exv10w1






Exhibit 10.1




EXECUTION VERSION




CREDIT AGREEMENT




Dated as of October 28, 2010




between




Harvest Natural Resources, Inc.




as the Borrower




and




MSD Energy Investments Private II, LLC,




as Lender




 









 





TABLE OF CONTENTS




	 	 	 	 	 
	 	 	Page	 
	ARTICLE I. DEFINITIONS AND ACCOUNTING TERMS
	 	 	1	 
	1.01. Defined Terms
	 	 	1	 
	1.02. Other Interpretive Provisions
	 	 	18	 
	1.03. Accounting Terms
	 	 	19	 
	1.04. Rounding
	 	 	19	 
	1.05. Times of Day
	 	 	19	 
	1.06. Currency Equivalents Generally
	 	 	19	 
	 
	 	 	 	 
	ARTICLE II. THE LOAN
	 	 	20	 
	2.01. The Loan
	 	 	20	 
	2.02. Prepayments
	 	 	20	 
	2.03. Repayment of Loan
	 	 	21	 
	2.04. Interest
	 	 	21	 
	2.05. Computation of Interest and Fees
	 	 	21	 
	2.06. Evidence of Debt
	 	 	21	 
	2.07. Payments Generally
	 	 	21	 
	 
	 	 	 	 
	ARTICLE III. TAXES, YIELD PROTECTION AND ILLEGALITY
	 	 	22	 
	3.01. Taxes
	 	 	22	 
	3.02. Increased Costs
	 	 	25	 
	3.03. Survival
	 	 	26	 
	 
	 	 	 	 
	ARTICLE IV. CONDITIONS PRECEDENT TO THE LOAN
	 	 	26	 
	4.01. Conditions of the Loan
	 	 	26	 
	 
	 	 	 	 
	ARTICLE V. REPRESENTATIONS AND WARRANTIES
	 	 	28	 
	5.01. Existence, Qualification and Power
	 	 	28	 
	5.02. Authorization; No Contravention
	 	 	28	 
	5.03. Governmental Authorization; Other Consents
	 	 	28	 
	5.04. Binding Effect
	 	 	28	 
	5.05. Financial Statements; No Material Adverse Effect
	 	 	28	 
	5.06. Litigation
	 	 	29	 
	5.07. No Default
	 	 	29	 
	5.08. Ownership of Property; Liens; Investments
	 	 	29	 






i









 




TABLE OF CONTENTS
(continued)









	 	 	 	 	 
	 	 	Page	 
	5.09. Environmental Compliance
	 	 	30	 
	5.10. Insurance
	 	 	31	 
	5.11. Taxes
	 	 	31	 
	5.12. ERISA Compliance
	 	 	31	 
	5.13. Subsidiaries; Equity Interests; Loan Parties
	 	 	32	 
	5.14. Margin Regulations; Investment Company Act
	 	 	32	 
	5.15. Disclosure
	 	 	32	 
	5.16. Compliance with Laws
	 	 	33	 
	5.17. Intellectual Property; Licenses, Etc.
	 	 	33	 
	5.18. Solvency
	 	 	33	 
	5.19. Casualty, Etc.
	 	 	33	 
	5.20. Labor Matters
	 	 	33	 
	5.21. Foreign Assets Control Regulations, Etc.
	 	 	33	 
	 
	 	 	 	 
	ARTICLE VI. AFFIRMATIVE COVENANTS
	 	 	34	 
	6.01. Financial Statements
	 	 	34	 
	6.02. Certificates; Other Information
	 	 	35	 
	6.03. Notices
	 	 	37	 
	6.04. Payment of Obligations
	 	 	37	 
	6.05. Preservation of Existence, Etc.
	 	 	38	 
	6.06. Maintenance of Properties
	 	 	38	 
	6.07. Maintenance of Insurance
	 	 	38	 
	6.08. Compliance with Laws
	 	 	38	 
	6.09. Books and Records
	 	 	38	 
	6.10. Inspection Rights
	 	 	38	 
	6.11. Use of Proceeds
	 	 	39	 
	6.12. Covenant to Guarantee Obligations
	 	 	39	 
	6.13. Compliance with Environmental Laws
	 	 	39	 
	6.14. Further Assurances
	 	 	39	 
	6.15. Compliance with Terms of Leaseholds
	 	 	39	 
	6.16. Material Contracts
	 	 	40	 






ii









 



TABLE OF CONTENTS
(continued)









	 	 	 	 	 
	 	 	Page	 
	ARTICLE VII. NEGATIVE COVENANTS

	 	 	40	 
	7.01. Liens
	 	 	40	 
	7.02. Indebtedness
	 	 	41	 
	7.03. Investments
	 	 	43	 
	7.04. Fundamental Changes
	 	 	45	 
	7.05. Dispositions
	 	 	46	 
	7.06. Restricted Payments
	 	 	47	 
	7.07. Change in Nature of Business
	 	 	48	 
	7.08. Transactions with Affiliates
	 	 	48	 
	7.09. Burdensome Agreements
	 	 	48	 
	7.10. Use of Proceeds
	 	 	48	 
	7.11. Amendments of Organization Documents
	 	 	49	 
	7.12. Accounting Changes
	 	 	49	 
	7.13. Prepayments, Etc. of Indebtedness
	 	 	49	 
	7.14. Terrorism Sanctions Regulations
	 	 	49	 
	 
	 	 	 	 
	ARTICLE
VIII. EVENTS OF DEFAULT AND REMEDIES
	 	 	49	 
	8.01. Events of Default
	 	 	49	 
	8.02. Remedies upon Event of Default
	 	 	51	 
	8.03. Application of Funds
	 	 	51	 
	 
	 	 	 	 
	ARTICLE IX.  MISCELLANENOUS
	 	 	52	 
	9.01. Amendments, Etc
	 	 	52	 
	9.02. Notices; Effectiveness
	 	 	52	 
	9.03. No Waiver; Cumulative Remedies; Enforcement
	 	 	52	 
	9.04. Expenses; Indemnity; Damage Waiver
	 	 	52	 
	9.05. Payments Set Aside
	 	 	54	 
	9.06. Tax Matters
	 	 	54	 
	9.07. Successors and Assigns
	 	 	54	 
	9.08. Right of Setoff
	 	 	55	 
	9.09. Interest Rate Limitation
	 	 	55	 
	9.10. Counterparts; Integration; Effectiveness
	 	 	55	 






iii









 



TABLE OF CONTENTS
(continued)









	 	 	 	 	 
	 	 	Page	 
	9.11. Survival of Representations and Warranties
	 	 	56	 
	9.12. Severability
	 	 	56	 
	9.13. Governing Law; Jurisdiction; Etc
	 	 	56	 
	9.14. Waiver of Jury Trial
	 	 	57	 
	9.15. Electronic Execution of Assignments and Certain Other Documents
	 	 	57	 
	9.16. USA PATRIOT Act
	 	 	57	 
	9.17. Time of the Essence
	 	 	57	 
	9.18. ENTIRE AGREEMENT
	 	 	58	 











iv










 








SCHEDULES




	 	 	 	 	 	 

	 

	 	5.03	 	 	Certain Authorizations
	 

	 	5.06	 	 	Litigation
	 

	 	5.08	(b)	 	Existing Liens
	 

	 	5.08	(d)	 	Existing Investments
	 

	 	5.09	 	 	Environmental Matters
	 

	 	5.13	 	 	Subsidiaries and Other Equity Investments; Loan Parties
	 

	 	6.12	 	 	Guarantors
	 

	 	7.02	 	 	Existing Indebtedness
	 

	 	7.09	 	 	Burdensome Agreements
	 

	 	9.02	 	 	Lender’s Office, Certain Addresses for Notices






EXHIBITS




	 	 	 	 	 

	 

	 	Form of	 	 
	 

	 	A
	 	Note
	 

	 	B
	 	Guaranty






 









 





CREDIT AGREEMENT




     This CREDIT AGREEMENT (“Agreement”) is entered into as of October 28, 2010, between
Harvest Natural Resources, Inc., a Delaware corporation (the “Borrower”), and MSD Energy
Investments Private II, LLC, a Delaware limited liability company (the “Lender”).



PRELIMINARY STATEMENTS:




     The Borrower has requested that the Lender provide a term loan facility, and the Lender has
indicated its willingness to lend on the terms and subject to the conditions set forth herein.



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



ARTICLE I.

DEFINITIONS AND ACCOUNTING TERMS




     1.01. Defined Terms. As used in this Agreement, the following terms shall have the meanings
set forth below:



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



     “Affiliated Entity” means the Subsidiaries of the Borrower and any of their or the
Borrower’s respective Controlled Affiliates.



     “Agreement” means this Credit Agreement.



     “Anti-Money Laundering Laws” has the meaning set forth in Section 5.21(c).



     “Applicable Rate” means (a) ten percent (10%) per annum from the Closing Date up to
but not including the Bridge Date and (b) fifteen percent (15%) on and after the Bridge Date.



     “Asset Coverage Ratio” means the ratio of (a) Present Value of Proved Reserves of a
Subsidiary to (b) Indebtedness of such Subsidiary (excluding, if applicable, Indebtedness under the
Guaranty of such Subsidiary of the Obligations).



     “Attributable Indebtedness” means, on any date, (a) in respect of any Capitalized
Lease of any Person, the capitalized amount thereof that would appear on a balance sheet of such
Person prepared as of such date in accordance with GAAP, (b) in respect of any Synthetic Lease
Obligation, the capitalized amount of the remaining lease or similar payments under the relevant
lease or other applicable agreement or instrument that would appear on a balance sheet of such
Person prepared as of such date in accordance with GAAP if such lease or other agreement or
instrument were accounted for as a Capitalized Lease and (c) all Synthetic Debt of such Person.



     “Audited Financial Statements” means the audited consolidated balance sheet of the
Borrower and its Subsidiaries for the fiscal year ended December 31, 2009, and the related



 









 




consolidated statements of income or operations, shareholders’ equity and cash flows for such
fiscal year of the Borrower and its Subsidiaries, including the notes thereto.




     “Bank Assignee” has the meaning set forth in Section 3.02(a).



     “Blocked Person” has the meaning set forth in Section 5.21(c).



     “Borrower” has the meaning specified in the introductory paragraph hereto.



     “Borrower Materials” has the meaning set forth in Section 6.02.



     “Bridge Date” means July 28, 2011; provided that so long as no Default or Event of
Default shall be continuing, such date will be extended to October 28, 2011 upon notice by the
Borrower to the Lender not less than ten (10) Business Days prior to July 28, 2011 of Borrower’s
intention to extend such date and the payment by the Borrower to the Lender of an extension fee in
the amount of $3,000,000 on or before July 28, 2011.



     “Budong-Budong, Indonesia Project” means that certain project owned by Harvest
Budong-Budong, B.V. that covers 883,635 acres in West Sulawesi, Indonesia under a Production
Sharing Contract in which Harvest Budong-Budong, B.V. has a 54.4 percent interest. During the
exploration phase, Harvest Budong-Budong, B.V. and its partner have agreed to acquire and process
seismic data and drill two exploration wells.



     “Business Day” means any day other than a Saturday, Sunday or other day on which
commercial banks are authorized to close under the Laws of, or are in fact closed in, the State of
New York.



     “Capitalized Leases” means all leases that have been or should be, in accordance with
GAAP, recorded as capitalized leases.



     “Cash Equivalents” means any of the following types of Investments, to the extent
owned by the Borrower or any of its Subsidiaries free and clear of all Liens:



     (a) readily marketable obligations issued or directly and fully guaranteed or insured by the
United States of America or any agency or instrumentality thereof having maturities of not more
than 360 days from the date of acquisition thereof; provided that the full faith and credit
of the United States of America is pledged in support thereof;



     (b) time deposits with, or insured certificates of deposit or bankers’ acceptances of, any
commercial bank that (i) (A) is the Lender or (B) is organized under the laws of the United States
of America, any state thereof or the District of Columbia or is the principal banking subsidiary of
a bank holding company organized under the laws of the United States of America, any state thereof
or the District of Columbia, and is a member of the Federal Reserve System, (ii) issues (or the
parent of which issues) commercial paper rated as described in clause (c) of this definition and
(iii) has combined capital and surplus of at least $1,000,000,000, in each case with maturities of
not more than 180 days from the date of acquisition thereof;



-2-









 





     (c) commercial paper in an aggregate amount of no more than $20,000,000 issued by any Person
organized under the laws of any state of the United States of America and rated at least “Prime-1”
(or the then equivalent grade) by Moody’s or at least “A-1” (or the then equivalent grade) by S&P,
in each case with maturities of not more than 180 days from the date of acquisition thereof; and



     (d) Investments, classified in accordance with GAAP as current assets of the Borrower or any
of its Subsidiaries, in money market investment programs registered under the Investment Company
Act of 1940, which are administered by financial institutions that have the highest rating
obtainable from either Moody’s or S&P, and the portfolios of which are limited solely to
Investments of the character, quality and maturity described in clauses (a), (b) and (c) of this
definition.



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



     “CERCLIS” means the Comprehensive Environmental Response, Compensation and Liability
Information System maintained by the U.S. Environmental Protection Agency.



     “CFC” means a Person that is a controlled foreign corporation under Section 957 of the
Code.



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



     “Change of Control” means an event or series of events by which:



     (a) any “person” or “group” (as such terms are used in Sections 13(d) and 14(d) of the
Securities Exchange Act of 1934, as amended, but excluding any employee benefit plan of such person
or its subsidiaries, and any person or entity acting in its capacity as trustee, agent or other
fiduciary or administrator of any such plan) other than the Equity Investors becomes the
“beneficial owner” (as defined in Rules 13d-3 and 13d-5 under the Securities Exchange Act of 1934,
except that a person or group shall be deemed to have “beneficial ownership” of all securities that
such person or group has the right to acquire, whether such right is exercisable immediately or
only after the passage of time (such right, an “option right”)), directly or indirectly, of
25% or more of the equity securities of Borrower entitled to vote for members of the board of
directors or equivalent governing body of the Borrower on a fully-diluted basis (and taking into
account all such securities that such “person” or “group” has the right to acquire pursuant to any
option right); or



     (b) during any period of 12 consecutive months, a majority of the members of the board of
directors or other equivalent governing body of the Borrower cease to be composed of individuals
(i) who were members of that board or equivalent governing body on the first day of such period,
(ii) whose election or nomination to that board or equivalent governing body was approved by
individuals referred to in clause (i) above constituting at the time of such election or



-3-









 




nomination at least a majority of that board or equivalent governing body or (iii) whose
election or nomination to that board or other equivalent governing body was approved by individuals
referred to in clauses (i) and (ii) above constituting at the time of such election or nomination
at least a majority of that board or equivalent governing body (excluding, in the case of both
clause (ii) and clause (iii), any individual whose initial nomination for, or assumption of office
as, a member of that board or equivalent governing body occurs as a result of an actual or
threatened solicitation of proxies or consents for the election or removal of one or more directors
by any person or group other than a solicitation for the election of one or more directors by or on
behalf of the board of directors); or




     (c) any Person or two or more Persons (other than the Equity Investors) acting in concert
shall have acquired by contract or otherwise, or shall have entered into a contract or arrangement
that, upon consummation thereof, will result in its or their acquisition of the power to exercise,
directly or indirectly, a controlling influence over the management or policies of the Borrower, or
control over the equity securities of the Borrower entitled to vote for members of the board of
directors or equivalent governing body of the Borrower on a fully-diluted basis (and taking into
account all such securities that such Person or Persons have the right to acquire pursuant to any
option right) representing 25% or more of the combined voting power of such securities; or



     (d) a “Fundamental Change” or any comparable term under, and as defined in, the Senior
Convertible Notes shall have occurred.



     Notwithstanding the foregoing, a Change of Control shall not be deemed to have occurred upon
the execution by the Borrower or any of its Subsidiaries of an agreement to enter into a Strategic
Transaction; provided that no such Strategic Transaction shall be consummated and no Disposition
shall occur pursuant to such agreement unless and until the Obligations have been paid in full in
cash.



     For avoidance of doubt in determining whether a Change of Control has occurred, any rights
(but excluding any exercise of such rights) of a pledgee in connection with a pledge by a pledgor
of Equity Interests of the Borrower to secure an obligation shall not be deemed to be control over
or beneficial ownership of those securities and shall not be deemed to confer any controlling
influence over the management or policies of the Borrower.



     “Closing Date” means the first date all the conditions precedent in Section
4.01 are satisfied or waived in accordance with Section 9.01.



     “Code” means the Internal Revenue Code of 1986, as amended.



     “Contractual Obligation” means, as to any Person, any provision of any security issued
by such Person or of any agreement, instrument or other undertaking to which such Person is a party
or by which it or any of its property is bound.



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



-4-









 





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



     “Default” means any event or condition that constitutes an Event of Default or that,
with the giving of any notice, the passage of time, or both, would be an Event of Default.



     “Default Rate” means an interest rate equal to the interest rate otherwise applicable
to the Loan plus 2% per annum.



     “Disclosed Litigation” has the meaning set forth in Section 5.06.



     “Disposition” or “Dispose” means the sale, transfer, license, lease or other
disposition (including, without limitation, any sale and leaseback transaction) of any property by
any Person (or the granting of any option or other right to do any of the foregoing) or the taking
(including, without limitation, by way of regulation or other commercially equivalent manner) or
nationalization of any property of such Person, including any sale, assignment, transfer or other
disposal, with or without recourse, of any notes or accounts receivable or any rights and claims
associated therewith.



     “Dollar” and “$” mean lawful money of the United States.



     “Environmental Laws” means any and all Federal, state, local, and foreign statutes,
laws, regulations, ordinances, rules, judgments, orders, decrees, permits, concessions, grants,
franchises, licenses, agreements or governmental restrictions relating to pollution and the
protection of the environment or the Release of any Hazardous Materials into the environment
including those related to air emissions and discharges to waste or public systems.



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



     “Environmental Permit” means any permit, approval, identification number, license or
other authorization required under any Environmental Law.



     “Equity Interests” means, with respect to any Person, all of the shares of capital
stock of (or other ownership or profit interests in) such Person, all of the warrants, options or
other rights for the purchase or acquisition from such Person of shares of capital stock of (or
other ownership or profit interests in) such Person, all of the securities convertible into or
exchangeable for shares of capital stock of (or other ownership or profit interests in) such Person
or warrants, rights or options for the purchase or acquisition from such Person of such shares (or
such other interests),



-5-









 




and all of the other ownership or profit interests in such Person (including partnership,
member or trust interests therein), whether voting or nonvoting, and whether or not such shares,
warrants, options, rights or other interests are outstanding on any date of determination.




     “Equity Investors” means any Affiliate of the Lender and the holders of the Warrants.



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



     “ERISA Affiliate” means any trade or business (whether or not incorporated) under
common control with the Borrower 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 (other than
a Multiemployer Plan); (b) the withdrawal of the Borrower or any ERISA Affiliate from a Pension
Plan subject to Section 4063 of ERISA during a plan year in which such entity was a “substantial
employer” as defined in Section 4001(a)(2) of ERISA or a cessation of operations that is treated as
such a withdrawal under Section 4062(e) of ERISA; (c) a complete or partial withdrawal by the
Borrower 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, the treatment of a Pension
Plan amendment as a termination under Section 4041 or 4041A of ERISA; (e) the institution by the
PBGC of proceedings to terminate a Pension Plan; (f) any event or condition which constitutes
grounds under Section 4042 of ERISA for the termination of, or the appointment of a trustee to
administer, any Pension Plan; (g) the determination that any Pension Plan is considered an at-risk
plan or any Multiemployer Plan is a plan in endangered or critical status within the meaning of
Sections 430, 431 and 432 of the Code or Sections 303, 304 and 305 of ERISA; or (h) the imposition
of any liability under Title IV of ERISA, other than for PBGC premiums due but not delinquent under
Section 4007 of ERISA, upon the Borrower or any ERISA Affiliate.



     “Event of Default” has the meaning specified in Section 8.01.



     “Excluded Taxes” means, with respect to the Lender or any other recipient of any
payment to be made by or on account of any obligation of the Borrower hereunder, (a) taxes imposed
on or measured by its overall net income, profits, or capital (however denominated), and franchise
taxes imposed on it (in lieu of or in addition to net income, profits, or capital taxes), by the
jurisdiction (or any political subdivision thereof) under the Laws of which such recipient is
organized or in which its principal office is located or, in the case of the Lender, in which its
Lending Office is located, (b) any branch profits taxes imposed by the United States or any similar
tax imposed by any other jurisdiction in which the Borrower is located or described in clause (a),
(c) any withholding tax that (i) is imposed on amounts payable to the Lender (or any assignee of
the Lender) at the time the Lender (or any assignee of the Lender) becomes a party to this
Agreement (or designates a new Lending Office), or (ii) is imposed on amounts payable to the Lender
(or any assignee of the Lender) as a result of the Lender (or any assignee of the Lender) failing
to comply with Section 3.01(e), and (d) any U.S. federal taxes imposed pursuant to FATCA on
any “withholdable payment” (as defined under FATCA) made to the Lender (or any assignee of the
Lender).



-6-









 





     “Extraordinary Receipt” means any cash received by or paid to or for the account of
any Person not in the ordinary course of business, including tax refunds, pension plan reversions,
proceeds of insurance (other than proceeds of business interruption insurance to the extent such
proceeds constitute compensation for lost earnings), condemnation awards (and payments in lieu
thereof), indemnity payments and any purchase price adjustments. Notwithstanding the foregoing,
(i) no receipt, directly or indirectly, by the Borrower or any of its Subsidiaries of dividends
from Petrodelta or of payments of invoices from Petrodelta shall be deemed to constitute an
extraordinary receipt and (ii) no receipt, directly or indirectly, by the Borrower or any of its
Subsidiaries of payments with respect to capital calls made pursuant to joint operating agreements
shall be deemed to constitute an extraordinary receipt.



     “Facility” means financing to be provided by a third party financial institution
providing for an oil and gas reserve-based loan to any Subsidiary (other than a CFC and Harvest
Holding LLC) of the Borrower, in each case in the aggregate principal amount not to exceed
$200,000,000.



     “FATCA” shall mean Sections 1471 through 1474 of the Code and any Treasury regulations
promulgated thereunder or official interpretations thereof.



     “FRB” means the Board of Governors of the Federal Reserve System of the United States.



     “GAAP” means generally accepted accounting principles in the United States set forth
in the opinions and pronouncements of the Accounting Principles Board and the American Institute of
Certified Public Accountants and statements and pronouncements of the Financial Accounting
Standards Board or such other principles as may be approved by a significant segment of the
accounting profession in the United States, that are applicable to the circumstances as of the date
of determination, consistently applied.



     “Gabon Project” means Harvest Dussafu B.V.’s 66.667 percent interest in the Dussafu
PSC signed in May 28, 2007 with the Dussafu PSC partners and the Republic of Gabon, represented by
the Ministry of Mines, Energy, Petroleum and Hydraulic Resources. The Dussafu PSC contract area is
located offshore Gabon, adjacent to the border with the Republic of Congo. It contains 680,000
acres with water depths to 1,000 feet. The exploration phase includes work commitment for the
acquisition and processing of 500 kilometers of 2-D seismic, geology and geophysical
interpretation, engineering studies and the drilling of a conditional well.



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



     “Guarantee” means, as to any Person, any (a) any obligation, contingent or otherwise,
of such Person guaranteeing or having the economic effect of guaranteeing any Indebtedness or other
obligation payable or performable by another Person (the “primary obligor”) in any



-7-









 




manner, whether directly or indirectly, and including any obligation of such Person, direct or
indirect, (i) to purchase or pay (or advance or supply funds for the purchase or payment of) such
Indebtedness or other obligation, (ii) to purchase or lease property, securities or services for
the purpose of assuring the obligee in respect of such Indebtedness or other obligation of the
payment or performance of such Indebtedness or other obligation, (iii) to maintain working capital,
equity capital or any other financial statement condition or liquidity or level of income or cash
flow of the primary obligor so as to enable the primary obligor to pay such Indebtedness or other
obligation, or (iv) entered into for the purpose of assuring in any other manner the obligee in
respect of such Indebtedness or other obligation of the payment or performance thereof or to
protect such obligee against loss in respect thereof (in whole or in part), or (b) any Lien on any
assets of such Person securing any Indebtedness or other obligation of any other Person, whether or
not such Indebtedness or other obligation is assumed by such Person (or any right, contingent or
otherwise, of any holder of such Indebtedness to obtain any such Lien). The amount of any
Guarantee shall be deemed to be an amount equal to the stated or determinable amount of the related
primary obligation, or portion thereof, in respect of which such Guarantee is made or, if not
stated or determinable, the maximum reasonably anticipated liability in respect thereof as
determined by the guaranteeing Person in good faith. The term “Guarantee” as a verb has a
corresponding meaning.




