALL HAVE REQUESTED
MERRILL LYNCH CEASE ANY SUCH FURTHER PUBLICATION.

 

88

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

 

SECTION 11.14       COUNTERPARTS; INTEGRATION.

 

This Agreement and the other Financing Documents may be signed in any number of
counterparts, each of which shall be an original, with the same effect as if the
signatures thereto and hereto were upon the same instrument. Signatures by
facsimile shall bind the parties hereto. This Agreement and the other Financing
Documents constitute the entire agreement and understanding among the parties
hereto and supersede any and all prior agreements and understandings, oral or
written, relating to the subject matter hereof.

 

SECTION 11.15       NO STRICT CONSTRUCTION.

 

The parties hereto have participated jointly in the negotiation and drafting of
this Agreement. In the event an ambiguity or question of intent or
interpretation arises, this Agreement shall be construed as if drafted jointly
by the parties hereto and no presumption or burden of proof shall arise favoring
or disfavoring any party by virtue of the authorship of any provisions of this
Agreement.

 

SECTION 11.16       USA PATRIOT ACT NOTIFICATION.

 

Administrative Agent (for itself and not on behalf of any Lender) and each
Lender hereby notifies Borrower that pursuant to the requirements of the USA
PATRIOT Act, it is required to obtain, verify and record certain information and
documentation that identifies Borrower, which information includes the name and
address of Borrower and such other information that will allow Administrative
Agent or such Lender, as applicable, to identify Borrower in accordance with the
USA PATRIOT Act.

 

SECTION 11.17       AMENDMENT AND RESTATEMENT.

 

This Agreement, the Notes the Guaranty and the Mortgages entered into on the
date hereof are in amendment and restatement, but not novation of the Existing
Credit Facility and the notes, guarantees and mortgages executed in connection
therewith.

 

89

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

 

IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be duly
executed by their respective authorized officers as of the day and year first
above written.

 

 

WARREN RESOURCES, INC.

 

 

 

 

 

 

By:

/s/ Norman F. Swanton

 

 

 

Name:

Norman F. Swanton

 

 

Title:

Chairman and Chief Executive Officer

 

 

 

 

 

Address:

1114 Avenue of the Americas

 

 

34th Floor

 

 

New York, NY 10036

 

 

Attention: David Fleming, Esq.

 

 

Secretary and General Counsel

 

 

Facsimile number: (212) 697-9466

 

E-mail Address:dfleming@warrenresources.com

 

Taxpayer Identification Number:

 

 

 

Borrower’s Account Designation:

 

 

 

JP Morgan Chase Bank

 

One Chase Plaza

 

New York, NY  10081

 

ABA # 021000021

 

Acct. # 459-1-517471

 

Warren Resources, Inc.

 

489 Fifth Avenue, 32nd Floor

 

New York, NY  10017

 

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

 

 

MERRILL LYNCH CAPITAL, a division of
Merrill Lynch Business Financial Services Inc.,
as Administrative Agent and a Lender

 

 

 

 

 

 

By:

/s/ Charles Kingswell-Smith

 

 

 

Name:

Charles Kingswell-Smith

 

 

Title:

Managing Director

 

 

 

 

 

Address:

   600 Travis St. Suite 7400

 

 

   Houston Texas, 77002

 

 

   Attn:  Account Manager for

 

 

   WARREN RESOURCES, INC.

 

 

transaction

 

 

 

Facsimile number:

 

E-Mail Address:

 

 

 

With a copy to:

 

 

 

Merrill Lynch Capital
222 N. LaSalle Street, 16th Floor
Chicago, Illinois  60601
Attn:  Group Senior Transaction Attorney,
Corporate Finance, for WARREN RESOURCES,
INC. transaction
Facsimile number:  (312) 499-3126

 

 

 

And with an additional copy to:

 

 

 

Thompson & Knight LLP

 

 

 

     Address:

1700 Pacific Ave., Suite 3300

 

 

Dallas, Texas

 

 

Attn: James McKellar

 

 

 

Facsimile number: 214.969.1605
E-Mail Address:  James.McKellar@tklaw.com

 

 

 

Payment Account Designation:

 

     LaSalle Bank, NA
     Chicago, IL
     ABA No.:  071 000 505
     Account No.: 5800393182
     Account Name: Warren Resources, Inc.

