exv4w2






Exhibit 4.2




EXECUTION VERSION




WARRANT PURCHASE AGREEMENT




between



HARVEST NATURAL RESOURCES, INC.



and



THE PURCHASER NAMED HEREIN



Dated as of October 28, 2010



 









 





TABLE OF CONTENTS




	 	 	 	 	 
	 	 	Page	 
	ARTICLE I CERTAIN DEFINED TERMS
	 	 	1	 
	 
	 	 	 	 
	ARTICLE II SALE AND PURCHASE OF WARRANTS
	 	 	3	 
	 
	 	 	 	 
	§2.1 Sale and Purchase of Warrants
	 	 	3	 
	 
	 	 	 	 
	§2.2 Acknowledgments of the Company and the Purchaser
	 	 	4	 
	 
	 	 	 	 
	§2.3 Closing Conditions
	 	 	4	 
	 
	 	 	 	 
	ARTICLE III THE CLOSING
	 	 	5	 
	 
	 	 	 	 
	ARTICLE IV REPRESENTATIONS OF THE COMPANY
	 	 	5	 
	 
	 	 	 	 
	ARTICLE V REPRESENTATIONS OF THE PURCHASER
	 	 	7	 
	 
	 	 	 	 
	ARTICLE VI COVENANTS OF THE COMPANY
	 	 	8	 
	 
	 	 	 	 
	§6.1 General
	 	 	8	 
	 
	 	 	 	 
	§6.2 Governmental and Other Approvals
	 	 	8	 
	 
	 	 	 	 
	§6.3 Reporting Status
	 	 	8	 
	 
	 	 	 	 
	§6.4 Listing Requirements
	 	 	8	 
	 
	 	 	 	 
	§6.5 Amendment to Rights Agreement
	 	 	8	 
	 
	 	 	 	 
	ARTICLE VII REGISTRATION RIGHTS
	 	 	8	 
	 
	 	 	 	 
	§7.1 Registration
	 	 	8	 
	 
	 	 	 	 
	§7.2 Expenses
	 	 	9	 
	 
	 	 	 	 
	§7.3 Registration Procedures
	 	 	9	 
	 
	 	 	 	 
	§7.4 Indemnification
	 	 	11	 
	 
	 	 	 	 
	§7.5 Certain Obligations of Holders
	 	 	12	 
	 
	 	 	 	 
	§7.6 Rule 144
	 	 	13	 
	 
	 	 	 	 
	ARTICLE VIII REDEMPTION OF C WARRANTS
	 	 	14	 
	 
	 	 	 	 
	§8.1 Right to Redeem C Warrants
	 	 	14	 
	 
	 	 	 	 
	§8.2 Redemption Closing
	 	 	14	 
	 
	 	 	 	 
	ARTICLE IX REGISTRATION AND TRANSFER OF WARRANTS
	 	 	14	 
	 
	 	 	 	 
	§9.1 Registration, Transfer and Exchange of Warrants
	 	 	14	 
	 
	 	 	 	 
	§9.2 Replacement of Warrants
	 	 	15	 
	 
	 	 	 	 
	§9.3 Transfer of Warrants
	 	 	15	 






i









 






TABLE OF CONTENTS




(continued)



	 	 	 	 	 
	 	 	Page	 
	ARTICLE X SURVIVAL OF REPRESENTATIONS; INDEMNIFICATION
	 	 	15	 
	 
	 	 	 	 
	§10.1 Survival of Representations
	 	 	15	 
	 
	 	 	 	 
	§10.2 Indemnification for Misrepresentations
	 	 	15	 
	 
	 	 	 	 
	§10.3 Expenses
	 	 	15	 
	 
	 	 	 	 
	ARTICLE XI MISCELLANEOUS
	 	 	16	 
	 
	 	 	 	 
	§11.1 Notices
	 	 	16	 
	 
	 	 	 	 
	§11.2 Governing Law, Jurisdiction, Etc
	 	 	16	 
	 
	 	 	 	 
	§11.3 Waiver of Jury Trial
	 	 	17	 
	 
	 	 	 	 
	§11.4 Amendments and Waivers
	 	 	17	 
	 
	 	 	 	 
	§11.5 Integration
	 	 	18	 
	 
	 	 	 	 
	§11.6 Rights and Obligations Several
	 	 	18	 
	 
	 	 	 	 
	§11.7 No Waiver; Cumulative Remedies
	 	 	18	 
	 
	 	 	 	 
	§11.8 Entire Agreement
	 	 	18	 
	 
	 	 	 	 
	§11.9 Severability
	 	 	18	 
	 
	 	 	 	 
	§11.10 Binding Effect
	 	 	18	 
	 
	 	 	 	 
	§11.11 Counterparts
	 	 	18	 






ii









 






Schedules



Schedule 1 — Purchaser




Exhibits




	 

	Exhibit A-1 - Form of A Warrant

	 

	Exhibit A-2 - Form of B Warrant

	 

	Exhibit A-3 - Form of C Warrant

	 

	Exhibit B - Form of Legal Opinion







 









 






WARRANT PURCHASE AGREEMENT




     THIS WARRANT PURCHASE AGREEMENT (this “Agreement”), dated as of October 28,
2010, is entered into by and between HARVEST NATURAL RESOURCES, INC., a Delaware corporation (the
“Company”), and the PURCHASER listed on Schedule 1 hereto (the
“Purchaser”).



     Whereas, this Agreement is being entered into in connection with the financings
contemplated by that certain Credit Agreement, dated of even date herewith (as amended, modified or
supplemented from time to time, the “Credit Agreement”) between the Company, as borrower, and the
Purchaser; and



     Whereas, in connection with, and as a condition of the Company and the Purchaser
entering into, the Credit Agreement, the Company and Purchaser have agreed to enter into this
Agreement pursuant to which the Company shall issue and sell to Purchaser certain warrants for the
purchase of shares of the Company’s Common Stock, subject to the terms and conditions set forth
herein.



     Now, Therefore, in consideration of the foregoing premises and the mutual covenants
contained herein and other good and valuable consideration, the receipt and sufficiency of which
are hereby acknowledged, the parties agree as follows:



ARTICLE I




CERTAIN DEFINED TERMS



     Terms used herein and not otherwise defined shall have the respective meaning given to such
term in the Credit Agreement. As used herein, the following terms shall have the respective
meanings assigned to them in this Article I:



     “Agreement” shall have the meaning ascribed to that term in the preamble hereto.



     “business day” means a day Monday through Friday on which banks are generally open for
business in New York.



     “Closing” shall have the meaning ascribed to that term in Article III hereof.



     “Closing Date” means the date of the Closing.



     “Common Stock” means the Common Stock of the Company, par value $.01 per share.



     “Company” shall have the meaning ascribed to that term in the preamble hereto.



     “Credit Agreement” shall have the meaning ascribed to that term in the preamble hereto.



     “Exchange Act” shall mean the Securities Exchange Act of 1934, as amended, and the
rules and regulations promulgated thereunder.



     “Filing Date” shall have the meaning ascribed to that term in §7.1 hereof.



     “Final Prospectus” shall have the meaning ascribed to that term in §7.4(a) hereof.



