Exhibit 10.15
 
CREDIT AGREEMENT
among
IVANHOE ENERGY (USA) INC.,
as Borrower
IVANHOE ENERGY INC.,
IVANHOE ENERGY HOLDINGS INC.,
IVANHOE ENERGY ROYALTY INC.,
IVANHOE ENERGY HTL INC.,
IVANHOE HTL PETROLEUM LTD.,
IVANHOE ENERGY PETROLEUM PROJECTS INC.,
AND
IVANHOE ENERGY HTL (USA) INC.,
as Guarantors
LASALLE BANK, NATIONAL ASSOCIATION,
as Administrative Agent and Issuing Lender
AND THE FINANCIAL INSTITUTIONS FROM TIME TO TIME PARTY HERETO,
as Lenders
 
Dated as of OCTOBER 30, 2006

 

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TABLE OF CONTENTS

              Page    
ARTICLE I. DEFINITIONS
    1  
 
       
1.01 Certain Defined Terms
    1  
1.02 Other Interpretive Provisions
    16  
1.03 Accounting Principles
    17  
 
       
ARTICLE II. THE CREDIT
    17  
 
       
2.01 Amounts and Terms of the Commitments
    17  
2.02 Procedure for Borrowings
    18  
2.03 Conversion and Continuation Elections
    18  
2.04 Optional Prepayments
    19  
2.05 Borrowing Base Determinations, Mandatory Prepayments of Loans
    19  
2.06 Repayment
    20  
2.07 Fees
    21  
2.08 Computation of Fees and Interest
    22  
2.09 Payments by the Company; Borrowings Pro Rata
    22  
2.10 Issuing the Letters of Credit
    23  
2.11 Payments by the Lenders to the Administrative Agent
    25  
2.12 Sharing of Payments, Etc.
    26  
 
       
ARTICLE III. TAXES, YIELD PROTECTION AND ILLEGALITY
    26  
 
       
3.01 Taxes
    26  
3.02 Illegality
    27  
3.03 Increased Costs and Reduction of Return
    28  
3.04 Funding Losses
    28  
3.05 Inability to Determine Rates
    29  
3.06 Certificates of Lenders
    29  
3.07 Substitution of Lenders
    29  
3.08 Survival
    29  
 
       
ARTICLE IV. SECURITY
    29  
 
       
4.01 The Security
    29  
4.02 Agreement to Deliver Security Documents
    29  
4.03 Perfection and Protection of Security Interests and Liens
    30  
4.04 Offset
    30  
4.05 Subsidiary Guaranty
    30  
4.06 Assignment of Production
    31  
4.07 Assignment of Runs
    31  

Credit Agreement

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                Page  
ARTICLE V. CONDITIONS PRECEDENT
    32  
 
       
5.01 Conditions of Initial Credit Extensions
    32  
5.02 Conditions to All Loans
    34  
5.03 Post Closing Conditions
    34  
 
       
ARTICLE VI. REPRESENTATIONS AND WARRANTIES
    34  
 
       
6.01 Organization, Existence and Power
    34  
6.02 Corporate Authorization; No Contravention
    35  
6.03 Governmental Authorization
    35  
6.04 Binding Effect
    35  
6.05 Litigation
    35  
6.06 No Default
    35  
6.07 ERISA Compliance
    36  
6.08 Margin Regulations
    36  
6.09 Title to Properties
    36  
6.10 Oil and Gas Reserves
    36  
6.11 Initial Reserve Report
    37  
6.12 Gas Imbalances
    37  
6.13 Taxes
    37  
6.14 Financial Condition
    37  
6.15 Environmental Matters
    38  
6.16 Regulated Entities
    39  
6.17 No Burdensome Restrictions
    39  
6.18 Copyrights, Patents, Trademarks and Licenses, etc.
    39  
6.19 Subsidiaries
    39  
6.20 Insurance
    39  
6.21 Derivative Contracts
    39  
6.22 Full Disclosure
    39  
6.23 Solvency
    39  
 
       
ARTICLE VII. AFFIRMATIVE COVENANTS
    39  
 
       
7.01 Financial Statements
    40  
7.02 Certificates; Other Production and Reserve Information
    40  
7.03 Notices
    42  
7.04 Preservation of Existence, Etc.
    43  
7.05 Maintenance of Property
    43  
7.06 Title Information
    43  
7.07 Additional Collateral
    44  
7.08 Insurance
    44  

Credit Agreement

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                Page  
7.09 Payment of Obligations
    44  
7.10 Compliance with Laws
    44  
7.11 Compliance with ERISA
    45  
7.12 Inspection of Property and Books and Records
    45  
7.13 Environmental Laws
    45  
7.14 New Subsidiary Guarantors
    46  
7.15 Reserved
    46  
7.16 Use of Proceeds
    46  
7.17 Operating Accounts
    46  
7.18 Phase I Reports
    46  
7.19 Further Assurances
    46  
7.20 Derivative Contracts
    47  
 
       
ARTICLE VIII. NEGATIVE COVENANTS
    47  
 
       
8.01 Limitation on Liens
    47  
8.02 Disposition of Assets
    48  
8.03 Consolidations and Mergers
    48  
8.04 Loans and Investments
    49  
8.05 Limitation on Indebtedness
    49  
8.06 Transactions with Affiliates
    50  
8.07 Margin Stock
    50  
8.08 Contingent Obligations
    50  
8.09 Restricted Payments; Restrictive Agreements
    50  
8.10 Derivative Contracts
    51  
8.11 Change in Business and Corporate Structure
    52  
8.12 Accounting Changes
    52  
8.13 ERISA Compliance
    52  
8.14 Financial Covenants
    53  
 
       
ARTICLE IX. EVENTS OF DEFAULT
    54  
 
       
9.01 Event of Default
    54  
9.02 Remedies
    56  
9.03 Rights Not Exclusive
    56  
 
       
ARTICLE X. AGENTS
    56  
 
       
10.01 Appointment and Authorization
    56  
10.02 Duties and Obligations of Administrative Agent
    57  
10.03 Action by Administrative Agent
    57  
10.04 Reliance by Administrative Agent
    58  
10.05 Sub-agents
    58  

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                Page  
10.06 Administrative Agent as Lender
    58  
10.07 No Reliance
    58  
10.08 Administrative Agent May File Proofs of Claim
    59  
10.09 Authority of Administrative Agent to Release Collateral and Liens
    59  
10.10 Reserved
    59  
10.11 Successor Administrative Agent
    59  
10.12 Withholding Tax
    60  
 
       
ARTICLE XI. MISCELLANEOUS
    61  
 
       
11.01 Amendments and Waivers
    61  
11.02 Notices
    62  
11.03 No Waiver; Cumulative Remedies
    63  
11.04 Costs and Expenses
    63  
11.05 Indemnity
    63  
11.06 Payments Set Aside
    64  
11.07 Successors and Assigns
    64  
11.08 Assignments, Participations, etc.
    64  
11.09 Interest
    66  
11.10 Indemnity and Subrogation
    67  
11.11 Collateral Matters; Derivative Contracts
    67  
11.12 USA Patriot Act Notice
    67  
11.13 Automatic Debits of Fees
    67  
11.14 Notification of Addresses, Lending Offices, Etc.
    68  
11.15 Counterparts
    68  
11.16 Severability
    68  
11.17 No Third Parties Benefited
    68  
11.18 Governing Law, Jurisdiction and Waiver of Jury Trial
    68  
11.19 Entire Agreement
    69  
11.20 NO ORAL AGREEMENTS
    69  

Credit Agreement

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SCHEDULES

              Page
Schedule 2.01
Schedule 4.01
Schedule 6.05
Schedule 6.07
Schedule 6.15
Schedule 6.19
Schedule 6.21
Schedule 8.01
Schedule 8.05
Schedule 8.08
Schedule 8.14(c)
Schedule 11.02
  Commitments and Pro Rata Shares
Security Documents
Litigation
ERISA Compliance
Environmental Matters
Subsidiaries
Derivative Contracts
Liens
Indebtedness
Contingent Obligations
Capital Expenditures and G&A Expenses
Lending Offices; Addresses for Notices  

EXHIBITS

     
Exhibit A
Exhibit B
Exhibit C
Exhibit D
Exhibit E
Exhibit F
Exhibit G
Exhibit H
  Form of Notice of Borrowing
Form of Notice of Conversion/Continuation
Form of Compliance Certificate
Form of Assignment and Acceptance Agreement
Form of Note
Form of Pricing Grid Certificate
Form of Continuing Guaranty Agreement
Form of Security Agreement and Pledge

Credit Agreement

 

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CREDIT AGREEMENT
     THIS CREDIT AGREEMENT is dated as of October 30, 2006, among IVANHOE ENERGY
(USA) INC., a Nevada corporation (the “Company”), IVANHOE ENERGY INC., a
corporation formed under the laws of the Yukon Territory of Canada (“Parent”),
IVANHOE ENERGY HOLDINGS INC., a Nevada corporation, IVANHOE ENERGY ROYALTY INC.,
a Nevada corporation, IVANHOE HTL PETROLEUM LTD., a Nevada corporation, IVANHOE
ENERGY PETROLEUM PROJECTS INC., a Nevada corporation, IVANHOE ENERGY HTL INC., a
Nevada corporation, and IVANHOE ENERGY HTL (USA) INC. a Nevada corporation
(collectively “Guarantors”), each of the financial institutions from time to
time party hereto (individually, a “Lender” and collectively, the “Lenders”),
and LASALLE BANK, NATIONAL ASSOCIATION, as administrative agent for the Lenders
(in such capacity, together with its successors in such capacity, the
“Administrative Agent”), and as Issuing Lender (in such capacity, the “Issuing
Lender”).
     In consideration of the representations, warranties, covenants and
agreements contained herein, and other good and valuable consideration, the
receipt and adequacy of which are hereby acknowledged, the Company, Guarantors,
Administrative Agent, Issuing Lender and Lenders hereby agree as follows:
ARTICLE I .
DEFINITIONS
     1.01 Certain Defined Terms. The following terms have the following
meanings:
          “Acquisition” means any transaction or series of related transactions
for the purpose of or resulting, directly or indirectly, in (a) the acquisition
of all or substantially all of the assets of a Person, or of any business or
division of a Person, (b) the acquisition of in excess of 50% of the capital
stock of a corporation (or similar entity), which stock has ordinary voting
power for the election of the members of such entity’s board of directors or
persons exercising similar functions (other than stock having such power only by
reason of the happening of a contingency), or the acquisition of in excess of
50% of the partnership interests or equity of any Person not a corporation which
acquisition gives the acquiring Person the power to direct or cause the
direction of the management and policies of such Person, or (c) a merger or
consolidation or any other combination with another Person.
          “Administrative Agent” has the meaning specified in the introductory
clause hereto.
          “Administrative Agent’s Payment Office” means the address for payments
as the Administrative Agent may from time to time specify.
          “Affected Lender” has the meaning specified in Section 3.07.
          “Affiliate” means, as to any Person, any other Person which, directly
or indirectly, is in control of, is controlled by, or is under common control
with, such Person. A Person shall be deemed to control another Person if the
controlling Person possesses the power to direct or cause the direction of the
management and policies of the other Person, whether through the ownership of
voting securities, by contract, or otherwise.
          “Agent-Related Persons” as to the Administrative Agent, means the
Administrative Agent, its Affiliates, and the officers, directors, employees,
agents and attorneys-in-fact of the Administrative Agent and its Affiliates.
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          “Agreement” means this Credit Agreement.
          “Applicable Margin” means, with respect to Base Rate Loans and LIBOR
Loans, the respective margins therefor as determined under the Pricing Grid.
          “Assignee” has the meaning specified in Subsection 11.08(a).
          “Assignment and Acceptance” has the meaning specified in
Subsection 11.08(a).
          “Attorney Costs” means and includes all reasonable fees and
disbursements of any law firm or other external counsel, the allocated cost of
internal legal services and all disbursements of internal counsel.
          “Availability Period” has the meaning specified in Subsection 2.01(b).
          “Available Borrowing Base” means, at the particular time in question,
the Borrowing Base then in effect minus the Effective Amount at such time.
          “Bankruptcy Code” means the Federal Bankruptcy Reform Act of 1978 (11
U.S.C. §101, et seq.), as amended, and regulations promulgated thereunder.
          “Base Rate” means, for any day, the fluctuating rate of interest in
effect for such day which rate per annum shall be equal to the higher of (a) the
rate of interest as publicly announced from time to time by Administrative Agent
as its “prime commercial lending rate,” and (b) one-half of one percent (0.50%)
per annum above the Federal Funds Rate in effect from time to time. (The “prime
commercial lending rate” is a rate set by Administrative Agent based upon
various factors including costs and desired return, general economic conditions
and other factors, and is used as a reference point for pricing some loans,
which may be priced at, above, or below such announced rate.) Any change in the
prime commercial lending rate announced by Administrative Agent shall take
effect at the opening of business on the day specified in the public
announcement of such change.
          “Base Rate Loan” means a Loan that bears interest based at the Base
Rate plus the Applicable Margin.
          “Borrower Group” means the Company and the Guarantors (other than
Parent).
          “Borrowing” means a borrowing hereunder consisting of Loans of the
same Interest Rate Type made to the Company on the same day by the Lenders under
Article II, and, other than in the case of Base Rate Loans, having the same
Interest Period.
          “Borrowing Base” means at the particular time in question, the amount
provided for in Section 2.05; provided, however, in no event shall the Borrowing
Base ever exceed the Maximum Loan Amount.
          “Borrowing Base Deficiency” means at any time, the Effective Amount
exceeds the Borrowing Base then in effect.
          “Borrowing Base Period” means the period from Closing to the initial
Scheduled Borrowing Base Determination Date, and thereafter, each six-month
period between Scheduled Borrowing Base Determination Dates.
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          “Borrowing Base Reduction Amount” means at the particular time in
question, the amount provided for in Section 2.05.
          “Borrowing Date” means any date on which a Borrowing occurs under
Section 2.02.
          “Business Day” means any day other than a Saturday, Sunday or other
day on which commercial banks in Houston, Texas or Chicago, Illinois are
authorized or required by law to close and, if the applicable Business Day
relates to any LIBOR Loan, means such a day on which dealings are carried on in
the applicable offshore dollar interbank market.
          “Capital Adequacy Regulation” means any guideline, request or
directive of any central bank or other Governmental Authority, or any other law,
rule or regulation, whether or not having the force of law, in each case,
regarding capital adequacy of any Lender or of any corporation controlling a
Lender.
          “Capital Expenditures and General Administrative Expenses” shall be
determined in accordance with and have the same meanings as such terms are used
in GAAP.
          “Capital Lease” means, when used with respect to any Person, any lease
in respect of which the obligations of such Person constitute Capitalized Lease
Obligations.
          “Capitalized Lease Obligations” means, when used with respect to any
Person, without duplication, all obligations of such Person to pay rent or other
amounts under any lease of (or other arrangement conveying the right to use)
real or personal property, or a combination thereof, which obligations shall
have been or should be, in accordance with GAAP, capitalized on the books of
such Person.
          “Cash Equivalents” means: (a) securities issued or fully guaranteed or
insured by the United States Government or any agency thereof and backed by the
full faith and credit of the United States and having maturities of not more
than twelve (12) months from the date of acquisition; (b) certificates of
deposit, time deposits, Eurodollar time deposits, or bankers’ acceptances having
in each case a tenor of not more than twelve (12) months from the date of
acquisition issued by, and demand deposits with, any U.S. commercial bank or any
branch or agency of a non-U.S. commercial bank licensed to conduct business in
the U.S. having combined capital and surplus of not less than $500,000,000,
whose long term securities are rated at least A (or then equivalent grade) by
S&P and A2 (or then equivalent grade) by Moody’s at the time of acquisition;
(c) commercial paper of an issuer rated at least A-1 by S&P or P-1 by Moody’s at
the time of acquisition, and in either case having a tenor of not more than
twelve (12) months; (d) debt securities which are registered under the
Securities Act of 1933, as amended (the “Securities Act”) (and not “restricted
securities” in the Company’s hands as defined in Rule 144 under the Securities
Act), or adjustable rate preferred stock traded on a national securities
exchange and issued by a corporation duly incorporated under the laws of a state
of the United States, or issued by any state, county or municipality located in
the United States of America, provided, however, that such debt securities are
rated A2 by Moody’s and A or better by S&P at the time of acquisition, and such
debt securities have a maturity not in excess of twelve (12) months from the
date of creation thereof; (e) repurchase agreements with a term of not more than
seven (7) days for underlying securities of the types described in clauses
(a) and (b) above; and (f) money market mutual or similar funds having assets in
excess of $100,000,000.
          “Casualty Event” means any loss, casualty or other insured damage to,
or any nationalization, taking under power of eminent domain or by condemnation
or similar proceeding of, any Property of the Company or any Guarantor having a
fair market value in excess of $250,000.
          “Change of Control” means (a) any Person (other than Robert Friedland
and/or his Affiliates) becomes the owner of 25% or more of the
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equity securities of the Parent entitled to vote for members of the board of
directors or equivalent governing body of the Parent on a fully diluted basis;
or (b) the Parent shall cease to own directly or indirectly, 100% of the issued
and outstanding shares of capital stock of the Company or any other Guarantor;
or (c) a sale of all or substantially all of the assets of the Company or any
Guarantor to any Person or group of Persons; or (d) the liquidation or
dissolution of the Company or any Guarantor; or (e) the first day on which a
majority of the board of directors of the Parent are not Continuing Directors.
“Continuing Directors” means any member of the board of directors of the Parent
who (A) is a member of such board of directors as of the date of this Agreement
or (B) was nominated for election or elected to such board of directors with the
affirmative vote of two-thirds of the Continuing Directors who were members of
such board of directors at the time of such nomination or election (not
including as board nominees any directors which the board is obligated to
nominate pursuant to shareholders’ agreements, voting trust arrangements or
similar arrangements).
          “Code” means the Internal Revenue Code of 1986, as amended, and
regulations promulgated thereunder.
          “Collateral” means all property of any kind which is subject to a Lien
in favor of Administrative Agent or which under the terms of any Security
Document is purported to be subject to such Lien.
          “Commitment” means, as to each Lender, such Lender’s Pro Rata Share of
the lesser of (a) the current Borrowing Base or (b) the Maximum Loan Amount, as
such commitment may be terminated and/or reduced from time to time in accordance
with the provisions hereof.
          “Commitment Fee” means the fee payable pursuant to Subsection 2.07(a).
          “Company” has the meaning specified in the introductory paragraph
hereto.
          “Compliance Certificate” means a certificate substantially in the form
of Exhibit C.
          “Consolidated Interest Expense” means, with respect any Person, for
any fiscal period, the sum of the aggregate amount of all costs, fees and
expenses paid such Person in such fiscal period which are classified as interest
expense on the consolidated financial statements of such Person determined in
conformity with GAAP, plus all other cash interest expense paid during such
fiscal period, including any debt issuance costs and commissions, discounts and
other fees and charges associated with Indebtedness, whether or not such amounts
are included as interest expense or are required to be capitalized on such
Person’s balance sheet or are otherwise accounted for under GAAP.
          “Consolidated Net Income” means, for any Person and for any period of
time, the net income (or net loss) of such Person for such period determined on
a consolidated basis in accordance with GAAP; provided, the effect, if any,
resulting from the application of FAS 133 shall be excluded from the calculation
of net income (or net loss).
          “Contingent Obligation” means, as to any Person without duplication,
any direct or indirect liability of that Person with or without recourse,
(a) with respect to any Indebtedness, dividend, letter of credit or other
similar obligation (the “primary obligations”) of another Person (the “primary
obligor”), including any obligation of that Person (i) to purchase, repurchase
or otherwise acquire such primary obligations or any security therefor, (ii) to
advance or provide funds for the payment or discharge of any such primary
obligation, or to maintain working capital or equity capital of the primary
obligor or otherwise to maintain the net worth or solvency or any balance sheet
item, level of income or financial condition of the primary obligor, (iii) to
purchase property, securities or services primarily for the purpose of assuring
the owner of any such primary obligation of the ability of the primary obligor
to make payment of such primary obligation, or (iv)
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otherwise to assure or hold harmless the holder of any such primary obligation
against loss in respect thereof (each, a “Guaranty Obligation”); (b) with
respect to any Surety Instrument issued for the account of that Person or as to
which that Person is otherwise liable for reimbursement of drawings or payments;
(c) to purchase any materials, supplies or other property from, or to obtain the
services of, another Person, other than in the ordinary course of business, if
the relevant contract or other related document or obligation requires that
payment for such materials, supplies or other property, or for such services,
shall be made regardless of whether delivery of such materials, supplies or
other property is ever made or tendered, or such services are ever performed or
tendered, or (d) in respect of any Derivative Contract. The amount of any
Contingent Obligation shall, in the case of Guaranty Obligations, be deemed
equal to the lesser of (a) the stated maximum amount, if any, of such Contingent
Obligation and (b) the maximum stated or determinable amount of the primary
obligation in respect of which such Guaranty Obligation is made or, if not
stated or if indeterminable, the maximum reasonably anticipated liability in
respect thereof, and in the case of other Contingent Obligations, shall be equal
to the lesser of (a) the stated maximum amount, if any, of such Contingent
Obligation and (b) the maximum reasonably anticipated liability in respect
thereof.
          “Continuing Directors” has the meaning specified in the definition of
“Change of Control.”
          “Contractual Obligation” means, as to any Person, any provision of any
security issued by such Person or of any agreement, undertaking, contract,
indenture, mortgage, deed of trust or other instrument, document or agreement to
which such Person is a party or by which it or any of its property is bound.
          “Conversion/Continuation Date” means any date on which, under
Section 2.03, the Company (a) converts Loans of one Interest Rate Type to
another Interest Rate Type, or (b) continues Loans having Interest Periods
expiring on such date as Loans of the same Interest Rate Type but with a new
Interest Period.
          “Credit Extension” means and includes the making of any Loans or
issuance of any Letter of Credit (including the extension of any existing Letter
of Credit) hereunder.
          “Current Assets” means, for any Person as of any time, the current
assets of such Person and its consolidated Subsidiaries, on a consolidated basis
at such time, plus, the Available Borrowing Base at such time, less, for
purposes of this definition, any non-cash gains for any Derivative Contract
resulting from the requirements of FAS 133 at such time.
          “Current Liabilities” means, for any Person as of any time, the
current liabilities of such Person and its consolidated Subsidiaries, on a
consolidated basis at such time, less the sum of (a) current maturities of the
Obligations to the extent such payments are not past due and (b) non-cash losses
or charges on any Derivative Contract resulting from the requirements of FAS 133
at such time.
          “Default” means any event or circumstance which, with the giving of
notice, the lapse of time, or both, would (if not cured or otherwise remedied
during such time) constitute an Event of Default.
          “Default Rate” has the meaning specified in Subsection 2.06(b)(iii).
          “Derivative Contract” means all futures contracts, forward contracts,
swap, cap or collar contracts, option contracts, hedging contracts or other
derivative contracts or similar agreements covering oil and gas commodities or
prices or financial, monetary or interest rate instruments.
          “Dispositions” has the meaning specified in Section 8.02.
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          “Dollars”, “dollars” and “$” each mean lawful money of the United
States.
          “EBITDA” means, for any Person and for any period of time, the sum of
Consolidated Net Income of such Person for such period plus, without
duplication, the following expenses or charges, to the extent deducted from
Consolidated Net Income for such period: exploration expense, interest expense,
depletion, depreciation, amortization, unrealized loss on Derivative Contracts
which relate to hedging, loss on sale of assets, cumulative effect of accounting
changes, income taxes, non-cash deferred stock compensation, and other noncash
charges, minus, without duplication, the following gains or credits to the
extent added to Consolidated Net Income in such twelve month period: unrealized
gain on Derivative Contracts which relate to hedging, gain on sale of assets,
stock based compensation paid, cumulative effect of accounting changes and other
noncash income. All calculations of EBITDA, for any applicable period during
which a permitted Acquisition or Disposition is consummated, shall be determined
on a pro forma basis (such calculation to be acceptable to, and approved by,
Administrative Agent) as if such Acquisition or Disposition was consummated on
the first day of such applicable period.
          “Effective Amount” means on any date, the aggregate outstanding
principal amount of all Loans thereof after giving effect to any prepayments or
repayments of Loans occurring on such date plus the LC Obligation.
          “Effective Date” means the date on which all conditions precedent set
forth in Sections 5.01 and 5.02 are satisfied or waived by Administrative Agent.
          “Eligible Assignee” means (a) a commercial bank organized under the
laws of the United States, or any state thereof, and having a combined capital
and surplus of at least $100,000,000; (b) a commercial bank organized under the
laws of any other country which is a member of the Organization for Economic
Cooperation and Development, or a political subdivision of any such country, and
having a combined capital and surplus of at least $100,000,000, provided that
such bank is acting through a branch or agency located in the United States;
(c) a Person with a combined capital and surplus of at least $100,000,000 that
is primarily engaged in the business of commercial banking and that is (i) a
Subsidiary of a bank, (ii) a Subsidiary of a Person of which a bank is a
Subsidiary, or (iii) a Person of which a bank is a Subsidiary; (d) a finance
company, insurance company or other financial institution or fund (whether a
corporation, partnership, trust or other entity) that is engaged in making,
purchasing or otherwise investing in commercial loans in the ordinary course of
its business and having total assets in excess of $100,000,000; and (e) any
other Person approved by the Administrative Agent.
          “Environmental Claims” means all material claims by any Governmental
Authority or other Person alleging potential liability or responsibility for
violation of any Environmental Law, or for release or injury to the environment.
          “Environmental Laws” means all material federal, state or local laws,
statutes, common law duties, rules, regulations, ordinances and codes, together
with all material administrative orders, requests, licenses, authorizations and
permits of, and agreements with, any Governmental Authorities, in each case
relating to environmental, health, and safety matters.
          “Equity” means all shares, options, warrants, general or limited
partnership interests, participations or other equivalents (regardless of how
designated) of or in a corporation, limited liability company, partnership or
equivalent entity whether voting or nonvoting, including, without limitation,
common stock, preferred stock, or any other “equity security” (as such term is
defined in Rule 3a11-1 of the General Rules and Regulations promulgated by the
Securities and Exchange Commission under the Securities Exchange Act of 1934, as
amended).
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          “ERISA” means the Employee Retirement Income Security Act of 1974, as
amended, and regulations promulgated thereunder.
          “ERISA Affiliate” means any trade or business (whether or not
incorporated) under common control with the Company or any Guarantor within the
meaning of Section 414(b) or (c) of the Code (and Sections 414(m) and (o) of the
Code for purposes of provisions relating to Section 412 of the Code).
          “ERISA Event” means (a) a Reportable Event with respect to a Pension
Plan; (b) a withdrawal by the Company or any Guarantor or any ERISA Affiliate
from a Pension Plan subject to Section 4063 of ERISA during a plan year in which
it was a substantial employer (as defined in Section 4001(a)(2) of ERISA) or a
cessation of operations which is treated as such a withdrawal under
Section 4062(e) of ERISA; (c) a complete or partial withdrawal by the Company or
any Guarantor or any ERISA Affiliate from a Multiemployer Plan or notification
that a Multiemployer Plan is in reorganization; (d) the filing of a notice of
intent to terminate (other than pursuant to Section 4041(b) of ERISA), the
treatment of a Plan amendment as a termination under Section 4041(c) or 4041A of
ERISA, or the commencement of proceedings by the PBGC to terminate a Pension
Plan or Multiemployer Plan; (e) an event or condition which might reasonably be
expected to constitute grounds under Section 4042 of ERISA for the termination
of, or the appointment of a trustee to administer, any Pension Plan or
Multiemployer Plan; or (f) the imposition of any liability under Title IV of
ERISA, other than PBGC premiums due but not delinquent under Section 4007 of
ERISA, upon the Company or any Guarantor or any ERISA Affiliate.
          “Event of Default” means any of the events or circumstances specified
in Section 9.01.
          “Exchange Act” means the Securities and Exchange Act of 1934, and
regulations promulgated thereunder.
          “Existing Credit Agreement” means that certain Credit Agreement dated
as of February 3, 2003 by and between the Company and Wells Fargo Bank, National
Association, as the same has been modified and amended through the date hereof.
          “FAS 133” means Statement No. 133 of the Financial Accounting
Standards Board to Derivative Contracts or any equivalent ruling or regulation
arising under Canadian generally accepted accounting principles.
          “FDIC” means the Federal Deposit Insurance Corporation, and any
Governmental Authority succeeding to any of its principal functions.
          “Federal Funds Rate” means, for any day, the rate set forth in the
weekly statistical release designated as H.15(519), or any successor
publication, published by the Federal Reserve Bank of New York (including any
such successor, “H.15(519)”) on the preceding Business Day opposite the caption
“Federal Funds (Effective)”; or, if for any relevant day such rate is not so
published on any such preceding Business Day, the rate for such day will be the
arithmetic mean as determined by the Administrative Agent of the rates for the
last transaction in overnight Federal funds arranged prior to 9:00 a.m.
(New York, New York time) on that day by each of three leading brokers of
Federal funds transactions in New York, New York selected by the Administrative
Agent.
          “Fee Letter” shall have the meaning specified in Subsection 2.07(c)
hereof.
          “Final Maturity Date” means the earlier of (a) the date that is two
(2) years after the date of this Agreement or (b) the date on which the
Obligations otherwise finally become due and payable in full in accordance with
the provisions of this Agreement.
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          “FRB” means the Board of Governors of the Federal Reserve System, and
any Governmental Authority succeeding to any of its principal functions.
          “GAAP” means generally accepted accounting principles in Canada set
forth from time to time in the opinions and pronouncements of the Canadian
Institute of Chartered Accountants (or agencies with similar functions of
comparable stature and authority within the Canadian 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, any central bank (or similar monetary or
regulatory authority) thereof, any entity exercising executive, legislative,
judicial, regulatory or administrative functions of or pertaining to government,
and any corporation or other entity owned or controlled, through stock or
capital ownership or otherwise, by any of the foregoing.
          “Guarantors” means, collectively, the entities identified in the
introduction hereto as Guarantors, together with any Subsidiary of Ivanhoe
Energy Holdings Inc. which is required to execute a Guaranty under Section 7.15.
“Guarantor” means, individually, any one of the Guarantors.
          “Guaranties” means, collectively, each Continuing Guaranty Agreement,
substantially in the form of Exhibit G hereto, executed by the Guarantors in
favor of Administrative Agent, as same may be amended, supplemented or otherwise
modified from time to time. “Guaranty” means, individually, any one of the
Guaranties.
          “Guaranty Obligation” has the meaning specified in the definition of
“Contingent Obligation.”
          “Highest Lawful Rate” means, as of a particular date, the maximum
nonusurious interest rate that under applicable federal and state law may then
be contracted for, charged or received by the Lenders in connection with the
Obligations.
          “HTL Technology Development Subsidiaries” is a collective reference to
Ivanhoe Energy HTL Inc., Ivanhoe Energy Petroleum Projects Inc., Ivanhoe HTL
Petroleum Ltd., and Ivanhoe Energy HTL (USA) Inc., and any other Subsidiary of
Parent actively engaged in the HTL technology development project currently
ongoing among Parent and certain of its Subsidiaries.
          “Hydrocarbon Interests” means leasehold and other interests in or
under oil, gas and other liquid or gaseous hydrocarbon leases wherever located,
mineral fee interests, overriding royalty and royalty interests, net profit
interests, production payment interests relating to oil, gas or other liquid or
gaseous hydrocarbons wherever located including any reserved or residual
interest of whatever nature.
          “Indebtedness” of any Person means, without duplication, (a) all
indebtedness for borrowed money; (b) all obligations issued, undertaken or
assumed as the deferred purchase price of property or services (other than trade
payables entered into in the ordinary course of business on ordinary terms);
(c) all non-contingent reimbursement or payment obligations with respect to
Surety Instruments; (d) all obligations evidenced by notes, bonds, debentures or
similar instruments, including obligations so evidenced incurred in connection
with the acquisition of property, assets or businesses; (e) all indebtedness
created or arising under any conditional sale or other title retention
agreement, or incurred as financing, in either case with respect to property
acquired by the Person (even though the rights and remedies of the seller or
Lender under such agreement in the event of default are limited to repossession
or sale of such property) including, without limitation, production payments,
net profit interests and other Hydrocarbon Interests subject to repayment out
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           of future Oil and Gas production; (f) all obligations with respect to
Capital Leases; (g) all net obligations with respect to Derivative Contracts;
(h) all indebtedness referred to in clauses (a) through (g) above secured by (or
for which the holder of such Indebtedness has an existing right, contingent or
otherwise, to be secured by) any Lien upon or in property (including accounts
and contracts rights) owned by such Person, even though such Person has not
assumed or become liable for the payment of such Indebtedness; and (i) all
Guaranty Obligations in respect of indebtedness or obligations of others of the
kinds referred to in clauses (a) through (g) above.
          “Indemnified Liabilities” has the meaning specified in Section 11.05.
          “Indemnified Person” has the meaning specified in Section 11.05.
          “Independent Auditor” has the meaning specified in Subsection 7.01(a).
          “Independent Engineer” has the meaning specified in Section 6.11.
          “Initial Reserve Report” has the meaning specified in Section 6.11.
          “Insolvency Proceeding” means (a) any case, action or proceeding
relating to bankruptcy, reorganization, insolvency, liquidation, receivership,
dissolution, winding-up or relief of debtors, or (b) any general assignment for
the benefit of creditors, composition, marshaling of assets for creditors, or
other, similar arrangement in respect of its creditors generally or any
substantial portion of its creditors; undertaken under U.S. federal, state or
foreign law, including the Bankruptcy Code.
          “Interest Payment Date” (a) as to any Base Rate Loan, means the last
Business Day of each month prior to the Final Maturity Date, and the Final
Maturity Date and (b) as to any LIBOR Loan, the last day of each Interest Period
applicable to such Loan; provided, however, that if any Interest Period for a
LIBOR Loan exceeds three months, the date that falls three months after the
beginning of such Interest Period, and the date that falls three months after
each Interest Payment Date thereafter for such Interest Period, is also an
Interest Payment Date.
          “Interest Period” means, as to any LIBOR Loan, the period commencing
on the Borrowing Date of such Loan or on the Conversion/Continuation Date on
which the Loan is converted into or continued as LIBOR Loan, and ending on the
date one, two, three or six months thereafter as selected by the Company in its
Notice of Borrowing or Notice of Conversion/Continuation; provided that: (a) if
any Interest Period would otherwise end on a day that is not a Business Day,
that Interest Period shall be extended to the following Business Day unless, in
the case of a LIBOR Loan, 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; (b) any Interest Period pertaining to
an LIBOR Loan that begins on the last Business Day of a calendar month (or on a
day for which there is no numerically corresponding day in the calendar month at
the end of such Interest Period) shall end on the last Business Day of the
calendar month at the end of such Interest Period; and (c) no Interest Period
for any Loan shall extend beyond the Final Maturity Date.
          “Interest Rate Type” means, with respect to any Loan, the interest
rate, being either the Base Rate or the LIBOR forming the basis upon which
interest is charged against such Loan hereunder.
          “IRS” means the Internal Revenue Service, and any Governmental
Authority succeeding to any of its principal functions under the Code.
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          “Issue” means with respect to any Letter of Credit, to issue or extend
the expiry of, or to renew or increase the amount of, such Letter of Credit; and
the terms “Issued,” “Issuing” and “Issuance” have corresponding meanings.
          “Issuing Lender” has the meaning specified in the introductory clause
hereto.
          “LC Application” means an application or agreement for a standby
Letter of Credit in such form acceptable to the Issuing Lender in its sole
discretion, and duly executed by the Company pursuant to Section 2.10(a).
          “LC Collateral” means any amounts held by the Administrative Agent as
security for LC Obligations of the Company.
          “LC Collateral Account” means a blocked deposit account held by the
Administrative Agent.
          “LC Obligation” means, at the time in question, the sum of the Matured
LC Obligations plus the aggregate amount outstanding under all Letters of Credit
then outstanding.
          “LC Related Document” means the Letters of Credit, LC Applications and
any other document relating to any Letter of Credit including any of the Issuing
Lender’s standard form documents for Letter of Credit issuances.
          “Lenders” has the meaning specified in the introductory clause hereto.
          “Lending Office” means, as to any Lender, the office or offices of
such Lender specified as its “Lending Office” or “Domestic Lending Office” or
“Offshore Lending Office”, as the case may be, on Schedule 11.02, or such other
office or offices as such Lender may from time to time notify the Company and
the Administrative Agent.
          “Letter of Credit” means any stand-by letter of credit issued by the
Issuing Lender pursuant to this Agreement and upon an LC Application.
          “Letter of Credit Fee” means the fee specified in Subsection 2.07(b).
          “LIBOR” ” shall mean a rate of interest equal to (a) the per annum
rate of interest at which United States dollar deposits for a period equal to
the relevant Interest Period are offered in the London Interbank Eurodollar
market at 11:00 a.m. (London time) two Business Days prior to the commencement
of such Interest Period (or three Business Days prior to the commencement of
such Interest Period if banks in London, England were not open and dealing in
offshore United States dollars on such second preceding Business Day), as
displayed in the Bloomberg Financial Markets system (or other authoritative
source selected by the Administrative Agent in its sole discretion), divided by
(b) a number determined by subtracting from 1.00 the then stated maximum reserve
percentage for determining reserves to be maintained by member banks of the
Federal Reserve System for Eurocurrency funding or liabilities as defined in
Regulation D (or any successor category of liabilities under Regulation D), or
as LIBOR is otherwise determined by the Administrative Agent in its sole and
absolute discretion. The Administrative Agent’s determination of LIBOR shall be
conclusive, absent manifest error.
          “LIBOR Loan” means a Loan that bears interest based on LIBOR plus the
Applicable Margin.
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          “Lien” means any security interest, mortgage, deed of trust, pledge,
hypothecation, assignment, charge or deposit arrangement, encumbrance, lien
(statutory or other) or preferential arrangement of any kind or nature
whatsoever in respect of any property (including those created by, arising under
or evidenced by any conditional sale or other title retention agreement and the
interest of a lessor under a Capital Lease), any financing lease having
substantially the same economic effect as any of the foregoing, or the filing of
any financing statement naming the owner of the asset to which such lien relates
as debtor, under the Uniform Commercial Code or any comparable law and any
contingent or other agreement to provide any of the foregoing, but not including
(a) the interest of a lessor under a lease on Oil and Gas Properties and (b) the
interest of a lessor under an Operating Lease.
          “Loan” means an extension of credit by a Lender to the Company under
Article II.
          “Loan Documents” means this Agreement, the Notes, each Guaranty, the
Security Documents, each LC Application and Letter of Credit and all other
documents delivered to the Administrative Agent or any Lender in connection
herewith, including without limitation, the Fee Letter and any commitment
letters.
          “Margin Stock” means “margin stock” as such term is defined in
Regulation T, U or X of the FRB.
          “Material Adverse Effect” means (a) a material adverse change in, or a
material adverse effect upon, the operations, business, properties or financial
condition of the Company or the Company and the Guarantors taken as a whole,
including without limitation, any material adverse change in commodity prices or
reserve estimates of the Oil and Gas Properties of the Company or the Company
and the Guarantors taken as a whole; (b) a material impairment of the ability of
the Company or any Guarantor to perform under any material Loan Document and to
avoid any Default; or (c) a material adverse effect upon the legality, validity,
binding effect or enforceability against the Company or any Guarantor of any
material Loan Document.
          “Matured LC Obligation” means the aggregate amount of payments
theretofore made by the Issuing Lender in respect to Letters of Credit and not
theretofore reimbursed by the Company to the Issuing Lender or deemed Loans
pursuant to Subsection 2.10(d).
          “Maximum Loan Amount” means the amount of $15,000,000.
          “Monthly Status Report” means a status report prepared monthly by the
Company in form, scope and content acceptable to the Administrative Agent,
setting forth as of such month then ended (a) detailing production from the Oil
and Gas Properties, the volumes of Oil and Gas produced and saved, the volumes
of Oil and Gas sold, gross revenue, net income, related leasehold operating
expenses, severance taxes, other taxes, capital costs and any production
imbalances incurred during such period and (b) information concerning any
Derivative Contracts entered into by the Company or any Guarantor, and (c) such
additional information with respect to any of the Oil and Gas Properties as may
be reasonably requested by Administrative Agent.
          “Mortgages” means the mortgages from the Company or any Guarantor in
favor of Administrative Agent, for the benefit of the Lenders, described on
Schedule 4.01 hereto, and all supplements, assignments, amendments and
restatements thereto (or any agreement in substitution therefor) as same may be
released in whole or in part from time to time which are executed and delivered
to Administrative Agent for benefit of the Lenders pursuant to Article IV of
this Agreement.
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          “Mortgaged Properties” means such Oil and Gas Properties upon which
the Company or any Guarantor has granted the Administrative Agent for the
benefit of the Lenders a Lien pursuant to the Mortgages.
          “Multiemployer Plan” means a “multiemployer plan”, within the meaning
of Section 4001(a)(3) of ERISA, to which the Company, any Guarantor or any ERISA
Affiliate makes, is making, or is obligated to make contributions or, during the
preceding three calendar years, has made, or been obligated to make,
contributions.
          “Notes” means the promissory notes, whether one or more, specified in
Section 2.01, substantially in the same form as Exhibit E including any
amendments, modifications, renewals or replacements of such promissory notes.
          “Notice of Borrowing” means a notice in substantially the form of
Exhibit A.
          “Notice of Conversion/Continuation” means a notice in substantially
the form of Exhibit B.
          “Obligations” means all advances, debts, liabilities, obligations,
covenants and duties arising under any Loan Document owing by the Company or any
Guarantor to any Lender, the Administrative Agent, or any Indemnified Person,
whether direct or indirect (including those acquired by assignment), absolute or
contingent, due or to become due, now existing or hereafter arising, including
all net Indebtedness owed to the Lenders or their Affiliates with respect to
Derivative Contracts (except to the extent excluded under Section 11.11).
          “Oil and Gas” means petroleum, natural gas and other related
hydrocarbons or minerals or any of them and all other substances produced or
extracted in association therewith.
          “Oil and Gas Liens” means liens reserved under oil and gas leases,
overriding royalty agreements, net profits agreements, royalty trust agreements,
farm-out agreements, division orders, contracts for the sale, purchase,
exchange, transportation, gathering or processing of oil, gas or other
hydrocarbons, unitizations and pooling designations, declarations, orders and
agreements, development agreements, Operating Agreements, production sales
contracts, area of mutual interest agreements, gas balancing or deferred
production agreements, injection, repressuring and recycling agreements, salt
water or other disposal agreements, seismic or geophysical permits or
agreements, and other agreements that are customary in the oil and gas business
and are entered into by any member of the Borrower Group in the ordinary course
of business, provided in all instances that such Liens are limited to the assets
that are the subject of the relevant agreement.
          “Oil and Gas Properties” means Hydrocarbon Interests now owned by any
member of the Borrower Group and contracts executed in connection therewith and
all tenements, hereditaments, appurtenances, and properties belonging, affixed
or incidental to such Hydrocarbon Interests, including, without limitation, any
and all property, real or personal, now owned by the Company or any Guarantor
and situated upon or to be situated upon, and used, built for use, or useful in
connection with the operating, working or developing of such Hydrocarbon
Interests, including, without limitation, any and all petroleum and/or natural
gas wells, buildings, structures, field separators, liquid extractors, plant
compressors, pumps, pumping units, field gathering systems, tank and tank
batteries, fixtures, valves, fittings, machinery and parts, engines, boilers,
liters, apparatus, equipment, appliances, tools, implements, cables, wires,
towers, taping, tubing and rods, surface leases, rights-of-way, easements and
servitudes, and all additions, substitutions, replacements for, fixtures and
attachments to any and all of the foregoing owned by any member of the Borrower
Group.
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          “Operating Agreements” mean those agreements now or hereafter executed
by any member of the Borrower Group and other working interest owners of the Oil
and Gas Properties in connection with the operation of the Oil and Gas
Properties.
          “Operating Lease” means an operating lease determined in accordance
with GAAP.
          “Organization Documents” means (a) for any corporation: the articles
of incorporation, the bylaws, any certificate of determination or instrument
relating to the rights of the shareholders of such corporation, any shareholder
rights agreement, and all applicable resolutions of the board of directors (or
any committee thereof) of such corporation; (b) for any limited liability
company: the articles of organization, the regulations or operating agreement,
certificate of organization and all applicable resolutions of the members of
such company; and (c) for any limited partnership: the limited partnership
agreement and all Organization Documents for its general partner, as any of the
foregoing have been amended or supplemented from time to time.
          “Other Taxes” means any present or future stamp or documentary taxes
or any other excise or property taxes, charges or similar levies which arise
from any payment made hereunder or from the execution, delivery or registration
of, or otherwise with respect to, this Agreement or any other Loan Documents.
          “Parent” has the meaning specified in the introductory clause hereto.
          “Participant” has the meaning specified in Subsection 11.08(d).
          “PBGC” means the Pension Benefit Guaranty Corporation, or any
Governmental Authority succeeding to any of its principal functions under ERISA.
          “Pension Plan” means a pension plan (as defined in Section 3(2) of
ERISA) subject to Title IV of ERISA, other than a Multiemployer Plan, which the
Company or any Guarantor sponsors, maintains, or to which it makes, is making,
or is obligated to make contributions, or in the case of a multiple employer
plan (as described in Section 4064(a) of ERISA) has made contributions at any
time during the immediately preceding five (5) plan years.
          “Permitted Liens” has the meaning specified in Section 8.01.
          “Person” means an individual, partnership, corporation, limited
liability company, business trust, joint stock company, trust, unincorporated
association, joint venture or Governmental Authority.
          “Plan” means an employee benefit plan (as defined in Section 3(3) of
ERISA) which is subject to ERISA, other than a Multiemployer Plan, which the
Company or any Guarantor sponsors, maintains, or to which it makes, is making,
or is obligated to make contributions, or in the case of a multiple employer
plan (as described in Section 4064(a) of ERISA) has made contributions at any
time during the immediately preceding five (5) plan years.
          “Pricing Grid” means the annualized variable rates (stated in terms of
basis points (“bps”)) set forth below for the Applicable Margin, Commitment Fee
and Letter of Credit Fee, based upon the ratio of the Effective Amount to the
Borrowing Base Amount, as follows:
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                                      Applicable Margin         Effective
Amount/   LIBOR           Commitment   Letter of Credit Borrowing   Rate        
  Fee   Fee Base Amount   (bps)   Base Rate (bps)   (bps)   (bps)
> 90%
    325.00       225.00       50.00       325.00  
< 90% ³ 50%
    300.00       200.00       50.00       300.00  
< 50%
    275.00       175.00       50.00       275.00  

