Credit Agreement, dated October 30, 2006



 





Exhibit
10.15




 





CREDIT AGREEMENT




among




IVANHOE ENERGY (USA) INC.,

as Borrower




IVANHOE ENERGY INC.,

IVANHOE ENERGY HOLDINGS INC.,

IVANHOE ENERGY ROYALTY INC.,

IVANHOE ENERGY HTL INC.,

IVANHOE HTL PETROLEUM LTD.,

IVANHOE ENERGY PETROLEUM PROJECTS INC.,

AND

IVANHOE ENERGY HTL (USA) INC.,

as Guarantors




LASALLE BANK, NATIONAL ASSOCIATION,

as Administrative Agent and Issuing Lender




AND THE FINANCIAL INSTITUTIONS FROM TIME TO TIME PARTY HERETO,

as Lenders




 





Dated as of OCTOBER 30, 2006




 









 





TABLE OF CONTENTS




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





Credit Agreement




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




Credit Agreement





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





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





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SCHEDULES




	 	 	 	 
	 	 	 	Page
	Schedule 2.01

Schedule 4.01


Schedule 6.05


Schedule 6.07



Schedule 6.15


Schedule 6.19


Schedule 6.21


Schedule 8.01


Schedule 8.05


Schedule 8.08


Schedule 8.14(c) 


Schedule 11.02

	 	Commitments and Pro Rata Shares

Security Documents 


Litigation 


ERISA Compliance 


Environmental Matters 


Subsidiaries 


Derivative Contracts 


Liens 


Indebtedness 


Contingent Obligations 


Capital Expenditures and G&A Expenses 


Lending Offices; Addresses for Notices	 






EXHIBITS




	 	 	 
	Exhibit A 

Exhibit B 

Exhibit C 

Exhibit D 

Exhibit E 

Exhibit F 

Exhibit G 

Exhibit H

	 	Form of Notice of Borrowing 


Form of Notice of Conversion/Continuation 


Form of Compliance Certificate 

Form of Assignment and Acceptance Agreement 


Form of Note 


Form of Pricing Grid Certificate 


Form of Continuing Guaranty Agreement 


Form of Security Agreement and Pledge






Credit Agreement




 




 (v) 









 







CREDIT AGREEMENT




     THIS CREDIT AGREEMENT is dated as of October 30, 2006, among IVANHOE ENERGY (USA) INC., a
Nevada corporation (the “Company”), IVANHOE ENERGY INC., a corporation formed under the laws of the
Yukon Territory of Canada (“Parent”), IVANHOE ENERGY HOLDINGS INC., a Nevada corporation, IVANHOE
ENERGY ROYALTY INC., a Nevada corporation, IVANHOE HTL PETROLEUM LTD., a Nevada corporation,
IVANHOE ENERGY PETROLEUM PROJECTS INC., a Nevada corporation, IVANHOE ENERGY HTL INC., a Nevada
corporation, and IVANHOE ENERGY HTL (USA) INC. a Nevada corporation (collectively “Guarantors”),
each of the financial institutions from time to time party hereto (individually, a “Lender” and
collectively, the “Lenders”), and LASALLE BANK, NATIONAL ASSOCIATION, as administrative agent for
the Lenders (in such capacity, together with its successors in such capacity, the “Administrative
Agent”), and as Issuing Lender (in such capacity, the “Issuing Lender”).



     In consideration of the representations, warranties, covenants and agreements contained
herein, and other good and valuable consideration, the receipt and adequacy of which are hereby
acknowledged, the Company, Guarantors, Administrative Agent, Issuing Lender and Lenders hereby
agree as follows:



ARTICLE I .




DEFINITIONS




     1.01 Certain Defined Terms. The following terms have the following meanings:



          “Acquisition” means any transaction or series of related transactions for the purpose of or
resulting, directly or indirectly, in (a) the acquisition of all or substantially all of the assets
of a Person, or of any business or division of a Person, (b) the acquisition of in excess of 50% of
the capital stock of a corporation (or similar entity), which stock has ordinary voting power for
the election of the members of such entity’s board of directors or persons exercising similar
functions (other than stock having such power only by reason of the happening of a contingency), or
the acquisition of in excess of 50% of the partnership interests or equity of any Person not a
corporation which acquisition gives the acquiring Person the power to direct or cause the direction
of the management and policies of such Person, or (c) a merger or consolidation or any other
combination with another Person.




          “Administrative Agent” has the meaning specified in the introductory clause hereto.




          “Administrative Agent’s Payment Office” means the address for payments as the Administrative
Agent may from time to time specify.




          “Affected Lender” has the meaning specified in Section 3.07.




          “Affiliate” means, as to any Person, any other Person which, directly or indirectly, is in
control of, is controlled by, or is under common control with, such Person. A Person shall be
deemed to control another Person if the controlling Person possesses the power to direct or cause
the direction of the management and policies of the other Person, whether through the ownership of
voting securities, by contract, or otherwise.




          “Agent-Related Persons” as to the Administrative Agent, means the Administrative Agent, its
Affiliates, and the officers, directors, employees, agents and attorneys-in-fact of the
Administrative Agent and its Affiliates.



 Credit Agreement




1









 








          “Agreement” means this Credit Agreement.




          “Applicable Margin” means, with respect to Base Rate Loans and LIBOR Loans, the respective
margins therefor as determined under the Pricing Grid.




          “Assignee” has the meaning specified in Subsection 11.08(a).




          “Assignment and Acceptance” has the meaning specified in Subsection 11.08(a).




          “Attorney Costs” means and includes all reasonable fees and disbursements of any law firm or
other external counsel, the allocated cost of internal legal services and all disbursements of
internal counsel.




          “Availability Period” has the meaning specified in Subsection 2.01(b).




          “Available Borrowing Base” means, at the particular time in question, the Borrowing Base then
in effect minus the Effective Amount at such time.




          “Bankruptcy Code” means the Federal Bankruptcy Reform Act of 1978 (11 U.S.C. §101, et
seq.), as amended, and regulations promulgated thereunder.




          “Base Rate” means, for any day, the fluctuating rate of interest in effect for such day which
rate per annum shall be equal to the higher of (a) the rate of interest as publicly announced from
time to time by Administrative Agent as its “prime commercial lending rate,” and (b) one-half of
one percent (0.50%) per annum above the Federal Funds Rate in effect from time to time. (The
“prime commercial lending rate” is a rate set by Administrative Agent based upon various factors
including costs and desired return, general economic conditions and other factors, and is used as a
reference point for pricing some loans, which may be priced at, above, or below such announced
rate.) Any change in the prime commercial lending rate announced by Administrative Agent shall
take effect at the opening of business on the day specified in the public announcement of such
change.




          “Base Rate Loan” means a Loan that bears interest based at the Base Rate plus the
Applicable Margin.




          “Borrower Group” means the Company and the Guarantors (other than Parent).




          “Borrowing” means a borrowing hereunder consisting of Loans of the same Interest Rate Type
made to the Company on the same day by the Lenders under Article II, and, other than in the case of
Base Rate Loans, having the same Interest Period.




          “Borrowing Base” means at the particular time in question, the amount provided for in
Section 2.05; provided, however, in no event shall the Borrowing Base ever exceed the Maximum Loan
Amount.




          “Borrowing Base Deficiency” means at any time, the Effective Amount exceeds the Borrowing Base
then in effect.




          “Borrowing Base Period” means the period from Closing to the initial Scheduled Borrowing Base
Determination Date, and thereafter, each six-month period between Scheduled Borrowing Base
Determination Dates.


 Credit Agreement




2









 







          “Borrowing Base Reduction Amount” means at the particular time in question, the amount
provided for in Section 2.05.




          “Borrowing Date” means any date on which a Borrowing occurs under Section 2.02.




          “Business Day” means any day other than a Saturday, Sunday or other day on which commercial
banks in Houston, Texas or Chicago, Illinois are authorized or required by law to close and, if the
applicable Business Day relates to any LIBOR Loan, means such a day on which dealings are carried
on in the applicable offshore dollar interbank market.




          “Capital Adequacy Regulation” means any guideline, request or directive of any central bank or
other Governmental Authority, or any other law, rule or regulation, whether or not having the force
of law, in each case, regarding capital adequacy of any Lender or of any corporation controlling a
Lender.




          “Capital Expenditures and General Administrative Expenses” shall be determined in accordance
with and have the same meanings as such terms are used in GAAP.




          “Capital Lease” means, when used with respect to any Person, any lease in respect of which the
obligations of such Person constitute Capitalized Lease Obligations.




          “Capitalized Lease Obligations” means, when used with respect to any Person, without
duplication, all obligations of such Person to pay rent or other amounts under any lease of (or
other arrangement conveying the right to use) real or personal property, or a combination thereof,
which obligations shall have been or should be, in accordance with GAAP, capitalized on the books
of such Person.




          “Cash Equivalents” means: (a) securities issued or fully guaranteed or insured by the United
States Government or any agency thereof and backed by the full faith and credit of the United
States and having maturities of not more than twelve (12) months from the date of acquisition; (b)
certificates of deposit, time deposits, Eurodollar time deposits, or bankers’ acceptances having in
each case a tenor of not more than twelve (12) months from the date of acquisition issued by, and
demand deposits with, any U.S. commercial bank or any branch or agency of a non-U.S. commercial
bank licensed to conduct business in the U.S. having combined capital and surplus of not less than
$500,000,000, whose long term securities are rated at least A (or then equivalent grade) by S&P and
A2 (or then equivalent grade) by Moody’s at the time of acquisition; (c) commercial paper of an
issuer rated at least A-1 by S&P or P-1 by Moody’s at the time of acquisition, and in either case
having a tenor of not more than twelve (12) months; (d) debt securities which are registered under
the Securities Act of 1933, as amended (the “Securities Act”) (and not “restricted securities” in
the Company’s hands as defined in Rule 144 under the Securities Act), or adjustable rate preferred
stock traded on a national securities exchange and issued by a corporation duly incorporated under
the laws of a state of the United States, or issued by any state, county or municipality located in
the United States of America, provided, however, that such debt securities are rated A2 by Moody’s
and A or better by S&P at the time of acquisition, and such debt securities have a maturity not in
excess of twelve (12) months from the date of creation thereof; (e) repurchase agreements with a
term of not more than seven (7) days for underlying securities of the types described in clauses
(a) and (b) above; and (f) money market mutual or similar funds having assets in excess of
$100,000,000.




          “Casualty Event” means any loss, casualty or other insured damage to, or any nationalization,
taking under power of eminent domain or by condemnation or similar proceeding of, any Property of
the Company or any Guarantor having a fair market value in excess of $250,000.




          “Change of Control” means (a) any Person (other than Robert Friedland and/or his Affiliates)
becomes the owner of 25% or more of the


 Credit Agreement




3









 







equity securities of the Parent entitled to vote for
members of the board of directors or equivalent governing body of the Parent on a fully diluted
basis; or (b) the Parent shall cease to own directly or indirectly, 100% of the issued and
outstanding shares of capital stock of the Company or any other Guarantor; or (c) a sale of all or
substantially all of the assets of the Company or any Guarantor to any Person or group of Persons;
or (d) the liquidation or dissolution of the Company or any Guarantor; or (e) the first day on
which a majority of the board of directors of the Parent are not Continuing Directors. “Continuing
Directors” means any member of the board of directors of the Parent who (A) is a member of such
board of directors as of the date of this Agreement or (B) was nominated for election or elected to
such board of directors with the affirmative vote of two-thirds of the Continuing Directors who
were members of such board of directors at the time of such nomination or election (not including
as board nominees any directors which the board is obligated to nominate pursuant to shareholders’
agreements, voting trust arrangements or similar arrangements).



          “Code” means the Internal Revenue Code of 1986, as amended, and regulations promulgated
thereunder.




          “Collateral” means all property of any kind which is subject to a Lien in favor of
Administrative Agent or which under the terms of any Security Document is purported to be subject
to such Lien.




          “Commitment” means, as to each Lender, such Lender’s Pro Rata Share of the lesser of (a) the
current Borrowing Base or (b) the Maximum Loan Amount, as such commitment may be terminated and/or
reduced from time to time in accordance with the provisions hereof.




          “Commitment Fee” means the fee payable pursuant to Subsection 2.07(a).




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




          “Compliance Certificate” means a certificate substantially in the form of Exhibit C.




          “Consolidated Interest Expense” means, with respect any Person, for any fiscal period, the sum
of the aggregate amount of all costs, fees and expenses paid such Person in such fiscal period
which are classified as interest expense on the consolidated financial statements of such Person
determined in conformity with GAAP, plus all other cash interest expense paid during such fiscal
period, including any debt issuance costs and commissions, discounts and other fees and charges
associated with Indebtedness, whether or not such amounts are included as interest expense or are
required to be capitalized on such Person’s balance sheet or are otherwise accounted for under
GAAP.




          “Consolidated Net Income” means, for any Person and for any period of time, the net income
(or net loss) of such Person for such period determined on a consolidated basis in accordance with
GAAP; provided, the effect, if any, resulting from the application of FAS 133 shall be excluded
from the calculation of net income (or net loss).




          “Contingent Obligation” means, as to any Person without duplication, any direct or indirect
liability of that Person with or without recourse, (a) with respect to any Indebtedness, dividend,
letter of credit or other similar obligation (the “primary obligations”) of another Person (the
“primary obligor”), including any obligation of that Person (i) to purchase, repurchase or
otherwise acquire such primary obligations or any security therefor, (ii) to advance or provide
funds for the payment or discharge of any such primary obligation, or to maintain working capital
or equity capital of the primary obligor or otherwise to maintain the
net worth or solvency or any balance sheet item, level of income or financial condition of the
primary obligor, (iii) to purchase property, securities or services primarily for the purpose of
assuring the owner of any such primary obligation of the ability of the primary obligor to make
payment of such primary obligation, or (iv)



Credit Agreement




4









 







otherwise to assure or hold harmless the holder of any
such primary obligation against loss in respect thereof (each, a “Guaranty Obligation”); (b) with
respect to any Surety Instrument issued for the account of that Person or as to which that Person
is otherwise liable for reimbursement of drawings or payments; (c) to purchase any materials,
supplies or other property from, or to obtain the services of, another Person, other than in the
ordinary course of business, if the relevant contract or other related document or obligation
requires that payment for such materials, supplies or other property, or for such services, shall
be made regardless of whether delivery of such materials, supplies or other property is ever made
or tendered, or such services are ever performed or tendered, or (d) in respect of any Derivative
Contract. The amount of any Contingent Obligation shall, in the case of Guaranty Obligations, be
deemed equal to the lesser of (a) the stated maximum amount, if any, of such Contingent Obligation
and (b) the maximum stated or determinable amount of the primary obligation in respect of which
such Guaranty Obligation is made or, if not stated or if indeterminable, the maximum reasonably
anticipated liability in respect thereof, and in the case of other Contingent Obligations, shall be
equal to the lesser of (a) the stated maximum amount, if any, of such Contingent Obligation and (b)
the maximum reasonably anticipated liability in respect thereof.



          “Continuing Directors” has the meaning specified in the definition of “Change of Control.”




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




          “Conversion/Continuation Date” means any date on which, under Section 2.03, the Company (a)
converts Loans of one Interest Rate Type to another Interest Rate Type, or (b) continues Loans
having Interest Periods expiring on such date as Loans of the same Interest Rate Type but with a
new Interest Period.




          “Credit Extension” means and includes the making of any Loans or issuance of any Letter of
Credit (including the extension of any existing Letter of Credit) hereunder.




          “Current Assets” means, for any Person as of any time, the current assets of such Person and
its consolidated Subsidiaries, on a consolidated basis at such time, plus, the Available
Borrowing Base at such time, less, for purposes of this definition, any non-cash gains for
any Derivative Contract resulting from the requirements of FAS 133 at such time.




          “Current Liabilities” means, for any Person as of any time, the current liabilities of such
Person and its consolidated Subsidiaries, on a consolidated basis at such time, less the
sum of (a) current maturities of the Obligations to the extent such payments are not past due and
(b) non-cash losses or charges on any Derivative Contract resulting from the requirements of FAS
133 at such time.




          “Default” means any event or circumstance which, with the giving of notice, the lapse of time,
or both, would (if not cured or otherwise remedied during such time) constitute an Event of
Default.




          “Default Rate” has the meaning specified in Subsection 2.06(b)(iii).




          “Derivative Contract” means all futures contracts, forward contracts, swap, cap or collar
contracts, option contracts, hedging contracts or other derivative contracts or similar agreements
covering oil and gas commodities or prices or financial, monetary or interest rate instruments.




          “Dispositions” has the meaning specified in Section 8.02.



 Credit Agreement




5









 








          “Dollars”, “dollars” and “$” each mean lawful money of the United States.




          “EBITDA” means, for any Person and for any period of time, the sum of Consolidated Net Income
of such Person for such period plus, without duplication, the following expenses or charges, to the
extent deducted from Consolidated Net Income for such period: exploration expense, interest
expense, depletion, depreciation, amortization, unrealized loss on Derivative Contracts which
relate to hedging, loss on sale of assets, cumulative effect of accounting changes, income taxes,
non-cash deferred stock compensation, and other noncash charges, minus, without
duplication, the following gains or credits to the extent added to Consolidated Net Income in such
twelve month period: unrealized gain on Derivative Contracts which relate to hedging, gain on sale
of assets, stock based compensation paid, cumulative effect of accounting changes and other noncash
income. All calculations of EBITDA, for any applicable period during which a permitted Acquisition
or Disposition is consummated, shall be determined on a pro forma basis (such calculation to be
acceptable to, and approved by, Administrative Agent) as if such Acquisition or Disposition was
consummated on the first day of such applicable period.




          “Effective Amount” means on any date, the aggregate outstanding principal amount of all Loans
thereof after giving effect to any prepayments or repayments of Loans occurring on such date
plus the LC Obligation.




          “Effective Date” means the date on which all conditions precedent set forth in Sections 5.01
and 5.02 are satisfied or waived by Administrative Agent.




          “Eligible Assignee” means (a) a commercial bank organized under the laws of the United States,
or any state thereof, and having a combined capital and surplus of at least $100,000,000; (b) a
commercial bank organized under the laws of any other country which is a member of the Organization
for Economic Cooperation and Development, or a political subdivision of any such country, and
having a combined capital and surplus of at least $100,000,000, provided that such bank is
acting through a branch or agency located in the United States; (c) a Person with a combined
capital and surplus of at least $100,000,000 that is primarily engaged in the business of
commercial banking and that is (i) a Subsidiary of a bank, (ii) a Subsidiary of a Person of which a
bank is a Subsidiary, or (iii) a Person of which a bank is a Subsidiary; (d) a finance company,
insurance company or other financial institution or fund (whether a corporation, partnership, trust
or other entity) that is engaged in making, purchasing or otherwise investing in commercial loans
in the ordinary course of its business and having total assets in excess of $100,000,000; and (e)
any other Person approved by the Administrative Agent.




          “Environmental Claims” means all material claims by any Governmental Authority or other Person
alleging potential liability or responsibility for violation of any Environmental Law, or for
release or injury to the environment.




          “Environmental Laws” means all material federal, state or local laws, statutes, common law
duties, rules, regulations, ordinances and codes, together with all material administrative orders,
requests, licenses, authorizations and permits of, and agreements with, any Governmental
Authorities, in each case relating to environmental, health, and safety matters.




          “Equity” means all shares, options, warrants, general or limited partnership interests,
participations or other equivalents (regardless of how designated) of or in a corporation, limited
liability company, partnership or equivalent entity whether voting or nonvoting, including, without
limitation, common stock, preferred stock, or any other “equity security” (as such term is defined
in Rule 3a11-1 of the
General Rules and Regulations promulgated by the Securities and Exchange Commission under the
Securities Exchange Act of 1934, as amended).


 Credit Agreement




6









 







          “ERISA” means the Employee Retirement Income Security Act of 1974, as amended, and regulations
promulgated thereunder.




          “ERISA Affiliate” means any trade or business (whether or not incorporated) under common
control with the Company or any Guarantor within the meaning of Section 414(b) or (c) of the Code
(and Sections 414(m) and (o) of the Code for purposes of provisions relating to Section 412 of the
Code).




          “ERISA Event” means (a) a Reportable Event with respect to a Pension Plan; (b) a withdrawal by
the Company or any Guarantor or any ERISA Affiliate from a Pension Plan subject to Section 4063 of
ERISA during a plan year in which it was a substantial employer (as defined in Section 4001(a)(2)
of ERISA) or a cessation of operations which is treated as such a withdrawal under Section 4062(e)
of ERISA; (c) a complete or partial withdrawal by the Company or any Guarantor or any ERISA
Affiliate from a Multiemployer Plan or notification that a Multiemployer Plan is in reorganization;
(d) the filing of a notice of intent to terminate (other than pursuant to Section 4041(b) of
ERISA), the treatment of a Plan amendment as a termination under Section 4041(c) or 4041A of ERISA,
or the commencement of proceedings by the PBGC to terminate a Pension Plan or Multiemployer Plan;
(e) an event or condition which might reasonably be expected to constitute grounds under
Section 4042 of ERISA for the termination of, or the appointment of a trustee to administer, any
Pension Plan or Multiemployer Plan; or (f) the imposition of any liability under Title IV of ERISA,
other than PBGC premiums due but not delinquent under Section 4007 of ERISA, upon the Company or
any Guarantor or any ERISA Affiliate.




          “Event of Default” means any of the events or circumstances specified in Section 9.01.




          “Exchange Act” means the Securities and Exchange Act of 1934, and regulations promulgated
thereunder.




          “Existing Credit Agreement” means that certain Credit Agreement dated as of February 3, 2003
by and between the Company and Wells Fargo Bank, National Association, as the same has been
modified and amended through the date hereof.




          “FAS 133” means Statement No. 133 of the Financial Accounting Standards Board to Derivative
Contracts or any equivalent ruling or regulation arising under Canadian generally accepted
accounting principles.




          “FDIC” means the Federal Deposit Insurance Corporation, and any Governmental Authority
succeeding to any of its principal functions.




          “Federal Funds Rate” means, for any day, the rate set forth in the weekly statistical release
designated as H.15(519), or any successor publication, published by the Federal Reserve Bank of New
York (including any such successor, “H.15(519)”) on the preceding Business Day opposite the caption
“Federal Funds (Effective)”; or, if for any relevant day such rate is not so published on any such
preceding Business Day, the rate for such day will be the arithmetic mean as determined by the
Administrative Agent of the rates for the last transaction in overnight Federal funds arranged
prior to 9:00 a.m. (New York, New York time) on that day by each of three leading brokers of
Federal funds transactions in New York, New York selected by the Administrative Agent.




          “Fee Letter” shall have the meaning specified in Subsection 2.07(c) hereof.




          “Final Maturity Date” means the earlier of (a) the date that is two (2) years after the date
of this Agreement or (b) the date on which the Obligations otherwise finally become due and payable
in full in accordance with the provisions of this Agreement.



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7









 








          “FRB” means the Board of Governors of the Federal Reserve System, and any Governmental
Authority succeeding to any of its principal functions.




          “GAAP” means generally accepted accounting principles in Canada set forth from time to time in
the opinions and pronouncements of the Canadian Institute of Chartered Accountants (or agencies
with similar functions of comparable stature and authority within the Canadian accounting
profession), which are applicable to the circumstances as of the date of determination.




          “Governmental Authority” means any nation or government, any state or other political
subdivision thereof, any central bank (or similar monetary or regulatory authority) thereof, any
entity exercising executive, legislative, judicial, regulatory or administrative functions of or
pertaining to government, and any corporation or other entity owned or controlled, through stock or
capital ownership or otherwise, by any of the foregoing.




          “Guarantors” means, collectively, the entities identified in the introduction hereto as
Guarantors, together with any Subsidiary of Ivanhoe Energy Holdings Inc. which is required to
execute a Guaranty under Section 7.15. “Guarantor” means, individually, any one of the Guarantors.




          “Guaranties” means, collectively, each Continuing Guaranty Agreement, substantially in the
form of Exhibit G hereto, executed by the Guarantors in favor of Administrative Agent, as same may
be amended, supplemented or otherwise modified from time to time. “Guaranty” means, individually,
any one of the Guaranties.




          “Guaranty Obligation” has the meaning specified in the definition of “Contingent Obligation.”




          “Highest Lawful Rate” means, as of a particular date, the maximum nonusurious interest rate
that under applicable federal and state law may then be contracted for, charged or received by the
Lenders in connection with the Obligations.




          “HTL Technology Development Subsidiaries” is a collective reference to Ivanhoe Energy HTL
Inc., Ivanhoe Energy Petroleum Projects Inc., Ivanhoe HTL Petroleum Ltd., and Ivanhoe Energy HTL
(USA) Inc., and any other Subsidiary of Parent actively engaged in the HTL technology development
project currently ongoing among Parent and certain of its Subsidiaries.




          “Hydrocarbon Interests” means leasehold and other interests in or under oil, gas and other
liquid or gaseous hydrocarbon leases wherever located, mineral fee interests, overriding royalty
and royalty interests, net profit interests, production payment interests relating to oil, gas or
other liquid or gaseous hydrocarbons wherever located including any reserved or residual interest
of whatever nature.




          “Indebtedness” of any Person means, without duplication, (a) all indebtedness for borrowed
money; (b) all obligations issued, undertaken or assumed as the deferred purchase price of property
or services (other than trade payables entered into in the ordinary course of business on ordinary
terms); (c) all non-contingent reimbursement or payment obligations with respect to Surety
Instruments; (d) all obligations evidenced by notes, bonds, debentures or similar instruments,
including obligations so evidenced incurred in connection with the acquisition of property, assets
or businesses; (e) all indebtedness created or arising under any conditional sale or other title
retention agreement, or incurred as financing, in either case with respect to
property acquired by the Person (even though the rights and remedies of the seller or Lender under
such agreement in the event of default are limited to repossession or sale of such property)
including, without limitation, production payments, net profit interests and other Hydrocarbon
Interests subject to repayment out



Credit Agreement




8









 







           of future Oil and Gas production; (f) all obligations with
respect to Capital Leases; (g) all net obligations with respect to Derivative Contracts; (h) all
indebtedness referred to in clauses (a) through (g) above secured by (or for which the holder of
such Indebtedness has an existing right, contingent or otherwise, to be secured by) any Lien upon
or in property (including accounts and contracts rights) owned by such Person, even though such
Person has not assumed or become liable for the payment of such Indebtedness; and (i) all Guaranty
Obligations in respect of indebtedness or obligations of others of the kinds referred to in clauses
(a) through (g) above.




          “Indemnified Liabilities” has the meaning specified in Section 11.05.




          “Indemnified Person” has the meaning specified in Section 11.05.




          “Independent Auditor” has the meaning specified in Subsection 7.01(a).




          “Independent Engineer” has the meaning specified in Section 6.11.




          “Initial Reserve Report” has the meaning specified in Section 6.11.




          “Insolvency Proceeding” means (a) any case, action or proceeding relating to bankruptcy,
reorganization, insolvency, liquidation, receivership, dissolution, winding-up or relief of
debtors, or (b) any general assignment for the benefit of creditors, composition, marshaling of
assets for creditors, or other, similar arrangement in respect of its creditors generally or any
substantial portion of its creditors; undertaken under U.S. federal, state or foreign law,
including the Bankruptcy Code.




          “Interest Payment Date” (a) as to any Base Rate Loan, means the last Business Day of each
month prior to the Final Maturity Date, and the Final Maturity Date and (b) as to any LIBOR Loan,
the last day of each Interest Period applicable to such Loan; provided, however,
that if any Interest Period for a LIBOR Loan exceeds three months, the date that falls three months
after the beginning of such Interest Period, and the date that falls three months after each
Interest Payment Date thereafter for such Interest Period, is also an Interest Payment Date.




          “Interest Period” means, as to any LIBOR Loan, the period commencing on the Borrowing Date of
such Loan or on the Conversion/Continuation Date on which the Loan is converted into or continued
as LIBOR Loan, and ending on the date one, two, three or six months thereafter as selected by the
Company in its Notice of Borrowing or Notice of Conversion/Continuation; provided that:
(a) if any Interest Period would otherwise end on a day that is not a Business Day, that Interest
Period shall be extended to the following Business Day unless, in the case of a LIBOR Loan, the
result of such extension would be to carry such Interest Period into another calendar month, in
which event such Interest Period shall end on the preceding Business Day; (b) any Interest Period
pertaining to an LIBOR Loan that begins on the last Business Day of a calendar month (or on a day
for which there is no numerically corresponding day in the calendar month at the end of such
Interest Period) shall end on the last Business Day of the calendar month at the end of such
Interest Period; and (c) no Interest Period for any Loan shall extend beyond the Final Maturity
Date.




          “Interest Rate Type” means, with respect to any Loan, the interest rate, being either the Base
Rate or the LIBOR forming the basis upon which interest is charged against such Loan hereunder.




          “IRS” means the Internal Revenue Service, and any Governmental Authority succeeding to any of
its principal functions under the Code.