     “Financial Statements” shall mean the (i) audited, consolidated, balance sheet,
statement of income and statement of cash flows of the Company as of the end of the most recently
completed fiscal



 









 




year which is included in the Annual Report on Form 10-K most recently filed by the Company
with the SEC prior to such date, and for the twelve (12)-month period ended on the last day of such
fiscal year, and (ii) unaudited, consolidated balance sheet (the “Balance Sheet”),
statement of income and statement of cash flows, as of the end of the most recently completed
fiscal quarter (the “Balance Sheet Date”) which is included in the Quarterly Report on Form
10-Q most recently filed by the Company with the SEC prior to such date, and for the portion of the
current fiscal year ended on the last day of such fiscal quarter.




     “Holder” means, as to any Security, the holder thereof, unless such holder shall have
presented such Security to the Company for transfer and the transferee shall have been entered in
the Company’s stock register (in the case of Warrant Shares) or in the register referred to in
§9.1(a) hereof (in the case of a Warrant), as a subsequent
holder, in which case “Holder” shall
mean such subsequent holder.



     “Holder Consent” means, at any particular date, the consent, approval or vote
of the Holder.



     “Indemnified Party” shall have the meaning ascribed to that term in §7.4(c) hereof.



     “Indemnifying Party” shall have the meaning ascribed to that term in §7.4(c) hereof.



     “Ninety Day Period” shall have the meaning ascribed to that term in §7.5(b) hereof.



     “Purchaser” shall have the meaning ascribed to that term in the preamble hereto.



     “Redemption Closing” shall have the meaning ascribed to that term in §8.2 hereof.



     “Redemption Closing Date” shall have the meaning ascribed to that term in §8.2 hereof.



     “Redemption Notice” shall have the meaning ascribed to that term in §8.1 hereof.



     “Redemption Price” means, with respect to each C Warrant, the product of $.01
multiplied by the number of Warrant Shares then purchasable under such C Warrant.



     “register, registered and registration” refers to a
registration effected by preparing and filing a Registration Statement in compliance with the
Securities Act and the declaration or ordering by the SEC of effectiveness of such Registration
Statement.



     “Registrable Securities” means the Warrant Shares and any other shares of Common Stock
held by a Holder; provided, however, that securities shall only be treated as Registrable
Securities if and only for so long as they (A) have not been disposed of pursuant to a registration
statement declared effective by the SEC, (B) have not been sold in a transaction exempt from the
registration and prospectus delivery requirements of the Securities Act so that all transfer
restrictions and restrictive legends with respect thereto are removed upon the consummation of such
sale and (C) are held by a Holder. Notwithstanding the foregoing, Registrable Securities shall not
be deemed Registrable Securities at any time during which such Registrable Securities may be sold
under Rule 144 during any 90 day period without any limitations as to volume or holding period.



     “Registration Expenses” means all expenses incurred by the Company in complying with
Article VII hereof, including, without limitation, all registration, qualification and filing fees,
printing expenses, escrow fees, fees and expenses of counsel for the Company, blue sky fees and
expenses, all fees and expenses of legal counsel for any Holder, and the expense of any special
audits incident to or required by any such registration (but excluding all Selling Expenses).



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     “Registration Period” shall have the meaning ascribed to that term in §7.3(a)
hereof.



     “Registration Statement” shall have the meaning ascribed to that term in §7.1
hereof.



     “Rule 144” means Rule 144 issued by the SEC under the Securities Act, or any
subsequent rule pertaining to the disposition of securities without registration.



     “SEC” shall mean the Securities and Exchange Commission.



     “SEC Filings” shall mean all reports, schedules, forms, statements and other documents
required to be filed by the Company with the SEC since January 1, 2009 pursuant to the requirements
of the Exchange Act, including material filed pursuant to Section 13(a) or 15(c) of the Exchange
Act, in each case, together with all exhibits, supplements, amendments and schedules thereto, and
all documents incorporated by reference therein.



     “Securities” means the Warrants and the Warrant Shares.



     “Securities Act” means the Securities Act of 1933, as amended, and the rules
and regulations promulgated thereunder.



     “Selling Expenses” means all selling commissions applicable to the sale of Registrable
Securities.



     “Warrants” means the A Warrants, the B Warrants and the C Warrants of the Company
issued to the Purchaser pursuant to §2.1 hereof and any other Warrants transferred to any other
permitted holders pursuant to Article 9 hereof.



     “Warrant Shares” means collectively, (a) the shares of Common Stock of the Company
issuable upon exercise of the Warrants in accordance with their terms, (b) any capital stock or
other securities into which or for which such securities shall have been converted or exchanged
pursuant to any recapitalization, reorganization or merger of the Company, and (c) any capital
stock or other securities issued with respect to the foregoing pursuant to an equity split or other
distribution.



ARTICLE II




SALE AND PURCHASE OF WARRANTS



     §2.1 Sale and Purchase of Warrants. At the Closing referred to in Article III
and subject to the terms and conditions hereof and in reliance on the representations and
warranties of the Purchaser set forth herein, the Company hereby agrees to issue and sell to the
Purchaser and, subject to all of the terms hereof and in reliance on the representations and
warranties of the Company set forth herein, the Purchaser hereby agrees to purchase from the
Company, for an aggregate purchase price of $3.00, the following Warrants:




     (a) a Warrant (“A Warrant”) to purchase 1,200,000 shares of Common
Stock, such A Warrant to be in the form of Exhibit A-1 attached
hereto;




     (b) a Warrant (“B Warrant”) to purchase 400,000 shares of Common
Stock, such B Warrant to be in the form of Exhibit A-2 attached
hereto; and




     (c) a Warrant (“C Warrant”) to purchase 4,400,000, such C Warrant
to be in the form of Exhibit A-3 attached hereto.



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     §2.2 Acknowledgments of the Company and the Purchaser. The Company and the
Purchaser understand, acknowledge and agree that the aggregate fair market value on the date
hereof of the Warrants is as set forth on Schedule 1, and will be reported as such by the
Company and the Purchaser for federal, state and local tax purposes.



     §2.3 Closing Conditions. The obligation of the Purchaser to purchase the
Warrants shall be subject to the satisfaction of the following conditions precedent:



     (a) The Warrants shall have been duly authorized and issued to the Purchaser, shall be in
full force and effect and shall be in form and substance satisfactory to the Purchaser.



     (b) The Loan Documents shall have been duly executed and delivered by the respective
parties thereto, all conditions precedent to the effectiveness of the Loan Documents shall have
been duly satisfied or waived, the Loan Documents shall be in full force and effect and each of
such agreements or instruments shall be in form and substance satisfactory to the Purchaser.



     (c) The Purchaser shall have received from Fulbright & Jaworski L.L.P., counsel for the
Company, a legal opinion dated the Closing Date in the form of Exhibit B attached hereto.



     (d) The Board of Directors of the Company shall have taken all such action as is necessary
such that the Purchaser would not be deemed an “Acquiring Person” for purposes of the Third Amended
and Restated Rights Agreement dated August 23, 2007 between the Company and Wells Fargo Bank, NA
(the “Rights Agreement”), including adopting an amendment to such Rights Agreement
exempting the Purchaser from being deemed an Acquiring Person for purposes of such Rights
Agreement.



     (e) The Company will have delivered to the Purchaser the following:




     (i) a certificate of the Secretary of the Company, dated as of the Closing
Date, certifying as to (A) the Certificate of Incorporation and Bylaws of the
Company, as in effect on the Closing Date, (B) the resolutions of the Board of
Directors of the Company authorizing the execution, delivery and performance of this
Agreement and the transactions contemplated hereby, including the issuance of the
Warrants, and (C) the incumbency and specimen signature of each officer of the
Company executing this Agreement and any other document delivered by it in
connection herewith; and




     (ii) a certificate of the Secretary of State of the State of Delaware,
dated as of a recent date, to the effect that the Company is in good standing in the
State of Delaware.