The Pricing Grid for any date shall be determined by reference to the ratio of
the Effective Amount and Borrowing Base as of the last day of the fiscal quarter
most recently ended and any change (a) shall become effective upon the delivery
to the Administrative Agent of a Pricing Grid Certificate of a Responsible
Officer of the Company (which certificate shall be delivered simultaneously with
(i) the delivery of each Notice of Borrowing, any notice required under
Section 2.04, Notice of Conversion/Continuation or a request for issuance or
extension of a Letter of Credit and (ii) any change in the amount of the
Borrowing Base), and (b) shall apply (i) in the case of the Base Rate Loans, to
Base Rate Loans outstanding on such delivery date or made on and after such
delivery date and (ii) in the case of the LIBOR Loans, to LIBOR Loans made,
continued or converted on and after such delivery date. Notwithstanding the
foregoing, at any time during which the Company has failed to deliver the
Pricing Grid Certificate when due, the ratio of Effective Amount to the
Borrowing Base shall be deemed, solely for the purposes of this definition, to
be greater than 90% until such time as the Company shall deliver such
certificate.
          “Pricing Grid Certificate” means a Pricing Grid Certificate
substantially in the form of Exhibit F hereto.
          “Principal Business” means (a) the business of the exploration for,
and development, acquisition, production, and upstream marketing and
transportation of Oil and Gas, (b) the business of developing raw land acquired
in conjunction with the exploration for, and development, acquisition,
production, and upstream marketing and transportation of Oil and Gas, and
remediating such land for resale; (c) the business of owning real estate and
improvements thereon, including rental properties, development and joint
ventures; (d) the business of providing services in connection with the
production of Oil and Gas; and (e) the business of developing and deploying HTL
technology.
          “Production Sales Contracts” mean those agreements now or hereafter
executed in connection with the sale of Oil and Gas attributable to the Oil and
Gas Properties.
          “Property” means any interest in any kind of property or asset,
whether real, personal or mixed, tangible or intangible.
          “Pro Rata Share” means, as to any Lender at any time, the percentage
set forth opposite its name on Schedule 2.01 hereto, as modified by any
Assignment and Acceptance.
          “Regulation U” and “Regulation X” means Regulation U and Regulation X,
respectively, of the FRB from time to time in effect and shall include any
successor or other regulations or official interpretations of the FRB relating
to the subject matter addressed therein.
          “Remedial Work” has the meaning specified in Section 7.13.
          “Replacement Lender” has the meaning specified in Section 3.07.
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          “Reportable Event” means, any of the events set forth in
Section 4043(b) of ERISA or the regulations thereunder, other than any such
event for which the 30-day notice requirement under ERISA has been waived in
regulations issued by the PBGC.
          “Required Lenders” means, at any time, the Administrative Agent and
the Lenders holding at least sixty-six and two-thirds percent (662/3%) of the
sum of the Effective Amount or, if there is no Effective Amount, the
Administrative Agent and the Lenders holding at least sixty-six and two-thirds
percent (662/3%) of the sum of the Commitments of all of the Lenders.
          “Requirement of Law” means, as to any Person, any law (statutory or
common), treaty, rule or regulation or determination of an arbitrator or of a
Governmental Authority, in each case applicable to or binding upon the Person or
any of its property or to which the Person or any of its property is subject.
          “Reserve Report” means a report, in form, scope and content acceptable
to the Lenders, covering proved developed and proved undeveloped Oil and Gas
reserves attributable to the Mortgaged Properties and setting forth with respect
thereto, (a) the total quantity of proved developed and proved undeveloped
reserves (separately classified as to producing, shut-in, behind pipe, and
undeveloped), (b) the estimated future net revenues and cumulative estimated
future net revenues, (c) the present discounted value of future net revenues,
and (d) such other information and data with respect to the Mortgaged Properties
as the Administrative Agent may reasonably request.
          “Responsible Officer” means any CEO or co-CEO, president, chief
financial officer or treasurer of the Company.
          “Scheduled Borrowing Base Determination” means a redetermination of
the Borrowing Base in accordance with Subsection 2.05(a) on each Scheduled
Borrowing Base Determination Date.
          “Scheduled Borrowing Base Determination Date” means December 1 and
June 1 of each calendar year, commencing on December 1, 2006.
          “SEC” means the Securities and Exchange Commission, or any
Governmental Authority succeeding to any of its principal functions.
          “Security Agreements” means collectively, each agreement in
substantially the form of Exhibit H executed by the Company or any Guarantor in
favor of Administrative Agent for the benefit of the Lenders.
          “Security Documents” means the Mortgages, the Security Agreements and
related financing statements as same may be amended from time to time and any
and all other instruments now or hereafter executed in connection with or as
security for the payment of the Obligations.
          “Solvent” means, as to any Person at any time, that (a) the fair value
of all of the property of such Person is greater than the amount of such
Person’s liabilities (including disputed, contingent and unliquidated
liabilities) as such value is established and liabilities evaluated for purposes
of Section 101(32) of the Bankruptcy Code; (b) the present fair salable value of
all of the property of such Person is not less than the amount that will be
required to pay the probable liability of such Person on its debts as they
become absolute and matured; (c) such Person does not intend to, and does not
believe that it will, incur debts or liabilities beyond such Person’s ability to
pay as such debts and liabilities mature; and (d) such Person is not engaged in
business or a transaction, and is not about to engage in business or a
transaction, for which such Person’s property would constitute unreasonably
small capital.
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          “Special Borrowing Base Determination” has the meaning specified in
Subsection 2.05(b).
          “Subsidiary” of a Person means any corporation, limited liability
company, association, partnership, joint venture or other business entity of
which more than 50% of the voting stock or other equity interests (in the case
of Persons other than corporations), is owned or controlled directly or
indirectly by the Person, or one or more of the Subsidiaries of the Person, or a
combination thereof. Unless the context otherwise clearly requires, references
herein to a “Subsidiary” refer to a subsidiary of the Parent.
          “Super-Majority Lenders” means, at any time, the Administrative Agent
and the Lenders holding at least seventy-five percent (75%) of the sum of the
Effective Amount or, if there is no Effective Amount, the Administrative Agent
and the Lenders holding at least seventy-five percent (75%) of the sum of the
Commitments of all of the Lenders.
          “Surety Instruments” means all letters of credit (including standby),
banker’s acceptances, bank guaranties, shipside bonds, surety bonds and similar
instruments.
          “Surface Estate” means any fee simple interest and estate from the
surface down to 500 feet below the surface in any and all such properties less
and except (a) all Oil and Gas beneath, within or that may be produced from any
and all such properties and (b) the right to occupy, use and improve the surface
and subsurface of any and all such properties insofar as necessary or convenient
to prospecting, exploring, and drilling for, producing, storing, treating and
transporting any and all such Oil and Gas.
          “Taxes” means any and all present or future taxes, levies, imposts,
deductions, charges or withholdings thereto imposed upon or related to the
transactions under this Agreement, and all liabilities with respect to this
transaction, excluding, in the case of each Lender and the Administrative Agent,
(a) such taxes (including income taxes or franchise taxes) as are imposed on or
measured by each Lender’s net income, gross receipts or capital by the
jurisdiction (or any political subdivision thereof) under the laws of any
applicable jurisdiction, (b) such withholding taxes as are in effect and would
apply to a payment to such Lender or Administrative Agent at the time such
person becomes a party to this Agreement, for the avoidance of doubt whether as
an original Lender or as an Assignee (or designated a new Lending Office), and
(c) such taxes as would not have been imposed but for the failure of such Lender
to comply with the certification requirements described in Section 10.12 hereof.
          “Termination Date” means the earlier of (a) the date that is eighteen
(18) months after the date of this Agreement, or (b) the date on which the
Lenders’ Commitments terminate in accordance with the provisions of this
Agreement.
          “Total Indebtedness” means, for any Person as of any date, all
Indebtedness of such Person and its Subsidiaries on a consolidated basis.
          “Unfunded Pension Liability” means the excess of a Plan’s benefit
liabilities under Section 4001(a)(16) of ERISA, over the current value of that
Plan’s assets, determined in accordance with the assumptions used for funding
the Pension Plan pursuant to Section 412 of the Code for the applicable plan
year.
          “United States” and “U.S.” each means the United States of America.
          1.02 Other Interpretive Provisions. The meanings of defined terms are
equally applicable to the singular and plural forms of the defined terms. Unless
otherwise specified or the context clearly requires otherwise, the words
“hereof,” “herein,” “hereunder” and similar words refer to this Agreement as a
whole and not to any particular provision of this Agreement; and subsection,
Section,
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Schedule and Exhibit references are to this Agreement. The term “documents”
includes any and all instruments, documents, agreements, certificates,
indentures, notices and other writings, however evidenced. The term “including”
is not limiting and means “including without limitation.” In the computation of
periods of time from a specified date to a later specified date, the word “from”
means “from and including,” the words “to” and “until” each mean “to but
excluding,” and the word “through” means “to and including.” Unless otherwise
expressly provided herein, (a) references to agreements (including this
Agreement) and other contractual instruments shall be deemed to include all
subsequent amendments and other modifications thereto, but only to the extent
such amendments and other modifications are not prohibited by the terms of any
Loan Document, and (b) references to any statute or regulation are to be
construed as including all statutory and regulatory provisions consolidating,
amending, replacing, supplementing or interpreting the statute or regulation.
The captions and headings of this Agreement are for convenience of reference
only and shall not affect the interpretation of this Agreement. This Agreement
and other Loan Documents may use several different limitations, tests or
measurements to regulate the same or similar matters. All such limitations,
tests and measurements are cumulative and shall each be performed in accordance
with their terms. This Agreement and the other Loan Documents are the result of
negotiations among and have been reviewed by counsel to the Administrative
Agent, the Company and the other parties, and are the products of all parties.
Accordingly, they shall not be construed against the Lenders or the
Administrative Agent merely because of the Administrative Agent’s or Lenders’
involvement in their preparation.
     1.03 Accounting Principles. Unless the context otherwise clearly requires,
all accounting terms not expressly defined herein shall be construed, and all
financial computations required under this Agreement shall be made, in
accordance with GAAP, consistently applied. References to “consolidated,” when
it precedes any accounting term, means such term as it would apply to the Parent
and its Subsidiaries or the Borrower Group, as applicable, each on a
consolidated basis, determined in accordance with GAAP.
ARTICLE II .
THE CREDIT
     2.01 Amounts and Terms of the Commitments.
          (a) Each Lender severally agrees, on the terms and conditions set
forth herein, to make loans to the Company (each such loan, a “Loan”) from time
to time on any Business Day during the period from the Effective Date to the
Termination Date, so long as (a) with respect to any Lender, such Loans then
requested to be made by such Lender do not exceed such Lender’s Pro Rata Share
of the aggregate amount of all Loans then requested from the Lenders, and
(b) the aggregate amount of all the Lenders’ Loans and the LC Obligation
outstanding at any time does not exceed the Borrowing Base in effect at such
time. The obligation of the Company to repay to each Lender the aggregate amount
of all Loans made by such Lender, together with interest accruing in connection
therewith, shall be evidenced by a promissory note from the Company payable to
the order of such Lender (herein called such Lender’s “Note” and collectively,
the “Notes”). The amount of principal owing on any Lender’s Note at any given
time shall be the aggregate amount of all Loans theretofore made by such Lender
minus all payments of principal theretofore received by such Lender on such
Note. Interest on each Note shall accrue and be due and payable as provided
herein and therein. Subject to the terms and conditions hereof, until the
Termination Date, Company may borrow, repay, and reborrow hereunder.
          (b) Subject to the terms and conditions of Section 2.10 below and
relying upon the representations and warranties herein set forth, the Issuing
Lender for the account of the Lenders agrees to issue Letters of Credit as
support for payment obligations incurred by the Company in the ordinary course
of business upon the request of the Company at any time and from time to time on
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and after the Effective Date and up to, but excluding, the Termination Date (the
“Availability Period”). No Letter of Credit will be issued in a face amount
which, after giving effect to the issuance of such Letter of Credit, would cause
either the LC Obligation to exceed $500,000 or the Effective Amount to exceed
the Borrowing Base then in effect. If any Letter of Credit has been drawn upon
and the amount so drawn has not been reimbursed to the Issuing Lender, the
Commitment of each Lender shall be deemed to be utilized for all purposes hereof
in an amount equal to such Lender’s Pro Rata Share of the LC Obligations.
          (c) Upon not less than five (5) Business Days’ notice, the Company may
(i) terminate the Loan Documents and the Commitment of each Lender, provided
that all Obligations are paid and discharged in full concurrently with such
termination or (ii) permanently reduce the unused portion of the Maximum Loan
Amount in an amount equal to $250,000 or any integral multiple of $250,000 in
excess thereof.
     2.02 Procedure for Borrowings.
          (a) Each Borrowing of Loans shall be made upon the Company’s
irrevocable written notice delivered to the Administrative Agent in the form of
a Notice of Borrowing duly completed; which notice must be received by the
Administrative Agent prior to 11:00 a.m. (Chicago, Illinois time) (i) three
(3) Business Days prior to the requested Borrowing Date, in the case of LIBOR
Loans; and (ii) on the requested Borrowing Date, in the case of Base Rate Loans.
          (b) Each Notice of Borrowing shall specify (i) the amount of the
Borrowing, which shall be in an aggregate minimum amount (A) for Base Rate Loans
equal to the lesser of (y) $250,000 or any multiple integrals of $250,000 in
excess thereof or (z) the unadvanced portion of the Available Borrowing Base and
(B) for LIBOR Loans $250,000 or any multiple integrals of $250,000 in excess
thereof (if the Available Borrowing Base as of such Borrowing Date will be less
than $250,000, then the Company may not request a LIBOR Loan); (ii) the
requested Borrowing Date, which shall be a Business Day; (iii) the Interest Rate
Type of Loans comprising the Borrowing; and (iv) for LIBOR Loans the duration of
the Interest Period applicable to such Loans. If the Notice of Borrowing fails
to specify the duration of the Interest Period for any Borrowing comprised of
LIBOR Loans, such Interest Period shall be three months.
          (c) The number of tranches outstanding of Base Rate Loans and LIBOR
Loans, whether under a Borrowing, conversion or continuation, shall not exceed
five (5) at any one time.
          (d) The Administrative Agent will promptly notify each Lender of its
receipt of any Notice of Borrowing and of the amount of such Lender’s Pro Rata
Share of that Borrowing.
          (e) Provided the applicable conditions in Article V are met, each
Lender will make the amount of its Pro Rata Share of each Borrowing available to
the Administrative Agent for the account of the Company at the Administrative
Agent’s Payment Office by 1:00 p.m. (Chicago, Illinois time) on the Borrowing
Date requested by the Company in funds immediately available to the
Administrative Agent. The proceeds of all such Loans will then be made available
to the Company by the Administrative Agent to the Company’s operating account
with the Administrative Agent or by wire transfer in accordance with written
instructions provided to the Administrative Agent by the Company of like funds
as received by the Administrative Agent.
     2.03 Conversion and Continuation Elections.
          (a) During the period from the Effective Date to the Final Maturity
Date, the Company may, upon irrevocable written notice to the Administrative
Agent in accordance with Subsection 2.03(b): (i) elect, as of any Business Day,
in the case of Base Rate Loans, or as of the last day of the applicable Interest
Period, in the case of LIBOR Loans, to convert any such Loans into Loans of any
other Interest Rate Type; or
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(ii) elect as of the last day of the applicable Interest Period, to continue any
Loans having Interest Periods expiring on such day; provided, that if at any
time a LIBOR Loan in respect of any Borrowing is reduced, by payment,
prepayment, or conversion of part thereof to less than $250,000, such LIBOR Loan
shall automatically convert into a Base Rate Loan.
          (b) The Company shall deliver a Notice of Conversion/Continuation to
be received by the Administrative Agent not later than 11:00 a.m. (Chicago,
Illinois time) at least (i) three (3) Business Days in advance of the
Conversion/Continuation Date, if the Loans are to be converted into or continued
as LIBOR Loans; and (ii) on the Conversion/Continuation Date, if the Loans are
to be converted into Base Rate Loans, specifying: (A) the proposed
Conversion/Continuation Date; (B) the aggregate amount of Loans to be converted
or continued; (C) the Interest Rate Type of Loans resulting from the proposed
conversion or continuation; and (D) other than in the case of conversions into
Base Rate Loans, the duration of the requested Interest Period.
          (c) If upon the expiration of any Interest Period applicable to LIBOR
Loans, the Company has failed to select timely a new Interest Period to be
applicable to LIBOR Loans, or if any Default or Event of Default then exists,
the Company shall be deemed to have elected to convert such LIBOR Loans into
Base Rate Loans effective as of the expiration date of such Interest Period.
          (d) The Administrative Agent will promptly notify each Lender of its
receipt of a Notice of Conversion/Continuation, or, if no timely notice is
provided by the Company, the Administrative Agent will promptly notify each
Lender of the details of any automatic conversion. All conversions and
continuations shall be made ratably according to the respective Lender’s Pro
Rata Share of outstanding principal amounts of the Loans with respect to which
the notice was given.
     2.04 Optional Prepayments. Subject to Section 3.04, the Company may, at any
time or from time to time,
          (a) prepay Base Rate Loans, without premium or penalty, upon
irrevocable notice to the Administrative Agent of not less than one (1) Business
Day, ratably as to each Lender, in whole or in part, in aggregate minimum
principal amounts of $250,000 or multiple integrals thereof (unless the
outstanding principal amount of all Base Rate Loans is less than $250,000, then
such prepayments shall be equal to such outstanding principal amount) and
          (b) prepay LIBOR Loans, without premium or penalty (but subject to
Section 3.04) upon irrevocable notice to the Administrative Agent of not less
than three (3) Business Days, ratably as to each Lender, in whole or in part, in
aggregate minimum principal amounts of $250,000 or multiple integrals thereof.
Each such notice of prepayment shall specify the date and amount of such
prepayment and the Interest Rate Type(s) of Loans to be prepaid. The
Administrative Agent will promptly notify each Lender of its receipt of any such
notice, and of such Lender’s Pro Rata Share of such prepayment. The payment
amount specified in such notice shall be due and payable on the date specified
therein.
     2.05 Borrowing Base Determinations, Mandatory Prepayments of Loans.
          (a) Scheduled Borrowing Base Determinations. At all times prior to the
Final Maturity Date, the Effective Amount shall not exceed the Borrowing Base
then in effect. From and after the Effective Date, the initial Borrowing Base
hereunder shall be $8,000,000, and the initial Borrowing Base Reduction Amount
shall be $250,000, in each case until redetermined pursuant to the terms of this
Section 2.05. Upon notice to the Company, the Borrowing Base and the Borrowing
Base Reduction Amount shall be redetermined for each Borrowing Base Period on
each Scheduled Borrowing Base Determination Date, and each such redetermination
shall be effective as of the date set forth in such notice of redetermination.
The
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Borrowing Base and the Borrowing Base Reduction Amount shall be determined based
upon the loan collateral value assigned to the Mortgaged Properties and such
other credit factors (including without limitation the assets, liabilities, cash
flow, business, properties, prospects, management and ownership of the Company
and the Guarantors) which the Lenders deem significant. The Lenders’
determination of the Borrowing Base and the Borrowing Base Reduction Amount
shall be in their sole discretion and shall not be subject to review or
challenge under Sections 11.18 and 11.19 hereof. Upon each redetermination of
the Borrowing Base and the Borrowing Base Reduction Amount, the Administrative
Agent shall recommend to the Lenders a new Borrowing Base and a new Borrowing
Base Reduction Amount and the Lenders in accordance with their customary
policies and procedures for extending credit to Oil and Gas reserve-based
customers shall (by unanimous agreement in the case of Borrowing Base increases
or Borrowing Base Reduction Amount decreases and by agreement of the
Super-Majority Lenders in the case of Borrowing Base decreases or affirmations
or Borrowing Base Reduction Amount increases or affirmations) establish the
redetermined Borrowing Base and Borrowing Base Reduction Amount. If the Company
does not furnish the Reserve Reports or all such other information and data by
the date required, the Lenders may nonetheless determine a new Borrowing Base
and Borrowing Base Reduction Amount. It is expressly understood that the Lenders
shall have no obligation to determine the Borrowing Base or the Borrowing Base
Reduction Amount at any particular amount, either in relation to the Maximum
Loan Amount or otherwise.
          (b) Special Borrowing Base Determinations. In addition to Scheduled
Borrowing Base Determinations pursuant to Subsection 2.05(a), the Company and
the Lenders may each request one (1) additional redetermination of the Borrowing
Base and Borrowing Base Reduction Amount during each Borrowing Base Period
(“Special Borrowing Base Determination”). In the event the Company requests a
Special Borrowing Base Determination pursuant to this Subsection 2.05(b), the
Company shall deliver written notice of such request to the Lenders which shall
include: (i) Reserve Report(s) prepared as of a date not more than thirty
(30) calendar days prior to the date of such request, for the benefit of the
Lenders, and (ii) such other information as the Lenders shall request prepared
as of a date not more than thirty (30) calendar days prior to the date of such
request. Likewise, in the event the Lenders exercise their option for a Special
Borrowing Base Determination, the Administrative Agent shall give the Company
notice of the redetermined Borrowing Base and Borrowing Base Reduction Amount.
          (c) Interim Borrowing Base Reductions. On the last day of each month
after each Schedule Borrowing Base Determination Date or the date of each
Special Borrowing Base Determination, the Borrowing Base shall, automatically
and without notice or further action, reduce by the Borrowing Base Reduction
Amount most recently determined or redetermined.
          (d) Mandatory Prepayment of Loans. If on any date a Borrowing Base
Deficiency shall exist as a result of a Borrowing Base redetermination or the
application of a Borrowing Base Reduction Amount, then the Company shall
exercise any one or combination of the following (subject to the proviso below):
(i) make a mandatory principal prepayment in an amount equal to the amount of
the Borrowing Base Deficiency, either (x) in a lump sum payment within thirty
(30) days after such Borrowing Base redetermination or (y) in three (3) equal
consecutive monthly installments commencing on the last day of the month
following the date of such Borrowing Base redetermination; or (ii) within thirty
(30) days after such Borrowing Base redetermination, pledge, or cause any
Guarantor to pledge, additional unencumbered collateral of sufficient value and
character (as determined by the Lenders in their sole discretion) that when
added to the existing Collateral shall cause the Borrowing Base to equal or
exceed the Effective Amount; provided that if the Borrowing Base Deficiency
shall exist as the result of the application of any Borrowing Base Reduction
Amount or occurs after the Termination Date, the Borrower shall eliminate the
Borrowing Base Deficiency by making a lump sum payment within three (3) days
after the Borrowing Base Deficiency occurs.
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          2.06 Repayment.
     (a) Principal. The Company shall repay to the Administrative Agent (for the
account of the Lenders in accordance with their respective Pro Rata Shares) the
Effective Amount outstanding on the Termination Date in six (6) equal
consecutive monthly installments, commencing on the last day of the month in
which the Termination Date occurs and continuing on the last day of each month
thereafter until paid in full. If not sooner paid in full, all Obligations shall
be due and payable in full on the Final Maturity Date.
     (b) Interest.
          (i) Each Loan shall bear interest on the aggregate outstanding
principal amount thereof from the applicable Borrowing Date or date of
conversion or continuation pursuant to Section 2.03, as the case may be, at a
rate per annum equal to the lesser of (A) the LIBOR or the Base Rate, as the
case may be, plus the Applicable Margin, or (B) the Highest Lawful Rate.
          (ii) Interest on each Loan shall be paid in arrears on each Interest
Payment Date. Interest shall also be paid on the date of any prepayment of Loans
under Subsection 2.04(b) or 2.05(d) (except in the case of Base Rate Loans) for
the portion of the Loans so prepaid and upon payment (including prepayment) in
full thereof and, during the existence of any Event of Default, interest shall
be paid on demand of the Administrative Agent.
          (iii) Notwithstanding Subsection 2.06(b)(i), while any Event of
Default exists, the Company shall pay interest (after, as well as before, entry
of judgment thereon, to the extent permitted by law) on the principal amount of
all outstanding Loans, at a rate per annum equal to the lesser of (A) the
Highest Lawful Rate and (B) the Base Rate plus the Applicable Margin for Base
Rate Loans plus two percent (2%)(the “Default Rate”).
     2.07 Fees.
          (a) Commitment Fee. The Company shall pay to the Administrative Agent,
for the account of the Lenders, an aggregate commitment fee calculated on the
average daily amount of the Available Borrowing Base at a per annum rate equal
to the amount set forth on the Pricing Grid. Such commitment fee shall accrue
from the Effective Date to the Termination Date and shall be due and payable
quarterly in arrears on the first Business Day of the first month of each
quarter commencing on January 2, 2007, through the Termination Date, with the
final payment to be made on the Termination Date; provided that, in connection
with any reduction or termination of Commitments, the accrued commitment fee
calculated for the period ending on such date shall also be paid on the date of
such reduction or termination, with the following quarterly payment being
calculated on the basis of the period from such reduction or termination date to
the following quarterly payment date. The commitment fee provided in this
subsection shall accrue at all times after the Effective Date up to the
Termination Date, including at any time during which one or more conditions in
Section 5.02 are not met.
          (b) Letter of Credit Fee. The Company agrees to pay (i) to Issuing
Lender (for the ratable account of the Lenders in their respective Pro Rata
Shares), a fee for each Letter of Credit, to be paid quarterly in arrears
following the Issuance of such Letter of Credit (including the initial Issuance
and any renewal, extension or increase in the amount thereof) in the amount
equal to the greater of (A) $500.00 and (B) the product equal to the Letter of
Credit rate set forth on the Pricing Grid multiplied by the undrawn amount
available under such Letter of Credit (such fee shall be deemed to be fully
earned and owing upon the Issuance of such Letter of Credit, and no refund shall
be due in the event such Letter of Credit is terminated prior to its expiry
date), and (ii) to the Issuing Lender for its account a fee for the issuance of
each Letter of Credit (including the initial Issuance and any renewal, extension
or increase in the amount thereof), at the Issuance of such Letter of Credit, in
an amount equal to the greater of (A) $500.00 and (B) one-eighth of one percent
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(0.125%) multiplied by the aggregate amount available under each Letter of
Credit (such fees shall be prorated for any period less than a full year but
shall not be refunded in the event any such Letter of Credit is terminated prior
to its expiry date) and (iii) Issuing Lender’s usual and customary fees for
amendment to transfer of or negotiation of the terms of each Letter of Credit.
The Administrative Agent shall pay to each Lender its Pro Rata Share of the
Letter of Credit Fee paid pursuant to Subsection 2.07(b)(i). The Administrative
Agent shall pay to the Issuing Lender the Letter of Credit fees paid pursuant to
Subsection 2.07(b)(ii) and (iii).
          (c) Agency Fees. The Company shall pay fees to the Administrative
Agent for the Administrative Agent’s own account, as required by that certain
letter agreement (as the same may be from time to time modified or amended, the
“Fee Letter”) between the Company and the Administrative Agent of even date
herewith, relating hereto.
     2.08 Computation of Fees and Interest.
          (a) All computations of interest for Base Rate Loans shall be made on
the basis of a year of 365 or 366 days, as the case may be, and actual days
elapsed. All other computations of fees and interest shall be made on the basis
of a 360-day year and actual days elapsed (which results in more interest being
paid than if computed on the basis of a 365-day year). Interest and fees shall
accrue during each period during which interest or such fees are computed from
the first day thereof to the last day thereof.
          (b) Each determination of an interest rate by the Administrative Agent
shall be conclusive and binding on the Company and the Lenders in the absence of
manifest error.
     2.09 Payments by the Company; Borrowings Pro Rata.
          (a) All payments to be made by the Company shall be made without
set-off, recoupment or counterclaim. All payments by the Company shall be made
in immediately available funds to the Administrative Agent by credit to the
Company’s operating account at the Administrative Agent’s Payment Office for the
account of the Administrative Agent or the Lender to whom such payment is owed,
and shall be made in dollars and in immediately available funds, no later than
11:00 a.m. (Chicago, Illinois time) on the date specified herein. Except to the
extent otherwise provided herein, (i) each payment by the Company of fees shall
be made pro rata for the account of the Lenders in accordance with their
respective Pro Rata Shares, (ii) each payment of principal of Loans shall be
made for the pro rata account of the Lenders in accordance with their respective
outstanding principal amount of Loans, and (iii) each payment of interest on
Loans shall be made for the account of the Lenders pro rata in accordance with
their respective shares of the aggregate amount of interest due and payable to
the Lenders. Notwithstanding the foregoing, to the extent money is received by
the Administrative Agent pursuant to the exercise of remedies under the Security
Documents such money shall be applied to the pro rata payment of Obligations
secured by such Security Document.
          (b) The Administrative Agent will promptly distribute to each Lender
its applicable share of such payment in like funds as received. Any payment
received by the Administrative Agent later than 11:00 a.m. (Chicago, Illinois
time) shall be deemed to have been received on the following Business Day and
any applicable interest or fee shall continue to accrue. When the Administrative
Agent collects or receives money on account of the Obligations or otherwise
pursuant to the Security Documents if such money is insufficient to pay all such
Obligations, such money shall be applied first to any reimbursements due
Administrative Agent under Section 11.05 or 11.06.
          (c) Subject to the provisions set forth in the definition of “Interest
Period” herein, whenever any payment is due on a day other than a Business Day,
such payment shall be made on the following Business Day, and such extension of
time shall in such case be included in the computation of interest or fees, as
the case may be.
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          (d) Unless the Administrative Agent receives notice from the Company
prior to the date on which any payment is due to the Lenders that the Company
will not make such payment in full as and when required, the Administrative
Agent may assume that the Company has made such payment in full to the
Administrative Agent on such date in immediately available funds and the
Administrative Agent may (but shall not be so required), in reliance upon such
assumption, distribute to each Lender on such due date an amount equal to the
amount then due such Lender. If and to the extent the Company has not made such
payment in full to the Administrative Agent, each Lender shall repay to the
Administrative Agent on demand such amount distributed to such Lender, together
with interest thereon for each day from the date such amount is distributed to
such Lender until two days following demand by the Administrative Agent at the
Federal Funds Rate and for each day thereafter until the date repaid at the Base
Rate.
          (e) Except to the extent otherwise expressly provided herein, each
borrowing hereunder shall be from the Lenders pro rata in accordance with their
respective Pro Rata Shares.
     2.10 Issuing the Letters of Credit.
          (a) Subject to the terms and conditions set forth herein, the Company
may request the Issuing Lender to issue Letters of Credit for its own account,
in a form reasonably acceptable to the Administrative Agent and the Issuing
Lender, at any time and from time to time during the Availability Period;
provided that the Company may not request the issuance, amendment, renewal or
extension of Letters of Credit hereunder if the Effective Amount exceeds the
Borrowing Base at such time or would exceed the Borrowing Base as a result
thereof.
          (b) In order to effect the issuance of a Letter of Credit, the Company
shall submit a Notice of Borrowing and a LC Application in writing by telecopy
to the Administrative Agent (who shall promptly notify the Issuing Lender) not
later than 1:00 p.m., Chicago, Illinois time, three (3) Business Days before the
requested date of issuance of such Letter of Credit. Each such Notice of
Borrowing and LC Application shall (i) be signed by the Company, (ii) specify
the Business Day on which such Letter of Credit is to be issued, (iii) specify
the purpose for the requested Letter of Credit, (iv) specify the availability
for Letters of Credit under (A) the Borrowing Base and (B) the $500,000
aggregate LC Obligation limitation, as of the date of issuance of such Letter of
Credit, and (v) specify the expiry date thereof, which shall not be later than
the earlier of (A) twelve (12) months from the date of issuance of such Letter
of Credit and (B) five (5) Business Days prior to the Final Maturity Date.