Credit Agreement





9









 








          “Issue” means with respect to any Letter of Credit, to issue or extend the expiry of, or to
renew or increase the amount of, such Letter of Credit; and the terms “Issued,” “Issuing” and
“Issuance” have corresponding meanings.




          “Issuing Lender” has the meaning specified in the introductory clause hereto.




          “LC Application” means an application or agreement for a standby Letter of Credit in such form
acceptable to the Issuing Lender in its sole discretion, and duly executed by the Company pursuant
to Section 2.10(a).




          “LC Collateral” means any amounts held by the Administrative Agent as security for LC
Obligations of the Company.




          “LC Collateral Account” means a blocked deposit account held by the Administrative Agent.




          “LC Obligation” means, at the time in question, the sum of the Matured LC Obligations
plus the aggregate amount outstanding under all Letters of Credit then outstanding.




          “LC Related Document” means the Letters of Credit, LC Applications and any other document
relating to any Letter of Credit including any of the Issuing Lender’s standard form documents for
Letter of Credit issuances.




          “Lenders” has the meaning specified in the introductory clause hereto.




          “Lending Office” means, as to any Lender, the office or offices of such Lender specified as
its “Lending Office” or “Domestic Lending Office” or “Offshore Lending Office”, as the case may be,
on Schedule 11.02, or such other office or offices as such Lender may from time to time notify the
Company and the Administrative Agent.




          “Letter of Credit” means any stand-by letter of credit issued by the Issuing Lender pursuant
to this Agreement and upon an LC Application.




          “Letter of Credit Fee” means the fee specified in Subsection 2.07(b).




          “LIBOR” ” shall mean a rate of interest equal to (a) the per annum rate of interest at which
United States dollar deposits for a period equal to the relevant Interest Period are offered in the
London Interbank Eurodollar market at 11:00 a.m. (London time) two Business Days prior to the
commencement of such Interest Period (or three Business Days prior to the commencement of such
Interest Period if banks in London, England were not open and dealing in offshore United States
dollars on such second preceding Business Day), as displayed in the Bloomberg Financial Markets
system (or other authoritative source selected by the Administrative Agent in its sole discretion),
divided by (b) a number determined by subtracting from 1.00 the then stated maximum reserve
percentage for determining reserves to be maintained by member banks of the Federal Reserve System
for Eurocurrency funding or liabilities as defined in Regulation D (or any successor category of
liabilities under Regulation D), or as LIBOR is otherwise determined by the Administrative Agent
in its sole and absolute discretion. The Administrative Agent’s determination of LIBOR shall be
conclusive, absent manifest error.




          “LIBOR Loan” means a Loan that bears interest based on LIBOR plus the Applicable
Margin.



 Credit Agreement




10









 








          “Lien” means any security interest, mortgage, deed of trust, pledge, hypothecation,
assignment, charge or deposit arrangement, encumbrance, lien (statutory or other) or preferential
arrangement of any kind or nature whatsoever in respect of any property (including those created
by, arising under or evidenced by any conditional sale or other title retention agreement and the
interest of a lessor under a Capital Lease), any financing lease having substantially the same
economic effect as any of the foregoing, or the filing of any financing statement naming the owner
of the asset to which such lien relates as debtor, under the Uniform Commercial Code or any
comparable law and any contingent or other agreement to provide any of the foregoing, but not
including (a) the interest of a lessor under a lease on Oil and Gas Properties and (b) the interest
of a lessor under an Operating Lease.




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




          “Loan Documents” means this Agreement, the Notes, each Guaranty, the Security Documents, each
LC Application and Letter of Credit and all other documents delivered to the Administrative Agent
or any Lender in connection herewith, including without limitation, the Fee Letter and any
commitment letters.




          “Margin Stock” means “margin stock” as such term is defined in Regulation T, U or X of the
FRB.




          “Material Adverse Effect” means (a) a material adverse change in, or a material adverse effect
upon, the operations, business, properties or financial condition of the Company or the Company and
the Guarantors taken as a whole, including without limitation, any material adverse change in
commodity prices or reserve estimates of the Oil and Gas Properties of the Company or the Company
and the Guarantors taken as a whole; (b) a material impairment of the ability of the Company or any
Guarantor to perform under any material Loan Document and to avoid any Default; or (c) a material
adverse effect upon the legality, validity, binding effect or enforceability against the Company or
any Guarantor of any material Loan Document.




          “Matured LC Obligation” means the aggregate amount of payments theretofore made by the Issuing
Lender in respect to Letters of Credit and not theretofore reimbursed by the Company to the Issuing
Lender or deemed Loans pursuant to Subsection 2.10(d).




          “Maximum Loan Amount” means the amount of $15,000,000.




          “Monthly Status Report” means a status report prepared monthly by the Company in form, scope
and content acceptable to the Administrative Agent, setting forth as of such month then ended (a)
detailing production from the Oil and Gas Properties, the volumes of Oil and Gas produced and
saved, the volumes of Oil and Gas sold, gross revenue, net income, related leasehold operating
expenses, severance taxes, other taxes, capital costs and any production imbalances incurred during
such period and (b) information concerning any Derivative Contracts entered into by the Company or
any Guarantor, and (c) such additional information with respect to any of the Oil and Gas
Properties as may be reasonably requested by Administrative Agent.




          “Mortgages” means the mortgages from the Company or any Guarantor in favor of Administrative
Agent, for the benefit of the Lenders, described on Schedule 4.01 hereto, and all supplements,
assignments, amendments and restatements thereto (or any agreement in substitution therefor) as
same may be released in whole or in part from time to time which are executed and delivered to Administrative
Agent for benefit of the Lenders pursuant to Article IV of this Agreement.



 Credit Agreement




11









 








          “Mortgaged Properties” means such Oil and Gas Properties upon which the Company or any
Guarantor has granted the Administrative Agent for the benefit of the Lenders a Lien pursuant to
the Mortgages.




          “Multiemployer Plan” means a “multiemployer plan”, within the meaning of Section 4001(a)(3) of
ERISA, to which the Company, any Guarantor or any ERISA Affiliate makes, is making, or is obligated
to make contributions or, during the preceding three calendar years, has made, or been obligated to
make, contributions.




          “Notes” means the promissory notes, whether one or more, specified in Section 2.01,
substantially in the same form as Exhibit E including any amendments, modifications, renewals or
replacements of such promissory notes.




          “Notice of Borrowing” means a notice in substantially the form of Exhibit A.




          “Notice of Conversion/Continuation” means a notice in substantially the form of Exhibit B.




          “Obligations” means all advances, debts, liabilities, obligations, covenants and duties
arising under any Loan Document owing by the Company or any Guarantor to any Lender, the
Administrative Agent, or any Indemnified Person, whether direct or indirect (including those
acquired by assignment), absolute or contingent, due or to become due, now existing or hereafter
arising, including all net Indebtedness owed to the Lenders or their Affiliates with respect to
Derivative Contracts (except to the extent excluded under Section 11.11).




          “Oil and Gas” means petroleum, natural gas and other related hydrocarbons or minerals or any
of them and all other substances produced or extracted in association therewith.




          “Oil and Gas Liens” means liens reserved under oil and gas leases, overriding royalty
agreements, net profits agreements, royalty trust agreements, farm-out agreements, division orders,
contracts for the sale, purchase, exchange, transportation, gathering or processing of oil, gas or
other hydrocarbons, unitizations and pooling designations, declarations, orders and agreements,
development agreements, Operating Agreements, production sales contracts, area of mutual interest
agreements, gas balancing or deferred production agreements, injection, repressuring and recycling
agreements, salt water or other disposal agreements, seismic or geophysical permits or agreements,
and other agreements that are customary in the oil and gas business and are entered into by any
member of the Borrower Group in the ordinary course of business, provided in all instances that
such Liens are limited to the assets that are the subject of the relevant agreement.




          “Oil and Gas Properties” means Hydrocarbon Interests now owned by any member of the Borrower
Group and contracts executed in connection therewith and all tenements, hereditaments,
appurtenances, and properties belonging, affixed or incidental to such Hydrocarbon Interests,
including, without limitation, any and all property, real or personal, now owned by the Company or
any Guarantor and situated upon or to be situated upon, and used, built for use, or useful in
connection with the operating, working or developing of such Hydrocarbon Interests, including,
without limitation, any and all petroleum and/or natural gas wells, buildings, structures, field
separators, liquid extractors, plant compressors, pumps, pumping units, field gathering systems,
tank and tank batteries, fixtures, valves, fittings, machinery and parts, engines, boilers, liters,
apparatus, equipment, appliances, tools, implements, cables, wires, towers, taping, tubing and
rods, surface leases, rights-of-way, easements and servitudes, and all additions, substitutions,
replacements for, fixtures and attachments to any and all of the foregoing owned by any member of
the Borrower Group.



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12









 








          “Operating Agreements” mean those agreements now or hereafter executed by any member of the
Borrower Group and other working interest owners of the Oil and Gas Properties in connection with
the operation of the Oil and Gas Properties.




          “Operating Lease” means an operating lease determined in accordance with GAAP.




          “Organization Documents” means (a) for any corporation: the articles of incorporation, the
bylaws, any certificate of determination or instrument relating to the rights of the shareholders
of such corporation, any shareholder rights agreement, and all applicable resolutions of the board
of directors (or any committee thereof) of such corporation; (b) for any limited liability company:
the articles of organization, the regulations or operating agreement, certificate of organization
and all applicable resolutions of the members of such company; and (c) for any limited partnership:
the limited partnership agreement and all Organization Documents for its general partner, as any of
the foregoing have been amended or supplemented from time to time.




          “Other Taxes” means any present or future stamp or documentary taxes or any other excise or
property taxes, charges or similar levies which arise from any payment made hereunder or from the
execution, delivery or registration of, or otherwise with respect to, this Agreement or any other
Loan Documents.




          “Parent” has the meaning specified in the introductory clause hereto.




          “Participant” has the meaning specified in Subsection 11.08(d).




          “PBGC” means the Pension Benefit Guaranty Corporation, or any Governmental Authority
succeeding to any of its principal functions under ERISA.




          “Pension Plan” means a pension plan (as defined in Section 3(2) of ERISA) subject to Title IV
of ERISA, other than a Multiemployer Plan, which the Company or any Guarantor sponsors, maintains,
or to which it makes, is making, or is obligated to make contributions, or in the case of a
multiple employer plan (as described in Section 4064(a) of ERISA) has made contributions at any
time during the immediately preceding five (5) plan years.




          “Permitted Liens” has the meaning specified in Section 8.01.




          “Person” means an individual, partnership, corporation, limited liability company, business
trust, joint stock company, trust, unincorporated association, joint venture or Governmental
Authority.




          “Plan” means an employee benefit plan (as defined in Section 3(3) of ERISA) which is subject
to ERISA, other than a Multiemployer Plan, which the Company or any Guarantor sponsors, maintains,
or to which it makes, is making, or is obligated to make contributions, or in the case of a
multiple employer plan (as described in Section 4064(a) of ERISA) has made contributions at any
time during the immediately preceding five (5) plan years.




          “Pricing Grid” means the annualized variable rates (stated in terms of basis points (“bps”))
set forth below for the Applicable Margin, Commitment Fee and Letter of Credit Fee, based upon the
ratio of the Effective Amount to the Borrowing Base Amount, as follows:



Credit Agreement




13









 







	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	 	 	Applicable Margin	 	 	 	 
	Effective Amount/	 	LIBOR	 	 	 	 	 	Commitment	 	Letter of Credit
	Borrowing	 	Rate	 	 	 	 	 	Fee	 	Fee
	Base Amount	 	(bps)	 	Base Rate (bps)	 	(bps)	 	(bps)
	> 90%

	 	 	325.00	 	 	 	225.00	 	 	 	50.00	 	 	 	325.00	 
	< 90% 3 50%

	 	 	300.00	 	 	 	200.00	 	 	 	50.00	 	 	 	300.00	 
	< 50%

	 	 	275.00	 	 	 	175.00	 	 	 	50.00	 	 	 	275.00	 





The Pricing Grid for any date shall be determined by reference to the ratio of the Effective Amount
and Borrowing Base as of the last day of the fiscal quarter most recently ended and any change (a)
shall become effective upon the delivery to the Administrative Agent of a Pricing Grid Certificate
of a Responsible Officer of the Company (which certificate shall be delivered simultaneously with
(i) the delivery of each Notice of Borrowing, any notice required under Section 2.04, Notice of
Conversion/Continuation or a request for issuance or extension of a Letter of Credit and (ii) any
change in the amount of the Borrowing Base), and (b) shall apply (i) in the case of the Base Rate
Loans, to Base Rate Loans outstanding on such delivery date or made on and after such delivery date
and (ii) in the case of the LIBOR Loans, to LIBOR Loans made, continued or converted on and after
such delivery date. Notwithstanding the foregoing, at any time during which the Company has failed
to deliver the Pricing Grid Certificate when due, the ratio of Effective Amount to the Borrowing
Base shall be deemed, solely for the purposes of this definition, to be greater than 90% until such
time as the Company shall deliver such certificate.




          “Pricing Grid Certificate” means a Pricing Grid Certificate substantially in the form of
Exhibit F hereto.




          “Principal Business” means (a) the business of the exploration for, and development,
acquisition, production, and upstream marketing and transportation of Oil and Gas, (b) the business
of developing raw land acquired in conjunction with the exploration for, and development,
acquisition, production, and upstream marketing and transportation of Oil and Gas, and remediating
such land for resale; (c) the business of owning real estate and improvements thereon, including
rental properties, development and joint ventures; (d) the business of providing services in
connection with the production of Oil and Gas; and (e) the business of developing and deploying HTL
technology.




          “Production Sales Contracts” mean those agreements now or hereafter executed in connection
with the sale of Oil and Gas attributable to the Oil and Gas Properties.




          “Property” means any interest in any kind of property or asset, whether real, personal or
mixed, tangible or intangible.




          “Pro Rata Share” means, as to any Lender at any time, the percentage set forth opposite its
name on Schedule 2.01 hereto, as modified by any Assignment and Acceptance.




          “Regulation U” and “Regulation X” means Regulation U and Regulation X, respectively, of the
FRB from time to time in effect and shall include any successor or other regulations or official
interpretations of the FRB relating to the subject matter addressed therein.




          “Remedial Work” has the meaning specified in Section 7.13.




          “Replacement Lender” has the meaning specified in Section 3.07.



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14









 








          “Reportable Event” means, any of the events set forth in Section 4043(b) of ERISA or the
regulations thereunder, other than any such event for which the 30-day notice requirement under
ERISA has been waived in regulations issued by the PBGC.




          “Required Lenders” means, at any time, the Administrative Agent and the Lenders holding at
least sixty-six and two-thirds percent
(662/3%) of the sum of the Effective Amount or, if there is no
Effective Amount, the Administrative Agent and the Lenders holding at least sixty-six and
two-thirds percent
(662/3%) of the sum of the Commitments of all of the Lenders.




          “Requirement of Law” means, as to any Person, any law (statutory or common), treaty, rule or
regulation or determination of an arbitrator or of a Governmental Authority, in each case
applicable to or binding upon the Person or any of its property or to which the Person or any of
its property is subject.




          “Reserve Report” means a report, in form, scope and content acceptable to the Lenders,
covering proved developed and proved undeveloped Oil and Gas reserves attributable to the Mortgaged
Properties and setting forth with respect thereto, (a) the total quantity of proved developed and
proved undeveloped reserves (separately classified as to producing, shut-in, behind pipe, and
undeveloped), (b) the estimated future net revenues and cumulative estimated future net revenues,
(c) the present discounted value of future net revenues, and (d) such other information and data
with respect to the Mortgaged Properties as the Administrative Agent may reasonably request.




          “Responsible Officer” means any CEO or co-CEO, president, chief financial officer or treasurer
of the Company.




          “Scheduled Borrowing Base Determination” means a redetermination of the Borrowing Base in
accordance with Subsection 2.05(a) on each Scheduled Borrowing Base Determination Date.




          “Scheduled Borrowing Base Determination Date” means December 1 and June 1 of each calendar
year, commencing on December 1, 2006.




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




          “Security Agreements” means collectively, each agreement in substantially the form of
Exhibit H executed by the Company or any Guarantor in favor of Administrative Agent for the benefit
of the Lenders.




          “Security Documents” means the Mortgages, the Security Agreements and related financing
statements as same may be amended from time to time and any and all other instruments now or
hereafter executed in connection with or as security for the payment of the Obligations.




          “Solvent” means, as to any Person at any time, that (a) the fair value of all of the property
of such Person is greater than the amount of such Person’s liabilities (including disputed,
contingent and unliquidated liabilities) as such value is established and liabilities evaluated for
purposes of Section 101(32) of the Bankruptcy Code; (b) the present fair salable value of all of
the property of such Person is not less than the amount that will be required to pay the probable
liability of such Person on its debts as they become absolute and matured; (c) such Person does not
intend to, and does not believe that it will, incur debts or liabilities beyond such Person’s
ability to pay as such debts and liabilities mature; and (d) such Person is not engaged in business
or a transaction, and is not about to engage in business or a transaction, for which such Person’s
property would constitute unreasonably small capital.



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15









 








          “Special Borrowing Base Determination” has the meaning specified in Subsection 2.05(b).




          “Subsidiary” of a Person means any corporation, limited liability company, association,
partnership, joint venture or other business entity of which more than 50% of the voting stock or
other equity interests (in the case of Persons other than corporations), is owned or controlled
directly or indirectly by the Person, or one or more of the Subsidiaries of the Person, or a
combination thereof. Unless the context otherwise clearly requires, references herein to a
“Subsidiary” refer to a subsidiary of the Parent.




          “Super-Majority Lenders” means, at any time, the Administrative Agent and the Lenders holding
at least seventy-five percent (75%) of the sum of the Effective Amount or, if there is no Effective
Amount, the Administrative Agent and the Lenders holding at least seventy-five percent (75%) of the
sum of the Commitments of all of the Lenders.




          “Surety Instruments” means all letters of credit (including standby), banker’s acceptances,
bank guaranties, shipside bonds, surety bonds and similar instruments.




          “Surface Estate” means any fee simple interest and estate from the surface down to 500 feet
below the surface in any and all such properties less and except (a) all Oil and Gas beneath,
within or that may be produced from any and all such properties and (b) the right to occupy, use
and improve the surface and subsurface of any and all such properties insofar as necessary or
convenient to prospecting, exploring, and drilling for, producing, storing, treating and
transporting any and all such Oil and Gas.




          “Taxes” means any and all present or future taxes, levies, imposts, deductions, charges or
withholdings thereto imposed upon or related to the transactions under this Agreement, and all
liabilities with respect to this transaction, excluding, in the case of each Lender and the
Administrative Agent, (a) such taxes (including income taxes or franchise taxes) as are imposed on
or measured by each Lender’s net income, gross receipts or capital by the jurisdiction (or any
political subdivision thereof) under the laws of any applicable jurisdiction, (b) such withholding
taxes as are in effect and would apply to a payment to such Lender or Administrative Agent at the
time such person becomes a party to this Agreement, for the avoidance of doubt whether as an
original Lender or as an Assignee (or designated a new Lending Office), and (c) such taxes as would
not have been imposed but for the failure of such Lender to comply with the certification
requirements described in Section 10.12 hereof.




          “Termination Date” means the earlier of (a) the date that is eighteen (18) months after the
date of this Agreement, or (b) the date on which the Lenders’ Commitments terminate in accordance
with the provisions of this Agreement.




          “Total Indebtedness” means, for any Person as of any date, all Indebtedness of such Person and
its Subsidiaries on a consolidated basis.




          “Unfunded Pension Liability” means the excess of a Plan’s benefit liabilities under
Section 4001(a)(16) of ERISA, over the current value of that Plan’s assets, determined in
accordance with the assumptions used for funding the Pension Plan pursuant to Section 412 of the
Code for the applicable plan year.




          “United States” and “U.S.” each means the United States of America.




          1.02 Other Interpretive Provisions. The meanings of defined terms are equally applicable to
the singular and plural forms of the defined terms. Unless otherwise specified or the context
clearly requires otherwise, the words “hereof,” “herein,” “hereunder” and similar words refer to
this Agreement as a whole and not to any particular provision of this
Agreement; and subsection, Section,



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16









 







 Schedule and Exhibit references are to this Agreement.
The term “documents” includes any and all instruments, documents, agreements, certificates,
indentures, notices and other writings, however evidenced. The term “including” is not limiting
and means “including without limitation.” In the computation of periods of time from a specified
date to a later specified date, the word “from” means “from and including,” the words “to” and
“until” each mean “to but excluding,” and the word “through” means “to and including.” Unless
otherwise expressly provided herein, (a) references to agreements (including this Agreement) and
other contractual instruments shall be deemed to include all subsequent amendments and other
modifications thereto, but only to the extent such amendments and other modifications are not
prohibited by the terms of any Loan Document, and (b) references to any statute or regulation are
to be construed as including all statutory and regulatory provisions consolidating, amending,
replacing, supplementing or interpreting the statute or regulation. The captions and headings of
this Agreement are for convenience of reference only and shall not affect the interpretation of
this Agreement. This Agreement and other Loan Documents may use several different limitations,
tests or measurements to regulate the same or similar matters. All such limitations, tests and
measurements are cumulative and shall each be performed in accordance with their terms. This
Agreement and the other Loan Documents are the result of negotiations among and have been reviewed
by counsel to the Administrative Agent, the Company and the other parties, and are the products of
all parties. Accordingly, they shall not be construed against the Lenders or the Administrative
Agent merely because of the Administrative Agent’s or Lenders’ involvement in their preparation.




     1.03 Accounting Principles. Unless the context otherwise clearly requires, all accounting
terms not expressly defined herein shall be construed, and all financial computations required
under this Agreement shall be made, in accordance with GAAP, consistently applied. References to
“consolidated,” when it precedes any accounting term, means such term as it would apply to the
Parent and its Subsidiaries or the Borrower Group, as applicable, each on a consolidated basis,
determined in accordance with GAAP.



ARTICLE II .




THE CREDIT




     2.01 Amounts and Terms of the Commitments.



          (a) Each Lender severally agrees, on the terms and conditions set forth herein, to make loans
to the Company (each such loan, a “Loan”) from time to time on any Business Day during the period
from the Effective Date to the Termination Date, so long as (a) with respect to any Lender, such
Loans then requested to be made by such Lender do not exceed such Lender’s Pro Rata Share of the
aggregate amount of all Loans then requested from the Lenders, and (b) the aggregate amount of all
the Lenders’ Loans and the LC Obligation outstanding at any time does not exceed the Borrowing Base
in effect at such time. The obligation of the Company to repay to each Lender the aggregate amount
of all Loans made by such Lender, together with interest accruing in connection therewith, shall be
evidenced by a promissory note from the Company payable to the order of such Lender (herein called
such Lender’s “Note” and collectively, the “Notes”). The amount of principal owing on any Lender’s
Note at any given time shall be the aggregate amount of all Loans theretofore made by such Lender
minus all payments of principal theretofore received by such Lender on such Note. Interest
on each Note shall accrue and be due and payable as provided herein and therein. Subject to the
terms and conditions hereof, until the Termination Date, Company may borrow, repay, and reborrow
hereunder.





          (b) Subject to the terms and conditions of Section 2.10 below and relying upon the
representations and warranties herein set forth, the Issuing Lender for the account of the Lenders
agrees to issue Letters of Credit as support for payment obligations incurred by the Company in the
ordinary course of business upon the request of the Company at any time and from time to time on



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17









 







and after the Effective Date and up to, but excluding, the Termination Date (the “Availability
Period”). No Letter of Credit will be issued in a face amount which, after giving effect to the
issuance of such Letter of Credit, would cause either the LC Obligation to exceed $500,000 or the
Effective Amount to exceed the Borrowing Base then in effect. If any Letter of Credit has been
drawn upon and the amount so drawn has not been reimbursed to the Issuing Lender, the Commitment of
each Lender shall be deemed to be utilized for all purposes hereof in an amount equal to such
Lender’s Pro Rata Share of the LC Obligations.



          (c) Upon not less than five (5) Business Days’ notice, the Company may (i) terminate the Loan
Documents and the Commitment of each Lender, provided that all Obligations are paid and discharged
in full concurrently with such termination or (ii) permanently reduce the unused portion of the
Maximum Loan Amount in an amount equal to $250,000 or any integral multiple of $250,000 in excess
thereof.




     2.02 Procedure for Borrowings.



          (a) Each Borrowing of Loans shall be made upon the Company’s irrevocable written notice
delivered to the Administrative Agent in the form of a Notice of Borrowing duly completed; which
notice must be received by the Administrative Agent prior to 11:00 a.m. (Chicago, Illinois time)
(i) three (3) Business Days prior to the requested Borrowing Date, in the case of LIBOR Loans; and
(ii) on the requested Borrowing Date, in the case of Base Rate Loans.




          (b) Each Notice of Borrowing shall specify (i) the amount of the Borrowing, which shall be in
an aggregate minimum amount (A) for Base Rate Loans equal to the lesser of (y) $250,000 or any
multiple integrals of $250,000 in excess thereof or (z) the unadvanced portion of the Available
Borrowing Base and (B) for LIBOR Loans $250,000 or any multiple integrals of $250,000 in excess
thereof (if the Available Borrowing Base as of such Borrowing Date will be less than $250,000, then
the Company may not request a LIBOR Loan); (ii) the requested Borrowing Date, which shall be a
Business Day; (iii) the Interest Rate Type of Loans comprising the Borrowing; and (iv) for LIBOR
Loans the duration of the Interest Period applicable to such Loans. If the Notice of Borrowing
fails to specify the duration of the Interest Period for any Borrowing comprised of LIBOR Loans,
such Interest Period shall be three months.




          (c) The number of tranches outstanding of Base Rate Loans and LIBOR Loans, whether under a
Borrowing, conversion or continuation, shall not exceed five (5) at any one time.




          (d) The Administrative Agent will promptly notify each Lender of its receipt of any Notice of
Borrowing and of the amount of such Lender’s Pro Rata Share of that Borrowing.




          (e) Provided the applicable conditions in Article V are met, each Lender will make the amount
of its Pro Rata Share of each Borrowing available to the Administrative Agent for the account of
the Company at the Administrative Agent’s Payment Office by 1:00 p.m. (Chicago, Illinois time) on
the Borrowing Date requested by the Company in funds immediately available to the Administrative
Agent. The proceeds of all such Loans will then be made available to the Company by the
Administrative Agent to the Company’s operating account with the Administrative Agent or by wire
transfer in accordance with written instructions provided to the Administrative Agent by the
Company of like funds as received by the Administrative Agent.




     2.03 Conversion and Continuation Elections.



          (a) During the period from the Effective Date to the Final Maturity Date, the Company may,
upon irrevocable written notice to the Administrative Agent in accordance with Subsection 2.03(b):
(i) elect, as of any Business Day, in the case of Base Rate Loans, or as of the last day of the
applicable Interest Period, in the case of LIBOR Loans, to convert any such Loans into Loans of any
other Interest Rate Type; or




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18











 




(ii) elect as of the last day of the applicable Interest Period, to
continue any Loans having Interest Periods expiring on such day; provided, that if at any
time a LIBOR Loan in respect of any Borrowing is reduced, by payment, prepayment, or conversion of
part thereof to less than $250,000, such LIBOR Loan shall automatically convert into a Base Rate
Loan.




          (b) The Company shall deliver a Notice of Conversion/Continuation to be received by the
Administrative Agent not later than 11:00 a.m. (Chicago, Illinois time) at least (i) three (3)
Business Days in advance of the Conversion/Continuation Date, if the Loans are to be converted into
or continued as LIBOR Loans; and (ii) on the Conversion/Continuation Date, if the Loans are to be
converted into Base Rate Loans, specifying: (A) the proposed Conversion/Continuation Date; (B) the
aggregate amount of Loans to be converted or continued; (C) the Interest Rate Type of Loans
resulting from the proposed conversion or continuation; and (D) other than in the case of
conversions into Base Rate Loans, the duration of the requested Interest Period.



          (c) If upon the expiration of any Interest Period applicable to LIBOR Loans, the Company has
failed to select timely a new Interest Period to be applicable to LIBOR Loans, or if any Default or
Event of Default then exists, the Company shall be deemed to have elected to convert such LIBOR
Loans into Base Rate Loans effective as of the expiration date of such Interest Period.



          (d) The Administrative Agent will promptly notify each Lender of its receipt of a Notice of
Conversion/Continuation, or, if no timely notice is provided by the Company, the Administrative
Agent will promptly notify each Lender of the details of any automatic conversion. All conversions
and continuations shall be made ratably according to the respective Lender’s Pro Rata Share of
outstanding principal amounts of the Loans with respect to which the notice was given.