 

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

 

 

BMO CAPITAL MARKETS
FINANCING, INC.

 

 

 

By:

 /s/ Gumaro Tijerina

 

 

 

Name:

Gumaro Tijerina

 

 

 

Title:

Vice President

 

 

 

 

 

Address:

First Canadian Place, 19th Floor

 

 

Toronto, Ontario Canada M5X 1A1

 

 

 

 

Facsimile number:  416-867-4050

 

 

E-Mail Address:  Joanne.panizares@bmo.com

 

 

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

 

 

BANK OF SCOTLAND PLC, NEW YORK BRANCH

 

 

 

By:

 /s/ Joseph Fratus

 

 

 

Name:

Joseph Fratus

 

 

 

Title:

First Vice President

 

 

 

 

Notice Address:

 

 

 

 

Bank of Scotland

 

 

565 Fifth Avenue, 5th Floor

 

 

New York, NY 10017

 

 

 

 

Attn.:

Victoria McFadden

 

 

Facsimile No.:

(212) 479-2806

 

 

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

 

 

U.S. BANK NATIONAL ASSOCIATION

 

 

 

By:

 /s/ Monte E. Deckerd

 

 

 

Name:

Monte E. Deckerd

 

 

 

Title:

Vice President

 

 

 

 

 

Address:

950 17th St.

 

 

DNCOT8E

 

 

Denver, CO 80202

 

 

 

 

Facsimile number:  303-585-4362

 

 

E-Mail Address:

monte.deckerd@usbank.com

 

 

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

 

 

CAPITAL ONE N.A.

 

 

 

By:

 /s/ Nancy G. Moragas

 

 

 

 

 

 

 

Name:

 Nancy G. Moragas

 

 

 

Title:

Senior Vice President

 

 

 

Address:

313 Carondelet St.,  10th Floor

 

 

New Orleans, LA 70112

 

 

Facsimile number:  504-533-5594

 

 

E-Mail Address:

 

 

 

nancy.moragas@capitalonebank.com

 

 

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

 

 

COMERICA BANK

 

 

 

By:

 /s/ Josh Strong

 

 

 

Name:

Josh Strong

 

 

 

Title:

Assistant Vice President

 

 

 

 

 

Address:

910 Louisiana, Ste 410

 

 

Houston, Texas 77002

 

 

 

 

Facsimile number:  713-220-5651

 

 

E-Mail:

jstrong@comerica.com

 

 

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

 

Annex A

 

Commitment Annex
(as of the Closing Date)

 

Lender

 

Revolving
Loan
Commitment
Amount

 

Initial
Borrowing
Base

 

Overadvance
Amount

 

Revolving Loan
Commitment
Percentage

 

Merrill Lynch Capital

 

$

54,000,000

 

$

23,760,000

 

$

3,240,000

 

21.6

%

Bank of Scotland plc

 

$

44,000,000

 

$

19,360,000

 

$

2,640,000

 

17.6

%

Capital One, N.A.

 

$

44,000,000

 

$

19,360,000

 

$

2,640,000

 

17.6

%

U.S. Bank National Association

 

$

44,000,000

 

$

19,360,000

 

$

2,640,000

 

17.6

%

BMO Capital Markets Financing, Inc.

 

$

36,000,000

 

$

15,840,000

 

$

2,160,000

 

14.4

%

Comerica Bank

 

$

28,000,00

 

$

12,320,000

 

$

1,680,000

 

11.2

%

TOTALS

 

$

250,000,000

 

$

110,000,000

 

$

15,000,000

 

100

%

 

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