     (f) The Company shall have obtained all consents and waivers necessary for the Company to
execute and deliver this Agreement and all related documents and agreements and to issue and
deliver the Warrants, and all such consents and waivers will be in full force and effect.



     (g) All proceedings to be consummated at or prior to the Closing, and all documents to be
delivered pursuant to this Agreement shall be reasonably satisfactory to the Purchaser and its
counsel, and the Purchaser and its counsel shall have received copies of all documents and
information which they may have reasonably requested in connection with the transactions
contemplated hereby and of all corporate proceedings in connection therewith, in form and substance
reasonably satisfactory to Purchaser and its counsel.



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ARTICLE III




THE CLOSING



     The closing of the purchase of the Warrants under this Agreement (the “Closing”) will
take place at 10:00 a.m. local time, on the closing date under the Credit Agreement or at such time
and on such other date as may be mutually agreed upon in writing by the Purchaser and the Company.
At the Closing, the Company will (among other things) deliver to the Purchaser the Warrants
purchased by the Purchaser hereunder, and the Purchaser will deliver to the Company the total
consideration payable by the Purchaser for such Warrants.



ARTICLE IV




REPRESENTATIONS OF THE COMPANY



     The Company hereby represents and warrants to the Purchaser that:



          (a) Organization, Good Standing and Qualification. The Company is a
corporation duly organized, validly existing and in good standing under the laws of the State of
Delaware and has all requisite corporate power and authority to carry on its business. The Company
is duly qualified to transact business as a corporation and is in good standing in each
jurisdiction in which the failure so to qualify would have a material adverse effect upon the
Company’s ability to perform its obligations under this Agreement or the validity or enforceability
of, or Purchaser’s rights and remedies under, this Agreement.



          (b) Authorization; Due Execution. The Company has the requisite
corporate power and authority to enter into this Agreement and to perform its obligations under the
terms of this Agreement. All corporate action on the part of the Company, its officers, directors
and stockholders necessary for the authorization, execution and delivery of this Agreement has been
taken. This Agreement has been duly authorized, executed and delivered by the Company and, upon
due execution and delivery by Purchaser of this Agreement, this Agreement will be a valid and
binding agreement of the Company, enforceable in accordance with its terms, except as
enforceability may be limited by bankruptcy, insolvency, reorganization, moratorium or similar laws
affecting creditors’ rights generally or by equitable principles.



          (c) Capitalization. As of the date hereof, the authorized capital stock
of the Company consists of 80,000,000 shares of Common Stock and 5,000,000 shares of preferred
stock, par value $.01 per share, of which 500,000 shares have been designated as Series B Preferred
Stock. As of June 30, 2010, (i) 33,803,025 shares of Common Stock were issued and outstanding,
(ii) no shares of Series B Preferred Stock were issued and outstanding, (iii) there were
outstanding options for the purchase of 3,705,500 shares of Common Stock, and (iv) 4,875,348 shares
of Common Stock were reserved for issuance upon exercise of outstanding options issued or options
that may be issued under the Company’s 2001 Long Term Stock Incentive Plan, the Harvest Natural
Resources 2004 Long Term Incentive Plan, the Harvest Natural Resources 2006 Long Term Incentive
Plan and the Harvest Natural Resources 2010 Long-Term Incentive Plan.



          (d) Valid Issuance of Warrants and Warrant Shares. The Warrants, when
issued, sold and delivered in accordance with the terms of Article II hereof for the consideration
and on the terms and conditions set forth herein, will be duly and validly authorized and issued,
fully paid and nonassessable and, based in part upon the representations of Purchaser in this
Agreement, will be issued in compliance with all applicable federal and state securities laws, and
will not be subject to any



-5-









 




preemptive rights or other similar rights of shareholders of the Company that are provided for
in the Company’s Certificate of Incorporation, its Bylaws or in any agreement to which the Company
is a party. Sufficient shares of authorized but unissued Common Stock have been reserved by
appropriate corporate action of the Company in connection with the prospective exercise of the
Warrants. The issuance of the Warrant Shares (i) does not require any further corporate action by
the stockholders of the Company or the Board of Directors, (ii) is not subject to the pre-emptive
rights or rights of first refusal of any present or future stockholders of the Company and (iii)
does not conflict with any provision of any agreement to which the Company is a party or by which
it is bound. All Warrant Shares, when issued upon exercise of the Warrants in accordance with
their terms, against payment of the exercise price therefor, will be duly authorized, validly
issued, fully paid and non-assessable.




          (e) No Defaults. There exists no default under the provisions of any
instrument or agreement evidencing, governing or otherwise relating to any material indebtedness of
the Company, or with respect to any other agreement, a default under which could affect the
Company’s ability to perform its obligations under this Agreement or the validity or enforceability
of, or Purchaser’s rights and remedies under, this Agreement.



          (f) SEC Filings. The Company has timely filed with the SEC all SEC
Filings. The SEC Filings were prepared in accordance with and, as of the date on which each such
SEC Filing was filed with the SEC, complied in all material respects with the applicable
requirements of the Exchange Act. None of such SEC Filings, including, without limitation, any
financial statements, exhibits and schedules included therein and documents incorporated therein by
reference, at the time filed, declared effective or mailed, as the case may be, contained an untrue
statement of a material fact or omitted to state a material fact required to be stated therein or
necessary in order to make the statements therein, in light of the circumstances under which they
were made, not misleading. Except to the extent information contained in any of the SEC Filings
has been revised, corrected or superseded by a later SEC Filing, none of the SEC Filings currently
contains an untrue statement of a material fact or omits to state a material fact required to be
stated therein or necessary in order to make the statements therein, in light of the circumstances
under which they were made, not misleading.



          (g) Governmental Consents. (i) No consent, approval, order or
authorization of, or registration, qualification, designation, declaration or filing with, any
federal, state, local or provincial governmental authority on the part of the Company is required
in connection with the consummation of the transactions contemplated by this Agreement, except for
such notices required or permitted to be filed with certain state and federal securities
commissions after the date of this Agreement, which notices will be filed on a timely basis. (2)
The Company does not own, operate, or control facilities for the generation or transmission or
distribution of electricity, except for electricity consumed by the Company and/or a subsidiary or
affiliate of the Company. The Company does not directly or indirectly, or through any affiliate,
sell electricity for resale. (3) The Company is not (x) a “public utility” or a “transmitting
utility” under the Federal Power Act, as amended (“FPA”), including the regulations of the
Federal Energy Regulatory Commission (“FERC”) thereunder, and is not (y) a “public-utility
company” under the Public Utility Holding Company Act of 2005 (“PUHCA”), including the
regulations of the FERC thereunder; and is not (z) a direct or indirect “holding company” (as the
term is defined under PUHCA or under the FPA) of any such “public utility” or “transmitting
utility”, nor of any “public-utility company.”