     “Guarantors” means, collectively, the Subsidiaries of the Borrower listed on
Schedule 6.12 and each other Subsidiary of the Borrower that shall be required to execute
and deliver a guaranty or guaranty supplement pursuant to Section 6.12.



     “Guaranty” means, the Guaranty made by the Guarantors in favor of the Lender,
substantially in the form of Exhibit B, together with each other guaranty and guaranty
supplement delivered pursuant to Section 6.12.



     “Harvest (US) Holdings” means Harvest (US) Holdings, Inc., a Delaware corporation and
wholly-owned Subsidiary of the Borrower.



     “Harvest Holding LLC” means Harvest Holding LLC, a Delaware limited liability company
and wholly-owned Subsidiary of the Borrower.



     “Hazardous Materials” means all explosive or radioactive substances or wastes and all
hazardous or toxic substances, wastes or other pollutants, including petroleum or petroleum
distillates, asbestos or asbestos-containing materials, polychlorinated biphenyls, radon gas,
infectious or medical wastes and all other substances or wastes of any nature regulated pursuant to
any Environmental Law.



     “Indebtedness” means, as to any Person at a particular time, without duplication, all
of the following, whether or not included as indebtedness or liabilities in accordance with GAAP:



     (a) all obligations of such Person for borrowed money and all obligations of such Person
evidenced by bonds, debentures, notes, loan agreements or other similar instruments;



     (b) the maximum amount of all direct or contingent obligations of such Person arising under
letters of credit (including standby and commercial), bankers’ acceptances, bank guaranties, surety
bonds and similar instruments;



-8-









 





     (c) net obligations of such Person under any Swap Contract;



     (d) all obligations of such Person to pay the deferred purchase price of property or services
(other than trade accounts payable in the ordinary course of business and not past due for more
than 60 days after the date on which such trade account was created);



     (e) indebtedness (excluding prepaid interest thereon) secured by a Lien on property owned or
being purchased by such Person (including indebtedness arising under conditional sales or other
title retention agreements), whether or not such indebtedness shall have been assumed by such
Person or is limited in recourse;



     (f) all Attributable Indebtedness in respect of Capitalized Leases and Synthetic Lease
Obligations of such Person and all Synthetic Debt of such Person;



     (g) all obligations of such Person to purchase, redeem, retire, defease or otherwise make any
payment in respect of any Equity Interest in such Person or any other Person or any warrant, right
or option to acquire such Equity Interest, valued, in the case of a redeemable preferred interest,
at the greater of its voluntary or involuntary liquidation preference plus accrued and
unpaid dividends; and



     (h) all Guarantees of such Person in respect of any of the foregoing.



     For all purposes hereof, the Indebtedness of any Person shall include the Indebtedness of any
partnership or joint venture (other than a joint venture that is itself a corporation or limited
liability company) in which such Person is a general partner or a joint venturer, unless such
Indebtedness is expressly made non-recourse to such Person. The amount of any net obligation under
any Swap Contract on any date shall be deemed to be the Swap Termination Value thereof as of such
date.



     “Indemnified Taxes” means Taxes other than Excluded Taxes.



     “Indemnitees” has the meaning specified in Section 9.04(b).



     “Interest Payment Date” means the last Business Day of each month and the Maturity
Date of the Loan.



     “Investment” means, as to any Person, any direct or indirect acquisition or investment
by such Person, whether by means of (a) the purchase or other acquisition of Equity Interests of
another Person, (b) a loan, advance or capital contribution to, Guarantee or assumption of debt of,
or purchase or other acquisition of any other debt or interest in, another Person, or (c) the
purchase or other acquisition (in one transaction or a series of transactions) of assets of another
Person that constitute a business unit or all or a substantial part of the business of, such
Person. For purposes of covenant compliance, the amount of any Investment shall be the amount
actually invested, without adjustment for subsequent increases or decreases in the value of such
Investment.



     “IP Rights” has the meaning specified in Section 5.17.



-9-









 





     “IRS” means the United States Internal Revenue Service.



     “Laws” means, collectively, all international, foreign, Federal, state and local
statutes, treaties, rules, guidelines, regulations, ordinances, codes and administrative or
judicial precedents or authorities, including the interpretation or administration thereof by any
Governmental Authority charged with the enforcement, interpretation or administration thereof, and
all applicable administrative orders, directed duties, licenses, authorizations and permits of, and
agreements with, any Governmental Authority, in each case whether or not having the force of law.



     “Lender” has the meaning specified in the introductory paragraph hereto and includes
any assignee of the rights and obligations of the Lender hereunder or under any other Loan
Documents.



     “Lending Office” means the office or offices of the Lender as it may from time to time
notify the Borrower.



     “Lien” means any mortgage, pledge, hypothecation, assignment, deposit arrangement,
encumbrance, lien (statutory or other), charge, or preference, priority or other security interest
or preferential arrangement in the nature of a security interest of any kind or nature whatsoever
(including any conditional sale or other title retention agreement, any easement, right of way or
other encumbrance on title to real property, and any financing lease having substantially the same
economic effect as any of the foregoing).



     “Loan” means an extension of credit by the Lender to the Borrower under Article
II.



     “Loan Documents” means, collectively, (a) this Agreement, (b) the Note, (c) the
Guaranty, (d) the Warrant Purchase Agreement, and (e) the Warrants.



     “Loan Parties” means, collectively, the Borrower and each Guarantor.



     “Material Adverse Effect” means (a) a material adverse change in, or a material
adverse effect upon, the operations, business, properties, liabilities (actual or contingent), or
condition (financial or otherwise) of the Borrower or the Borrower and its Subsidiaries taken as a
whole (which, for the avoidance of doubt, shall not include the drilling of one or more dry holes,
as such term is commonly used in the oil and gas industry, but shall include the drilling of a
material number of dry holes that would have a material adverse change in, or a material adverse
effect upon, the operations, business, properties, liabilities (actual or contingent), or condition
(financial or otherwise) of the Borrower or the Borrower and its Subsidiaries taken as a whole);
(b) a material impairment of the rights and remedies of the Lender under any Loan Document, or of
the ability of any Loan Party to perform its obligations under any Loan Document to which it is a
party; or (c) a material adverse effect upon the legality, validity, binding effect or
enforceability against any Loan Party of any Loan Document to which it is a party.



     “Material Contract” means, with respect to any Person, each contract to which such
Person is a party that is of a type that would be required to be disclosed by Harvest pursuant to
Item 1.01 of a current report on Form 8-K under the rules and regulations of the SEC.



-10-









 





     “Maturity Date” means October 28, 2012; provided, however, that if
such date is not a Business Day, the Maturity Date shall be the next preceding Business Day.



     “Merrill Lynch Letter” means that certain engagement letter, dated September 24, 2010,
between the Borrower and Merrill Lynch, Pierce, Fenner & Smith Incorporated, as in effect on the
Closing Date.



     “Moody’s” means Moody’s Investors Service, Inc. and any successor thereto.



     “Multiemployer Plan” means any employee benefit plan of the type described in
Section 4001(a)(3) of ERISA, to which the Borrower or any ERISA Affiliate makes or is obligated to
make contributions, or during the preceding five plan years, has made or been obligated to make
contributions.



     “Multiple Employer Plan” means a Plan which has two or more contributing sponsors
(including the Borrower or any ERISA Affiliate) at least two of whom are not under common control,
as such a plan is described in Section 4064 of ERISA.



     “Net Cash Proceeds” means:



     (a) with respect to any Disposition by the Borrower or any of its Subsidiaries, or any
Extraordinary Receipt received or paid to the account of the Borrower or any of its Subsidiaries,
the excess, if any, of (i) the sum of cash and Cash Equivalents received in connection with such
transaction (including any cash or Cash Equivalents received by way of deferred payment pursuant
to, or by monetization of, a note receivable or otherwise, but only as and when so received) over
(ii) the sum of (A) the principal amount of any Indebtedness that is secured by the applicable
asset and that is required to be repaid in connection with such transaction (other than
Indebtedness under the Loan Documents), (B) the reasonable and customary out-of-pocket expenses
incurred by the Borrower or such Subsidiary in connection with such transaction and (C) income
taxes reasonably estimated to be actually payable within two years of the date of the relevant
transaction as a result of any gain recognized in connection therewith; provided that, if
the amount of any estimated taxes pursuant to subclause (C) exceeds the amount of taxes actually
required to be paid in cash in respect of such Disposition, the aggregate amount of such excess
shall constitute Net Cash Proceeds; and



     (b) with respect to the incurrence or issuance of any Indebtedness by the Borrower or any of
its Subsidiaries, the excess of (i) the sum of the cash and Cash Equivalents received in connection
with such transaction over (ii) the underwriting discounts and commissions, and other reasonable
and customary out-of-pocket expenses, incurred by the Borrower or such Subsidiary in connection
therewith.



     “NewCo” has the meaning set forth in Section 7.02(i).



     “Note” means the promissory note made by the Borrower in favor of the Lender
evidencing the Loan, substantially in the form of Exhibit A.



     “NPL” means the National Priorities List under CERCLA.



-11-









 





     “Obligations” means all advances to, and debts, liabilities, obligations, covenants
and duties of, any Loan Party arising under any Loan Document or otherwise with respect to the
Loan, in each case whether direct or indirect (including those acquired by assumption), absolute or
contingent, due or to become due, now existing or hereafter arising and including interest and fees
that accrue after the commencement by or against any Loan Party or any Affiliate thereof of any
proceeding under any Debtor Relief Laws naming such Person as the debtor in such proceeding,
regardless of whether such interest and fees are allowed claims in such proceeding.



     “OFAC” has the meaning set forth in Section 5.21(c).



     “OFAC Listed Person” has the meaning set forth in Section 5.21(c).



     “Oman Project” means Harvest Oman B.V.’s interest in the Exploration and Production
Sharing Agreement (“EPSA”) with Oman for the Al Ghubar/Qarn Alam license, dated April 11, 2009,
under which Harvest Oman B.V. has a 100 percent working interest in Block 64 EPSA during the
exploration phase. Oman Oil Company has the option to back-in to up to a 20 percent interest in
Block 64 EPSA after the discovery of gas. The work commitment is to drill two wells over a three
year period.



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



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



     “PBGC” means the Pension Benefit Guaranty Corporation.



     “Pension Act” means the Pension Protection Act of 2006.



     “Pension Funding Rules” means the rules of the Code and ERISA regarding minimum
required contributions (including any installment payment thereof) to Pension Plans and set forth
in, with respect to plan years ending prior to the effective date of the Pension Act, Section 412
of the Code and Section 302 of ERISA, each as in effect prior to the Pension Act and, thereafter,
Section 412, 430, 431, 432 and 436 of the Code and Sections 302, 303, 304 and 305 of ERISA.



     “Pension Plan” means any employee pension benefit plan within the meaning of Section
3(3) of ERISA (including a Multiple Employer Plan or a Multiemployer Plan) that is maintained



-12-









 




or is contributed to by the Borrower and any ERISA Affiliate and is either covered by Title IV
of ERISA or is subject to the minimum funding standards under Section 412 of the Code.




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



     “Petrodelta” means Petrodelta, S.A., a Venezuelan corporation, 40% of the Equity
Interests of which are owned by HNR Finance B.V., a Netherlands corporation, which is an 80% owned
Subsidiary of the Borrower.



     “Petroleum Property” means any interest of a Subsidiary in oil and gas reserves and
assets consisting primarily of gas gathering, processing and storage facilities and transmission
pipelines.



     “Plan” means any employee benefit plan within the meaning of Section 3(3) of ERISA
(including a Pension Plan) other than a Multiemployer Plan, maintained for employees of the
Borrower or any ERISA Affiliate or any such Plan to which the Borrower or any ERISA Affiliate is
required to contribute on behalf of any of its employees.



     “Present Value of Proved Reserves” means, at any time, the net present value,
discounted at 10% per annum, of the future after-tax net revenues expected to accrue to a
Subsidiary’s interests in Proved Reserves expected to be produced from their Petroleum Properties
during the remaining expected economic lives of such reserves. Each calculation of such expected
future after-tax net revenues shall be made in accordance with the then existing standards of the
Society of Petroleum Engineers, provided that in any event (a) appropriate deductions shall be made
for severance and ad valorem taxes, and for operating, gathering, transportation and marketing
costs required for the production and sale of such reserves, (b) appropriate adjustments shall be
made for hedging operations, provided that Swap Contracts with non-investment grade counterparties
shall not be taken into account to the extent that such Swap Contracts improve the position of or
otherwise benefit such Subsidiary, (c) the pricing assumptions used in determining net present
value for any particular reserves shall be based upon the following price decks: (i) for natural
gas, the quotation for deliveries of natural gas for each such year from the New York Mercantile
Exchange for Henry Hub, provided that with respect to quotations for calendar years after the fifth
calendar year, the quotation for the fifth calendar year shall be applied and (ii) for crude oil,
the quotation for deliveries of West Texas Intermediate crude oil for each such calendar year from
the New York Mercantile Exchange for Cushing, Oklahoma, provided that with respect to quotations
for calendar years after the fifth calendar year, the quotation for the fifth calendar year shall
be applied, and (d) the cash-flows derived from the pricing assumptions set forth in clause (c)
above shall be further adjusted to account for the historical basis differentials for each month
during the preceding 12-month period calculated by comparing realized crude oil and natural gas
prices to Cushing, Oklahoma and Henry Hub NYMEX prices for each month during such period; provided
that in calculating the Present Value of Proved Reserves, Proved Undeveloped Reserves shall not be
taken into account to the extent that more than 40% of the Present Value of Proved Reserves is
attributable to Proved Undeveloped Reserves. The Present Value of Proved Reserves will be
determined and adjusted periodically as follows: (x) the calculation of Present Value of Proved
Reserves will be determined from the most recent Reserve Report; (y) upon any sale by such
Subsidiary of any Petroleum Property owned by such Subsidiary including but not



-13-









 




limited to a sale of a lesser interest such as a royalty or a net profit interest to the
extent the sale of such lesser interest is not considered to create a Lien (other than the sale of
hydrocarbons after severance occurring in the ordinary course of such Subsidiary’s business), the
calculation of Present Value of Proved Reserves shall be reduced, effective on the date of
consummation of such sale, by an amount equal to the Present Value of Proved Reserves attributable
to Proved Reserves included in such sale; and (z) immediately upon acquisition or development by
such Subsidiary of any Petroleum Property owned directly by such Subsidiary and not reflected in
the most recent Reserve Report, the calculation of Present Value of Proved Reserves shall be
increased in an amount equal to the Present Value of Proved Reserves attributable to such Petroleum
Property.




     “Project Financing Indebtedness” means Indebtedness incurred to finance oil and gas
related projects by a special purpose Subsidiary of the Borrower to finance the acquisition,
construction or development of a specific tangible property or asset (the “Specified Property”) and
with respect to which the obligation to repay such obligation is recourse (a) only to the Specified
Property, and not to the general credit of, or any other asset of, such Subsidiary or the Borrower
or any of its other Subsidiaries and/or (b) only to contract revenues under a contract for the sale
of products or services manufactured at and/or derived from the Specified Property by such
Subsidiary and entered into in the ordinary course of business, and not to the general credit of,
or any other asset of, such Subsidiary or the Borrower or any of its other Subsidiaries.



     “Proved Developed Non-Producing Reserves” has the meaning assigned to that term by the
Society of Petroleum Engineers, as it may be amended from time to time, but generally shall mean
the subcategory of “Proved Developed Reserves” (as defined by the Society of Petroleum Engineers)
which will become “Proved Developed Producing Reserves” upon minor capital expenditures being made
with respect to existing wells which will cause formerly non-producing completions or intervals to
become open and producing to market.



     “Proved Developed Producing Reserves” has the meaning assigned to that term by the
Society of Petroleum Engineers, as it may be amended from time to time, but generally shall mean
the subcategory of “Proved Developed Reserves” (as defined by the Society of Petroleum Engineers)
which are recoverable by natural reservoir energies (including pumping) from the completion
intervals currently open and producing to market. Additional oil and gas expected to be obtained
through the application of fluid injection or other improved recovery techniques for supplementing
the natural forces and mechanisms of primary recovery will be included as “Proved Developed
Producing Reserves” only after testing by a pilot project or after the operation of an installed
program has confirmed through production response through existing completions producing to market
that increased recovery will be achieved. Proved Developed Producing Reserves shall not include
any Proved Developed Non-Producing Reserves.



     “Proved Reserves” means and includes Proved Developed Producing Reserves, Proved
Developed Non-Producing Reserves and Proved Undeveloped Reserves.



     “Proved Undeveloped Reserves” has the meaning assigned to that term by the Society of
Petroleum Engineers, as it may be amended from time to time, but generally shall mean those
reserves that are expected to be recovered from new wells on undrilled acreage, or from existing
wells where a relatively major expenditure is required for recompletion. Proved Undeveloped



-14-









 




Reserves on undrilled acreage shall be limited to those drilling units offsetting productive
units that are reasonably certain of production when drilled. Proved Undeveloped Reserves for
other undrilled units can be claimed only where it can be demonstrated with certainty that there is
continuity of production from the existing productive formation. Under no circumstances should
estimates for Proved Undeveloped Reserves be attributable to any acreage for which an application
of fluid injection or other improved recovery technique is contemplated, unless such techniques
have been proved effective by actual tests in the area and in the same reservoir.




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



     “Release” means any spilling, leaking, pumping, pouring, emitting, emptying,
discharging, injecting, escaping, leaching, dumping, or disposing into the environment of any
Hazardous Materials (including the abandonment or discarding of barrels, containers and other
closed receptacles containing any Hazardous Materials).



     “Reportable Event” means any of the events set forth in Section 4043(c) of ERISA,
other than events for which the 30 day notice period has been waived.



     “Reserve Report” means the reserve report delivered to the Lender for the fiscal year
ended December 31, 2009 and, subsequently, a report delivered by the Borrower pursuant to
Section 6.01(c).



     “Responsible Officer” means the chief executive officer, president, chief financial
officer or general counsel of a Loan Party. Any document delivered hereunder that is signed by a
Responsible Officer of a Loan Party shall be conclusively presumed to have been authorized by all
necessary corporate, partnership and/or other action on the part of such Loan Party and such
Responsible Officer shall be conclusively presumed to have acted on behalf of such Loan Party.



     “Restricted Payment” means any dividend or other distribution (whether in cash,
securities or other property) with respect to any capital stock or other Equity Interest of any
Person or any of its Subsidiaries, or any payment (whether in cash, securities or other property),
including any sinking fund or similar deposit, on account of the purchase, redemption, retirement,
defeasance, acquisition, cancellation or termination of any such capital stock or other Equity
Interest, or on account of any return of capital to any Person’s stockholders, partners or members
(or the equivalent of any thereof), or any option, warrant or other right to acquire any such
dividend or other distribution or payment; provided that, notwithstanding the foregoing,
the term “Restricted Payment” shall not include any redemption, retirement, purchase or other
acquisition of, any Warrants and/or any Senior Convertible Notes.



     “S&P” means Standard & Poor’s Ratings Services, a division of The McGraw-Hill
Companies, Inc., and any successor thereto.



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



     “Second NewCo” has the meaning set forth in Section 7.03(c)(v).



-15-









 





     “Senior Convertible Notes” means the $32,000,000 8.25% Senor Convertible Notes due
2013 as evidenced by that certain Indenture dated as of February 17, 2010 between the Borrower and
U.S. Bank National Association, as Trustee (the “Trustee”), as supplemented by that certain
First Supplemental Indenture dated as of February 17, 2010 between the Borrower and the Trustee, in
each case as in effect on the Closing Date.



     “Significant Subsidiary” means a “Significant Subsidiary” as defined in Regulation S-X
of the Securities Act of 1933, as amended from time to time.



     “Solvent” and “Solvency” mean, with respect to any Person on any date of
determination, that on such date (a) the fair value of the property of such Person is greater than
the total amount of liabilities, including contingent liabilities, of such Person, (b) the present
fair salable value of the assets 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 such debts and liabilities as they mature, (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 an unreasonably small capital, and (e) such
Person is able to pay its debts and liabilities, contingent obligations and other commitments as
they mature in the ordinary course of business. The amount of contingent liabilities at any time
shall be computed as the amount that, in the light of all the facts and circumstances existing at
such time, represents the amount that can reasonably be expected to become an actual or matured
liability.



     “Strategic Transaction” means a “Transaction” as such term is defined in the Merrill
Lynch Letter.



     “Subsidiary” of a Person means a corporation, partnership, joint venture, limited
liability company or other business entity of which a majority of the shares of securities or other
interests having ordinary voting power for the election of directors or other governing body (other
than securities or interests having such power only by reason of the happening of a contingency)
are at the time beneficially owned, or the management of which is otherwise controlled, directly,
or indirectly through one or more intermediaries, or both, by such Person. Unless otherwise
specified, all references herein to a “Subsidiary” or to “Subsidiaries” shall refer
to a Subsidiary or Subsidiaries of the Borrower. For the avoidance of doubt, none of Fusion LLC
and its Subsidiaries, nor Petrodelta and its Subsidiaries, shall be deemed to be Subsidiaries of
the Borrower or any of its Subsidiaries as of October 28, 2010 based on the organizational
structure and respective ownership percentages of the Borrower and its Subsidiaries as of such
date.



     “Swap Contract” means (a) any and all rate swap transactions, basis swaps, credit
derivative transactions, forward rate transactions, commodity swaps, commodity options, forward
commodity contracts, equity or equity index swaps or options, bond or bond price or bond index
swaps or options or forward bond or forward bond price or forward bond index transactions, interest
rate options, forward foreign exchange transactions, cap transactions, floor transactions, collar
transactions, currency swap transactions, cross-currency rate swap transactions, currency options,
spot contracts, or any other similar transactions or any combination of any of the foregoing
(including any options to enter into any of the foregoing), whether or not any such transaction is
governed by or subject to any master agreement, and (b)



-16-









 




any and all transactions of any kind, and the related confirmations, which are subject to the
terms and conditions of, or governed by, any form of master agreement published by the
International Swaps and Derivatives Association, Inc., any International Foreign Exchange Master
Agreement, or any other master agreement (any such master agreement, together with any related
schedules, a “Master Agreement”), including any such obligations or liabilities under any
Master Agreement.




     “Swap Termination Value” means, in respect of any one or more Swap Contracts, after
taking into account the effect of any legally enforceable netting agreement relating to such Swap
Contracts, (a) for any date on or after the date such Swap Contracts have been closed out and
termination value(s) determined in accordance therewith, such termination value(s), and (b) for any
date prior to the date referenced in clause (a), the amount(s) determined as the mark-to-market
value(s) for such Swap Contracts, as determined based upon one or more mid-market or other readily
available quotations provided by any recognized dealer in such Swap Contracts (which may include
the Lender or any Affiliate of the Lender).



     “Synthetic Debt” means, with respect to any Person as of any date of determination
thereof, all obligations of such Person in respect of transactions entered into by such Person that
are intended to function primarily as a borrowing of funds (including any minority interest
transactions that function primarily as a borrowing) but are not otherwise included in the
definition of “Indebtedness” or as a liability on the consolidated balance sheet of such
Person and its Subsidiaries in accordance with GAAP.



     “Synthetic Lease Obligation” means the monetary obligation of a Person under (a) a
so-called synthetic, off-balance sheet or tax retention lease, or (b) an agreement for the use or
possession of property (including sale and leaseback transactions), in each case, creating
obligations that do not appear on the balance sheet of such Person but which, upon the application
of any Debtor Relief Laws to such Person, would be characterized as the indebtedness of such Person
(without regard to accounting treatment).



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



     “Threshold Amount” means $3,000,000.



     “United States” and “U.S.” mean the United States of America.



     “U.S. Loan Party” means any Loan Party that is organized under the laws of one of the
states of the United States of America and that is not a CFC.



     “WAB-21 Project” means Harvest Offshore China Company’s interest in a petroleum
contract signed in December of 1996 with China National Offshore Oil Corporation for the WAB-21
area. The WAB-21 petroleum contract covers 6.2 million acres in the South China Sea, with an
option for an additional 1.25 million acres under certain circumstances, and lies within an area
which is the subject of a border dispute between the People’s Republic of China and Socialist
Republic of Vietnam. Vietnam has executed an agreement on a portion of the same



-17-









 




offshore acreage with another company. The border dispute has lasted for many years, and
there has been limited exploration and no development activity in the WAB-21 area due to the
dispute.