          (c) Upon satisfaction of the applicable terms and conditions set forth
in Article V, the Issuing Lender shall issue such Letter of Credit to the
specified beneficiary not later than the close of business, Chicago, Illinois
time, on the date so specified. The Administrative Agent shall provide the
Company and each Lender with a copy of each Letter of Credit so issued. Each
such Letter of Credit shall (i) provide for the payment of drafts, presented for
honor thereunder by the beneficiary in accordance with the terms thereon, at
sight when accompanied by the documents described therein and (ii) unless
otherwise expressly agreed by the Issuing Lender and the Company at the time
such Letter of Credit is issued, be subject to the rules of the “International
Standby Practices 1998” or such later version as may be published by the
Institute of International Banking Law and Practice (the “ISP 1998”), or any
successor entity, and shall, as to matters not governed by the ISP 1998, be
governed by, and construed and interpreted in accordance with, the laws of the
State of New York.
          (d) Upon the issuance date of each Letter of Credit, the Issuing
Lender shall be deemed, without further action by any party hereto, to have sold
to each other Lender, and each other Lender shall be deemed, without further
action by any party hereto, to have purchased from the Issuing Lender, a
participation, to the extent of such Lender’s Pro Rata Share, in such Letter of
Credit, the obligations
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thereunder and in the reimbursement obligations of the Company due in respect of
drawings made under such Letter of Credit. If requested by the Issuing Lender,
the other Lenders will execute any other documents reasonably requested by the
Issuing Lender to evidence the purchase of such participation.
          (e) Upon the presentment of any draft for honor under any Letter of
Credit by the beneficiary thereof which the Issuing Lender determines is in
compliance with the conditions for payment thereunder, the Issuing Lender shall
promptly notify the Company, the Administrative Agent and each Lender of the
intended date of honor of such draft and the Company hereby promises and agrees,
at the Company’s option, to either (i) pay to the Administrative Agent for the
account of the Issuing Lender, by 11:00 a.m., Chicago, Illinois time, on the
date payment is due as specified in such notice, the full amount of such draft
in immediately available funds or (ii) request a Loan pursuant to the provisions
of Subsection 2.01(a) and Section 2.02 of this Agreement in the full amount of
such draft, which request shall specify that the Borrowing Date is to be the
date payment is due under the Letter of Credit as specified in the Issuing
Lender’s notice. If the Company fails timely to make such payment because a Loan
cannot be made pursuant to Subsection 2.01(a) and/or Section 5.02, each Lender
shall, notwithstanding any other provision of this Agreement (including the
occurrence and continuance of a Default or an Event of Default), make available
to the Administrative Agent for the benefit of the Issuing Lender an amount
equal to its Pro Rata Share of the presented draft on the day the Issuing Lender
is required to honor such draft. If such amount is not in fact made available to
the Administrative Agent by such Lender on such date, such Lender shall pay to
the Administrative Agent for the account of the Issuing Lender, on demand made
by the Issuing Lender, in addition to such amount, interest thereon at the
Federal Funds Rate for the first two days following demand and thereafter until
paid at the Base Rate. Upon receipt by the Administrative Agent from the Lenders
of the full amount of such draft, notwithstanding any other provision of this
Agreement (including the occurrence and continuance of a Default or an Event of
Default) the full amount of such draft shall automatically and without any
action by the Company, be deemed to have been a Base Rate Loan as of the date of
payment of such draft. Nothing in this Subsection 2.10(e) or elsewhere in this
Agreement shall diminish the Company’s obligation under this Agreement to
provide the funds for the payment of, or on demand to reimburse the Issuing
Lender for payment of, any draft presented to, and duly honored by, the Issuing
Lender under any Letter of Credit, and the automatic funding of a Loan as in
this subsection provided shall not constitute a cure or waiver of the Event of
Default for failure to provide timely such funds as in this subsection agreed.
          (f) In order to induce the issuance of Letters of Credit by the
Issuing Lender and the purchase of participations therein by the other Lenders,
the Company agrees with Administrative Agent, Issuing Lender and the other
Lenders that neither Administrative Agent nor any Lender (including the Issuing
Lender) shall be responsible or liable (except as provided in the following
sentence) for amounts paid by the Issuing Lender, as provided in
Subsection 2.10(e), on account of drafts so honored under the Letters of Credit,
and the Company’s unconditional obligation to reimburse the Issuing Lender
through the Administrative Agent for such amounts shall not be affected by, any
circumstance, act or omission whatsoever (whether or not known to the
Administrative Agent or any Lender (including the Issuing Lender) other than a
circumstance, act or omission resulting from the gross negligence or willful
misconduct of the Administrative Agent or any Lender, including the Issuing
Lender. The Company agrees that any action taken or omitted to be taken by the
Administrative Agent or any Lender (including the Issuing Lender) under or in
connection with any Letter of Credit or any related draft, document or Property
shall be binding on the Company and shall not put the Administrative Agent or
any Lender (including the Issuing Lender) under any resulting liability to the
Company, unless such action or omission is the result of the gross negligence or
willful misconduct of the Administrative Agent or any such Lender (including the
Issuing Lender). The Company hereby waives presentment for payment (except the
presentment required by the terms of any Letter of Credit) and notice of
dishonor, protest and notice of protest with respect to drafts honored under the
Letters of Credit. The Issuing Lender agrees promptly to notify the Company
whenever a draft is presented under any Letter of Credit, but failure to so
notify the Company shall not in any way affect the Company’s obligations
hereunder. Subject to Section 3.07, if while any Letter of Credit is
outstanding, any law, executive order or regulation is
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enforced, adopted or interpreted by any public body, governmental agency or
court of competent jurisdiction so as to affect any of the Company’s obligations
or the compensation to any Lender in respect of the Letters of Credit or the
cost to such Lender of establishing and/or maintaining the Letters of Credit (or
any participation therein), such Lender shall promptly notify the Company
thereof in writing and within ten (10) Business Days after receipt by the
Company of such Lender’s request (through the Administrative Agent) for
reimbursement or indemnification or within thirty (30) days after receipt of a
notice in respect of Taxes or Other Taxes, the Company shall reimburse or
indemnify such Lender, as the case may be, with respect thereto so that such
Lender shall be in the same position as if there had been no such enforcement,
adoption or interpretation, unless the Company notifies the Administrative Agent
of its good faith contest to, and dispute of, the requested amount. The
foregoing agreement of the Company to reimburse or indemnify the Lenders shall
apply in (but shall not be limited to) the following situations: an imposition
of or change in reserve, capital maintenance or other similar requirements or in
excise or similar taxes or monetary restraints, except a change in franchise
taxes imposed on such Lender or in tax on the net income of such Lender.
          (g) In the event that any provision of a LC Application is
inconsistent with, or in conflict of, any provision of this Agreement, including
provisions for the rate of interest applicable to drawings thereunder or rights
of setoff or any representations, warranties, covenants or any events of default
set forth therein, the provisions of this Agreement shall govern.
          (h) If the Obligations, or any part thereof, are declared or otherwise
become immediately due and payable pursuant to Article IX of this Agreement (for
the purposes of this subsection, the “Matured Obligations”), then all LC
Obligations shall become immediately due and payable without regard for actual
drawings or payments on the Letters of Credit, and the Company shall be
obligated to pay to the Administrative Agent immediately an amount equal to the
LC Obligations. All amounts made due and payable by the Company under this
Subsection 2.10(h) may be applied as the Issuing Lender and the Lenders elect to
any of the various LC Obligations; provided, however, that such amounts applied
by the Issuing Lender and the Lenders to the LC Obligations shall be (i) first
applied to the Matured LC Obligations, and (ii) second held by the
Administrative Agent for the benefit of the Issuing Lender and the Lenders as LC
Collateral in the LC Collateral Account until all remaining Matured Obligations
have been satisfied. This Subsection 2.10(h) shall not limit or impair any
rights which the Administrative Agent, the Issuing Lender or any of the Lenders
may have under any other document or agreement relating to any Letter of Credit
or LC Obligation, including without limitation, any LC Application. The Company
hereby grants a security interest in and lien on the LC Collateral Account to
the Administrative Agent for and on behalf of the Lenders as security for the
Obligations. The Company agrees to execute and deliver from time to time such
documentation as the Administrative Agent may reasonably request to further
assure such security interest.
     2.11 Payments by the Lenders to the Administrative Agent.
          (a) Unless the Administrative Agent receives notice from a Lender on
or prior to the Effective Date or, with respect to any Borrowing after the
Effective Date, at least one (1) Business Day prior to the date of such
Borrowing, that such Lender will not make available as and when required
hereunder to the Administrative Agent for the account of the Company the amount
of that Lender’s Pro Rata Share of the Borrowing, the Administrative Agent may
assume that each Lender has made such amount available to the Administrative
Agent in immediately available funds on the Borrowing Date and the
Administrative Agent may (but shall not be so required), in reliance upon such
assumption, make available to the Company on such date a corresponding amount.
If and to the extent any Lender shall not have made its full amount available to
the Administrative Agent in immediately available funds and the Administrative
Agent in such circumstances has made available to the Company such amount, that
Lender shall on the Business Day following such Borrowing Date make such amount
available to the Administrative Agent, together with interest at the Federal
Funds Rate for the first two days during such period and thereafter at the Base
Rate. A notice of the Administrative Agent submitted to any Lender with respect
to amounts owing under this Subsection 2.11(a)
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shall be conclusive, absent manifest error. If such amount is so made available,
such payment to the Administrative Agent shall constitute such Lender’s Loan on
the date of Borrowing for all purposes of this Agreement. If such amount is not
made available to the Administrative Agent on the Business Day following the
Borrowing Date, the Administrative Agent will notify the Company of such failure
to fund and, upon demand by the Administrative Agent, the Company shall pay such
amount to the Administrative Agent for the Administrative Agent’s account,
together with interest thereon for each day elapsed since the date of such
Borrowing, at a rate per annum equal to the interest rate applicable at the time
to the Loans comprising such Borrowing.
          (b) The failure of any Lender to make any Loan on any Borrowing Date
shall not relieve any other Lender of any obligation hereunder to make a Loan on
such Borrowing Date, but no Lender shall be responsible for the failure of any
other Lender to make the Loan to be made by such other Lender on any Borrowing
Date.
     2.12 Sharing of Payments, Etc. If any Lender shall obtain on account of the
Obligations made by it any payment (whether voluntary, involuntary, through the
exercise of any right of set-off, or otherwise) or receive any collateral in
respect thereof in excess of the amount such Lender was entitled to receive
pursuant to the terms hereof, such Lender shall immediately (a) notify the
Administrative Agent of such fact, and (b) purchase from the other Lenders such
participations in the Loans made by them as shall be necessary to cause such
purchasing Lender to share the excess payment according to the terms hereof;
provided, however, that if all or any portion of such excess payment is
thereafter recovered from the purchasing Lender, such purchase shall to that
extent be rescinded and each other Lender shall repay to the purchasing Lender
the purchase price paid therefor, together with an amount equal to such paying
Lender’s ratable share (according to the proportion of (i) the amount of such
paying Lender’s required repayment to (ii) the total amount so recovered from
the purchasing Lender) of any interest or other amount paid or payable by the
purchasing Lender in respect of the total amount so recovered. The Company
agrees that any Lender so purchasing a participation from another Lender may, to
the fullest extent permitted by law, exercise all its rights of payment
(including the right of set-off, but subject to Section 11.09) with respect to
such participation as fully as if such Lender were the direct creditor of the
Company in the amount of such participation. The Administrative Agent will keep
records (which shall be conclusive and binding in the absence of manifest error)
of participations purchased under this Section and will in each case notify the
Lenders following any such purchases or repayments.
ARTICLE III .
TAXES, YIELD PROTECTION AND ILLEGALITY
     3.01 Taxes.
          (a) Any and all payments by the Company to each Lender or the
Administrative Agent under this Agreement and any other Loan Document shall be
made free and clear of, and without deduction or withholding for any Taxes. In
addition, the Company shall pay all Other Taxes.
          (b) The Company agrees to indemnify and hold harmless each Lender and
the Administrative Agent for the full amount of Taxes or Other Taxes (including
any Taxes or Other Taxes imposed by any jurisdiction on amounts payable under
this Section) paid by the Lender or the Administrative Agent and any liability
(including penalties, interest, additions to tax and expenses) arising therefrom
or with respect thereto, whether or not such Taxes or Other Taxes were correctly
or legally asserted. Payment under this indemnification shall be made within
thirty (30) days after the date the Lender or the Administrative Agent makes
written demand therefor.
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          (c) If the Company shall be required by law to deduct or withhold any
Taxes or Other Taxes from or in respect of any sum payable hereunder to any
Lender or the Administrative Agent, then: (i) the sum payable shall be increased
as necessary so that after making all required deductions and withholdings
(including deductions and withholdings applicable to additional sums payable
under this Section) such Lender or the Administrative Agent, as the case may be,
receives an amount equal to the sum it would have received had no such
deductions or withholdings been made; (ii) the Company shall make such
deductions and withholdings; and (iii) the Company shall pay the full amount
deducted or withheld to the relevant taxing authority or other authority in
accordance with applicable law.
          (d) Upon request of the Administrative Agent, the Company shall
furnish the Administrative Agent the original or a certified copy of a receipt
evidencing payment by the Company of Taxes or Other Taxes under
Subsection 3.01(c), or other evidence of payment satisfactory to the
Administrative Agent.
          (e) If the Company is required to pay additional amounts to any Lender
or the Administrative Agent pursuant to this Section 3.01, then upon written
request of the Company such Lender shall use reasonable efforts (consistent with
legal and regulatory restrictions) to change the jurisdiction of its Lending
Office and take such other steps, in each case, so as to eliminate any such
additional payment by the Company which may thereafter accrue, if such change or
step, as applicable, in the judgment of such Lender is not otherwise
disadvantageous to such Lender.
          (f) If the Company pays any additional amounts under this Section 3.01
to a Lender and such Lender determines that it has actually received or realized
in connection therewith any refund or reduction of, or credit against, its tax
liability in or with respect to the taxable year in which the additional amount
is paid (a “Tax Benefit”), such Lender shall pay to the Company an amount that
such Lender shall determine is equal to the net benefit after tax, which was
obtained by such Lender in such year as a consequences of such Tax Benefit. If
the Company determines in good faith that a reasonable basis exists for
contesting any Taxes or Other Taxes with respect to which the Company has paid
any additional amounts under this Section 3.01 or for which indemnification has
been demanded hereunder, the relevant Lender or Administrative Agent, as
applicable, may, in its discretion, not to be unreasonably withheld, cooperate
with the Company in challenging such Taxes or Other Taxes at the Company’s
expense if so requested by the Company in writing.
     3.02 Illegality.
          (a) If any Lender determines that the introduction of any Requirement
of Law, or any change in any Requirement of Law, or in the interpretation or
administration of any Requirement of Law, has, since the Effective Date, made it
unlawful, or that, since the Effective Date, any central bank or other
Governmental Authority has asserted that it is unlawful, for any Lender or its
applicable Lending Office to make LIBOR Loans, then, on notice thereof by the
Lender to the Company through the Administrative Agent, any obligation of that
Lender to make LIBOR Loans shall be suspended until the Lender notifies the
Administrative Agent and the Company that the circumstances giving rise to such
determination no longer exist; such notice to be promptly given upon the
determination that such circumstances no longer exist.
          (b) If a Lender determines that it is unlawful to maintain any LIBOR
Loan, the Company shall, upon its receipt of notice of such fact and demand from
such Lender (with a copy to the Administrative Agent), convert such LIBOR Loans
of that Lender then outstanding, together with interest accrued thereon and
amounts required under Section 3.04 into a Base Rate Loan without regard to
conditions precedent described in Subsection 5.02(b), either on the last day of
the Interest Period thereof, if the Lender may lawfully continue to maintain
such LIBOR Loans to such day, or immediately, if the Lender may not lawfully
continue to maintain such LIBOR Loan. If the Company is required to so prepay
any LIBOR Loan, then
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concurrently with such prepayment, the Company shall borrow from the affected
Lender, in the amount of such repayment, a Base Rate Loan.
          (c) If the obligation of any Lender to make or maintain LIBOR Loans
has been so terminated or suspended, all Loans which would otherwise be made by
the Lender as LIBOR Loans shall be instead Base Rate Loans.
          (d) Before giving any notice to the Administrative Agent under this
Section, the affected Lender shall designate a different Lending Office with
respect to its LIBOR Loans if such designation will avoid the need for giving
such notice or making such demand and will not, in the judgment of the Lender,
be illegal or otherwise disadvantageous to the Lender.
     3.03 Increased Costs and Reduction of Return.
          (a) If any Lender determines, after the Effective Date, that, due to
either (i) the introduction of or any change (other than any change by way of
imposition of or increase in reserve requirements included in the calculation of
the LIBOR) in or in the interpretation of any law or regulation or (ii) the
compliance by that Lender with any guideline or request from any central bank or
other Governmental Authority (whether or not having the force of law), there
shall be any increase in the cost to such Lender of agreeing to make or making,
funding or maintaining any LIBOR Loans, (except for any such increased cost
resulting from taxes of any kind, including Taxes and Other Taxes, as to which
Section 3.01 shall govern) then the Company shall be liable for, and shall from
time to time, upon demand (with a copy of such demand to be sent to the
Administrative Agent), pay to the Administrative Agent for the account of such
Lender, additional amounts as are sufficient to compensate such Lender for such
increased costs.
          (b) If any Lender shall have determined, after the Effective Date,
that (i) the introduction of any Capital Adequacy Regulation, (ii) any change in
any Capital Adequacy Regulation, (iii) any change in the interpretation or
administration of any Capital Adequacy Regulation by any central bank or other
Governmental Authority charged with the interpretation or administration
thereof, or (iv) compliance by the Lender (or its Lending Office) or any
corporation controlling the Lender with any Capital Adequacy Regulation, affects
or would affect the amount of capital required or expected to be maintained by
the Lender or any corporation controlling the Lender and (taking into
consideration such Lender’s or such corporation’s policies with respect to
capital adequacy and such Lender’s desired return on capital) determines that
the amount of such capital is increased as a consequence of its Commitments,
loans, credits or obligations under this Agreement, then, upon demand of such
Lender to the Company through the Administrative Agent, the Company shall pay to
the Lender, from time to time as specified by the Lender, additional amounts
sufficient to compensate the Lender for such increase.
     3.04 Funding Losses. The Company shall reimburse each Lender and hold each
Lender harmless from any loss or expense excluding consequential losses which
the Lender may sustain or incur as a consequence of: (a) the failure of the
Company to make on a timely basis any payment of principal of any LIBOR Loan;
(b) the failure of the Company to borrow, continue or convert a Loan after the
Company has given (or is deemed to have given) a Notice of Borrowing or a Notice
of Conversion/Continuation (including by reason of the failure to satisfy any
condition precedent thereto); (c) the failure of the Company to make any
prepayment in accordance with any notice delivered under Section 2.04; (d) the
prepayment (including pursuant to Section 2.05 or 2.06) or other payment
(including after acceleration thereof) of an LIBOR Loan on a day that is not the
last day of the relevant Interest Period; or (e) the automatic conversion under
Section 2.03 of any LIBOR Loan to a Base Rate Loan on a day that is not the last
day of the relevant Interest Period; including any such loss or expense arising
from the liquidation or reemployment of funds obtained by it to maintain its
LIBOR Loans or from fees payable to terminate the deposits from which such funds
were obtained. For purposes of calculating amounts payable by the Company to the
Lenders under this Section and
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under Subsection 3.03(a), each LIBOR Loan made by a Lender (and each related
reserve, special deposit or similar requirement) shall be conclusively deemed to
have been funded at the LIBOR used in determining the LIBOR for such LIBOR Loan
by a matching deposit or other borrowing in the interbank Eurodollar market for
a comparable amount and for a comparable period, whether or not such LIBOR Loan
is in fact so funded.
     3.05 Inability to Determine Rates. If Administrative Agent determines that
for any reason adequate and reasonable means do not exist for determining the
LIBOR for any requested Interest Period with respect to a proposed LIBOR Loan,
or that the LIBOR applicable pursuant to Subsection 2.06(b) for any requested
Interest Period with respect to a proposed LIBOR Loan does not adequately and
fairly reflect the cost to the Lenders of funding such Loan, the Administrative
Agent will promptly so notify the Company and each Lender. Thereafter, the
obligation of the Lenders to make or maintain LIBOR Loans hereunder shall be
suspended until the Administrative Agent upon the instruction of the Lenders
revokes such notice in writing; such written revocation to be promptly given
upon determination that such circumstances no longer exist. Upon receipt of such
notice, the Company may revoke any Notice of Borrowing or Notice of
Conversion/Continuation then submitted by it. If the Company does not revoke
such Notice, the Lenders shall make, convert or continue the Loans, as proposed
by the Company, in the amount specified in the applicable notice submitted by
the Company, but such Loans shall be made, converted or continued as Base Rate
Loans instead of LIBOR Loans.
     3.06 Certificates of Lenders. Any Lender claiming reimbursement or
compensation under this Article III shall deliver to the Company (with a copy to
the Administrative Agent) a certificate setting forth in reasonable detail the
amount payable to the Lender hereunder and such certificate shall be conclusive
and binding on the Company in the absence of manifest error provided, however,
that such Lender shall only be entitled to collect amounts incurred within
180 days of such notice.
     3.07 Substitution of Lenders. Upon the receipt by the Company from any
Lender (an “Affected Lender”) of a claim for compensation under this
Article III, the Company may: (a) obtain a replacement Lender or financial
institution satisfactory to the Administrative Agent (a “Replacement Lender”) to
acquire and assume all or a ratable part of all of such Affected Lender’s Loans
and Commitment; or (b) request one more of the other Lenders to acquire and
assume all or part of such Affected Lender’s Loans and Commitment but none of
the Lenders shall have any obligation to do so. Any such designation of a
Replacement Lender under (a) shall be subject to the prior written consent of
the Administrative Agent which consent shall not be unreasonably withheld or
delayed.
     3.08 Survival. The agreements and obligations of the Company in this
Article III shall survive the payment of all other Obligations.
ARTICLE IV .
SECURITY
     4.01 The Security. The Obligations will be secured by the Security
Documents described in Schedule 4.01 and any additional Security Documents
hereafter delivered by the Company or any Guarantor and accepted by the
Administrative Agent.
     4.02 Agreement to Deliver Security Documents. The Company and each
Guarantor agrees to deliver, to further secure the Obligations whenever
requested by the Administrative Agent in its sole and absolute discretion, deeds
of trust, mortgages, chattel mortgages, security agreements, financing
statements and other Security Documents in form and substance reasonably
satisfactory to the Administrative Agent for the purpose of granting,
confirming, and perfecting first and prior liens or security interests in all
Oil and Gas Properties now owned or hereafter acquired by the Company or any
Guarantor, subject to Permitted Liens.
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The Company and each Guarantor also agrees to deliver, whenever requested by the
Lenders, title opinions from legal counsel acceptable to the Lenders or such
other evidence of title satisfactory to the Lenders with respect to the
Mortgaged Properties designated by the Lenders, based upon abstract or record
examinations to dates acceptable to the Lenders and (a) stating that the
applicable member of the Borrower Group has good and defensible title to such
properties and interests, free and clear of all Liens except Permitted Liens,
(b) confirming that such Oil and Gas Properties are subject to Security
Documents securing the Obligations that constitute and create legal, valid and
duly perfected deed of trust or mortgage liens in such Oil and Gas Properties
and assignments of and security interests in the Oil and Gas attributable to
such Oil and Gas Properties and the proceeds thereof, in each case subject only
to Permitted Liens, and (c) covering such other matters as the Lenders may
reasonably request.
     4.03 Perfection and Protection of Security Interests and Liens. The Company
and each Guarantor will from time to time deliver to the Administrative Agent
any financing statements, amendment, assignment and continuation statements,
extension agreements and other documents, properly completed and executed if
required by law (and acknowledged when required) by the Company or any
Guarantor, as applicable, in form and substance reasonably satisfactory to the
Administrative Agent, which the Administrative Agent reasonably requests for the
purpose of perfecting, confirming, or protecting any Liens or other rights in
Collateral securing any Obligations.
     4.04 Offset. To secure the repayment of the Obligations, the Company and
each Guarantor hereby grants the Administrative Agent and each Lender a security
interest, a lien, and a right of offset, each of which shall be in addition to
all other interests, liens, and rights of the Administrative Agent at common
law, under the Loan Documents, or otherwise, and each of which shall be upon and
against (a) any and all moneys, securities or other property (and the proceeds
therefrom) of the Company or any Guarantor now or hereafter held or received by
or in transit to the Administrative Agent or any Lender from or for the account
of the Company or any Guarantor, whether for safekeeping, custody, pledge,
transmission, collection or otherwise, (b) any and all deposits (general or
special, time or demand, provisional or final) of the Company or any Guarantor
with the Administrative Agent or any Lender, and (c) any other credits and
claims of the Company or any Guarantor at any time existing against the
Administrative Agent or any Lender, including claims under certificates of
deposit. During the existence of any Event of Default, the Administrative Agent
or any Lender is hereby authorized to foreclose upon, offset, appropriate, and
apply, at any time and from time to time, without notice to the Company or any
Guarantor, any and all items hereinabove referred to against the Obligations
then due and payable.
     4.05 Subsidiary Guaranty.
          (a) Ivanhoe Energy Holdings Inc. and each Subsidiary of Ivanhoe Energy
Holdings Inc. (other than the Company) now existing or created, acquired or
coming into existence after the date hereof, and the Parent, shall promptly upon
request by the Administrative Agent, execute and deliver to the Administrative
Agent an absolute and unconditional guaranty of the timely repayment, and the
due and punctual performance, of the Obligations of the Company hereunder, which
Guaranty shall be substantially in the form and substance of Exhibit G. Ivanhoe
Energy Holdings Inc. and each such Subsidiary and the Parent will deliver to the
Administrative Agent, simultaneously with its delivery of such a Guaranty,
written evidence satisfactory to the Administrative Agent and its counsel that
such Subsidiary has taken all organizational action necessary to duly approve
and authorize its execution, delivery and performance of such Guaranty and any
other documents which it is required to execute.
          (b) The Company and each Guarantor are Affiliates and are mutually
dependent on each other in the conduct of their respective businesses, with the
credit needed from time to time by each often being provided by another or by
means of financing obtained by one with the support of the other for their
mutual benefit and the ability of each to obtain such financing is dependent on
the successful operations of the
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other. The board of directors or managers, where applicable, of each Guarantor
has determined that such Guarantor’s execution, delivery and performance of this
Agreement may reasonably be expected to directly or indirectly benefit such
Guarantor and is in the best interests of such Guarantor.
          (c) The direct or indirect value of the consideration received and to
be received by such Guarantor in connection herewith is reasonably worth at
least as much as the liability and obligations of each Guarantor hereunder, and
the incurrence of such liability and obligations in return for such
consideration may reasonably be expected to benefit such Guarantor, directly or
indirectly.
          (d) The Company and the Guarantors, taken as a whole, are Solvent on
the date hereof. Each of the Company and each Guarantor has capital which is
adequate for the businesses in which such Person is engaged and intends to be
engaged. Neither of the Company nor any Guarantor has incurred (whether hereby
or otherwise), nor does the Company or any Guarantor intend to incur or believe
that it will incur, liabilities which will be beyond its ability to pay as such
liabilities mature.
     4.06 Assignment of Production.
          (a) The Company shall provide to Administrative Agent undated letters
in blank to purchasers of production and disbursers of proceeds of production
from or attributable to the Company’s Mortgaged Properties, with the names and
addressees left blank, authorizing and directing the addressees to make future
payments attributable to production from the Mortgaged Properties directly to
Administrative Agent for the ratable account of the Lenders.
          (b) The Company hereby designates Administrative Agent as its agent
and attorney-in-fact, to act in its name, place, and stead for the purpose of
completing and delivering any and all of the letters in lieu of transfer orders
delivered by the Company to Administrative Agent, including, without limitation,
completing any blanks contained in such letters and attaching exhibits thereto
describing the relevant Collateral. The Company hereby ratifies and confirms all
that Administrative Agent shall lawfully do or cause to be done by virtue of
this power of attorney and the rights granted with respect to such power of
attorney. This power of attorney is coupled with the interest of Administrative
Agent in the Collateral, shall commence and be in full force and effect as of
the date hereof and shall remain in full force and effect and shall be
irrevocable so long as any Obligation remains outstanding or unpaid or any
Commitment exists. The powers conferred on Administrative Agent by this
appointment are solely to protect the interests of the secured parties under the
Loan Documents and shall not impose any duty upon Administrative Agent to
exercise any such powers. Administrative Agent shall be accountable only for
amounts that it actually receives as a result of the exercise of such powers and
shall not be responsible to any of the Company, Guarantors, or any other Person
for any act or failure to act with respect to such powers, except for
Administrative Agent’s gross negligence or willful misconduct.
     4.07 Assignment of Runs. Notwithstanding that, under of the Mortgages, the
Company has assigned to Administrative Agent for the ratable account of itself,
the Issuing Lender, and the Lenders (and any Affiliate thereof) all of the
proceeds of production accruing to the Company’s Mortgaged Properties covered
thereby:
          (a) Until such time as an Event of Default shall have occurred and be
continuing, the Company shall be entitled to receive from the purchasers or
disbursers of its production all such proceeds, subject however to the liens
created under the Mortgages. Upon the occurrence and during the continuance of
an Event of Default, Administrative Agent may deliver to the addressees the
letters-in-lieu described in Section 4.06 above and may exercise all rights and
remedies granted under the Mortgages, including the right to obtain possession
of all proceeds of runs then held by the Company or any Guarantor or to receive
directly from the purchaser or disburser of production such proceeds of
production.
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          (b) In no case shall any failure, whether intentional or inadvertent,
by Administrative Agent to collect directly any such proceeds of runs constitute
in any way a waiver, rescission or release of any of its rights under the
Mortgages, nor shall any release of any other proceeds of runs or of any rights
of Administrative Agent to collect other proceeds of runs thereafter.
ARTICLE V.
CONDITIONS PRECEDENT
     5.01 Conditions of Initial Credit Extensions. The effectiveness of this
Agreement and the obligation of each Lender to make its initial Loan hereunder
and the obligation of the Issuing Lender to issue Letters of Credit hereunder,
are subject to the condition that the Administrative Agent shall have received
all of the following, in form and substance satisfactory to the Administrative
Agent, and in sufficient copies for each Lender:
          (a) Credit Agreement and Notes. This Agreement, the Notes, the
Guaranties, the Security Documents and the other Loan Documents executed by each
party thereto;
          (b) Resolutions; Incumbency; Organization Documents, Good Standing. A
certificate of the Secretary or Assistant Secretary of the Company and each
Guarantor, or in the event that the Company or any such Guarantor is a limited
partnership, such Person’s general partner, certifying as of the Effective Date:
(i) Resolutions of its board of directors or members, authorizing the