          (h) Financial Statements. The Financial Statements are true and correct
in all material respects, are in accordance with the books and records of the Company in all
material respects and have been prepared in accordance with generally accepted accounting
principles consistently applied with the past practices of the Company (except as may be indicated
in the notes thereto), and fairly and accurately present in all material respects the financial
position of the Company and the results of its operations for the periods then ended. The Company
has no material liabilities, debts or obligations,



-6-









 




whether accrued, absolute or contingent that under generally accepted accounting principles
would be required to be reflected in a consolidated balance sheet of the Company prepared as of the
date of this Agreement except for: (i) liabilities identified as such in the “liabilities” column
of the Balance Sheet; (ii) accounts payable or accrued salaries that have been incurred by the
Company since the Balance Sheet Date in the ordinary course of business; (iii) liabilities which
have arisen since the Balance Sheet Date and, individually or in the aggregate, are not material to
the Company and its subsidiaries taken as a whole and that were incurred in the ordinary course of
business; and (iv) liabilities arising under the Credit Agreement.




          (i) No Conflict. The Company’s execution, delivery and performance of
this Agreement does not violate any provision of the Company’s Certificate of Incorporation or
Bylaws, each as amended as of the date hereof (copies of which have been filed with, or are
incorporated by reference in, the Company’s SEC Filings), any provision of any order, writ,
judgment, injunction, decree, determination or award to which the Company is a party or by which it
is bound, or, to the Company’s knowledge, any law, rule or regulation currently in effect having
applicability to the Company.



          (j) No Default or Violation. The Company is not (i) in default under or in
violation of any indenture, loan or credit agreement or any other agreement or instrument to which
it is a party or by which it or any of its properties is bound or (ii) in violation of any order of
any court, arbitrator or governmental body.



          (k) Credit Agreement. All of the representations and warranties set forth in
Article V of the Credit Agreement are true and correct on and as of the Closing Date.



ARTICLE V




REPRESENTATIONS OF THE PURCHASER



     The Purchaser represents and warrants to the Company that:



     (a) The Purchaser is purchasing the Warrants from the Company in accordance with the terms
hereof for the Purchaser’s own account without a view to any distribution thereof in violation of
the Securities Act, but, subject, nevertheless, to any requirement of law that the
disposition of the Purchaser’s property shall at all times be within the Purchaser’s control. The
Purchaser has been informed and understands that the Securities have not been registered pursuant
to the provisions of Section 5 of the Securities Act and must be held indefinitely unless such
Securities are subsequently registered under the provisions of the Securities Act or an exemption
from such registration is available.



     (b) The Purchaser represents that it is an “accredited investor” within the meaning of
Rule 501(a) promulgated under the Securities Act.



     (c) Each instrument (if any) representing or evidencing any Securities shall bear a legend
in or substantially in the following form:




“THE SECURITIES REPRESENTED HEREBY HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT
OF 1933, AS AMENDED. NO REGISTRATION OF TRANSFER OF SUCH SECURITIES WILL BE MADE ON
THE BOOKS OF THE COMPANY UNLESS SUCH TRANSFER IS MADE IN CONNECTION WITH AN
EFFECTIVE REGISTRATION STATEMENT UNDER SUCH ACT OR PURSUANT TO AN EXEMPTION FROM THE
REGISTRATION REQUIREMENTS OF SUCH ACT OR SUCH ACT DOES NOT APPLY.”





-7-









 







ARTICLE VI




COVENANTS OF THE COMPANY



     The Company hereby covenants with the Holders that the Company will comply with the following:



     §6.1 General. The Company will comply in all material respects with the
provisions of Sections 6.01 and 6.02 of the Credit Agreement, which articles (and any applicable
corresponding definitions) are each hereby incorporated herein by reference as if fully set forth
herein and shall survive any termination of the Credit Agreement.



     §6.2 Governmental and Other Approvals. The Company shall apply for, obtain and
maintain in effect, as applicable, all material authorizations, consents, approvals, licenses,
qualifications, exemptions, filings, declarations and registrations (whether with any court,
governmental agency, regulatory authority, securities exchange or otherwise) which are necessary
in connection with the execution, delivery and performance by such party of this Agreement, or any
other documents or instruments to be executed or delivered by such party in connection herewith
and the transactions consummated or to be consummated hereunder; provided, that the
Company shall not be or become a “public utility” or a “holding company” thereof under the FPA,
nor a “public-utility company” nor a “holding company” thereof, as those terms are defined under
PUHCA, absent the express, prior, written consent of Holders, such consent subject to Holders’
discretion.



     §6.3 Reporting Status. So long as the Company is subject to the reporting
requirements of the Exchange Act, the Company will file timely all reports required to be filed
with the SEC pursuant to the Exchange Act.



     §6.4 Listing Requirements. So long as the Company shall continue the listing and
trading of its Common Stock on the New York Stock Exchange, the Company will comply in all
material respects with the Company’s reporting, filing and other obligations under the rules of
the New York Stock Exchange.



     §6.5 Amendment to Rights Agreement. The Company shall not agree to any amendment
after the date hereof to the Rights Agreement, as amended by the Amendment dated as of the date
hereof, which would amend or otherwise modify the provision in Section 1(a)(iv) thereof.



ARTICLE VII

REGISTRATION RIGHTS




     §7.1 Registration.



     (a) At the written request of the Purchaser, the Company will, as soon as
reasonably practicable, but in no event later than thirty (30) days following such request (the
“Filing Date”), file a registration statement covering the resale of the Registrable
Securities on a Form S-3 Registration Statement (the “Registration Statement”) with the
SEC and the Company shall use its commercially reasonable efforts to effect the registration,
qualifications or compliances (including, without limitation, the execution of any required
undertaking to file post-effective amendments, appropriate qualifications or exemptions under
applicable blue sky or other state securities laws and appropriate compliance with applicable
securities laws, requirements or regulations) as promptly as practicable after the filing



-8-









 







thereof. The Company shall not be obligated to enter into any underwriting agreement for the
sale of any of the Registrable Securities.



     (b) Notwithstanding the foregoing, if at the time of any request to register
Registrable Securities pursuant to Section 7.1(a) or after the filing of any Registration Statement
but before the effectiveness thereof, the Board of Directors of the Company determines in its good
faith reasonable judgment that the Company should not file or seek effectiveness of such
Registration Statement otherwise required to be filed pursuant to such Section 7.1(a) because (i)
the filing of the Registration Statement or continuation of the registration process would
adversely affect a pending or proposed material financing or a material acquisition, merger,
recapitalization, consolidation, reorganization or similar transaction, or negotiations,
discussions or pending proposals with respect thereto or (ii) the Registration Statement and any
prospectus contains or would contain a material misstatement of fact or omission as a result of an
event that has occurred or is continuing, the Company shall be entitled to postpone for the
shortest reasonable period of time (but not exceeding 180 days from the date of such determination
of the Board of Directors of the Company), the filing or effectiveness of such Registration
Statement and shall promptly give the Holders written notice of such determination, and, upon
request of the Holders, a general statement of the reasons for such postponement and an
approximation of the anticipated delay. If the Company shall so postpone the filing or
effectiveness of the Registration Statement, the Holders shall have the right to withdraw the
request for registration by giving written notice to the Company within 30 days after receipt of
the notice of postponement. Such right to delay a request for registration pursuant to this
Section 7.1(b) may not be exercised more than once in any 12 month period.



     §7.2 Expenses. All Registration Expenses incurred in connection with
any registration, qualification, exemption or compliance pursuant to §7.1 shall be borne
by the Company. All Selling Expenses relating to the sale of securities registered by or on behalf
of Holders shall be borne by such Holders pro rata on the basis of the number of securities so
registered.