     “Warrants” means those certain common stock warrants issued by the Borrower evidencing
rights to purchase, in the aggregate, 6,000,000 shares of common stock of the Borrower issued
pursuant to the terms of the Warrant Purchase Agreement.



     “Warrant Purchase Agreement” means that certain Warrant Purchase Agreement, dated as
of the Closing Date, between the Borrower and the purchasers named therein, as amended from time to
time.



     “West Bay Leases” means those certain leases between Harvest (US) Holdings and third
parties with respect to oil and gas properties located along the Gulf Coast region of the United
States.



     “West Bay Project” means Harvest (US) Holdings’s interest in the Area of Mutual
Interest agreement signed in March 2008, with a private third party for an area in the upper Gulf
Coast Region of the United States. Harvest (US) Holdings has a 50 percent interest in the project
and as operator will lease acreage, process 3-D seismic data and drill wells on the prospects that
have been identified.



     1.02. Other Interpretive Provisions. With reference to this Agreement and each other Loan
Document, unless otherwise specified herein or in such other Loan Document:



     (a) The definitions of terms herein shall apply equally to the singular and plural forms of
the terms defined. Whenever the context may require, any pronoun shall include the corresponding
masculine, feminine and neuter forms. The words “include,” “includes” and “including” shall be
deemed to be followed by the phrase “without limitation.” The word “will” shall be construed to
have the same meaning and effect as the word “shall.” Unless the context requires otherwise, (i)
any definition of or reference to any agreement, instrument or other document (including any
Organization Document) shall be construed as referring to such agreement, instrument or other
document as from time to time amended, supplemented or otherwise modified (subject to any
restrictions on such amendments, supplements or modifications set forth herein or in any other Loan
Document), (ii) any reference herein to any Person shall be construed to include such Person’s
successors and assigns, (iii) the words “herein,” “hereof” and “hereunder,” and words of similar
import when used in any Loan Document, shall be construed to refer to such Loan Document in its
entirety and not to any particular provision thereof, (iv) all references in a Loan Document to
Articles, Sections, Preliminary Statements, Exhibits and Schedules shall be construed to refer to
Articles and Sections of, and Preliminary Statements, Exhibits and Schedules to, the Loan Document
in which such references appear, (v) any reference to any law shall include all statutory and
regulatory provisions consolidating, amending, replacing or interpreting such law and any reference
to any law or regulation shall, unless otherwise specified, refer to such law or regulation as
amended, modified or supplemented from time to time, and (vi) the words “asset” and
“property” shall be construed to have the same meaning and effect and to refer to any and
all tangible and intangible assets and properties, including cash, securities, accounts and
contract rights.



-18-









 





     (b) 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.”



     (c) Section headings herein and in the other Loan Documents are included for convenience of
reference only and shall not affect the interpretation of this Agreement or any other Loan
Document.



     1.03. Accounting Terms. (a) Generally. All accounting terms not specifically or completely
defined herein shall be construed in conformity with, and all financial data (including financial
ratios and other financial calculations) required to be submitted pursuant to this Agreement shall
be prepared in conformity with, GAAP applied on a consistent basis, as in effect from time to time,
applied in a manner consistent with that used in preparing the Audited Financial Statements,
except as otherwise specifically prescribed herein.



     (b) Changes in GAAP. If at any time any change in GAAP would affect the computation
of any financial ratio or requirement set forth in any Loan Document, and either the Borrower or
the Lender shall so request, the Lender and the Borrower shall negotiate in good faith to amend
such ratio or requirement to preserve the original intent thereof in light of such change in GAAP;
provided that, until so amended, (i) such ratio or requirement shall continue to be
computed in accordance with GAAP prior to such change therein and (ii) the Borrower shall provide
to the Lender financial statements and other documents required under this Agreement or as
reasonably requested hereunder setting forth a reconciliation between calculations of such ratio or
requirement made before and after giving effect to such change in GAAP.



     1.04. Rounding. Any financial ratios required to be maintained by the Borrower pursuant to
this Agreement shall be calculated by dividing the appropriate component by the other component,
carrying the result to one place more than the number of places by which such ratio is expressed
herein and rounding the result up or down to the nearest number (with a rounding-up if there is no
nearest number).



     1.05. Times of Day. Unless otherwise specified, all references herein to times of day shall
be references to Eastern time (daylight or standard, as applicable).



     1.06. Currency Equivalents Generally. Any amount specified in this Agreement or any of the
other Loan Documents to be in Dollars shall also include the equivalent of such amount in any
currency other than Dollars, such equivalent amount thereof in the applicable currency to be
determined by the Lender at such time on the basis of the Spot Rate (as defined below) for the
purchase of such currency with Dollars. For purposes of this Section 1.06, the “Spot
Rate” for a currency means the rate determined by the Lender to be the rate quoted by the
Person acting in such capacity as the spot rate for the purchase by such Person of such currency
with another currency through its principal foreign exchange trading office at approximately 11:00
a.m. on the date two Business Days prior to the date of such determination; provided that
the Lender may obtain such spot rate from another financial institution designated by the Lender if
the Person acting in such capacity does not have as of the date of determination a spot buying rate
for any such currency.



-19-









 





ARTICLE II.

THE LOAN




     2.01. The Loan. Subject to the terms and conditions set forth herein, the Lender agrees to
make a single loan to the Borrower on the Closing Date in the amount of $60,000,000.



     2.02. Prepayments. (a) Optional. Subject to the last sentence of this Section
2.02(a), the Borrower may, upon notice to the Lender, at any time or from time to time
voluntarily prepay the Loan in whole or in part without premium or penalty; provided that
(A) such notice must be received by the Lender not later than 11:00 a.m. three Business Days prior
to any date of prepayment of the Loan; and (B) any prepayment shall be in a principal amount of
$5,000,000 or a whole multiple of $1,000,000 in excess thereof or, if less, the entire principal
amount thereof then outstanding. Each such notice shall specify the date and amount of such
prepayment. If such notice is given by the Borrower, the Borrower shall make such prepayment and
the payment amount specified in such notice shall be due and payable on the date specified therein.
Any prepayment shall be accompanied by all accrued interest on the amount prepaid.
Notwithstanding anything to the contrary contained herein, if the Borrower prepays the Loan, in
whole or in part, at any time before the Bridge Date, the Borrower shall pay a premium with respect
to each such prepayment in the amount of 3.5% of the amount so prepaid.



     (b) Mandatory. (i) If the Borrower or any of its Subsidiaries Disposes of any
property (other than any Disposition of any property permitted (x) by Sections 7.05(a),
(b), (c), (d), (o), (p) or (q) and/or (y) by Sections
7.05(e), (f), (g), (h), (i), (j), (k),
(l), (m), (n) or (r) only to the extent the fair market value of
all Dispositions pursuant to these Sections in this clause (y) is less than $75,000,000 in the
aggregate) which results in the realization by such Person of Net Cash Proceeds, the Borrower shall
prepay an aggregate principal amount of the Loan equal to 100% of such Net Cash Proceeds
immediately upon receipt thereof by such Person.




     (ii) Upon the incurrence or issuance by the Borrower or any of its Subsidiaries of any
Indebtedness (other than Indebtedness expressly permitted to be incurred or issued pursuant
to Section 7.02), the Borrower shall prepay an aggregate principal amount of Loan
equal to 100% of all Net Cash Proceeds received therefrom immediately upon receipt thereof
by the Borrower or such Subsidiary.




     (iii) Upon any Extraordinary Receipt received by or paid to or for the account of the
Borrower or any of its Subsidiaries, and not otherwise included in clause (i) or (ii) of
this Section 2.02(b), the Borrower shall prepay an aggregate principal amount of
Loans equal to 100% of all Net Cash Proceeds received therefrom immediately upon receipt
thereof by the Borrower or such Subsidiary.




     If the Borrower prepays the Loan, in whole or in part under this Section
2.02(b) at any time before the Bridge Date, the Borrower shall pay a premium with
respect to each such prepayment in the amount of 3.5% of the amount so prepaid.




     Nothing in this section 2.02(b) shall be deemed to require a mandatory prepayment of
any amounts or property received by the Borrower upon the sale of any Equity Interest in the
Borrower.



-20-









 





     2.03. Repayment of Loan. On the Maturity Date the Borrower shall repay to the Lender the
aggregate principal amount of the Loan outstanding, together with interest accrued thereon and all
other amounts due hereunder and under the other Loan Documents.



     2.04. Interest. (a) Subject to the provisions of Section 2.04(b), the Loan shall bear
interest on the outstanding principal amount thereof at a rate equal to the Applicable Rate.



     (b) (i) If any amount of principal of the Loan is not paid when due (without regard to any
applicable grace periods), whether at stated maturity, by acceleration or otherwise, such amount
shall thereafter bear interest at a fluctuating interest rate per annum at all times equal to the
Default Rate to the fullest extent permitted by applicable Laws.




     (ii) If any amount (other than principal of the Loan) payable by the Borrower under any
Loan Document is not paid when due (without regard to any applicable grace periods), whether
at stated maturity, by acceleration or otherwise, then such amount shall thereafter bear
interest at a rate per annum at all times equal to the Default Rate to the fullest extent
permitted by applicable Laws.




     (iii) While any Event of Default exists, the Borrower shall pay interest on the
principal amount of all outstanding Obligations hereunder at a rate per annum at all times
equal to the Default Rate to the fullest extent permitted by applicable Laws.




     (iv) Accrued and unpaid interest on past due amounts (including interest on past due
interest) shall be due and payable upon demand.



     (c) Interest on the Loan shall be due and payable in arrears on each Interest Payment Date
applicable thereto and at such other times as may be specified herein. Interest hereunder shall be
due and payable in accordance with the terms hereof before and after judgment, and before and after
the commencement of any proceeding under any Debtor Relief Law.



     2.05. Computation of Interest and Fees. All computations of fees, if any, and interest shall
be made on the basis of a 360-day year and actual days elapsed (which results in more fees or
interest, as applicable, being paid than if computed on the basis of a 365-day year). Interest
shall accrue on the Loan for the day on which the Loan is made, and shall not accrue on the Loan,
or any portion thereof, for the day on which the Loan or such portion is paid, provided
that any portion of the Loan that is repaid on the same day on which it is made shall, subject to
Section 2.07, bear interest for one day. Each determination by the Lender of an interest
rate or fee hereunder shall be conclusive and binding for all purposes, absent manifest error.



     2.06. Evidence of Debt. The Loan made by the Lender shall be evidenced by one or more
accounts or records maintained by the Lender. The accounts or records maintained by the Lender
shall be conclusive absent manifest error of the amount of the Loan made by the Lender to the
Borrower and the interest and payments thereon. Any failure to so record or any error in doing so
shall not, however, limit or otherwise affect the obligation of the Borrower hereunder to pay any
amount owing with respect to the Obligations.



     2.07. Payments Generally. All payments to be made by the Borrower shall be made without
condition or deduction for any counterclaim, defense, recoupment or setoff. Except as



-21-









 




otherwise expressly provided herein, all payments by the Borrower hereunder shall be made to
the Lender at the Lender’s office at 645 Fifth Avenue, 21st Floor, New York, New York 10022 (or
such other address as the Lender may from time to time notify the Borrower) in Dollars and in
immediately available funds not later than 2:00 p.m. on the date specified herein. All payments
received by the Lender after 2:00 p.m. shall be deemed received on the next succeeding Business Day
and any applicable interest or fee shall continue to accrue. If any payment to be made by the
Borrower shall come due on a day other than a Business Day, payment shall be made on the next
following Business Day, and such extension of time shall be reflected on computing interest or
fees, as the case may be.




ARTICLE III.

TAXES, YIELD PROTECTION AND ILLEGALITY




     3.01. Taxes. (a) Payments Free of Taxes; Obligation to Withhold; Payments on Account of
Taxes. Any and all payments by or on account of any obligation of the Loan Parties hereunder
or under any other Loan Document shall to the extent permitted by applicable Laws be made free and
clear of and without reduction or withholding for any Taxes. If, however, applicable Laws require
the Loan Parties to withhold or deduct any Tax, such Tax shall be withheld or deducted in
accordance with such Laws as determined by the Loan Parties upon the basis of the information and
documentation to be delivered pursuant to subsection (e) below. If the Loan Parties shall be
required by applicable Law to withhold or deduct any Taxes, including both United States Federal
backup withholding and withholding taxes, from any payment, then (A) the Loan Parties shall
withhold or make such deductions as are determined by the Loan Parties to be required based upon
the information and documentation it has received pursuant to subsection (e) below, (B) the Loan
Parties shall timely pay the full amount withheld or deducted to the relevant Governmental
Authority in accordance with applicable Laws, and (C) to the extent that the withholding or
deduction is made on account of Indemnified Taxes or Other Taxes, the sum payable by the Loan
Parties shall be increased as necessary so that after any required withholding or the making of all
required deductions (including deductions applicable to additional sums payable under this Section)
the Lender receives an amount equal to the sum it would have received had no such withholding or
deduction been made.



     (b) Payment of Other Taxes by the Loan Parties. Without limiting the provisions of
subsection (a) above, the Loan Parties shall timely pay any Other Taxes to the relevant
Governmental Authority in accordance with applicable law, to the extent such Other Taxes are
imposed on the Loan Parties under applicable Law.



     (c) Tax Indemnifications. (i) Without limiting the provisions of subsection (a) or
(b) above, the Borrower shall, and does hereby, indemnify the Lender, and shall make payment in
respect thereof within 30 days after demand therefor, for the full amount of any Indemnified Taxes
or Other Taxes (including Indemnified Taxes or Other Taxes imposed or asserted on or attributable
to amounts payable under this Section) paid by the Lender, and any penalties, interest and
reasonable expenses arising therefrom or with respect thereto, whether or not such Indemnified
Taxes or Other Taxes were correctly or legally imposed or asserted by the relevant Governmental
Authority. A certificate as to the amount of any such payment or liability delivered to the
Borrower by the Lender shall be conclusive absent manifest error.



-22-









 






     (ii) Without limiting the provisions of subsection (a) or (b) above, the Lender shall,
and does hereby, indemnify the Borrower, and shall make payment in respect thereof within 30
days after demand therefor, against any and all Taxes and any and all related losses,
claims, liabilities, penalties, interest and expenses (including the fees, charges and
disbursements of any counsel for the Borrower incurred by or asserted against the Borrower
by any Governmental Authority as a result of the failure by the Lender to deliver, or as a
result of the inaccuracy, inadequacy or deficiency of, any documentation required to be
delivered by the Lender to the Borrower pursuant to subsection (e). The agreements in this
clause (ii) shall survive the repayment, satisfaction or discharge of all of the
Obligations.



     (d) Evidence of Payments. As soon as reasonably practicable after the request by the
Borrower or the Lender, as the case may be, after any payment of Taxes by the Borrower or the
Lender to a Governmental Authority as provided in this Section 3.01, the Borrower shall
deliver to the Lender or the Lender shall deliver to the Borrower, as the case may be, the original
or a certified copy of a receipt issued by such Governmental Authority evidencing such payment, a
copy of any return required by Laws to report such payment or other evidence of such payment
reasonably satisfactory to the Borrower or the Lender, as the case may be.



     (e) Status of Lender; Tax Documentation. (i) If the Lender is entitled to an
exemption from or a reduction of withholding taxes with respect to payments hereunder or under any
other Loan Document, then the Lender shall deliver to the Borrower, on or prior to the date that
the Lender becomes a party to this Agreement (and from time to time thereafter at the time or times
prescribed by applicable Laws or when reasonably requested by the Borrower), such properly
completed and executed documentation prescribed by applicable Laws or by the taxing authorities of
any jurisdiction and such other reasonably requested information as will permit such payments made
to be made without withholding or at a reduced rate of withholding. Additionally, the Lender shall
deliver to the Borrower, on or prior to the date that the Lender becomes a party to this Agreement
(and from time to time thereafter at the time or times prescribed by applicable Law or when
reasonably requested by the Borrower), such properly completed and executed documentation
prescribed by applicable Law or by the taxing authorities of any jurisdiction and such other
reasonably requested information as will enable the Borrower (A) to determine whether or not
payments made hereunder or under any other Loan Document are subject to Taxes, (B) to determine, if
applicable, the required rate of withholding or deduction, and (C) otherwise to establish the
Lender’s status for withholding tax purposes in the applicable jurisdiction.




     (ii) Without limiting the generality of subsection (i), if the Borrower is resident for
tax purposes in the United States and the Lender is resident for tax purposes in the United
States, the Lender shall deliver to the Borrower, on or prior to the date that the Lender
becomes a party to this Agreement (and from time to time thereafter at the time or times
prescribed by applicable Law or when reasonably requested by the Borrower), properly
completed and executed originals of IRS Form W-9 (or successor form) or such other
documentation or information prescribed by applicable Laws or reasonably requested by the
Borrower as will certify that the Lender is not subject to United States Federal backup
withholding tax and as will enable the Borrower to determine whether or not the Lender is
subject to information reporting requirements.



-23-









 






     (iii) Without limiting the generality of subsection (i), if the Borrower is resident for
tax purposes in the United States, the Lender is not resident for tax purposes in the United
States and the Lender is entitled under the Code or any applicable treaty to an exemption
from or reduction of withholding tax with respect to payments hereunder or under any other
Loan Document, the Lender shall deliver to the Borrower on or prior to the date on which the
Lender becomes a party to this Agreement (and from time to time thereafter upon the request
of the Borrower, but only if the Lender is legally entitled to do so), whichever of the
following is applicable: (A) properly completed and executed originals of IRS W-8BEN (or
successor form) claiming eligibility for benefits of an income tax treaty to which the
United States is a party; (B) properly completed and executed originals of IRS Form W-8ECI
(or successor form); (C) in the case of the Lender claiming the benefits of the exemption
for portfolio interest under Section 881(c) of the Code, (1) a certificate in a form
approved by the Borrower to the effect that (i) the Lender is not a “bank” within the
meaning of Section 881(c)(3)(A) of the Code, (ii) the Lender is not a “10 percent
shareholder” of the Borrower within the meaning of Section 881(c)(3)(B) of the Code, (iii)
the Lender is not a “controlled foreign corporation” described in Section 881(c)(3)(C) of
the Code and (iv) no payments made hereunder or under any other Loan Document are
effectively connected with the Lender’s conduct of a United States trade or business and (2)
properly completed and executed originals of IRS Form W-8BEN or (or successor form); or (D)
any other form prescribed by applicable Law as a basis for claiming exemption from or
reduction in United States Federal withholding tax, properly completed and executed,
together with such other documentation as may be prescribed by applicable Law to permit the
Borrower to determine the withholding or deduction required to be made.




     (iv) Without limiting the generality of subsection (i), if the Lender would be subject
to United States Federal withholding taxes imposed by FATCA on payments made hereunder or
under any other Loan Document and the Lender fails to comply with the applicable reporting
requirements of FATCA (including those contained in Section 1471(b) or 1472(b) of the Code,
as applicable), the Lender shall provide such documentation prescribed by applicable law
(including as prescribed by Section 1471(b)(3)(C)(i) of the Code) and such additional
documentation reasonably requested by the Borrower as may be necessary for the Borrower to
comply with its obligations under FATCA, to determine that such Lender has complied with
such Lender’s obligations under FATCA, or to determine the amount to deduct and withhold
from any such payments.




     (v) The Lender shall promptly (A) notify the Borrower of any change in circumstances
which would modify or render invalid any claimed exemption or reduction in withholding taxes
with respect to payments made hereunder or under any other Loan Document, and (B) take such
steps as shall not be materially disadvantageous to it, in the reasonable judgment of the
Lender, and as may be reasonably necessary (including the designation of new Lending Office)
to avoid any requirement of applicable Laws of any jurisdiction that the Borrower make any
withholding or deduction for taxes from amounts payable to the Lender.



-24-









 





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



     3.02. Increased Costs. (a) Increased Costs Generally. If the Lender assigns, in
accordance with Section 9.07, all or any part of the Loan to a commercial bank or any other
entity that is subject to regulation by federal or state banking authorities (a “Bank Assignee”),
and if any Change in Law shall:




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




     (ii) subject such Bank Assignee to any tax of any kind whatsoever with respect to this
Agreement, or change the basis of taxation of payments to such Bank Assignee in respect
thereof (except for Indemnified Taxes or Other Taxes covered by Section 3.01 and the
imposition of, or any change in the rate of, any Excluded Tax payable by or with respect to
such Bank Assignee); or




     (iii) impose on such Bank Assignee any other condition, cost or expense affecting this
Agreement;


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




     (b) Capital Requirements. If a Bank Assignee determines that any Change in Law
affecting such Bank Assignee or such Bank Assignee’s holding company, if any, regarding capital
requirements has or would have the effect of reducing the rate of return on such Bank Assignee’s
capital or on the capital of such Bank Assignee’s holding company, if any, as a consequence of this
Agreement or the portion of the Loan assigned to such Bank Assignee, to a level below that which
such Bank Assignee or such Bank Assignee’s holding company could have achieved but for such Change
in Law (taking into consideration such Bank Assignee’s policies and the policies of such Bank
Assignee’s holding company with respect to capital



-25-









 




adequacy), then from time to time the Borrower will pay to such Bank Assignee, such additional
amount or amounts as will compensate such Bank Assignee or such Bank Assignee’s holding company for
any such reduction suffered.




     (c) Certificates for Reimbursement. A certificate of a Bank Assignee setting forth
the amount or amounts necessary to compensate such Bank Assignee or its holding company, as
specified in subsection (a) or (b) of this Section and delivered to the Borrower shall be
conclusive absent manifest error. The Borrower shall pay such Bank Assignee the amount shown as
due on any such certificate within 10 days after receipt thereof.



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



     3.03. Survival. All of the Borrower’s obligations under this Article III shall
survive repayment of all other Obligations hereunder.



ARTICLE IV.

CONDITIONS PRECEDENT TO THE LOAN




     4.01. Conditions of the Loan. The obligation of the Lender to make the Loan hereunder is
subject to satisfaction of the following conditions precedent:



     (a) The representations and warranties of the Borrower and each other Loan Party contained in
Article V or any other Loan Document, or which are contained in any document furnished at
any time under or in connection herewith or therewith, shall be true and correct on and as of the
date of the Loan.



     (b) No Default shall exist, or would result from the Loan or from the application of the
proceeds thereof.



     (c) The Lender’s receipt of the following, each of which shall be originals or telecopies
(followed promptly by originals) unless otherwise specified, each properly executed by a
Responsible Officer of the signing Loan Party, each dated the Closing Date (or, in the case of
certificates of governmental officials, a recent date before the Closing Date) and each in form and
substance satisfactory to the Lender:




     (i) executed counterparts of this Agreement, the Guaranty and the Warrant Purchase
Agreement, sufficient in number for distribution to the Lender and the Borrower;




-26-











 






     (ii) a Note executed by the Borrower in favor of the Lender;




     (iii) such certificates of resolutions or other action, incumbency certificates
and/or other certificates of Responsible Officers of each Loan Party as the Lender may
require evidencing the identity, authority and capacity of each Responsible Officer thereof
authorized to act as a Responsible Officer in connection with this Agreement and the other
Loan Documents to which such Loan Party is a party or is to be a party;




     (iv) such documents and certifications as the Lender may reasonably require to
evidence that each Loan Party is duly organized or formed, and that each Loan Party is
validly existing, in good standing and qualified to engage in business in each jurisdiction
where its ownership, lease or operation of properties or the conduct of its business
requires such qualification, except to the extent that failure to do so could not reasonably
be expected to have a Material Adverse Effect;




     (v) a favorable opinion of Fulbright & Jaworski L.L.P., counsel to the Loan
Parties, addressed to the Lender and in form and substance satisfactory to the Lender;




     (vi) a certificate of a Responsible Officer of each Loan Party either (A) attaching
copies of all consents, licenses and approvals required in connection with the execution,
delivery and performance by such Loan Party and the validity against such Loan Party of the
Loan Documents to which it is a party, and such consents, licenses and approvals shall be in
full force and effect, or (B) stating that no such consents, licenses or approvals are so
required;




     (vii) a certificate signed by a Responsible Officer of the Borrower certifying that
the conditions specified in Sections 4.01(a) and (b) have been satisfied;
and




     (viii) such other assurances, certificates, documents or consents as the Lender
reasonably may require.



     (d) The Borrower shall have executed and issued Warrants to the Lender.