     2.04 Optional Prepayments. Subject to Section 3.04, the Company may, at any time or from time
to time,



          (a) prepay Base Rate Loans, without premium or penalty, upon irrevocable notice to the
Administrative Agent of not less than one (1) Business Day, ratably as to each Lender, in whole or
in part, in aggregate minimum principal amounts of $250,000 or multiple integrals thereof (unless
the outstanding principal amount of all Base Rate Loans is less than $250,000, then such
prepayments shall be equal to such outstanding principal amount) and



          (b) prepay LIBOR Loans, without premium or penalty (but subject to Section 3.04) upon
irrevocable notice to the Administrative Agent of not less than three (3) Business Days, ratably as
to each Lender, in whole or in part, in aggregate minimum principal amounts of $250,000 or multiple
integrals thereof. Each such notice of prepayment shall specify the date and amount of such
prepayment and the Interest Rate Type(s) of Loans to be prepaid. The Administrative Agent will
promptly notify each Lender of its receipt of any such notice, and of such Lender’s Pro Rata Share
of such prepayment. The payment amount specified in such notice shall be due and payable on the
date specified therein.



     2.05 Borrowing Base Determinations, Mandatory Prepayments of Loans.



          (a) Scheduled Borrowing Base Determinations. At all times prior to the Final
Maturity Date, the Effective Amount shall not exceed the Borrowing Base then in effect. From and
after the Effective
Date, the initial Borrowing Base hereunder shall be $8,000,000, and the initial Borrowing Base
Reduction Amount shall be $250,000, in each case until redetermined pursuant to the terms of this
Section 2.05. Upon notice to the Company, the Borrowing Base and the Borrowing Base Reduction
Amount shall be redetermined for each Borrowing Base Period on each Scheduled Borrowing Base
Determination Date, and each such redetermination shall be effective as of the date set forth in
such notice of redetermination. The



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19









 




Borrowing Base and the Borrowing Base Reduction Amount shall
be determined based upon the loan collateral value assigned to the Mortgaged Properties and such
other credit factors (including without limitation the assets, liabilities, cash flow, business,
properties, prospects, management and ownership of the Company and the Guarantors) which the
Lenders deem significant. The Lenders’ determination of the Borrowing Base and the Borrowing Base
Reduction Amount shall be in their sole discretion and shall not be subject to review or challenge
under Sections 11.18 and 11.19 hereof. Upon each redetermination of the Borrowing Base and the
Borrowing Base Reduction Amount, the Administrative Agent shall recommend to the Lenders a new
Borrowing Base and a new Borrowing Base Reduction Amount and the Lenders in accordance with their
customary policies and procedures for extending credit to Oil and Gas reserve-based customers shall
(by unanimous agreement in the case of Borrowing Base increases or Borrowing Base Reduction Amount
decreases and by agreement of the Super-Majority Lenders in the case of Borrowing Base decreases or
affirmations or Borrowing Base Reduction Amount increases or affirmations) establish the
redetermined Borrowing Base and Borrowing Base Reduction Amount. If the Company does not furnish
the Reserve Reports or all such other information and data by the date required, the Lenders may
nonetheless determine a new Borrowing Base and Borrowing Base Reduction Amount. It is expressly
understood that the Lenders shall have no obligation to determine the Borrowing Base or the
Borrowing Base Reduction Amount at any particular amount, either in relation to the Maximum Loan
Amount or otherwise.




          (b) Special Borrowing Base Determinations. In addition to Scheduled Borrowing Base
Determinations pursuant to Subsection 2.05(a), the Company and the Lenders may each request one (1)
additional redetermination of the Borrowing Base and Borrowing Base Reduction Amount during each
Borrowing Base Period (“Special Borrowing Base Determination”). In the event the Company requests a
Special Borrowing Base Determination pursuant to this Subsection 2.05(b), the Company shall deliver
written notice of such request to the Lenders which shall include: (i) Reserve Report(s) prepared
as of a date not more than thirty (30) calendar days prior to the date of such request, for the
benefit of the Lenders, and (ii) such other information as the Lenders shall request prepared as of
a date not more than thirty (30) calendar days prior to the date of such request. Likewise, in
the event the Lenders exercise their option for a Special Borrowing Base Determination, the
Administrative Agent shall give the Company notice of the redetermined Borrowing Base and Borrowing
Base Reduction Amount.



          (c) Interim Borrowing Base Reductions. On the last day of each month after each
Schedule Borrowing Base Determination Date or the date of each Special Borrowing Base
Determination, the Borrowing Base shall, automatically and without notice or further action, reduce
by the Borrowing Base Reduction Amount most recently determined or redetermined.



          (d) Mandatory Prepayment of Loans. If on any date a Borrowing Base Deficiency shall
exist as a result of a Borrowing Base redetermination or the application of a Borrowing Base
Reduction Amount, then the Company shall exercise any one or combination of the following (subject
to the proviso below): (i) make a mandatory principal prepayment in an amount equal to the amount
of the Borrowing Base Deficiency, either (x) in a lump sum payment within thirty (30) days after
such Borrowing Base redetermination or (y) in three (3) equal consecutive monthly installments
commencing on the last day of the month following the date of such Borrowing Base redetermination;
or (ii) within thirty (30) days after such Borrowing Base redetermination, pledge, or cause any
Guarantor to pledge, additional unencumbered collateral of sufficient value and character (as
determined by the Lenders in their sole discretion) that when added to the existing Collateral
shall cause the Borrowing Base to equal or exceed the Effective Amount; provided that if the
Borrowing Base Deficiency shall exist as the result of the application of any Borrowing
Base Reduction Amount or occurs after the Termination Date, the Borrower shall eliminate the
Borrowing Base Deficiency by making a lump sum payment within three (3) days after the Borrowing
Base Deficiency occurs.



Credit Agreement



20









 






          2.06 Repayment.



     (a) Principal. The Company shall repay to the Administrative Agent (for the
account of the Lenders in accordance with their respective Pro Rata Shares) the Effective
Amount outstanding on the Termination Date in six (6) equal consecutive monthly
installments, commencing on the last day of the month in which the Termination Date occurs
and continuing on the last day of each month thereafter until paid in full. If not sooner
paid in full, all Obligations shall be due and payable in full on the Final Maturity Date.




     (b) Interest.




          (i) Each Loan shall bear interest on the aggregate outstanding principal amount thereof
from the applicable Borrowing Date or date of conversion or continuation pursuant to
Section 2.03, as the case may be, at a rate per annum equal to the lesser of (A) the LIBOR
or the Base Rate, as the case may be, plus the Applicable Margin, or (B) the Highest
Lawful Rate.




          (ii) Interest on each Loan shall be paid in arrears on each Interest Payment Date.
Interest shall also be paid on the date of any prepayment of Loans under Subsection 2.04(b)
or 2.05(d) (except in the case of Base Rate Loans) for the portion of the Loans so prepaid
and upon payment (including prepayment) in full thereof and, during the existence of any
Event of Default, interest shall be paid on demand of the Administrative Agent.




          (iii) Notwithstanding Subsection 2.06(b)(i), while any Event of Default exists, the
Company shall pay interest (after, as well as before, entry of judgment thereon, to the
extent permitted by law) on the principal amount of all outstanding Loans, at a rate per
annum equal to the lesser of (A) the Highest Lawful Rate and (B) the Base Rate plus
the Applicable Margin for Base Rate Loans plus two percent (2%)(the “Default
Rate”).



     2.07 Fees.



          (a) Commitment Fee. The Company shall pay to the Administrative Agent, for the account
of the Lenders, an aggregate commitment fee calculated on the average daily amount of the Available
Borrowing Base at a per annum rate equal to the amount set forth on the Pricing Grid. Such
commitment fee shall accrue from the Effective Date to the Termination Date and shall be due and
payable quarterly in arrears on the first Business Day of the first month of each quarter
commencing on January 2, 2007, through the Termination Date, with the final payment to be made on
the Termination Date; provided that, in connection with any reduction or termination of
Commitments, the accrued commitment fee calculated for the period ending on such date shall also be
paid on the date of such reduction or termination, with the following quarterly payment being
calculated on the basis of the period from such reduction or termination date to the following
quarterly payment date. The commitment fee provided in this subsection shall accrue at all times
after the Effective Date up to the Termination Date, including at any time during which one or more
conditions in Section 5.02 are not met.



          (b) Letter of Credit Fee. The Company agrees to pay (i) to Issuing Lender (for the
ratable account of the Lenders in their respective Pro Rata Shares), a fee for each Letter of
Credit, to be paid quarterly in arrears following the Issuance of such Letter of Credit (including
the initial Issuance and any renewal, extension or increase in the amount thereof) in the amount
equal to the greater of (A) $500.00 and (B) the
product equal to the Letter of Credit rate set forth on the Pricing Grid multiplied by
the undrawn amount available under such Letter of Credit (such fee shall be deemed to be fully
earned and owing upon the Issuance of such Letter of Credit, and no refund shall be due in the
event such Letter of Credit is terminated prior to its expiry date), and (ii) to the Issuing Lender
for its account a fee for the issuance of each Letter of Credit (including the initial Issuance and
any renewal, extension or increase in the amount thereof), at the Issuance of such Letter of
Credit, in an amount equal to the greater of (A) $500.00 and (B) one-eighth of one percent



Credit Agreement


21









 







(0.125%)
multiplied by the aggregate amount available under each Letter of Credit (such fees shall
be prorated for any period less than a full year but shall not be refunded in the event any such
Letter of Credit is terminated prior to its expiry date) and (iii) Issuing Lender’s usual and
customary fees for amendment to transfer of or negotiation of the terms of each Letter of Credit.
The Administrative Agent shall pay to each Lender its Pro Rata Share of the Letter of Credit Fee
paid pursuant to Subsection 2.07(b)(i). The Administrative Agent shall pay to the Issuing Lender
the Letter of Credit fees paid pursuant to Subsection 2.07(b)(ii) and (iii).



          (c) Agency Fees. The Company shall pay fees to the Administrative Agent for the
Administrative Agent’s own account, as required by that certain letter agreement (as the same may
be from time to time modified or amended, the “Fee Letter”) between the Company and the
Administrative Agent of even date herewith, relating hereto.



     2.08 Computation of Fees and Interest.



          (a) All computations of interest for Base Rate Loans shall be made on the basis of a year of
365 or 366 days, as the case may be, and actual days elapsed. All other computations of fees and
interest shall be made on the basis of a 360-day year and actual days elapsed (which results in
more interest being paid than if computed on the basis of a 365-day year). Interest and fees shall
accrue during each period during which interest or such fees are computed from the first day
thereof to the last day thereof.



          (b) Each determination of an interest rate by the Administrative Agent shall be conclusive and
binding on the Company and the Lenders in the absence of manifest error.



     2.09 Payments by the Company; Borrowings Pro Rata.



          (a) All payments to be made by the Company shall be made without set-off, recoupment or
counterclaim. All payments by the Company shall be made in immediately available funds to the
Administrative Agent by credit to the Company’s operating account at the Administrative Agent’s
Payment Office for the account of the Administrative Agent or the Lender to whom such payment is
owed, and shall be made in dollars and in immediately available funds, no later than 11:00 a.m.
(Chicago, Illinois time) on the date specified herein. Except to the extent otherwise provided
herein, (i) each payment by the Company of fees shall be made pro rata for the account of the
Lenders in accordance with their respective Pro Rata Shares, (ii) each payment of principal of
Loans shall be made for the pro rata account of the Lenders in accordance with their respective
outstanding principal amount of Loans, and (iii) each payment of interest on Loans shall be made
for the account of the Lenders pro rata in accordance with their respective shares of the aggregate
amount of interest due and payable to the Lenders. Notwithstanding the foregoing, to the extent
money is received by the Administrative Agent pursuant to the exercise of remedies under the
Security Documents such money shall be applied to the pro rata payment of Obligations secured by
such Security Document.



          (b) The Administrative Agent will promptly distribute to each Lender its applicable share of
such payment in like funds as received. Any payment received by the Administrative Agent later
than 11:00 a.m. (Chicago, Illinois time) shall be deemed to have been received on the following
Business Day and any applicable interest or fee shall continue to accrue. When the Administrative
Agent collects or receives
money on account of the Obligations or otherwise pursuant to the Security Documents if such money
is insufficient to pay all such Obligations, such money shall be applied first to any
reimbursements due Administrative Agent under Section 11.05 or 11.06.



          (c) Subject to the provisions set forth in the definition of “Interest Period” herein,
whenever any payment is due on a day other than a Business Day, such payment shall be made on the
following Business Day, and such extension of time shall in such case be included in the
computation of interest or fees, as the case may be.



Credit Agreement


22









 





          (d) Unless the Administrative Agent receives notice from the Company prior to the date on
which any payment is due to the Lenders that the Company will not make such payment in full as and
when required, the Administrative Agent may assume that the Company has made such payment in full
to the Administrative Agent on such date in immediately available funds and the Administrative
Agent may (but shall not be so required), in reliance upon such assumption, distribute to each
Lender on such due date an amount equal to the amount then due such Lender. If and to the extent
the Company has not made such payment in full to the Administrative Agent, each Lender shall repay
to the Administrative Agent on demand such amount distributed to such Lender, together with
interest thereon for each day from the date such amount is distributed to such Lender until two
days following demand by the Administrative Agent at the Federal Funds Rate and for each day
thereafter until the date repaid at the Base Rate.



          (e) Except to the extent otherwise expressly provided herein, each borrowing hereunder shall
be from the Lenders pro rata in accordance with their respective Pro Rata Shares.



     2.10 Issuing the Letters of Credit.



          (a) Subject to the terms and conditions set forth herein, the Company may request the Issuing
Lender to issue Letters of Credit for its own account, in a form reasonably acceptable to the
Administrative Agent and the Issuing Lender, at any time and from time to time during the
Availability Period; provided that the Company may not request the issuance, amendment,
renewal or extension of Letters of Credit hereunder if the Effective Amount exceeds the Borrowing
Base at such time or would exceed the Borrowing Base as a result thereof.



          (b) In order to effect the issuance of a Letter of Credit, the Company shall submit a Notice
of Borrowing and a LC Application in writing by telecopy to the Administrative Agent (who shall
promptly notify the Issuing Lender) not later than 1:00 p.m., Chicago, Illinois time, three (3)
Business Days before the requested date of issuance of such Letter of Credit. Each such Notice of
Borrowing and LC Application shall (i) be signed by the Company, (ii) specify the Business Day on
which such Letter of Credit is to be issued, (iii) specify the purpose for the requested Letter of
Credit, (iv) specify the availability for Letters of Credit under (A) the Borrowing Base and (B)
the $500,000 aggregate LC Obligation limitation, as of the date of issuance of such Letter of
Credit, and (v) specify the expiry date thereof, which shall not be later than the earlier of (A)
twelve (12) months from the date of issuance of such Letter of Credit and (B) five (5) Business
Days prior to the Final Maturity Date.



          (c) Upon satisfaction of the applicable terms and conditions set forth in Article V, the
Issuing Lender shall issue such Letter of Credit to the specified beneficiary not later than the
close of business, Chicago, Illinois time, on the date so specified. The Administrative Agent shall
provide the Company and each Lender with a copy of each Letter of Credit so issued. Each such
Letter of Credit shall (i) provide for the payment of drafts, presented for honor thereunder by the
beneficiary in accordance with the terms thereon, at sight when accompanied by the documents
described therein and (ii) unless otherwise expressly agreed by the Issuing Lender and the Company
at the time such Letter of Credit is issued, be subject to the rules of the “International Standby
Practices 1998” or such later version as may be published by the
Institute of International Banking Law and Practice (the “ISP 1998”), or any successor entity, and
shall, as to matters not governed by the ISP 1998, be governed by, and construed and interpreted in
accordance with, the laws of the State of New York.



          (d) Upon the issuance date of each Letter of Credit, the Issuing Lender shall be deemed,
without further action by any party hereto, to have sold to each other Lender, and each other
Lender shall be deemed, without further action by any party hereto, to have purchased from the
Issuing Lender, a participation, to the extent of such Lender’s Pro Rata Share, in such Letter of
Credit, the obligations



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thereunder and in the reimbursement obligations of the Company due in
respect of drawings made under such Letter of Credit. If requested by the Issuing Lender, the
other Lenders will execute any other documents reasonably requested by the Issuing Lender to
evidence the purchase of such participation.



          (e) Upon the presentment of any draft for honor under any Letter of Credit by the beneficiary
thereof which the Issuing Lender determines is in compliance with the conditions for payment
thereunder, the Issuing Lender shall promptly notify the Company, the Administrative Agent and each
Lender of the intended date of honor of such draft and the Company hereby promises and agrees, at
the Company’s option, to either (i) pay to the Administrative Agent for the account of the Issuing
Lender, by 11:00 a.m., Chicago, Illinois time, on the date payment is due as specified in such
notice, the full amount of such draft in immediately available funds or (ii) request a Loan
pursuant to the provisions of Subsection 2.01(a) and Section 2.02 of this Agreement in the full
amount of such draft, which request shall specify that the Borrowing Date is to be the date payment
is due under the Letter of Credit as specified in the Issuing Lender’s notice. If the Company
fails timely to make such payment because a Loan cannot be made pursuant to Subsection 2.01(a)
and/or Section 5.02, each Lender shall, notwithstanding any other provision of this Agreement
(including the occurrence and continuance of a Default or an Event of Default), make available to
the Administrative Agent for the benefit of the Issuing Lender an amount equal to its Pro Rata
Share of the presented draft on the day the Issuing Lender is required to honor such draft. If
such amount is not in fact made available to the Administrative Agent by such Lender on such date,
such Lender shall pay to the Administrative Agent for the account of the Issuing Lender, on demand
made by the Issuing Lender, in addition to such amount, interest thereon at the Federal Funds Rate
for the first two days following demand and thereafter until paid at the Base Rate. Upon receipt
by the Administrative Agent from the Lenders of the full amount of such draft, notwithstanding any
other provision of this Agreement (including the occurrence and continuance of a Default or an
Event of Default) the full amount of such draft shall automatically and without any action by the
Company, be deemed to have been a Base Rate Loan as of the date of payment of such draft. Nothing
in this Subsection 2.10(e) or elsewhere in this Agreement shall diminish the Company’s obligation
under this Agreement to provide the funds for the payment of, or on demand to reimburse the Issuing
Lender for payment of, any draft presented to, and duly honored by, the Issuing Lender under any
Letter of Credit, and the automatic funding of a Loan as in this subsection provided shall not
constitute a cure or waiver of the Event of Default for failure to provide timely such funds as in
this subsection agreed.



          (f) In order to induce the issuance of Letters of Credit by the Issuing Lender and the
purchase of participations therein by the other Lenders, the Company agrees with Administrative
Agent, Issuing Lender and the other Lenders that neither Administrative Agent nor any Lender
(including the Issuing Lender) shall be responsible or liable (except as provided in the following
sentence) for amounts paid by the Issuing Lender, as provided in Subsection 2.10(e), on account of
drafts so honored under the Letters of Credit, and the Company’s unconditional obligation to
reimburse the Issuing Lender through the Administrative Agent for such amounts shall not be
affected by, any circumstance, act or omission whatsoever (whether or not known to the
Administrative Agent or any Lender (including the Issuing Lender) other than a circumstance, act or
omission resulting from the gross negligence or willful misconduct of the Administrative Agent or
any Lender, including the Issuing Lender. The Company agrees that any action taken or omitted to be
taken by the Administrative Agent or any Lender (including the Issuing Lender) under or in
connection with any Letter of Credit or any related draft, document or Property shall be binding on
the Company and
shall not put the Administrative Agent or any Lender (including the Issuing Lender) under any
resulting liability to the Company, unless such action or omission is the result of the gross
negligence or willful misconduct of the Administrative Agent or any such Lender (including the
Issuing Lender). The Company hereby waives presentment for payment (except the presentment
required by the terms of any Letter of Credit) and notice of dishonor, protest and notice of
protest with respect to drafts honored under the Letters of Credit. The Issuing Lender agrees
promptly to notify the Company whenever a draft is presented under any Letter of Credit, but
failure to so notify the Company shall not in any way affect the Company’s obligations hereunder.
Subject to Section 3.07, if while any Letter of Credit is outstanding, any law, executive order or
regulation is



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enforced, adopted or interpreted by any public body, governmental agency or court of
competent jurisdiction so as to affect any of the Company’s obligations or the compensation to any
Lender in respect of the Letters of Credit or the cost to such Lender of establishing and/or
maintaining the Letters of Credit (or any participation therein), such Lender shall promptly notify
the Company thereof in writing and within ten (10) Business Days after receipt by the Company of
such Lender’s request (through the Administrative Agent) for reimbursement or indemnification or
within thirty (30) days after receipt of a notice in respect of Taxes or Other Taxes, the Company
shall reimburse or indemnify such Lender, as the case may be, with respect thereto so that such
Lender shall be in the same position as if there had been no such enforcement, adoption or
interpretation, unless the Company notifies the Administrative Agent of its good faith contest to,
and dispute of, the requested amount. The foregoing agreement of the Company to reimburse or
indemnify the Lenders shall apply in (but shall not be limited to) the following situations: an
imposition of or change in reserve, capital maintenance or other similar requirements or in excise
or similar taxes or monetary restraints, except a change in franchise taxes imposed on such Lender
or in tax on the net income of such Lender.



          (g) In the event that any provision of a LC Application is inconsistent with, or in conflict
of, any provision of this Agreement, including provisions for the rate of interest applicable to
drawings thereunder or rights of setoff or any representations, warranties, covenants or any events
of default set forth therein, the provisions of this Agreement shall govern.



          (h) If the Obligations, or any part thereof, are declared or otherwise become immediately due
and payable pursuant to Article IX of this Agreement (for the purposes of this subsection, the
“Matured Obligations”), then all LC Obligations shall become immediately due and payable without
regard for actual drawings or payments on the Letters of Credit, and the Company shall be obligated
to pay to the Administrative Agent immediately an amount equal to the LC Obligations. All amounts
made due and payable by the Company under this Subsection 2.10(h) may be applied as the Issuing
Lender and the Lenders elect to any of the various LC Obligations; provided,
however, that such amounts applied by the Issuing Lender and the Lenders to the LC
Obligations shall be (i) first applied to the Matured LC Obligations, and (ii) second held by the
Administrative Agent for the benefit of the Issuing Lender and the Lenders as LC Collateral in the
LC Collateral Account until all remaining Matured Obligations have been satisfied. This
Subsection 2.10(h) shall not limit or impair any rights which the Administrative Agent, the Issuing
Lender or any of the Lenders may have under any other document or agreement relating to any Letter
of Credit or LC Obligation, including without limitation, any LC Application. The Company hereby
grants a security interest in and lien on the LC Collateral Account to the Administrative Agent for
and on behalf of the Lenders as security for the Obligations. The Company agrees to execute and
deliver from time to time such documentation as the Administrative Agent may reasonably request to
further assure such security interest.



     2.11 Payments by the Lenders to the Administrative Agent.



          (a) Unless the Administrative Agent receives notice from a Lender on or prior to the Effective
Date or, with respect to any Borrowing after the Effective Date, at least one (1) Business Day
prior to the date of such Borrowing, that such Lender will not make available as and when required
hereunder to the Administrative Agent for the account of the Company the amount of that Lender’s
Pro Rata Share of the
Borrowing, the Administrative Agent may assume that each Lender has made such amount available to
the Administrative Agent in immediately available funds on the Borrowing Date and the
Administrative Agent may (but shall not be so required), in reliance upon such assumption, make
available to the Company on such date a corresponding amount. If and to the extent any Lender
shall not have made its full amount available to the Administrative Agent in immediately available
funds and the Administrative Agent in such circumstances has made available to the Company such
amount, that Lender shall on the Business Day following such Borrowing Date make such amount
available to the Administrative Agent, together with interest at the Federal Funds Rate for the
first two days during such period and thereafter at the Base Rate. A notice of the Administrative
Agent submitted to any Lender with respect to amounts owing under this Subsection 2.11(a)



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shall be
conclusive, absent manifest error. If such amount is so made available, such payment to the
Administrative Agent shall constitute such Lender’s Loan on the date of Borrowing for all purposes
of this Agreement. If such amount is not made available to the Administrative Agent on the
Business Day following the Borrowing Date, the Administrative Agent will notify the Company of such
failure to fund and, upon demand by the Administrative Agent, the Company shall pay such amount to
the Administrative Agent for the Administrative Agent’s account, together with interest thereon for
each day elapsed since the date of such Borrowing, at a rate per annum equal to the interest rate
applicable at the time to the Loans comprising such Borrowing.



          (b) The failure of any Lender to make any Loan on any Borrowing Date shall not relieve any
other Lender of any obligation hereunder to make a Loan on such Borrowing Date, but no Lender shall
be responsible for the failure of any other Lender to make the Loan to be made by such other Lender
on any Borrowing Date.



     2.12 Sharing of Payments, Etc. If any Lender shall obtain on account of the Obligations made
by it any payment (whether voluntary, involuntary, through the exercise of any right of set-off, or
otherwise) or receive any collateral in respect thereof in excess of the amount such Lender was
entitled to receive pursuant to the terms hereof, such Lender shall immediately (a) notify the
Administrative Agent of such fact, and (b) purchase from the other Lenders such participations in
the Loans made by them as shall be necessary to cause such purchasing Lender to share the excess
payment according to the terms hereof; provided, however, that if all or any
portion of such excess payment is thereafter recovered from the purchasing Lender, such purchase
shall to that extent be rescinded and each other Lender shall repay to the purchasing Lender the
purchase price paid therefor, together with an amount equal to such paying Lender’s ratable share
(according to the proportion of (i) the amount of such paying Lender’s required repayment to (ii)
the total amount so recovered from the purchasing Lender) of any interest or other amount paid or
payable by the purchasing Lender in respect of the total amount so recovered. The Company agrees
that any Lender so purchasing a participation from another Lender may, to the fullest extent
permitted by law, exercise all its rights of payment (including the right of set-off, but subject
to Section 11.09) with respect to such participation as fully as if such Lender were the direct
creditor of the Company in the amount of such participation. The Administrative Agent will keep
records (which shall be conclusive and binding in the absence of manifest error) of participations
purchased under this Section and will in each case notify the Lenders following any such purchases
or repayments.



ARTICLE III .




TAXES, YIELD PROTECTION AND ILLEGALITY




     3.01 Taxes.



          (a) Any and all payments by the Company to each Lender or the Administrative Agent under this
Agreement and any other Loan Document shall be made free and clear of, and without deduction or
withholding for any Taxes. In addition, the Company shall pay all Other Taxes.



          (b) The Company agrees to indemnify and hold harmless each Lender and the Administrative Agent
for the full amount of Taxes or Other Taxes (including any Taxes or Other Taxes imposed by any
jurisdiction on amounts payable under this Section) paid by the Lender or the Administrative Agent
and any liability (including penalties, interest, additions to tax and expenses) arising therefrom
or with respect thereto, whether or not such Taxes or Other Taxes were correctly or legally
asserted. Payment under this indemnification shall be made within thirty (30) days after the date
the Lender or the Administrative Agent makes written demand therefor.



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          (c) If the Company shall be required by law to deduct or withhold any Taxes or Other Taxes
from or in respect of any sum payable hereunder to any Lender or the Administrative Agent, then:
(i) the sum payable shall be increased as necessary so that after making all required deductions
and withholdings (including deductions and withholdings applicable to additional sums payable under
this Section) such Lender or the Administrative Agent, as the case may be, receives an amount equal
to the sum it would have received had no such deductions or withholdings been made; (ii) the
Company shall make such deductions and withholdings; and (iii) the Company shall pay the full
amount deducted or withheld to the relevant taxing authority or other authority in accordance with
applicable law.



          (d) Upon request of the Administrative Agent, the Company shall furnish the Administrative
Agent the original or a certified copy of a receipt evidencing payment by the Company of Taxes or
Other Taxes under Subsection 3.01(c), or other evidence of payment satisfactory to the
Administrative Agent.



          (e) If the Company is required to pay additional amounts to any Lender or the Administrative
Agent pursuant to this Section 3.01, then upon written request of the Company such Lender shall use
reasonable efforts (consistent with legal and regulatory restrictions) to change the jurisdiction
of its Lending Office and take such other steps, in each case, so as to eliminate any such
additional payment by the Company which may thereafter accrue, if such change or step, as
applicable, in the judgment of such Lender is not otherwise disadvantageous to such Lender.



          (f) If the Company pays any additional amounts under this Section 3.01 to a Lender and such
Lender determines that it has actually received or realized in connection therewith any refund or
reduction of, or credit against, its tax liability in or with respect to the taxable year in which
the additional amount is paid (a “Tax Benefit”), such Lender shall pay to the Company an amount
that such Lender shall determine is equal to the net benefit after tax, which was obtained by such
Lender in such year as a consequences of such Tax Benefit. If the Company determines in good faith
that a reasonable basis exists for contesting any Taxes or Other Taxes with respect to which the
Company has paid any additional amounts under this Section 3.01 or for which indemnification has
been demanded hereunder, the relevant Lender or Administrative Agent, as applicable, may, in its
discretion, not to be unreasonably withheld, cooperate with the Company in challenging such Taxes
or Other Taxes at the Company’s expense if so requested by the Company in writing.