     §7.3 Registration Procedures. In the case of the registration,
qualification, exemption or compliance effected by the Company pursuant to this Agreement, the
Company shall, upon reasonable written request, inform each Holder as to the status of such
registration, qualification, exemption and compliance. At its expense the Company shall:



     (a) subject to §7.5, use its commercially reasonable efforts to keep such
registration, and any qualification, exemption or compliance under state securities laws which the
Company determines to obtain, continuously effective until the earlier of the following: (i) such
time as all of the Registrable Securities are sold, or (ii) such time as all Warrant Shares and any
other shares of Common Stock held by the Holders cease to be Registrable Securities. The period of
time during which the Company is required hereunder to keep the Registration Statement effective is
referred to herein as the “Registration Period.”



     (b) advise the Holders within five business days:



               (i) when the Registration Statement or any amendment thereto has been filed with
the SEC and when the Registration Statement or any post-effective amendment thereto has become
effective;



               (ii) of any request by the SEC for amendments or supplements to the Registration
Statement or the prospectus included therein or for additional information;



               (iii) of the issuance by the SEC of any stop order suspending the effectiveness
of the Registration Statement or the initiation of any proceedings for such purpose;



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               (iv) of the receipt by the Company of any notification with respect to the
suspension of the qualification of the Registrable Securities included therein for sale in any
jurisdiction or the initiation or threatening of any proceeding for such purpose; and



               (v) of the occurrence of any event that requires the making of any changes in
the Registration Statement or the prospectus so that, as of such date, the statements therein are
not misleading and do not omit to state a material fact required to be stated therein or necessary
to make the statements therein (in the case of the prospectus, in the light of the circumstances
under which they were made) not misleading;



     (c) use its commercially reasonable efforts to obtain the withdrawal of any order
suspending the effectiveness of any Registration Statement at the earliest possible time;



     (d) promptly furnish to each Holder, without charge, at least one copy of such
Registration Statement and any post-effective amendment thereto, including financial statements and
schedules, and, if the Holder so requests in writing, all exhibits in the form filed with the SEC;



     (e) during the Registration Period, promptly deliver to each Holder, without charge, as
many copies of the prospectus included in such Registration Statement and any amendment or
supplement thereto as such Holder may reasonably request; and the Company consents to the use,
consistent with the provisions hereof and thereof, of the prospectus or any amendment or supplement
thereto by each of the selling Holders of Registrable Securities in connection with the offering
and sale of the Registrable Securities covered by the prospectus or any amendment or supplement
thereto;



     (f) during the Registration Period, promptly deliver to each Holder, without charge, (i)
as soon as practicable one copy of the following documents, other than those documents available
via EDGAR: (A) its annual report to its stockholders, if any; (B) if not included in substance in
its annual report to stockholders, its annual report on Form 10-K (or similar form); and (C) each
of its quarterly reports to its stockholders, and, if not included in substance in its quarterly
reports to stockholders, its quarterly report on Form 10-Q (or similar form) (the foregoing, in
each case, excluding exhibits); and (ii) upon reasonable request, all exhibits excluded by the
parenthetical to the immediately preceding clause (C);



     (g) prior to any public offering of Registrable Securities pursuant to any Registration
Statement, promptly take such actions as may be necessary to register or qualify or obtain an
exemption for offer and sale under the securities or blue sky laws of such jurisdictions as any
such Holders reasonably request in writing, provided that the Company shall not for any such
purpose be required to qualify generally to transact business as a foreign corporation in any
jurisdiction where it is not so qualified, to consent to general service of process in any such
jurisdiction or to become subject to taxation in any jurisdiction in which it is not then already
subject to taxation, and do any and all other acts or things reasonably necessary or advisable to
enable the offer and sale in such jurisdictions of the Registrable Securities covered by such
Registration Statement;



     (h) upon the occurrence of any event contemplated by §7.3(b)(v) above, the
Company shall use its commercially reasonable efforts to promptly prepare a post-effective
amendment to the Registration Statement or a supplement to the related prospectus, or file any
other required document so that, as thereafter delivered to purchasers of the Registrable
Securities included therein, the prospectus will not include any untrue statement of a material
fact or omit to state any material fact necessary to make the statements therein, in the light of
the circumstances under which they were made, not misleading;



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     (i) otherwise use its commercially reasonable efforts to comply with all applicable rules
and regulations of the SEC which could affect the sale of the Registrable Securities;



     (j) use its commercially reasonable efforts to cause all Registrable Securities to be
listed on each securities exchange or market, if any, on which equity securities issued by the
Company have been listed; and



     (k) use its commercially reasonable efforts to take all other steps necessary to effect
the registration of the Registrable Securities contemplated hereby and to enable the Holders to
sell Registrable Securities under Rule 144.



     §7.4 Indemnification.



     (a) To the extent permitted by law, the Company shall indemnify each Holder and each
person controlling such Holder within the meaning of Section 15 of the Securities Act, with respect
to which any registration that has been effected pursuant to this Agreement, against all claims,
losses, damages and liabilities (or action in respect thereof), including any of the foregoing
incurred in settlement of any litigation, commenced or threatened (subject to §7.4(c)
below), arising out of or based on any untrue statement (or alleged untrue statement) of a material
fact contained in the Registration Statement, prospectus, any amendment or supplement thereof or
based on any omission (or alleged omission) to state therein a material fact required to be stated
therein or necessary to make the statements therein not misleading, in light of the circumstances
in which they were made, or any violation by the Company of any rule or regulation promulgated by
the Securities Act applicable to the Company and relating to any action or inaction required of the
Company in connection with any such registration and will reimburse each Holder and each person
controlling such Holder for reasonable legal and other expenses reasonably incurred in connection
with investigating or defending any such claim, loss, damage, liability or action as incurred;
provided, however, that the Company will not be liable in any such case to the extent that any
untrue statement or omission or allegation thereof is made in reliance upon and in conformity with
written information furnished to the Company by or on behalf of such Holder and stated to be
specifically for use in preparation of such Registration Statement, prospectus, or any amendment or
supplement thereof; provided further, however, that the Company will not be liable in any such case
where the claim, loss, damage or liability arises out of or is related to the failure of the Holder
to comply with the covenants and agreements contained in this Agreement respecting sales of
Registrable Securities, and except that the foregoing indemnity agreement is subject to the
condition that, insofar as it relates to any such untrue statement or alleged untrue statement or
omission or alleged omission made in the preliminary prospectus but eliminated or remedied in the
amended prospectus on file with the SEC at the time the Registration Statement becomes effective or
in the amended prospectus filed with the SEC pursuant to Rule 424(b) or in the prospectus subject
to completion under Rule 434 of the Securities Act, which together meet the requirements of Section
10(a) of the Securities Act (the “Final Prospectus”), such indemnity shall not inure to the
benefit of any such Holder or any such controlling person, if a copy of the Final Prospectus
furnished by the Company to the Holder for delivery was not furnished to the person or entity
asserting the loss, liability, claim or damage at or prior to the time such furnishing is required
by the Securities Act and the Final Prospectus would have cured the defect giving rise to such
loss, liability, claim or damage.