transactions contemplated hereby; (ii) the names and genuine signatures of the
Responsible Officers of such Person, authorized to execute, deliver and perform,
as applicable, this Agreement, the Notes, the Guaranties, the Security
Documents, and all other Loan Documents to be delivered by such Person
hereunder; (iii) the Organization Documents of such Person as in effect as of
the Effective Date; (iv) the good standing certificate for such Person, from its
state of incorporation, formation or organization, as applicable, evidencing its
qualification to do business in such state as of a date no more than thirty
(30) days prior to the Effective Date; and (v) as applicable, certificate(s) of
authority for such Person from foreign states wherein such Person conducts
business, evidencing such Person’s qualification to do business in such state as
of a date no more than thirty (30) days prior to the Effective Date;
          (c) Payment of Fees. Evidence of payment by the Company of all accrued
and unpaid fees, costs and expenses owed pursuant to this Agreement to the
extent then due and payable on the Effective Date, including any such costs,
fees and expenses arising under or referenced in Sections 2.07 and 11.04;
          (d) Certificate. A certificate signed by a Responsible Officer, dated
as of the Effective Date, stating that (i) the representations and warranties
contained in Article VI are true and correct in all material respects on and as
of such date, as though made on and as of such date; (ii) no litigation is
pending or threatened against any of the Company or any Subsidiary in which
there is a reasonable probability of an adverse decision that could reasonably
be expected to result in a Material Adverse Effect; and (iii) there has occurred
no event or circumstance that has resulted or could reasonably be expected to
result in a Material Adverse Effect;
          (e) Insurance Certificates. Insurance certificates in form and
substance reasonably satisfactory to the Administrative Agent, from the
Company’s and the Guarantors’ insurance carriers reflecting the current
insurance policies required under Section 7.08 including any necessary
endorsements to reflect the Administrative Agent as additional insured and loss
payee for the ratable benefit of the Lenders;
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          (f) Corporate Due Diligence. Due diligence review satisfactory to the
Administrative Agent including but not limited to review of and satisfaction
with the legal structure of the Parent and its Subsidiaries, and consolidated
pro-forma financial statements;
          (g) Reserve Engineering. The Lenders shall have completed, to their
satisfaction, an independent engineering review of the Oil and Gas Properties;
          (h) Environmental. Copies of all environmental assessments, reports
and other information in the possession or control of the Company or any
Guarantor, with contents and findings satisfactory to Administrative Agent with
respect to the Mortgaged Properties;
          (i) Title. The Company and the Guarantors shall have good and
defensible title, on at least 80% of the net present value of the Oil and Gas
Properties (the net present value of which has been determined by a discount
factor of 10%) subject to no other liens, other than Permitted Liens, evidenced
by current opinions of title or other title information satisfactory to the
Administrative Agent and the Lenders, and substantially all of the Oil and Gas
Properties of the Borrower Group shall be covered by the Mortgages;
          (j) Material Contracts. Copies of all material contracts entered into
by the Company or any Guarantor to the extent requested by Administrative Agent
or the Lenders;
          (k) Equity Pledge. To the extent certificated, the Company shall have
delivered to Administrative Agent original certificates for all Equity held
(i) by the Parent in Ivanhoe Energy Holdings Inc., and (ii) by Ivanhoe Energy
Holdings Inc. and/or its Subsidiaries in every member of the Borrower Group,
together with undated, blank stock powers for each certificate, representing all
issued and outstanding Equity of each such Subsidiary;
          (l) Opinion of Counsel. Opinions of Goodmans LLP, Erwin & Thompson
LLP, and Lackowicz, Shier & Hoffman, as counsel for the Company and each of the
Guarantors, covering such matters as Administrative Agent may require and in
form and substance satisfactory to Administrative Agent dated as of the
Effective Date;
          (m) Repayment of Existing Indebtedness. Evidence satisfactory to
Administrative Agent that all Indebtedness outstanding under the Existing Credit
Agreement has been paid in full, assurances reasonably satisfactory to the
Administrative Agent that all liens and security interests securing such
Indebtedness have been or will be released of record, and all commitments under
such Existing Credit Agreement have expired or been terminated;
          (n) Operating Accounts. Evidence that (i) each of the Company and the
Parent has established and will maintain all of its principal depository and
operating accounts with the Administrative Agent and (ii) each member of the
Borrower Group other than the Company has established and will maintain any of
its depository or operating accounts with the Administrative Agent if any such
account has an average collected balance for any month in excess of $100,000.00.
          (o) Derivative Contracts. Evidence satisfactory to the Administrative
Agent that the Borrower Group has entered into Derivative Contracts covering not
less than 75% of the estimated production from the Oil and Gas Properties of the
Borrower Group for a term of at least 24 months, with counterparties and
otherwise having terms and conditions satisfactory to the Administrative Agent
and the Required Lenders.
          (p) Other Documents. Such other approvals, opinions, documents or
materials as the Administrative Agent or any Lender may reasonably request.
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     5.02 Conditions to All Loans. The obligation of each Lender to make any
Loan (including its initial Loan) or to continue or convert any Loan under
Section 2.03 (but specifically excluding the conversion of LIBOR Loans on the
last day of the Interest Period therefor into Base Rate Loans or the
continuation of Base Rate Loans) is subject to the satisfaction of the following
conditions precedent on the relevant Borrowing Date or Conversion/Continuation
Date and immediately after giving effect to such Borrowing or
Conversion/Continuation:
          (a) Notice. The Administrative Agent shall have received a Notice of
Borrowing or a Notice of Conversion/Continuation, as applicable;
          (b) Continuation of Representations and Warranties. The
representations and warranties in Article VI shall be true and correct in all
material respects on and as of such Borrowing Date or Conversion/Continuation
Date with the same effect as if made on and as of such Borrowing Date or
Conversion/Continuation Date (except to the extent such representations and
warranties expressly refer to an earlier date, in which case they shall be true
and correct as of such earlier date);
          (c) Continuation of Covenants. The Company and each Guarantor shall be
in compliance with the covenants in Articles VII and VIII;
          (d) No Material Adverse Effect. No Material Adverse Effect shall have
occurred or shall exist from such Borrowing or continuation or conversion; and
          (e) No Existing Default. No Default or Event of Default shall exist or
shall result from such Borrowing or continuation or conversion.
Each Notice of Borrowing or Notice of Conversion/Continuation submitted by the
Company hereunder shall constitute a representation and warranty by the Company
and each Guarantor hereunder, as of the date of each such notice and as of each
Borrowing Date or Conversion/Continuation Date, as applicable, that the
conditions in this Section 5.02 are satisfied.
     5.03 Post Closing Condition. The obligation of each Lender to continue to
make Loans and the obligation of the Issuing Bank to continue to issue Letters
of Credit are subject to satisfaction of the condition that the Company deliver
a Phase 1 report covering the Mortgaged Properties designated by the
Administrative Agent in form and substance satisfactory to the Administrative
Agent within sixty (60) days after the date hereof. In the event such condition
is not met within the deadlines herein stated, the Lenders’ Commitments shall
terminate and such failure shall constitute an Event of Default.
ARTICLE VI .
REPRESENTATIONS AND WARRANTIES
     Each of the Company and the Guarantors represents and warrants to the
Administrative Agent and each Lender that:
     6.01 Organization, Existence and Power. Each of the Company and the
Guarantors: (a) is duly organized, validly existing and in good standing under
the laws of the jurisdiction of its formation; (b) has the power and authority
and all material governmental licenses, authorizations, consents and approvals
to own its assets, carry on its business and to execute, deliver, and perform
its obligations under the Loan Documents; (c) is duly qualified as a foreign
corporation or other organization and is licensed and in good standing under the
laws of each jurisdiction where its ownership, lease or operation of property or
the conduct of its business
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requires such qualification or license, except where failure to do so would not
reasonably be expected to have a Material Adverse Effect; and (d) is in
compliance in all material respects with all Requirements of Law.
     6.02 Corporate Authorization; No Contravention. The execution, delivery and
performance by the Company and the Guarantors of this Agreement and each other
Loan Document to which such Person is a party, have been duly authorized by all
necessary organizational action, and do not and will not: (a) contravene the
terms of any of that Person’s Organization Documents; (b) conflict with or
result in any breach or contravention of, or the creation of any Lien under, any
document evidencing any Contractual Obligation to which such Person is a party
that would be prior to the Liens granted to the Administrative Agent for the
benefit of the Lenders or otherwise that would constitute a Material Adverse
Effect or any order, injunction, writ or decree of any Governmental Authority to
which such Person or its property is subject; or (c) violate any Requirement of
Law, that would constitute a Material Adverse Effect.
     6.03 Governmental Authorization. No approval, consent, exemption,
authorization, or other action by, or notice to, or filing with, any
Governmental Authority is necessary or required in connection with the
execution, delivery or performance by, or enforcement against, the Company or
any Guarantor of this Agreement or any other Loan Document to which it is a
party, except for filings necessary to obtain and maintain perfection of Liens;
routine filings related to the Company and the Guarantors and the operation of
their business; and such filings as may be necessary in connection with Lenders’
exercise of its remedies hereunder.
     6.04 Binding Effect. This Agreement and each other Loan Document to which
the Company or any Guarantor is a party constitute the legal, valid and binding
obligations of the Company or such Guarantor, enforceable against such Person in
accordance with their respective terms, except as enforceability may be limited
by applicable Bankruptcy, insolvency, or similar laws affecting the enforcement
of creditors’ rights generally or by equitable principles relating to
enforceability.
     6.05 Litigation. Unless specifically disclosed in Schedule 6.05 attached
hereto, there are no actions, suits, proceedings, claims or disputes pending, or
to the knowledge of the Company or any Guarantor, threatened or contemplated, at
law, in equity, in arbitration or before any Governmental Authority, against the
Company or any Guarantor or any of their respective properties which: (a)
purport to affect or pertain to this Agreement or any other Loan Document, or
any of the transactions contemplated hereby or thereby; or (b) if determined
adversely to the Company or such Guarantor, would reasonably be expected to have
a Material Adverse Effect. To the knowledge of the Company and each Guarantor,
no injunction, writ, temporary restraining order or any order of any nature has
been issued by any court or other Governmental Authority purporting to enjoin or
restrain the execution, delivery or performance of this Agreement or any other
Loan Document, or directing that the transactions provided for herein or therein
not be consummated as herein or therein provided.
     6.06 No Default. No Default or Event of Default exists or would be
reasonably expected to result from the incurring of any Obligations by the
Company or the Guarantors. As of the Effective Date, neither the Company nor any
Guarantor is in default under or with respect to any Contractual Obligation in
any respect which, individually or together with all such defaults, would
reasonably be expected to have a Material Adverse Effect, or that would, if such
default had occurred after the Effective Date, create an Event of Default under
Subsection 9.01(e). Each of the Company and the Guarantors is in compliance with
all requirements of any Governmental Authority applicable to it or its Property
and all agreements and other instruments binding upon it or its Property, and
possesses all licenses, permits, franchises, exemptions, approvals and other
authorizations granted by Governmental Authorities necessary for the ownership
of its Property and the present conduct of its business, except in each case
where the failure to do so, individually or in the aggregate, could not
reasonably be expected to result in a Material Adverse Effect.
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     6.07 ERISA Compliance. Except as specifically disclosed in Schedule 6.07:
          (a) Each Plan is in compliance in all material respects with the
applicable provisions of ERISA, the Code and other federal or state law. Each
Plan which is intended to qualify under Section 401(a) of the Code has received
a favorable determination letter from the IRS and to the knowledge of the
Company and the Guarantors, nothing has occurred which would cause the loss of
such qualification. The Company, the Guarantors and each ERISA Affiliate has
made all required contributions to any Plan subject to Section 412 of the Code,
and no application for a funding waiver or an extension of any amortization
period pursuant to Section 412 of the Code has been made with respect to any
Plan.
          (b) There are no pending or, to the knowledge of Company or any
Guarantor, threatened claims, actions or lawsuits, or action by any Governmental
Authority, with respect to any Plan which has resulted or could reasonably be
expected to result in a Material Adverse Effect. There has been no prohibited
transaction or violation of the fiduciary responsibility rules with respect to
any Plan which has resulted or could reasonably be expected to result in a
Material Adverse Effect.
          (c) (i) No ERISA Event has occurred or is reasonably expected to
occur; (ii) no Pension Plan has any Unfunded Pension Liability; (iii) neither
the Company, any Guarantors nor any ERISA Affiliate has incurred, or reasonably
expects to incur, any liability under Title IV of ERISA with respect to any
Pension Plan (other than premiums due and not delinquent under Section 4007 of
ERISA); (iv) neither the Company, any Guarantor nor any ERISA Affiliate has
incurred, or reasonably expects to incur, any liability (and no event has
occurred which, with the giving of notice under Section 4219 of ERISA, would
result in such liability) under Section 4201 or 4243 of ERISA with respect to a
Multiemployer Plan; and (v) neither the Company, any Guarantor nor any ERISA
Affiliate has engaged in a transaction that could be subject to Section 4069 or
4212(c) or ERISA.
     6.08 Margin Regulations. The proceeds of the Loans shall be used solely for
the purposes set forth in and permitted by Section 7.16. Neither the Company nor
any Guarantor is generally engaged in the business of purchasing or selling
Margin Stock or extending credit for the purpose of purchasing or carrying
Margin Stock.
     6.09 Title to Properties. Subject to Permitted Liens, the Company and each
Guarantor have good and defensible title to all of its Oil and Gas Properties
evaluated in the most recently delivered Reserve Report, and except for such
defects in title as would not, individually or in the aggregate, reasonably be
expected to have a Material Adverse Effect, and the Company and each Guarantor
have good title to all other Oil and Gas Properties necessary or used in the
ordinary conduct of their respective businesses. After giving full effect to the
Permitted Liens, the Company or any Guarantor specified as the owner under the
most recently delivered Reserve Report owns the net interests in production
attributable to the Oil and Gas Properties as reflected in the most recently
delivered Reserve Report, and the ownership of such Properties shall not in any
material respect obligate the Company or any Guarantor to bear the costs and
expenses relating to the maintenance, development and operations of each such
Property in an amount in excess of its working interest of each Property set
forth in the most recently delivered Reserve Report that is not offset by a
corresponding proportionate increase in the Company’s or any Guarantor’s net
revenue interest in such Property. No consents or rights of first refusal exist
or remain outstanding with respect to the Company’s or any Guarantor’s interest
in the Mortgaged Properties assigned to it pursuant to any Acquisition of Oil
and Gas Properties other than Permitted Liens. As of the Effective Date, the
Property of the Company and the Guarantors is subject to no Liens, other than
Permitted Liens.
     6.10 Oil and Gas Reserves. The Company and each Guarantor is and will
hereafter be, in all material respects, the owner of the Oil and Gas that it
purports to own from time to time in and under its Oil and Gas Properties,
together with the right to produce the same. The Oil and Gas Properties are not
subject to
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any Lien other than as set forth in the financial statements referred to in
Section 6.14, as disclosed to the Lenders in writing prior to the date of this
Agreement and Permitted Liens. All Oil and Gas have been and will hereafter be
produced, sold and delivered in accordance in all material respects with all
applicable laws and regulations of governmental authority; each of the Company
and the Guarantors has complied in all material respects and will hereafter use
commercially reasonable efforts to comply with all material terms of each oil,
gas and mineral lease and any other agreement comprising its Oil and Gas
Properties; and all such oil, gas and mineral leases and other agreements have
been and will hereafter be maintained in full force and effect. Provided,
however that nothing in this Section 6.10 shall prevent the Company or any
Guarantor from abandoning any well or forfeiting, surrendering, releasing or
defaulting under any lease in the ordinary course of business which is not
disadvantageous in any way to the Lenders and which, in the opinion of the
Company or such Guarantor, is in its best interest, and the Company and each
Guarantor is and will hereafter be in compliance with all obligations hereunder.
All of the Company’s and each Guarantor’s Operating Agreements and Operating
Leases with respect to its Oil and Gas Properties are and will hereafter be
enforceable in all material respects in accordance with their terms except as
such may be modified by applicable bankruptcy law or an order of a court in
equity.
     6.11 Initial Reserve Report. The Company has heretofore delivered to the
Lenders a true and complete copy of a report, dated effective as of December 31,
2005, prepared by Netherland, Sewell and Associates, Inc. (the “Initial Reserve
Report”) relating to an evaluation of the Oil and Gas attributable to certain of
the Mortgaged Properties described therein. To the knowledge of the Company and
the Guarantors, (a) the assumptions stated or used in the preparation of the
Initial Reserve Report are reasonable, (b) all information furnished by the
Company or any Guarantor to Netherland, Sewell and Associates, Inc. (the
“Independent Engineer”) for use in the preparation of the Initial Reserve Report
was accurate in all material respects, (c) there has been no material adverse
change in the amount of the estimated Oil and Gas shown in the Initial Reserve
Report since the date thereof, except for changes which have occurred as a
result of production in the ordinary course of business, and (d) the Initial
Reserve Report does not omit any material statement or information necessary to
cause the same not to be misleading to the Lenders.
     6.12 Gas Imbalances. There are no gas imbalances, take or pay or other
prepayments with respect to any of the Oil and Gas Properties which would
require the Company or any Guarantor to deliver Oil and Gas produced from any of
the Oil and Gas Properties at some future time without then or thereafter
receiving full payment therefor exceeding 50,000 Mcf of gas (on an MMBTU
equivalent basis) in the aggregate.
     6.13 Taxes. The Company and the Guarantors have filed all federal tax
returns and reports required to be filed, and have paid all federal taxes,
assessments, fees and other governmental charges levied or imposed upon them or
their properties, income or assets otherwise due and payable, except those which
are being contested in good faith by appropriate proceedings and for which
adequate reserves have been provided in accordance with GAAP. The Company and
the Guarantors have filed all state and other non-federal tax returns and
reports required to be filed, and have paid all state and other non-federal
taxes, assessments, fees and other governmental charges levied or imposed upon
them or their properties, income or assets prior to delinquency thereof, except
those which are being contested in good faith by appropriate proceedings and for
which adequate reserves have been provided in accordance with GAAP. To the
Company’s and each Guarantor’s knowledge, there is no proposed tax assessment
against the Company or any Guarantor that would, if made, reasonably be expected
to have a Material Adverse Effect.
     6.14 Financial Condition.
          (a) The Company has heretofore furnished to the Lenders (i) the
unaudited financial statements for the Company, as of and for the fiscal year
ending December 31, 2005 and the six months ended June 30, 2006 (the “Company
Initial Financial Statements”), and (ii) the Parent’s audited consolidated
financial statements, as of and for the fiscal year ending December 31, 2005 and
the Parent’s unaudited
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consolidated financial statements, as of and for the six months ended June 30,
2006 (the “Parent Initial Financial Statements”), each certified by a
Responsible Officer. Such Company Initial Financial Statements present fairly,
in all material respects, the financial position, results of operations and cash
flows of the Company as of such dates and for such periods then ended in
accordance with GAAP, subject to the absence of footnotes. Such Parent Initial
Financial Statements present fairly, in all material respects, the financial
position, results of operations and cash flows of the Parent and its
Subsidiaries, on a consolidated basis as of such dates and for such periods then
ended in accordance with GAAP.
          (b) Since June 30, 2006, (i) there has been no event, development or
circumstance that has had or could reasonably be expected to have a Material
Adverse Effect, and (ii) the business of the Company and the Guarantors has been
conducted only in the ordinary course consistent with past business practices.
     6.15 Environmental Matters. Except as described on Schedule 6.15 hereto or
as could not be reasonably expected to have a Material Adverse Effect (or with
respect to (c) and (d) below, where the failure to take such actions could not
be reasonably expected to have a Material Adverse Effect):
          (a) neither any Property of the Company or any Guarantor nor the
operations conducted thereon violate Environmental Laws.
          (b) no Property of the Company or any Guarantor nor the operations
currently conducted thereon by the Company or any Guarantor or, to the knowledge
of the Company or any Guarantor, no operations conducted thereon by any prior
owner or operator of such Property, are in violation of or subject to any
existing, or to the knowledge of the Company or any Guarantor, pending or
threatened action, suit, investigation, inquiry or proceeding by or before any
court or Governmental Authority under Environmental Laws.
          (c) all notices, permits, licenses, exemptions, and approvals, if any,
required to be obtained or filed under any Environmental Law in connection with
the operation or use of any and all Property by the Company and each Guarantor,
including, without limitation, past or present treatment, storage, disposal or
release of a hazardous substance, oil and gas waste or hazardous waste into the
environment, have been duly obtained or filed or requested, and the Company and
each Guarantor are in compliance with the material terms and conditions of all
such notices, permits, licenses, exemptions and approvals.
          (d) all hazardous substances, hazardous waste and oil and gas waste,
if any, generated by the Company or any Guarantor at any and all Property of the
Company or any Guarantor have in the past been transported, treated and disposed
of in compliance with Environmental Laws then in effect, and, to the knowledge
of the Company and each Guarantor, transport carriers and treatment and disposal
facilities known by the Company or any Guarantor to have been used by the
Company or any Guarantor are not the subject of any existing action,
investigation or inquiry by any Governmental Authority under any Environmental
Laws.
          (e) no hazardous substances, hazardous waste or oil and gas waste,
have been disposed of or otherwise released by the Company or any Guarantor on
or to any Property of the Company or any Guarantor except in compliance with
Environmental Laws.
          (f) neither the Company nor any Guarantor has any known pending
assessment, investigation, monitoring, removal or remedial obligations under
applicable Environmental Laws in connection with any release or threatened
release of any hazardous substance, hazardous waste or oil and gas waste into
the environment by the Company or any Guarantor.
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     6.16 Regulated Entities. None of the Company, any Guarantor or any Person
controlling the Company or any Guarantor, is an “Investment Company” within the
meaning of the Investment Company Act of 1940. None of the Company, any
Guarantor or any Person controlling the Company or any Guarantor, is subject to
regulation under the Federal Power Act, the Interstate Commerce Act, any state
public utilities code, or any other Federal or state statute or regulation
limiting its ability to incur Indebtedness.
     6.17 No Burdensome Restrictions. Neither the Company nor any Guarantor is a
party to or bound by any Contractual Obligation, or subject to any restriction
in any Organization Document, or any Requirement of Law, which would reasonably
be expected to have a Material Adverse Effect.
     6.18 Copyrights, Patents, Trademarks and Licenses, etc. The Company and
each Guarantor own or are licensed or otherwise have the right to use all of the
material patents, trademarks, service marks, trade names, copyrights,
contractual franchises, authorizations and other rights that are reasonably
necessary for the operation of their respective businesses, without material
conflict with the rights of any other Person. To the knowledge of the Company
and each Guarantor, no slogan or other advertising device, product, process,
method, substance, part or other material now employed, or now contemplated to
be employed, by the Company or any Guarantor infringes in a material respect
upon any rights held by any other Person. Except as specifically disclosed in
Schedule 6.05, no claim or litigation regarding any of the foregoing is pending
or threatened, and no patent, invention, device, application, principle or any
statute, law, rule, regulation, standard or code is pending or, to the knowledge
of the Company and each Guarantor, proposed, which, in either case, could
reasonably be expected to have a Material Adverse Effect.
     6.19 Subsidiaries. The Parent has no Subsidiary or other material equity
investment other than those specifically disclosed in Schedule 6.19 hereto. The
Parent owns the percentage interest of all issued and outstanding Equity in each
Subsidiary or other material equity investment described on Schedule 6.19. The
Company may update and replace Schedule 6.19 from time to time to reflect
changes resulting from transactions or other events permitted hereunder.
     6.20 Insurance. The Properties of the Company and each Guarantor are
insured with financially sound and reputable insurance companies not Affiliates
of the Company or any Guarantor, in such amounts, with such deductibles and
covering such risks as are customarily carried by companies engaged in similar
businesses and owning similar properties in localities where the Company or such
Guarantor operates.
     6.21 Derivative Contracts. Schedule 6.21 sets forth, a true and complete
list of all Derivative Contracts of the Borrower Group outstanding as of the
Effective Date, the material terms thereof (including the type, term, effective
date, termination date and notional amounts or volumes), the net mark-to-market
value thereof, all credit support agreements relating thereto (including any
margin required or supplied) and the counterparty to each such agreement.
     6.22 Full Disclosure. None of the representations or warranties made by the
Company or any Guarantor in the Loan Documents as of the date such
representations and warranties are made or deemed made, and none of the
statements contained in any exhibit, report, written statement or certificate
furnished by or on behalf of the Company or any Guarantor in connection with the
Loan Documents, taken as whole, contains any untrue statement of a material fact
known to the Company or any Guarantor or omits any material fact known to the
Company or any Guarantor required to be stated therein or necessary to make the
statements made therein, in light of the circumstances under which they are
made, not misleading as of the time when made or delivered.
     6.23 Solvency. The Company and the Guarantors, taken as a whole, are
Solvent.
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ARTICLE VII.
AFFIRMATIVE COVENANTS
     So long as the Issuing Lender or any Lender shall have any Commitment
hereunder, or any Loan, Letter of Credit or other Obligation shall remain unpaid
or unsatisfied, unless the Lenders waive compliance in writing:
     7.01 Financial Statements. Each of the Parent and the Company shall
maintain for itself and each Subsidiary on a consolidated basis a system of
accounting established and administered in accordance with GAAP and deliver to
the Administrative Agent, with sufficient copies for each Lender:
          (a) As soon as available, but not later than 90 days after the end of
each fiscal year (i) a copy of the annual audited consolidated financial
statements of the Parent and its Subsidiaries as of the end of such year,
setting forth in each case in comparative form the figures for the previous
fiscal year, (A) certified by a Responsible Officer as fairly presenting in all
material respects, in accordance with GAAP, the consolidated financial position,
results of operations and cash flows of the Parent and its Subsidiaries, and
(B) accompanied by the unqualified opinion and a copy of a management letter (if
one is issued) of a nationally recognized independent public accounting firm
(the “Independent Auditor”), which opinion and letter shall state that such
consolidated financial statements present fairly, in all material respects, the
financial position, results of operations and cash flows for the periods
indicated in conformity with GAAP applied on a basis consistent with prior
years, and (ii) a copy of the annual unaudited consolidated financial statements
for the Company as of the end of such year, certified by a Responsible Officer
as fairly presenting in all material respects, in accordance with GAAP, the
financial position, results of operations and cash flows of the Company; and
          (b) As soon as available, but not later than 45 days after the close
of each of the first three quarterly periods of each fiscal year, a copy of the
unaudited consolidated financial statements setting forth the financial
position, results of operations and cash flows, for the period commencing on the
first day and ending on the last day of such quarter, and for the fiscal year up
through the quarter then ended of (i) the Parent and its Subsidiaries, certified
by a Responsible Officer as being fairly presented in all material respects, in
accordance with GAAP and (ii) the Company and its Subsidiaries, certified by a
Responsible Officer as being fairly presented in all material respects, in
accordance with GAAP subject to the absence of footnotes.
     7.02 Certificates; Other Production and Reserve Information. The Company
shall furnish to the Administrative Agent, with sufficient copies for each
Lender:
          (a) As soon as available, but not later than 45 days after the close
of each month, a Monthly Status Report in a form reasonably acceptable to the
Lenders, as of the last day of the immediately preceding month;
          (b) Concurrently with any delivery of financial statements under
Subsections 7.01(a) and (b), a certificate of a Responsible Officer, in form and
substance satisfactory to the Administrative Agent, setting forth as of the last
Business Day of such fiscal quarter or fiscal year, a true and complete list of
all Derivative Contracts of the Borrower Group, the material terms thereof
(including the type, term, effective date, termination date and notional amounts
or volumes), the net mark-to-market value therefor, any new credit support
agreements relating thereto not listed on Schedule 6.21, any margin required or
supplied under any credit support document, and the counterparty to each such
agreement;
          (c) Concurrently with the delivery of the statements referred to in
Subsection 7.01(b) and within sixty (60) days following the end of the Company’s
fiscal year, a Pricing Grid Certificate executed by a Responsible Officer;
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          (d) Concurrently with the delivery of the statements and reports
referred to in Subsections 7.01(a) and (b), and 7.02(a) a Compliance Certificate
executed by a Responsible Officer;
          (e) Annually commencing April 15, 2007, dated as of January 1st of
such year, a Reserve Report prepared by the Independent Engineer or other
independent petroleum engineer reasonably acceptable to the Administrative Agent
and the Company, and annually, commencing October 15, 2006, dated as of July 1st
of such year, a Reserve Report prepared by personnel of the Company and
certified by a Responsible Officer of the Company as true and correct in all
material respects. Each Reserve Report shall be in form and substance reasonably
satisfactory to the Lenders. With the delivery of each Reserve Report, the
Company shall provide to the Administrative Agent and the Lenders a certificate
from a Responsible Officer certifying that in all material respects: (i) the
information contained in the Reserve Report and any other information delivered
in connection therewith is true and correct, (ii) the Company or a Guarantor
owns good and defensible title to the Oil and Gas Properties evaluated in such
Reserve Report and such Properties are free of all Liens except for Liens
permitted by Section 8.01, (iii) except as set forth on an exhibit to the
certificate, on a net basis there are no gas imbalances, take or pay or other
prepayments in excess of the volume specified in Section 6.12 with respect to
their Oil and Gas Properties evaluated in such Reserve Report that would require
the Company or any Guarantor to deliver Oil and Gas either generally or produced
from such Oil and Gas Properties at some future time without then or thereafter
receiving full payment therefor, (iv) none of their proved Oil and Gas
Properties have been sold since the date of the last Borrowing Base
determination except as set forth on an exhibit to the certificate, which
certificate shall list all of its proved Oil and Gas Properties sold and in such
detail as reasonably required by the Administrative Agent, (v) attached to the
certificate is a list of all marketing agreements entered into subsequent to the
most recently delivered Reserve Report and (vi) attached thereto is a schedule
of the Oil and Gas Properties evaluated by such Reserve Report that are
Mortgaged Properties and demonstrating the percentage of the present value that
such Mortgaged Properties represent;
          (f) Promptly after the furnishing thereof, copies of all periodic and
other financial reports and other financial materials (not otherwise required to
be delivered within a specific timeframe pursuant to the terms hereof)
distributed by the Parent to its shareholders;
          (g) Promptly after the furnishing thereof, copies of any financial
statement, report or notice furnished to or by any Person pursuant to the terms
of any preferred stock designation, indenture, loan or credit or other similar
agreement, other than this Agreement and not otherwise required to be furnished
to the Lenders pursuant to any other provision of this Section 7.02;
          (h) Concurrently with the delivery of any Reserve Report to the
Administrative Agent pursuant to Subsection 7.02(e), or after an Event of
Default, upon request, a list of all Persons purchasing Oil and Gas from the
Company or any Guarantor;
          (i) In the event the Company or any Guarantor intends to sell,