     3.02 Illegality.



          (a) If any Lender determines that the introduction of any Requirement of Law, or any change in
any Requirement of Law, or in the interpretation or administration of any Requirement of Law, has,
since the Effective Date, made it unlawful, or that, since the Effective Date, any central bank or
other Governmental Authority has asserted that it is unlawful, for any Lender or its applicable
Lending Office to
make LIBOR Loans, then, on notice thereof by the Lender to the Company through the Administrative
Agent, any obligation of that Lender to make LIBOR Loans shall be suspended until the Lender
notifies the Administrative Agent and the Company that the circumstances giving rise to such
determination no longer exist; such notice to be promptly given upon the determination that such
circumstances no longer exist.



          (b) If a Lender determines that it is unlawful to maintain any LIBOR Loan, the Company shall,
upon its receipt of notice of such fact and demand from such Lender (with a copy to the
Administrative Agent), convert such LIBOR Loans of that Lender then outstanding, together with
interest accrued thereon and amounts required under Section 3.04 into a Base Rate Loan without
regard to conditions precedent described in Subsection 5.02(b), either on the last day of the
Interest Period thereof, if the Lender may lawfully continue to maintain such LIBOR Loans to such
day, or immediately, if the Lender may not lawfully continue to maintain such LIBOR Loan. If the
Company is required to so prepay any LIBOR Loan, then



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concurrently with such prepayment, the
Company shall borrow from the affected Lender, in the amount of such repayment, a Base Rate Loan.



          (c) If the obligation of any Lender to make or maintain LIBOR Loans has been so terminated or
suspended, all Loans which would otherwise be made by the Lender as LIBOR Loans shall be instead
Base Rate Loans.



          (d) Before giving any notice to the Administrative Agent under this Section, the affected
Lender shall designate a different Lending Office with respect to its LIBOR Loans if such
designation will avoid the need for giving such notice or making such demand and will not, in the
judgment of the Lender, be illegal or otherwise disadvantageous to the Lender.



     3.03 Increased Costs and Reduction of Return.



          (a) If any Lender determines, after the Effective Date, that, due to either (i) the
introduction of or any change (other than any change by way of imposition of or increase in reserve
requirements included in the calculation of the LIBOR) in or in the interpretation of any law or
regulation or (ii) the compliance by that Lender with any guideline or request from any central
bank or other Governmental Authority (whether or not having the force of law), there shall be any
increase in the cost to such Lender of agreeing to make or making, funding or maintaining any LIBOR
Loans, (except for any such increased cost resulting from taxes of any kind, including Taxes and
Other Taxes, as to which Section 3.01 shall govern) then the Company shall be liable for, and shall
from time to time, upon demand (with a copy of such demand to be sent to the Administrative Agent),
pay to the Administrative Agent for the account of such Lender, additional amounts as are
sufficient to compensate such Lender for such increased costs.



          (b) If any Lender shall have determined, after the Effective Date, that (i) the introduction
of any Capital Adequacy Regulation, (ii) any change in any Capital Adequacy Regulation, (iii) any
change in the interpretation or administration of any Capital Adequacy Regulation by any central
bank or other Governmental Authority charged with the interpretation or administration thereof, or
(iv) compliance by the Lender (or its Lending Office) or any corporation controlling the Lender
with any Capital Adequacy Regulation, affects or would affect the amount of capital required or
expected to be maintained by the Lender or any corporation controlling the Lender and (taking into
consideration such Lender’s or such corporation’s policies with respect to capital adequacy and
such Lender’s desired return on capital) determines that the amount of such capital is increased as
a consequence of its Commitments, loans, credits or obligations under this Agreement, then, upon
demand of such Lender to the Company through the Administrative Agent, the Company shall pay to the
Lender, from time to time as specified by the Lender, additional amounts sufficient to compensate
the Lender for such increase.



     3.04 Funding Losses. The Company shall reimburse each Lender and hold each Lender harmless
from any loss or expense excluding consequential losses which the Lender may sustain or incur as a
consequence of: (a) the failure of the Company to make on a timely basis any payment of principal
of any LIBOR Loan; (b) the failure of the Company to borrow, continue or convert a Loan after the
Company has given (or is deemed to have given) a Notice of Borrowing or a Notice of
Conversion/Continuation (including by reason of the failure to satisfy any condition precedent
thereto); (c) the failure of the Company to make any prepayment in accordance with any notice
delivered under Section 2.04; (d) the prepayment (including pursuant to Section 2.05 or 2.06) or
other payment (including after acceleration thereof) of an LIBOR Loan on a day that is not the last
day of the relevant Interest Period; or (e) the automatic conversion under Section 2.03 of any
LIBOR Loan to a Base Rate Loan on a day that is not the last day of the relevant Interest Period;
including any such loss or expense arising from the liquidation or reemployment of funds obtained
by it to maintain its LIBOR Loans or from fees payable to terminate the deposits from which such
funds were obtained. For purposes of calculating amounts payable by the Company to the Lenders
under this Section and



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under Subsection 3.03(a), each LIBOR Loan made by a Lender (and each related
reserve, special deposit or similar requirement) shall be conclusively deemed to have been funded
at the LIBOR used in determining the LIBOR for such LIBOR Loan by a matching deposit or other
borrowing in the interbank Eurodollar market for a comparable amount and for a comparable period,
whether or not such LIBOR Loan is in fact so funded.



     3.05 Inability to Determine Rates. If Administrative Agent determines that for any reason
adequate and reasonable means do not exist for determining the LIBOR for any requested Interest
Period with respect to a proposed LIBOR Loan, or that the LIBOR applicable pursuant to
Subsection 2.06(b) for any requested Interest Period with respect to a proposed LIBOR Loan does not
adequately and fairly reflect the cost to the Lenders of funding such Loan, the Administrative
Agent will promptly so notify the Company and each Lender. Thereafter, the obligation of the
Lenders to make or maintain LIBOR Loans hereunder shall be suspended until the Administrative Agent
upon the instruction of the Lenders revokes such notice in writing; such written revocation to be
promptly given upon determination that such circumstances no longer exist. Upon receipt of such
notice, the Company may revoke any Notice of Borrowing or Notice of Conversion/Continuation then
submitted by it. If the Company does not revoke such Notice, the Lenders shall make, convert or
continue the Loans, as proposed by the Company, in the amount specified in the applicable notice
submitted by the Company, but such Loans shall be made, converted or continued as Base Rate Loans
instead of LIBOR Loans.



     3.06 Certificates of Lenders. Any Lender claiming reimbursement or compensation under this
Article III shall deliver to the Company (with a copy to the Administrative Agent) a certificate
setting forth in reasonable detail the amount payable to the Lender hereunder and such certificate
shall be conclusive and binding on the Company in the absence of manifest error provided, however,
that such Lender shall only be entitled to collect amounts incurred within 180 days of such notice.



     3.07 Substitution of Lenders. Upon the receipt by the Company from any Lender (an “Affected
Lender”) of a claim for compensation under this Article III, the Company may: (a) obtain a
replacement Lender or financial institution satisfactory to the Administrative Agent (a
“Replacement Lender”) to acquire and assume all or a ratable part of all of such Affected Lender’s
Loans and Commitment; or (b) request one more of the other Lenders to acquire and assume all or
part of such Affected Lender’s Loans and Commitment but none of the Lenders shall have any
obligation to do so. Any such designation of a Replacement Lender under (a) shall be subject to
the prior written consent of the Administrative Agent which consent shall not be unreasonably
withheld or delayed.



     3.08 Survival. The agreements and obligations of the Company in this Article III shall
survive the payment of all other Obligations.



ARTICLE IV .




SECURITY




     4.01 The Security. The Obligations will be secured by the Security Documents described in
Schedule 4.01 and any additional Security Documents hereafter delivered by the Company or any
Guarantor and accepted by the Administrative Agent.



     4.02 Agreement to Deliver Security Documents. The Company and each Guarantor agrees to
deliver, to further secure the Obligations whenever requested by the Administrative Agent in its
sole and absolute discretion, deeds of trust, mortgages, chattel mortgages, security agreements,
financing statements and other Security Documents in form and substance reasonably satisfactory to
the Administrative Agent for the purpose of granting, confirming, and perfecting first and prior
liens or security interests in all Oil and Gas Properties now owned or hereafter acquired by the
Company or any Guarantor, subject to Permitted Liens.



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The Company and each Guarantor also agrees
to deliver, whenever requested by the Lenders, title opinions from legal counsel acceptable to the
Lenders or such other evidence of title satisfactory to the Lenders with respect to the Mortgaged
Properties designated by the Lenders, based upon abstract or record examinations to dates
acceptable to the Lenders and (a) stating that the applicable member of the Borrower Group has good
and defensible title to such properties and interests, free and clear of all Liens except Permitted
Liens, (b) confirming that such Oil and Gas Properties are subject to Security Documents securing
the Obligations that constitute and create legal, valid and duly perfected deed of trust or
mortgage liens in such Oil and Gas Properties and assignments of and security interests in the Oil
and Gas attributable to such Oil and Gas Properties and the proceeds thereof, in each case subject
only to Permitted Liens, and (c) covering such other matters as the Lenders may reasonably request.



     4.03 Perfection and Protection of Security Interests and Liens. The Company and each
Guarantor will from time to time deliver to the Administrative Agent any financing statements,
amendment, assignment and continuation statements, extension agreements and other documents,
properly completed and executed if required by law (and acknowledged when required) by the Company
or any Guarantor, as applicable, in form and substance reasonably satisfactory to the
Administrative Agent, which the Administrative Agent reasonably requests for the purpose of
perfecting, confirming, or protecting any Liens or other rights in Collateral securing any
Obligations.



     4.04 Offset. To secure the repayment of the Obligations, the Company and each Guarantor
hereby grants the Administrative Agent and each Lender a security interest, a lien, and a right of
offset, each of which shall be in addition to all other interests, liens, and rights of the
Administrative Agent at common law, under the Loan Documents, or otherwise, and each of which shall
be upon and against (a) any and all moneys, securities or other property (and the proceeds
therefrom) of the Company or any Guarantor now or hereafter held or received by or in transit to
the Administrative Agent or any Lender from or for the account of the Company or any Guarantor,
whether for safekeeping, custody, pledge, transmission, collection or otherwise, (b) any and all
deposits (general or special, time or demand, provisional or final) of the Company or any Guarantor
with the Administrative Agent or any Lender, and (c) any other credits and claims of the Company or
any Guarantor at any time existing against the Administrative Agent or any Lender, including claims
under certificates of deposit. During the existence of any Event of Default, the Administrative
Agent or any Lender is hereby authorized to foreclose upon, offset, appropriate, and apply, at any
time and from time to time, without notice to the Company or any Guarantor, any and all items
hereinabove referred to against the Obligations then due and payable.



     4.05 Subsidiary Guaranty.



          (a) Ivanhoe Energy Holdings Inc. and each Subsidiary of Ivanhoe Energy Holdings Inc. (other
than the Company) now existing or created, acquired or coming into existence after the date hereof,
and the Parent, shall promptly upon request by the Administrative Agent, execute and deliver to the
Administrative Agent an absolute and unconditional guaranty of the timely repayment, and the due
and punctual performance, of the Obligations of the Company hereunder, which Guaranty shall be
substantially in the form and substance of Exhibit G. Ivanhoe Energy Holdings Inc. and each such
Subsidiary and the Parent will deliver to the Administrative Agent, simultaneously with its
delivery of such a Guaranty, written evidence satisfactory to the Administrative Agent and its
counsel that such Subsidiary has taken all organizational action necessary to duly approve and
authorize its execution, delivery and performance of such Guaranty and any other documents which it
is required to execute.



          (b) The Company and each Guarantor are Affiliates and are mutually dependent on each other in
the conduct of their respective businesses, with the credit needed from time to time by each often
being provided by another or by means of financing obtained by one with the support of the other
for their mutual benefit and the ability of each to obtain such financing is dependent on the
successful operations of the



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other. The board of directors or managers, where applicable, of each
Guarantor has determined that such Guarantor’s execution, delivery and performance of this
Agreement may reasonably be expected to directly or indirectly benefit such Guarantor and is in the
best interests of such Guarantor.



          (c) The direct or indirect value of the consideration received and to be received by such
Guarantor in connection herewith is reasonably worth at least as much as the liability and
obligations of each Guarantor hereunder, and the incurrence of such liability and obligations in
return for such consideration may reasonably be expected to benefit such Guarantor, directly or
indirectly.



          (d) The Company and the Guarantors, taken as a whole, are Solvent on the date hereof. Each of
the Company and each Guarantor has capital which is adequate for the businesses in which such
Person is engaged and intends to be engaged. Neither of the Company nor any Guarantor has incurred
(whether hereby or otherwise), nor does the Company or any Guarantor intend to incur or believe
that it will incur, liabilities which will be beyond its ability to pay as such liabilities mature.



     4.06 Assignment of Production.



          (a) The Company shall provide to Administrative Agent undated letters in blank to purchasers
of production and disbursers of proceeds of production from or attributable to the Company’s
Mortgaged Properties, with the names and addressees left blank, authorizing and directing the
addressees to make future payments attributable to production from the Mortgaged Properties
directly to Administrative Agent for the ratable account of the Lenders.



          (b) The Company hereby designates Administrative Agent as its agent and attorney-in-fact, to
act in its name, place, and stead for the purpose of completing and delivering any and all of the
letters in lieu of transfer orders delivered by the Company to Administrative Agent, including,
without limitation, completing any blanks contained in such letters and attaching exhibits thereto
describing the relevant Collateral. The Company hereby ratifies and confirms all that
Administrative Agent shall lawfully do or cause to be done by virtue of this power of attorney and
the rights granted with respect to such power of attorney. This power of attorney is coupled with
the interest of Administrative Agent in the Collateral, shall commence and be in full force and
effect as of the date hereof and shall remain in full force and effect and shall be irrevocable so
long as any Obligation remains outstanding or unpaid or any Commitment exists. The powers conferred
on Administrative Agent by this appointment are solely to protect the interests of the secured
parties under the Loan Documents and shall not impose any duty upon Administrative Agent to
exercise any such powers. Administrative Agent shall be accountable only for amounts that it
actually receives as a result of the exercise of such powers and shall not be responsible to any of
the Company, Guarantors, or any other
Person for any act or failure to act with respect to such powers, except for Administrative
Agent’s gross negligence or willful misconduct.



     4.07 Assignment of Runs. Notwithstanding that, under of the Mortgages, the Company has
assigned to Administrative Agent for the ratable account of itself, the Issuing Lender, and the
Lenders (and any Affiliate thereof) all of the proceeds of production accruing to the Company’s
Mortgaged Properties covered thereby:



          (a) Until such time as an Event of Default shall have occurred and be continuing, the Company
shall be entitled to receive from the purchasers or disbursers of its production all such proceeds,
subject however to the liens created under the Mortgages. Upon the occurrence and during the
continuance of an Event of Default, Administrative Agent may deliver to the addressees the
letters-in-lieu described in Section 4.06 above and may exercise all rights and remedies granted
under the Mortgages, including the right to obtain possession of all proceeds of runs then held by
the Company or any Guarantor or to receive directly from the purchaser or disburser of production
such proceeds of production.



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          (b) In no case shall any failure, whether intentional or inadvertent, by Administrative Agent
to collect directly any such proceeds of runs constitute in any way a waiver, rescission or release
of any of its rights under the Mortgages, nor shall any release of any other proceeds of runs or of
any rights of Administrative Agent to collect other proceeds of runs thereafter.



ARTICLE V.




CONDITIONS PRECEDENT




     5.01 Conditions of Initial Credit Extensions. The effectiveness of this Agreement and the
obligation of each Lender to make its initial Loan hereunder and the obligation of the Issuing
Lender to issue Letters of Credit hereunder, are subject to the condition that the Administrative
Agent shall have received all of the following, in form and substance satisfactory to the
Administrative Agent, and in sufficient copies for each Lender:



          (a) Credit Agreement and Notes. This Agreement, the Notes, the Guaranties, the
Security Documents and the other Loan Documents executed by each party thereto;



          (b) Resolutions; Incumbency; Organization Documents, Good Standing. A certificate of
the Secretary or Assistant Secretary of the Company and each Guarantor, or in the event that the
Company or any such Guarantor is a limited partnership, such Person’s general partner, certifying
as of the Effective Date: (i) Resolutions of its board of directors or members, authorizing the
transactions contemplated hereby; (ii) the names and genuine signatures of the Responsible Officers
of such Person, authorized to execute, deliver and perform, as applicable, this Agreement, the
Notes, the Guaranties, the Security Documents, and all other Loan Documents to be delivered by such
Person hereunder; (iii) the Organization Documents of such Person as in effect as of the Effective
Date; (iv) the good standing certificate for such Person, from its state of incorporation,
formation or organization, as applicable, evidencing its qualification to do business in such state
as of a date no more than thirty (30) days prior to the Effective Date; and (v) as applicable,
certificate(s) of authority for such Person from foreign states wherein such Person conducts
business, evidencing such Person’s qualification to do business in such state as of a date no more
than thirty (30) days prior to the Effective Date;



          (c) Payment of Fees. Evidence of payment by the Company of all accrued and unpaid
fees, costs and expenses owed pursuant to this Agreement to the extent then due and payable on the
Effective Date, including any such costs, fees and expenses arising under or referenced in Sections
2.07 and 11.04;



          (d) Certificate. A certificate signed by a Responsible Officer, dated as of the
Effective Date, stating that (i) the representations and warranties contained in Article VI are
true and correct in all material respects on and as of such date, as though made on and as of such
date; (ii) no litigation is pending or threatened against any of the Company or any Subsidiary in
which there is a reasonable probability of an adverse decision that could reasonably be expected to
result in a Material Adverse Effect; and (iii) there has occurred no event or circumstance that has
resulted or could reasonably be expected to result in a Material Adverse Effect;



          (e) Insurance Certificates. Insurance certificates in form and substance reasonably
satisfactory to the Administrative Agent, from the Company’s and the Guarantors’ insurance carriers
reflecting the current insurance policies required under Section 7.08 including any necessary
endorsements to reflect the Administrative Agent as additional insured and loss payee for the
ratable benefit of the Lenders;



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          (f) Corporate Due Diligence. Due diligence review satisfactory to the Administrative
Agent including but not limited to review of and satisfaction with the legal structure of the
Parent and its Subsidiaries, and consolidated pro-forma financial statements;



          (g) Reserve Engineering. The Lenders shall have completed, to their satisfaction, an
independent engineering review of the Oil and Gas Properties;



          (h) Environmental. Copies of all environmental assessments, reports and other
information in the possession or control of the Company or any Guarantor, with contents and
findings satisfactory to Administrative Agent with respect to the Mortgaged Properties;



          (i) Title. The Company and the Guarantors shall have good and defensible title, on at
least 80% of the net present value of the Oil and Gas Properties (the net present value of which
has been determined by a discount factor of 10%) subject to no other liens, other than Permitted
Liens, evidenced by current opinions of title or other title information satisfactory to the
Administrative Agent and the Lenders, and substantially all of the Oil and Gas Properties of the
Borrower Group shall be covered by the Mortgages;



          (j) Material Contracts. Copies of all material contracts entered into by the Company
or any Guarantor to the extent requested by Administrative Agent or the Lenders;



          (k) Equity Pledge. To the extent certificated, the Company shall have delivered to
Administrative Agent original certificates for all Equity held (i) by the Parent in Ivanhoe Energy
Holdings Inc., and (ii) by Ivanhoe Energy Holdings Inc. and/or its Subsidiaries in every member of
the Borrower Group, together with undated, blank stock powers for each certificate, representing
all issued and outstanding Equity of each such Subsidiary;



          (l) Opinion of Counsel. Opinions of Goodmans LLP, Erwin & Thompson LLP, and
Lackowicz, Shier & Hoffman, as counsel for the Company and each of the Guarantors, covering such
matters as Administrative Agent may require and in form and substance satisfactory to
Administrative Agent dated as of the Effective Date;



          (m) Repayment of Existing Indebtedness. Evidence satisfactory to Administrative Agent
that all Indebtedness outstanding under the Existing Credit Agreement has been paid in full,
assurances reasonably satisfactory to the Administrative Agent that all liens and security
interests securing such Indebtedness have been or will be released of record, and all commitments
under such Existing Credit Agreement have expired or been terminated;



          (n) Operating Accounts. Evidence that (i) each of the Company and the Parent has
established and will maintain all of its principal depository and operating accounts with the
Administrative Agent and (ii) each member of the Borrower Group other than the Company has
established and will maintain any of its depository or operating accounts with the Administrative
Agent if any such account has an average collected balance for any month in excess of $100,000.00.



          (o) Derivative Contracts. Evidence satisfactory to the Administrative Agent that the
Borrower Group has entered into Derivative Contracts covering not less than 75% of the estimated
production from the Oil and Gas Properties of the Borrower Group for a term of at least 24 months,
with counterparties and otherwise having terms and conditions satisfactory to the Administrative
Agent and the Required Lenders.



          (p) Other Documents. Such other approvals, opinions, documents or materials as the
Administrative Agent or any Lender may reasonably request.



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     5.02 Conditions to All Loans. The obligation of each Lender to make any Loan (including its
initial Loan) or to continue or convert any Loan under Section 2.03 (but specifically excluding the
conversion of LIBOR Loans on the last day of the Interest Period therefor into Base Rate Loans or
the continuation of Base Rate Loans) is subject to the satisfaction of the following conditions
precedent on the relevant Borrowing Date or Conversion/Continuation Date and immediately after
giving effect to such Borrowing or Conversion/Continuation:



          (a) Notice. The Administrative Agent shall have received a Notice of Borrowing or a
Notice of Conversion/Continuation, as applicable;



          (b) Continuation of Representations and Warranties. The representations and warranties
in Article VI shall be true and correct in all material respects on and as of such Borrowing Date
or Conversion/Continuation Date with the same effect as if made on and as of such Borrowing Date or
Conversion/Continuation Date (except to the extent such representations and warranties expressly
refer to an earlier date, in which case they shall be true and correct as of such earlier date);



          (c) Continuation of Covenants. The Company and each Guarantor shall be in compliance
with the covenants in Articles VII and VIII;



          (d) No Material Adverse Effect. No Material Adverse Effect shall have occurred or
shall exist from such Borrowing or continuation or conversion; and



          (e) No Existing Default. No Default or Event of Default shall exist or shall result
from such Borrowing or continuation or conversion.


Each Notice of Borrowing or Notice of Conversion/Continuation submitted by the Company hereunder
shall constitute a representation and warranty by the Company and each Guarantor hereunder, as of
the date of each such notice and as of each Borrowing Date or Conversion/Continuation Date, as
applicable, that the conditions in this Section 5.02 are satisfied.




     5.03 Post Closing Condition. The obligation of each Lender to continue to make Loans and the
obligation of the Issuing Bank to continue to issue Letters of Credit are subject to satisfaction
of the condition that the Company deliver a Phase 1 report covering the Mortgaged Properties
designated by the Administrative Agent in form and substance satisfactory to the Administrative
Agent within sixty (60) days after the date hereof. In the event such condition is not met within
the deadlines herein stated, the Lenders’ Commitments shall terminate and such failure shall
constitute an Event of Default.



ARTICLE VI .




REPRESENTATIONS AND WARRANTIES




     Each of the Company and the Guarantors represents and warrants to the Administrative Agent and
each Lender that:



     6.01 Organization, Existence and Power. Each of the Company and the Guarantors: (a) is duly
organized, validly existing and in good standing under the laws of the jurisdiction of its
formation; (b) has the power and authority and all material governmental licenses, authorizations,
consents and approvals to own its assets, carry on its business and to execute, deliver, and
perform its obligations under the Loan Documents; (c) is duly qualified as a foreign corporation or
other organization and is licensed and in good standing under the laws of each jurisdiction where
its ownership, lease or operation of property or the conduct of its business



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requires such
qualification or license, except where failure to do so would not reasonably be expected to have a
Material Adverse Effect; and (d) is in compliance in all material respects with all Requirements of
Law.



     6.02 Corporate Authorization; No Contravention. The execution, delivery and performance by
the Company and the Guarantors of this Agreement and each other Loan Document to which such Person
is a party, have been duly authorized by all necessary organizational action, and do not and will
not: (a) contravene the terms of any of that Person’s Organization Documents; (b) conflict with or
result in any breach or contravention of, or the creation of any Lien under, any document
evidencing any Contractual Obligation to which such Person is a party that would be prior to the
Liens granted to the Administrative Agent for the benefit of the Lenders or otherwise that would
constitute a Material Adverse Effect or any order, injunction, writ or decree of any Governmental
Authority to which such Person or its property is subject; or (c) violate any Requirement of Law,
that would constitute a Material Adverse Effect.



     6.03 Governmental Authorization. No approval, consent, exemption, authorization, or other
action by, or notice to, or filing with, any Governmental Authority is necessary or required in
connection with the execution, delivery or performance by, or enforcement against, the Company or
any Guarantor of this Agreement or any other Loan Document to which it is a party, except for
filings necessary to obtain and maintain perfection of Liens; routine filings related to the
Company and the Guarantors and the operation of their business; and such filings as may be
necessary in connection with Lenders’ exercise of its remedies hereunder.



     6.04 Binding Effect. This Agreement and each other Loan Document to which the Company or any
Guarantor is a party constitute the legal, valid and binding obligations of the Company or such
Guarantor, enforceable against such Person in accordance with their respective terms, except as
enforceability may be limited by applicable Bankruptcy, insolvency, or similar laws affecting the
enforcement of creditors’ rights generally or by equitable principles relating to enforceability.



     6.05 Litigation. Unless specifically disclosed in Schedule 6.05 attached hereto, there are no
actions, suits, proceedings, claims or disputes pending, or to the knowledge of the Company or any
Guarantor, threatened or contemplated, at law, in equity, in arbitration or before any Governmental
Authority, against the Company or any Guarantor or any of their respective properties which: (a)
purport to affect or pertain to this Agreement or any other Loan Document, or any of the
transactions contemplated hereby or thereby; or (b) if determined adversely to the Company or such
Guarantor, would reasonably be expected to have a Material Adverse Effect. To the knowledge of the
Company and each Guarantor, no injunction, writ, temporary restraining order or any order of any
nature has
been issued by any court or other Governmental Authority purporting to enjoin or restrain the
execution, delivery or performance of this Agreement or any other Loan Document, or directing that
the transactions provided for herein or therein not be consummated as herein or therein provided.



     6.06 No Default. No Default or Event of Default exists or would be reasonably expected to
result from the incurring of any Obligations by the Company or the Guarantors. As of the Effective
Date, neither the Company nor any Guarantor is in default under or with respect to any Contractual
Obligation in any respect which, individually or together with all such defaults, would reasonably
be expected to have a Material Adverse Effect, or that would, if such default had occurred after
the Effective Date, create an Event of Default under Subsection 9.01(e). Each of the Company and
the Guarantors is in compliance with all requirements of any Governmental Authority applicable to
it or its Property and all agreements and other instruments binding upon it or its Property, and
possesses all licenses, permits, franchises, exemptions, approvals and other authorizations granted
by Governmental Authorities necessary for the ownership of its Property and the present conduct of
its business, except in each case where the failure to do so, individually or in the aggregate,
could not reasonably be expected to result in a Material Adverse Effect.



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     6.07 ERISA Compliance. Except as specifically disclosed in Schedule 6.07:



          (a) Each Plan is in compliance in all material respects with the applicable provisions of
ERISA, the Code and other federal or state law. Each Plan which is intended to qualify under
Section 401(a) of the Code has received a favorable determination letter from the IRS and to the
knowledge of the Company and the Guarantors, nothing has occurred which would cause the loss of
such qualification. The Company, the Guarantors and each ERISA Affiliate has made all required
contributions to any Plan subject to Section 412 of the Code, and no application for a funding
waiver or an extension of any amortization period pursuant to Section 412 of the Code has been made
with respect to any Plan.



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



          (c) (i) No ERISA Event has occurred or is reasonably expected to occur; (ii) no Pension Plan
has any Unfunded Pension Liability; (iii) neither the Company, any Guarantors nor any ERISA
Affiliate has incurred, or reasonably expects to incur, any liability under Title IV of ERISA with
respect to any Pension Plan (other than premiums due and not delinquent under Section 4007 of
ERISA); (iv) neither the Company, any Guarantor nor any ERISA Affiliate has incurred, or
reasonably expects to incur, any liability (and no event has occurred which, with the giving of
notice under Section 4219 of ERISA, would result in such liability) under Section 4201 or 4243 of
ERISA with respect to a Multiemployer Plan; and (v) neither the Company, any Guarantor nor any
ERISA Affiliate has engaged in a transaction that could be subject to Section 4069 or 4212(c) or
ERISA.



     6.08 Margin Regulations. The proceeds of the Loans shall be used solely for the purposes set
forth in and permitted by Section 7.16. Neither the Company nor any Guarantor is generally engaged
in the business of purchasing or selling Margin Stock or extending credit for the purpose of
purchasing or carrying Margin Stock.