     (b) Each Holder will severally, if Registrable Securities held by such Holder are included
in the securities as to which such registration is being effected, indemnify the Company, each of
its directors and officers and each person who controls the Company within the meaning of Section
15 of the Securities Act, against all claims, losses, damages and liabilities (or actions in
respect thereof), including any of the foregoing incurred in settlement of any litigation,
commenced or threatened (subject to §7.4(c) below), arising out of or based on any untrue
statement (or alleged untrue statement) of a material fact contained in the Registration Statement,
prospectus, or any amendment or supplement thereof, or based



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on any omission (or alleged omission) to state therein a material fact required to be stated
therein or necessary to make the statements therein not misleading, in light of the circumstances
in which they were made, and will reimburse the Company, such directors and officers and each
person controlling the Company for reasonable legal and any other expenses reasonably incurred in
connection with investigating or defending any such claim, loss, damage, liability or action as
incurred, in each case to the extent, but only to the extent, that such untrue statement or
omission or allegation thereof is made in reliance upon and in conformity with written information
furnished to the Company by or on behalf of the Holder and stated to be specifically for use in
preparation of the Registration Statement, prospectus, any amendment or supplement thereof;
provided that the indemnity shall not apply to the extent that such claim, loss, damage or
liability results from the fact that the Final Prospectus was not made available to the person or
entity asserting the loss, liability, claim or damage at or prior to the time such furnishing is
required by the Securities Act and the Final Prospectus would have cured the defect giving rise to
such loss, claim, damage or liability. Notwithstanding the foregoing, a Holder’s aggregate
liability pursuant to this subsection (b) and subsection (d) shall be limited to the net amount
received by the Holder from the sale of the Registrable Securities.




     (c) Each party entitled to indemnification under this §7.4 (the “Indemnified
Party”) shall give notice to the party required to provide indemnification (the
“Indemnifying Party”) promptly after such Indemnified Party has actual knowledge of any
claim as to which indemnity may be sought, and shall permit the Indemnifying Party (at its expense)
to assume the defense of any such claim or any litigation resulting therefrom, provided, however,
that counsel for the Indemnifying Party, who shall conduct the defense of such claim or litigation,
shall be approved by the Indemnified Party (whose approval shall not unreasonably be withheld), and
the Indemnified Party may participate in such defense provided that all legal and other expenses
incurred by the Indemnified Party in connection therewith shall be at such Indemnified Party’s
expense, and, provided further, that the failure of any Indemnified Party to give notice as
provided herein shall not relieve the Indemnifying Party of its obligations under this Agreement,
unless such failure is materially prejudicial to the Indemnifying Party in defending such claim or
litigation. An Indemnifying Party shall not be liable for any settlement of an action or claim
effected without its written consent (which consent will not be unreasonably withheld). No
Indemnifying Party, in its defense of any such claim or litigation, shall, except with the consent
of each Indemnified Party, consent to entry of any judgment or enter into any settlement which does
not include as an unconditional term thereof the giving by the claimant or plaintiff to such
Indemnified Party of a release from all liability in respect to such claim or litigation.



     (d) If the indemnification provided for in this §7.4 is held by a court of
competent jurisdiction to be unavailable to an Indemnified Party with respect to any loss,
liability, claim, damage or expense referred to therein, then the Indemnifying Party, in lieu of
indemnifying such Indemnified Party thereunder, shall contribute to the amount paid or payable by
such Indemnified Party as a result of such loss, liability, claim, damage or expense in such
proportion as is appropriate to reflect the relative fault of the Indemnifying Party on the one
hand and of the Indemnified Party on the other in connection with the statements or omissions which
resulted in such loss, liability, claim, damage or expense as well as any other relevant equitable
considerations. The relative fault of the Indemnifying Party and of the Indemnified Party shall be
determined by reference to, among other things, whether the untrue or alleged untrue statement of a
material fact or the omission to state a material fact relates to information supplied by the
Indemnifying Party or by the Indemnified Party and the parties’ relative intent, knowledge, access
to information and opportunity to correct or prevent such statement or omission.



     §7.5 Certain Obligations of Holders.



     (a) Each Holder agrees that, upon receipt of any notice from the Company of the happening
of any event requiring the preparation of a supplement or amendment to a prospectus relating to



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Registrable Securities so that, as thereafter delivered to the Holders, such prospectus shall not
contain an untrue statement of a material fact or omit to state any material fact required to be
stated therein or necessary to make the statements therein not misleading, each Holder will
forthwith discontinue disposition of Registrable Securities pursuant to the Registration Statement
and prospectus contemplated by §7.1 until its receipt of copies of the supplemented or
amended prospectus from the Company and, if so directed by the Company, each Holder shall deliver
to the Company all copies, other than permanent file copies then in such Holder’s possession, of
the prospectus covering such Registrable Securities current at the time of receipt of such notice.




     (b) Each Holder shall suspend, upon request of the Company, any disposition of Registrable
Securities pursuant to the Registration Statement and prospectus contemplated by §7.1
during (i) any period not to exceed one 90-day period within any one 12-month period (the
“Ninety Day Period”) the Company requires in connection with a primary underwritten
offering of equity securities so long as the Holders are permitted to participate in such primary
underwritten offering on a pro rata basis based on the number of Shares they hold at such time
relative to the Company’s total number of outstanding shares of Common Stock at such time
(provided, however, that, to the extent the underwriters for such offering advise the Holders that
marketing factors require a limitation of the number of Shares that may be included in such
underwritten offering, the right of the Holders to participate in such offering on a pro rata basis
as described above shall be reduced or eliminated and such Holder shall nonetheless remain
obligated to suspend its disposition of Registrable Securities pursuant to the Registration
Statement and prospectus contemplated by §7.1 for up to the entirety of the Ninety Day
Period), and (ii) any period, not to exceed one 90-day period per twelve (12) month period, when
the Company determines in good faith that offers and sales pursuant thereto should not be made by
reason of the presence of material undisclosed circumstances or developments with respect to which
the disclosure that would be required in such a prospectus is premature or would have a material
adverse effect on the Company.



     (c) As a condition to the inclusion of its Registrable Securities, each Holder shall
furnish to the Company such information regarding such Holder and the distribution proposed by such
Holder as the Company may request in writing, including completing a Registration Statement
Questionnaire substantially in the form provided by the Company, or as shall be required in
connection with any registration referred to in this Agreement.



     (d) Each Holder acknowledges and agrees that the Registrable Securities sold pursuant to
the Registration Statement are not transferable on the books of the Company unless the stock
certificate submitted to the transfer agent evidencing such Registrable Securities is accompanied
by a certificate reasonably satisfactory to the Company to the effect that (i) the Registrable
Securities have been sold in accordance with such Registration Statement and (ii) the requirement
of delivering a current prospectus has been satisfied.



     (e) Each Holder agrees not to take any action with respect to any distribution deemed to
be made pursuant to such Registration Statement which would constitute a violation of Regulation M
under the Exchange Act or any other applicable rule, regulation or law.



     (f) At the end of the Registration Period the Holders shall discontinue sales of shares
pursuant to such Registration Statement upon receipt of notice from the Company of its intention to
remove from registration the shares covered by such Registration Statement which remain unsold, and
such Holders shall notify the Company of the number of shares registered which remain unsold
immediately upon receipt of such notice from the Company.