transfer, assign or otherwise dispose of any Oil or Gas Properties included in
the most recently delivered Reserve Report (or any Equity Interests in the
Company or any Guarantor owning interests in such Oil and Gas Properties) during
any Borrowing Base Period having a fair market value, individually or in the
aggregate, in excess of $250,000, prior written notice of such disposition, the
price thereof, the anticipated date of closing, and any other details thereof
requested by the Administrative Agent;
          (j) Prompt written notice, and in any event within three (3) Business
Days, of the occurrence of any Casualty Event;
          (k) Prompt written notice (and in any event within thirty (30) days
prior thereto) of any change (i) in the Company or any Guarantor’s
organizational name or in any trade name used to identify such
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Person in the conduct of its business or in the ownership of its Properties,
(ii) in the location of the Company or any Guarantor’s chief executive office or
principal place of business, (iii) in the Company or any Guarantor’s identity or
organizational structure or in the jurisdiction in which such Person is
incorporated or formed, (iv) in the Company or any Guarantor’s jurisdiction of
organization or such Person’s organizational identification number in such
jurisdiction of organization, and (v) in the Company or any Guarantor’s federal
taxpayer identification number, if any;
          (l) Promptly upon the request of the Administrative Agent, such copies
of all geological, engineering and related data contained in the Company’s or
any Guarantor’s files or readily accessible to the Company or any Guarantor
relating to the Oil and Gas Properties as may reasonably be requested;
          (m) On request by the Administrative Agent, based upon the
Administrative Agent’s or Lenders’ good faith belief that the Company’s or any
Guarantor’s title to the Mortgaged Properties or the Administrative Agent’s lien
thereon is subject to claims of third parties, or if required by regulations to
which the Administrative Agent or any of the Lenders is subject, title and
mortgage lien evidence satisfactory to the Administrative Agent covering such
Mortgaged Property as may be designated by the Administrative Agent, covering
the Company’s or any Guarantor’s title thereto and evidencing that the
Obligations are secured by liens and security interests as provided in this
Agreement and the Security Documents;
          (n) As soon as available, and in any event within 90 days after the
end of each fiscal year, a business and financial plan for the Company and the
Parent (in form reasonably satisfactory to the Administrative Agent), prepared
by a Responsible Officer, setting forth for the current fiscal year, quarterly
financial projections and budgets for the Company and the Guarantors, and for
the next fiscal year thereafter a yearly financial projection and budget; and
          (o) Promptly, such additional information regarding the business,
financial or corporate affairs of the Company or any Guarantor as the
Administrative Agent, at the reasonable request of any Lender, may from time to
time request.
     7.03 Notices. The Company shall promptly notify the Administrative Agent:
          (a) of the occurrence of any Default or Event of Default or any event
or circumstance that would reasonably be expected to become a Default or Event
of Default;
          (b) of any matter that has resulted or may reasonably be expected to
result in a Material Adverse Effect, including (i) breach or non-performance of,
or any default under, a Contractual Obligation of the Company or any Guarantor;
(ii) any dispute, litigation, investigation, proceeding or suspension between
the Company or any Guarantor and any Governmental Authority; (iii) the
commencement of, or any material development in, any litigation, proposed
legislation, ordinance or regulation of a Governmental Authority, or proceeding
affecting the Company or any Guarantor; including pursuant to any applicable
Environmental Laws; or (iv) revocation, cancellation or failure to renew any
license, permit or franchise where such revocation, failure or loss could
reasonably be expected to have a Material Adverse Effect;
          (c) of any material change in accounting policies or financial
reporting practices by the Company or any Guarantor; or
          (d) of the formation or acquisition of any Subsidiary of Ivanhoe
Energy Holdings Inc.
Each notice under this Section 7.03 shall be accompanied by a written statement
by a Responsible Officer setting forth details of the occurrence referred to
therein, and stating what action the Company or any affected Guarantor proposes
to take with respect thereto and at what time. Each notice under
Subsection 7.03(a) shall
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describe with particularity any and all clauses or provisions of this Agreement
or other Loan Document that have been (or foreseeably will be) breached or
violated.
     7.04 Preservation of Existence, Etc. The Company and each Guarantor shall:
          (a) preserve and maintain in full force and effect its legal
existence, and maintain its good standing under the laws of its state or
jurisdiction of formation, except as otherwise permitted hereunder;
          (b) preserve and maintain in full force and effect all governmental
rights, privileges, qualifications, permits, licenses and franchises necessary
or desirable in the normal conduct of its business except where the failure to
do so would not reasonably be expected to have a Material Adverse Effect;
          (c) use reasonable efforts, in the ordinary course of business, to
preserve its business organization and goodwill except where the failure to do
so would not reasonably be expected to have a Material Adverse Effect; and
          (d) preserve or renew all of its registered patents, trademarks, trade
names and service marks, the non-preservation of which could reasonably be
expected to have a Material Adverse Effect.
     7.05 Maintenance of Property. The Company and each Guarantor shall maintain
and preserve all its Property which is used or useful in its business in good
working order and condition, ordinary wear and tear excepted and to use the
standard of care typical in the industry in the operation and maintenance of its
facilities except where the failure to do so would not reasonably be expected to
have a Material Adverse Effect provided, however, that nothing in this
Section 7.05 shall prevent the Company or any Guarantor from abandoning any well
or forfeiting, surrendering, releasing or defaulting under any lease in the
ordinary course of business which is not materially disadvantageous in any way
to the Lenders and which, in its opinion, is in the best interest of the Company
or such Guarantor.
     7.06 Title Information.
          (a) On or before the delivery to the Administrative Agent and the
Lenders of each Reserve Report required by Subsection 7.02(e), the Company will
deliver title information in form and substance acceptable to the Administrative
Agent covering enough of the Oil and Gas Properties evaluated by such Reserve
Report that were not included in the immediately preceding Reserve Report, so
that the Administrative Agent shall have received together with title
information previously delivered to the Administrative Agent, satisfactory title
information on at least 80% of the total net present value (determined by a
discount factor of 10%) of the proved Oil and Gas Properties evaluated by such
Reserve Report.
          (b) If the Company has provided title information for additional
Properties under Subsection 7.06(a), the Company shall, within 60 days of notice
from the Administrative Agent that title defects or exceptions exist with
respect to such additional Properties, either (i) cure any such title defects or
exceptions (including defects or exceptions as to priority) which are not
permitted by Section 8.01 raised by such information, (ii) substitute acceptable
Mortgaged Properties with no title defects or exceptions except for Permitted
Liens having an equivalent value or (iii) deliver title information in form and
substance reasonably acceptable to the Administrative Agent so that the
Administrative Agent shall have received, together with title information
previously delivered to the Administrative Agent, satisfactory title information
on at least 80% of the net present value (determined by a discount factor of
10%) of the Oil and Gas Properties evaluated by such Reserve Report.
          (c) If the Company is unable to cure any title defect requested by the
Administrative Agent or the Lenders to be cured within the 60-day period or the
Company does not comply with the
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requirements to provide acceptable title information covering 80% of the net
present value (determined by a discount factor of 10%) of the Oil and Gas
Properties evaluated in the most recent Reserve Report, such default shall not
be a Default, but instead the Administrative Agent and/or the Required Lenders
shall have the right to exercise the following remedy in their sole discretion
from time to time, and any failure to so exercise this remedy at any time shall
not be a waiver as to future exercise of the remedy by the Administrative Agent
or the Lenders. To the extent that the Administrative Agent or the Required
Lenders are not reasonably satisfied with title to any Mortgaged Property after
the 60-day period has elapsed, such unacceptable Mortgaged Property shall not
count towards “the 80% requirement”, and the Administrative Agent may send a
notice to the Company and the Lenders that the then outstanding Borrowing Base
shall be reduced by an amount as determined by the Super-Majority Lenders to
cause the Company to be in compliance with the requirement to provide acceptable
title information on 80% of the net present value (determined by a discount
factor of 10%) of the Oil and Gas Properties. This new Borrowing Base shall
become effective immediately after receipt of such notice.
     7.07 Additional Collateral. In connection with each redetermination of the
Borrowing Base, the Company shall review the Reserve Report and the list of
current Mortgaged Properties (as described in Subsection 7.02(e)) to ascertain
whether the Mortgaged Properties represent substantially all of the total net
present value (determined by a discount factor of 10%) of the Oil and Gas
Properties evaluated in the most recently completed Reserve Report after giving
effect to exploration and production activities, acquisitions, dispositions and
production. In the event that the Mortgaged Properties do not represent
substantially all of such total net present value, then the Company and the
Guarantors shall grant, within thirty (30) days of delivery of the certificate
required under Subsection 7.02(e), to the Administrative Agent or its designee
as security for the Obligations a first-priority Lien interest on additional Oil
and Gas Properties not already subject to a Lien of the Security Documents such
that after giving effect thereto, the Mortgaged Properties will represent
substantially all of such total net present value. All such Liens will be
created and perfected by and in accordance with the provisions of deeds of
trust, security agreements and financing statements or other Security Documents,
all in form and substance reasonably satisfactory to the Administrative Agent or
its designee and in sufficient executed (and acknowledged where necessary or
appropriate) counterparts for recording purposes.
     7.08 Insurance. The Company and each Guarantor shall maintain, with
financially sound and reputable independent insurers, insurance with respect to
its properties and business against loss or damage of the kinds customarily
insured against by Persons engaged in the same or similar business, of such
types and in such amounts as are customarily carried under similar circumstances
by such other Persons except where the failure to do so would not reasonably be
expected to have a Material Adverse Effect. The loss payable clauses or
provisions in said insurance policy or policies insuring any of the Collateral
for the Loan shall be endorsed in favor of and made payable to the
Administrative Agent as its interests may appear and such policies shall name
the Administrative Agent and the Lenders as “additional insured” and provide
that the insurer will give at least 30 days prior notice of any cancellation to
the Administrative Agent.
     7.09 Payment of Obligations. The Company and each Guarantor shall pay and
discharge prior to delinquency, all their respective obligations and
liabilities, including: (a) all tax liabilities, assessments and governmental
charges or levies upon it or its properties or assets, unless the same are being
contested in good faith by appropriate proceedings and adequate reserves in
accordance with GAAP are being maintained by the Company or such Guarantor;
(b) all lawful claims which, if unpaid, would by law become a Lien upon its
property; and (c) all Indebtedness, as and when due and payable, but subject to
any subordination provisions contained in any instrument or agreement evidencing
such Indebtedness; except in each of (a), (b) and (c), where the failure to do
so would not reasonably be expected to have a Material Adverse Effect.
     7.10 Compliance with Laws. The Company and each Guarantor shall comply in
all material respects with all Requirements of Law of any Governmental Authority
having jurisdiction over it or its
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business (including Environmental Laws, the Federal Fair Labor Standards Act and
any California Requirement of Law promulgated with respect to earthquakes),
except (a) such as may be contested in good faith or as to which a bona fide
dispute may exist or (b) where the failure to do so would not reasonably be
expected to have a Material Adverse Effect.
     7.11 Compliance with ERISA. The Company and each Guarantor shall, and each
shall cause each of its ERISA Affiliates to: (a) maintain each Plan in
compliance in all material respects with the applicable provisions of ERISA, the
Code and other federal or state law; (b) cause each Plan which is qualified
under Section 401(a) of the Code to maintain such qualification; and (c) make
all required contributions to any Plan subject to Section 412 of the Code.
     7.12 Inspection of Property and Books and Records. The Company and each
Guarantor shall maintain proper books of record and account, in which full, true
and correct entries in conformity with GAAP consistently applied shall be made
of all financial transactions and matters involving the assets and business of
the Company and such Guarantor. The Company and each Guarantor shall permit,
representatives and independent contractors of the Administrative Agent or any
Lender to visit and inspect any of their respective properties, to examine their
respective company, financial and operating records, and make copies thereof or
abstracts therefrom, and to discuss their respective affairs, finances and
accounts with their respective managers, directors, officers, and independent
public accountants, all at the expense of the Company or such Guarantor and at
such reasonable times during normal business hours and as often as may be
reasonably desired, upon reasonable advance notice to the Company or such
Guarantor; provided, however, when an Event of Default exists the Administrative
Agent or any Lender may do any of the foregoing at the expense of the Company or
such Guarantor at any time during normal business hours and without advance
notice.
     7.13 Environmental Laws.
          (a) The Company and each Guarantor shall conduct its operations and
keep and maintain its property in compliance with all Environmental Laws and
maintain all environmental, health and safety permits, licenses and
authorizations necessary for its operations and will maintain such in full force
and effect except where the failure to do so would not reasonably be expected to
have a Material Adverse Effect. The Company and each Guarantor shall promptly
commence and diligently prosecute to completion any assessment, evaluation,
investigation, monitoring, containment, cleanup, removal, repair, restoration,
remediation or other remedial obligations (collectively, the “Remedial Work”) in
the event any Remedial Work is required or reasonably necessary under applicable
Environmental Laws because of or in connection with the actual or suspected
past, present or future disposal or other release of any oil, oil and gas waste,
hazardous substance or solid waste on, under, about or from any of the Company’s
or such Guarantor’s Properties, which failure to commence and diligently
prosecute to completion could reasonably be expected to have a Material Adverse
Effect.
          (b) The Company and each Guarantor will establish and implement such
procedures as may be reasonably necessary to continuously determine and assure
that the Company’s and such Guarantor’s obligations under this Section 7.13 are
timely and fully satisfied, which failure to establish and implement could
reasonably be expected to have a Material Adverse Effect
          (c) The Company and each Guarantor will promptly furnish to the
Administrative Agent all written notices of violation, orders, claims,
citations, complaints, penalty assessments, suits or other proceedings received
by the Company or such Guarantor, or of which it has notice, pending or
threatened against the Company or such Guarantor, by any Governmental Authority
with respect to any alleged violation of or non-compliance with any
Environmental Laws or any permits, licenses or authorizations in connection with
its ownership or use of its Properties or the operation of its business, except
where any such alleged
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violations or incidents of non-compliance would not, individually or in the
aggregate, result in a penalty, assessment, fine or other cost or liability
exceeding $100,000.
          (d) The Company and each Guarantor will promptly furnish to the
Administrative Agent all requests for information, notices of claim, demand
letters, and other notifications, received by the Company or such Guarantor in
connection with its ownership or use of its Properties or the conduct of its
business, relating to potential responsibility with respect to any investigation
or clean-up of hazardous materials at any location, except where any such
alleged responsibility would not, individually or in the aggregate, result in a
penalty, assessment, fine or other cost or liability exceeding $100,000.
     7.14 New Subsidiary Guarantors. If, at any time after the date of this
Agreement, any new Subsidiary of Ivanhoe Energy Holdings Inc. is acquired or
created then the owner(s) of such Subsidiary shall execute and deliver a
Security Agreement to the Administrative Agent, whereby such owner(s) pledge all
of the Equity in such Subsidiary as security for the Obligations.
     7.15 Reserved.
     7.16 Use of Proceeds. The Company shall use the proceeds of the Loans
(a) to refinance Indebtedness, (b) for standby letters of credit up to the
sub-facility amount of $500,000, (c) for working capital purposes (including
capital expenditures made for the exploration and development of Oil and Gas
Properties) of the Company and the Guarantors, (d) for general company purposes
of the Company, and (e) for acquisitions permitted under Section 8.04 and
Restricted Payments permitted under Section 8.09.
     7.17 Operating Accounts. (i) Each of the Company and the Parent shall
establish and maintain with Administrative Agent all of its primary operating
and depository accounts and (ii) each member of the Borrower Group other than
the Company shall establish and maintain with the Administrative Agent any of
its operating or depository accounts to the extent any such account has an
average collected balance for any month in excess of $100,000.00.
     7.18 Phase I Reports. As soon as available, and in any case within fifteen
(15) days prior to closing any Acquisition of Oil and Gas Properties, the
Company shall deliver to the Lenders a Phase I report covering such Oil and Gas
Properties to be acquired in form and substance satisfactory to the
Administrative Agent.
     7.19 Further Assurances.
          (a) The Company and the Guarantors will promptly cure any defects in
the creation and issuance of the Notes and the execution and delivery of this
Agreement, the Security Documents or any other instruments referred to or
mentioned herein or therein. The Company and the Guarantors at their expense
will promptly do all acts and things, and will execute and file or record, all
instruments reasonably requested by the Administrative Agent, to establish,
perfect, maintain and continue the perfected security interest of the
Administrative Agent in or the Lien of the Administrative Agent on the Mortgaged
Properties. Upon request by the Administrative Agent, the Company and the
Guarantors shall promptly execute such additional Security Documents covering
any new Oil and Gas Properties reflected on the Monthly Status Reports. The
Company and the Guarantors will pay the reasonable costs and expenses of all
filings and recordings and all searches deemed necessary by the Administrative
Agent to establish and determine the validity and the priority of the Liens
created or intended to be created by the Security Documents; and the Company and
the Guarantors will satisfy all other claims and charges which in the reasonable
opinion of the Administrative Agent might prejudice, impair or otherwise affect
any of the Mortgaged Properties or any Liens thereon in favor of the
Administrative Agent for the benefit of the Issuing Lender and the Lenders.
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          (b) The Company and each Guarantor hereby authorizes the
Administrative Agent to file one or more financing or continuation statements,
and amendments thereto, relative to all or any part of the Mortgaged Property
and/or the Collateral without the signature of the Company or any Guarantor
where permitted by law. A carbon, photographic or other reproduction of the
Security Documents or any financing statement covering the Mortgaged Property
and/or the Collateral or any part thereof shall be sufficient as a financing
statement where permitted by law. The Administrative Agent will promptly send
the Company any financing or continuation statements it files without the
signature of the Company or any Guarantor and the Administrative Agent will
promptly send the Company the filing or recordation information with respect
thereto.
     7.20 Derivative Contracts. The Borrower Group shall enter into and maintain
such Derivative Contracts with respect to estimated production from their Oil
and Gas Properties as the Administrative Agent and the Required Lenders may
reasonably require, in form and substance, and with volumes, pricing, structure
and other terms and conditions, as may be satisfactory to the Administrative
Agent, including terms that each such Derivative Contract is fully assignable to
the Administrative Agent, with each counterparty agreeing to provide the
Administrative Agent with notice of and an opportunity to cure any defaults
thereunder before declaring an early termination date or otherwise terminating
such Derivative Contract or any transaction thereunder.
ARTICLE VIII.
NEGATIVE COVENANTS
     So long as any Lender shall have any Commitment hereunder, or any Loan or
other Obligation shall remain unpaid or unsatisfied, unless the Lenders waive
compliance in writing:
     8.01 Limitation on Liens. Each of the Company and the Guarantors agrees
that it shall not, directly or indirectly, make, create, incur, assume or suffer
to exist any Lien upon or with respect to any part of its Property, whether now
owned or hereafter acquired, other than the following (“Permitted Liens”):
          (a) any Lien created under any Loan Document;
          (b) Liens for taxes, fees, assessments or other governmental charges
which are not delinquent or remain payable without penalty, or to the extent
that non-payment thereof is permitted by Section 7.09;
          (c) carriers’, warehousemen’s, mechanics’, landlords’, materialmen’s,
repairmen’s or other similar Liens arising in the ordinary course of business
(whether by law or by contract) which are not delinquent or remain payable
without penalty or which are being contested in good faith and by appropriate
proceedings, which proceedings have the effect of preventing the forfeiture or
sale of the property subject thereto;
          (d) Liens consisting of pledges or deposits required in the ordinary
course of business in connection with workers’ compensation, unemployment
insurance and other social security legislation;
          (e) Liens on the Property of the Company or any Guarantor securing
(i) the non-delinquent performance of bids, trade contracts (other than for
borrowed money), statutory obligations, (ii) contingent obligations on surety
and appeal bonds, and (iii) other non-delinquent obligations of a like nature;
in each case, incurred in the ordinary course of business;
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          (f) easements, rights-of-way, restrictions, defects or other
exceptions to title and other similar encumbrances incurred in the ordinary
course of business which, in the aggregate, are not substantial in amount, are
not incurred to secure Indebtedness, and which do not in any case materially
detract from the value of the Property subject thereto or interfere with the
ordinary conduct of the businesses of the Company or any Guarantor;
          (g) Liens arising solely by virtue of any statutory or common law
provision relating to bankers’ liens, rights of set-off or similar rights and
remedies as to deposit accounts or other funds maintained with a creditor
depository institution; or under any deposit account agreement entered into in
the ordinary course of business; provided that (i) such deposit account is not a
dedicated cash collateral account and is not subject to restrictions against
access by the Company or any Guarantor, (ii) the Company (or applicable
Guarantor) maintains (subject to such right of set off) dominion and control
over such account(s), and (iii) such deposit account is not intended by the
Company or any Guarantor to provide cash collateral to the depository
institution; and
          (h) Oil and Gas Liens.
     8.02 Disposition of Assets. Each of the Borrower Group agrees that it shall
not, directly or indirectly, sell, assign, lease, convey, transfer or otherwise
dispose of (whether in one or a series of transactions) (collectively,
“Dispositions”) any Property used or useful by the Borrower Group (including
accounts and notes receivable, with or without recourse) or enter into any
agreement to do any of the foregoing, except:
          (a) as permitted under Sections 7.05, 8.03, 8.04, 8.09, or 8.10;
          (b) Dispositions of inventory including produced Oil and Gas in the
ordinary course of business;
          (c) Dispositions by one member of the Borrower Group to another member
of the Borrower Group;
          (d) used, worn-out or surplus equipment in the ordinary course of
business; and
          (e) Dispositions not otherwise permitted under Subsections 8.02 (a) —
(d) above which are made in the ordinary course of business; provided that,
(i) no Event of Default shall exist at the time of such Disposition or result
therefrom, and (ii) the aggregate value (as determined by the value assigned to
such properties under the most recent Reserve Report) of all Dispositions of Oil
and Gas Properties made by the Borrower Group, together, shall not exceed in any
Borrowing Base Period five percent (5%) of the Borrowing Base then in effect;
further provided that, the Borrowing Base shall be automatically reduced by an
amount equal to the aggregate value of such Oil and Gas Properties and to the
extent a Borrowing Base Deficiency results from such reduction, up to
one-hundred percent (100%) of the proceeds of such Dispositions, net of usual
and customary reasonable fees, expenses and taxes, shall be applied, as
necessary, to cure such Borrowing Base Deficiency.
     8.03 Consolidations and Mergers. Each of the Company and the Guarantors
agrees that it shall not consolidate with or into, or convey, transfer, lease or
otherwise dispose of (whether in one transaction or in a series of transactions)
all or substantially all of its assets (whether now owned or hereafter acquired)
to or in favor of any Person, except:
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          (a) any member of the Borrower Group may merge with any other member
of the Borrower Group, provided that with respect to any such merger involving
the Company, the Company shall be the continuing or surviving entity;
          (b) any Subsidiary of the Parent (other than a member of the Borrower
Group) may merge with the Parent, so long as the Parent shall be the continuing
or surviving entity; and
          (c) Dispositions permitted under Subsection 8.02(c) or (e).
     8.04 Loans and Investments. Each member of the Borrower Group agrees that
it shall not purchase or acquire or make any commitment therefor, any capital
stock, equity interest, or any obligations or other securities of, or any
interest in, any Person or make or commit to make any Acquisition, or make or
commit to make any advance, loan, extension of credit or capital contribution to
or any other investment in (collectively, “Investments”) any Person except for:
          (a) Investments in Cash Equivalents;
          (b) extensions of credit in the nature of accounts receivable or notes
receivable arising from the sale or lease of goods or services in the ordinary
course of business;
          (c) Investments in Subsidiaries (other than HTL Technology Development
Subsidiaries) that are or become Guarantors;
          (d) Investments permitted under Subsection 8.02(c);
          (e) Investments in Derivative Contracts required under this Agreement
or permitted under Section 8.10;
          (f) Investments with third parties that are (i) customary in the oil
and gas business, (ii) made in the ordinary course of the Company’s or such
Guarantor’s business, and (iii) made in the form of or pursuant to Operating
Agreements, processing agreements, farm-in agreements, farm-out agreements,
development agreements, unitization agreements, pooling agreements, joint
bidding agreements, service contracts and other similar agreements;
          (g) extensions of credit by the Borrower Group to any of their full
time employees which do not exceed $250,000 at any time outstanding in the
aggregate to all such employees;
          (h) Investments made after June 30, 2006 in HTL Technology Development
Subsidiaries not to exceed $2,000,000 in the aggregate upon terms and conditions
acceptable to the Administrative Agent; and
          (i) other Investments not to exceed $250,000 in the aggregate.
     8.05 Limitation on Indebtedness. Each member of the Borrower Group agrees
that it shall not create, incur, assume, suffer to exist, or otherwise become or
remain directly or indirectly liable with respect to, any Indebtedness, except:
          (a) Indebtedness incurred pursuant to this Agreement or the other Loan
Documents;
          (b) Indebtedness consisting of Contingent Obligations permitted
pursuant to Section 8.08;
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          (c) Indebtedness incurred in connection with the issuance of
Derivative Contracts required under this Agreement or permitted under
Section 8.10 hereof;
          (d) specific Indebtedness outstanding on the date hereof and listed in
Schedule 8.05 hereto;
          (e) Indebtedness not otherwise permitted under Subsections 8.05(a) —
(d) above not exceeding $250,000 at any time outstanding.
     8.06 Transactions with Affiliates. Each of the Company and the Guarantors
agrees that it shall not enter into any transaction with or make any payment or
transfer to (collectively, "Transactions”) any Affiliate of the Company or any
such Guarantor, except for Transactions between the Company and any Guarantor or
between Guarantors, and for other Transactions entered into in the ordinary
course of business and upon fair and reasonable terms no less favorable to the
Company or such Guarantor than would obtain in a comparable arm’s-length
transaction with a Person not an Affiliate of the Company or such Guarantor.
Nothing in this Section 8.06 shall restrict the Borrower Group’s ability (a) to
make Restricted Payments permitted under Section 8.09 or (b) to make Investments
permitted under Subsections 8.04(c), 8.04(h) and 8.04(i).
     8.07 Margin Stock. Each of the Company and the Guarantors agrees that it
shall not use any portion of the Loan proceeds, directly or indirectly, (i) to
purchase or carry Margin Stock, (ii) to repay or otherwise refinance
indebtedness of the Company or any Guarantor incurred to purchase or carry
Margin Stock, (iii) to extend credit for the purpose of purchasing or carrying
any Margin Stock, or (iv) to acquire any security in any transaction that is
subject to Section 13 or 14 of the Exchange Act. If requested by the
Administrative Agent, the Company will furnish to the Administrative Agent and
each Lender a statement to the foregoing effect in conformity with the
requirements of FR Form U-1 or such other form referred to in Regulation U,
Regulation T or Regulation X of the Board, as the case may be.
     8.08 Contingent Obligations. Each of the Borrower Group agrees that it
shall not create, incur, assume or suffer to exist any Contingent Obligations
except:
          (a) endorsements for collection or deposit in the ordinary course of
business;
          (b) Derivative Contracts required under this Agreement or permitted
under Section 8.10 hereof;
          (c) Contingent Obligations of the Borrower Group listed in
Schedule 8.08 hereto;
          (d) plugging bonds, performance bonds and fidelity bonds issued for
the account of any member of the Borrower Group, obligations to indemnify or
make whole any surety and similar agreements incurred in the ordinary course of
business, provided that such obligations shall not exceed $500,000 in the
aggregate;
          (e) this Agreement and the Loan Documents; and
          (f) any other Contingent Obligations of the Borrower Group to the
extent not described in Subsections 8.08 (a) — (e) not to exceed $250,000 in the
aggregate.
     8.09 Restricted Payments; Restrictive Agreements. Each of (i) the Parent
and (ii) each member of the Borrower Group agrees that it shall not purchase,
redeem or otherwise acquire for value any
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membership interests, partnership interests, capital accounts, shares of its
capital stock or any warrants, rights or options to acquire such membership
interest, partnership interest or shares, now or hereafter outstanding from its
members, partners or stockholders and will not declare or pay any distribution,
dividend or return capital to its members, partners or stockholders, or make any
distribution of assets in cash or in kind to its members, partners or
stockholders (collectively “Restricted Payments”), except any member of the
Borrower Group may make Restricted Payments to any other member of the Borrower
Group to the extent permitted under its Organization Documents, so long as
(a) no Event of Default exists or would result therefrom and (b) after giving
effect to such Restricted Payment, the Company and the Guarantors are in
compliance with all terms and conditions of this Agreement. Each of the Company
and the Guarantors agrees that it will not create, incur, assume or suffer to
exist any contract, agreement or understanding (other than this Agreement and
the Security Documents) that in any way prohibits or restricts the granting,
conveying, creation or imposition of any Lien on any of its Property in favor of
the Administrative Agent and the Lenders or restricts any Subsidiary from paying
dividends or making distributions to the Company or any Guarantor, or which
requires the consent of or notice to other Persons in connection therewith.
     8.10 Derivative Contracts. None of the Borrower Group shall enter into or
in any manner be liable on any Derivative Contract except:
          (a) Derivative Contracts entered into by the any member of the
Borrower Group with the purpose and effect of limiting or reducing the market
price risk of Oil and Gas expected to be produced by the Borrower Group;
provided that at all times: (i) the aggregate of all such Derivative Contracts
limits or reduces such market price risk for a term of no more than thirty-six
(36) months; (ii) no such contract, when aggregated with all Derivative
Contracts permitted under this Subsection 8.10(a) (but excluding put option
contracts that are not related to corresponding calls, collars or swaps)
requires the Borrower Group to deliver more than 80% of the reasonably
anticipated production for each month for the total Oil and Gas classified as
“proved producing” on the most recent Reserve Report delivered to the
Administrative Agent covering the Oil and Gas Properties, and (iii) each such
contract (excluding Derivative Contracts offered by national commodity exchange)
shall be between a member of the Borrower Group and the Administrative Agent, or
any of the Lenders or its Affiliate, or with an unsecured counterparty or have a
guarantor of the obligation of the unsecured counterparty who, at the time the
contract is made, has long-term obligations rated BBB+ or Baal or better,
respectively, by Standard & Poor’s Corporation or Moody’s Investors Services,
Inc. (or a successor credit rating agency);
          (b) Derivative Contracts entered into by any member of the Borrower
Group with the purpose and effect of fixing interest rates on a principal amount
of Indebtedness of the Borrower Group that is accruing interest at a variable
rate, provided that (i) the floating rate index of each such contract generally
matches the index used to determine the floating rates of interest on the
corresponding Indebtedness of the Borrower Group to be hedged by such contract,
(ii) no such contract, except those with a Lender or its Affiliate, when
aggregated with all Derivative Contracts permitted under Subsections 8.10(a) and