     (e) All fees required to be paid by the Borrower to the Lender on or before the Closing
Date shall have been paid.



     (f) Unless waived by the Lender, the Borrower shall have paid all fees, charges and
disbursements of counsel to the Lender (directly to such counsel if requested by the Lender) to the
extent invoiced prior to or on the Closing Date, plus such additional amounts of such fees, charges
and disbursements as shall constitute its reasonable estimate of such fees, charges and
disbursements incurred or to be incurred by it through the closing proceedings (provided
that such estimate shall not thereafter preclude a final settling of accounts between the Borrower
and the Lender).



     (g) The Lender shall have received the results of a recent lien search with respect to
each of the Loan Parties on terms and conditions satisfactory to the Lender.



-27-









 





ARTICLE V.

REPRESENTATIONS AND WARRANTIES




     The Borrower represents and warrants to the Lender that:



     5.01. Existence, Qualification and Power. Each Loan Party and each of its Subsidiaries
(a) is duly organized or formed, validly existing and, as applicable, in good standing under the
Laws of the jurisdiction of its incorporation or organization, (b) has all requisite power and
authority and all requisite governmental licenses, authorizations, consents and approvals to (i)
own or lease its assets and carry on its business and (ii) execute, deliver and perform its
obligations under the Loan Documents to which it is a party, and (c) is duly qualified and is
licensed and, as applicable, in good standing under the Laws of each jurisdiction where its
ownership, lease or operation of properties or the conduct of its business requires such
qualification or license; except in each case referred to in clause (b)(i) or (c), to the extent
that failure to do so could not reasonably be expected to have a Material Adverse Effect.



     5.02. Authorization; No Contravention. The execution, delivery and performance by each
Loan Party of each Loan Document to which such Person is or is to be a party have been duly
authorized by all necessary corporate or other organizational action, and do not and will not (a)
contravene the terms of any of such Person’s Organization Documents; (b) conflict with or result in
any breach or contravention of, or the creation of any Lien under, or require any payment to be
made under (i) any Contractual Obligation to which such Person is a party or affecting such Person
or the properties of such Person or any of its Subsidiaries or (ii) any order, injunction, writ or
decree of any Governmental Authority or any arbitral award to which such Person or its property is
subject; or (c) violate any Law.



     5.03. Governmental Authorization; Other Consents. No approval, consent, exemption,
authorization, or other action by, or notice to, or filing with, any Governmental Authority or any
other Person is necessary or required to be obtained by the Borrower or any Subsidiary in
connection with (a) the execution, delivery or performance by, or enforcement against, any Loan
Party of this Agreement or any other Loan Document or (b) the exercise by the Lender of its rights
under the Loan Documents, except for the authorizations, approvals, actions, notices and filings
listed on Schedule 5.03, all of which have been duly obtained, taken, given or made and are
in full force and effect.



     5.04. Binding Effect. This Agreement has been, and each other Loan Document, when
delivered hereunder, will have been, duly executed and delivered by each Loan Party that is party
thereto. This Agreement constitutes, and each other Loan Document when so delivered will
constitute, a legal, valid and binding obligation of such Loan Party, enforceable against each Loan
Party that is party thereto in accordance with its terms, subject to the effects of any Debtor
Relief Laws.



     5.05. Financial Statements; No Material Adverse Effect. (a) The Audited Financial
Statements (i) were prepared in accordance with GAAP consistently applied throughout the period
covered thereby, except as otherwise expressly noted therein; (ii) fairly present the financial
condition of the Borrower and its Subsidiaries as of the date thereof and their results of
operations for the period covered thereby in accordance with GAAP consistently applied



-28-









 




throughout the period covered thereby, except as otherwise expressly noted therein; and (iii)
show all material indebtedness and other liabilities, direct or contingent, of the Borrower and its
Subsidiaries as of the date thereof and required by GAAP to be reflected thereon, including
liabilities for taxes, material commitments and Indebtedness.




     (b) The unaudited consolidated balance sheets of the Borrower and its Subsidiaries dated
June 30, 2010, and the related consolidated statements of income or operations, shareholders’
equity and cash flows for the fiscal quarter ended on that date (i) were prepared in accordance
with GAAP consistently applied throughout the period covered thereby, except as otherwise expressly
noted therein, and (ii) fairly present the financial condition of the Borrower and its Subsidiaries
as of the date thereof and their results of operations for the period covered thereby, subject, in
the case of clauses (i) and (ii), to the absence of footnotes and to normal year-end audit
adjustments.



     (c) Since the date of the Audited Financial Statements, there has been no event or
circumstance, either individually or in the aggregate, that has had or could reasonably be expected
to have a Material Adverse Effect.



     5.06. Litigation. There are no actions, suits, proceedings, claims or disputes pending
or, to the knowledge of the Borrower, threatened or contemplated, at law, in equity, in arbitration
or before any Governmental Authority, by or against the Borrower or any of its Subsidiaries or
against any of their properties or revenues that (a) purport to affect or pertain to this Agreement
or any other Loan Document, or (b) except as specifically disclosed in Schedule 5.06 (the
“Disclosed Litigation”), either individually or in the aggregate, if determined adversely,
could reasonably be expected to have a Material Adverse Effect.



     5.07. No Default. Neither any Loan Party nor any Subsidiary thereof is in default under
or with respect to, or a party to, any Contractual Obligation that could, either individually or in
the aggregate, reasonably be expected to have a Material Adverse Effect. No Default has occurred
and is continuing or would result from the consummation of the transactions contemplated by this
Agreement or any other Loan Document.



     5.08. Ownership of Property; Liens; Investments.



     (a) Each Loan Party and each of its Subsidiaries has good record and marketable title in
fee simple to, or valid leasehold interests in, all real property necessary or used in the ordinary
conduct of its business, except for such defects in title as could not, individually or in the
aggregate, reasonably be expected to have a Material Adverse Effect.



     (b) Schedule 5.08(b) sets forth a complete and accurate list of all Liens on the
property or assets of each Loan Party and each of its Subsidiaries, showing as of the date hereof
the lienholder thereof, the principal amount of the obligations secured thereby and the property or
assets of such Loan Party or such Subsidiary subject thereto. The property of each Loan Party and
each of its Subsidiaries is subject to no Liens, other than Liens set forth on Schedule
5.08(b), and as otherwise permitted by Section 7.01.



-29-









 





     (c) Each Loan Party and each of its Subsidiaries has good, marketable and insurable fee
simple title to the real property owned by such Loan Party or such Subsidiary, free and clear of
all Liens, other than Liens created or permitted by the Loan Documents.



     (d) Schedule 5.08(d) sets forth a complete and accurate list of all Investments
held by any Loan Party or any Subsidiary of a Loan Party on the date hereof, showing as of the date
hereof the amount, obligor or issuer and maturity, if any, thereof.



     5.09. Environmental Compliance.



     (a) The Loan Parties and their respective Subsidiaries conduct in the ordinary course of
business a review of the effect of existing Environmental Laws on the Loan Parties’ and their
respective Subsidiaries’ business, operations and properties and claims asserted against the Loan
Parties and their respective Subsidiaries alleging potential liability or responsibility for
violation of any Environmental Law, and as a result thereof the Borrower has reasonably concluded
that such Environmental Laws and such claims could not, individually or in the aggregate,
reasonably be expected to have a Material Adverse Effect.



     (b) Except as otherwise set forth in Schedule 5.09, none of the properties
currently or formerly owned or operated by any Loan Party or any of its Subsidiaries is listed or
proposed for listing on the NPL or on the CERCLIS or any analogous foreign, state or local list or,
to the knowledge of the Loan Parties, is adjacent to any such property; there are no and never have
been any underground or above-ground storage tanks other than in material compliance with
applicable Environmental Laws or any surface impoundments, septic tanks, pits, sumps or lagoons in
which Hazardous Materials are being or have been treated, stored or disposed on any property
currently owned or operated by any Loan Party or any of its Subsidiaries or, to the knowledge of
the Loan Parties, on any property formerly owned or operated by any Loan Party or any of its
Subsidiaries; other than in material compliance with applicable Environmental Laws, there is no
asbestos or asbestos-containing material on any property currently owned or operated by any Loan
Party or any of its Subsidiaries; and Hazardous Materials have not been Released, discharged or
disposed of by any Loan Party or any of its Subsidiaries or, to the knowledge of the Loan Parties,
any other Person on any property currently or formerly owned or operated by any Loan Party or any
of its Subsidiaries.



     (c) Except as otherwise set forth on Schedule 5.09, or as could not reasonably be
expected to have a Material Adverse Effect, neither any Loan Party nor any of its Subsidiaries is
undertaking, either individually or together with other potentially responsible parties, any
investigation or assessment or remedial or response action relating to any actual or threatened
release, discharge or disposal of Hazardous Materials at any site, location or operation, either
voluntarily or pursuant to the order of any Governmental Authority or the requirements of any
Environmental Law; and to the knowledge of the Loan Parties, all Hazardous Materials generated,
used, treated, handled or stored at, or transported to or from, any property currently or formerly
owned or operated by any Loan Party or any of its Subsidiaries have been disposed of in a manner
not reasonably expected to result in material liability to any Loan Party or any of its
Subsidiaries.



-30-









 





     5.10. Insurance. The properties of the Borrower and its Subsidiaries are insured with
financially sound and reputable insurance companies not Affiliates of the Borrower, 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 Borrower or the
applicable Subsidiary operates.



     5.11. Taxes. The Borrower and its Subsidiaries have filed all Federal, state and other
material tax returns and reports required to be filed, and have paid all Federal, state and other
material taxes, assessments, fees and other governmental charges levied or imposed upon them or
their properties, income or assets otherwise not yet delinquent, except (i) those which are being
contested in good faith by appropriate proceedings diligently conducted and for which adequate
reserves have been provided in accordance with GAAP or (ii) where failure to do so has not and
could not reasonably be expected to result in a Material Adverse Effect. Neither the Borrower nor
any of its Subsidiaries has received any written notice from a Governmental Authority proposing a
tax assessment against the Borrower or any of its Subsidiaries that would, if actually imposed,
have a Material Adverse Effect. Neither any Loan Party nor any Subsidiary thereof is party to any
tax sharing agreement; provided, that the allocation of taxes in connection with a business
combination agreement does not constitute a tax sharing agreement.



     5.12. ERISA Compliance.



     (a) Each Plan is in compliance in all material respects with the applicable provisions of
ERISA, the Code and other Federal or state laws. Each Pension Plan that is intended to be a
qualified plan under Section 401(a) of the Code has received a favorable determination letter from
the IRS to the effect that the form of such Plan is qualified under Section 401(a) of the Code and
the trust related thereto has been determined by the IRS to be exempt from federal income tax under
Section 501(a) of the Code, or has an applicable remedial amendment period that will not have ended
before the Closing Date. To the knowledge of the Borrower, nothing has occurred that would prevent
or cause the loss of such tax-qualified status.



     (b) There are no pending or, to the knowledge of the Borrower, threatened claims, actions
or lawsuits, or action by any Governmental Authority, with respect to any Plan that could
reasonably be expected to have a Material Adverse Effect. There has been no prohibited transaction
or violation of the fiduciary responsibility rules with respect to any Plan that has resulted or
could reasonably be expected to result in a Material Adverse Effect.



     (c) (i) No ERISA Event has occurred, and neither the Borrower nor any ERISA Affiliate is
aware of any fact, event or circumstance that could reasonably be expected to constitute or result
in an ERISA Event with respect to any Pension Plan; (ii) the Borrower and each ERISA Affiliate has
met all applicable requirements under the Pension Funding Rules in respect of each Pension Plan,
and no waiver of the minimum funding standards under the Pension Funding Rules has been applied for
or obtained; (iii) as of the most recent valuation date for any Pension Plan which is not a
Multiemployer Plan, the funding target attainment percentage (as defined in Section 430(d)(2) of
the Code) is 60% or higher and neither the Borrower nor any ERISA Affiliate knows of any facts or
circumstances that could reasonably be expected to cause the funding target attainment percentage
for any such plan to drop below 60% as of the most recent valuation date; (iv) neither the Borrower
nor any ERISA Affiliate has



-31-









 





incurred any liability to the PBGC other than for the payment of premiums, and there are no
premium payments which have become due that are unpaid; (v) neither the Borrower nor any ERISA
Affiliate has engaged in a transaction that could be subject to Section 4069 or Section 4212(c) of
ERISA; and (vi) no Pension Plan has been terminated by the plan administrator thereof nor by the
PBGC, and no event or circumstance has occurred or exists that could reasonably be expected to
cause the PBGC to institute proceedings under Title IV of ERISA to terminate any Pension Plan.




     (d) Neither the Borrower or any ERISA Affiliate maintains or contributes to, or has any
unsatisfied obligation to contribute to, or liability under, any active or terminated Pension Plan.



     5.13. Subsidiaries; Equity Interests; Loan Parties. As of the Closing Date, no Loan Party
has any Subsidiaries other than those specifically disclosed in Part (a) of Schedule 5.13,
and all of the outstanding Equity Interests in such Subsidiaries have been validly issued, are
fully paid and non-assessable and are owned by a Loan Party in the amounts specified on Part (a) of
Schedule 5.13 free and clear of all Liens. No Loan Party has any equity investments in any
other corporation or entity other than those specifically disclosed in Part (b) of Schedule
5.13. Set forth on Part (d) of Schedule 5.13 is a complete and accurate list of all
Loan Parties, showing as of the Closing Date (as to each Loan Party) the jurisdiction of its
incorporation, the address of its principal place of business and its U.S. taxpayer identification
number or, in the case of any non-U.S. Loan Party that does not have a U.S. taxpayer identification
number, its unique identification number issued to it by the jurisdiction of its incorporation.
The copy of the charter of each Loan Party and each amendment thereto provided pursuant to
Section 4.01(c)(iv) is a true and correct copy of each such document, each of which is
valid and in full force and effect.



     5.14. Margin Regulations; Investment Company Act. (a) The Borrower is not engaged and
will not engage, principally or as one of its important activities, in the business of purchasing
or carrying margin stock (within the meaning of Regulation U issued by the FRB), or extending
credit for the purpose of purchasing or carrying margin stock.



     (b) None of the Borrower, any Person Controlling the Borrower, or any Subsidiary is or is
required to be registered as an “investment company” under the Investment Company Act of 1940.



     5.15. Disclosure. The Borrower has disclosed to the Lender (or such information is
publicly available in documents filed with the SEC) all agreements, instruments and corporate or
other restrictions to which it or any of its Subsidiaries is subject, and all other matters known
to it, that, individually or in the aggregate, could reasonably be expected to result in a Material
Adverse Effect. No report, financial statement, certificate or other information furnished
(whether in writing or orally) by or on behalf of any Loan Party to the Lender in connection with
the transactions contemplated hereby and the negotiation of this Agreement or delivered hereunder
or under any other Loan Document (in each case as modified or supplemented by other information so
furnished) contains any material misstatement of fact or omits to state any material fact necessary
to make the statements therein, in the light of the circumstances under which they were made, not
misleading; provided that, with respect to projected financial



-32-









 




information, the Borrower represents only that such information was prepared in good faith
based upon assumptions believed to be reasonable at the time.




     5.16. Compliance with Laws. Each Loan Party and each Subsidiary thereof is in compliance
in all material respects with the requirements of all applicable Laws and all orders, writs,
injunctions and decrees applicable to it or to its properties, except in such instances in which
(a) such requirement of Law or order, writ, injunction or decree is being contested in good faith
by appropriate proceedings diligently conducted or (b) the failure to comply therewith, either
individually or in the aggregate, could not reasonably be expected to have a Material Adverse
Effect.



     5.17. Intellectual Property; Licenses, Etc. Each Loan Party and each of its Subsidiaries
own, or possess the right to use, all of the trademarks, service marks, trade names, copyrights,
patents, patent rights, franchises, licenses and other intellectual property rights (collectively,
“IP Rights”) that are reasonably necessary for the operation of their respective
businesses, without conflict with the rights of any other Person. To the knowledge of the
Borrower, no slogan or other advertising device, product, process, method, substance, part or other
material now employed, or now contemplated to be employed, by any Loan Party or any of its
Subsidiaries infringes upon any rights held by any other Person. No claim or litigation regarding
any of the foregoing is pending or, to the knowledge of the Borrower, threatened, which, either
individually or in the aggregate, could reasonably be expected to have a Material Adverse Effect.



     5.18. Solvency. Each Loan Party is, individually and together with its Subsidiaries on a
consolidated basis, Solvent.



     5.19. Casualty, Etc. Neither the businesses nor the properties of any Loan Party or any
of its Subsidiaries have been affected by any fire, explosion, accident, strike, lockout or other
labor dispute, drought, storm, hail, earthquake, embargo, act of God or of the public enemy or
other casualty (whether or not covered by insurance) that, either individually or in the aggregate,
could reasonably be expected to have a Material Adverse Effect.



     5.20. Labor Matters. There are no collective bargaining agreements or Multiemployer Plans
covering the employees of the Borrower or any of its Subsidiaries as of the Closing Date and
neither the Borrower nor any Subsidiary has suffered any strikes, walkouts, work stoppages or other
material labor difficulty within the last five years.



     5.21. Foreign Assets Control Regulations, Etc.



     (a) Neither the Borrower nor any Affiliated Entity is (i) a Person whose name appears on
the list of Specially Designated Nationals and Blocked Persons published by the Office of Foreign
Assets Control, U.S. Department of Treasury (“OFAC”) (an “OFAC Listed Person”) or
(ii) a department, agency or instrumentality of, or is otherwise controlled by or acting on behalf
of, directly or indirectly, (x) any OFAC Listed Person or (y) the government of a country subject
to comprehensive U.S. economic sanctions administered by OFAC, currently Iran, Sudan, Cuba, Burma,
Syria and North Korea (each OFAC Listed Person and each other entity described in clause (ii), a
“Blocked Person”).



-33-









 





     (b) No part of the proceeds from the Loan hereunder constitutes or will constitute funds
obtained on behalf of any Blocked Person or will otherwise be used, directly by the Borrower or
indirectly through any Affiliated Entity, in connection with any investment in, or any transactions
or dealings with, any Blocked Person.



     (c) To the Borrower’s actual knowledge, neither the Borrower nor any Affiliated Entity (i)
is under investigation by any Governmental Authority for, or has been charged with, or convicted
of, money laundering, drug trafficking, terrorist-related activities or other money laundering
predicate crimes under any applicable law (collectively, “Anti-Money Laundering Laws”),
(ii) has been assessed civil penalties under any Anti-Money Laundering Laws or (iii) has had any of
its funds seized or forfeited in an action under any Anti-Money Laundering Laws. The Borrower has
taken reasonable measures appropriate to the circumstances (in any event as required by applicable
law), to ensure that the Borrower and each Affiliated Entity is and will continue to be in
compliance with all applicable current and future Anti-Money Laundering Laws.



     (d) No part of the proceeds from the Loan hereunder will be used, directly or indirectly,
for any improper payments to any governmental official or employee, political party, official of a
political party, candidate for political office, official of any public international organization
or anyone else acting in an official capacity, in order to obtain, retain or direct business or
obtain any improper advantage. The Borrower has taken reasonable measures appropriate to the
circumstances (in any event as required by applicable law), to ensure that the Borrower and each
Affiliated Entity is and will continue to be in compliance with all applicable current and future
anti-corruption laws and regulations.



ARTICLE VI.

AFFIRMATIVE COVENANTS




     So long as the Loan or other Obligation hereunder shall remain unpaid or unsatisfied, the
Borrower shall, and shall (except in the case of the covenants set forth in Sections 6.01,
6.02, 6.03 and 6.11) cause each Subsidiary to:



     6.01. Financial Statements. Deliver to the Lender, in form and detail satisfactory to the
Lender:



     (a) as soon as available, but in any event within 90 days after the end of each fiscal
year of the Borrower (commencing with the fiscal year ended December 31, 2010), a consolidated
balance sheet of the Borrower and its Subsidiaries as at the end of such fiscal year, and the
related consolidated statements of income or operations, changes in shareholders’ equity, and cash
flows for such fiscal year, setting forth in each case in comparative form the figures for the
previous fiscal year, all in reasonable detail and prepared in accordance with GAAP, such
consolidated statements to be audited and accompanied by a report and opinion of an independent
certified public accountant of nationally recognized standing reasonably acceptable to the Lender,
which report and opinion shall be prepared in accordance with generally accepted auditing standards
and shall not be subject to any “going concern” or like qualification or exception or any
qualification or exception as to the scope of such audit, and such consolidated statements to be
certified by the chief executive officer, chief financial officer, treasurer or



-34-









 




controller of the Borrower to the effect that such statements are fairly stated in all
material respects when considered in relation to the consolidated financial statements of the
Borrower and its Subsidiaries;




     (b) as soon as available, but in any event within 45 days after the end of each of the
first three fiscal quarters of each fiscal year of the Borrower (commencing with the fiscal quarter
ended September 30, 2010), a consolidated balance sheet of the Borrower and its Subsidiaries as at
the end of such fiscal quarter, and the related consolidated statements of income or operations,
changes in shareholders’ equity, and cash flows for such fiscal quarter and for the portion of the
Borrower’s fiscal year then ended, setting forth in each case in comparative form the figures for
the corresponding fiscal quarter of the previous fiscal year and the corresponding portion of the
previous fiscal year, all in reasonable detail, such consolidated statements to be certified by the
chief executive officer, chief financial officer, treasurer or controller of the Borrower as fairly
presenting the financial condition, results of operations, shareholders’ equity and cash flows of
the Borrower and its Subsidiaries in accordance with GAAP, subject only to normal year-end audit
adjustments and the absence of footnotes;



     (c) by April 10th of each year, a report in form and substance reasonably satisfactory to
the Lender prepared by or under the supervision of a petroleum engineer who may be an employee of
the Borrower or its Subsidiaries, which shall evaluate all net Proved Reserves owned by
Subsidiaries which have Indebtedness outstanding under Sections 7.02(i) or (j),
such report to be as of the preceding December 31st and which shall set forth the information
necessary to determine the Present Value of Proved Reserves as of such date, together with a review
report thereon in form and substance reasonably satisfactory to the Lender by independent petroleum
engineers of nationally recognized standing reasonably acceptable to the Lender.



     The filing by the Borrower on the SEC’s EDGAR system, within the time period set forth in
Section 6.01(a) above, of the Borrower’s annual reports on Form 10-K, with certifications required
by SEC rules, shall be deemed to satisfy the delivery and certification requirements of Section
6.01(a). The filing by the Borrower on the SEC’s EDGAR system, within the time period set forth in
Section 6.01(b) above, of the Borrower’s quarterly reports on Form 10-Q, with certifications
required by SEC rules, shall be deemed to satisfy the delivery and certification requirements of
Section 6.01(b).



     6.02. Certificates; Other Information. Deliver to the Lender, in form and detail
reasonably satisfactory to the Lender:



     (a) promptly after the furnishing thereof, copies of any statement or report furnished to
any holder of debt securities of any Loan Party or of any of its Subsidiaries pursuant to the terms
of any indenture, loan or credit or similar agreement and not otherwise required to be furnished to
the Lender pursuant to Section 6.01 or any other clause of this Section 6.02;



     (b) as soon as available, but in any event within 30 days after the end of each fiscal
year of the Borrower, a report summarizing the insurance coverage (specifying type, amount and
carrier) in effect for each Loan Party and its Subsidiaries and containing such additional
information as the Lender may reasonably specify;



-35-









 





     (c) promptly, and in any event within five Business Days after receipt thereof by any Loan
Party or any Subsidiary thereof, copies of each notice or other correspondence received from the
SEC (or comparable agency in any applicable non-U.S. jurisdiction) concerning any investigation or
possible investigation or other inquiry by such agency regarding financial or other operational
results of any Loan Party or any Subsidiary thereof; provided however, that no Loan Party or any
Subsidiary thereof shall be required to provide copies of any notice or other correspondence
received from the SEC regarding routine reviews by the SEC of periodic filings;



     (d) not later than five Business Days after receipt thereof by any Loan Party or any
Subsidiary thereof, copies of all notices, requests and other documents (including amendments,
waivers and other modifications) so received under or pursuant to any instrument, indenture, loan
or credit or similar agreement and, from time to time upon request by the Lender, such information
and reports regarding such instruments, indentures and loan and credit and similar agreements as
the Lender may reasonably request (excluding information sent in the ordinary course of
administration under any such facility);



     (e) promptly after the assertion or occurrence thereof, notice of any action or proceeding
against or of any noncompliance by any Loan Party or any of its Subsidiaries with any Environmental
Law or Environmental Permit that could (i) reasonably be expected to have a Material Adverse Effect
or (ii) cause any related property to be subject to any restrictions on ownership, occupancy, use
or transferability under any Environmental Law;



     (f) as soon as available, but in any event within 30 days after the end of each fiscal
year of the Borrower, a report supplementing Schedule 5.13 containing a description of all
changes in the information included in such Schedule as may be necessary for such Schedule to be
accurate and complete, such report to be signed by a Responsible Officer of the Borrower and to be
in a form reasonably satisfactory to the Lender; and



     (g) promptly, such additional information regarding the business, financial, legal or
corporate affairs of any Loan Party or any Subsidiary thereof, or compliance with the terms of the
Loan Documents, as the Lender may from time to time reasonably request.