     §7.6 Rule 144. With a view to making available to the Holders the
benefits of certain rules and regulations of the SEC which at any time permit the sale of the
Registrable Securities to the public



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without registration, so long as the Holders still own Registrable Securities, the Company shall
use its commercially reasonable efforts to:




     (a) make and keep public information available, as those terms are understood and defined
in Rule 144 under the Securities Act, at all times;



     (b) file with the SEC in a timely manner all reports and other documents required of the
Company under the Exchange Act; and



     (c) furnish to such Holder, upon any reasonable request, a written statement by the
Company as to its compliance with Rule 144 under the Securities Act, and of the Exchange Act, a
copy of the most recent annual or quarterly report of the Company, and such other reports and
documents of the Company as such Holder may reasonably request in availing itself of any rule or
regulation of the SEC allowing a Holder to sell any such securities without registration.



ARTICLE VIII




REDEMPTION OF C WARRANTS



     §8.1 Right to Redeem C Warrants. In the event that all obligations of the
Company outstanding under the Credit Agreement have been repaid in full in cash and all
commitments to lend have been terminated thereunder prior to the Bridge Date, the Company may, by
written notice to the Holders of C Warrants (the “Redemption Notice”) which shall
be delivered within 10 days following such repayment and termination of the Credit Agreement,
elect to purchase from the Holders of the C Warrants (and such Holders hereby agree to sell to the
Company), at the Redemption Price for such C Warrants, all but not less than all of the C Warrants
as are then outstanding on a date specified in such notice not more than 90 days after the date of
the Redemption Notice.



     §8.2 Redemption Closing. The closing of the transactions contemplated by the
Redemption Notice (the “Redemption Closing”) shall take place at the offices of the Company at
10:00 a.m. local time on the date so specified, or at such other time and place as the Company and
the Holders may agree upon in writing (the “Redemption Closing Date”). At
the Redemption Closing, each Holder will deliver to the Company instruments of transfer
representing the C Warrants held by such Holder (properly endorsed or accompanied by assignments)
against payment of the Redemption Price to such Holder in cash.



ARTICLE IX




REGISTRATION AND TRANSFER OF WARRANTS



     §9.1 Registration, Transfer and Exchange of Warrants. (a) The Company shall keep
a register in which shall be entered the names and addresses of the Holders of Warrants issued by
it and particulars of the respective Warrants held by them and of all transfers of such Warrants.
The ownership of any of the Warrants shall be proven by such register and the Company may
conclusively rely upon such register.



     (b) The Holder of any of the Warrants may at any time and from time to time prior to
exercise or redemption thereof surrender any Warrant held by it for exchange or transfer at said
office of the Company. On surrender for exchange of the Warrants, properly endorsed, to the
Company, the



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Company at its expense will issue and deliver to or on the order of the Holder thereof a new
Warrant or Warrants of like tenor, in the name of such Holder or, upon payment by such Holder of
any applicable transfer taxes, as such Holder may direct, calling in the aggregate on the face or
faces thereof for the number of Warrant Shares called for on the face or faces of the Warrants so
surrendered. The Company will pay shipping and insurance charges, from and to the Holder’s
principal office, involved in the exchange or transfer of any Warrant.




     (c) Each Warrant issued hereunder, whether originally or in substitution for, or upon
transfer or exchange of, any Warrant shall be registered on the date of execution thereof by the
Company. The registered Holder of a Warrant shall be deemed to be the owner of such Warrant for
all purposes of this Agreement. All notices given hereunder to such Holder shall be deemed validly
given if given in the manner specified in §11.1 hereof.



     §9.2 Replacement of Warrants. Upon receipt of evidence reasonably satisfactory
to the Company of the loss, theft, destruction or mutilation of any Warrant and, in the case of
any such loss, theft or destruction, upon delivery of an indemnity agreement from such Holder
reasonably satisfactory to the Company, or, in the case of any such mutilation, upon the surrender
of such Warrant for cancellation to the Company at its principal office, the Company, at its own
expense, will execute and deliver, in lieu thereof, a new Warrant of like tenor. Any Warrant in
lieu of which any such new Warrant has been so executed and delivered by the Company shall not be
deemed to be outstanding for any purpose of this Agreement.



     §9.3 Transfer of Warrants. The Warrants shall be freely transferable, subject to
applicable federal and state securities laws and regulations.



ARTICLE X




SURVIVAL OF REPRESENTATIONS; INDEMNIFICATION



     §10.1 Survival of Representations. The representations and warranties of the
Company and of the Purchaser contained in this Agreement, or any agreement, instrument or document
delivered pursuant to any of the provisions of this Agreement, shall survive the execution and
delivery of this Agreement, any examination or investigation conducted by or on behalf of the
Company or the Purchaser, and each Closing hereunder.



     §10.2 Indemnification for Misrepresentations. The Company agrees to indemnify
and hold the Purchaser harmless from and against, and to pay to the Purchaser, on demand by the
Purchaser from time to time, the full amount of any loss, claim, damage, liability, cost or
expense (including reasonable attorneys’ fees) resulting to the Purchaser from any false,
incorrect or misleading representation or warranty of the Company contained in this Agreement, or
any agreement, instrument or document delivered by the Company to the Purchaser pursuant to any of
the provisions of this Agreement.



     §10.3 Expenses. Whether or not all or any of the arrangements or transactions
contemplated by this Agreement or by any of the Warrants shall be consummated, the Company agrees
to pay to the Purchaser, on demand by the Purchaser at any time and as often as the occasion
therefor may require: (a) all of the reasonable legal fees, plus all reasonable
out-of-pocket expenses and disbursements, of Bingham McCutchen LLP, special counsel for the
Purchaser, which have been or shall be incurred or sustained at any time in connection with the
preparation, negotiation, execution or delivery of this Agreement, any of the Warrants, or any
other agreements, instruments or documents relating thereto; and (b) all reasonable out-of-pocket
costs and expenses which shall be incurred or sustained by the Purchaser at any time in connection
with any modifications or amendments to or consents, approvals or



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waivers under this Agreement or any of the Warrants (other than any such modifications or
amendments entered into at the request of the Purchaser), or in connection with any litigation,
proceeding or dispute arising out of or relating to this Agreement or any of the Warrants in
connection with any action or proceeding taken by the Purchaser to protect or preserve all or any
of the rights, remedies, powers or privileges of the Purchaser under any of such documents or to
enforce any of the covenants, agreements or obligations of the Company under any of such documents
(including, without limitation, all of the reasonable fees and disbursements of legal counsel for
the Purchaser).



ARTICLE XI




MISCELLANEOUS



     §11.1 Notices.



     (a) All notices and other communications pursuant to this Agreement shall be in writing,
either delivered in hand, mailed by United States registered or certified first-class mail, postage
prepaid, sent by overnight courier, or sent by telegraph, telecopy, facsimile or telex and
confirmed by delivery via courier or postal service, addressed as follows:




     (i) if to the Company, at 1177 Enclave Parkway, Suite 300, Houston, Texas 77077,
attention: General Counsel, or at such other address as shall have been furnished to each of
the Holders in writing by the Company;




     (ii) if to the Purchaser, at the address set forth on Schedule 1 attached
hereto, and if to any other Holder, at such address as shall have been furnished to the
Company in writing by such Holder.



     (b) Any notice or other communication pursuant to this Agreement shall be deemed to have
been duly given or made and to have become effective (i) if delivered by hand, overnight courier or
facsimile to a responsible officer of the party to which it is directed, at the time of receipt
thereof by such officer or the sending of such facsimile or (ii) if sent by registered or certified
first-class mail, postage prepaid, on the third business day following the mailing thereof.