(b), requires any member of the Borrower Group to put up money, assets, letters
of credit, or other security against the event of its non-performance prior to
actual default by it in performing obligations thereunder, and (iii) each such
contract shall be with a Lender or its Affiliate, or with an unsecured
counterparty or have a guarantor of the obligation of an unsecured counterparty
who, at the time the contract is made, has long-term obligations rated A+ or A1
or better, respectively, by Standard & Poor’s Corporation or Moody’s Investors
Services, Inc. (or a successor credit rating agency);
          (c) In the event of a Derivative Contract between any member of the
Borrower Group and any of the Lenders or their respective Affiliates, the
Contingent Obligation evidenced under such Derivative Contract shall not be
applied against such Lender’s Commitment nor against the Effective Amount. Any
Indebtedness to any Lender or its Affiliate incurred under any Derivative
Contract shall be treated as an Obligation pari passu and secured pro rata under
the Security Documents with all Obligations otherwise
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incurred hereunder or under the other Loan Documents as more particularly
provided under Section 11.11; and
          (d) No member of the Borrower Group shall modify or terminate any
Derivative Contract to which it is currently a party or subsequently becomes a
party without the consent of the Administrative Agent.
     8.11 Change in Business and Corporate Structure.
          (a) Neither the Company nor any other member of the Borrower Group
shall (i) have any Subsidiaries other than wholly-owned Subsidiaries, (ii) enter
into, or allow any Subsidiary to enter into, any joint ventures or (iii) have
any other material equity investment, except as otherwise permitted hereunder.
          (b) Neither the Company nor any other member of the Borrower Group
shall engage in any business or activity other than its Principal Business.
          (c) Neither the Company nor any Guarantor shall alter, amend or modify
in any manner materially adverse to the Lenders any of its Organization
Documents.
     8.12 Accounting Changes. Except as expressly permitted by the Required
Lenders, neither the Company nor any Guarantor shall make any significant change
in accounting treatment or reporting practices, except as required by GAAP, or
change its fiscal year.
     8.13 ERISA Compliance. Except as would not reasonably be expected to result
in a Material Adverse Effect, each of the Company and the Guarantors will not at
any time:
          (a) engage in, or permit any ERISA Affiliate to engage in, any
transaction in connection with which the Company, any Guarantor or any ERISA
Affiliate could be subjected to either a civil penalty assessed pursuant to
subsections (c), (i) or (l) of section 502 of ERISA or a tax imposed by
Chapter 43 of Subtitle D of the Code.
          (b) terminate, or permit any ERISA Affiliate to terminate, any Plan in
a manner, or take any other action with respect to any Plan, which could result
in any liability of the Company, any Guarantor or any ERISA Affiliate to the
PBGC.
          (c) fail to make, or permit any ERISA Affiliate to fail to make, full
payment when due of all amounts which, under the provisions of any Plan,
agreement relating thereto or applicable law, the Company, any Guarantor or any
ERISA Affiliate is required to pay as contributions thereto.
          (d) permit to exist, or allow any ERISA Affiliate to permit to exist,
any accumulated funding deficiency within the meaning of section 302 of ERISA or
section 412 of the Code, whether or not waived, with respect to any Plan.
          (e) permit, or allow any ERISA Affiliate to permit, the actuarial
present value of the benefit liabilities under any Plan maintained by the
Company, any Guarantor or any ERISA Affiliate which is regulated under Title IV
of ERISA to exceed the current value of the assets (computed on a plan
termination basis in accordance with Title IV of ERISA) of such Plan allocable
to such benefit liabilities. The term “actuarial present value of the benefit
liabilities” shall have the meaning specified in section 4041 of ERISA.
          (f) incur, or permit any ERISA Affiliate to incur, any withdrawal
liability pursuant to Section 4201 or 4202 of ERISA.
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          (g) acquire, or permit any ERISA Affiliate to acquire, an interest in
any Person that causes such Person to become an ERISA Affiliate with respect to
the Company or any Guarantor or with respect to any ERISA Affiliate of the
Company or any Guarantor if such Person sponsors, maintains or contributes to,
or at any time in the six-year period preceding such acquisition has sponsored,
maintained, or contributed to, (i) any Multiemployer Plan with respect to which
such Person has an outstanding withdrawal liability under Section 4201 or 4202
of ERISA, or (ii) any other Plan that is subject to Title IV of ERISA under
which the actuarial present value of the benefit liabilities under such Plan
exceeds the current value of the assets (computed on a plan termination basis in
accordance with Title IV of ERISA) of such Plan allocable to such benefit
liabilities.
          (h) incur, or permit any ERISA Affiliate to incur, a liability to or
on account of a Plan under sections 515, 4062, 4063, 4064, or 4204 of ERISA.
          (i) contribute to or assume an obligation to contribute to, or permit
any ERISA Affiliate to contribute to or assume an obligation to contribute to,
any employee welfare benefit plan, as defined in section 3(1) of ERISA, that
provides retiree benefits to former employees of such entities (other than
coverage mandated by applicable law), that may not be terminated by such
entities in their sole discretion at any time without any material liability.
          (j) amend, or permit any ERISA Affiliate to amend, a Plan resulting in
an increase in current liability such that the Company, any Guarantor or any
ERISA Affiliate is required to provide security to such Plan under section
401(a)(29) of the Code.
     8.14 Financial Covenants. (a) The Company shall not permit, as of the last
day of any fiscal quarter beginning with the fiscal quarter ended September 30,
2006, the ratio of the Company’s EBITDA to Consolidated Interest Expense, each
calculated for the four consecutive fiscal quarters then ended, to be less than
3.00 to 1.00. The Company shall not permit, as of the last day of any fiscal
quarter beginning with the fiscal quarter ended September 30, 2006, the ratio of
the Parent’s EBITDA to Consolidated Interest Expense, each calculated for the
four consecutive fiscal quarters then ended, to be less than 3.00 to 1.00.
     (b) The Company shall not permit , as of the last day of any fiscal quarter
beginning with the fiscal quarter ended September 30, 2006, the ratio of the
Company’s Total Indebtedness to EBITDA, the latter of which is to be calculated
for the four consecutive fiscal quarters then ended, to exceed 2.50 to 1.00. The
Company shall not permit, as of the last day of any fiscal quarter beginning
with the fiscal quarter ended September 30, 2006, the ratio of the Parent’s
Total Indebtedness to EBITDA, the latter of which is to be calculated for the
four consecutive fiscal quarters then ended, to exceed 2.50 to 1.00.
     (c) The Company shall not permit the Company’s Capital Expenditures and
General and Administrative Expenses for any fiscal quarter to exceed the amount
reflected for such fiscal quarter on Schedule 8.14(c) hereto, as such schedule
may be amended from time to time with the consent of the Required Lenders.
     (d) The Company will not permit, as of the last day of any fiscal quarter
beginning with the fiscal quarter ended September 30, 2006, the ratio of the
Company’s Current Assets to Current Liabilities to be less than 1.00 to 1.00.
The Company will not permit, as of the last day of any fiscal quarter beginning
with the fiscal quarter ended September 30, 2006, the ratio of the Parent’s
Current Assets to Current Liabilities to be less than 1.00 to 1.00.
     (e) Neither the Company nor any other member of the Borrower Group will
create, incur, assume or suffer to exist any obligation for the payment of rent
or hire of Property of any kind whatsoever (real or
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personal but excluding leases of Hydrocarbon Interests), under leases or lease
agreements which would cause the aggregate amount of all payments made by the
Borrower Group pursuant to all such leases or lease agreements, including,
without limitation, any residual payments at the end of any lease, to exceed
$500,000.00 in any period of twelve consecutive calendar months during the life
of such leases.
ARTICLE IX.
EVENTS OF DEFAULT
     9.01 Event of Default. Any of the following shall constitute an “Event of
Default”:
          (a) Non-Payment. The Company fails to pay, when and as required to be
paid herein, any amount of principal or interest of any Loan, or fails to pay
within two (2) Business Days of when due any fee or other amount payable
hereunder or under any other Loan Document; or
          (b) Representation or Warranty. Any representation or warranty by the
Company or any Guarantor made or deemed made herein, in any other Loan Document,
or which is contained in any certificate, document or financial or other
statement by the Company, any Guarantor, or any Responsible Officer, furnished
at any time under this Agreement, or in or under any other Loan Document, is
incorrect on or as of the date made or deemed made; or
          (c) Specific Defaults. The Company or any Guarantor fails to perform
or observe any term, covenant or agreement contained in Subsection 7.03(a) or
Article VIII; or
          (d) Other Defaults. The Company or any Guarantor fails to perform or
observe any other term or covenant contained in this Agreement (other than as
otherwise described in this Section 9.01) or any other Loan Document, and same
shall continue unremedied for a period of 30 days after the earlier of (i) the
date upon which a Responsible Officer knew or reasonably should have known of
such default or (ii) the date upon which written notice thereof is given to the
Company or such Guarantor by the Administrative Agent or any Lender; or
          (e) Cross-Default. (i) The Company or any Guarantor fails to make any
payment in respect of any Indebtedness or Contingent Obligation having an
aggregate principal amount (including undrawn committed or available amounts and
including amounts owing to all creditors under any combined or syndicated credit
arrangement) of more than $250,000 when due (whether by scheduled maturity,
required prepayment, acceleration, demand, or otherwise) and such failure
continues after the applicable grace or notice period, if any, specified in the
relevant document on the date of such failure; or (ii) the Company or any
Guarantor fails after the applicable grace or notice period, if any, specified
in the relevant document on the date of such failure to perform or observe any
other condition or covenant, or any other event shall occur or condition exist,
under any agreement or instrument relating to any such Indebtedness or
Contingent Obligation having an aggregate principal amount of more than
$250,000, if the effect of such failure, event or condition is to cause, or to
permit the holder or holders of such Indebtedness or beneficiary or
beneficiaries of such Indebtedness (or a trustee or agent on behalf of such
holder or holders or beneficiary or beneficiaries) to cause such Indebtedness to
be declared to be due and payable prior to its stated maturity, or such
Contingent Obligation to become payable or cash collateral in respect thereof to
be demanded; or (iii) any Indebtedness or Contingent Obligations of the Company
or any Guarantor in excess of $250,000 shall be declared due and payable prior
to its stated maturity or cash collateral is demanded in respect of such
Contingent Obligations; or
          (f) Insolvency; Voluntary Proceedings. The Company or any Guarantor
(i) generally fails to pay, or admits in writing its inability to pay, its debts
as they become due, subject to applicable grace
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periods, if any, whether at stated maturity or otherwise; (ii) commences any
Insolvency Proceeding with respect to itself; or (iii) takes any action to
effectuate or authorize any of the foregoing; or
          (g) Involuntary Proceedings. (i) Any involuntary Insolvency Proceeding
is commenced or filed against the Company or any Guarantor, or any writ,
judgment, warrant of attachment, execution or similar process, is issued or
levied against all or a substantial part of the Company’s or any Guarantor’s
properties, and any such proceeding or petition shall not be dismissed, or such
writ, judgment, warrant of attachment, execution or similar process shall not be
released, vacated or fully bonded within 60 days after commencement, filing or
levy; (ii) the Company or any Guarantor admits the material allegations of a
petition against it in any Insolvency Proceeding, or an order for relief (or
similar order under non-U.S. law) is ordered in any Insolvency Proceeding; or
(iii) the Company or any Guarantor acquiesces in the appointment of a receiver,
trustee, custodian, conservator, liquidator, mortgagee in possession (or agent
therefor), or other similar Person for itself or a substantial portion of its
property or business; or
          (h) Change of Control. There shall occur a Change of Control; or
          (i) Monetary Judgments. One or more non-interlocutory judgments,
non-interlocutory orders, decrees or arbitration awards is entered against the
Company or any Guarantor involving in the aggregate a liability (to the extent
not covered by independent third-party insurance as to which the insurer does
not dispute coverage) as to any single or related series of transactions,
incidents or conditions, of $250,000 or more, and the same shall remain
unsatisfied, unvacated and unstayed pending appeal for a period of 30 days after
the entry thereof; or
          (j) Loss of Permit. Any Governmental Authority revokes or fails to
renew any material license, permit or franchise of the Company or any Guarantor,
or the Company or any Guarantor for any reason loses any material license,
permit or franchise, or the Company or any Guarantor suffers the imposition of
any restraining order, escrow, suspension or impounding of funds in connection
with any proceeding (judicial or administrative) with respect to any material
license, permit or franchise; and, in each case such revocation, failure or loss
could reasonably be expected to have a Material Adverse Effect; and such default
remains unremedied for a period of 30 days after the earlier of (i) the date
upon which a Responsible Officer knew or reasonably should have known of such
default or (ii) the date upon which written notice thereof is given to the
Company or such Guarantor by the Administrative Agent or any Lender; or
          (k) Adverse Change. There occurs a Material Adverse Effect; or
          (l) Guaranty Default. A Guaranty is for any reason partially
(including with respect to future advances) or wholly revoked or invalidated, or
otherwise ceases to be in full force and effect, or any Guarantor or any other
Person contests in any manner the validity or enforceability thereof or denies
that it has any further liability or obligation thereunder; or
          (m) Material Agreements. Any member of the Borrower Group shall fail
to observe, perform or comply with any material covenant, agreement, condition
or provision of any material Contractual Obligation including without limitation
the following: (i) Derivative Contracts required under this Agreement or
permitted under Section 8.10, (ii) material leases associated with the Mortgaged
Properties and (iii) material agreements governing the transportation of Oil and
Gas from the Mortgaged Properties; or
          (n) ERISA. The occurrence of any of the following events: (i) the
happening of a Reportable Event which has resulted or could reasonably be
expected to result in a Material Adverse Effect (if not waived by the PBGC or by
the Required Lenders, or if such event can be avoided by any corrective action
of the Company or any Guarantor, such corrective action is not completed within
ninety (90) days after the occurrence of such Reportable Event) with respect to
any Pension Plan; (ii) the termination of any Pension
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Plan in a “distress termination” under the provisions of Section 4041 of ERISA;
(iii) the appointment of a trustee by an appropriate United States District
Court to administer any Pension Plan; and (iv) the institution of any
proceedings by the PBGC to terminate any Pension Plan or to appoint a trustee to
administer any such plan; or
          (o) Environmental Claims. An Environmental Claim shall have been
asserted against the Company or any Guarantor which could have a Material
Adverse Effect;
     9.02 Remedies. If any Event of Default occurs and is continuing, the
Administrative Agent shall, at the request of, or may, with the consent of, the
Required Lenders:
          (a) declare the Commitment, if any, of each Lender to make Loans and
issue Letters of Credit to be terminated, and/or declare all or any part of the
unpaid principal of the Loans, all interest accrued and unpaid thereon and all
other amounts payable under the Loan Documents to be immediately due and
payable, whereupon the same shall become due and payable, without presentment,
demand, protest, notice of intention to accelerate, notice of acceleration or
any other notice of any kind, all of which are hereby expressly waived by the
Company and each Guarantor.
          (b) exercise on behalf of itself and the Lenders all rights and
remedies available to it and the Lenders under the Loan Documents or applicable
law; provided, however, that upon the occurrence of any event specified in
Subsection (f) or (g) of Section 9.01 (in the case of Clause (i) of Subsection
(g) upon the expiration of the 60-day period mentioned therein), the obligation
of each Lender to make Loans and issue Letters of Credit shall automatically
terminate and the unpaid principal amount of all outstanding Loans and all
interest and other amounts as aforesaid shall automatically become due and
payable without further act of the Administrative Agent, or any Lender and
without presentment, demand, protest, notice of intention to accelerate, notice
of acceleration or any other notice of any kind, all of which are hereby
expressly waived by the Company and each Guarantor.
          (c) All proceeds realized from the liquidation or other disposition of
Collateral or otherwise received after maturity of the Notes, whether by
acceleration or otherwise, shall be applied: first, to reimbursement of expenses
and indemnities provided for in this Agreement and the Security Documents;
second, to accrued interest on the Notes; third, to fees owed to the
Administrative Agent or any Lender; fourth, pro rata to principal outstanding on
the Notes and the Indebtedness referred to in Clause (g) of the definition of
“Indebtedness” owing to a Lender or an Affiliate of a Lender; fifth, to serve as
cash collateral to be held by the Administrative Agent to secure the LC
Obligation; sixth, to any other Indebtedness; and any excess shall be paid to
the Company or as otherwise required by any Governmental Authority.
     9.03 Rights Not Exclusive. The rights provided for in this Agreement and
the other Loan Documents are cumulative and are not exclusive of any other
rights, powers, privileges or remedies provided by law or in equity, or under
any other instrument, document or agreement now existing or hereafter arising.
ARTICLE X.
ADMINISTRATIVE AGENT
     10.01 Appointment and Authorization. Each of the Lenders and the Issuing
Lender hereby irrevocably appoints the Administrative Agent as its agent and
authorizes the Administrative Agent to take such actions on its behalf and to
exercise such powers as are delegated to the Administrative Agent by the terms
hereof and the other Loan Documents, together with such actions and powers as
are reasonably incidental thereto.
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     10.02 Duties and Obligations of Administrative Agent. The Administrative
Agent shall not have any duties or obligations except those expressly set forth
in the Loan Documents. Without limiting the generality of the foregoing, (a) the
Administrative Agent shall not be subject to any fiduciary or other implied
duties, regardless of whether a Default has occurred and is continuing (the use
of the term “agent” herein and in the other Loan Documents with reference to the
Administrative Agent is not intended to connote any fiduciary or other implied
(or express) obligations arising under agency doctrine of any applicable law;
rather, such term is used merely as a matter of market custom, and is intended
to create or reflect only an administrative relationship between independent
contracting parties), (b) the Administrative Agent shall not have any duty to
take any discretionary action or exercise any discretionary powers, except as
provided in Section 10.03, and (c) except as expressly set forth herein, the
Administrative Agent shall have no duty to disclose, and shall not be liable for
the failure to disclose, any information relating to the Company or any
Guarantor that is communicated to or obtained by the Lender serving as
Administrative Agent or any of its Affiliates in any capacity. The
Administrative Agent shall be deemed not to have knowledge of any Default unless
and until written notice thereof is given to the Administrative Agent by the
Company or any Guarantor or a Lender, and shall not be responsible for or have
any duty to ascertain or inquire into (i) any statement, warranty or
representation made in or in connection with this Agreement or any other Loan
Document, (ii) the contents of any certificate, report or other document
delivered hereunder or under any other Loan Document or in connection herewith
or therewith, (iii) the performance or observance of any of the covenants,
agreements or other terms or conditions set forth herein or in any other Loan
Document, (iv) the validity, enforceability, effectiveness or genuineness of
this Agreement, any other Loan Document or any other agreement, instrument or
document, (v) the satisfaction of any condition set forth in Article V or
elsewhere herein, other than to confirm receipt of items expressly required to
be delivered to the Administrative Agent or as to those conditions precedent
expressly required to be to the Administrative Agent’s satisfaction, (vi) the
existence, value, perfection or priority of any collateral security or the
financial or other condition of the Company or any Guarantor or any other
obligor or guarantor, or (vii) any failure by the Company or any other Person
(other than itself) to perform any of its obligations hereunder or under any
other Loan Document or the performance or observance of any covenants,
agreements or other terms or conditions set forth herein or therein.
     10.03 Action by Administrative Agent. The Administrative Agent shall not
have any duty to take any discretionary action or exercise any discretionary
powers, except discretionary rights and powers expressly contemplated hereby
that the Administrative Agent is required to exercise in writing as directed by
the Required Lenders (or such other number or percentage of the Lenders as shall
be necessary under the circumstances as provided herein) and in all cases the
Administrative Agent shall be fully justified in failing or refusing to act
hereunder or under any other Loan Documents unless it shall (i) receive written
instructions from the Required Lenders or the Lenders, as applicable, (or such
other number or percentage of the Lenders as shall be necessary under the
circumstances as provided herein) specifying the action to be taken and (ii) be
indemnified to its satisfaction by the Lenders against any and all liability and
expenses which may be incurred by it by reason of taking or continuing to take
any such action. The instructions as aforesaid and any action taken or failure
to act pursuant thereto by the Administrative Agent shall be binding on all of
the Lenders. If a Default has occurred and is continuing, then the
Administrative Agent shall take such action with respect to such Default as
shall be directed by the Required Lenders in the written instructions (with
indemnities) described in this Section 10.03, provided that, unless and until
the Administrative Agent shall have received such directions, the Administrative
Agent may (but shall not be obligated to) take such action, or refrain from
taking such action, with respect to such Default as it shall deem advisable in
the best interests of the Lenders. In no event, however, shall the
Administrative Agent be required to take any action which exposes the
Administrative Agent to personal liability or which is contrary to this
Agreement, the Loan Documents or applicable law. The Administrative Agent shall
not be liable for any action taken or not taken by it with the consent or at the
request of the Required Lenders or the Lenders (or such other number or
percentage of the Lenders as shall be necessary under the circumstances as
provided herein), and otherwise the Administrative Agent shall not be liable for
any action taken or not taken by it hereunder or under any other Loan Document
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or under any other document or instrument referred to or provided for herein or
therein or in connection herewith or therewith INCLUDING ITS OWN ORDINARY
NEGLIGENCE, except for its own gross negligence or willful misconduct.
     10.04 Reliance by Administrative Agent. The Administrative Agent shall be
entitled to rely upon, and shall not incur any liability for relying upon, any
notice, request, certificate, consent, statement, instrument, document or other
writing believed by it to be genuine and to have been signed or sent by the
proper Person. The Administrative Agent also may rely upon any statement made to
it orally or by telephone and believed by it to be made by the proper Person,
and shall not incur any liability for relying thereon and the Company, the
Guarantors, the Lenders and the Issuing Lender hereby waive the right to dispute
the Administrative Agent’s record of such statement, except in the case of gross
negligence or willful misconduct by the Administrative Agent. The Administrative
Agent may consult with legal counsel (who may be counsel for the Company or any
Guarantor), independent accountants and other experts selected by it, and shall
not be liable for any action taken or not taken by it in accordance with the
advice of any such counsel, accountants or experts. The Administrative Agent may
deem and treat the payee of any Note as the holder thereof for all purposes
hereof unless and until a written notice of the assignment or transfer thereof
permitted hereunder shall have been filed with the Administrative Agent.
     10.05 Sub-agents. The Administrative Agent may perform any and all its
duties and exercise its rights and powers by or through any one or more
sub-agents appointed by the Administrative Agent. The Administrative Agent and
any such sub-agent may perform any and all its duties and exercise its rights
and powers through their respective Agent-Related Persons. The exculpatory
provisions of the preceding Sections of this Article X shall apply to any such
sub-agent and to the Agent-Related Persons of the Administrative Agent and any
such sub-agent, and shall apply to their respective activities in connection
with the syndication of the credit facilities provided for herein as well as
activities as Administrative Agent.
     10.06 Administrative Agent as Lender. Administrative Agent shall have the
same rights and powers in its capacity as a Lender as any other Lender and may
exercise the same as though it were not Administrative Agent, and it and its
Affiliates may accept deposits from, lend money to and generally engage in any
kind of business with the Company or any Guarantor or Affiliate thereof as if it
were not Administrative Agent hereunder.
     10.07 No Reliance. Each Lender acknowledges that it has, independently and
without reliance upon the Administrative Agent or any other Lender and based on
such documents and information as it has deemed appropriate, made its own credit
analysis and decision to enter into this Agreement and each other Loan Document
to which it is a party. Each Lender also acknowledges that it will,
independently and without reliance upon the Administrative Agent or any other
Lender and based on such documents and information as it shall from time to time
deem appropriate, continue to make its own decisions in taking or not taking
action under or based upon this Agreement, any other Loan Document, any related
agreement or any document furnished hereunder or thereunder. The Administrative
Agent shall not be required to keep themselves informed as to the performance or
observance by the Company or any Guarantor of this Agreement, the Loan Documents
or any other document referred to or provided for herein or to inspect the
Properties or books of the Company or any Guarantor. Except for notices, reports
and other documents and information expressly required to be furnished to the
Lenders by the Administrative Agent hereunder, the Administrative Agent shall
have no duty or responsibility to provide any Lender with any credit or other
information concerning the affairs, financial condition or business of the
Company (or any of its Affiliates) which may come into the possession of the
Administrative Agent or any of its Affiliates. In this regard, each Lender
acknowledges that Haynes and Boone, LLP is acting in this transaction as special
counsel to the Administrative Agent only, except to the extent otherwise
expressly stated in any legal opinion or any Loan Document. Each other party
hereto will consult with its own legal counsel to the extent that it deems
necessary in connection with the Loan Documents and the matters contemplated
therein.
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     10.08 Administrative Agent May File Proofs of Claim. In case of the
pendency of any receivership, insolvency, liquidation, bankruptcy,
reorganization, arrangement, adjustment, composition or other judicial
proceeding relative to the Company or any Guarantor, the Administrative Agent
(irrespective of whether the principal of any Loan shall then be due and payable
as herein expressed or by declaration or otherwise and irrespective of whether
the Administrative Agent shall have made any demand on the Company or any
Guarantor) shall be entitled and empowered, by intervention in such proceeding
or otherwise:
          (a) to file and prove a claim for the whole amount of the principal
and interest owing and unpaid in respect of the Loans and all other Indebtedness
that are owing and unpaid and to file such other documents as may be necessary
or advisable in order to have the claims of the Lenders and the Administrative
Agent (including any claim for the reasonable compensation, expenses,
disbursements and advances of the Lenders and the Administrative Agent and their
respective agents and counsel and all other amounts due the Lenders and the
Administrative Agent under Section 11.04) allowed in such judicial proceeding;
and
          (b) to collect and receive any monies or other property payable or
deliverable on any such claims and to distribute the same; and any custodian,
receiver, assignee, trustee, liquidator, sequestrator or other similar official
in any such judicial proceeding is hereby authorized by each Lender to make such
payments to the Administrative Agent and, in the event that the Administrative
Agent shall consent to the making of such payments directly to the Lenders, to
pay to the Administrative Agent any amount due for the reasonable compensation,
expenses, disbursements and advances of the Administrative Agent and its agents
and counsel, and any other amounts due the Administrative Agent under
Section 11.04.
Nothing contained herein shall be deemed to authorize the Administrative Agent
to authorize or consent to or accept or adopt on behalf of any Lender any plan
of reorganization, arrangement, adjustment or composition affecting the
Indebtedness or the rights of any Lender or to authorize the Administrative
Agent to vote in respect of the claim of any Lender in any such proceeding.
     10.09 Authority of Administrative Agent to Release Collateral and Liens.
Each Lender and Issuing Lender hereby authorizes the Administrative Agent to
release any Collateral that is permitted to be sold or released pursuant to the
terms of the Loan Documents. Each Lender and Issuing Lender hereby authorizes
the Administrative Agent to execute and deliver to the Company or any Guarantor,
at the Company’s or such Guarantor’s sole cost and expense, any and all releases
of Liens, termination statements, assignments, or other documents reasonably
requested by the Company or such Guarantor in connection with any sale or other
disposition of property to the extent such sale or other disposition is
permitted by the terms of Section 8.02 or is otherwise authorized by the terms
of the Loan Documents.
     10.10 Reserved.
     10.11 Successor Administrative Agent. The Administrative Agent may resign
as the Administrative Agent upon 30 days’ notice to the Lenders. If the
Administrative Agent resigns under this Agreement, the Required Lenders shall
appoint from among the Lenders a successor administrative agent reasonably
satisfactory to the Company in the same capacity as the retiring Administrative
Agent for the Lenders. If no successor administrative agent is appointed prior
to the effective date of the resignation of such retiring Administrative Agent,
such retiring Administrative Agent may appoint, after consulting with the
Lenders, a successor administrative agent from among the Lenders. Upon the
acceptance of its appointment as successor administrative agent hereunder, such
successor administrative agent shall succeed to all the rights, powers and
duties of the retiring Administrative Agent and the term “Administrative Agent”
shall mean such successor administrative agent and the retiring Administrative
Agent’s appointment, powers and duties as the Administrative Agent shall be
terminated. After any retiring Administrative Agent’s resignation hereunder as
the Administrative Agent, the provisions of this Article X and Sections 11.04
and 11.05 shall inure to its benefit as to any actions taken or omitted to be
taken by it while it was the Administrative Agent
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under this Agreement. If no successor administrative agent has accepted
appointment as the Administrative Agent in the same capacity as the retiring
Administrative Agent by the date which is 30 days following a retiring
Administrative Agent’s notice of resignation, the retiring Administrative Agent
shall either withdraw its resignation or may appoint as a successor
administrative agent a commercial Lender organized under the laws of the United
States of America or of any State thereof having a commercial capital surplus of
at least $500,000,000.
     10.12 Withholding Tax.
          (a) If any Lender is a not a “United States person” within the meaning
of Section 7701(a)(3) of the Code (a “Foreign Lender”), such Foreign Lender
agrees with and in favor of the Administrative Agent, to deliver to the
Administrative Agent prior to receipt of any payment subject to withholding
under the Code (or upon accepting an assignment or participation of an interest
herein), two duly signed completed copies of either IRS Form W-8BEN or any
successor thereto (relating to such Foreign Lender and entitling it to a
complete exemption from withholding tax on all payments to be made to such
Foreign Lender by the Company pursuant to this Agreement) or IRS Form W-8ECI or
any successor thereto (relating to all payments to be made to such Foreign
Lender by the Company pursuant to this Agreement) or such other evidence
satisfactory to the Company that such Foreign Lender is entitled to a complete
exemption from U.S. withholding tax, including any exemption pursuant to Section
881(c) of the Code. Thereafter and from time to time, each such Foreign Lender
shall (i) promptly submit to the Company such additional duly completed and
signed copies of one of such forms (or such successor forms as shall be adopted
from time to time by the relevant United States taxing authorities) as may then
be available under then current United States laws and regulations to avoid, or
such evidence as is satisfactory to the Company of any available complete
exemption from United States withholding taxes in respect of all payments to be
made to such Foreign Lender by the Company pursuant to this Agreement, and
(ii) promptly notify the Administrative Agent and the Company of any change in
circumstances which would modify or render invalid any claimed exemption.
          (b) Each Foreign Lender, to the extent it does not act or ceases to
act for its own account with respect to any portion of any sums paid or payable
to that Lender under any of the Loan Documents (for example, in the case of a
typical participation by that Lender), shall deliver to the Administrative Agent
on the date when such Foreign Lender ceases to act for its own account with
respect to any portion of any such sums paid or payable, and at such other times
as may be necessary in the determination of the Administrative Agent (in the
reasonable exercise of its discretion), (i) two duly signed completed copies of
the forms or statements required to be provided by that Lender as set forth
above, to establish the portion of any such sums paid or payable with respect to
which that Lender acts for its own account that is not subject to U.S.
withholding tax, and (ii) two duly signed completed copies of IRS Form W-8IMY
(or any successor thereto), together with any information that is required by
the Code and Treasury regulations promulgated thereunder and any additional
information that Lender chooses to transmit with such form, and any other
certificate or statement of exemption required under the Code, to establish that
that Lender is not acting for its own account with respect to a portion of any