     6.09 Title to Properties. Subject to Permitted Liens, the Company and each Guarantor have
good and defensible title to all of its Oil and Gas Properties evaluated
in the most recently delivered Reserve Report, and except for such defects in title as would
not, individually or in the aggregate, reasonably be expected to have a Material Adverse Effect,
and the Company and each Guarantor have good title to all other Oil and Gas Properties necessary or
used in the ordinary conduct of their respective businesses. After giving full effect to the
Permitted Liens, the Company or any Guarantor specified as the owner under the most recently
delivered Reserve Report owns the net interests in production attributable to the Oil and Gas
Properties as reflected in the most recently delivered Reserve Report, and the ownership of such
Properties shall not in any material respect obligate the Company or any Guarantor to bear the
costs and expenses relating to the maintenance, development and operations of each such Property in
an amount in excess of its working interest of each Property set forth in the most recently
delivered Reserve Report that is not offset by a corresponding proportionate increase in the
Company’s or any Guarantor’s net revenue interest in such Property. No consents or rights of first
refusal exist or remain outstanding with respect to the Company’s or any Guarantor’s interest in
the Mortgaged Properties assigned to it pursuant to any Acquisition of Oil and Gas Properties other
than Permitted Liens. As of the Effective Date, the Property of the Company and the Guarantors is
subject to no Liens, other than Permitted Liens.



     6.10 Oil and Gas Reserves. The Company and each Guarantor is and will hereafter be, in all
material respects, the owner of the Oil and Gas that it purports to own from time to time in and
under its Oil and Gas Properties, together with the right to produce the same. The Oil and Gas
Properties are not subject to



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any Lien other than as set forth in the financial statements referred
to in Section 6.14, as disclosed to the Lenders in writing prior to the date of this Agreement and
Permitted Liens. All Oil and Gas have been and will hereafter be produced, sold and delivered in
accordance in all material respects with all applicable laws and regulations of governmental
authority; each of the Company and the Guarantors has complied in all material respects and will
hereafter use commercially reasonable efforts to comply with all material terms of each oil, gas
and mineral lease and any other agreement comprising its Oil and Gas Properties; and all such oil,
gas and mineral leases and other agreements have been and will hereafter be maintained in full
force and effect. Provided, however that nothing in this Section 6.10 shall prevent the Company or
any Guarantor from abandoning any well or forfeiting, surrendering, releasing or defaulting under
any lease in the ordinary course of business which is not disadvantageous in any way to the Lenders
and which, in the opinion of the Company or such Guarantor, is in its best interest, and the
Company and each Guarantor is and will hereafter be in compliance with all obligations hereunder.
All of the Company’s and each Guarantor’s Operating Agreements and Operating Leases with respect to
its Oil and Gas Properties are and will hereafter be enforceable in all material respects in
accordance with their terms except as such may be modified by applicable bankruptcy law or an order
of a court in equity.



     6.11 Initial Reserve Report. The Company has heretofore delivered to the Lenders a true and
complete copy of a report, dated effective as of December 31, 2005, prepared by Netherland, Sewell
and Associates, Inc. (the “Initial Reserve Report”) relating to an evaluation of the Oil and Gas
attributable to certain of the Mortgaged Properties described therein. To the knowledge of the
Company and the Guarantors, (a) the assumptions stated or used in the preparation of the Initial
Reserve Report are reasonable, (b) all information furnished by the Company or any Guarantor to
Netherland, Sewell and Associates, Inc. (the “Independent Engineer”) for use in the preparation of
the Initial Reserve Report was accurate in all material respects, (c) there has been no material
adverse change in the amount of the estimated Oil and Gas shown in the Initial Reserve Report since
the date thereof, except for changes which have occurred as a result of production in the ordinary
course of business, and (d) the Initial Reserve Report does not omit any material statement or
information necessary to cause the same not to be misleading to the Lenders.



     6.12 Gas Imbalances. There are no gas imbalances, take or pay or other prepayments with
respect to any of the Oil and Gas Properties which would require the Company or any Guarantor to
deliver Oil and Gas produced from any of the Oil and Gas Properties at some
future time without then or thereafter receiving full payment therefor exceeding 50,000 Mcf of
gas (on an MMBTU equivalent basis) in the aggregate.



     6.13 Taxes. The Company and the Guarantors have filed all federal tax returns and reports
required to be filed, and have paid all federal taxes, assessments, fees and other governmental
charges levied or imposed upon them or their properties, income or assets otherwise due and
payable, except those which are being contested in good faith by appropriate proceedings and for
which adequate reserves have been provided in accordance with GAAP. The Company and the Guarantors
have filed all state and other non-federal tax returns and reports required to be filed, and have
paid all state and other non-federal taxes, assessments, fees and other governmental charges levied
or imposed upon them or their properties, income or assets prior to delinquency thereof, except
those which are being contested in good faith by appropriate proceedings and for which adequate
reserves have been provided in accordance with GAAP. To the Company’s and each Guarantor’s
knowledge, there is no proposed tax assessment against the Company or any Guarantor that would, if
made, reasonably be expected to have a Material Adverse Effect.



     6.14 Financial Condition.



          (a) The Company has heretofore furnished to the Lenders (i) the unaudited financial statements
for the Company, as of and for the fiscal year ending December 31, 2005 and the six months ended
June 30, 2006 (the “Company Initial Financial Statements”), and (ii) the Parent’s audited
consolidated financial statements, as of and for the fiscal year ending December 31, 2005 and the
Parent’s unaudited



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consolidated financial statements, as of and for the six months ended June 30,
2006 (the “Parent Initial Financial Statements”), each certified by a Responsible Officer. Such
Company Initial Financial Statements present fairly, in all material respects, the financial
position, results of operations and cash flows of the Company as of such dates and for such periods
then ended in accordance with GAAP, subject to the absence of footnotes. Such Parent Initial
Financial Statements present fairly, in all material respects, the financial position, results of
operations and cash flows of the Parent and its Subsidiaries, on a consolidated basis as of such
dates and for such periods then ended in accordance with GAAP.



          (b) Since June 30, 2006, (i) there has been no event, development or circumstance that has
had or could reasonably be expected to have a Material Adverse Effect, and (ii) the business of the
Company and the Guarantors has been conducted only in the ordinary course consistent with past
business practices.



     6.15 Environmental Matters. Except as described on Schedule 6.15 hereto or as could not be
reasonably expected to have a Material Adverse Effect (or with respect to (c) and (d) below, where
the failure to take such actions could not be reasonably expected to have a Material Adverse
Effect):



          (a) neither any Property of the Company or any Guarantor nor the operations conducted thereon
violate Environmental Laws.



          (b) no Property of the Company or any Guarantor nor the operations currently conducted thereon
by the Company or any Guarantor or, to the knowledge of the Company or any Guarantor, no operations
conducted thereon by any prior owner or operator of such Property, are in violation of or subject
to any existing, or to the knowledge of the Company or any Guarantor, pending or threatened action,
suit, investigation, inquiry or proceeding by or before any court or Governmental Authority under
Environmental Laws.



          (c) all notices, permits, licenses, exemptions, and approvals, if any, required to be obtained
or filed under any Environmental Law in connection with the operation or use of any and all
Property by the Company and each Guarantor, including, without limitation, past or present
treatment, storage, disposal or release of a hazardous substance, oil and gas waste or hazardous
waste into the environment, have been duly obtained or filed or requested, and the Company and each
Guarantor are in compliance with the material terms and conditions of all such notices, permits,
licenses, exemptions and approvals.



          (d) all hazardous substances, hazardous waste and oil and gas waste, if any, generated by the
Company or any Guarantor at any and all Property of the Company or any Guarantor have in the past
been transported, treated and disposed of in compliance with Environmental Laws then in effect,
and, to the knowledge of the Company and each Guarantor, transport carriers and treatment and
disposal facilities known by the Company or any Guarantor to have been used by the Company or any
Guarantor are not the subject of any existing action, investigation or inquiry by any Governmental
Authority under any Environmental Laws.



          (e) no hazardous substances, hazardous waste or oil and gas waste, have been disposed of or
otherwise released by the Company or any Guarantor on or to any Property of the Company or any
Guarantor except in compliance with Environmental Laws.



          (f) neither the Company nor any Guarantor has any known pending assessment, investigation,
monitoring, removal or remedial obligations under applicable Environmental Laws in connection with
any release or threatened release of any hazardous substance, hazardous waste or oil and gas waste
into the environment by the Company or any Guarantor.



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     6.16 Regulated Entities. None of the Company, any Guarantor or any Person controlling the
Company or any Guarantor, is an “Investment Company” within the meaning of the Investment Company
Act of 1940. None of the Company, any Guarantor or any Person controlling the Company or any
Guarantor, is subject to regulation under the Federal Power Act, the Interstate Commerce Act, any
state public utilities code, or any other Federal or state statute or regulation limiting its
ability to incur Indebtedness.



     6.17 No Burdensome Restrictions. Neither the Company nor any Guarantor is a party to or bound
by any Contractual Obligation, or subject to any restriction in any Organization Document, or any
Requirement of Law, which would reasonably be expected to have a Material Adverse Effect.



     6.18 Copyrights, Patents, Trademarks and Licenses, etc. The Company and each Guarantor own or
are licensed or otherwise have the right to use all of the material patents, trademarks, service
marks, trade names, copyrights, contractual franchises, authorizations and other rights that are
reasonably necessary for the operation of their respective businesses, without material conflict
with the rights of any other Person. To the knowledge of the Company and each Guarantor, no
slogan or other advertising device, product, process, method, substance, part or other material now
employed, or now contemplated to be employed, by the Company or any Guarantor infringes in a
material respect upon any rights held by any other Person. Except as specifically disclosed in
Schedule 6.05, no claim or litigation regarding any of the foregoing is pending or threatened, and
no patent, invention, device, application, principle or any statute, law, rule, regulation,
standard or code is pending or, to the knowledge of the Company and each Guarantor, proposed,
which, in either case, could reasonably be expected to have a Material Adverse Effect.



     6.19 Subsidiaries. The Parent has no Subsidiary or other material equity investment other than
those specifically disclosed in Schedule 6.19 hereto. The Parent owns the percentage interest of
all issued and outstanding Equity in each Subsidiary or other material equity
investment described on Schedule 6.19. The Company may update and replace Schedule 6.19 from
time to time to reflect changes resulting from transactions or other events permitted hereunder.



     6.20 Insurance. The Properties of the Company and each Guarantor are insured with financially
sound and reputable insurance companies not Affiliates of the Company or any Guarantor, in such
amounts, with such deductibles and covering such risks as are customarily carried by companies
engaged in similar businesses and owning similar properties in localities where the Company or such
Guarantor operates.



     6.21 Derivative Contracts. Schedule 6.21 sets forth, a true and complete list of all
Derivative Contracts of the Borrower Group outstanding as of the Effective Date, the material terms
thereof (including the type, term, effective date, termination date and notional amounts or
volumes), the net mark-to-market value thereof, all credit support agreements relating thereto
(including any margin required or supplied) and the counterparty to each such agreement.



     6.22 Full Disclosure. None of the representations or warranties made by the Company or any
Guarantor in the Loan Documents as of the date such representations and warranties are made or
deemed made, and none of the statements contained in any exhibit, report, written statement or
certificate furnished by or on behalf of the Company or any Guarantor in connection with the Loan
Documents, taken as whole, contains any untrue statement of a material fact known to the Company or
any Guarantor or omits any material fact known to the Company or any Guarantor required to be
stated therein or necessary to make the statements made therein, in light of the circumstances
under which they are made, not misleading as of the time when made or delivered.



     6.23
Solvency. The Company and the Guarantors, taken as a whole, are Solvent.



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ARTICLE VII.




AFFIRMATIVE COVENANTS




     So long as the Issuing Lender or any Lender shall have any Commitment hereunder, or any Loan,
Letter of Credit or other Obligation shall remain unpaid or unsatisfied, unless the Lenders waive
compliance in writing:



     7.01 Financial Statements. Each of the Parent and the Company shall maintain for
itself and each Subsidiary on a consolidated basis a system of accounting established and
administered in accordance with GAAP and deliver to the Administrative Agent, with sufficient
copies for each Lender:



          (a) As soon as available, but not later than 90 days after the end of each fiscal year (i) a
copy of the annual audited consolidated financial statements of the Parent and its Subsidiaries as
of the end of such year, setting forth in each case in comparative form the figures for the
previous fiscal year, (A) certified by a Responsible Officer as fairly presenting in all material
respects, in accordance with GAAP, the consolidated financial position, results of operations and
cash flows of the Parent and its Subsidiaries, and (B) accompanied by the unqualified opinion and
a copy of a management letter (if one is issued) of a nationally recognized independent public
accounting firm (the “Independent Auditor”), which opinion and letter shall state that such
consolidated financial statements present fairly, in all material respects, the financial position,
results of operations and cash flows for the periods indicated in conformity with GAAP applied on a
basis consistent with prior years, and (ii) a copy of the annual unaudited consolidated financial
statements for the Company as of the end of such year, certified by a Responsible Officer as fairly
presenting in all material
respects, in accordance with GAAP, the financial position, results of operations and cash flows of
the Company; and



          (b) As soon as available, but not later than 45 days after the close of each of the first
three quarterly periods of each fiscal year, a copy of the unaudited consolidated financial
statements setting forth the financial position, results of operations and cash flows, for the
period commencing on the first day and ending on the last day of such quarter, and for the fiscal
year up through the quarter then ended of (i) the Parent and its Subsidiaries, certified by a
Responsible Officer as being fairly presented in all material respects, in accordance with GAAP and
(ii) the Company and its Subsidiaries, certified by a Responsible Officer as being fairly presented
in all material respects, in accordance with GAAP subject to the absence of footnotes.



     7.02 Certificates; Other Production and Reserve Information. The Company shall furnish to the
Administrative Agent, with sufficient copies for each Lender:



          (a) As soon as available, but not later than 45 days after the close of each month, a Monthly
Status Report in a form reasonably acceptable to the Lenders, as of the last day of the immediately
preceding month;



          (b) Concurrently with any delivery of financial statements under Subsections 7.01(a) and (b),
a certificate of a Responsible Officer, in form and substance satisfactory to the Administrative
Agent, setting forth as of the last Business Day of such fiscal quarter or fiscal year, a true and
complete list of all Derivative Contracts of the Borrower Group, the material terms thereof
(including the type, term, effective date, termination date and notional amounts or volumes), the
net mark-to-market value therefor, any new credit support agreements relating thereto not listed on
Schedule 6.21, any margin required or supplied under any credit support document, and the
counterparty to each such agreement;



          (c) Concurrently with the delivery of the statements referred to in Subsection 7.01(b) and
within sixty (60) days following the end of the Company’s fiscal year, a Pricing Grid Certificate
executed by a Responsible Officer;



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          (d) Concurrently with the delivery of the statements and reports referred to in Subsections
7.01(a) and (b), and 7.02(a) a Compliance Certificate executed by a Responsible Officer;



          (e) Annually commencing April 15, 2007, dated as of January 1st of such year, a
Reserve Report prepared by the Independent Engineer or other independent petroleum engineer
reasonably acceptable to the Administrative Agent and the Company, and annually, commencing
October 15, 2006, dated as of July 1st of such year, a Reserve Report prepared by
personnel of the Company and certified by a Responsible Officer of the Company as true and correct
in all material respects. Each Reserve Report shall be in form and substance reasonably
satisfactory to the Lenders. With the delivery of each Reserve Report, the Company shall provide to
the Administrative Agent and the Lenders a certificate from a Responsible Officer certifying that
in all material respects: (i) the information contained in the Reserve Report and any other
information delivered in connection therewith is true and correct, (ii) the Company or a Guarantor
owns good and defensible title to the Oil and Gas Properties evaluated in such Reserve Report and
such Properties are free of all Liens except for Liens permitted by Section 8.01, (iii) except as
set forth on an exhibit to the certificate, on a net basis there are no gas imbalances, take or pay
or other prepayments in excess of the volume specified in Section 6.12 with respect to their Oil
and Gas Properties evaluated in such Reserve Report that would require the Company or any Guarantor
to deliver Oil and Gas either generally or produced from such Oil and Gas Properties at some future
time without then or thereafter receiving full payment therefor, (iv) none of their proved Oil and
Gas Properties have been sold since the date of the last Borrowing Base determination except as set
forth on an exhibit to the certificate, which certificate shall list all of its proved Oil and Gas
Properties
sold and in such detail as reasonably required by the Administrative Agent, (v) attached to the
certificate is a list of all marketing agreements entered into subsequent to the most recently
delivered Reserve Report and (vi) attached thereto is a schedule of the Oil and Gas Properties
evaluated by such Reserve Report that are Mortgaged Properties and demonstrating the percentage of
the present value that such Mortgaged Properties represent;



          (f) Promptly after the furnishing thereof, copies of all periodic and other financial reports
and other financial materials (not otherwise required to be delivered within a specific timeframe
pursuant to the terms hereof) distributed by the Parent to its shareholders;



          (g) Promptly after the furnishing thereof, copies of any financial statement, report or notice
furnished to or by any Person pursuant to the terms of any preferred stock designation, indenture,
loan or credit or other similar agreement, other than this Agreement and not otherwise required to
be furnished to the Lenders pursuant to any other provision of this Section 7.02;



          (h) Concurrently with the delivery of any Reserve Report to the Administrative Agent pursuant
to Subsection 7.02(e), or after an Event of Default, upon request, a list of all Persons purchasing
Oil and Gas from the Company or any Guarantor;



          (i) In the event the Company or any Guarantor intends to sell, transfer, assign or otherwise
dispose of any Oil or Gas Properties included in the most recently delivered Reserve Report (or any
Equity Interests in the Company or any Guarantor owning interests in such Oil and Gas Properties)
during any Borrowing Base Period having a fair market value, individually or in the aggregate, in
excess of $250,000, prior written notice of such disposition, the price thereof, the anticipated
date of closing, and any other details thereof requested by the Administrative Agent;



          (j) Prompt written notice, and in any event within three (3) Business Days, of the occurrence
of any Casualty Event;



          (k) Prompt written notice (and in any event within thirty (30) days prior thereto) of any
change (i) in the Company or any Guarantor’s organizational name or in any trade name used to
identify such



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Person in the conduct of its business or in the ownership of its Properties, (ii) in
the location of the Company or any Guarantor’s chief executive office or principal place of
business, (iii) in the Company or any Guarantor’s identity or organizational structure or in the
jurisdiction in which such Person is incorporated or formed, (iv) in the Company or any Guarantor’s
jurisdiction of organization or such Person’s organizational identification number in such
jurisdiction of organization, and (v) in the Company or any Guarantor’s federal taxpayer
identification number, if any;



          (l) Promptly upon the request of the Administrative Agent, such copies of all geological,
engineering and related data contained in the Company’s or any Guarantor’s files or readily
accessible to the Company or any Guarantor relating to the Oil and Gas Properties as may reasonably
be requested;



          (m) On request by the Administrative Agent, based upon the Administrative Agent’s or Lenders’
good faith belief that the Company’s or any Guarantor’s title to the Mortgaged Properties or the
Administrative Agent’s lien thereon is subject to claims of third parties, or if required by
regulations to which the Administrative Agent or any of the Lenders is subject, title and mortgage
lien evidence satisfactory to the Administrative Agent covering such Mortgaged Property as may be
designated by the Administrative Agent, covering the Company’s or any Guarantor’s title thereto and
evidencing that the Obligations are secured by liens and security interests as provided in this
Agreement and the Security Documents;



          (n) As soon as available, and in any event within 90 days after the end of each fiscal year, a
business and financial plan for the Company and the Parent (in form reasonably satisfactory to the
Administrative Agent), prepared by a Responsible Officer, setting forth for the current fiscal
year, quarterly financial projections and budgets for the Company and the Guarantors, and for the
next fiscal year thereafter a yearly financial projection and budget; and



          (o) Promptly, such additional information regarding the business, financial or corporate
affairs of the Company or any Guarantor as the Administrative Agent, at the reasonable request of
any Lender, may from time to time request.



     7.03 Notices. The Company shall promptly notify the Administrative Agent:



          (a) of the occurrence of any Default or Event of Default or any event or circumstance that
would reasonably be expected to become a Default or Event of Default;



          (b) of any matter that has resulted or may reasonably be expected to result in a Material
Adverse Effect, including (i) breach or non-performance of, or any default under, a Contractual
Obligation of the Company or any Guarantor; (ii) any dispute, litigation, investigation, proceeding
or suspension between the Company or any Guarantor and any Governmental Authority; (iii) the
commencement of, or any material development in, any litigation, proposed legislation, ordinance or
regulation of a Governmental Authority, or proceeding affecting the Company or any Guarantor;
including pursuant to any applicable Environmental Laws; or (iv) revocation, cancellation or
failure to renew any license, permit or franchise where such revocation, failure or loss could
reasonably be expected to have a Material Adverse Effect;



          (c) of any material change in accounting policies or financial reporting practices by the
Company or any Guarantor; or



          (d) of the formation or acquisition of any Subsidiary of Ivanhoe Energy Holdings Inc.


Each notice under this Section 7.03 shall be accompanied by a written statement by a Responsible
Officer setting forth details of the occurrence referred to therein, and stating what action the
Company or any affected Guarantor proposes to take with respect thereto and at what time. Each
notice under Subsection 7.03(a) shall


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describe with particularity any and all clauses or provisions
of this Agreement or other Loan Document that have been (or foreseeably will be) breached or
violated.




     7.04 Preservation of Existence, Etc. The Company and each Guarantor shall:



          (a) preserve and maintain in full force and effect its legal existence, and maintain its good
standing under the laws of its state or jurisdiction of formation, except as otherwise permitted
hereunder;



          (b) preserve and maintain in full force and effect all governmental rights, privileges,
qualifications, permits, licenses and franchises necessary or desirable in the normal conduct of
its business except where the failure to do so would not reasonably be expected to have a Material
Adverse Effect;



          (c) use reasonable efforts, in the ordinary course of business, to preserve its business
organization and goodwill except where the failure to do so would not reasonably be expected to
have a Material Adverse Effect; and



          (d) preserve or renew all of its registered patents, trademarks, trade names and service
marks, the non-preservation of which could reasonably be expected to have a Material Adverse
Effect.



     7.05 Maintenance of Property. The Company and each Guarantor shall maintain and preserve all
its Property which is used or useful in its business in good working order and condition, ordinary
wear and tear excepted and to use the standard of care typical in the industry in the operation and
maintenance of its facilities except where the failure to do so would not reasonably be expected to
have a Material Adverse Effect provided, however, that nothing in this Section 7.05 shall prevent
the Company or any Guarantor from abandoning any well or forfeiting, surrendering, releasing or
defaulting under any lease in the ordinary course of business which is not materially
disadvantageous in any way to the Lenders and which, in its opinion, is in the best interest of the
Company or such Guarantor.



     7.06 Title Information.



          (a) On or before the delivery to the Administrative Agent and the Lenders of each Reserve
Report required by Subsection 7.02(e), the Company will deliver title information in form and
substance acceptable to the Administrative Agent covering enough of the Oil and Gas Properties
evaluated by such Reserve Report that were not included in the immediately preceding Reserve
Report, so that the Administrative Agent shall have received together with title information
previously delivered to the Administrative Agent, satisfactory title information on at least 80% of
the total net present value (determined by a discount factor of 10%) of the proved Oil and Gas
Properties evaluated by such Reserve Report.



          (b) If the Company has provided title information for additional Properties under
Subsection 7.06(a), the Company shall, within 60 days of notice from the Administrative Agent that
title defects or exceptions exist with respect to such additional Properties, either (i) cure any
such title defects or exceptions (including defects or exceptions as to priority) which are not
permitted by Section 8.01 raised by such information, (ii) substitute acceptable Mortgaged
Properties with no title defects or exceptions except for Permitted Liens having an equivalent
value or (iii) deliver title information in form and substance reasonably acceptable to the
Administrative Agent so that the Administrative Agent shall have received, together with title
information previously delivered to the Administrative Agent, satisfactory title information on at
least 80% of the net present value (determined by a discount factor of 10%) of the Oil and Gas
Properties evaluated by such Reserve Report.



          (c) If the Company is unable to cure any title defect requested by the Administrative Agent or
the Lenders to be cured within the 60-day period or the Company does not comply with the



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requirements to provide acceptable title information covering 80% of the net present value
(determined by a discount factor of 10%) of the Oil and Gas Properties evaluated in the most recent
Reserve Report, such default shall not be a Default, but instead the Administrative Agent and/or
the Required Lenders shall have the right to exercise the following remedy in their sole discretion
from time to time, and any failure to so exercise this remedy at any time shall not be a waiver as
to future exercise of the remedy by the Administrative Agent or the Lenders. To the extent that
the Administrative Agent or the Required Lenders are not reasonably satisfied with title to any
Mortgaged Property after the 60-day period has elapsed, such unacceptable Mortgaged Property shall
not count towards “the 80% requirement”, and the Administrative Agent may send a notice to the
Company and the Lenders that the then outstanding Borrowing Base shall be reduced by an amount as
determined by the Super-Majority Lenders to cause the Company to be in compliance with the
requirement to provide acceptable title information on 80% of the net present value (determined by
a discount factor of 10%) of the Oil and Gas Properties. This new Borrowing Base shall become
effective immediately after receipt of such notice.



     7.07 Additional Collateral. In connection with each redetermination of the Borrowing Base, the
Company shall review the Reserve Report and the list of current Mortgaged Properties (as described
in Subsection 7.02(e)) to ascertain whether the Mortgaged Properties represent substantially all of
the total net present value (determined by a discount factor of 10%) of the Oil and Gas Properties
evaluated in the most recently completed Reserve Report after giving effect to exploration and
production activities, acquisitions, dispositions and production. In the event that the Mortgaged
Properties do not represent substantially all of such total net present value, then the Company and
the Guarantors shall grant, within thirty (30) days of delivery of the certificate required under
Subsection 7.02(e), to the Administrative Agent or its designee as security for the Obligations a
first-priority Lien interest on additional Oil and Gas Properties not already subject to a Lien of
the Security Documents such that after giving effect thereto, the Mortgaged Properties will
represent substantially all of such total net present value. All such Liens will be created and
perfected by and in accordance with the provisions of deeds of trust, security agreements and
financing statements or other Security Documents, all in form and substance reasonably satisfactory
to the Administrative Agent or its designee and in sufficient executed (and acknowledged where
necessary or appropriate) counterparts for recording purposes.



     7.08 Insurance. The Company and each Guarantor shall maintain, with financially sound and
reputable independent insurers, insurance with respect to its properties and business against loss
or damage of the kinds customarily insured against by Persons engaged in the same or similar
business, of such types and in such amounts as are customarily carried under similar circumstances
by such other Persons except where the failure to do so would not reasonably be expected to have a
Material Adverse Effect. The loss payable clauses or provisions in said insurance policy or
policies insuring any of the Collateral for the Loan shall be endorsed in favor of and made payable
to the Administrative Agent as its interests may appear and such policies shall name the
Administrative Agent and the Lenders as “additional insured” and provide that the insurer will give
at least 30 days prior notice of any cancellation to the Administrative Agent.



     7.09 Payment of Obligations. The Company and each Guarantor shall pay and discharge prior to
delinquency, all their respective obligations and liabilities, including: (a) all tax liabilities,
assessments and governmental charges or levies upon it or its properties or assets, unless the same
are being contested in good faith by appropriate proceedings and adequate reserves in accordance
with GAAP are being maintained by the Company or such Guarantor; (b) all lawful claims which, if
unpaid, would by law become a Lien upon its property; and (c) all Indebtedness, as and when due and
payable, but subject to any subordination provisions contained in any instrument or agreement
evidencing such Indebtedness; except in each of (a), (b) and (c), where the failure to do so would
not reasonably be expected to have a Material Adverse Effect.



     7.10 Compliance with Laws. The Company and each Guarantor shall comply in all material
respects with all Requirements of Law of any Governmental Authority having jurisdiction over it or
its



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business (including Environmental Laws, the Federal Fair Labor Standards Act and any California
Requirement of Law promulgated with respect to earthquakes), except (a) such as may be contested in
good faith or as to which a bona fide dispute may exist or (b) where the failure to do so would not
reasonably be expected to have a Material Adverse Effect.



     7.11 Compliance with ERISA. The Company and each Guarantor shall, and each shall cause each of
its ERISA Affiliates to: (a) maintain each Plan in compliance in all material respects with the
applicable provisions of ERISA, the Code and other federal or state law; (b) cause each Plan which
is qualified under Section 401(a) of the Code to maintain such qualification; and (c) make all
required contributions to any Plan subject to Section 412 of the Code.