     The Borrower hereby acknowledges that the Lender may have personnel who do not wish to receive
material non-public information with respect to the Borrower or its Affiliates, or the respective
securities of any of the foregoing, and who may be engaged in investment and other market-related
activities with respect to such Person’s securities. The Borrower hereby agrees that so long as
the Borrower is the issuer of any outstanding debt or equity securities that are registered or
issued pursuant to a private offering or is actively contemplating issuing any such securities (w)
all materials and/or information provided by the Borrower hereunder (collectively, “Borrower
Materials”) that are made available to the Lender shall, to the extent applicable, be clearly
and conspicuously marked “PUBLIC” which, at a minimum, shall mean that the word “PUBLIC” shall
appear prominently on the first page thereof; (x) by marking Borrower Materials “PUBLIC,” the
Borrower shall be deemed to have authorized the Lender to treat such Borrower Materials as not
containing any material non-public information with respect to the Borrower or its securities for
purposes of United States Federal and state securities laws; (y) all Borrower Materials marked
“PUBLIC” are permitted to be made available to any personnel of the Lender and (z) Borrower
Materials that are not marked “PUBLIC” may be made available to



-36-









 




personnel who wish to receive material non-public information with respect to the Borrower or
its Affiliates, or the respective securities of any of the foregoing, and who may be engaged in
investment and other market-related activities with respect to such Person’s securities.




     The Borrower acknowledges and agrees that the Lender may notify the Borrower at any time and
from time to time directing the Borrower (a) to terminate providing any Borrower Materials to the
Lender that contain any material non-public information with respect to the Borrower or its
securities and/or (b) to notify the Lender prior to making available to the Lender any Borrower
Materials containing any material non-public information with respect to the Borrower or its
securities.



     6.03. Notices. Promptly notify the Lender:



     (a) of the occurrence of any Default;



     (b) of any matter that has resulted or could 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 Borrower or any Subsidiary; (ii) any dispute, litigation,
investigation, proceeding or suspension between the Borrower or any Subsidiary and any Governmental
Authority; or (iii) the commencement of, or any material development in, any litigation or
proceeding affecting the Borrower or any Subsidiary, including pursuant to any applicable
Environmental Laws;



     (c) of the occurrence of any ERISA Event;



     (d) of any material change in accounting policies or financial reporting practices by any
Loan Party or any Subsidiary thereof; and



     (e) of the (i) occurrence of any Disposition of property or assets for which the Borrower
is required to make a mandatory prepayment pursuant to Section 2.02(b)(i), (ii) incurrence
or issuance of any Indebtedness for which the Borrower is required to make a mandatory prepayment
pursuant to Section 2.02(b)(ii), and (iii) receipt of any Extraordinary Receipt for which
the Borrower is required to make a mandatory prepayment pursuant to Section 2.0(b)(iii).



     Each notice pursuant to Section 6.03 (other than Section 6.03(e)) shall be
accompanied by a statement of a Responsible Officer of the Borrower setting forth details of the
occurrence referred to therein and stating what action the Borrower has taken and proposes to take
with respect thereto. Each notice pursuant to Section 6.03(a) shall describe with
particularity any and all provisions of this Agreement and any other Loan Document that have been
breached.



     6.04. Payment of Obligations. Pay and discharge as the same shall become due and payable,
all its obligations and liabilities, including (a) all tax liabilities, assessments and
governmental charges or levies upon it or its properties or assets, unless (i) the same are being
contested in good faith by appropriate proceedings diligently conducted and adequate reserves in
accordance with GAAP are being maintained by the Borrower or such Subsidiary or (ii) the failure to
do so would not have a Material Adverse Effect; (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



-37-









 




payable, but subject to any subordination provisions contained in any instrument or agreement
evidencing such Indebtedness.




     6.05. Preservation of Existence, Etc. (a) Preserve, renew and maintain in full force and
effect its legal existence and good standing under the Laws of the jurisdiction of its organization
except in a transaction permitted by Section 7.04 or 7.05; (b) take all reasonable
action to maintain all rights, privileges, permits, licenses and franchises necessary or desirable
in the normal conduct of its business, except to the extent that failure to do so could not
reasonably be expected to have a Material Adverse Effect; and (c) 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.



     6.06. Maintenance of Properties. (a) Maintain, preserve and protect all of its material
properties, leases and equipment necessary in the operation of its business in good working order
and condition, ordinary wear and tear excepted; (b) make all necessary repairs thereto and renewals
and replacements thereof except where the failure to do so could not reasonably be expected to have
a Material Adverse Effect; and (c) use the standard of care typical in the industry in the
operation and maintenance of its facilities.



     6.07. Maintenance of Insurance. Maintain with financially sound and reputable insurance
companies not Affiliates of the Borrower, 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 and providing for not less than 30 days’ prior notice to the
Lender of termination, lapse or cancellation of such insurance.



     6.08. Compliance with Laws. Comply in all material respects with the requirements of all
applicable Laws and all orders, writs, injunctions and decrees applicable to it or to its business
or property, except in such instances in which (a) such requirement of Law or order, writ,
injunction or decree is being contested in good faith by appropriate proceedings diligently
conducted; or (b) the failure to comply therewith could not reasonably be expected to have a
Material Adverse Effect.



     6.09. Books and Records. (a) 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 Borrower or such
Subsidiary, as the case may be; and (b) maintain such books of record and account in material
conformity with all applicable requirements of any Governmental Authority having regulatory
jurisdiction over the Borrower or such Subsidiary, as the case may be.



     6.10. Inspection Rights. Permit representatives and independent contractors of the Lender
to visit and inspect any of its properties, to examine its corporate, financial and operating
records, and make copies thereof or abstracts therefrom, and to discuss its affairs, finances and
accounts with its directors, officers, and independent public accountants, all at the expense of
the Borrower and at such reasonable times during normal business hours and as often as may be
reasonably desired, upon reasonable advance notice to the Borrower; provided,
however, that when an Event of Default exists the Lender (or any of its representatives or
independent



-38-









 




contractors) may do any of the foregoing at the expense of the Borrower at any time during
normal business hours and without advance notice.




     6.11. Use of Proceeds. Use the proceeds of Loan for working capital purposes and general
corporate purposes not in contravention of any Law or of any Loan Document.



     6.12. Covenant to Guarantee Obligations. Upon the formation or acquisition of any new
direct or indirect Subsidiary (other than any CFC or a Subsidiary that is held directly or
indirectly by a CFC) by any Loan Party, then the Borrower shall, at the Borrower’s expense:



     (a) within 10 days after such formation or acquisition, cause such Subsidiary, and cause
each direct and indirect parent of such Subsidiary (if it has not already done so), to duly execute
and deliver to the Lender a guaranty or guaranty supplement, in form and substance satisfactory to
the Lender, guaranteeing the other Loan Parties’ obligations under the Loan Documents, and



     (b) within 30 days after such formation or acquisition, deliver to the Lender, upon the
request of the Lender in its sole discretion, a signed copy of a favorable opinion, addressed to
the Lender, of counsel for the Loan Parties acceptable to the Lender as to the matters contained in
clause (a), and as to such other matters as the Lender may reasonably request.



     6.13. Compliance with Environmental Laws. Comply, and, except with respect to oil and gas
properties that are not operated by the Borrower or any of its Subsidiaries, cause all lessees and
other Persons operating or occupying its properties to comply, in all material respects, with all
applicable Environmental Laws and Environmental Permits; obtain and renew all Environmental Permits
necessary for its operations and properties; and conduct any investigation, study, sampling and
testing, and undertake any cleanup, removal, remedial or other action required to remove and clean
up all Hazardous Materials from any of its properties, as required under, and in accordance with
the requirements of all Environmental Laws; provided, however, that neither the
Borrower nor any of its Subsidiaries shall be required to undertake any such cleanup, removal,
remedial or other action to the extent that its obligation to do so is being contested in good
faith and by proper proceedings and appropriate reserves are being maintained with respect to such
circumstances in accordance with GAAP.



     6.14. Further Assurances. Promptly upon request by the Lender, (a) correct any material
defect or error that may be discovered in any Loan Document or in the execution, acknowledgment,
filing or recordation thereof, and (b) do, execute, acknowledge, deliver, record, re-record, file,
re-file, register and re-register any and all such further acts, deeds, certificates, assurances
and other instruments as the Lender may reasonably require from time to time in order to carry out
more effectively the purposes of the Loan Documents, and cause each of its Subsidiaries to do so.



     6.15. Compliance with Terms of Leaseholds. Make all payments and otherwise perform all
obligations in respect of all leases of real property to which the Borrower or any of its
Subsidiaries is a party, keep such leases in full force and effect and not allow such leases to
lapse or be terminated or any rights to renew such leases to be forfeited or cancelled, notify the
Lender of any default by any party with respect to such leases and cooperate with the Lender in



-39-









 




all respects to cure any such default, and cause each of its Subsidiaries to do so, except, in
any case, where the failure to do so, either individually or in the aggregate, could not be
reasonably likely to have a Material Adverse Effect. Notwithstanding the foregoing, with respect
to leases of oil and gas properties, the Borrower and its Subsidiaries may, in the ordinary course
of business and in their sole discretion, allow any such leases to lapse, terminate, be forfeited
or cancelled, provided that any such lapses, terminations, forfeitures or cancellations, either
individually or in the aggregate, could not be reasonably likely to have a Material Adverse Effect,
and the Borrower and its Subsidiaries shall not be required to notify the Lender of any such
lapses, terminations, forfeitures or cancellations.




     6.16. Material Contracts. Perform and observe all the terms and provisions of each
Material Contract to be performed or observed by it, maintain each such Material Contract in full
force and effect and enforce in all material respects each such Material Contract in accordance
with its terms.



ARTICLE VII.

NEGATIVE COVENANTS




     So long as the Loan or other Obligation hereunder shall remain unpaid or unsatisfied, the
Borrower shall not, nor shall it permit any Subsidiary to, directly or indirectly:



     7.01. Liens. Create, incur, assume or suffer to exist any Lien upon any of its property,
assets or revenues, whether now owned or hereafter acquired, or sign or file or suffer to exist
under the Uniform Commercial Code of any jurisdiction a financing statement that names the Borrower
or any of its Subsidiaries as debtor, or assign any accounts or other right to receive income,
other than the following:



     (a) Liens pursuant to any Loan Document;



     (b) Liens existing on the date hereof and listed on Schedule 5.08(b) and any
renewals or extensions thereof, provided that (i) the property covered thereby is not
changed, (ii) the amount secured or benefited thereby is not increased except as contemplated by
Section 7.02(e), (iii) the direct or any contingent obligor with respect thereto is not
changed, and (iv) any renewal or extension of the obligations secured or benefited thereby is
permitted by Section 7.02(e);



     (c) Liens for taxes not yet delinquent or which are being contested in good faith and by
appropriate proceedings diligently conducted, if adequate reserves with respect thereto are
maintained on the books of the applicable Person in accordance with GAAP;



     (d) carriers’, warehousemen’s, mechanics’, materialmen’s, repairmen’s or other like Liens
arising in the ordinary course of business which are not overdue for a period of more than 30 days
or which are being contested in good faith and by appropriate proceedings diligently conducted, if
adequate reserves with respect thereto are maintained on the books of the applicable Person;



     (e) pledges or deposits in the ordinary course of business in connection with workers’
compensation, unemployment insurance and other social security legislation, other than any Lien
imposed by ERISA;



-40-









 





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



     (g) easements, rights-of-way, restrictions and other similar encumbrances affecting real
property which, in the aggregate, are not substantial in amount, and which do not in any case
materially detract from the value of the property subject thereto or materially interfere with the
ordinary conduct of the business of the applicable Person;



     (h) Liens securing judgments for the payment of money not constituting an Event of Default
under Section 8.01(h);



     (i) Liens securing Indebtedness permitted under Section 7.02(g); provided
that (i) such Liens do not at any time encumber any property other than the property financed by
such Indebtedness and (ii) the Indebtedness secured thereby does not exceed the cost or fair market
value, whichever is lower, of the property being acquired on the date of acquisition;



     (j) Liens on the assets (excluding any Equity Interests owned by Harvest (US) Holdings)
and the Equity Interests in Harvest (US) Holdings securing Indebtedness of Harvest (US) Holdings
permitted under Section 7.02(i);



     (k) Liens on the Equity Interests in a Subsidiary (other than Harvest (US) Holdings and
Harvest Holding LLC) which is not a CFC and the assets of such Subsidiary (excluding any Equity
Interests owned by such Subsidiary) securing Indebtedness of such Subsidiary permitted under
Section 7.02(j); and



     (l) Liens on the Specified Property (as defined in the definition of Project Financing
Indebtedness) of the special purpose Subsidiary incurring the applicable Project Financing
Indebtedness and/or Liens on the contract revenues under a contract for the sale of products or
services manufactured at and/or derived from the Specified Property by such special purpose
Subsidiary entered into in the ordinary course of business to secure Project Financing Indebtedness
of such special purpose Subsidiary.



     7.02. Indebtedness. Create, incur, assume or suffer to exist any Indebtedness, except:



     (a) obligations (contingent or otherwise) existing or arising under any Swap Contract,
provided that (i) such obligations are (or were) entered into by such Person in the
ordinary course of business (and not for speculative purposes) to hedge or mitigate risks to which
the Borrower or any Subsidiary (other than Harvest Holding LLC) is exposed in the conduct of its
business or the management of its liabilities and (ii) such Swap Contract does not contain any
provision exonerating the non-defaulting party from its obligation to make payments on outstanding
transactions to the defaulting party; provided that the aggregate Swap Termination Value thereof
shall not exceed $15,000,000 at any time outstanding;



     (b) Indebtedness of a Subsidiary of the Borrower (other than Harvest Holding LLC) owing to
a wholly-owned Subsidiary of the Borrower (which is not a Loan Party or Harvest Holding LLC), which
Indebtedness shall be permitted under the provisions of Section 7.03;



-41-









 





     (c) Indebtedness of a Subsidiary of the Borrower (other than Harvest Holding LLC) owing to
the Borrower or another Loan Party, which Indebtedness shall (i) be subordinated to the Obligations
on terms and conditions satisfactory to the Lender and (ii) be otherwise permitted under the
provisions of Section 7.03;



     (d) Indebtedness under the Loan Documents;



     (e) Indebtedness outstanding on the date hereof and listed on Schedule 7.02 and
any refinancings, refundings, renewals or extensions thereof; provided that the amount of
such Indebtedness is not increased at the time of such refinancing, refunding, renewal or extension
except by an amount equal to a reasonable premium or other reasonable amount paid, and fees and
expenses reasonably incurred, in connection with such refinancing and by an amount equal to any
existing commitments unutilized thereunder and the direct or any contingent obligor with respect
thereto is not changed, as a result of or in connection with such refinancing, refunding, renewal
or extension; and provided, still further, that the terms relating to
principal amount, amortization, maturity, collateral (if any) and subordination (if any), and other
material terms taken as a whole, of any such refinancing, refunding, renewing or extending
Indebtedness, and of any agreement entered into and of any instrument issued in connection
therewith, are no less favorable in any material respect to the Loan Parties or the Lender than the
terms of any agreement or instrument governing the Indebtedness being refinanced, refunded, renewed
or extended and the interest rate applicable to any such refinancing, refunding, renewing or
extending Indebtedness does not exceed the then applicable market interest rate;



     (f) Guarantees of the Borrower or any Guarantor in respect of Indebtedness of the Borrower
or any other Guarantor otherwise permitted under clauses (a), (b), (c), (d) or (g) of this
Section 7.02;



     (g) Indebtedness in respect of Capitalized Leases, Synthetic Lease Obligations and
purchase money obligations for fixed or capital assets within the limitations set forth in
Section 7.01(i); provided, however, that (x) the aggregate amount of all
such Indebtedness at any one time outstanding shall not exceed $10,000,000 and (y) Harvest Holding
LLC shall not be permitted to create, incur, assume or suffer to exist any of such Indebtedness;



     (h) Indebtedness of the Borrower under the Senior Convertible Notes;



     (i) Indebtedness of Harvest (US) Holdings under a Facility and Indebtedness in the form of
a Guarantee by Borrower of the obligations of Harvest (US) Holdings under such Facility so long as
(x) the Guarantee by Borrower is subordinated to the Obligations on terms and conditions reasonably
satisfactory to the Lender and (y) prior to incurring such Indebtedness Harvest (US) Holdings shall
have transferred the Equity Interests of all of its Subsidiaries to a newly formed Subsidiary
(“NewCo”) of the Borrower (which Subsidiary is not a CFC) and the requirements of
Section 6.12 shall have been satisfied; provided that such Indebtedness under such Facility
shall only be Indebtedness permitted under this clause (i) (1) if within six months after initially
incurring such Indebtedness Harvest (US) Holdings shall have assigned the West Bay Leases to NewCo
and (2) on any date if the Asset Coverage Ratio on such date is not less than 1.5 to 1.0;



-42-









 





     (j) Indebtedness of a Subsidiary (other than Harvest (US) Holdings or Harvest Holding LLC)
which is not a CFC under a Facility; provided that such Indebtedness under such Facility shall only
be Indebtedness permitted under this clause (j) on any date if the Asset Coverage Ratio of such
Subsidiary on such date is not less than 1.5 to 1.0;



     (k) Unsecured Indebtedness of Subsidiaries (other than Harvest Holding LLC) which is
subordinated to the Obligations on terms and conditions satisfactory to the Lender in an aggregate
principal amount outstanding not to exceed $20,000,000 at any time;



     (l) Unsecured Indebtedness of the Borrower incurred in connection with a Strategic
Transaction, the proceeds of which shall be placed in escrow arrangements reasonably satisfactory
to the Lender and the Borrower;



     (m) Unsecured Indebtedness of the Borrower incurred under clause (g) of the definition of
Indebtedness in the form of an agreement to distribute certain Equity Interests of Second NewCo to
the holders of the Equity Interests in the Borrower in connection with a Strategic Transaction, so
long as such agreement at all times provides for the repayment at the closing of such Strategic
Transaction of the Obligations in full in cash; provided that no such Strategic Transaction shall
be consummated unless and until the Obligations have been paid in full in cash; and



     (n) Project Financing Indebtedness of any Subsidiary (other than Harvest Holding LLC) of
the Borrower;



     provided that, notwithstanding anything contained in this Section 7.02, the
Borrower shall not permit any Subsidiary to have outstanding any obligation (by Guarantee or
otherwise) in favor of any holder of the Senior Convertible Note unless the Lender has a Guarantee
of the Loan from such Subsidiary which is fully enforceable and pari passu with the claims of
holder against such Subsidiary under the Senior Convertible Note.



     7.03. Investments. Make or hold any Investments, except:



     (a) Investments held by the Borrower and its Subsidiaries in the form of Cash Equivalents
in an aggregate principal amount for all such Investments not to exceed $200,000,000 at any time
outstanding;



     (b) advances to officers, directors and employees of the Borrower and Subsidiaries in an
aggregate amount not to exceed $750,000 at any time outstanding, for travel, entertainment,
relocation and analogous ordinary business purposes;



     (c) (i) Investments by the Borrower and its Subsidiaries in their respective Subsidiaries
outstanding on the date hereof, (ii) additional Investments by the Borrower and its Subsidiaries in
Loan Parties, (iii) additional Investments by Subsidiaries of the Borrower that are not Loan
Parties in other Subsidiaries (other than Harvest Holding LLC) that are not Loan Parties, (iv) so
long as no Default has occurred and is continuing or would result from such Investment, additional
Investments by the Loan Parties in wholly-owned Subsidiaries (other than Harvest Holding LLC) that
are not Loan Parties; provided that, the aggregate amount of Investments made pursuant to this
clause (iv) shall not exceed $700,000,000 in the aggregate and



-43-









 




(v) so long as no Default has occurred and is continuing or would result from such Investment, an
Investment by a Loan Party in a newly formed wholly-owned Subsidiary which is not a Loan Party
(“Second NewCo”) in connection with a Strategic Transaction, the proceeds of which Investment shall
be placed in escrow arrangements reasonably satisfactory to the Lender and the Borrower;




     (d) Investments consisting of extensions of credit in the nature of accounts receivable or
notes receivable arising from the grant of trade credit in the ordinary course of business, and
Investments received in satisfaction or partial satisfaction thereof from financially troubled
account debtors to the extent reasonably necessary in order to prevent or limit loss;



     (e) Guarantees permitted by Section 7.02;



     (f) Investments existing on the date hereof (other than those referred to in Section
7.03(c)(i)) and set forth on Schedule 5.08(d);



     (g) the purchase or other acquisition of all of the Equity Interests in, or all or
substantially all of the property of, any Person that, upon the consummation thereof, will be
wholly-owned directly by the Borrower or one or more of its wholly-owned Subsidiaries (other than
Harvest Holding LLC) (including as a result of a merger or consolidation); provided that,
with respect to each purchase or other acquisition made pursuant to this Section 7.03(g):




     (i) any such newly-created or acquired Subsidiary shall comply with any applicable
requirements of Section 6.12;




     (ii) the lines of business of the Person to be (or the property of which is to be)
so purchased or otherwise acquired shall be substantially the same lines of business as one
or more of the principal businesses of the Borrower and its Subsidiaries in the ordinary
course;




     (iii) such purchase or other acquisition shall not include or result in any
contingent liabilities that could reasonably be expected to be material to the business,
financial condition, operations or prospects of the Borrower and its Subsidiaries, taken as
a whole (as determined in good faith by the board of directors (or the persons performing
similar functions) of the Borrower or such Subsidiary if the board of directors is otherwise
approving such transaction and, in each other case, by a Responsible Officer);




     (iv) the total cash and noncash consideration (including the fair market value of
all Equity Interests issued or transferred to the sellers thereof, all indemnities, earnouts
and other contingent payment obligations to, and the aggregate amounts paid or to be paid
under noncompete, consulting and other affiliated agreements with, the sellers thereof, all
write-downs of property and reserves for liabilities with respect thereto and all
assumptions of debt, liabilities and other obligations in connection therewith) paid by or
on behalf of the Borrower and its Subsidiaries for any such purchase or other acquisition,
when aggregated with the total cash and noncash consideration paid by or on behalf of the
Borrower and its Subsidiaries for all other purchases and other acquisitions made by the
Borrower and its Subsidiaries pursuant to this Section 7.03(g) shall not exceed
$200,000,000 in the aggregate; and



-44-









 






     (v) immediately before and immediately after giving pro forma effect to any such
purchase or other acquisition, no Default shall have occurred and be continuing;



     (h) Investments by the Borrower and its Subsidiaries (other than Harvest Holding LLC) not
otherwise permitted under this Section 7.03; provided that, the aggregate amount of
Investments made pursuant to this clause (h) shall not exceed $100,000,000 in the aggregate;
further provided that, with respect to each Investment made pursuant to this
Section 7.03(h):




     (i) such Investment shall not include or result in any contingent liabilities that
could reasonably be expected to be material to the business, financial condition, operations
or prospects of the Borrower and its Subsidiaries, taken as a whole (as determined in good
faith by the board of directors (or persons performing similar functions) of the Borrower or
such Subsidiary if the board of directors is otherwise approving such transaction and, in
each other case, by a Responsible Officer);




     (ii) such Investment shall be in property that is part of, or in lines of business
that are, substantially the same lines of business as one or more of the principal
businesses of the Borrower and its Subsidiaries in the ordinary course;




     (iii) any determination of the amount of such Investment shall include all cash and
noncash consideration (including the fair market value of all Equity Interests issued or
transferred to the sellers thereof, all indemnities, earnouts and other contingent payment
obligations to, and the aggregate amounts paid or to be paid under noncompete, consulting
and other affiliated agreements with, the sellers thereof, all write-downs of property and
reserves for liabilities with respect thereto and all assumptions of debt, liabilities and
other obligations in connection therewith) paid by or on behalf of the Borrower and its
Subsidiaries in connection with such Investment; and




     (iv) immediately before and immediately after giving pro forma effect to any such
purchase or other acquisition, no Default shall have occurred and be continuing; and



     (i) other Investments (other than in Harvest Holding LLC) not exceeding $5,000,000 in the
aggregate.