such sums payable to that Lender.
          (c) The Company shall not be required to pay any additional amount to
any Foreign Lender under Section 3.01: (i) with respect to any Taxes or Other
Taxes required to be deducted or withheld on the basis of the information,
certificates or statements of exemption that Foreign Lender transmits with an
IRS Form W-8IMY pursuant to Subsection 10.12(b) or (ii) if that Foreign Lender
shall have failed to satisfy the foregoing provisions of this Section 10.12.
          (d) Each Lender that is a “United States person” within the meaning of
Section 7701(a)(30) of the Code (“Domestic Lender”) shall deliver to the
Administrative Agent two duly signed completed copies of IRS Form W-9. If that
Domestic Lender fails to deliver such forms, then the Company may withhold from
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any interest payment to that Domestic Lender an amount equivalent to the
applicable back-up withholding tax imposed by the Code, without reduction.
Thereafter and from time to time, each such Domestic Lender shall (i) promptly
submit to the Company such additional duly completed and signed copies of one of
such forms (or such successor forms as shall be adopted from time to time by the
relevant United States taxing authorities) as may then be available under then
current United States laws and regulations to avoid, or such evidence as is
satisfactory to the Company of any available exemption from United States
withholding taxes in respect of all payments to be made to such Domestic Lender
by the Company pursuant to this Agreement, and (ii) promptly notify the Company
of any change in circumstances which would modify or render invalid any claimed
exemption.
          (e) No Assignee shall be entitled to the benefits of Section 3.01
unless the Company is notified of the assignment and such Assignee has complied
with the requirements of this Section 10.12.
          (f) If any Lender is entitled to a reduction in the applicable
withholding tax, the Administrative Agent may withhold from any payment to such
Lender an amount equivalent to the applicable withholding tax after taking into
account such reduction. If (i) a Lender does not deliver the forms or other
documentation required this Section 10.12 to the Administrative Agent, or
(ii) the Company is required by law to deduct and withhold from or in respect of
any amounts payable under any Loan Document to a Lender but is not required to
pay additional amounts under Section 3.01 with respect to such payment, then the
Administrative Agent may deduct from any payment to such Lender an amount
equivalent to the applicable withholding tax.
          (g) If the IRS or any other Governmental Authority of the United
States or other jurisdiction asserts a claim that the Administrative Agent did
not properly withhold tax from amounts paid to or for the account of any Lender
(because the appropriate form was not delivered, was not properly executed, or
because such Lender failed to notify the Administrative Agent of a change in
circumstances which rendered the exemption from, or reduction of, withholding
tax ineffective, or for any other reason) such Lender shall indemnify the
Administrative Agent fully for all amounts paid, directly or indirectly, by the
Administrative Agent as tax or otherwise, including penalties and interest, and
including any taxes imposed by any jurisdiction on the amounts payable to the
Administrative Agent under this Section, together with all costs and expenses
(including Attorney Costs). The obligation of the Lenders under this subsection
shall survive the payment of all Obligations and the resignation or replacement
of the Administrative Agent.
ARTICLE XI.
MISCELLANEOUS
     11.01 Amendments and Waivers. No amendment, modification, termination or
waiver of any provision of this Agreement or any other Loan Document, and no
consent with respect to any departure by the Company or any applicable
Subsidiary therefrom, shall be effective unless the same shall be in writing and
signed by the Required Lenders (or by the Administrative Agent at the written
request of the Required Lenders) and the Company and acknowledged by the
Administrative Agent, and then any such waiver or consent shall be effective
only in the specific instance and for the specific purpose for which given;
provided, however, that no such waiver, amendment, modification, termination or
consent shall, unless in writing and signed by all the Lenders and the Company
and acknowledged by the Administrative Agent, do any of the following:
          (a) increase or extend the Commitment of any Lender (or reinstate any
Commitment terminated pursuant to Section 9.02), or increase the maximum amount
of Letters of Credit;
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          (b) postpone the final maturity date of any Loan, or postpone or delay
any date fixed by this Agreement or any other Loan Document for any payment of
principal, interest, fees or other amounts due to the Lenders (or any of them)
hereunder or under any other Loan Document;
          (c) reduce the principal of, or the rate of interest specified herein
on any Loan, or any fees or other amounts payable hereunder or under any other
Loan Document;
          (d) change the Pro Rata Shares or change in any manner the definition
of “Super-Majority Lenders” or “Required Lenders”;
          (e) amend this Section 11.01 or any provision of this Agreement which,
by its terms, expressly requires the approval or concurrence of all Lenders;
          (f) release all, substantially all, or any material portion of the
Collateral (except for releases in connection with dispositions of assets which
are permitted hereunder or under any Loan Document), or release any Guarantor
from any Guaranty, except in releases in connection with sales of Guarantors
permitted hereunder;
          (g) reduce the amount or postpone the due date of any amount payable
in respect of, or extends the required expiration date of, any Letter of Credit,
or change in any manner the obligations of Lenders relating to the purchase of
participations in Letters of Credit; or
          (h) increase the Borrowing Base or decrease the Borrowing Base
Reduction Amount pursuant to Section 2.05, provided, the Required Lenders may
maintain or decrease the Borrowing Base or maintain or increase the Borrowing
Base Reduction Amount pursuant to Section 2.05;
and; provided further, that (i) any amendment, modification, termination or
waiver of any of the provisions contained in Article V shall be effective only
if evidenced by a writing signed by or on behalf of the Administrative Agent and
the Required Lenders, (ii) no amendment, waiver or consent shall, unless in
writing and signed by the Issuing Lender in addition to the Required Lenders or
all the Lenders, as the case may be, affect the rights or duties of the Issuing
Lender under this Agreement or any LC Related Document relating to any Letter of
Credit Issued or to be Issued by it, and (iii) no amendment, waiver or consent
shall, unless in writing and signed by the Administrative Agent in addition to
the Required Lenders or all the Lenders, as the case may be, affect the rights
or duties of the Administrative Agent under this Agreement or any other Loan
Document.
     11.02 Notices.
          (a) All notices, requests and other communications shall be in writing
and mailed, faxed or delivered, to the address or facsimile number specified for
notices on Schedule 11.02; or, as directed by the Company, any Guarantor or the
Administrative Agent, to such other address as shall be designated by such party
in a written notice to the other parties, and as directed to any other party, at
such other address as shall be designated by such party in a written notice to
the Company and the Administrative Agent.
          (b) All such notices, requests and communications shall, when
transmitted by overnight delivery, or faxed, be effective when delivered for
overnight (next-day) delivery, or transmitted in legible form by facsimile
machine, respectively, or if mailed, upon the third Business Day after the date
deposited into the U.S. mail, or if delivered, upon delivery; except that
notices pursuant to Article II or IX shall not be effective until actually
received.
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          (c) Any agreement of the Administrative Agent and the Lenders herein
to receive certain notices by telephone or facsimile is solely for the
convenience and at the request of the Company and the Guarantors. The
Administrative Agent and the Lenders shall be entitled to rely on the authority
of any Person purporting to be a Person authorized by the Company or any
Guarantor to give such notice and the Administrative Agent and the Lenders shall
not have any liability to the Company or any Guarantor or other Person on
account of any action taken or not taken by the Administrative Agent or the
Lenders in reliance upon such telephonic or facsimile notice. The obligation of
the Company to repay the Loans shall not be affected in any way or to any extent
by any failure by the Administrative Agent and the Lenders to receive written
confirmation of any telephonic or facsimile notice or the receipt by the
Administrative Agent and the Lenders of a confirmation which is at variance with
the terms understood by the Administrative Agent and the Lenders to be contained
in the telephonic or facsimile notice.
     11.03 No Waiver; Cumulative Remedies. No failure to exercise and no delay
in exercising, on the part of the Administrative Agent or any Lender, any right,
remedy, power or privilege hereunder, shall operate as a waiver thereof; nor
shall any single or partial exercise of any right, remedy, power or privilege
hereunder preclude any other or further exercise thereof or the exercise of any
other right, remedy, power or privilege.
     11.04 Costs and Expenses. The Company and the Guarantors shall:
          (a) whether or not the transactions contemplated hereby are
consummated, pay or reimburse the Administrative Agent within five (5) Business
Days after demand (subject to Subsection 5.01(c)) for all reasonable costs and
expenses incurred by the Administrative Agent in connection with the
development, preparation, delivery, administration and execution of, and any
amendment, supplement, waiver or modification to (in each case, whether or not
consummated), this Agreement, any Loan Document and any other documents prepared
in connection herewith or therewith, and the consummation of the transactions
contemplated hereby and thereby, including Attorney Costs incurred by the
Administrative Agent with respect thereto except such costs and expenses as may
be incurred by the assignor Lenders or Assignee under Subsection 11.08(c); and
          (b) pay or reimburse the Administrative Agent and each Lender within
five (5) Business Days after demand (subject to Subsection 5.01(c)) for all
costs and expenses (including Attorney Costs) incurred by each of them in
connection with the enforcement, attempted enforcement, or preservation of any
rights or remedies under this Agreement or any other Loan Document during the
existence of an Event of Default or after acceleration of the Loans (including
in connection with any “workout” or restructuring regarding the Loans, and
including in any Insolvency Proceeding or appellate proceeding).
     11.05 Indemnity. Whether or not the transactions contemplated hereby are
consummated, the Company and the Guarantors shall indemnify and hold the
Agent-Related Persons, and each Lender and each of their respective officers,
directors, employees, counsel, agents and attorneys-in-fact (each, an
“Indemnified Person”) harmless from and against any and all liabilities,
obligations, losses, damages, penalties, actions, judgments, suits, costs,
charges, expenses and disbursements (including Attorney Costs) of any kind or
nature whatsoever which may at any time (including at any time following
repayment of the Loans, and the termination, resignation or replacement of the
Administrative Agent or replacement of any Lender) be imposed on, incurred by or
asserted against any such Person in any way relating to or arising out of this
Agreement or any document contemplated by or referred to herein, or the
transactions contemplated hereby, or any action taken or omitted by any such
Person under or in connection with any of the foregoing, including with respect
to any investigation, litigation or proceeding (including any Insolvency
Proceeding or appellate proceeding) related to or arising out of this Agreement
or the Loans or the use of the proceeds thereof, whether or not any Indemnified
Person is a party thereto (all the foregoing, collectively, the “Indemnified
Liabilities”) WHETHER OR NOT SUCH INDEMNIFIED LIABILITIES ARISE OUT OF OR AS A
RESULT OF ANY INDEMNIFIED PARTY’S NEGLIGENCE IN WHOLE OR IN PART, INCLUDING,
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WITHOUT LIMITATION, THOSE CLAIMS WHICH RESULT FROM THE SOLE, JOINT, CONCURRENT
OR COMPARATIVE NEGLIGENCE OF THE INDEMNIFIED PARTY, OR ANY ONE OR MORE OF THEM;
provided, that neither the Company nor any Guarantor shall have any obligation
hereunder to any Indemnified Person with respect to Indemnified Liabilities to
the extent same arise from (i) the gross negligence or willful misconduct of any
Indemnified Person or (ii) a claim or action asserted by one or more other
Indemnified Persons. The agreements in this Section shall survive payment of all
other Obligations.
     11.06 Payments Set Aside. To the extent that the Company or any Guarantor
makes a payment to the Administrative Agent or the Lenders, or the
Administrative Agent or the Lenders exercise their right of set-off, and such
payment or the proceeds of such set-off or any part thereof are subsequently
invalidated, declared to be fraudulent or preferential, set aside or required
(including pursuant to any settlement entered into by the Administrative Agent
or such Lender in its discretion) to be repaid to a trustee, receiver or any
other party, in connection with any Insolvency Proceeding or otherwise, then
(a) to the extent of such recovery the obligation or part thereof originally
intended to be satisfied shall be revived and continued in full force and effect
as if such payment had not been made or such set-off had not occurred, and
(b) each Lender severally agrees to pay to the Administrative Agent upon demand
its pro rata share of any amount so recovered from or repaid by the
Administrative Agent.
     11.07 Successors and Assigns. Except for all provisions in Section 11.08,
the provisions of this Agreement shall be binding upon and inure to the benefit
of the parties hereto and their respective successors and assigns, except that,
neither the Company nor any Guarantor may assign or transfer any of its rights
or obligations under this Agreement without the prior written consent of the
Administrative Agent and each Lender except in connection with a merger
permitted hereunder.
     11.08 Assignments, Participations, etc.
          (a) Any Lender may upon written consent of the Administrative Agent,
the Issuing Lender and the Company, which consent shall not be unreasonably
withheld (provided at any time that an Event of Default has occurred and is
continuing, no approval from the Company shall be required), at any time, assign
and delegate to one or more Eligible Assignees (provided that no written consent
of the Administrative Agent or the Issuing Lender shall be required in
connection with any assignment and delegation by the Lender to an Eligible
Assignee that is an Affiliate of such Lender) (each an “Assignee”) all, or any
ratable part of all in a minimum commitment amount at least equal to $2,500,000,
of the Loans, the Commitments, and the other rights and obligations of such
Lender hereunder; provided, however, that the Company and the Administrative
Agent may continue to deal solely and directly with such Lender in connection
with the interest so assigned to an Assignee until (i) written notice of such
assignment, together with payment instructions, addresses and related
information with respect to the Assignee, shall have been given to the Company
and the Administrative Agent by such Lender and the Assignee; (ii) such Lender
and its Assignee shall have delivered to the Company and the Administrative
Agent an Assignment and Acceptance in the form of Exhibit D (“Assignment and
Acceptance”) together with any Note or Notes subject to such assignment and
(iii) the assignor Lender or Assignee has paid to the Administrative Agent a
processing fee in the amount of $3,500.00.
          (b) From and after the date that the Administrative Agent notifies the
assignor Lender that it has received an executed Assignment and Acceptance and
payment of the above-referenced processing fee, (i) the Assignee thereunder
shall be a party hereto and, to the extent that rights and obligations hereunder
have been assigned to it pursuant to such Assignment and Acceptance, shall have
the rights and obligations of a Lender under the Loan Documents, and (ii) the
assignor Lender shall, to the extent that rights and obligations hereunder and
under the other Loan Documents have been assigned by it pursuant to such
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Assignment and Acceptance, relinquish its rights and be released from its
obligations under the Loan Documents.
          (c) Within five (5) Business Days after its receipt of notice by the
Administrative Agent that it has received an executed Assignment and Acceptance
and payment of the processing fee, (and provided that it consents to such
assignment in accordance with Subsection 11.08(a)) the Company shall execute and
deliver to the Administrative Agent, new Notes evidencing such Assignee’s
assigned Loans and Commitment and, if the assignor Lender has retained a portion
of its Loans and its Commitment, replacement Notes in the principal amount of
the Loans retained by the assignor Lender (such Notes to be in exchange for, but
not in payment of, the Notes held by such Lender, which shall be cancelled upon
receipt of the new or replacement Notes). Immediately upon each Assignee’s
making its processing fee payment under the Assignment and Acceptance, this
Agreement shall be deemed to be amended to the extent, but only to the extent,
necessary to reflect the addition of the Assignee and the resulting adjustment
of the Commitments arising therefrom. The Commitment allocated to each Assignee
shall reduce such Commitments of the assigning Lender pro tanto.
          (d) Any Lender may at any time sell to one or more commercial Lenders
or other Persons not Affiliates of the Company or any Guarantor (a
“Participant”) participating interests in any Loans, the Commitment of that
Lender and the other interests of that Lender (the “originating Lender”)
hereunder and under the other Loan Documents; provided, however, that (i) the
originating Lender’s obligations under this Agreement shall remain unchanged,
the originating Lender shall remain a Lender for all purposes hereof and the
other Loan Documents to which such originating Lender is a party, and the
Participant may not become a Lender for purposes hereof or for any other of the
Loan Documents, (ii) the originating Lender shall remain solely responsible for
the performance of such obligations, (iii) the Company, the Guarantors and the
Administrative Agent shall continue to deal solely and directly with the
originating Lender in connection with the originating Lender’s rights and
obligations under this Agreement and the other Loan Documents, and (iv) no
Lender shall transfer or grant any participating interest under which the
Participant has rights to approve any amendment to, or any consent or waiver
with respect to, this Agreement or any other Loan Document, except to the extent
such amendment, consent or waiver would require unanimous consent of the
Lenders. In the case of any such participation, the Participant shall not have
any rights under this Agreement, or any of the other Loan Documents (the
Participant’s rights against the granting Lender in respect of such
participation being those set forth in the agreement creating or evidencing such
participation with such Lender), and all amounts payable by the Company or any
Guarantor hereunder shall be determined as if such Lender had not sold such
participation; except that, if amounts outstanding under this Agreement are due
and unpaid, or shall have been declared or shall have become due and payable
upon the occurrence of an Event of Default, each Participant shall be deemed to
have the right of set-off in respect of its participating interest in amounts
owing under this Agreement to the same extent as if the amount of its
participating interest were owing directly to it as a Lender under this
Agreement.
          (e) Each Lender agrees to take normal and reasonable precautions and
exercise due care to maintain the confidentiality of all information identified
as “confidential” or “secret” by the Company or any Guarantor and provided to it
by the Company or any Guarantor, or by the Administrative Agent on Company’s or
any Guarantor’s behalf, under or in connection with this Agreement or any other
Loan Document, and neither it nor any of its Affiliates shall use any such
information other than in connection with or in enforcement of this Agreement
and the other Loan Documents; except to the extent such information (i) was or
becomes generally available to the public other than as a result of disclosure
by any Lender or the Administrative Agent or any Guarantor, or (ii) was or
becomes available on a non-confidential basis from a source other than the
Company or any Guarantor, provided that such source is not bound by a
confidentiality agreement with the Company or any Guarantor known to the Lender;
provided, however, that any Lender may disclose such information (A) at the
request or pursuant to any requirement of any Governmental Authority to which
the Lender is subject or in connection with an examination of such Lender by any
such authority; (B) pursuant to subpoena or other court process; (C) when
required to do so in accordance with the
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provisions of any applicable Requirement of Law; (D) to the extent reasonably
required in connection with any litigation or proceeding to which the
Administrative Agent, any Lender or their respective Affiliates may be party;
(E) to the extent reasonably required in connection with the exercise of any
remedy hereunder or under any other Loan Document; (F) to such Lender’s
independent auditors and other professional advisors; (G) to any Affiliate of
such Lender, or to any Participant or Assignee, actual or potential, provided
that such Affiliate, Participant or Assignee agrees to keep such information
confidential to the same extent required of the Lenders hereunder, and (H) as to
any Lender, as expressly permitted under the terms of any other document or
agreement regarding confidentiality to which the Company or any Guarantor is
party or is deemed party with such Lender.
          (f) Notwithstanding any other provision in this Agreement, any Lender
may at any time create a security interest in, or pledge, all or any portion of
its rights under and interest in this Agreement and the Notes held by it in
favor of any Federal Reserve Lender in accordance with Regulation A of the FRB
or U.S. Treasury Regulation 31 CFR §203.14, and such Federal Reserve Lender may
enforce such pledge or security interest in any manner permitted under
applicable law.
     11.09 Interest.
          (a) It is the intention of the parties hereto to comply with
applicable usury laws, if any; accordingly, notwithstanding any provision to the
contrary in this Agreement, the Notes or in any of the other Loan Documents
securing the payment hereof or otherwise relating hereto, in no event shall this
Agreement, the Notes or such other Loan Documents require or permit the payment,
taking, reserving, receiving, collection, or charging of any sums constituting
interest under applicable laws which exceed the maximum amount permitted by such
laws. If any such excess interest is called for, contracted for, charged, taken,
reserved, or received in connection with the Loans evidenced by the Notes or in
any of the Loan Documents securing the payment thereof or otherwise relating
thereto, or in any communication by the Administrative Agent, the Issuing Lender
or the Lenders or any other Person to the Company or any other Person, or in the
event all or part of the principal or interest thereof shall be prepaid or
accelerated, so that under any of such circumstances or under any other
circumstance whatsoever the amount of interest contracted for, charged, taken,
reserved, or received on the amount of principal actually outstanding from time
to time under the Notes or any other Loan Document shall exceed the maximum
amount of interest permitted by applicable usury laws, then in any such event it
is agreed as follows: (i) the provisions of this paragraph shall govern and
control, (ii) neither any Company nor any other Person now or hereafter liable
for the payment of the Notes or any Obligation shall be obligated to pay the
amount of such interest to the extent such interest is in excess of the maximum
amount of interest permitted by applicable usury laws, (iii) any such excess
which is or has been received notwithstanding this paragraph shall be credited
against the then unpaid principal balance of the Notes or other Obligations, as
applicable, or, if the Notes or other Obligations, as applicable, have been or
would be paid in full, refunded to the Company, and (iv) the provisions of this
Agreement, the Notes and the other Loan Documents securing the payment thereof
and otherwise relating thereto, and any communication to the Company or any
other person, shall immediately be deemed reformed and such excess interest
reduced, without the necessity of executing any other document, to the maximum
lawful rate allowed under applicable laws as now or hereafter construed by
courts having jurisdiction hereof or thereof. Without limiting the foregoing,
all calculations of the rate of the interest contracted for, charged, collected,
taken, reserved, or received in connection with the Notes, this Agreement or any
other Loan Document which are made for the purpose of determining whether such
rate exceeds the maximum lawful rate shall be made to the extent permitted by
applicable laws by amortizing, prorating, allocating and spreading during the
period of the full term of the Loans or other Obligations, as applicable,
including all prior and subsequent renewals and extensions, all interest at any
time contracted for, charged, taken, collected, reserved, or received. The terms
of this paragraph shall be deemed to be incorporated in every document and
communication relating to the Notes, the Loans or any other Loan Document.
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     11.10 Indemnity and Subrogation. In addition to all such rights of
indemnity and subrogation as any Guarantor may have under applicable law, the
Company agrees that in the event a payment shall be made by any Guarantor under
a Guaranty in respect of a Loan to the Company, the Company shall indemnify such
Guarantor for the full amount of such payment and such Guarantor shall be
subrogated to the rights of the person to whom such payment shall have been made
to the extent of such payment subject to the provisions of the Guaranty executed
by such Guarantor. Notwithstanding any provision of this Agreement to the
contrary, all rights of any Guarantor under this Section 11.10 and all other
rights of indemnity, contribution or subrogation under applicable law or
otherwise shall be fully subordinated to the indefeasible payment in full of the
Obligations, and no payments may be made in respect of such rights of indemnity,
contribution or subrogation until all the Obligations have been paid in full and
all Commitments have expired. No failure on the part of the Company to make the
payments required by this Section (or any other payments required under
applicable law or otherwise) shall in any respect limited the obligations and
liabilities required under applicable law or otherwise) shall in any respect
limit the obligations and liability of any Guarantor with respect to any
Guaranty, and such Guarantor shall remain liable for the full amount of the
obligation of such Guarantor under each such Guaranty in accordance therewith.
     11.11 Collateral Matters; Derivative Contracts. The benefit of the Security
Documents and of the provisions of this Agreement relating to any Collateral
securing the Indebtedness shall also extend to and be available to any Lender or
any Affiliate of a Lender that is counterparty to any Derivative Contract with
the Company or any Guarantor (including any Derivative Contract between such
Persons in existence prior to the Effective Date) on a pro rata basis in respect
of any obligations of the Company or any Guarantor which arise under any such
Derivative Contract; provided that the applicable counterparty must have
provided Administrative Agent written notice of the existence thereof (such
notice to include a summary of the contract date, price, volumes and other terms
of such Derivative Contracts as the Administrative Agent may reasonably request)
and such transaction must not otherwise be prohibited under this Agreement at
the time it was entered into and provided further that if such Lender or
Affiliate ceases to be a Lender (a) its Derivative Contract obligations shall be
secured pari passu with the Lenders’ Obligations but only to the extent such
counterparty’s obligations arise from transactions entered into at the time such
counterparty was a Lender hereunder or an Affiliate of a Lender hereunder, and
(b) such counterparty shall have no voting rights under any Loan Documents as a
result of the existence of obligations owed to it under any such Derivative
Contract. For the avoidance of doubt, a Person ceases to be a Lender hereunder
if (i) pursuant to an assignment, such Person ceases to have any Commitment,
Loans and LC Obligation hereunder or (ii) the Commitments of all of the Lenders
hereunder have been terminated and all principal, interest and other amounts
outstanding under this Agreement have been paid in full in cash (whether as a
result of repayment at maturity, prepayment in connection with the refinancing
of this Agreement or otherwise).
     11.12 USA Patriot Act Notice. Each Lender hereby notifies the Company and
the Guarantors that pursuant to the requirements of the USA Patriot Act (Title
III of Pub. L. 107-56 (signed into law October 26, 2001)) (the “Act”), it is
required to obtain, verify and record information that identifies the Company
and the Guarantors, which information includes the name and address of the
Company and the Guarantors and other information that will allow such Lender to
identify the Company and the Guarantors, insofar as it is needed to comply with
the Act, in accordance with the Act. The Company and the Guarantors hereby
represent and warrant to Administrative Agent and each Lender that neither the
Company, any Guarantor nor any of their Affiliates is a country, individual or
entity named on the “Specifically Designated National and Blocked Persons” list
issued by the Office of Foreign Asset Control of the Department of the Treasury
of the United States of America.
     11.13 Automatic Debits of Fees. With respect to any commitment fee,
arrangement fee, letter of credit fee or other fee, or any other cost or expense
(including Attorney Costs) due and payable to the Administrative Agent or any
Lender under the Loan Documents, each of the Company and the Guarantors hereby
irrevocably authorizes the Administrative Agent, after giving reasonable prior
notice to the Company
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or the applicable Guarantor, to debit any deposit account of the Company or such
Guarantor with the Administrative Agent in an amount such that the aggregate
amount debited from all such deposit accounts does not exceed such fee or other
cost or expense. If there are insufficient funds in such deposit accounts to
cover the amount of the fee or other cost or expense then due, such debits will
be reversed (in whole or in part, in the Administrative Agent’s sole discretion)
and such amount not debited shall be deemed to be unpaid. No such debit under
this Section shall be deemed a set-off.
     11.14 Notification of Addresses, Lending Offices, Etc. Each Lender shall
notify the Administrative Agent in writing of any changes in the address to
which notices to the Lender should be directed, of addresses of any Lending
Office, of payment instructions in respect of all payments to be made to it
hereunder and of such other administrative information as the Administrative
Agent shall reasonably request.
     11.15 Counterparts. This Agreement may be executed in any number of
separate counterparts, each of which, when so executed, shall be deemed an
original, and all of said counterparts taken together shall be deemed to
constitute but one and the same instrument.
     11.16 Severability. The illegality or unenforceability of any provision of
this Agreement or any instrument or agreement required hereunder shall not in
any way affect or impair the legality or enforceability of the remaining
provisions of this Agreement or any instrument or agreement required hereunder.
     11.17 No Third Parties Benefited. This Agreement is made and entered into
for the sole protection and legal benefit of the Company, the Guarantors, the
Lenders, the Administrative Agent and the Agent-Related Persons, and their
permitted successors and assigns, and no other Person shall be a direct or
indirect legal beneficiary of, or have any direct or indirect cause of action or
claim in connection with, this Agreement or any of the other Loan Documents.
     11.18 Governing Law, Jurisdiction and Waiver of Jury Trial. The provisions
of Section 11.19 hereof shall govern the resolution of any Dispute (as such term
is defined in such Section 11.19). If, however, the provisions of Section 11.19
are not invoked as therein provided, the following provisions shall apply:
          (a) THIS AGREEMENT AND THE NOTES SHALL BE GOVERNED BY, AND CONSTRUED
IN ACCORDANCE WITH, THE LAW OF THE STATE OF NEW YORK AND APPLICABLE FEDERAL LAW;
AND THE ADMINISTRATIVE AGENT AND THE LENDERS SHALL RETAIN ALL RIGHTS ARISING
UNDER FEDERAL LAW.
          (b) THE COMPANY AND EACH OF THE GUARANTORS IRREVOCABLY CONSENTS TO THE
SERVICE OF PROCESS IN ANY LEGAL ACTION OR PROCEEDING WITH RESPECT TO THIS
AGREEMENT OR ANY OTHER LOAN DOCUMENT BY THE MAILING OF COPIES THEREOF BY
REGISTERED OR CERTIFIED MAIL, POSTAGE PREPAID, TO IT AT ITS ADDRESS SET FORTH IN
SCHEDULE 11.02. SUCH SERVICE TO BECOME EFFECTIVE TEN DAYS AFTER SUCH MAILING.
NOTHING HEREIN SHALL AFFECT THE RIGHT OF THE ADMINISTRATIVE AGENT OR ANY LENDER
TO SERVE PROCESS IN ANY OTHER MANNER PERMITTED BY LAW.
          (c) ANY LEGAL ACTION OR PROCEEDING WITH RESPECT TO THIS AGREEMENT OR
ANY OTHER LOAN DOCUMENT MAY BE BROUGHT IN THE COURTS OF THE STATE OF NEW YORK OR
OF THE UNITED STATES FOR THE SOUTHERN DISTRICT OF NEW YORK AND BY EXECUTION AND
DELIVERY OF THIS AGREEMENT, THE COMPANY AND EACH GUARANTOR CONSENTS, FOR ITSELF
AND IN RESPECT OF ITS PROPERTY, TO THE NON-EXCLUSIVE JURISDICTION OF THOSE
COURTS. THE COMPANY AND EACH GUARANTOR
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IRREVOCABLY WAIVES ANY OBJECTION, INCLUDING ANY OBJECTION TO THE LAYING OF VENUE
OR BASED ON THE GROUNDS OF FORUM NON CONVENIENS, WHICH IT MAY NOW OR HEREAFTER
HAVE TO THE BRINGING OF ANY ACTION OR PROCEEDING IN SUCH JURISDICTION IN RESPECT
OF THIS AGREEMENT OR ANY DOCUMENT RELATED HERETO. THE COMPANY AND EACH GUARANTOR
WAIVES PERSONAL SERVICE OF ANY SUMMONS, COMPLAINT OR OTHER PROCESS, AND CONSENTS
TO THE SERVICE OF PROCESS IN ANY SUCH LEGAL ACTION OR PROCEEDING BY THE MAILING
OF COPIES THEREOF BY REGISTERED OR CERTIFIED MAIL, POSTAGE PREPAID, TO IT AT ITS
ADDRESS FOR NOTICES SET FORTH HEREIN, SUCH SERVICE TO BECOME EFFECTIVE TEN DAYS
AFTER SUCH MAILING. NOTHING HEREIN SHALL AFFECT THE RIGHT OF THE ADMINISTRATIVE
AGENT OR ANY LENDER TO SERVE PROCESS IN ANY OTHER MANNER PERMITTED BY LAW.
          (d) THE COMPANY, EACH GUARANTOR, THE LENDERS AND THE ADMINISTRATIVE
AGENT EACH WAIVES ITS RESPECTIVE RIGHTS TO A TRIAL BY JURY OF ANY CLAIM OR CAUSE
OF ACTION BASED UPON OR ARISING OUT OF OR RELATED TO THIS AGREEMENT, THE OTHER
LOAN DOCUMENTS, OR THE TRANSACTIONS CONTEMPLATED HEREBY OR THEREBY, IN ANY
ACTION, PROCEEDING OR OTHER LITIGATION OF ANY TYPE BROUGHT BY ANY OF THE PARTIES
AGAINST ANY OTHER PARTY OR ANY AGENT-RELATED PERSON, PARTICIPANT OR ASSIGNEE,
WHETHER WITH RESPECT TO CONTRACT CLAIMS, TORT CLAIMS, OR OTHERWISE. THE COMPANY,
EACH GUARANTOR, THE LENDERS AND THE ADMINISTRATIVE AGENT EACH AGREES THAT ANY
SUCH CLAIM OR CAUSE OF ACTION SHALL BE TRIED BY A COURT TRIAL WITHOUT A JURY.
WITHOUT LIMITING THE FOREGOING, THE PARTIES FURTHER AGREE THAT THEIR RESPECTIVE
RIGHT TO A TRIAL BY JURY IS WAIVED BY OPERATION OF THIS SECTION AS TO ANY
ACTION, COUNTERCLAIM OR OTHER PROCEEDING WHICH SEEKS, IN WHOLE OR IN PART, TO
CHALLENGE THE VALIDITY OR ENFORCEABILITY OF THIS AGREEMENT OR THE OTHER LOAN
DOCUMENTS OR ANY PROVISION HEREOF OR THEREOF. THIS WAIVER SHALL APPLY TO ANY
SUBSEQUENT AMENDMENTS, RENEWALS, SUPPLEMENTS OR MODIFICATIONS TO THIS AGREEMENT
AND THE OTHER LOAN DOCUMENTS.
     11.19 Entire Agreement. This Agreement, together with the other Loan
Documents, embodies the entire agreement and understanding among the Company,
the Guarantors, the Lenders and the Administrative Agent, and supersedes all
prior or contemporaneous agreements and understandings of such Persons, verbal
or written, relating to the subject matter hereof and thereof.
     11.20 NO ORAL AGREEMENTS. THIS WRITTEN LOAN AGREEMENT, TOGETHER WITH THE
OTHER WRITTEN LOAN DOCUMENTS EXECUTED IN CONNECTION HEREWITH, REPRESENTS THE
FINAL AGREEMENT BETWEEN THE PARTIES AND MAY NOT BE CONTRADICTED BY EVIDENCE OF
PRIOR, CONTEMPORANEOUS OR SUBSEQUENT ORAL AGREEMENTS OF THE PARTIES.
     THERE ARE NO UNWRITTEN ORAL AGREEMENTS BETWEEN THE PARTIES.
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     IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed and delivered by their proper and duly authorized officers as of
the day and year first above written.