     7.12 Inspection of Property and Books and Records. The Company and each Guarantor shall
maintain proper books of record and account, in which full, true and correct entries in conformity
with GAAP consistently applied shall be made of all financial transactions and matters involving
the assets and business of the Company and such Guarantor. The Company and each Guarantor shall
permit, representatives and independent contractors of the Administrative Agent or any Lender to
visit and inspect any of their respective properties, to examine their respective company,
financial and operating records, and make copies thereof or abstracts therefrom, and to discuss
their respective affairs, finances and accounts with their respective managers, directors,
officers, and independent public accountants, all at the expense of the Company or such Guarantor
and at such reasonable times during normal business hours and as often as may be reasonably
desired, upon reasonable advance notice to the Company or such Guarantor; provided,
however, when an Event of Default exists the Administrative Agent or any Lender may do any
of the foregoing at the expense of the Company or such Guarantor at any time during normal business
hours and without advance notice.



     7.13 Environmental Laws.



          (a) The Company and each Guarantor shall conduct its operations and keep and maintain its
property in compliance with all Environmental Laws and maintain all environmental, health and
safety permits, licenses and authorizations necessary for its operations and will maintain such in
full force and effect except where the failure to do so would not reasonably be expected to have
a Material Adverse Effect. The Company and each Guarantor shall promptly commence and diligently
prosecute to completion any assessment, evaluation, investigation, monitoring, containment,
cleanup, removal, repair, restoration, remediation or other remedial obligations (collectively, the
“Remedial Work”) in the event any Remedial Work is required or reasonably necessary under
applicable Environmental Laws because of or in connection with the actual or suspected past,
present or future disposal or other release of any oil, oil and gas waste, hazardous substance or
solid waste on, under, about or from any of the Company’s or such Guarantor’s Properties, which
failure to commence and diligently prosecute to completion could reasonably be expected to have a
Material Adverse Effect.



          (b) The Company and each Guarantor will establish and implement such procedures as may be
reasonably necessary to continuously determine and assure that the Company’s and such Guarantor’s
obligations under this Section 7.13 are timely and fully satisfied, which failure to establish and
implement could reasonably be expected to have a Material Adverse Effect



          (c) The Company and each Guarantor will promptly furnish to the Administrative Agent all
written notices of violation, orders, claims, citations, complaints, penalty assessments, suits or
other proceedings received by the Company or such Guarantor, or of which it has notice, pending or
threatened against the Company or such Guarantor, by any Governmental Authority with respect to any
alleged violation of or non-compliance with any Environmental Laws or any permits, licenses or
authorizations in connection with its ownership or use of its Properties or the operation of its
business, except where any such alleged



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violations or incidents of non-compliance would not,
individually or in the aggregate, result in a penalty, assessment, fine or other cost or liability
exceeding $100,000.



          (d) The Company and each Guarantor will promptly furnish to the Administrative Agent all
requests for information, notices of claim, demand letters, and other notifications, received by
the Company or such Guarantor in connection with its ownership or use of its Properties or the
conduct of its business, relating to potential responsibility with respect to any investigation or
clean-up of hazardous materials at any location, except where any such alleged responsibility would
not, individually or in the aggregate, result in a penalty, assessment, fine or other cost or
liability exceeding $100,000.



     7.14 New Subsidiary Guarantors. If, at any time after the date of this Agreement, any new
Subsidiary of Ivanhoe Energy Holdings Inc. is acquired or created then the owner(s) of such
Subsidiary shall execute and deliver a Security Agreement to the Administrative Agent, whereby such
owner(s) pledge all of the Equity in such Subsidiary as security for the Obligations.



     7.15 Reserved.



     7.16 Use of Proceeds. The Company shall use the proceeds of the Loans (a) to refinance
Indebtedness, (b) for standby letters of credit up to the sub-facility amount of $500,000, (c) for
working capital purposes (including capital expenditures made for the exploration and development
of Oil and Gas Properties) of the Company and the Guarantors, (d) for general company purposes of
the Company, and (e) for acquisitions permitted under Section 8.04 and Restricted Payments
permitted under Section 8.09.



     7.17 Operating Accounts. (i) Each of the Company and the Parent shall establish and maintain
with Administrative Agent all of its primary operating and depository accounts and (ii) each member
of the Borrower Group other than the Company shall establish and maintain with the Administrative
Agent any of its operating or depository accounts to the extent any such account has an average
collected balance for any month in excess of $100,000.00.



     7.18 Phase I Reports. As soon as available, and in any case within fifteen (15) days prior to
closing any Acquisition of Oil and Gas Properties, the Company shall deliver to the Lenders a Phase
I report covering such Oil and Gas Properties to be acquired in form and substance satisfactory to
the Administrative Agent.



     7.19 Further Assurances.



          (a) The Company and the Guarantors will promptly cure any defects in the creation and issuance
of the Notes and the execution and delivery of this Agreement, the Security Documents or any other
instruments referred to or mentioned herein or therein. The Company and the Guarantors at their
expense will promptly do all acts and things, and will execute and file or record, all instruments
reasonably requested by the Administrative Agent, to establish, perfect, maintain and continue the
perfected security interest of the Administrative Agent in or the Lien of the Administrative Agent
on the Mortgaged Properties. Upon request by the Administrative Agent, the Company and the
Guarantors shall promptly execute such additional Security Documents covering any new Oil and Gas
Properties reflected on the Monthly Status Reports. The Company and the Guarantors will pay the
reasonable costs and expenses of all filings and recordings and all searches deemed necessary by
the Administrative Agent to establish and determine the validity and the priority of the Liens
created or intended to be created by the Security Documents; and the Company and the Guarantors
will satisfy all other claims and charges which in the reasonable opinion of the Administrative
Agent might prejudice, impair or otherwise affect any of the Mortgaged Properties or any Liens
thereon in favor of the Administrative Agent for the benefit of the Issuing Lender and the Lenders.




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          (b) The Company and each Guarantor hereby authorizes the Administrative Agent to file one or
more financing or continuation statements, and amendments thereto, relative to all or any part of
the Mortgaged Property and/or the Collateral without the signature of the Company or any Guarantor
where permitted by law. A carbon, photographic or other reproduction of the Security Documents or
any financing statement covering the Mortgaged Property and/or the Collateral or any part thereof
shall be sufficient as a financing statement where permitted by law. The Administrative Agent will
promptly send the Company any financing or continuation statements it files without the signature
of the Company or any Guarantor and the Administrative Agent will promptly send the Company the
filing or recordation information with respect thereto.




     7.20 Derivative Contracts. The Borrower Group shall enter into and maintain such Derivative
Contracts with respect to estimated production from their Oil and Gas Properties as the
Administrative Agent and the Required Lenders may reasonably require, in form and substance, and
with volumes, pricing, structure and other terms and conditions, as may be satisfactory to the
Administrative Agent, including terms that each such Derivative Contract is fully assignable to the
Administrative Agent, with each counterparty agreeing to provide the Administrative Agent with
notice of and an opportunity to cure any defaults thereunder before declaring an early termination
date or otherwise terminating such Derivative Contract or any transaction thereunder.



ARTICLE VIII.




NEGATIVE COVENANTS




     So long as any Lender shall have any Commitment hereunder, or any Loan or other Obligation
shall remain unpaid or unsatisfied, unless the Lenders waive compliance in writing:



     8.01 Limitation on Liens. Each of the Company and the Guarantors agrees that it shall not,
directly or indirectly, make, create, incur, assume or suffer to exist any Lien upon or with
respect to any part of its Property, whether now owned or hereafter acquired, other than the
following (“Permitted Liens”):



          (a) any Lien created under any Loan Document;




          (b) Liens for taxes, fees, assessments or other governmental charges which are not delinquent
or remain payable without penalty, or to the extent that non-payment thereof is permitted by
Section 7.09;




          (c) carriers’, warehousemen’s, mechanics’, landlords’, materialmen’s, repairmen’s or other
similar Liens arising in the ordinary course of business (whether by law or by contract) which are
not delinquent or remain payable without penalty or which are being contested in good faith and by
appropriate proceedings, which proceedings have the effect of preventing the forfeiture or sale of
the property subject thereto;




          (d) Liens consisting of pledges or deposits required in the ordinary course of business in
connection with workers’ compensation, unemployment insurance and other social security
legislation;




          (e) Liens on the Property of the Company or any Guarantor securing (i) the non-delinquent
performance of bids, trade contracts (other than for borrowed money), statutory obligations, (ii)
contingent obligations on surety and appeal bonds, and (iii) other non-delinquent obligations of a
like nature; in each case, incurred in the ordinary course of business;




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          (f) easements, rights-of-way, restrictions, defects or other exceptions to title and other
similar encumbrances incurred in the ordinary course of business which, in the aggregate, are not
substantial in amount, are not incurred to secure Indebtedness, and which do not in any case
materially detract from the value of the Property subject thereto or interfere with the ordinary
conduct of the businesses of the Company or any Guarantor;




          (g) Liens arising solely by virtue of any statutory or common law provision relating to
bankers’ liens, rights of set-off or similar rights and remedies as to deposit accounts or other
funds maintained with a creditor depository institution; or under any deposit account agreement
entered into in the ordinary course of business; provided that (i) such deposit account is
not a dedicated cash collateral account and is not subject to restrictions against access by the
Company or any Guarantor, (ii) the Company (or applicable Guarantor) maintains (subject to such
right of set off) dominion and control over such account(s), and (iii) such deposit account is not
intended by the Company or any Guarantor to provide cash collateral to the depository institution;
and




          (h) Oil and Gas Liens.




     8.02 Disposition of Assets. Each of the Borrower Group agrees that it shall not, directly or
indirectly, sell, assign, lease, convey, transfer or otherwise dispose of (whether in one or a
series of transactions) (collectively, “Dispositions”) any Property used or useful by the Borrower
Group (including accounts and notes receivable, with or without recourse) or enter into any
agreement to do any of the foregoing, except:



          (a) as permitted under Sections 7.05, 8.03, 8.04, 8.09, or 8.10;




          (b) Dispositions of inventory including produced Oil and Gas in the ordinary course of
business;




          (c) Dispositions by one member of the Borrower Group to another member of the Borrower Group;




          (d) used, worn-out or surplus equipment in the ordinary course of business; and




          (e) Dispositions not otherwise permitted under Subsections 8.02 (a) — (d) above which are
made in the ordinary course of business; provided that, (i) no Event of Default shall
exist at the time of such Disposition or result therefrom, and (ii) the aggregate value (as
determined by the value assigned to such properties under the most recent Reserve Report) of all
Dispositions of Oil and Gas Properties made by the Borrower Group, together, shall not exceed in
any Borrowing Base Period five percent (5%) of the Borrowing Base then in effect; further
provided that, the Borrowing Base shall be automatically reduced by an amount equal to the
aggregate value of such Oil and Gas Properties and to the extent a Borrowing Base Deficiency
results from such reduction, up to one-hundred percent (100%) of the proceeds of such
Dispositions, net of usual and customary reasonable fees, expenses and taxes, shall be applied, as
necessary, to cure such Borrowing Base Deficiency.




     8.03 Consolidations and Mergers. Each of the Company and the Guarantors agrees that it shall
not consolidate with or into, or convey, transfer, lease or otherwise dispose of (whether in one
transaction or in a series of transactions) all or substantially all of its assets (whether now
owned or hereafter acquired) to or in favor of any Person, except:




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          (a) any member of the Borrower Group may merge with any other member of the Borrower Group,
provided that with respect to any such merger involving the Company, the Company shall be
the continuing or surviving entity;




          (b) any Subsidiary of the Parent (other than a member of the Borrower Group) may merge with
the Parent, so long as the Parent shall be the continuing or surviving entity; and




          (c) Dispositions permitted under Subsection 8.02(c) or (e).




     8.04 Loans and Investments. Each member of the Borrower Group agrees that it shall not
purchase or acquire or make any commitment therefor, any capital stock, equity interest, or any
obligations or other securities of, or any interest in, any Person or make or commit to make any
Acquisition, or make or commit to make any advance, loan, extension of credit or capital
contribution to or any other investment in (collectively, “Investments”) any Person except for:



          (a) Investments in Cash Equivalents;




          (b) extensions of credit in the nature of accounts receivable or notes receivable arising from
the sale or lease of goods or services in the ordinary course of business;




          (c) Investments in Subsidiaries (other than HTL Technology Development Subsidiaries) that are
or become Guarantors;




          (d) Investments permitted under Subsection 8.02(c);




          (e) Investments in Derivative Contracts required under this Agreement or permitted under
Section 8.10;




          (f) Investments with third parties that are (i) customary in the oil and gas business, (ii)
made in the ordinary course of the Company’s or such Guarantor’s business, and (iii) made in the
form of or pursuant to Operating Agreements, processing agreements, farm-in agreements, farm-out
agreements, development agreements, unitization agreements, pooling agreements, joint bidding
agreements, service contracts and other similar agreements;




          (g) extensions of credit by the Borrower Group to any of their full time employees which do
not exceed $250,000 at any time outstanding in the aggregate to all such employees;




          (h) Investments made after June 30, 2006 in HTL Technology Development Subsidiaries not to
exceed $2,000,000 in the aggregate upon terms and conditions acceptable to the Administrative
Agent; and




          (i) other Investments not to exceed $250,000 in the aggregate.




     8.05 Limitation on Indebtedness. Each member of the Borrower Group agrees that it shall not
create, incur, assume, suffer to exist, or otherwise become or remain directly or indirectly liable
with respect to, any Indebtedness, except:



          (a) Indebtedness incurred pursuant to this Agreement or the other Loan Documents;




          (b) Indebtedness consisting of Contingent Obligations permitted pursuant to Section 8.08;




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          (c) Indebtedness incurred in connection with the issuance of Derivative Contracts required
under this Agreement or permitted under Section 8.10 hereof;




          (d) specific Indebtedness outstanding on the date hereof and listed in Schedule 8.05 hereto;




          (e) Indebtedness not otherwise permitted under Subsections 8.05(a) — (d) above not exceeding
$250,000 at any time outstanding.




     8.06 Transactions with Affiliates. Each of the Company and the Guarantors agrees that it shall
not enter into any transaction with or make any payment or transfer to (collectively,
"Transactions”) any Affiliate of the Company or any such Guarantor, except for Transactions between
the Company and any Guarantor or between Guarantors, and for other Transactions entered into in the
ordinary course of business and upon fair and reasonable terms no less favorable to the Company or
such Guarantor than would obtain in a comparable arm’s-length transaction with a Person not an
Affiliate of the Company or such Guarantor. Nothing in this Section 8.06 shall restrict the
Borrower Group’s ability (a) to make Restricted Payments permitted under Section 8.09 or (b) to
make Investments permitted under Subsections 8.04(c), 8.04(h) and 8.04(i).



     8.07 Margin Stock. Each of the Company and the Guarantors agrees that it shall not use any
portion of the Loan proceeds, directly or indirectly, (i) to purchase or carry Margin Stock, (ii)
to repay or otherwise refinance indebtedness of the Company or any Guarantor incurred to purchase
or carry Margin Stock, (iii) to extend credit for the purpose of purchasing or carrying any Margin
Stock, or (iv) to acquire any security in any transaction that is subject to Section 13 or 14 of
the Exchange Act. If requested by the Administrative Agent, the Company will furnish to the
Administrative Agent and each Lender a statement to the foregoing effect in conformity with the
requirements of FR Form U-1 or such other form referred to in Regulation U, Regulation T or
Regulation X of the Board, as the case may be.



     8.08 Contingent Obligations. Each of the Borrower Group agrees that it shall not create,
incur, assume or suffer to exist any Contingent Obligations except:



          (a) endorsements for collection or deposit in the ordinary course of business;




          (b) Derivative Contracts required under this Agreement or permitted under Section 8.10 hereof;




          (c) Contingent Obligations of the Borrower Group listed in Schedule 8.08 hereto;




          (d) plugging bonds, performance bonds and fidelity bonds issued for the account of any member
of the Borrower Group, obligations to indemnify or make whole any surety and similar agreements
incurred in the ordinary course of business, provided that such obligations shall not
exceed $500,000 in the aggregate;




          (e) this Agreement and the Loan Documents; and




          (f) any other Contingent Obligations of the Borrower Group to the extent not described in
Subsections 8.08 (a) — (e) not to exceed $250,000 in the aggregate.




     8.09 Restricted Payments; Restrictive Agreements. Each of (i) the Parent and (ii) each member
of the Borrower Group agrees that it shall not purchase, redeem or otherwise acquire for value any



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membership interests, partnership interests, capital accounts, shares of its capital stock or any
warrants, rights or options to acquire such membership interest, partnership interest or shares,
now or hereafter outstanding from its members, partners or stockholders and will not declare or pay
any distribution, dividend or return capital to its members, partners or stockholders, or make any
distribution of assets in cash or in kind to its members, partners or stockholders (collectively
“Restricted Payments”), except any member of the Borrower Group may make Restricted Payments to any
other member of the Borrower Group to the extent permitted under its Organization Documents, so
long as (a) no Event of Default exists or would result therefrom and (b) after giving effect to
such Restricted Payment, the Company and the Guarantors are in compliance with all terms and
conditions of this Agreement. Each of the Company and the Guarantors agrees that it will not
create, incur, assume or suffer to exist any contract, agreement or understanding (other than this
Agreement and the Security Documents) that in any way prohibits or restricts the granting,
conveying, creation or imposition of any Lien on any of its Property in favor of the Administrative
Agent and the Lenders or restricts any Subsidiary from paying dividends or making distributions to
the Company or any Guarantor, or which requires the consent of or notice to other Persons in
connection therewith.




     8.10 Derivative Contracts. None of the Borrower Group shall enter into or in any manner be
liable on any Derivative Contract except:



          (a) Derivative Contracts entered into by the any member of the Borrower Group with the
purpose and effect of limiting or reducing the market price risk of Oil and Gas expected to be
produced by the Borrower Group; provided that at all times: (i) the aggregate of all such
Derivative Contracts limits or reduces such market price risk for a term of no more than thirty-six
(36) months; (ii) no such contract, when aggregated with all Derivative Contracts permitted under
this Subsection 8.10(a) (but excluding put option contracts that are not related to
corresponding calls, collars or swaps) requires the Borrower Group to deliver more than 80% of the
reasonably anticipated production for each month for the total Oil and Gas classified as “proved
producing” on the most recent Reserve Report delivered to the Administrative Agent covering the Oil
and Gas Properties, and (iii) each such contract (excluding Derivative Contracts offered by
national commodity exchange) shall be between a member of the Borrower Group and the Administrative
Agent, or any of the Lenders or its Affiliate, or with an unsecured counterparty or have a
guarantor of the obligation of the unsecured counterparty who, at the time the contract is made,
has long-term obligations rated BBB+ or Baal or better, respectively, by Standard & Poor’s
Corporation or Moody’s Investors Services, Inc. (or a successor credit rating agency);




          (b) Derivative Contracts entered into by any member of the Borrower Group with the purpose and
effect of fixing interest rates on a principal amount of Indebtedness of the Borrower Group that is
accruing interest at a variable rate, provided that (i) the floating rate index of each
such contract generally matches the index used to determine the floating rates of interest on the
corresponding Indebtedness of the Borrower Group to be hedged by such contract, (ii) no such
contract, except those with a Lender or its Affiliate, when aggregated with all Derivative
Contracts permitted under Subsections 8.10(a) and (b), requires any member of the Borrower Group to
put up money, assets, letters of credit, or other security against the event of its non-performance
prior to actual default by it in performing obligations thereunder, and (iii) each such contract
shall be with a Lender or its Affiliate, or with an unsecured counterparty or have a guarantor of
the obligation of an unsecured counterparty who, at the time the contract is made, has long-term
obligations rated A+ or A1 or better, respectively, by Standard & Poor’s Corporation or Moody’s
Investors Services, Inc. (or a successor credit rating agency);




          (c) In the event of a Derivative Contract between any member of the Borrower Group and any of
the Lenders or their respective Affiliates, the Contingent Obligation evidenced under such
Derivative Contract shall not be applied against such Lender’s Commitment nor against the Effective
Amount. Any Indebtedness to any Lender or its Affiliate incurred under any Derivative Contract
shall be treated as an Obligation pari passu and secured pro rata under the Security Documents with
all Obligations otherwise




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incurred hereunder or under the other Loan Documents as more particularly
provided under Section 11.11; and




          (d) No member of the Borrower Group shall modify or terminate any Derivative Contract to which
it is currently a party or subsequently becomes a party without the consent of the Administrative
Agent.




     8.11 Change in Business and Corporate Structure.



          (a) Neither the Company nor any other member of the Borrower Group shall (i) have any
Subsidiaries other than wholly-owned Subsidiaries, (ii) enter into, or allow any Subsidiary to
enter into, any joint ventures or (iii) have any other material equity investment, except as
otherwise permitted hereunder.




          (b) Neither the Company nor any other member of the Borrower Group shall engage in any
business or activity other than its Principal Business.




          (c) Neither the Company nor any Guarantor shall alter, amend or modify in any manner
materially adverse to the Lenders any of its Organization Documents.




     8.12 Accounting Changes. Except as expressly permitted by the Required Lenders, neither the
Company nor any Guarantor shall make any significant change in accounting treatment or reporting
practices, except as required by GAAP, or change its fiscal year.



     8.13 ERISA Compliance. Except as would not reasonably be expected to result in a Material
Adverse Effect, each of the Company and the Guarantors will not at any time:



          (a) engage in, or permit any ERISA Affiliate to engage in, any transaction in connection with
which the Company, any Guarantor or any ERISA Affiliate could be subjected to either a civil
penalty assessed pursuant to subsections (c), (i) or (l) of section 502 of ERISA or a tax imposed
by Chapter 43 of Subtitle D of the Code.




          (b) terminate, or permit any ERISA Affiliate to terminate, any Plan in a manner, or take any
other action with respect to any Plan, which could result in any liability of the Company, any
Guarantor or any ERISA Affiliate to the PBGC.




          (c) fail to make, or permit any ERISA Affiliate to fail to make, full payment when due of all
amounts which, under the provisions of any Plan, agreement relating thereto or applicable law, the
Company, any Guarantor or any ERISA Affiliate is required to pay as contributions thereto.




          (d) permit to exist, or allow any ERISA Affiliate to permit to exist, any accumulated funding
deficiency within the meaning of section 302 of ERISA or section 412 of the Code, whether or not
waived, with respect to any Plan.




          (e) permit, or allow any ERISA Affiliate to permit, the actuarial present value of the benefit
liabilities under any Plan maintained by the Company, any Guarantor or any ERISA Affiliate which is
regulated under Title IV of ERISA to exceed the current value of the assets (computed on a
plan termination basis in accordance with Title IV of ERISA) of such Plan allocable to such benefit
liabilities. The term “actuarial present value of the benefit liabilities” shall have the meaning
specified in section 4041 of ERISA.




          (f) incur, or permit any ERISA Affiliate to incur, any withdrawal liability pursuant to
Section 4201 or 4202 of ERISA.




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          (g) acquire, or permit any ERISA Affiliate to acquire, an interest in any Person that causes
such Person to become an ERISA Affiliate with respect to the Company or any Guarantor or with
respect to any ERISA Affiliate of the Company or any Guarantor if such Person sponsors, maintains
or contributes to, or at any time in the six-year period preceding such acquisition has sponsored,
maintained, or contributed to, (i) any Multiemployer Plan with respect to which such Person has an
outstanding withdrawal liability under Section 4201 or 4202 of ERISA, or (ii) any other Plan that
is subject to Title IV of ERISA under which the actuarial present value of the benefit liabilities
under such Plan exceeds the current value of the assets (computed on a plan termination basis in
accordance with Title IV of ERISA) of such Plan allocable to such benefit liabilities.




          (h) incur, or permit any ERISA Affiliate to incur, a liability to or on account of a Plan
under sections 515, 4062, 4063, 4064, or 4204 of ERISA.




          (i) contribute to or assume an obligation to contribute to, or permit any ERISA Affiliate to
contribute to or assume an obligation to contribute to, any employee welfare benefit plan, as
defined in section 3(1) of ERISA, that provides retiree benefits to former employees of such
entities (other than coverage mandated by applicable law), that may not be terminated by such
entities in their sole discretion at any time without any material liability.




          (j) amend, or permit any ERISA Affiliate to amend, a Plan resulting in an increase in current
liability such that the Company, any Guarantor or any ERISA Affiliate is required to provide
security to such Plan under section 401(a)(29) of the Code.




     8.14 Financial Covenants. (a) The Company shall not permit, as of the last day of any fiscal
quarter beginning with the fiscal quarter ended September 30, 2006, the ratio of the Company’s
EBITDA to Consolidated Interest Expense, each calculated for the four consecutive fiscal quarters
then ended, to be less than 3.00 to 1.00. The Company shall not permit, as of the last day of any
fiscal quarter beginning with the fiscal quarter ended September 30, 2006, the ratio of the
Parent’s EBITDA to Consolidated Interest Expense, each calculated for the four consecutive fiscal
quarters then ended, to be less than 3.00 to 1.00.



     (b) The Company shall not permit , as of the last day of any fiscal quarter beginning with
the fiscal quarter ended September 30, 2006, the ratio of the Company’s Total Indebtedness to
EBITDA, the latter of which is to be calculated for the four consecutive fiscal quarters then
ended, to exceed 2.50 to 1.00. The Company shall not permit, as of the last day of any fiscal
quarter beginning with the fiscal quarter ended September 30, 2006, the ratio of the Parent’s Total
Indebtedness to EBITDA, the latter of which is to be calculated for the four consecutive fiscal
quarters then ended, to exceed 2.50 to 1.00.



     (c) The Company shall not permit the Company’s Capital Expenditures and General and
Administrative Expenses for any fiscal quarter to exceed the amount reflected for such fiscal
quarter on Schedule 8.14(c) hereto, as such schedule may be amended from time to time with the
consent of the Required Lenders.



     (d) The Company will not permit, as of the last day of any fiscal quarter beginning with the
fiscal quarter ended September 30, 2006, the ratio of the Company’s Current Assets to Current
Liabilities to be less than 1.00 to 1.00. The Company will not permit, as of the last day of any
fiscal quarter beginning with the fiscal quarter ended September 30, 2006, the ratio of the
Parent’s Current Assets to Current Liabilities to be less than 1.00 to 1.00.



     (e) Neither the Company nor any other member of the Borrower Group will create, incur, assume
or suffer to exist any obligation for the payment of rent or hire of Property of any kind
whatsoever (real or



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personal but excluding leases of Hydrocarbon Interests), under leases or lease
agreements which would cause the aggregate amount of all payments made by the Borrower Group
pursuant to all such leases or lease agreements, including, without limitation, any residual
payments at the end of any lease, to exceed $500,000.00 in any period of twelve consecutive
calendar months during the life of such leases.




ARTICLE IX.