     7.04. Fundamental Changes. Merge, dissolve, liquidate, consolidate with or into another
Person, or 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 that, so long as no Default exists or would result therefrom:



     (a) any Subsidiary may merge with (i) the Borrower, provided that the Borrower
shall be the continuing or surviving Person, or (ii) any one or more other Subsidiaries (other than
Harvest Holding LLC), provided that when any Loan Party is merging with another Subsidiary,
such Loan Party shall be the continuing or surviving Person;



     (b) any Loan Party may Dispose of all or substantially all of its assets (upon voluntary
liquidation or otherwise) to the Borrower or to another Loan Party (other than a Subsidiary which
is obligated in respect of a Facility); and



-45-









 





     (c) any Subsidiary that is not a Loan Party may dispose of all or substantially all its
assets (including any Disposition that is in the nature of a liquidation) to (i) another Subsidiary
(other than Harvest Holding LLC) that is not a Loan Party or (ii) to a Loan Party.



     7.05. Dispositions. Make any Disposition or enter into any agreement to make any
Disposition, except:



     (a) Dispositions of obsolete or worn out property, whether now owned or hereafter
acquired, in the ordinary course of business;



     (b) Dispositions or sales of hydrocarbons in the ordinary course of business;



     (c) Dispositions of equipment or real property to the extent that (i) such property is
exchanged for credit against the purchase price of similar replacement property or (ii) the
proceeds of such Disposition are promptly applied to the purchase price of such replacement
property;



     (d) Dispositions of property by the Borrower or any Subsidiary to the Borrower or to a
wholly-owned Subsidiary (excluding (x) a Subsidiary which is obligated in respect of a Facility and
(y) Harvest Holding LLC); provided that if the transferor of such property is a Guarantor,
the transferee thereof must either be the Borrower or a Guarantor;



     (e) Dispositions of assets related to the Monument Butte Extension area in Utah for cash
and possible payment of past costs;



     (f) Farmouts of a percentage of Subsidiaries’ working interest in the Gabon Project for
cash and possible payment of past costs;



     (g) Farmouts of a percentage of Subsidiaries’ working interest for cash and possible
payment of past costs in the Oman Project;



     (h) Farmouts of a percentage of Subsidiaries’ working interest, payment of past costs or
receipt of a carried interest in future exploration and development costs in the West Bay Project;



     (i) Farmouts of a percentage of the Subsidiaries’ working interest, payment of past costs
or receipt of a carried interest in future exploration and development costs in the Budong Budong,
Indonesia Project;



     (j) Disposition of all or part of the Borrower’s or its Subsidiaries’ Equity Interest in
Fusion LLC;



     (k) Disposition of all or part of Subsidiaries’ interest in the WAB-21 Block Project;



     (l) Execution of an agreement to enter into a Strategic Transaction, so long as such
agreement at all times provides for the repayment at the closing of such Strategic Transaction of
the Obligations in full in cash; provided that no such Strategic Transaction shall be consummated



-46-









 




and no Disposition shall occur pursuant to such agreement unless and until the Obligations
have been paid in full in cash;




     (m) Entering into of any West Bay Leases;



     (n) Entering into any assignments of leasehold interests to form AMIs (Areas of Mutual
Interest) with third parties in the ordinary course of business and on customary terms and
conditions;



     (o) Dispositions permitted by Section 7.04;



     (p) Subject to Section 7.14, Dispositions by the Borrower and its Subsidiaries of
property pursuant to sale-leaseback transactions, provided that the book value of all
property so Disposed of shall not exceed $5,000,000 in any fiscal year;



     (q) Dispositions by the Borrower and its Subsidiaries not otherwise permitted under this
Section 7.05; provided that (i) at the time of such Disposition, no Default or
Event of Default shall exist or would result from such Disposition, (ii) the aggregate book value
of all property Disposed of in reliance on this clause (q) in any fiscal year shall not exceed
$5,000,000 and (iii) the purchase price for such asset shall be paid to the Borrower or such
Subsidiary solely in cash;



     (r) Dispositions of oil and gas properties in the ordinary course of business not
exceeding $20,000,000 in the aggregate and not otherwise permitted under this Section 7.05;



     (s) A Disposition in the form of the execution of an agreement to make a Restricted
Payment as permitted by Section 7.02(m), so long as such agreement at all times provides
for the repayment at the closing of such Strategic Transaction of the Obligations in full in cash;
provided that no such Disposition and Strategic Transaction shall be consummated unless and until
the Obligations have been paid in full in cash; and



     (t) A Disposition in the form of cash as permitted by Section 7.03(c)(v).


provided, however, that any Disposition pursuant to Section 7.05(a) through Section 7.05(s)
shall be for fair market value.




     7.06. Restricted Payments. Declare or make, directly or indirectly, any Restricted
Payment, or incur any obligation (contingent or otherwise) to do so, or issue or sell any Equity
Interests or accept any capital contributions, except that, so long as no Default shall have
occurred and be continuing at the time of any action described below or would result therefrom:



     (a) each Subsidiary may make Restricted Payments to (i) the Borrower, (ii) any
Subsidiaries of the Borrower that are Guarantors and (iii) any other Person that owns a direct
Equity Interest in such Subsidiary (to the extent such Subsidiary is making a contemporaneous
Restricted Payment to the Borrower or Guarantor which also holds an Equity Interest in such
Subsidiary), in each case ratably according to their respective holdings of the type of Equity
Interest in respect of which such Restricted Payment is being made;



-47-









 





     (b) the Borrower and each Subsidiary may declare and make dividend payments or other
distributions payable solely in the common stock or other common Equity Interests of such Person;



     (c) capital contributions permitted by Sections 7.03(c)(ii)and (v) and
Section 7.05(d); and



     (d) the execution of an agreement to make a Restricted Payment as permitted by Section
7.02(m), so long as such agreement at all times provides for the repayment at the closing of
such Strategic Transaction of the Obligations in full in cash; provided that no such Restricted
Payment shall be made and no such Strategic Transaction shall be consummated unless and until the
Obligations have been paid in full in cash.



     7.07. Change in Nature of Business. Engage in any material line of business substantially
different from those lines of business conducted by the Borrower and its Subsidiaries on the date
hereof or any business substantially related or incidental thereto.



     7.08. Transactions with Affiliates. Enter into any transaction of any kind with any
Affiliate of the Borrower, whether or not in the ordinary course of business, other than on fair
and reasonable terms substantially as favorable to the Borrower or such Subsidiary as would be
obtainable by the Borrower or such Subsidiary at the time in a comparable arm’s length transaction
with a Person other than an Affiliate; provided, however, that nothing herein shall prohibit (a)
intercompany loans to fund expenditures of a Subsidiary in the ordinary course of business and
permitted under Sections 7.02 and 7.03 or (b) the transfer of the Equity Interests
of Harvest (US) Holdings’s Subsidiaries to NewCo or the assignment of the West Bay Leases by
Harvest (US) Holdings to NewCo permitted by Section 7.02(i).



     7.09. Burdensome Agreements. Enter into or permit to exist any Contractual Obligation
(other than this Agreement or any other Loan Document) that (a) limits the ability (i) of any
Subsidiary to make Restricted Payments to the Borrower or any Guarantor or to otherwise transfer
property to or invest in the Borrower or any Guarantor, except for any agreement in effect (A) on
the date hereof and set forth on Schedule 7.09 or (B) at the time any Subsidiary becomes a
Subsidiary of the Borrower, so long as such agreement was not entered into solely in contemplation
of such Person becoming a Subsidiary of the Borrower, (ii) of any Subsidiary to Guarantee the
Indebtedness of the Borrower or (iii) of the Borrower or any Subsidiary to create, incur, assume or
suffer to exist Liens on property of such Person; provided, however, that this
clause (iii) shall not prohibit any negative pledge incurred or provided in favor of any holder of
Indebtedness permitted under Section 7.02(g) solely to the extent any such negative pledge
relates to the property financed by or the subject of such Indebtedness; or (b) requires the grant
of a Lien to secure an obligation of such Person if a Lien is granted to secure another obligation
of such Person.



     7.10. Use of Proceeds. Use the proceeds of the Loan, whether directly or indirectly, and
whether immediately, incidentally or ultimately, to purchase or carry margin stock (within the
meaning of Regulation U of the FRB) or to extend credit to others for the purpose of purchasing or
carrying margin stock or to refund indebtedness originally incurred for such purpose.



-48-









 





     7.11. Amendments of Organization Documents. Amend any of its Organization Documents in
any way that would have an adverse effect on the ability of the Loan Parties to repay the Loan.



     7.12. Accounting Changes. Make any change in (a) accounting policies or reporting
practices, except as required by GAAP, or (b) fiscal year.



     7.13. Prepayments, Etc. of Indebtedness. Prepay, redeem, purchase, defease or otherwise
satisfy prior to the scheduled maturity thereof in any manner, or make any payment in violation of
any subordination terms of, any Indebtedness, except (a) the prepayment of the Loan in accordance
with the terms of this Agreement, (b) regularly scheduled or required repayments or redemptions of
Indebtedness set forth in Schedule 7.02 and (c) conversions into common stock of the
Borrower under the Senior Convertible Notes or mandatory repurchases of any Senior Convertible
Notes, in each case in accordance with the terms thereof.



     7.14. Terrorism Sanctions Regulations. The Borrower will not and will not permit any
Affiliated Entity to (a) become an OFAC Listed Person or (b) have any investments in, or engage in
any dealings or transactions with, any Blocked Person.



ARTICLE VIII.

EVENTS OF DEFAULT AND REMEDIES




     8.01. Events of Default. Any of the following shall constitute an Event of Default:



     (a) Non-Payment. The Borrower or any other Loan Party fails to (i) pay when and
as required to be paid herein, any amount of principal of the Loan, or (ii) pay within three days
after the same becomes due, any interest on the Loan, or any fee due hereunder, or (iii) pay within
five days after the same becomes due, any other amount payable hereunder or under any other Loan
Document; or



     (b) Specific Covenants. (i) the Borrower fails to perform or observe any term,
covenant or agreement contained in any of Section 6.01, 6.02, 6.03,
6.05, 6.10, 6.11, 6.12, or Article VII, or (ii) any of the
Guarantors fails to perform or observe any term, covenant or agreement contained in the Guaranty;
or



     (c) Other Defaults. Any Loan Party fails to perform or observe in any material
respect any other covenant or agreement (not specified in Section 8.01(a) or (b)
above) contained in any Loan Document on its part to be performed or observed and such failure
continues for 30 days; or



     (d) Representations and Warranties. Any representation, warranty, certification
or statement of fact made by or on behalf of the Borrower or any other Loan Party herein, in any
other Loan Document, or in any document delivered in connection herewith or therewith shall be
materially incorrect or misleading when made; or



     (e) Cross-Default. (i) Any Loan Party or any Subsidiary thereof (A) fails to make
any payment when due (whether by scheduled maturity, required prepayment, acceleration, demand, or
otherwise) in respect of any Indebtedness or Guarantee (other than Indebtedness



-49-









 




hereunder and Indebtedness under Swap Contracts) 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 the Threshold Amount, or (B) fails to observe or
perform any other agreement or condition relating to any such Indebtedness or Guarantee or
contained in any instrument or agreement evidencing, securing or relating thereto, or any other
event occurs, the effect of which default or other event is to cause, or to permit the holder or
holders of such Indebtedness or the beneficiary or beneficiaries of such Guarantee (or a trustee or
agent on behalf of such holder or holders or beneficiary or beneficiaries) to cause, with the
giving of notice if required, such Indebtedness to be demanded or to become due or to be
repurchased, prepaid, defeased or redeemed (automatically or otherwise), or an offer to repurchase,
prepay, defease or redeem such Indebtedness to be made, prior to its stated maturity, or such
Guarantee to become payable or cash collateral in respect thereof to be demanded; or (ii) there
occurs under any Swap Contract an Early Termination Date (as defined in such Swap Contract)
resulting from (A) any event of default under such Swap Contract as to which a Loan Party or any
Subsidiary thereof is the Defaulting Party (as defined in such Swap Contract) or (B) any
Termination Event (as so defined) under such Swap Contract as to which a Loan Party or any
Subsidiary thereof is an Affected Party (as so defined) and, in either event, the Swap Termination
Value owed by such Loan Party or such Subsidiary as a result thereof is greater than the Threshold
Amount; or




     (f) Insolvency Proceedings, Etc. Any Loan Party or any Significant Subsidiary
thereof institutes or consents to the institution of any proceeding under any Debtor Relief Law, or
makes an assignment for the benefit of creditors; or applies for or consents to the appointment of
any receiver, trustee, custodian, conservator, liquidator, rehabilitator or similar officer for it
or for all or any material part of its property; or any receiver, trustee, custodian, conservator,
liquidator, rehabilitator or similar officer is appointed without the application or consent of
such Person and the appointment continues undischarged or unstayed for 60 calendar days; or any
proceeding under any Debtor Relief Law relating to any such Person or to all or any material part
of its property is instituted without the consent of such Person and continues undismissed or
unstayed for 60 calendar days, or an order for relief is entered in any such proceeding; or



     (g) Inability to Pay Debts; Attachment. (i) Any Loan Party or any Significant
Subsidiary thereof becomes unable or admits in writing its inability or fails generally to pay its
debts as they become due, or (ii) any writ or warrant of attachment or execution or similar process
is issued or levied against all or any material part of the property of any such Person and is not
released, vacated or fully bonded within 30 days after its issue or levy; or



     (h) Judgments. There is entered against any Loan Party or any Significant
Subsidiary thereof (i) one or more final judgments or orders for the payment of money in an
aggregate amount (as to all such judgments and orders) exceeding the Threshold Amount (to the
extent not covered by independent third-party insurance as to which the insurer is rated at least
“A” by A.M. Best Company, has been notified of the potential claim and does not dispute coverage),
or (ii) any one or more non-monetary final judgments that have, or could reasonably be expected to
have, individually or in the aggregate, a Material Adverse Effect and, in either case, (A)
enforcement proceedings are commenced by any creditor upon such judgment or order, or (B) there is
a period of 10 consecutive days during which a stay of enforcement of such judgment, by reason of a
pending appeal or otherwise, is not in effect; or



-50-









 





     (i) ERISA. (i) An ERISA Event occurs with respect to a Pension Plan or
Multiemployer Plan which has resulted or could reasonably be expected to result in liability of the
Borrower under Title IV of ERISA to the Pension Plan, Multiemployer Plan or the PBGC in an
aggregate amount in excess of the Threshold Amount, or (ii) the Borrower or any ERISA Affiliate
fails to pay when due, after the expiration of any applicable grace period, any installment payment
with respect to its withdrawal liability under Section 4201 of ERISA under a Multiemployer Plan in
an aggregate amount in excess of the Threshold Amount; or



     (j) Invalidity of Loan Documents. Any material provision of any Loan Document, at
any time after its execution and delivery and for any reason other than as expressly permitted
hereunder or thereunder or satisfaction in full of all the Obligations, ceases to be in full force
and effect to the same extent as on the Closing Date; or any Loan Party or any other Person
contests in any manner the validity or enforceability of any provision of any Loan Document; or any
Loan Party denies that it has any or further liability or obligation under any provision of any
Loan Document, or purports to revoke, terminate or rescind any provision of any Loan Document; or



     (k) Change of Control. There occurs any Change of Control.



     8.02. Remedies upon Event of Default. If any Event of Default occurs and is continuing,
the Lender may take any or all of the following actions:



     (a) declare the unpaid principal amount of the outstanding Loan, all interest accrued and
unpaid thereon, and all other amounts owing or payable hereunder or under any other Loan Document
to be immediately due and payable, without presentment, demand, protest or other notice of any
kind, all of which are hereby expressly waived by the Borrower; and



     (b) exercise all rights and remedies available to it under the Loan Documents;


provided, however, that upon the occurrence of an actual or deemed entry of an
order for relief with respect to the Borrower under the Bankruptcy Code of the United States, the
unpaid principal amount of the outstanding Loan and all interest and other amounts as aforesaid
shall automatically become due and payable.




     8.03. Application of Funds. After the exercise of remedies provided for in Section
8.02 (or after the Loan has automatically become immediately due and payable), any amounts
received on account of the Obligations shall be applied by the Lender in the following order:



     First, to payment of that portion of the Obligations constituting fees, indemnities,
expenses and other amounts (including fees, charges and disbursements of counsel to the Lender and
amounts payable under Article III) payable to the Lender;



     Second, to payment of that portion of the Obligations constituting accrued and unpaid
interest on the Loan and other Obligations arising under the Loan Documents;



     Third, to payment of that portion of the Obligations constituting unpaid principal of
the Loan; and



-51-









 





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



ARTICLE IX.

MISCELLANENOUS




     9.01. Amendments, Etc. No amendment or waiver of any provision of this Agreement or any
other Loan Document, and no consent to any departure by the Borrower or any other Loan Party
therefrom, shall be effective unless in writing signed by the Lender and the Borrower or the
applicable Loan Party, as the case may be, and each such waiver or consent shall be effective only
in the specific instance and for the specific purpose for which given.



     9.02. Notices; Effectiveness.



     (a) Notices Generally. All notices and other communications provided for herein
shall be in writing and shall be delivered by hand or overnight courier service, mailed by
certified or registered mail or sent by telecopier to the address or telecopier number specified
for the Borrower or the Lender, as applicable, on Schedule 9.02.



     Notices and other communications sent by hand or overnight courier service, or mailed by
certified or registered mail, shall be deemed to have been given when received; notices and other
communications sent by telecopier shall be deemed to have been given when sent (except that, if not
given during normal business hours for the recipient, shall be deemed to have been given at the
opening of business on the next business day for the recipient).



     (b) Change of Address, Etc. Each of the Borrower and the Lender may change its
address or telecopier number for notices and other communications hereunder by notice to the other
parties hereto.



     9.03. No Waiver; Cumulative Remedies; Enforcement. No failure by the Lender, to exercise,
and no delay by the Lender in exercising, any right, remedy, power or privilege hereunder or under
any other Loan Document 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. The rights, remedies, powers and
privileges herein provided, and provided under each other Loan Document, are cumulative and not
exclusive of any rights, remedies, powers and privileges provided by law.



     9.04. Expenses; Indemnity; Damage Waiver. (a) Expenses. The Borrower shall pay
(i) all reasonable out-of-pocket expenses incurred by the Lender and its Affiliates (including the
reasonable fees, charges and disbursements of counsel for the Lender), in connection with the
preparation, negotiation, execution, delivery and administration of this Agreement and the other
Loan Documents or any amendments, modifications or waivers of the provisions hereof or any
assignment, syndication, or grant of participation of the Lender’s rights and obligations hereunder
(whether or not the transactions contemplated hereby or thereby shall be consummated), and (ii) all
out-of-pocket expenses incurred by the Lender (including the reasonable fees, charges and
disbursements of any counsel for the Lender, in connection with the



-52-









 




enforcement or protection of
its rights (A) in connection with this Agreement and the other Loan
Documents, including its rights under this Section, or (B) in connection with Loan made
hereunder, including all such out-of-pocket expenses incurred during any workout, litigation,
restructuring or negotiations in respect of the Loan.




     (b) Indemnification by the Borrower. The Borrower shall indemnify the Lender and
each Related Party of any of the foregoing Persons (each such Person being called an
“Indemnitee”) against, and hold each Indemnitee harmless from, any and all losses, claims,
damages, liabilities and related expenses (including the fees, charges and disbursements of any
counsel for any Indemnitee), and shall indemnify and hold harmless each Indemnitee from all fees
and time charges and disbursements for attorneys who may be employees of any Indemnitee, incurred
by any Indemnitee or asserted against any Indemnitee by any third party or by the Borrower or any
other Loan Party arising out of, in connection with, or as a result of (i) the execution or
delivery of this Agreement, any other Loan Document or any agreement or instrument contemplated
hereby or thereby, the performance by the parties hereto of their respective obligations hereunder
or thereunder or the consummation of the transactions contemplated hereby or thereby, (ii) the Loan
or the use or proposed use of the proceeds therefrom, (iii) any actual or alleged presence or
Release of Hazardous Materials on or from any property owned or operated by the Borrower or any of
its Subsidiaries, or any Environmental Liability related to the Borrower or any of its
Subsidiaries, or (iv) any actual or prospective claim, litigation, investigation or proceeding
relating to any of the foregoing, whether based on contract, tort or any other theory, whether
brought by a third party or by the Borrower or any other Loan Party or any of the Borrower’s or
such Loan Party’s directors, shareholders or creditors, and regardless of whether any Indemnitee is
a party thereto; provided that such indemnity shall not, as to any Indemnitee, be available
to the extent that such losses, claims, damages, liabilities or related expenses (x) are determined
by a court of competent jurisdiction by final and nonappealable judgment to have resulted from the
gross negligence or willful misconduct of such Indemnitee or (y) result from a claim brought by the
Borrower or any other Loan Party against an Indemnitee for breach in bad faith of such Indemnitee’s
obligations hereunder or under any other Loan Document, if the Borrower or such Loan Party has
obtained a final and nonappealable judgment in its favor on such claim as determined by a court of
competent jurisdiction.



     (c) Waiver of Consequential Damages, Etc. To the fullest extent permitted by
applicable law, the Borrower shall not assert, and hereby waives, any claim against any Indemnitee,
on any theory of liability, for special, indirect, consequential or punitive damages (as opposed to
direct or actual damages) arising out of, in connection with, or as a result of, this Agreement,
any other Loan Document or any agreement or instrument contemplated hereby, the transactions
contemplated hereby or thereby, any Loan or Letter of Credit or the use of the proceeds thereof.
No Indemnitee referred to in subsection (b) above shall be liable for any damages arising from the
use by unintended recipients of any information or other materials distributed to such unintended
recipients by such Indemnitee through telecommunications, electronic or other information
transmission systems in connection with this Agreement or the other Loan Documents or the
transactions contemplated hereby or thereby other than for direct or actual damages resulting from
the gross negligence or willful misconduct of such Indemnitee as determined by a final and
nonappealable judgment of a court of competent jurisdiction.



-53-









 





     (d) Payments. All amounts due under this Section shall be payable not later than
ten Business Days after demand therefor.



     (e) Survival. The agreements in this Section shall survive the replacement of the
Lender and the repayment, satisfaction or discharge of all the other Obligations.



     9.05. Payments Set Aside. To the extent that any payment by or on behalf of the Borrower
is made to the Lender, or the Lender exercises its right of setoff, and such payment or the
proceeds of such setoff or any part thereof is subsequently invalidated, declared to be fraudulent
or preferential, set aside or required (including pursuant to any settlement entered into by the
Lender in its discretion) to be repaid to a trustee, receiver or any other party, in connection
with any proceeding under any Debtor Relief Law or otherwise, then 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 setoff had not occurred.



     9.06. Tax Matters. The Borrower and the Lender agree and acknowledge that the Warrants
and the Note are being issued together as an “investment unit” within the meaning of Section
1273(c)(2) of the Code. For the purposes of allocating the issue price to the Warrants and the
Note as required by Section 1273(c)(2) of the Code and the Treasury regulations promulgated
thereunder, the Borrower and the Lender agree that the fair market value of the Warrants on the
date of issue is as set forth in the Warrant Purchase Agreement (the “Warrant Fair Market
Value”), and the fair market value of the Note on the date of issue is the result of
$60,000,000 minus the Warrant Fair Market Value. Except as otherwise required by applicable Law,
the Borrower and the Lender agree that they will use such allocation to prepare and file all tax
returns and other reports consistent with such allocation. The Borrower and the Lender acknowledge
that this Section 9.06 is intended to establish the allocation of the issue price of the
“investment unit” in accordance with Treasury regulations section 1.1273-2(h)(1) and Section
1273(c)(2) of the Code, which allocation is binding on the Borrower and the Lender pursuant to
Treasury regulations section 1.1273-2(h)(2).