                  THE COMPANY:    
 
                IVANHOE ENERGY (USA) INC.,
a Nevada corporation    
 
           
 
  By:   /s/Gordon Lancaster    
 
  Name:  
 
Gordon Lancaster    
 
  Title:   Chief Financial Officer    
 
                GUARANTORS:    
 
                IVANHOE ENERGY INC.,
a Yukon corporation    
 
           
 
  By:   /s/Gordon Lancaster    
 
  Name:  
 
Gordon Lancaster    
 
  Title:   Chief Financial Officer    
 
                IVANHOE ENERGY HOLDINGS INC.,
a Nevada corporation    
 
           
 
  By:   /s/E. Leon Daniel    
 
  Name:  
 
E. Leon Daniel    
 
  Title:   President    
 
                IVANHOE ENERGY ROYALTY INC.,
a Nevada corporation    
 
           
 
  By:   /s/E. Leon Daniel    
 
  Name:  
 
E. Leon Daniel    
 
  Title:   President    

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\

                  IVANHOE ENERGY PETROLEUM PROJECTS INC.,
a Nevada corporation
 
           
 
  By:   /s/Gordon Lancaster    
 
  Name:  
 
Gordon Lancaster    
 
  Title:   Treasurer    
 
                IVANHOE ENERGY HTL INC.,
a Nevada corporation    
 
           
 
  By:   /s/Gordon Lancaster    
 
  Name:  
 
Gordon Lancaster    
 
  Title:   Chief Financial Officer    
 
                IVANHOE HTL PETROLEUM LTD.,
a Nevada corporation    
 
           
 
  By:   /s/Gordon Lancaster    
 
  Name:  
 
Gordon Lancaster    
 
  Title:   Chief Financial Officer    
 
                IVANHOE ENERGY HTL (USA) INC.,
a Nevada corporation    
 
           
 
  By:   /s/E. Leon Daniel    
 
  Name:  
 
E. Leon Daniel    
 
  Title:   President    

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                  ADMINISTRATIVE AGENT:    
 
                LASALLE BANK, NATIONAL ASSOCIATION    
 
           
 
  By:   /s/F. Ward Nixon    
 
  Name:  
 
F. Ward Nixon    
 
  Title:   Senior Vice President    
 
                ISSUING LENDER:    
 
                LASALLE BANK, NATIONAL ASSOCIATION    
 
           
 
  By:   /s/F. Ward Nixon    
 
  Name:  
 
F. Ward Nixon    
 
  Title:   Senior Vice President    

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                  LENDERS:    
 
                LASALLE BANK, NATIONAL ASSOCIATION    
 
           
 
  By:   /s/F. Ward Nixon    
 
  Name:  
 
F. Ward Nixon    
 
  Title:   Senior Vice President    

Signature Page Credit Agreement