EVENTS OF DEFAULT




     9.01 Event of Default. Any of the following shall constitute an “Event of Default”:



          (a) Non-Payment. The Company fails to pay, when and as required to be paid herein,
any amount of principal or interest of any Loan, or fails to pay within two (2) Business Days of
when due any fee or other amount payable hereunder or under any other Loan Document; or




          (b) Representation or Warranty. Any representation or warranty by the Company or any
Guarantor made or deemed made herein, in any other Loan Document, or which is contained in any
certificate, document or financial or other statement by the Company, any Guarantor, or any
Responsible Officer, furnished at any time under this Agreement, or in or under any other Loan
Document, is incorrect on or as of the date made or deemed made; or




          (c) Specific Defaults. The Company or any Guarantor fails to perform or observe any
term, covenant or agreement contained in Subsection 7.03(a) or Article VIII; or




          (d) Other Defaults. The Company or any Guarantor fails to perform or observe any
other term or covenant contained in this Agreement (other than as otherwise described in this
Section 9.01) or any other Loan Document, and same shall continue unremedied for a period of 30
days after the earlier of (i) the date upon which a Responsible Officer knew or reasonably should
have known of such default or (ii) the date upon which written notice thereof is given to the
Company or such Guarantor by the Administrative Agent or any Lender; or




          (e) Cross-Default. (i) The Company or any Guarantor fails to make any payment in
respect of any Indebtedness or Contingent Obligation having an aggregate principal amount
(including undrawn committed or available amounts and including amounts owing to all creditors
under any combined or syndicated credit arrangement) of more than $250,000 when due (whether by
scheduled maturity, required prepayment, acceleration, demand, or otherwise) and such failure
continues after the applicable grace or notice period, if any, specified in the relevant document
on the date of such failure; or (ii) the Company or any Guarantor fails after the applicable grace
or notice period, if any, specified in the relevant document on the date of such failure to perform
or observe any other condition or covenant, or any other event shall occur or condition exist,
under any agreement or instrument relating to any such Indebtedness or Contingent Obligation having
an aggregate principal amount of more than $250,000, if the effect of such failure, event or
condition is to cause, or to permit the holder or holders of such Indebtedness or beneficiary or
beneficiaries of
such Indebtedness (or a trustee or agent on behalf of such holder or holders or beneficiary or
beneficiaries) to cause such Indebtedness to be declared to be due and payable prior to its stated
maturity, or such Contingent Obligation to become payable or cash collateral in respect thereof to
be demanded; or (iii) any Indebtedness or Contingent Obligations of the Company or any Guarantor in
excess of $250,000 shall be declared due and payable prior to its stated maturity or cash
collateral is demanded in respect of such Contingent Obligations; or




          (f) Insolvency; Voluntary Proceedings. The Company or any Guarantor (i) generally
fails to pay, or admits in writing its inability to pay, its debts as they become due, subject to
applicable grace




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periods, if any, whether at stated maturity or otherwise; (ii) commences any
Insolvency Proceeding with respect to itself; or (iii) takes any action to effectuate or authorize
any of the foregoing; or




          (g) Involuntary Proceedings. (i) Any involuntary Insolvency Proceeding is commenced
or filed against the Company or any Guarantor, or any writ, judgment, warrant of attachment,
execution or similar process, is issued or levied against all or a substantial part of the
Company’s or any Guarantor’s properties, and any such proceeding or petition shall not be
dismissed, or such writ, judgment, warrant of attachment, execution or similar process shall not be
released, vacated or fully bonded within 60 days after commencement, filing or levy; (ii) the
Company or any Guarantor admits the material allegations of a petition against it in any Insolvency
Proceeding, or an order for relief (or similar order under non-U.S. law) is ordered in any
Insolvency Proceeding; or (iii) the Company or any Guarantor acquiesces in the appointment of a
receiver, trustee, custodian, conservator, liquidator, mortgagee in possession (or agent therefor),
or other similar Person for itself or a substantial portion of its property or business; or




          (h) Change of Control. There shall occur a Change of Control; or




          (i) Monetary Judgments. One or more non-interlocutory judgments, non-interlocutory
orders, decrees or arbitration awards is entered against the Company or any Guarantor involving in
the aggregate a liability (to the extent not covered by independent third-party insurance as to
which the insurer does not dispute coverage) as to any single or related series of transactions,
incidents or conditions, of $250,000 or more, and the same shall remain unsatisfied, unvacated and
unstayed pending appeal for a period of 30 days after the entry thereof; or




          (j) Loss of Permit. Any Governmental Authority revokes or fails to renew any material
license, permit or franchise of the Company or any Guarantor, or the Company or any Guarantor for
any reason loses any material license, permit or franchise, or the Company or any Guarantor suffers
the imposition of any restraining order, escrow, suspension or impounding of funds in connection
with any proceeding (judicial or administrative) with respect to any material license, permit or
franchise; and, in each case such revocation, failure or loss could reasonably be expected to have
a Material Adverse Effect; and such default remains unremedied for a period of 30 days after the
earlier of (i) the date upon which a Responsible Officer knew or reasonably should have known of
such default or (ii) the date upon which written notice thereof is given to the Company or such
Guarantor by the Administrative Agent or any Lender; or




          (k) Adverse Change. There occurs a Material Adverse Effect; or




          (l) Guaranty Default. A Guaranty is for any reason partially (including with respect
to future advances) or wholly revoked or invalidated, or otherwise ceases to be in full force and
effect, or any Guarantor or any other Person contests in any manner the validity or enforceability
thereof or denies that it has any further liability or obligation thereunder; or




          (m) Material Agreements. Any member of the Borrower Group shall fail to observe,
perform or comply with any material covenant, agreement, condition or provision of any material
Contractual
Obligation including without limitation the following: (i) Derivative Contracts required under this
Agreement or permitted under Section 8.10, (ii) material leases associated with the Mortgaged
Properties and (iii) material agreements governing the transportation of Oil and Gas from the
Mortgaged Properties; or




          (n) ERISA. The occurrence of any of the following events: (i) the happening of a
Reportable Event which has resulted or could reasonably be expected to result in a Material Adverse
Effect (if not waived by the PBGC or by the Required Lenders, or if such event can be avoided by
any corrective action of the Company or any Guarantor, such corrective action is not completed
within ninety (90) days after the occurrence of such Reportable Event) with respect to any Pension
Plan; (ii) the termination of any Pension




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Plan in a “distress termination” under the provisions of
Section 4041 of ERISA; (iii) the appointment of a trustee by an appropriate United States District
Court to administer any Pension Plan; and (iv) the institution of any proceedings by the PBGC to
terminate any Pension Plan or to appoint a trustee to administer any such plan; or




          (o) Environmental Claims. An Environmental Claim shall have been asserted against the
Company or any Guarantor which could have a Material Adverse Effect;




     9.02 Remedies. If any Event of Default occurs and is continuing, the Administrative Agent
shall, at the request of, or may, with the consent of, the Required Lenders:



          (a) declare the Commitment, if any, of each Lender to make Loans and issue Letters of Credit
to be terminated, and/or declare all or any part of the unpaid principal of the Loans, all interest
accrued and unpaid thereon and all other amounts payable under the Loan Documents to be immediately
due and payable, whereupon the same shall become due and payable, without presentment, demand,
protest, notice of intention to accelerate, notice of acceleration or any other notice of any kind,
all of which are hereby expressly waived by the Company and each Guarantor.




          (b) exercise on behalf of itself and the Lenders all rights and remedies available to it and
the Lenders under the Loan Documents or applicable law; provided, however, that
upon the occurrence of any event specified in Subsection (f) or (g) of Section 9.01 (in the case of
Clause (i) of Subsection (g) upon the expiration of the 60-day period mentioned therein), the
obligation of each Lender to make Loans and issue Letters of Credit shall automatically terminate
and the unpaid principal amount of all outstanding Loans and all interest and other amounts as
aforesaid shall automatically become due and payable without further act of the Administrative
Agent, or any Lender and without presentment, demand, protest, notice of intention to accelerate,
notice of acceleration or any other notice of any kind, all of which are hereby expressly waived by
the Company and each Guarantor.




          (c) All proceeds realized from the liquidation or other disposition of Collateral or otherwise
received after maturity of the Notes, whether by acceleration or otherwise, shall be applied:
first, to reimbursement of expenses and indemnities provided for in this Agreement and the Security
Documents; second, to accrued interest on the Notes; third, to fees owed to the Administrative
Agent or any Lender; fourth, pro rata to principal outstanding on the Notes and the Indebtedness
referred to in Clause (g) of the definition of “Indebtedness” owing to a Lender or an Affiliate of
a Lender; fifth, to serve as cash collateral to be held by the Administrative Agent to secure the
LC Obligation; sixth, to any other Indebtedness; and any excess shall be paid to the Company or as
otherwise required by any Governmental Authority.




     9.03 Rights Not Exclusive. The rights provided for in this Agreement and the other Loan
Documents are cumulative and are not exclusive of any other rights, powers, privileges or remedies
provided by law or in equity, or under any other instrument, document or agreement now existing or
hereafter arising.



ARTICLE X.




ADMINISTRATIVE AGENT




     10.01 Appointment and Authorization. Each of the Lenders and the Issuing Lender hereby
irrevocably appoints the Administrative Agent as its agent and authorizes the Administrative Agent
to take such actions on its behalf and to exercise such powers as are delegated to the
Administrative Agent by the terms hereof and the other Loan Documents, together with such actions
and powers as are reasonably incidental thereto.



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     10.02 Duties and Obligations of Administrative Agent. The Administrative Agent shall not have
any duties or obligations except those expressly set forth in the Loan Documents. Without limiting
the generality of the foregoing, (a) the Administrative Agent shall not be subject to any fiduciary
or other implied duties, regardless of whether a Default has occurred and is continuing (the use of
the term “agent” herein and in the other Loan Documents with reference to the Administrative Agent
is not intended to connote any fiduciary or other implied (or express) obligations arising under
agency doctrine of any applicable law; rather, such term is used merely as a matter of market
custom, and is intended to create or reflect only an administrative relationship between
independent contracting parties), (b) the Administrative Agent shall not have any duty to take any
discretionary action or exercise any discretionary powers, except as provided in Section 10.03, and
(c) except as expressly set forth herein, the Administrative Agent shall have no duty to disclose,
and shall not be liable for the failure to disclose, any information relating to the Company or any
Guarantor that is communicated to or obtained by the Lender serving as Administrative Agent or any
of its Affiliates in any capacity. The Administrative Agent shall be deemed not to have knowledge
of any Default unless and until written notice thereof is given to the Administrative Agent by the
Company or any Guarantor or a Lender, and shall not be responsible for or have any duty to
ascertain or inquire into (i) any statement, warranty or representation made in or in connection
with this Agreement or any other Loan Document, (ii) the contents of any certificate, report or
other document delivered hereunder or under any other Loan Document or in connection herewith or
therewith, (iii) the performance or observance of any of the covenants, agreements or other terms
or conditions set forth herein or in any other Loan Document, (iv) the validity, enforceability,
effectiveness or genuineness of this Agreement, any other Loan Document or any other agreement,
instrument or document, (v) the satisfaction of any condition set forth in Article V or elsewhere
herein, other than to confirm receipt of items expressly required to be delivered to the
Administrative Agent or as to those conditions precedent expressly required to be to the
Administrative Agent’s satisfaction, (vi) the existence, value, perfection or priority of any
collateral security or the financial or other condition of the Company or any Guarantor or any
other obligor or guarantor, or (vii) any failure by the Company or any other Person (other than
itself) to perform any of its obligations hereunder or under any other Loan Document or the
performance or observance of any covenants, agreements or other terms or conditions set forth
herein or therein.



     10.03 Action by Administrative Agent. The Administrative Agent shall not have any duty to
take any discretionary action or exercise any discretionary powers, except discretionary rights and
powers expressly contemplated hereby that the Administrative Agent is required to exercise in
writing as directed by the Required Lenders (or such other number or percentage of the Lenders as
shall be necessary under the circumstances as provided herein) and in all cases the Administrative
Agent shall be fully justified in failing or refusing to act hereunder or under any other Loan
Documents unless it shall (i) receive written instructions from the Required Lenders or the
Lenders, as applicable, (or such other number or percentage of the Lenders as shall be necessary
under the circumstances as provided herein) specifying the action to be taken and (ii) be
indemnified to its satisfaction by the Lenders against any and all liability and expenses which may
be incurred by it by reason of taking or continuing to take any such action. The instructions as
aforesaid and any action taken or failure to act pursuant thereto by the Administrative Agent shall
be binding on all of the Lenders. If a Default has occurred
and is continuing, then the Administrative Agent shall take such action with respect to such
Default as shall be directed by the Required Lenders in the written instructions (with indemnities)
described in this Section 10.03, provided that, unless and until the Administrative Agent
shall have received such directions, the Administrative Agent may (but shall not be obligated to)
take such action, or refrain from taking such action, with respect to such Default as it shall deem
advisable in the best interests of the Lenders. In no event, however, shall the Administrative
Agent be required to take any action which exposes the Administrative Agent to personal liability
or which is contrary to this Agreement, the Loan Documents or applicable law. The Administrative
Agent shall not be liable for any action taken or not taken by it with the consent or at the
request of the Required Lenders or the Lenders (or such other number or percentage of the Lenders
as shall be necessary under the circumstances as provided herein), and otherwise the Administrative
Agent shall not be liable for any action taken or not taken by it hereunder or under any other Loan
Document



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or under any other document or instrument referred to or provided for herein or therein or
in connection herewith or therewith INCLUDING ITS OWN ORDINARY NEGLIGENCE, except for its own gross
negligence or willful misconduct.




     10.04 Reliance by Administrative Agent. The Administrative Agent shall be entitled to rely
upon, and shall not incur any liability for relying upon, any notice, request, certificate,
consent, statement, instrument, document or other writing believed by it to be genuine and to have
been signed or sent by the proper Person. The Administrative Agent also may rely upon any
statement made to it orally or by telephone and believed by it to be made by the proper Person, and
shall not incur any liability for relying thereon and the Company, the Guarantors, the Lenders and
the Issuing Lender hereby waive the right to dispute the Administrative Agent’s record of such
statement, except in the case of gross negligence or willful misconduct by the Administrative
Agent. The Administrative Agent may consult with legal counsel (who may be counsel for the Company
or any Guarantor), independent accountants and other experts selected by it, and shall not be
liable for any action taken or not taken by it in accordance with the advice of any such counsel,
accountants or experts. The Administrative Agent may deem and treat the payee of any Note as the
holder thereof for all purposes hereof unless and until a written notice of the assignment or
transfer thereof permitted hereunder shall have been filed with the Administrative Agent.



     10.05 Sub-agents. The Administrative Agent may perform any and all its duties and exercise
its rights and powers by or through any one or more sub-agents appointed by the Administrative
Agent. The Administrative Agent and any such sub-agent may perform any and all its duties and
exercise its rights and powers through their respective Agent-Related Persons. The exculpatory
provisions of the preceding Sections of this Article X shall apply to any such sub-agent and to the
Agent-Related Persons of the Administrative Agent and any such sub-agent, and shall apply to their
respective activities in connection with the syndication of the credit facilities provided for
herein as well as activities as Administrative Agent.



     10.06 Administrative Agent as Lender. Administrative Agent shall have the same rights and
powers in its capacity as a Lender as any other Lender and may exercise the same as though it were
not Administrative Agent, and it and its Affiliates may accept deposits from, lend money to and
generally engage in any kind of business with the Company or any Guarantor or Affiliate thereof as
if it were not Administrative Agent hereunder.



     10.07 No Reliance. Each Lender acknowledges that it has, independently and without reliance
upon the Administrative Agent or any other Lender and based on such documents and information as it
has deemed appropriate, made its own credit analysis and decision to enter into this Agreement and
each other Loan Document to which it is a party. Each Lender also acknowledges that it will,
independently and without reliance upon the Administrative Agent or any other Lender and based on
such documents and information as it shall from time to time deem appropriate, continue to make its
own decisions in taking or not taking action under or based upon this Agreement, any other Loan
Document, any related agreement or any document furnished hereunder or thereunder. The
Administrative Agent shall not be required to keep themselves informed as to the performance or
observance by the Company or any Guarantor of this Agreement, the Loan Documents or any other
document referred to or provided for herein or to inspect the Properties or books of the Company or
any Guarantor. Except for notices, reports and other documents and information expressly required
to be furnished to the Lenders by the Administrative Agent hereunder, the Administrative Agent
shall have no duty or responsibility to provide any Lender with any credit or other information
concerning the affairs, financial condition or business of the Company (or any of its Affiliates)
which may come into the possession of the Administrative Agent or any of its Affiliates. In this
regard, each Lender acknowledges that Haynes and Boone, LLP is acting in this transaction as
special counsel to the Administrative Agent only, except to the extent otherwise expressly stated
in any legal opinion or any Loan Document. Each other party hereto will consult with its own legal
counsel to the extent that it deems necessary in connection with the Loan Documents and the matters
contemplated therein.



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



          (a) to file and prove a claim for the whole amount of the principal and interest owing and
unpaid in respect of the Loans and all other Indebtedness that are owing and unpaid and to file
such other documents as may be necessary or advisable in order to have the claims of the Lenders
and the Administrative Agent (including any claim for the reasonable compensation, expenses,
disbursements and advances of the Lenders and the Administrative Agent and their respective agents
and counsel and all other amounts due the Lenders and the Administrative Agent under Section 11.04)
allowed in such judicial proceeding; and




          (b) to collect and receive any monies or other property payable or deliverable on any such
claims and to distribute the same; and any custodian, receiver, assignee, trustee, liquidator,
sequestrator or other similar official in any such judicial proceeding is hereby authorized by each
Lender to make such payments to the Administrative Agent and, in the event that the Administrative
Agent shall consent to the making of such payments directly to the Lenders, to pay to the
Administrative Agent any amount due for the reasonable compensation, expenses, disbursements and
advances of the Administrative Agent and its agents and counsel, and any other amounts due the
Administrative Agent under Section 11.04.



Nothing contained herein shall be deemed to authorize the Administrative Agent to authorize or
consent to or accept or adopt on behalf of any Lender any plan of reorganization, arrangement,
adjustment or composition affecting the Indebtedness or the rights of any Lender or to authorize
the Administrative Agent to vote in respect of the claim of any Lender in any such proceeding.




     10.09 Authority of Administrative Agent to Release Collateral and Liens. Each Lender and
Issuing Lender hereby authorizes the Administrative Agent to release any Collateral that is
permitted to be sold or released pursuant to the terms of the Loan Documents. Each Lender and
Issuing Lender hereby authorizes the Administrative Agent to execute and deliver to the Company or
any Guarantor, at the Company’s or such Guarantor’s sole cost and expense, any and all releases of
Liens, termination statements, assignments, or other documents reasonably requested by the Company
or such Guarantor in connection with any sale or other disposition of property to the extent such
sale or other disposition is permitted by the terms of Section 8.02 or is otherwise authorized by
the terms of the Loan Documents.



     10.10 Reserved.



     10.11 Successor Administrative Agent. The Administrative Agent may resign as the
Administrative Agent upon 30 days’ notice to the Lenders. If the Administrative Agent resigns
under this Agreement, the Required Lenders shall appoint from among the Lenders a successor
administrative agent reasonably satisfactory to the Company in the same capacity as the retiring
Administrative Agent for the Lenders. If no successor administrative agent is appointed prior to
the effective date of the resignation of such retiring Administrative Agent, such retiring
Administrative Agent may appoint, after consulting with the Lenders, a successor administrative
agent from among the Lenders. Upon the acceptance of its appointment as successor administrative
agent hereunder, such successor administrative agent shall succeed to all the rights, powers and
duties of the retiring Administrative Agent and the term “Administrative Agent” shall mean such
successor administrative agent and the retiring Administrative Agent’s appointment, powers and
duties as the Administrative Agent shall be terminated. After any retiring Administrative Agent’s
resignation hereunder as the Administrative Agent, the provisions of this Article X and Sections
11.04 and 11.05 shall inure to its benefit as to any actions taken or omitted to be taken by it
while it was the Administrative Agent



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under this Agreement. If no successor administrative agent
has accepted appointment as the Administrative Agent in the same capacity as the retiring
Administrative Agent by the date which is 30 days following a retiring Administrative Agent’s
notice of resignation, the retiring Administrative Agent shall either withdraw its resignation or
may appoint as a successor administrative agent a commercial Lender organized under the laws of the
United States of America or of any State thereof having a commercial capital surplus of at least
$500,000,000.




     10.12 Withholding Tax.



          (a) If any Lender is a not a “United States person” within the meaning of Section 7701(a)(3)
of the Code (a “Foreign Lender”), such Foreign Lender agrees with and in favor of the
Administrative Agent, to deliver to the Administrative Agent prior to receipt of any payment
subject to withholding under the Code (or upon accepting an assignment or participation of an
interest herein), two duly signed completed copies of either IRS Form W-8BEN or any successor
thereto (relating to such Foreign Lender and entitling it to a complete exemption from withholding
tax on all payments to be made to such Foreign Lender by the Company pursuant to this Agreement) or
IRS Form W-8ECI or any successor thereto (relating to all payments to be made to such Foreign
Lender by the Company pursuant to this Agreement) or such other evidence satisfactory to the
Company that such Foreign Lender is entitled to a complete exemption from U.S. withholding tax,
including any exemption pursuant to Section 881(c) of the Code. Thereafter and from time to time,
each such Foreign Lender shall (i) promptly submit to the Company such additional duly completed
and signed copies of one of such forms (or such successor forms as shall be adopted from time to
time by the relevant United States taxing authorities) as may then be available under then current
United States laws and regulations to avoid, or such evidence as is satisfactory to the Company of
any available complete exemption from United States withholding taxes in respect of all payments to
be made to such Foreign Lender by the Company pursuant to this Agreement, and (ii) promptly notify
the Administrative Agent and the Company of any change in circumstances which would modify or
render invalid any claimed exemption.




          (b) Each Foreign Lender, to the extent it does not act or ceases to act for its own account
with respect to any portion of any sums paid or payable to that Lender under any of the Loan
Documents (for example, in the case of a typical participation by that Lender), shall deliver to
the Administrative Agent on the date when such Foreign Lender ceases to act for its own account
with respect to any portion of any such sums paid or payable, and at such other times as may be
necessary in the determination of the Administrative Agent (in the reasonable exercise of its
discretion), (i) two duly signed completed copies of the forms or statements required to be
provided by that Lender as set forth above, to establish the portion of any such sums paid or
payable with respect to which that Lender acts for its own account that is not subject to U.S.
withholding tax,
and (ii) two duly signed completed copies of IRS Form W-8IMY (or any successor thereto), together
with any information that is required by the Code and Treasury regulations promulgated thereunder
and any additional information that Lender chooses to transmit with such form, and any other
certificate or statement of exemption required under the Code, to establish that that Lender is not
acting for its own account with respect to a portion of any such sums payable to that Lender.




          (c) The Company shall not be required to pay any additional amount to any Foreign Lender
under Section 3.01: (i) with respect to any Taxes or Other Taxes required to be deducted or
withheld on the basis of the information, certificates or statements of exemption that Foreign
Lender transmits with an IRS Form W-8IMY pursuant to Subsection 10.12(b) or (ii) if that Foreign
Lender shall have failed to satisfy the foregoing provisions of this Section 10.12.




          (d) Each Lender that is a “United States person” within the meaning of Section 7701(a)(30) of
the Code (“Domestic Lender”) shall deliver to the Administrative Agent two duly signed completed
copies of IRS Form W-9. If that Domestic Lender fails to deliver such forms, then the Company may
withhold from




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any interest payment to that Domestic Lender an amount equivalent to the applicable
back-up withholding tax imposed by the Code, without reduction. Thereafter and from time to time,
each such Domestic Lender shall (i) promptly submit to the Company such additional duly completed
and signed copies of one of such forms (or such successor forms as shall be adopted from time to
time by the relevant United States taxing authorities) as may then be available under then current
United States laws and regulations to avoid, or such evidence as is satisfactory to the Company of
any available exemption from United States withholding taxes in respect of all payments to be made
to such Domestic Lender by the Company pursuant to this Agreement, and (ii) promptly notify the
Company of any change in circumstances which would modify or render invalid any claimed exemption.




          (e) No Assignee shall be entitled to the benefits of Section 3.01 unless the Company is
notified of the assignment and such Assignee has complied with the requirements of this Section
10.12.




          (f) If any Lender is entitled to a reduction in the applicable withholding tax, the
Administrative Agent may withhold from any payment to such Lender an amount equivalent to the
applicable withholding tax after taking into account such reduction. If (i) a Lender does not
deliver the forms or other documentation required this Section 10.12 to the Administrative Agent,
or (ii) the Company is required by law to deduct and withhold from or in respect of any amounts
payable under any Loan Document to a Lender but is not required to pay additional amounts under
Section 3.01 with respect to such payment, then the Administrative Agent may deduct from any
payment to such Lender an amount equivalent to the applicable withholding tax.




          (g) If the IRS or any other Governmental Authority of the United States or other jurisdiction
asserts a claim that the Administrative Agent did not properly withhold tax from amounts paid to or
for the account of any Lender (because the appropriate form was not delivered, was not properly
executed, or because such Lender failed to notify the Administrative Agent of a change in
circumstances which rendered the exemption from, or reduction of, withholding tax ineffective, or
for any other reason) such Lender shall indemnify the Administrative Agent fully for all amounts
paid, directly or indirectly, by the Administrative Agent as tax or otherwise, including penalties
and interest, and including any taxes imposed by any jurisdiction on the amounts payable to the
Administrative Agent under this Section, together with all costs and expenses (including Attorney
Costs). The obligation of the Lenders under this subsection shall survive the payment of all
Obligations and the resignation or replacement of the Administrative Agent.




ARTICLE XI.




MISCELLANEOUS




     11.01 Amendments and Waivers. No amendment, modification, termination or waiver of any
provision of this Agreement or any other Loan Document, and no consent with respect to any
departure by the Company or any applicable Subsidiary therefrom, shall be effective unless the same
shall be in writing and signed by the Required Lenders (or by the Administrative Agent at the
written request of the Required Lenders) and the Company and acknowledged by the Administrative
Agent, and then any such waiver or consent shall be effective only in the specific instance and for
the specific purpose for which given; provided, however, that no such waiver,
amendment, modification, termination or consent shall, unless in writing and signed by all the
Lenders and the Company and acknowledged by the Administrative Agent, do any of the following:



          (a) increase or extend the Commitment of any Lender (or reinstate any Commitment terminated
pursuant to Section 9.02), or increase the maximum amount of Letters of Credit;




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          (b) postpone the final maturity date of any Loan, or postpone or delay any date fixed by this
Agreement or any other Loan Document for any payment of principal, interest, fees or other amounts
due to the Lenders (or any of them) hereunder or under any other Loan Document;




          (c) reduce the principal of, or the rate of interest specified herein on any Loan, or any
fees or other amounts payable hereunder or under any other Loan Document;




          (d) change the Pro Rata Shares or change in any manner the definition of “Super-Majority
Lenders” or “Required Lenders”;




          (e) amend this Section 11.01 or any provision of this Agreement which, by its terms, expressly
requires the approval or concurrence of all Lenders;




          (f) release all, substantially all, or any material portion of the Collateral (except for
releases in connection with dispositions of assets which are permitted hereunder or under any Loan
Document), or release any Guarantor from any Guaranty, except in releases in connection with sales
of Guarantors permitted hereunder;




          (g) reduce the amount or postpone the due date of any amount payable in respect of, or extends
the required expiration date of, any Letter of Credit, or change in any manner the obligations of
Lenders relating to the purchase of participations in Letters of Credit; or




          (h) increase the Borrowing Base or decrease the Borrowing Base Reduction Amount pursuant to
Section 2.05, provided, the Required Lenders may maintain or decrease the Borrowing Base or
maintain or increase the Borrowing Base Reduction Amount pursuant to Section 2.05;



and; provided further, that (i) any amendment, modification, termination or waiver
of any of the provisions contained in Article V shall be effective only if evidenced by a writing
signed by or on behalf of the Administrative Agent and the Required Lenders, (ii) no amendment,
waiver or consent shall, unless in writing and signed by the Issuing Lender in addition to the
Required Lenders or all the Lenders, as the case may be, affect the rights or duties of the Issuing
Lender under this Agreement or any LC Related Document relating to any Letter of Credit Issued or
to be Issued by it, and (iii) no amendment, waiver or consent shall, unless in writing and signed
by the Administrative Agent in addition to the Required Lenders or all the Lenders, as the case may
be, affect the rights or duties of the Administrative Agent under this Agreement or any other Loan
Document.




     11.02 Notices.



          (a) All notices, requests and other communications shall be in writing and mailed, faxed or
delivered, to the address or facsimile number specified for notices on Schedule 11.02; or, as
directed by the Company, any Guarantor or the Administrative Agent, to such other address as shall
be designated by such party in a written notice to the other parties, and as directed to any other
party, at such other address as shall be designated by such party in a written notice to the
Company and the Administrative Agent.




          (b) All such notices, requests and communications shall, when transmitted by overnight
delivery, or faxed, be effective when delivered for overnight (next-day) delivery, or transmitted
in legible form by facsimile machine, respectively, or if mailed, upon the third Business Day after
the date deposited into the U.S. mail, or if delivered, upon delivery; except that notices pursuant
to Article II or IX shall not be effective until actually received.




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          (c) Any agreement of the Administrative Agent and the Lenders herein to receive certain
notices by telephone or facsimile is solely for the convenience and at the request of the Company
and the Guarantors. The Administrative Agent and the Lenders shall be entitled to rely on the
authority of any Person purporting to be a Person authorized by the Company or any Guarantor to
give such notice and the Administrative Agent and the Lenders shall not have any liability to the
Company or any Guarantor or other Person on account of any action taken or not taken by the
Administrative Agent or the Lenders in reliance upon such telephonic or facsimile notice. The
obligation of the Company to repay the Loans shall not be affected in any way or to any extent by
any failure by the Administrative Agent and the Lenders to receive written confirmation of any
telephonic or facsimile notice or the receipt by the Administrative Agent and the Lenders of a
confirmation which is at variance with the terms understood by the Administrative Agent and the
Lenders to be contained in the telephonic or facsimile notice.




     11.03 No Waiver; Cumulative Remedies. No failure to exercise and no delay in exercising, on
the part of the Administrative Agent or any Lender, any right, remedy, power or privilege
hereunder, shall operate as a waiver thereof; nor shall any single or partial exercise of any
right, remedy, power or privilege hereunder preclude any other or further exercise thereof or the
exercise of any other right, remedy, power or privilege.



     11.04 Costs and Expenses. The Company and the Guarantors shall:



          (a) whether or not the transactions contemplated hereby are consummated, pay or reimburse the
Administrative Agent within five (5) Business Days after demand (subject to Subsection 5.01(c)) for
all reasonable costs and expenses incurred by the Administrative Agent in connection with the
development, preparation, delivery, administration and execution of, and any amendment, supplement,
waiver or modification to (in each case, whether or not consummated), this Agreement, any Loan
Document and any other documents prepared in connection herewith or therewith, and the consummation
of the transactions contemplated hereby and thereby, including Attorney Costs incurred by the
Administrative Agent with respect thereto except such costs and expenses as may be incurred by the
assignor Lenders or Assignee under Subsection 11.08(c); and




          (b) pay or reimburse the Administrative Agent and each Lender within five (5) Business Days
after demand (subject to Subsection 5.01(c)) for all costs and expenses (including Attorney Costs)
incurred by each of them in connection with the enforcement, attempted enforcement, or preservation
of any rights or remedies under this Agreement or any other Loan Document during the existence of
an Event of Default or after acceleration of the Loans (including in connection with any “workout”
or restructuring regarding the Loans, and including in any Insolvency Proceeding or appellate
proceeding).