     9.07. Successors and Assigns. The provisions of this Agreement shall be binding upon and
inure to the benefit of the parties hereto and their respective successors and assigns permitted
hereby, except that the Borrower may not assign or otherwise transfer any of its rights or
obligations hereunder without the prior written consent of the Lender (and any other attempted
assignment or transfer by the Borrower shall be null and void). Prior to the occurrence of an
Event of Default, the Lender may assign, grant participations in or otherwise transfer any of its
rights or obligations hereunder and under the other Loan Documents (a) to an Affiliate, but only to
an Affiliate, of the Lender without the consent of the Borrower and (b) to a non-affiliate of the
Lender with the consent of the Borrower, which consent shall not be unreasonably withheld or
delayed. After the occurrence of an Event of Default, the Lender may assign, grant participations
in or otherwise transfer any of its rights or obligations hereunder and under the other Loan
Documents to one or more third parties without the consent of the Borrower. As a condition to any
permitted assignment by the Lender hereunder, the assignee shall be required to execute and deliver
to the Borrower a confidentiality agreement in form and substance reasonably acceptable to the
Borrower (it being agreed and understood that a confidentiality agreement in substantially the same
form as previously entered into by the Borrower with an



-54-









 




Affiliate of the Lender is acceptable to the Borrower). The Borrower agrees to promptly
execute and deliver to the Lender any and all amendments, agreements, notes and/or documents in
connection with any such permitted assignment, participation or other transfer as requested by the
Lender, including, without limitation, amended and restated loan documents to reflect a syndicated
credit facility. Any transferee or assignee permitted hereunder shall deliver to the Borrower the
documents and certifications required to be provided by a Lender under Section 3.01(e).
Notwithstanding anything herein to the contrary, no transferee or assignee shall be entitled to any
greater increased payments under Section 3.01 than that which the transferor Lender was
otherwise entitled.




     9.08. Right of Setoff. If an Event of Default shall have occurred and be continuing, the
Lender and its Affiliates is hereby authorized at any time and from time to time, to the fullest
extent permitted by applicable law, to set off and apply any and all deposits (general or special,
time or demand, provisional or final, in whatever currency) at any time held and other obligations
(in whatever currency) at any time owing by the Lender or any such Affiliate to or for the credit
or the account of the Borrower against any and all of the obligations of the Borrower now or
hereafter existing under this Agreement or any other Loan Document to the Lender, irrespective of
whether or not the Lender shall have made any demand under this Agreement or any other Loan
Document and although such obligations of the Borrower may be contingent or unmatured or are owed
to a branch or office of the Lender different from the branch or office holding such deposit or
obligated on such indebtedness. The rights of the Lender and its Affiliates under this Section are
in addition to other rights and remedies (including other rights of setoff) that the Lender or its
Affiliates may have. The Lender agrees to notify the Borrower promptly after any such setoff and
application, provided that the failure to give such notice shall not affect the validity of
such setoff and application.



     9.09. Interest Rate Limitation. Notwithstanding anything to the contrary contained in any
Loan Document, the interest paid or agreed to be paid under the Loan Documents shall not exceed the
maximum rate of non-usurious interest permitted by applicable Law (the “Maximum Rate”). If
the Lender shall receive interest in an amount that exceeds the Maximum Rate, the excess interest
shall be applied to the principal of the Loan or, if it exceeds such unpaid principal, refunded to
the Borrower. In determining whether the interest contracted for, charged, or received by the
Lender exceeds the Maximum Rate, such Person may, to the extent permitted by applicable Law, (a)
characterize any payment that is not principal as an expense, fee, or premium rather than interest,
(b) exclude voluntary prepayments and the effects thereof, and (c) amortize, prorate, allocate, and
spread in equal or unequal parts the total amount of interest throughout the contemplated term of
the Obligations hereunder.



     9.10. Counterparts; Integration; Effectiveness. This Agreement may be executed in
counterparts (and by different parties hereto in different counterparts), each of which shall
constitute an original, but all of which when taken together shall constitute a single contract.
This Agreement and the other Loan Documents constitute the entire contract among the parties
relating to the subject matter hereof and supersede any and all previous agreements and
understandings, oral or written, relating to the subject matter hereof. Delivery of an executed
counterpart of a signature page of this Agreement by telecopy or other electronic imaging means
shall be effective as delivery of a manually executed counterpart of this Agreement.



-55-









 





     9.11. Survival of Representations and Warranties. All representations and warranties made
hereunder and in any other Loan Document or other document delivered pursuant hereto or thereto or
in connection herewith or therewith shall survive the execution and delivery hereof and thereof.
Such representations and warranties have been or will be relied upon by the Lender, regardless of
any investigation made by the Lender or on its behalf and notwithstanding that the Lender may have
had notice or knowledge of any Default at the time of the Loan, and shall continue in full force
and effect, as of the time made, as long as the Loan or any other Obligation hereunder shall remain
unpaid or unsatisfied.



     9.12. Severability. If any provision of this Agreement or the other Loan Documents is
held to be illegal, invalid or unenforceable, (a) the legality, validity and enforceability of the
remaining provisions of this Agreement and the other Loan Documents shall not be affected or
impaired thereby and (b) the parties shall endeavor in good faith negotiations to replace the
illegal, invalid or unenforceable provisions with valid provisions the economic effect of which
comes as close as possible to that of the illegal, invalid or unenforceable provisions. The
invalidity of a provision in a particular jurisdiction shall not invalidate or render unenforceable
such provision in any other jurisdiction.



     9.13. Governing Law; Jurisdiction; Etc. (a) GOVERNING LAW. THIS AGREEMENT SHALL
BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAW OF THE STATE OF NEW YORK.



     (b) SUBMISSION TO JURISDICTION. THE BORROWER 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 ANY OTHER LOAN DOCUMENT, OR FOR RECOGNITION OR ENFORCEMENT OF ANY JUDGMENT, AND EACH
OF THE PARTIES HERETO IRREVOCABLY AND UNCONDITIONALLY AGREES THAT ALL CLAIMS IN RESPECT OF ANY SUCH
ACTION OR PROCEEDING MAY BE HEARD AND DETERMINED IN SUCH NEW YORK STATE COURT OR, TO THE FULLEST
EXTENT PERMITTED BY APPLICABLE LAW, IN SUCH FEDERAL COURT. EACH OF THE PARTIES HERETO AGREES THAT
A FINAL JUDGMENT IN ANY SUCH ACTION OR PROCEEDING SHALL BE CONCLUSIVE AND MAY BE ENFORCED IN OTHER
JURISDICTIONS BY SUIT ON THE JUDGMENT OR IN ANY OTHER MANNER PROVIDED BY LAW. NOTHING IN THIS
AGREEMENT OR IN ANY OTHER LOAN DOCUMENT SHALL AFFECT ANY RIGHT THAT THE LENDER MAY OTHERWISE HAVE
TO BRING ANY ACTION OR PROCEEDING RELATING TO THIS AGREEMENT OR ANY OTHER LOAN DOCUMENT AGAINST THE
BORROWER OR ITS PROPERTIES IN THE COURTS OF ANY JURISDICTION.



     (c) WAIVER OF VENUE. THE BORROWER 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 ANY
OTHER LOAN DOCUMENT IN ANY



-56-









 




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 SECTION 9.02. NOTHING IN THIS AGREEMENT WILL
AFFECT THE RIGHT OF ANY PARTY HERETO TO SERVE PROCESS IN ANY OTHER MANNER PERMITTED BY APPLICABLE
LAW



     9.14. 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 ANY OTHER LOAN
DOCUMENT 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 OTHER LOAN DOCUMENTS
BY, AMONG OTHER THINGS, THE MUTUAL WAIVERS AND CERTIFICATIONS IN THIS SECTION.



     9.15. Electronic Execution of Assignments and Certain Other Documents. The words
“execution,” “signed,” “signature,” and words of like import in any amendment or other modification
hereof (including waivers and consents) shall be deemed to include electronic signatures or the
keeping of records in electronic form, each of which shall be of the same legal effect, validity or
enforceability as a manually executed signature or the use of a paper-based recordkeeping system,
as the case may be, to the extent and as provided for in any applicable law, including the Federal
Electronic Signatures in Global and National Commerce Act, the New York State Electronic Signatures
and Records Act, or any other similar state laws based on the Uniform Electronic Transactions Act.



     9.16. USA PATRIOT Act. The Lender hereby notifies the Borrower that pursuant to the
requirements of the USA Patriot Act (Title III of Pub. L. 107-56 (signed into law October 26,
2001)) (the “Act”), may be required to obtain, verify and record information that identifies each
Loan Party, which information includes the name and address of each Loan Party and other
information that will allow the Lender to identify each Loan Party in accordance with the Act. The
Borrower shall, promptly following a request by the Lender, provide all documentation and other
information that the Lender requests in order to comply with its ongoing obligations under
applicable “know your customer” and anti-money laundering rules and regulations, including the Act.



     9.17. Time of the Essence. Time is of the essence of the Loan Documents.



-57-









 





     9.18. ENTIRE AGREEMENT. THIS AGREEMENT AND THE OTHER LOAN DOCUMENTS REPRESENT THE FINAL
AGREEMENT AMONG 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 AMONG THE
PARTIES.



-58-









 





     IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be duly executed as of
the date first above written.



	 	 	 	 	 
	 	HARVEST NATURAL RESOURCES, INC.

 	 
	 	By:  	/s/ James A. Edmiston
 	 
	 	 	Name:  	James A. Edmiston 	 
	 	 	Title:  	President and Chief Executive Officer 	 
	 
	 	MSD ENERGY INVESTMENTS PRIVATE II, LLC

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



 









 






	 	 	 	 	 



EXHIBIT A




FORM OF TERM NOTE




			
	$60,000,000
	 	October 28, 2010






     FOR VALUE RECEIVED, the undersigned HARVEST NATURAL RESOURCES, INC., a Delaware corporation
(the “Borrower”), hereby promises to pay to the order of MSD ENERGY INVESTMENTS PRIVATE II, LLC
(the “Lender”) at the Lender’s office at 645 Fifth Avenue, 21st Floor, New York, New York 10022:




     (a) prior to or on the Maturity Date the principal amount of Sixty Million and
00/100 Dollars ($60,000,000), evidencing the Loan made by the Lender to the Borrower
pursuant to the Credit Agreement dated of even date herewith (as amended and in effect from
time to time, the “Credit Agreement”), between the Borrower and the Lender;




     (b) the principal outstanding hereunder from time to time at the times provided in
the Credit Agreement; and




     (c) interest from the date hereof on the principal amount from time to time
outstanding to and including the maturity hereof at the rates and terms and in all cases in
accordance with the terms of the Credit Agreement.



     This Term Note evidences borrowings under and has been issued by the Borrower in accordance
with the terms of the Credit Agreement. The Lender and any holder hereof is entitled to the
benefits of the Credit Agreement and the other Loan Documents, and may enforce the agreements of
the Borrower contained therein, and any holder hereof may exercise the respective remedies provided
for thereby or otherwise available in respect thereof, all in accordance with the respective terms
thereof. All capitalized terms used in this Term Note and not otherwise defined herein shall have
the same meanings herein as in the Credit Agreement.



     The Borrower irrevocably authorizes the Lender to make or cause to be made, at the time of
receipt of any payment of principal of this Term Note, an appropriate notation on the grid attached
to this Term Note, or the continuation of such grid, or any other similar record, including
computer records, reflecting the receipt of such payment. The outstanding amount of the Loan set
forth on the grid attached to this Term Note, or the continuation of such grid, or any other
similar record, including computer records, maintained by the Lender with respect to the Loan shall
be, absent manifest error, prima facie evidence of the principal amount of the Loan
owing and unpaid to the Lender, but the failure to record, or any error in so recording, any such
amount on any such grid, continuation or other record shall not limit or otherwise affect the
obligation of the Borrower hereunder or under the Credit Agreement to make payments of principal of
and interest on this Term Note when due.



     The Borrower has the right in certain circumstances and the obligation under certain other
circumstances to prepay the whole or part of the principal of this Term Note on the terms and
conditions specified in the Credit Agreement.



Exhibit A - 1









 





     If any one or more of the Events of Default shall occur, the entire unpaid principal amount of
this Term Note and all of the unpaid interest accrued thereon may become or be declared due and
payable in the manner and with the effect provided in the Credit Agreement.



     No delay or omission on the part of the Lender or any holder hereof in exercising any right
hereunder shall operate as a waiver of such right or of any other rights of the Lender or such
holder, nor shall any delay, omission or waiver on any one occasion be deemed a bar or waiver of
the same or any other right on any future occasion.



     The Borrower and every endorser and guarantor of this Term Note or the obligation represented
hereby waives presentment, demand, notice, protest and all other demands and notices in connection
with the delivery, acceptance, performance, default or enforcement of this Term Note, and assents
to any extension or postponement of the time of payment or any other indulgence, to any
substitution, exchange or release of collateral and to the addition or release of any other party
or person primarily or secondarily liable.



     THIS TERM NOTE AND THE OBLIGATIONS OF THE BORROWER HEREUNDER SHALL FOR ALL PURPOSES BE
GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAW OF THE STATE OF NEW YORK. THE BORROWER
AGREES THAT, AS MORE FULLY SET FORTH IN § 9.12(b) OF THE CREDIT AGREEMENT, ANY ACTION OR PROCEEDING
FOR THE ENFORCEMENT OF THIS TERM NOTE MAY BE BROUGHT IN 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 AND CONSENTS TO THE NONEXCLUSIVE JURISDICTION OF SUCH COURT AND THE SERVICE OF
PROCESS IN ANY SUCH SUIT BEING MADE UPON THE BORROWER BY MAIL AT THE ADDRESS SPECIFIED IN
SCHEDULE 9.02 OF THE CREDIT AGREEMENT. THE BORROWER HEREBY 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 SUCH ACTION OR PROCEEDING OR ANY SUCH COURT OR THAT
SUCH SUIT IS BROUGHT IN AN INCONVENIENT COURT AS MORE FULLY SET FORTH IN § 9.12(c) OF THE CREDIT
AGREEMENT.



     THE BORROWER 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 TERM NOTE OR ANY OTHER LOAN DOCUMENT OR THE TRANSACTIONS CONTEMPLATED HEREBY OR
THEREBY (WHETHER BASED ON CONTRACT, TORT OR ANY OTHER THEORY). THE BORROWER (A) CERTIFIES THAT NO
REPRESENTATIVE, AGENT OR ATTORNEY OF THE LENDER OR ANY OTHER PERSON HAS REPRESENTED, EXPRESSLY OR
OTHERWISE, THAT THE LENDER OR SUCH OTHER PERSON WOULD NOT, IN THE EVENT OF LITIGATION, SEEK TO
ENFORCE THE FOREGOING WAIVER AND (B) ACKNOWLEDGES THAT IT HAS BEEN INDUCED TO ENTER INTO THIS TERM
NOTE AND THE OTHER LOAN DOCUMENTS BY, AMONG OTHER THINGS, THE WAIVERS AND CERTIFICATIONS IN THIS
PARAGRAPH.



Exhibit A - 2









 





     IN WITNESS WHEREOF, the undersigned has caused this Term Note to be signed by its duly
authorized officer as of the day and year first above written.



	 	 	 	 	 
	 	HARVEST NATURAL RESOURCES, INC.

 	 
	 	By:  	 	 
	 	 	Name:  	 	 
	 	 	Title:  	 	 



Exhibit A - 3









 






	 	 	 	 	 



	 	 	 	 	 	 	 
	 	 	Amount of	 	Balance of	 	 
	 	 	Principal Paid	 	Principal	 	Notation
	Date	 	or Prepaid	 	Unpaid	 	Made By:
	 	 	 	 	 	 	 
	 	 	 	 	 	 	 
	 	 	 	 	 	 	 
	 	 	 	 	 	 	 
	 	 	 	 	 	 	 
	 	 	 	 	 	 	 
	 	 	 	 	 	 	 
	 	 	 	 	 	 	 
	 	 	 	 	 	 	 
	 	 	 	 	 	 	 
	 	 	 	 	 	 	 
	 	 	 	 	 	 	 
	 	 	 	 	 	 	 
	 	 	 	 	 	 	 
	 	 	 	 	 	 	 
	 	 	 	 	 	 	 
	 	 	 	 	 	 	 
	 	 	 	 	 	 	 
	 	 	 	 	 	 	 
	 	 	 	 	 	 	 
	 	 	 	 	 	 	 
	 	 	 	 	 	 	 
	 	 	 	 	 	 	 
	 	 	 	 	 	 	 
	 	 	 	 	 	 	 
	 	 	 	 	 	 	 
	 	 	 	 	 	 	 
	 	 	 	 	 	 	 
	 	 	 	 	 	 	 
	 	 	 	 	 	 	 
	 	 	 	 	 	 	 
	 	 	 	 	 	 	 
	 	 	 	 	 	 	 
	 	 	 	 	 	 	 
	 	 	 	 	 	 	 
	 	 	 	 	 	 	 
	 	 	 	 	 	 	 
	 	 	 	 	 	 	 
	 	 	 	 	 	 	 
	 	 	 	 	 	 	 
	 	 	 	 	 	 	 
	 	 	 	 	 	 	 
	 	 	 	 	 	 	 
	 	 	 	 	 	 	 
	 	 	 	 	 	 	 
	 	 	 	 	 	 	 
	 	 	 	 	 	 	 
	 	 	 	 	 	 	 
	 	 	 	 	 	 	 
	 	 	 	 	 	 	 
	 	 	 	 	 	 	 
	 	 	 	 	 	 	 
	 	 	 	 	 	 	 
	 	 	 	 	 	 	 
	 	 	 	 	 	 	 
	 	 	 	 	 	 	 
	 	 	 	 	 	 	 
	 	 	 	 	 	 	 
	 	 	 	 	 	 	 
	 	 	 	 	 	 	 
	 	 	 	 	 	 	 





Exhibit A - 4









 






EXHIBIT B




FORM OF GUARANTY




     GUARANTY, dated as of October 28, 2010 (this “Guaranty”), by Harvest US Holdings,
Inc., a Delaware corporation (“Harvest US Holdings”), Harvest Natural Resources, Inc. (UK),
a Delaware corporation (“HNR UK”), and Harvest Offshore China Company, a Colorado
corporation (“Harvest Offshore”, and together with Harvest US Holdings and HNR UK, each
individually, a “Guarantor”, and collectively, the “Guarantors”), in favor of MSD
Energy Investments Private II, LLC, a Delaware limited liability company (the “Lender”).



     WHEREAS, Harvest Natural Resources, Inc., a Delaware corporation (the “Borrower”), has
entered into that certain Credit Agreement dated as of the date hereof (as amended and in effect
from time to time, the “Credit Agreement”), with the Lender, pursuant to which the Lender,
subject to the terms and conditions contained therein, is to provide the Borrower with the term
loan facility as provided for therein;



     WHEREAS, the Borrower and the Guarantors are members of a group of related entities, the
success of any one of which is dependent in part on the success of the other members of such group;



     WHEREAS, the Guarantors expect to receive substantial direct and indirect benefits from the
extensions of credit to the Borrower by the Lender pursuant to the Credit Agreement (which benefits
are hereby acknowledged);



     WHEREAS, it is a condition precedent to the Lender’s making any loan or otherwise extending
credit to the Borrower under the Credit Agreement that the Guarantors execute and deliver to the
Lender a guaranty substantially in the form hereof; and



     WHEREAS, the Guarantors wish to guaranty the Borrower’s obligations to the Lender under or in
respect of the Credit Agreement as provided herein.



     NOW, THEREFORE, each Guarantor hereby agrees with the Lender as follows:



     1. Definitions. The term “Obligations” and all other capitalized terms used
herein without definition shall have the respective meanings provided therefor in the Credit
Agreement.



     2. Guaranty of Payment and Performance. Each Guarantor hereby jointly and
severally guarantees to the Lender the full and punctual payment when due (whether at stated
maturity, by required pre-payment, by acceleration or otherwise), as well as the performance, of
all of the Obligations including all such Obligations which would become due but for the operation
of the automatic stay pursuant to §362(a) of the Federal Bankruptcy Code and the operation of
§§502(b) and 506(b) of the Federal Bankruptcy Code. This Guaranty is an absolute, unconditional
and continuing guaranty of the full and punctual payment and performance of all of the Obligations
and not of their collectibility only and is in no way conditioned upon any requirement that the
Lender first attempt to collect any of the Obligations from the Borrower or



Exhibit B - 1









 




any other guarantor or resort to any collateral security, guarantee of the Obligations or
other means of obtaining payment. Should the Borrower default in the payment or performance of any
of the Obligations, the obligations of each Guarantor hereunder with respect to such Obligations in
default shall become immediately due and payable to the Lender, without demand or notice of any
nature, all of which are expressly waived by each Guarantor. Payments by the Guarantors hereunder
may be required by the Lender on any number of occasions. All payments by the Guarantors hereunder
shall be made to the Lender, in the manner and at the place of payment specified therefor in the
Credit Agreement.




     3. Guarantors’ Agreement to Pay Enforcement Costs, etc. Each Guarantor further
agrees, as the principal obligor and not as a guarantor only, to pay to the Lender, on demand, all
costs and expenses (including court costs, legal expenses and costs and expenses incurred during
any workout, litigation, restructuring or negotiations in respect of the Obligations) incurred or
expended by the Lender and its Affiliates (including the reasonable fees, charges and disbursements
of counsel for the Lender) in connection with the Obligations, this Guaranty and the enforcement
thereof, together with interest on amounts recoverable under this §3 from the time when such
amounts become due until payment, whether before or after judgment, at the rate of interest for
overdue principal set forth in the Credit Agreement, provided that if such interest exceeds
the maximum amount permitted to be paid under applicable law, then such interest shall be reduced
to such maximum permitted amount.



     4. Waivers by Guarantor; Lender’s Freedom to Act. Each Guarantor agrees that the
Obligations will be paid and performed strictly in accordance with their respective terms,
regardless of any law, regulation or order now or hereafter in effect in any jurisdiction affecting
any of such terms or the rights of the Lender with respect thereto. Each Guarantor waives
promptness, diligence, presentment, demand, protest, notice of acceptance, notice of any
Obligations incurred and all other notices of any kind, all defenses which may be available by
virtue of any valuation, stay, moratorium law or other similar law now or hereafter in effect, any
right to require the marshalling of assets of the Borrower or any other entity or other person
primarily or secondarily liable with respect to any of the Obligations, and all suretyship defenses
generally. Without limiting the generality of the foregoing, each Guarantor agrees to the
provisions of any instrument evidencing, securing or otherwise executed in connection with any
Obligation and agrees that the obligations of such Guarantor hereunder shall not be released or
discharged, in whole or in part, or otherwise affected by (i) the failure of the Lender to assert
any claim or demand or to enforce any right or remedy against the Borrower or any other entity or
other person primarily or secondarily liable with respect to any of the Obligations; (ii) any
extensions, compromise, refinancing, consolidation or renewals of any Obligation; (iii) any change
in the time, place or manner of payment of any of the Obligations or any rescissions, waivers,
compromise, refinancing, consolidation, amendments or modifications of any of the terms or
provisions of the Credit Agreement, the Notes, the other Loan Documents or any other agreement
evidencing, securing or otherwise executed in connection with any of the Obligations; (iv) the
addition, substitution or release of any entity or other person primarily or secondarily liable for
any Obligation, (v) the adequacy of any rights which the Lender may have against any collateral
security or other means of obtaining repayment of any of the Obligations; (vi) the impairment of
any collateral securing any of the Obligations, including without limitation the failure to perfect
or preserve any rights which the Lender might have in such collateral security or the substitution,
exchange, surrender, release, loss or destruction of any such collateral



Exhibit B - 2









 




security; or (vii) any other act or omission which might in any manner or to any extent vary
the risk of any Guarantor or otherwise operate as a release or discharge of such Guarantor, all of
which may be done without notice to the Guarantors. To the fullest extent permitted by law, each
Guarantor hereby expressly waives any and all rights or defenses arising by reason of (A) any “one
action” or “anti-deficiency” law which would otherwise prevent the Lender from bringing any action,
including any claim for a deficiency, or exercising any other right or remedy (including any right
of set-off), against such Guarantor before or after the Lender’s commencement or completion of any
foreclosure action, whether judicially, by exercise of power of sale or otherwise, or (B) any other
law which in any other way would otherwise require any election of remedies by the Lender. To the
extent that it lawfully may, each Guarantor hereby agrees that it will not invoke any law (other
than the applicable statute of limitations) which might cause delay in or impede the enforcement of
the rights and remedies of the Lender under this Guaranty, and to the fullest extent it lawfully
may, such Guarantor hereby irrevocably waives the benefits of all such laws. In addition, and
notwithstanding anything to the contrary contained herein, the Lender shall have the right, at any
time, to name any Guarantor as a party defendant in any foreclosure action(s) it or its assignee
may commence to foreclose upon any and all collateral of the Borrower or any other guarantor which
secures the Obligations.