     §11.2 Governing Law, Jurisdiction, Etc.



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



     (b) SUBMISSION TO JURISDICTION. THE COMPANY IRREVOCABLY AND UNCONDITIONALLY
SUBMITS, FOR ITSELF AND ITS PROPERTY, TO THE NONEXCLUSIVE JURISDICTION OF THE COURTS OF THE STATE
OF NEW YORK OR ANY FEDERAL COURT SITTING IN THE BOROUGH OF MANHATTAN, THE CITY OF NEW YORK, AND
ANY APPELLATE COURT FROM ANY THEREOF, IN ANY ACTION OR PROCEEDING ARISING OUT OF OR RELATING TO
THIS AGREEMENT OR THE WARRANTS, OR FOR RECOGNITION OR ENFORCEMENT OF ANY JUDGMENT, AND EACH OF THE
PARTIES HERETO IRREVOCABLY AND UNCONDITIONALLY AGREES THAT ALL CLAIMS IN RESPECT OF ANY SUCH
ACTION OR PROCEEDING MAY BE HEARD AND DETERMINED IN SUCH NEW YORK STATE COURT OR, TO THE FULLEST
EXTENT PERMITTED BY APPLICABLE LAW, IN SUCH FEDERAL COURT. EACH OF THE PARTIES HERETO AGREES THAT
A FINAL JUDGMENT IN ANY SUCH ACTION OR PROCEEDING SHALL BE CONCLUSIVE AND MAY BE ENFORCED IN OTHER
JURISDICTIONS BY SUIT ON THE JUDGMENT OR IN ANY OTHER



-16-









 







MANNER PROVIDED BY LAW. NOTHING IN THIS AGREEMENT OR IN THE WARRANTS SHALL AFFECT ANY RIGHT
THAT THE HOLDER MAY OTHERWISE HAVE TO BRING ANY ACTION OR PROCEEDING RELATING TO THIS AGREEMENT OR
THE WARRANTS AGAINST THE COMPANY OR ITS PROPERTIES IN THE COURTS OF ANY JURISDICTION.



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



     (d) SERVICE OF PROCESS. EACH PARTY HERETO IRREVOCABLY CONSENTS TO SERVICE OF
PROCESS IN THE MANNER PROVIDED FOR NOTICES IN §11.1. NOTHING IN THIS AGREEMENT WILL
AFFECT THE RIGHT OF ANY PARTY HERETO TO SERVE PROCESS IN ANY OTHER MANNER PERMITTED BY APPLICABLE
LAW.



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



     §11.4 Amendments and Waivers.



     (a) Except as otherwise provided by paragraph (b) of this §11.4, and except as otherwise
expressly required by any other provisions of this Agreement, none of the terms or provisions
contained in this Agreement, and none of the agreements, obligations or covenants of the Company
contained in this Agreement, may be amended, modified, supplemented, waived or terminated unless
(i) the Company shall execute an instrument in writing agreeing or consenting to such amendment,
modification, supplement, waiver or termination, and (ii) the Company shall receive a prior written
Holder Consent therefor from Holders of a majority of the Registrable Securities then outstanding.



     (b) Each of the terms and provisions contained in this §11.4 or in the definitions of
Holder Consent contained in Article I hereof may be amended, modified,
supplemented, waived or terminated only by a written instrument or consent signed by the Company
and by each of the Holders holding of record any Securities at the effective date thereof.



     (c) In connection with any action taken or to be taken pursuant to paragraph (a) of this
§11.4, there shall be no obligation or requirement on the part of the Company, any of the Holders
or any other persons (i) to solicit or to attempt to solicit from all of the Holders the consent or
approval of all of the



-17-









 




Holders for such action, or (ii) to submit any notices of any kind to all of the Holders in
advance of any action proposed to be taken pursuant to paragraph (a) of this §11.4. However,
copies of all written consents or approvals given by Holders in connection with any action taken or
to be taken pursuant to and in compliance with paragraph (a) of this §11.4 shall be sent by the
Company, promptly after the receipt thereof by the Company, to each Holder who shall have failed or
refused to give a written consent or approval for such action.




     (d) Any action taken pursuant to and in compliance with paragraph (a) of this §11.4 shall
be binding upon the Company and upon all of the Holders, including all of the Holders who shall
have failed or refused to give a written consent or approval for such action.



     §11.5 Integration. Annexed to this Agreement are Schedule 1,
Exhibit A-1, Exhibit A-2,
Exhibit A-3, and Exhibit B. Such
Schedules and Exhibits are an integral part of this Agreement and are hereby
incorporated by reference.



     §11.6 Rights and Obligations Several. The rights and obligations of each of the
parties hereto shall be several (and not joint), except as otherwise expressly provided by this
Agreement.



     §11.7 No Waiver; Cumulative Remedies. No failure or delay on the part of any
Holder in exercising any right, power or remedy hereunder shall operate as a waiver thereof; nor
shall any single or partial exercise of any such right, power or remedy preclude any other or
further exercise thereof or the exercise of any other right, power or remedy hereunder. The
remedies herein provided are cumulative and not exclusive of any remedies provided by law.



     §11.8 Entire Agreement. This Agreement, including the Schedules and
Exhibits hereto, and the Credit Agreement (to the extent incorporated herein by reference)
constitute the entire agreement among the parties hereto with respect to the subject matter hereof
and supersede any prior understandings or agreements concerning the subject matter hereof.



     §11.9 Severability. The invalidity or unenforceability of any provision hereof
shall in no way affect the validity or enforceability of any other provision.



     §11.10 Binding Effect. All of the covenants and agreements of the Company
contained in, and all of the rights granted by the Company pursuant to, this Agreement, shall
inure to the benefit of each Holder.



     §11.11 Counterparts. This Agreement may be executed simultaneously in several
counterparts, each of which shall be deemed an original, but all of which together shall
constitute one and the same agreement. In making proof of this Agreement, it shall not be
necessary to produce or account for more than one such counterpart signed by each of the parties
hereto.



-18-









 





     In Witness Whereof, the parties hereto have duly executed this Agreement as of the
date first written above.



	 	 	 	 	 
	 	HARVEST NATURAL RESOURCES, INC.

 	 
	 	By:  	/s/ James A. Edmiston
 	 
	 	 	Name:  	James A. Edmiston 	 
	 	 	Title:  	President and Chief Executive
Officer 	 
	 
	 	PURCHASER:



MSD ENERGY INVESTMENTS PRIVATE II, LLC

 	 
	 	By:  	/s/ Marcello Liguori
 	 
	 	 	Name:  	Marcello Liguori 	 
	 	 	Title:  	Vice President 	 



 









 






	 	 	 	 	 



Schedule 1




	 	 	 	 	 	 	 	 	 
	 	 	 	 	Purchase Price for	 	 	 
	Purchaser	 	Warrants Purchased	 	Warrants	 	Value of Warrants	 
	MSD Energy
	 	A Warrant for 1,200,000 shares	 	$1.00 for A Warrant	 	$	6,552,000	 
	Investments Private II, LLC
	 	B Warrant for 400,000 shares	 	$1.00 for B Warrant	 	$	1,840,000	 
	645 Fifth Avenue
	 	 	 	 	 	 	 	 
	21st Floor
	 	 	 	 	 	 	 	 
	New York, NY 10022
	 	C Warrant for 4,400,000 shares 	 	$1.00 for C Warrant	 	$	2,730,000