     11.05 Indemnity. Whether or not the transactions contemplated hereby are consummated, the
Company and the Guarantors shall indemnify and hold the Agent-Related Persons, and each Lender and
each of their respective officers, directors, employees, counsel, agents and attorneys-in-fact
(each, an “Indemnified Person”) harmless from and against any and all liabilities, obligations,
losses, damages, penalties, actions, judgments, suits, costs, charges, expenses and disbursements
(including Attorney Costs) of any kind or nature whatsoever which may at any time (including at any
time following repayment of the Loans, and the termination, resignation or replacement of the
Administrative Agent or replacement of any Lender) be imposed on, incurred by or asserted against
any such Person in any way relating to or arising out of this Agreement or any document
contemplated by or referred to herein, or the transactions contemplated hereby, or any action taken
or omitted by any such Person under or in connection with any of the foregoing, including with
respect to any investigation, litigation or proceeding (including any Insolvency Proceeding or
appellate proceeding) related to or arising out of this Agreement or the Loans or the use of the
proceeds thereof, whether or not any Indemnified Person is a party thereto (all the foregoing,
collectively, the “Indemnified Liabilities”) WHETHER OR NOT SUCH INDEMNIFIED LIABILITIES ARISE OUT
OF OR AS A RESULT OF ANY INDEMNIFIED PARTY’S NEGLIGENCE IN WHOLE OR IN PART, INCLUDING,



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WITHOUT
LIMITATION, THOSE CLAIMS WHICH RESULT FROM THE SOLE, JOINT, CONCURRENT OR COMPARATIVE NEGLIGENCE OF
THE INDEMNIFIED PARTY, OR ANY ONE OR MORE OF THEM; provided, that neither the Company nor
any Guarantor shall have any obligation hereunder to any Indemnified Person with respect to
Indemnified Liabilities to the extent same arise from (i) the gross negligence or willful
misconduct of any Indemnified Person or (ii) a claim or action asserted by one or more other
Indemnified Persons. The agreements in this Section shall survive payment of all other Obligations.




     11.06 Payments Set Aside. To the extent that the Company or any Guarantor makes a payment to
the Administrative Agent or the Lenders, or the Administrative Agent or the Lenders exercise their
right of set-off, and such payment or the proceeds of such set-off or any part thereof are
subsequently invalidated, declared to be fraudulent or preferential, set aside or required
(including pursuant to any settlement entered into by the Administrative Agent or such Lender in
its discretion) to be repaid to a trustee, receiver or any other party, in connection with any
Insolvency Proceeding or otherwise, then (a) to the extent of such recovery the obligation or part
thereof originally intended to be satisfied shall be revived and continued in full force and effect
as if such payment had not been made or such set-off had not occurred, and (b) each Lender
severally agrees to pay to the Administrative Agent upon demand its pro rata share of any amount so
recovered from or repaid by the Administrative Agent.



     11.07 Successors and Assigns. Except for all provisions in Section 11.08, the provisions of
this Agreement shall be binding upon and inure to the benefit of the parties hereto and their
respective successors and assigns, except that, neither the Company nor any Guarantor may assign or
transfer any of its rights or obligations under this Agreement without the prior written consent of
the Administrative Agent and each Lender except in connection with a merger permitted hereunder.



     11.08 Assignments, Participations, etc.



          (a) Any Lender may upon written consent of the Administrative Agent, the Issuing Lender and
the Company, which consent shall not be unreasonably withheld (provided at any time that an Event
of Default has occurred and is continuing, no approval from the Company shall be required), at any
time, assign and delegate to one or more Eligible Assignees (provided that no written
consent of the Administrative Agent or the Issuing Lender shall be required in connection with any
assignment and delegation by the Lender to an Eligible Assignee that is an Affiliate of such
Lender) (each an “Assignee”) all, or any ratable part of all in a minimum commitment amount at
least equal to $2,500,000, of the Loans, the
Commitments, and the other rights and obligations of such Lender hereunder; provided,
however, that the Company and the Administrative Agent may continue to deal solely and
directly with such Lender in connection with the interest so assigned to an Assignee until (i)
written notice of such assignment, together with payment instructions, addresses and related
information with respect to the Assignee, shall have been given to the Company and the
Administrative Agent by such Lender and the Assignee; (ii) such Lender and its Assignee shall have
delivered to the Company and the Administrative Agent an Assignment and Acceptance in the form of
Exhibit D (“Assignment and Acceptance”) together with any Note or Notes subject to such assignment
and (iii) the assignor Lender or Assignee has paid to the Administrative Agent a processing fee in
the amount of $3,500.00.




          (b) From and after the date that the Administrative Agent notifies the assignor Lender that it
has received an executed Assignment and Acceptance and payment of the above-referenced processing
fee, (i) the Assignee thereunder shall be a party hereto and, to the extent that rights and
obligations hereunder have been assigned to it pursuant to such Assignment and Acceptance, shall
have the rights and obligations of a Lender under the Loan Documents, and (ii) the assignor Lender
shall, to the extent that rights and obligations hereunder and under the other Loan Documents have
been assigned by it pursuant to such




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Assignment and Acceptance, relinquish its rights and be
released from its obligations under the Loan Documents.




          (c) Within five (5) Business Days after its receipt of notice by the Administrative Agent that
it has received an executed Assignment and Acceptance and payment of the processing fee, (and
provided that it consents to such assignment in accordance with Subsection 11.08(a)) the
Company shall execute and deliver to the Administrative Agent, new Notes evidencing such Assignee’s
assigned Loans and Commitment and, if the assignor Lender has retained a portion of its Loans and
its Commitment, replacement Notes in the principal amount of the Loans retained by the assignor
Lender (such Notes to be in exchange for, but not in payment of, the Notes held by such Lender,
which shall be cancelled upon receipt of the new or replacement Notes). Immediately upon each
Assignee’s making its processing fee payment under the Assignment and Acceptance, this Agreement
shall be deemed to be amended to the extent, but only to the extent, necessary to reflect the
addition of the Assignee and the resulting adjustment of the Commitments arising therefrom. The
Commitment allocated to each Assignee shall reduce such Commitments of the assigning Lender pro
tanto.




          (d) Any Lender may at any time sell to one or more commercial Lenders or other Persons not
Affiliates of the Company or any Guarantor (a “Participant”) participating interests in any Loans,
the Commitment of that Lender and the other interests of that Lender (the “originating Lender”)
hereunder and under the other Loan Documents; provided, however, that (i) the originating
Lender’s obligations under this Agreement shall remain unchanged, the originating Lender shall
remain a Lender for all purposes hereof and the other Loan Documents to which such originating
Lender is a party, and the Participant may not become a Lender for purposes hereof or for any other
of the Loan Documents, (ii) the originating Lender shall remain solely responsible for the
performance of such obligations, (iii) the Company, the Guarantors and the Administrative Agent
shall continue to deal solely and directly with the originating Lender in connection with the
originating Lender’s rights and obligations under this Agreement and the other Loan Documents, and
(iv) no Lender shall transfer or grant any participating interest under which the Participant has
rights to approve any amendment to, or any consent or waiver with respect to, this Agreement or any
other Loan Document, except to the extent such amendment, consent or waiver would require unanimous
consent of the Lenders. In the case of any such participation, the Participant shall not have any
rights under this Agreement, or any of the other Loan Documents (the Participant’s rights against
the granting Lender in respect of such participation being those set forth in the agreement
creating or evidencing such participation with such Lender), and all amounts payable by the Company
or any Guarantor hereunder shall be determined as if such Lender had not sold such participation;
except that, if amounts outstanding under this Agreement are due and unpaid, or shall have been
declared or shall have become due and payable upon the occurrence of an Event of Default, each
Participant shall be deemed to have the right of set-off in respect of its participating interest
in amounts owing
under this Agreement to the same extent as if the amount of its participating interest were owing
directly to it as a Lender under this Agreement.




          (e) Each Lender agrees to take normal and reasonable precautions and exercise due care to
maintain the confidentiality of all information identified as “confidential” or “secret” by the
Company or any Guarantor and provided to it by the Company or any Guarantor, or by the
Administrative Agent on Company’s or any Guarantor’s behalf, under or in connection with this
Agreement or any other Loan Document, and neither it nor any of its Affiliates shall use any such
information other than in connection with or in enforcement of this Agreement and the other Loan
Documents; except to the extent such information (i) was or becomes generally available to the
public other than as a result of disclosure by any Lender or the Administrative Agent or any
Guarantor, or (ii) was or becomes available on a non-confidential basis from a source other than
the Company or any Guarantor, provided that such source is not bound by a confidentiality
agreement with the Company or any Guarantor known to the Lender; provided, however,
that any Lender may disclose such information (A) at the request or pursuant to any requirement of
any Governmental Authority to which the Lender is subject or in connection with an examination of
such Lender by any such authority; (B) pursuant to subpoena or other court process; (C) when
required to do so in accordance with the




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provisions of any applicable Requirement of Law; (D) to
the extent reasonably required in connection with any litigation or proceeding to which the
Administrative Agent, any Lender or their respective Affiliates may be party; (E) to the extent
reasonably required in connection with the exercise of any remedy hereunder or under any other Loan
Document; (F) to such Lender’s independent auditors and other professional advisors; (G) to any
Affiliate of such Lender, or to any Participant or Assignee, actual or potential, provided
that such Affiliate, Participant or Assignee agrees to keep such information confidential to
the same extent required of the Lenders hereunder, and (H) as to any Lender, as expressly permitted
under the terms of any other document or agreement regarding confidentiality to which the Company
or any Guarantor is party or is deemed party with such Lender.




          (f) Notwithstanding any other provision in this Agreement, any Lender may at any time create a
security interest in, or pledge, all or any portion of its rights under and interest in this
Agreement and the Notes held by it in favor of any Federal Reserve Lender in accordance with
Regulation A of the FRB or U.S. Treasury Regulation 31 CFR §203.14, and such Federal Reserve Lender
may enforce such pledge or security interest in any manner permitted under applicable law.




     11.09 Interest.



          (a) It is the intention of the parties hereto to comply with applicable usury laws, if any;
accordingly, notwithstanding any provision to the contrary in this Agreement, the Notes or in any
of the other Loan Documents securing the payment hereof or otherwise relating hereto, in no event
shall this Agreement, the Notes or such other Loan Documents require or permit the payment, taking,
reserving, receiving, collection, or charging of any sums constituting interest under applicable
laws which exceed the maximum amount permitted by such laws. If any such excess interest is
called for, contracted for, charged, taken, reserved, or received in connection with the Loans
evidenced by the Notes or in any of the Loan Documents securing the payment thereof or otherwise
relating thereto, or in any communication by the Administrative Agent, the Issuing Lender or the
Lenders or any other Person to the Company or any other Person, or in the event all or part of the
principal or interest thereof shall be prepaid or accelerated, so that under any of such
circumstances or under any other circumstance whatsoever the amount of interest contracted for,
charged, taken, reserved, or received on the amount of principal actually outstanding from time to
time under the Notes or any other Loan Document shall exceed the maximum amount of interest
permitted by applicable usury laws, then in any such event it is agreed as follows: (i) the
provisions of this paragraph shall govern and control, (ii) neither any Company nor any other
Person now or hereafter liable for the payment of the Notes or any Obligation shall be obligated to
pay the amount of such interest to the extent such interest is in excess of the maximum amount of
interest permitted by applicable usury laws, (iii) any such excess which is or has
been received notwithstanding this paragraph shall be credited against the then unpaid principal
balance of the Notes or other Obligations, as applicable, or, if the Notes or other Obligations, as
applicable, have been or would be paid in full, refunded to the Company, and (iv) the provisions of
this Agreement, the Notes and the other Loan Documents securing the payment thereof and otherwise
relating thereto, and any communication to the Company or any other person, shall immediately be
deemed reformed and such excess interest reduced, without the necessity of executing any other
document, to the maximum lawful rate allowed under applicable laws as now or hereafter construed by
courts having jurisdiction hereof or thereof. Without limiting the foregoing, all calculations of
the rate of the interest contracted for, charged, collected, taken, reserved, or received in
connection with the Notes, this Agreement or any other Loan Document which are made for the purpose
of determining whether such rate exceeds the maximum lawful rate shall be made to the extent
permitted by applicable laws by amortizing, prorating, allocating and spreading during the period
of the full term of the Loans or other Obligations, as applicable, including all prior and
subsequent renewals and extensions, all interest at any time contracted for, charged, taken,
collected, reserved, or received. The terms of this paragraph shall be deemed to be incorporated
in every document and communication relating to the Notes, the Loans or any other Loan Document.




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     11.10 Indemnity and Subrogation. In addition to all such rights of indemnity and subrogation
as any Guarantor may have under applicable law, the Company agrees that in the event a payment
shall be made by any Guarantor under a Guaranty in respect of a Loan to the Company, the Company
shall indemnify such Guarantor for the full amount of such payment and such Guarantor shall be
subrogated to the rights of the person to whom such payment shall have been made to the extent of
such payment subject to the provisions of the Guaranty executed by such Guarantor. Notwithstanding
any provision of this Agreement to the contrary, all rights of any Guarantor under this Section
11.10 and all other rights of indemnity, contribution or subrogation under applicable law or
otherwise shall be fully subordinated to the indefeasible payment in full of the Obligations, and
no payments may be made in respect of such rights of indemnity, contribution or subrogation until
all the Obligations have been paid in full and all Commitments have expired. No failure on the part
of the Company to make the payments required by this Section (or any other payments required under
applicable law or otherwise) shall in any respect limited the obligations and liabilities required
under applicable law or otherwise) shall in any respect limit the obligations and liability of any
Guarantor with respect to any Guaranty, and such Guarantor shall remain liable for the full amount
of the obligation of such Guarantor under each such Guaranty in accordance therewith.



     11.11 Collateral Matters; Derivative Contracts. The benefit of the Security Documents and of
the provisions of this Agreement relating to any Collateral securing the Indebtedness shall also
extend to and be available to any Lender or any Affiliate of a Lender that is counterparty to any
Derivative Contract with the Company or any Guarantor (including any Derivative Contract between
such Persons in existence prior to the Effective Date) on a pro rata basis in respect of any
obligations of the Company or any Guarantor which arise under any such Derivative Contract;
provided that the applicable counterparty must have provided Administrative Agent written
notice of the existence thereof (such notice to include a summary of the contract date, price,
volumes and other terms of such Derivative Contracts as the Administrative Agent may reasonably
request) and such transaction must not otherwise be prohibited under this Agreement at the time it
was entered into and provided further that if such Lender or Affiliate ceases to be a
Lender (a) its Derivative Contract obligations shall be secured pari passu with the Lenders’
Obligations but only to the extent such counterparty’s obligations arise from transactions entered
into at the time such counterparty was a Lender hereunder or an Affiliate of a Lender hereunder,
and (b) such counterparty shall have no voting rights under any Loan Documents as a result of the
existence of obligations owed to it under any such Derivative Contract. For the avoidance of
doubt, a Person ceases to be a Lender hereunder if (i) pursuant to an assignment, such Person
ceases to have any Commitment, Loans and LC Obligation hereunder or (ii) the Commitments of all of
the Lenders hereunder have been terminated and all principal, interest and other amounts
outstanding under this
Agreement have been paid in full in cash (whether as a result of repayment at maturity,
prepayment in connection with the refinancing of this Agreement or otherwise).



     11.12 USA Patriot Act Notice. Each Lender hereby notifies the Company and the Guarantors that
pursuant to the requirements of the USA Patriot Act (Title III of Pub. L. 107-56 (signed into law
October 26, 2001)) (the “Act”), it is required to obtain, verify and record information that
identifies the Company and the Guarantors, which information includes the name and address of the
Company and the Guarantors and other information that will allow such Lender to identify the
Company and the Guarantors, insofar as it is needed to comply with the Act, in accordance with the
Act. The Company and the Guarantors hereby represent and warrant to Administrative Agent and each
Lender that neither the Company, any Guarantor nor any of their Affiliates is a country, individual
or entity named on the “Specifically Designated National and Blocked Persons” list issued by the
Office of Foreign Asset Control of the Department of the Treasury of the United States of America.



     11.13 Automatic Debits of Fees. With respect to any commitment fee, arrangement fee, letter
of credit fee or other fee, or any other cost or expense (including Attorney Costs) due and payable
to the Administrative Agent or any Lender under the Loan Documents, each of the Company and the
Guarantors hereby irrevocably authorizes the Administrative Agent, after giving reasonable prior
notice to the Company



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or the applicable Guarantor, to debit any deposit account of the Company or
such Guarantor with the Administrative Agent in an amount such that the aggregate amount debited
from all such deposit accounts does not exceed such fee or other cost or expense. If there are
insufficient funds in such deposit accounts to cover the amount of the fee or other cost or expense
then due, such debits will be reversed (in whole or in part, in the Administrative Agent’s sole
discretion) and such amount not debited shall be deemed to be unpaid. No such debit under this
Section shall be deemed a set-off.




     11.14 Notification of Addresses, Lending Offices, Etc. Each Lender shall notify the
Administrative Agent in writing of any changes in the address to which notices to the Lender should
be directed, of addresses of any Lending Office, of payment instructions in respect of all payments
to be made to it hereunder and of such other administrative information as the Administrative Agent
shall reasonably request.



     11.15 Counterparts. This Agreement may be executed in any number of separate counterparts,
each of which, when so executed, shall be deemed an original, and all of said counterparts taken
together shall be deemed to constitute but one and the same instrument.



     11.16 Severability. The illegality or unenforceability of any provision of this Agreement or
any instrument or agreement required hereunder shall not in any way affect or impair the legality
or enforceability of the remaining provisions of this Agreement or any instrument or agreement
required hereunder.



     11.17 No Third Parties Benefited. This Agreement is made and entered into for the sole
protection and legal benefit of the Company, the Guarantors, the Lenders, the Administrative Agent
and the Agent-Related Persons, and their permitted successors and assigns, and no other Person
shall be a direct or indirect legal beneficiary of, or have any direct or indirect cause of action
or claim in connection with, this Agreement or any of the other Loan Documents.



     11.18 Governing Law, Jurisdiction and Waiver of Jury Trial. The provisions of Section 11.19
hereof shall govern the resolution of any Dispute (as such term is defined in such Section 11.19).
If, however, the provisions of Section 11.19 are not invoked as therein provided, the following
provisions shall apply:



          (a) THIS AGREEMENT AND THE NOTES SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE
LAW OF THE STATE OF NEW YORK AND APPLICABLE FEDERAL LAW; AND THE ADMINISTRATIVE AGENT AND THE
LENDERS SHALL RETAIN ALL RIGHTS ARISING UNDER FEDERAL LAW.




          (b) THE COMPANY AND EACH OF THE GUARANTORS IRREVOCABLY CONSENTS TO THE SERVICE OF PROCESS IN
ANY LEGAL ACTION OR PROCEEDING WITH RESPECT TO THIS AGREEMENT OR ANY OTHER LOAN DOCUMENT BY THE
MAILING OF COPIES THEREOF BY REGISTERED OR CERTIFIED MAIL, POSTAGE PREPAID, TO IT AT ITS ADDRESS
SET FORTH IN SCHEDULE 11.02. SUCH SERVICE TO BECOME EFFECTIVE TEN DAYS AFTER SUCH MAILING.
NOTHING HEREIN SHALL AFFECT THE RIGHT OF THE ADMINISTRATIVE AGENT OR ANY LENDER TO SERVE PROCESS IN
ANY OTHER MANNER PERMITTED BY LAW.




          (c) ANY LEGAL ACTION OR PROCEEDING WITH RESPECT TO THIS AGREEMENT OR ANY OTHER LOAN DOCUMENT
MAY BE BROUGHT IN THE COURTS OF THE STATE OF NEW YORK OR OF THE UNITED STATES FOR THE SOUTHERN
DISTRICT OF NEW YORK AND BY EXECUTION AND DELIVERY OF THIS AGREEMENT, THE COMPANY AND EACH
GUARANTOR CONSENTS, FOR ITSELF AND IN RESPECT OF ITS PROPERTY, TO THE NON-EXCLUSIVE JURISDICTION OF
THOSE COURTS. THE COMPANY AND EACH GUARANTOR




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IRREVOCABLY WAIVES ANY OBJECTION, INCLUDING ANY
OBJECTION TO THE LAYING OF VENUE OR BASED ON THE GROUNDS OF FORUM NON CONVENIENS, WHICH IT MAY NOW
OR HEREAFTER HAVE TO THE BRINGING OF ANY ACTION OR PROCEEDING IN SUCH JURISDICTION IN RESPECT OF
THIS AGREEMENT OR ANY DOCUMENT RELATED HERETO. THE COMPANY AND EACH GUARANTOR WAIVES PERSONAL
SERVICE OF ANY SUMMONS, COMPLAINT OR OTHER PROCESS, AND CONSENTS TO THE SERVICE OF PROCESS IN ANY
SUCH LEGAL ACTION OR PROCEEDING BY THE MAILING OF COPIES THEREOF BY REGISTERED OR CERTIFIED MAIL,
POSTAGE PREPAID, TO IT AT ITS ADDRESS FOR NOTICES SET FORTH HEREIN, SUCH SERVICE TO BECOME
EFFECTIVE TEN DAYS AFTER SUCH MAILING. NOTHING HEREIN SHALL AFFECT THE RIGHT OF THE ADMINISTRATIVE
AGENT OR ANY LENDER TO SERVE PROCESS IN ANY OTHER MANNER PERMITTED BY LAW.




          (d) THE COMPANY, EACH GUARANTOR, THE LENDERS AND THE ADMINISTRATIVE AGENT EACH WAIVES ITS
RESPECTIVE RIGHTS TO A TRIAL BY JURY OF ANY CLAIM OR CAUSE OF ACTION BASED UPON OR ARISING OUT OF
OR RELATED TO THIS AGREEMENT, THE OTHER LOAN DOCUMENTS, OR THE TRANSACTIONS CONTEMPLATED HEREBY OR
THEREBY, IN ANY ACTION, PROCEEDING OR OTHER LITIGATION OF ANY TYPE BROUGHT BY ANY OF THE PARTIES
AGAINST ANY OTHER PARTY OR ANY AGENT-RELATED PERSON, PARTICIPANT OR ASSIGNEE, WHETHER WITH RESPECT
TO CONTRACT CLAIMS, TORT CLAIMS, OR OTHERWISE. THE COMPANY, EACH GUARANTOR, THE LENDERS AND THE
ADMINISTRATIVE AGENT EACH AGREES THAT ANY SUCH CLAIM OR CAUSE OF ACTION SHALL BE TRIED BY A COURT
TRIAL WITHOUT A JURY. WITHOUT LIMITING THE FOREGOING, THE PARTIES FURTHER AGREE THAT THEIR
RESPECTIVE RIGHT TO A TRIAL BY JURY IS WAIVED BY OPERATION OF THIS SECTION AS TO ANY ACTION,
COUNTERCLAIM OR OTHER PROCEEDING WHICH SEEKS, IN WHOLE OR IN PART, TO CHALLENGE THE VALIDITY OR
ENFORCEABILITY OF THIS AGREEMENT OR THE OTHER LOAN DOCUMENTS OR ANY PROVISION HEREOF OR THEREOF.
THIS WAIVER SHALL APPLY TO ANY SUBSEQUENT AMENDMENTS, RENEWALS, SUPPLEMENTS OR MODIFICATIONS TO
THIS AGREEMENT AND THE OTHER LOAN DOCUMENTS.




     11.19 Entire Agreement. This Agreement, together with the other Loan Documents, embodies the
entire agreement and understanding among the Company, the Guarantors, the Lenders and the
Administrative Agent, and supersedes all prior or contemporaneous agreements and understandings of
such Persons, verbal or written, relating to the subject matter hereof and thereof.



     11.20 NO ORAL AGREEMENTS. THIS WRITTEN LOAN AGREEMENT, TOGETHER WITH THE OTHER WRITTEN LOAN
DOCUMENTS EXECUTED IN CONNECTION HEREWITH, REPRESENTS THE FINAL AGREEMENT BETWEEN THE PARTIES AND
MAY NOT BE CONTRADICTED BY EVIDENCE OF PRIOR, CONTEMPORANEOUS OR SUBSEQUENT ORAL AGREEMENTS OF THE
PARTIES.



     THERE ARE NO UNWRITTEN ORAL AGREEMENTS BETWEEN THE PARTIES.



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



	 	 	 	 	 	 	 
	 	 	THE COMPANY:	 	 
	 
	 	 	 	 	 	 
	 	 	IVANHOE ENERGY (USA) INC.,

a Nevada corporation	 	 
	 
	 	 	 	 	 	 
	 

	 	By:
	 	/s/Gordon Lancaster	 	 
	 

	 	Name:
	 	 

Gordon Lancaster
	 	 
	 

	 	Title:
	 	Chief Financial Officer	 	 
	 
	 	 	 	 	 	 
	 	 	GUARANTORS:	 	 
	 
	 	 	 	 	 	 
	 	 	IVANHOE ENERGY INC.,

a Yukon corporation	 	 
	 
	 	 	 	 	 	 
	 

	 	By:
	 	/s/Gordon Lancaster	 	 
	 

	 	Name:
	 	 

Gordon Lancaster
	 	 
	 

	 	Title:
	 	Chief Financial Officer	 	 
	 
	 	 	 	 	 	 
	 	 	IVANHOE ENERGY HOLDINGS INC.,

a Nevada corporation	 	 
	 
	 	 	 	 	 	 
	 

	 	By:
	 	/s/E. Leon Daniel	 	 
	 

	 	Name:
	 	 

E. Leon Daniel
	 	 
	 

	 	Title:
	 	President	 	 
	 
	 	 	 	 	 	 
	 	 	IVANHOE ENERGY ROYALTY INC.,

a Nevada corporation	 	 
	 
	 	 	 	 	 	 
	 

	 	By:
	 	/s/E. Leon Daniel	 	 
	 

	 	Name:
	 	 

E. Leon Daniel
	 	 
	 

	 	Title:
	 	President	 	 






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\






	 	 	 	 	 	 	 
	 	 	IVANHOE ENERGY PETROLEUM PROJECTS INC.,

a Nevada corporation
	 
	 	 	 	 	 	 
	 

	 	By:
	 	/s/Gordon Lancaster	 	 
	 

	 	Name:
	 	 

Gordon Lancaster
	 	 
	 

	 	Title:
	 	Treasurer	 	 
	 
	 	 	 	 	 	 
	 	 	IVANHOE ENERGY HTL INC.,

a Nevada corporation	 	 
	 
	 	 	 	 	 	 
	 

	 	By:
	 	/s/Gordon Lancaster	 	 
	 

	 	Name:
	 	 

Gordon Lancaster
	 	 
	 

	 	Title:
	 	Chief Financial Officer	 	 
	 
	 	 	 	 	 	 
	 	 	IVANHOE HTL PETROLEUM LTD.,

a Nevada corporation	 	 
	 
	 	 	 	 	 	 
	 

	 	By:
	 	/s/Gordon Lancaster	 	 
	 

	 	Name:
	 	 

Gordon Lancaster
	 	 
	 

	 	Title:
	 	Chief Financial Officer	 	 
	 
	 	 	 	 	 	 
	 	 	IVANHOE ENERGY HTL (USA) INC.,

a Nevada corporation	 	 
	 
	 	 	 	 	 	 
	 

	 	By:
	 	/s/E. Leon Daniel	 	 
	 

	 	Name:
	 	 

E. Leon Daniel
	 	 
	 

	 	Title:
	 	President	 	 






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	 	 	ADMINISTRATIVE AGENT:	 	 
	 
	 	 	 	 	 	 
	 	 	LASALLE BANK, NATIONAL ASSOCIATION	 	 
	 
	 	 	 	 	 	 
	 

	 	By:
	 	/s/F. Ward Nixon	 	 
	 

	 	Name:
	 	 

F. Ward Nixon
	 	 
	 

	 	Title:
	 	Senior Vice President	 	 
	 
	 	 	 	 	 	 
	 	 	ISSUING LENDER:	 	 
	 
	 	 	 	 	 	 
	 	 	LASALLE BANK, NATIONAL ASSOCIATION	 	 
	 
	 	 	 	 	 	 
	 

	 	By:
	 	/s/F. Ward Nixon	 	 
	 

	 	Name:
	 	 

F. Ward Nixon
	 	 
	 

	 	Title:
	 	Senior Vice President	 	 






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	 	 	LENDERS:	 	 
	 
	 	 	 	 	 	 
	 	 	LASALLE BANK, NATIONAL ASSOCIATION	 	 
	 
	 	 	 	 	 	 
	 

	 	By:
	 	/s/F. Ward Nixon	 	 
	 

	 	Name:
	 	 

F. Ward Nixon
	 	 
	 

	 	Title:
	 	Senior Vice President	 	 






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