     5. Unenforceability of Obligations Against Borrower or Other Guarantors. If for
any reason the Borrower or any other guarantor has no legal existence or is under no legal
obligation to discharge any of the Obligations, or if any of the Obligations have become
irrecoverable from the Borrower or any other guarantor by reason of the Borrower’s or such other
guarantor’s insolvency, bankruptcy or reorganization or by other operation of law or for any other
reason, this Guaranty shall nevertheless be binding on each Guarantor, to the same extent as if
such Guarantor at all times had been the principal obligor on all such Obligations. In the event
that acceleration of the time for payment of any of the Obligations is stayed upon the insolvency,
bankruptcy or reorganization of the Borrower, or for any other reason, all such amounts otherwise
subject to acceleration under the terms of the Credit Agreement, the Notes, the other Loan
Documents or any other agreement evidencing, securing or otherwise executed in connection with any
Obligation shall be immediately due and payable by the Guarantor.



     6. Subrogation; Subordination.




     6.1. Waiver of Rights Against Borrower. Until the final payment and
performance in full of all of the Obligations and any and all other obligations of the
Borrower to the Lender or any affiliate of the Lender, no Guarantor shall exercise any
rights against the Borrower or any other guarantor of the Obligations arising as a result of
payment by any Guarantor hereunder (or any other guarantor), by way of subrogation,
reimbursement, restitution, contribution or otherwise, and no Guarantor will prove any claim
in competition with the Lender or such affiliate in respect of any payment hereunder in any
bankruptcy, insolvency or reorganization case or proceedings of any nature; no Guarantor
will claim any setoff, recoupment or counterclaim against the Borrower in respect of any
liability of any Guarantor to the Borrower; and each Guarantor waives any benefit of and any
right to participate in any collateral security which may be held by the Lender or such
affiliate.



Exhibit B - 3









 






     6.2. Subordination to Lender. The payment of any amounts due with respect
to any indebtedness of the Borrower or any other guarantor of the Obligations now or
hereafter owed to the Guarantor is hereby subordinated to the prior payment in full of all
of the Obligations and any and all other obligations of the Borrower or any other guarantor
of the Obligations to the Lender or any affiliate of the Lender. Each Guarantor agrees
that, after the occurrence of any default in the payment or performance of any of the
Obligations, such Guarantor will not demand, sue for or otherwise attempt to collect any
such indebtedness of the Borrower or any other guarantor of the Obligations to such
Guarantor until all of the Obligations shall have been paid in full. If, notwithstanding
the foregoing sentence, the Guarantor shall collect, enforce or receive any amounts in
respect of such indebtedness, such amounts shall be collected, enforced and received by such
Guarantor as trustee for the Lender and be paid over to the Lender on account of the
Obligations without affecting in any manner the liability of such Guarantor under the other
provisions of this Guaranty.




     6.3. Subordination of Obligations. Each Guarantor covenants and agrees,
and the Lender, by its acceptance of this Guaranty likewise covenants and agrees, that
payment of the Obligations by any of the Guarantors arising under this Guaranty shall be
subordinated to the Indebtedness of Subsidiaries permitted under Section 7.02(j) and
Section 7.02(n) of the Credit Agreement, such subordination arrangements to be on
terms and conditions reasonably satisfactory to the Lender.




     6.4. Provisions Supplemental. The provisions of this §6 shall be
supplemental to and not in derogation of any rights and remedies of the Lender or any
affiliate of the Lender under any separate subordination agreement which the Lender or such
affiliate may at any time and from time to time enter into with any Guarantor.



     7. Security; Setoff. Each Guarantor grants to the Lender, as security for the
full and punctual payment and performance of all of such Guarantor’s obligations hereunder, a
continuing lien on and security interest in all securities or other property belonging to such
Guarantor now or hereafter held by the Lender and in all deposits (general or special, time or
demand, provisional or final) and other sums credited by or due from the Lender to such Guarantor
or subject to withdrawal by such Guarantor. Regardless of the adequacy of any collateral security
or other means of obtaining payment of any of the Obligations, the Lender is hereby authorized at
any time and from time to time, without notice to such Guarantor (any such notice being expressly
waived by such Guarantor) and to the fullest extent permitted by law, to set off and apply such
deposits and other sums against the obligations of such Guarantor under this Guaranty, whether or
not the Lender shall have made any demand under this Guaranty and although such obligations may be
contingent or unmatured.



     8. Further Assurances. Each Guarantor agrees that it will from time to time, at
the request of the Lender, provide to the Lender such Guarantor’s most recent audited and unaudited
balance sheets and related statements of income and changes in financial condition and such other
information relating to the business and affairs of such Guarantor as the Lender may reasonably
request. Each Guarantor also agrees to do all such things and execute all such documents as the
Lender may consider necessary or desirable to give full effect to this Guaranty and to perfect and
preserve the rights and powers of the Lender hereunder. Each Guarantor



Exhibit B - 4









 




acknowledges and confirms that such Guarantor itself has established its own adequate means of
obtaining from the Borrower on a continuing basis all information desired by such Guarantor
concerning the financial condition of the Borrower and that such Guarantor will look to the
Borrower and not to the Lender in order for such Guarantor to keep adequately informed of changes
in the Borrower’s financial condition.




     9. Termination; Reinstatement. Upon final payment and performance in full in cash
of the Obligations (other than inchoate indemnification liabilities arising under the Loan
Documents) and termination of all lending and other credit commitments of the Lender and its
affiliates in respect thereof, this Guaranty shall terminate. Such termination shall not affect
any rights of the Lender or of any affiliate of the Lender hereunder (including without limitation
the rights set forth in §§4 and 6) with respect to any Obligations incurred or accrued prior to the
receipt of such notice or any Obligations incurred or accrued pursuant to any contract or
commitment in existence prior to such receipt. Notwithstanding the foregoing, this Guaranty shall
continue to be effective or be reinstated if at any time any payment made or value received with
respect to any Obligation is rescinded or must otherwise be returned by the Lender upon the
insolvency, bankruptcy or reorganization of the Borrower, or otherwise, all as though such payment
had not been made or value received.



     10. Successors and Assigns. This Guaranty shall be binding upon each Guarantor,
its successors and assigns, and shall inure to the benefit of and be enforceable by the Lender and
its successors, transferees and assigns. Without limiting the generality of the foregoing
sentence, the Lender may assign or otherwise transfer the Credit Agreement, the Notes, the other
Loan Documents or any other agreement or note held by it evidencing, securing or otherwise executed
in connection with the Obligations, or sell participations in any interest therein, to any other
entity or other person, and such other entity or other person shall thereupon become vested, to the
extent set forth in the agreement evidencing such assignment, transfer or participation, with all
the rights in respect thereof granted to the Lender herein. No Guarantor may assign its rights
hereunder.



     11. Amendments and Waivers. No amendment or waiver of any provision of this
Guaranty nor consent to any departure by any Guarantor therefrom shall be effective unless the same
shall be in writing and signed by the Lender. No failure on the part of the Lender to exercise, and
no delay in exercising, any right hereunder shall operate as a waiver thereof; nor shall any single
or partial exercise of any right hereunder preclude any other or further exercise thereof or the
exercise of any other right.



     12. Notices.




     12.1. Notices Generally. All notices and other communications provided for
herein shall be in writing and shall be delivered by hand or overnight courier service,
mailed by certified or registered mail or sent by telecopier as follows: if to any
Guarantor, at the address or telecopier number set forth beneath its signature hereto, and
if to the Lender, at the address for notices to the Lender set forth in Schedule
9.02 of the Credit Agreement.



Exhibit B - 5









 






     Notices and other communications sent by hand or overnight courier service, or mailed
by certified or registered mail, shall be deemed to have been given when received; notices
and other communications sent by telecopier shall be deemed to have been given when sent
(except that, if not given during normal business hours for the recipient, shall be deemed
to have been given at the opening of business on the next business day for the recipient).




     12.2. Change of Address. Each Guarantor and the Lender may change its
address or telecopier number for notices and other communications hereunder by notice to the
other parties hereto.




     12.3. Reliance by Lender. The Lender shall be entitled to rely and act
upon any notices purportedly given by or on behalf of any Guarantor even if (i) such notices
were not made in a manner specified herein, were incomplete or were not preceded or followed
by any other form of notice specified herein, or (ii) the terms thereof, as understood by
the recipient, varied from any confirmation thereof. Each Guarantor shall indemnify the
Lender and the Related Parties (as defined in the Credit Agreement) of each of them from all
losses, costs, expenses and liabilities resulting from the reliance by such Person on each
notice purportedly given by or on behalf of such Guarantor.



     13. Governing Law. THIS GUARANTY SHALL BE GOVERNED BY, AND CONSTRUED IN
ACCORDANCE WITH, THE LAW OF THE STATE OF NEW YORK.



     14. Submission to Jurisdiction. EACH GUARANTOR 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
GUARANTY OR ANY OTHER LOAN DOCUMENT, OR FOR RECOGNITION OR ENFORCEMENT OF ANY JUDGMENT, AND EACH
GUARANTOR 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 GUARANTOR AGREES THAT A FINAL JUDGMENT IN
ANY SUCH ACTION OR PROCEEDING SHALL BE CONCLUSIVE AND MAY BE ENFORCED IN OTHER JURISDICTIONS BY
SUIT ON THE JUDGMENT OR IN ANY OTHER MANNER PROVIDED BY LAW. NOTHING IN THIS GUARANTY OR IN ANY
OTHER LOAN DOCUMENT SHALL AFFECT ANY RIGHT THAT THE LENDER MAY OTHERWISE HAVE TO BRING ANY ACTION
OR PROCEEDING RELATING TO THIS GUARANTY OR ANY OTHER LOAN DOCUMENT AGAINST ANY GUARANTOR OR ANY
OTHER LOAN PARTY (AS DEFINED IN THE CREDIT AGREEMENT) OR ITS PROPERTIES IN THE COURTS OF ANY
JURISDICTION.



     15. Waiver of Venue. EACH GUARANTOR IRREVOCABLY AND UNCONDITIONALLY WAIVES, TO
THE FULLEST EXTENT PERMITTED BY APPLICABLE LAW, ANY OBJECTION THAT IT MAY NOW OR HEREAFTER HAVE TO



Exhibit B - 6









 




THE LAYING OF VENUE OF ANY ACTION OR PROCEEDING ARISING OUT OF OR RELATING TO THIS GUARANTY OR
ANY OTHER LOAN DOCUMENT IN ANY COURT REFERRED TO IN §14. EACH GUARANTOR 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.




     16. Service of Process. EACH GUARANTOR IRREVOCABLY CONSENTS TO SERVICE OF PROCESS
IN THE MANNER PROVIDED FOR NOTICES IN §12. NOTHING IN THIS GUARANTY WILL AFFECT THE RIGHT OF THE
LENDER OR ANY GUARANTOR TO SERVE PROCESS IN ANY OTHER MANNER PERMITTED BY APPLICABLE LAW.



     17. Waiver of Jury Trial. EACH GUARANTOR 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 GUARANTY OR ANY OTHER LOAN
DOCUMENT OR THE TRANSACTIONS CONTEMPLATED HEREBY OR THEREBY (WHETHER BASED ON CONTRACT, TORT OR ANY
OTHER THEORY). EXCEPT AS PROHIBITED BY LAW, EACH GUARANTOR HEREBY WAIVES ANY RIGHT WHICH IT MAY
HAVE TO CLAIM OR RECOVER IN ANY LITIGATION ANY SPECIAL, EXEMPLARY, PUNITIVE OR CONSEQUENTIAL
DAMAGES OR ANY DAMAGES OTHER THAN, OR IN ADDITION TO, ACTUAL DAMAGES. EACH GUARANTOR (I) CERTIFIES
THAT NO REPRESENTATIVE, AGENT OR ATTORNEY OF THE LENDER OR ANY OTHER PERSON HAS REPRESENTED,
EXPRESSLY OR OTHERWISE, THAT THE LENDER OR SUCH OTHER PERSON WOULD NOT, IN THE EVENT OF LITIGATION,
SEEK TO ENFORCE THE FOREGOING WAIVER AND (II) ACKNOWLEDGES THAT IT AND THE OTHER PARTIES HERETO
HAVE BEEN INDUCED TO ENTER INTO THIS GUARANTY AND THE OTHER LOAN DOCUMENTS BY, AMONG OTHER THINGS,
THE WAIVERS AND CERTIFICATIONS IN THIS §17.



     18. Joint and Several Nature of Guaranty. Notwithstanding any term contained
herein to the contrary, each of the obligations and liabilities of each of the Guarantors hereunder
are expressly agreed to be joint and several.



     19. Contribution. To the extent any Guarantor makes a payment hereunder in excess
of the aggregate amount of the benefit received by such Guarantor in respect of the extensions of
credit under the Credit Agreement (the “Benefit Amount”), then such Guarantor, after the payment in
full, in cash, of all of the Obligations, shall be entitled to recover from each other guarantor of
the Obligations such excess payment, pro rata, in accordance with the ratio of the Benefit Amount
received by each such other guarantor to the total Benefit Amount received by all guarantors of the
Obligations, and the right to such recovery shall be deemed to be an asset and property of such
Guarantor so funding; provided, that all such rights to recovery shall be subordinated and junior
in right of payment to the final and undefeasible payment in full in cash of all of the
Obligations.



Exhibit B - 7









 





     20. Miscellaneous. This Guaranty constitutes the entire agreement of each
Guarantor with respect to the matters set forth herein. The rights and remedies herein provided
are cumulative and not exclusive of any remedies provided by law or any other agreement, and this
Guaranty shall be in addition to any other guaranty of or collateral security for any of the
Obligations. The invalidity or unenforceability of any one or more sections of this Guaranty shall
not affect the validity or enforceability of its remaining provisions. Captions are for the ease
of reference only and shall not affect the meaning of the relevant provisions. The meanings of all
defined terms used in this Guaranty shall be equally applicable to the singular and plural forms of
the terms defined.



[Remainder of page intentionally left blank.]






Exhibit B - 8









 








     IN WITNESS WHEREOF, each Guarantor has caused this Guaranty to be executed and delivered as of
the date first above written.



	 	 	 	 	 
	 	HARVEST (US) HOLDINGS, INC.

 	 
	 	By:  	 	 
	 	 	Name:  	Stephen C. Haynes 	 
	 	 	Title:  	Vice President and Chief Financial Officer
 	 
	 
	 	 	Address:	

    1177 Enclave Parkway, Suite 300

 Houston, TX 77077 	 
	 
	 	HARVEST NATURAL RESOURCES, INC. (UK)

 	 
	 	By:  	 	 
	 	 	Name:  	Stephen C. Haynes 	 
	 	 	Title:  	Vice President and Chief Financial Officer

 	 
	 
	 	 	Address:  	

   First Floor, Talbot House

17 Church Street

Rickmansworth

Hertfordshire WD3 1DE

United Kingdom 	 
	 
	 	HARVEST OFFSHORE CHINA COMPANY

 	 
	 	By:  	 	 
	 	 	Name:  	Stephen C. Haynes 	 
	 	 	Title:  	Vice President and Chief Financial Officer
	 
	 
	 	 	Address:  	

   1177 Enclave Parkway, Suite 300

Houston, TX 77077 	 



Exhibit B - 9









 






	 	 	 	 	 



SCHEDULE 5.03




CERTAIN AUTHORIZATIONS




None.



Schedule 5.03




 









 








SCHEDULE 5.06




LITIGATION




None.



Schedule 5.06






 









 








SCHEDULE 5.08(b)




EXISTING LIENS





	•	 	Joint Exploration and Development Agreement dated October 24, 2007, by and between
Branta Exploration & Production, L.P. (“Branta”) and Harvest (US) Holdings, Inc. (“Harvest
US”) on the Antelope Prospect. The Agreement and four related Joint Operating Agreements
between the parties each contains mutual rights of first offer with respect to the sale of
either party’s rights or interests.






	•	 	Pursuant to each Joint Operating Agreement between Harvest US and Branta, each party has
granted to the other a lien and security interest to secure payment of the grantor’s share
of costs when due.






	•	 	Petroleum Contract dated May 8, 1992 by and between China National Offshore Oil
Corporation (“CNOOC”) and Harvest Offshore China Corporation (formerly Crestone Energy
Corporation) (“Harvest China”) for the Contract Area WAB-21 in the South China Sea of
China. Assignment of the Contract by Harvest China requires CNOOC’s consent.






	•	 	Exploration and Production Sharing Agreement dated April 11, 2009, by and between the
Government of the Sultanate of Oman (“Government”) and Harvest Oman, B.V. (“Harvest”) and
Oman Oil Company. Assignment of the Agreement requires Government approval.






	•	 	Joint Operating Agreement for the Dussafu Block, Offshore Gabon. The Agreement contains
consent requirements and mutual rights of first offer with respect to the sale of either
party’s interest.






	•	 	Production Sharing Contract and Joint Operating Agreement with respect to Budong-Budong
Block, West Sulawesi Area. Transfers of interest require the consent of each party and
BPMIGAS.






	•	 	Contract for Conversion to a Mixed Company between Corporation Venezolana Del Petroleo,
S.A., Harvest-Vinccler, S.C.A. and HNR Finance B.V. (“HNR Finance”) signed on




Schedule 5.08(b)-1









 












	 	 	September 11, 2007. The transfer of Petrodelta shares by HNR Finance is subject to a right
of first refusal.






	•	 	Participation Agreement dated March 28, 2008, by and between Harvest (US) Holdings, Inc.
and Legends II LLC for West Bay. A transfer of interest requires the consent of the
non-transferring party.






	•	 	Operating Agreement dated September 18, 2009, by and between Newfield Production
Company, as Operator, and Harvest (US) Holdings, Inc. and Branta Exploration & Production
LLC, as Non-Operator. Each party has granted to the others a lien and security interest to
secure payment of the grantor’s share of costs when due.






	•	 	The assignment of certain oil and gas leases held by Harvest (US) Holdings, Inc.
requires the consent of the lessor.




Schedule 5.08(b)-2









 











SCHEDULE 5.08(d)




EXISTING INVESTMENTS





	•	 	Fusion Geophysical, L.L.C. — Harvest (US) Holdings, Inc. owns a 49% interest in Fusion
Geophysical, L.L.C.






	•	 	Petrodelta, S.A. — Harvest Natural Resources, Inc. indirectly owns an 80 percent
interest in HNR Finance BV. HNR Finance BV has a 40 percent ownership interest in
Petrodelta, S.A. Harvest Natural Resources, Inc. indirectly owns a net 32 percent interest
in Petrodelta, S.A.






	•	 	On April 9, 2009, Harvest Natural Resources, Inc. entered into a service agreement with
Fusion Petroleum Technologies Inc. whereby Harvest prepaid $1.5 million for certain
services. As of September 30, 2010, the balance under the service agreement was
approximately $500,000.





Schedule 5.08(d)





 









 








SCHEDULE 5.09




ENVIRONMENTAL MATTERS




None.



Schedule 5.09




 









 








SCHEDULE 5.13




Part (a)




SUBSIDIARIES



	 	 	 
	Subsidiaries of Borrower	 	Percent owned
	HNR Energia B.V. (Netherlands Antilles)
	 	100%
	HNR Sukuk Partner B.V. (Netherlands)
	 	100%
	Harvest Holding LLC (Delaware)
	 	100%
	Harvest Natural Resources Malta Limited (Malta)
	 	100%
	Harvest Cayman Holding Ltd. (Cayman Islands, BWI)
	 	100%
	Harvest Natural Resources Finance Malta Limited (Malta)
	 	100%
	Harvest Natural Resources Holding Malta Limited (Malta)
	 	100%
	Harvest-Vinccler Dutch Holding B.V. (Netherlands)
	 	80%
	HNR Finance B.V. (Netherlands)
	 	80%
	Harvest Vinccler Ltd. (Cayman)
	 	80%
	Harvest Vinccler, S.C.A. (Venezuela)
	 	80%
	HNR Global Holding B.V. (Netherlands)
	 	100%
	HNR International B.V. (Netherlands)
	 	100%
	Harvest Senami Behar B.V. (Netherlands)
	 	100%
	Harvest Budong-Budong B.V. (Netherlands)
	 	100%
	Harvest Oman B.V. (Netherlands)
	 	100%
	Harvest Far East Pte. Ltd. (Singapore)
	 	100%
	Harvest Dussafu B.V. (Netherlands)
	 	100%
	Harvest Natural Resources, Inc. (UK) (Delaware)
	 	100%
	Harvest (US) Holdings, Inc. (Delaware)
	 	100%
	Benton Oil and Gas Company of Venezuela (BVI)
	 	100%
	Harvest Offshore China Company (Colorado)
	 	100%
	 
	 	 
	Subsidiaries of Harvest (US) Holdings, Inc.
	 	 
	 
	 	 
	Harvest Offshore China Company (Colorado)
	 	100%
	 
	 	 
	Subsidiaries of Harvest Natural Resources, Inc. (UK)
	 	 
	 
	 	 
	None
	 	 
	 
	 	 
	Subsidiaries of Harvest Offshore China Company
	 	 
	 
	 	 
	None
	 	 






Schedule 5.13 — Part (a)




 









 








SCHEDULE 5.13




Part (b)




SUBSIDIARIES AND OTHER EQUITY INVESTMENTS; LOAN PARTIES




	•	 	Fusion Geophysical, L.L.C. — Harvest (US) Holdings, Inc. owns a 49% interest in Fusion
Geophysical, L.L.C.






	•	 	Petrodelta, S.A. — Harvest Natural Resources, Inc. indirectly owns an 80 percent
interest in HNR Finance BV. HNR Finance BV has a 40 percent ownership interest in
Petrodelta, S.A. Harvest Natural Resources, Inc. indirectly owns a net 32 percent interest
in Petrodelta, S.A.





Schedule 5.13 — Part (b)









 








SCHEDULE 5.13




Part (d)




SUBSIDIARIES AND OTHER EQUITY INVESTMENTS; LOAN PARTIES



Harvest Natural Resources, Inc., a Delaware corporation

1177 Enclave Parkway, Suite 300

Houston, TX 77077

U.S. TAX ID#: 77-0196707




Harvest (US) Holdings, Inc., a Delaware corporation

1177 Enclave Parkway, Suite 300

Houston, TX 77077

U.S. TAX ID#: 77-0451721




Harvest Offshore China Company, a Colorado corporation

1177 Enclave Parkway, Suite 300

Houston, TX 77077

U.S. TAX ID#: 84-0847015




Harvest Natural Resources, Inc. (UK), a Delaware corporation

Regus Rickmansworth Cardinal Point

Park Road

Rickmansworth, Herts

United Kingdom WD3 1RE

U.S. TAX ID#: 03-0589773




Schedule 5.13 — Part (d)




 









 








SCHEDULE 6.12




GUARANTORS





	•	 	Harvest Natural Resources, Inc. (UK), a Delaware corporation






	•	 	Harvest Offshore China Company, a Colorado corporation






	•	 	Harvest (US) Holdings, Inc., a Delaware corporation





Schedule 6.12





 









 








SCHEDULE 7.02




EXISTING INDEBTEDNESS



Guarantee dated December 27, by Harvest Natural Resources Inc. guaranteeing farm-in obligations of
Harvest Budong-Budong B.V. (“Harvest Budong”) under the Farmout Agreement dated December 22, 2007
between Tately Budong-Budong N.V. and Harvest Budong.



Letter of Credit dated February 24, 2010 issued by JPMorgan Chase Bank, N.A. for the account of
Harvest Far East Pte. Ltd. in the face amount of $1,000,000 in connection with a joint study for
Binjai, North Sumatra.




Schedule 7.02




 









 








SCHEDULE 7.09




BURDENSOME AGREEMENTS



See Schedule 5.08(b).




Schedule 7.09



 









 





SCHEDULE 9.02




LENDER’S OFFICE, CERTAIN ADDRESSES FOR NOTICES



Borrower:




Harvest Natural Resources, Inc.

1177 Enclave Parkway, Suite 300

Houston, TX 77077

Attention: General Counsel

Ph: 281-899-5700

Fax: 281-899-5702



With a copy to:




Fulbright & Jaworski LLP

2200 Sul Ross Avenue, Suite 2800

Dallas, TX 75201

Attention: Harva Dockery

Ph: 214-855-8369

Fax: 214-855-8200



Lender:




MSD Energy Investments Private II, LLC

645 Fifth Avenue, 21st Floor

New York, NY 10022

Attention: General Counsel




Ph: 212-303-1650

Fax: 212-303-1772




Schedule 9.02