exv10w2





Exhibit 10.2



Execution Version


CREDIT AGREEMENT




DATED AS OF SEPTEMBER 6, 2011




AMONG




QUICKSILVER RESOURCES CANADA INC.,

as BORROWER,




JPMORGAN CHASE BANK, N.A., TORONTO BRANCH,

as ADMINISTRATIVE AGENT,




THE BANK OF NOVA SCOTIA,

as SYNDICATION AGENT,




THE TORONTO-DOMINION BANK AND CANADIAN IMPERIAL BANK OF COMMERCE,

as CO-DOCUMENTATION AGENTS,




AND




THE LENDERS PARTY HERETO




JOINT BOOKRUNNERS




J.P.  MORGAN SECURITIES LLC AND THE BANK OF NOVA SCOTIA









 









 





 TABLE OF CONTENTS 




	 	 	 	 	 	 	 
	 	 	 	 	Page	 
	 
	 	Article 1	 	 	 	 
	 
	 	Definitions and Accounting Matters	 	 	 	 
	 
	 	 	 	 	 	 
	Section 1.01
	 	Terms Defined Above	 	 	1	 
	Section 1.02
	 	Certain Defined Terms	 	 	1	 
	Section 1.03
	 	Types of Loans and Borrowings	 	 	29	 
	Section 1.04
	 	Terms Generally; Rules of Construction	 	 	29	 
	Section 1.05
	 	Accounting Terms and Determinations; GAAP	 	 	30	 
	 
	 	 	 	 	 	 
	 
	 	Article 2	 	 	 	 
	 
	 	The Credits	 	 	 	 
	 
	 	 	 	 	 	 
	Section 2.01
	 	Commitments	 	 	30	 
	Section 2.02
	 	Loans and Borrowings	 	 	30	 
	Section 2.03
	 	Requests for Borrowings	 	 	31	 
	Section 2.04
	 	Interest Elections	 	 	32	 
	Section 2.05
	 	Funding of Borrowings	 	 	33	 
	Section 2.06
	 	Termination and Reduction of Aggregate Maximum Credit Amounts	 	 	34	 
	Section 2.07
	 	Borrowing Base	 	 	35	 
	Section 2.08
	 	Letters of Credit	 	 	36	 
	Section 2.09
	 	Increase in the Maximum Credit Amounts	 	 	41	 
	Section 2.10
	 	Defaulting Lenders	 	 	42	 
	Section 2.11
	 	Currency Conversion and Currency Indemnity	 	 	44	 
	 
	 	 	 	 	 	 
	 
	 	Article 3	 	 	 	 
	 
	 	Payments of Principal and Interest; Prepayments; Fees	 	 	 	 
	 
	 	 	 	 	 	 
	Section 3.01
	 	Repayment of Loans	 	 	45	 
	Section 3.02
	 	Interest	 	 	45	 
	Section 3.03
	 	Alternate Rate of Interest	 	 	46	 
	Section 3.04
	 	Prepayments	 	 	47	 
	Section 3.05
	 	Fees	 	 	49	 
	 
	 	 	 	 	 	 
	 
	 	Article 4	 	 	 	 
	 
	 	Payments; Pro Rata Treatment; Sharing of Set-Offs	 	 	 	 
	 
	 	 	 	 	 	 
	Section 4.01
	 	Payments Generally; Pro Rata Treatment; Sharing of Set-offs	 	 	50	 
	Section 4.02
	 	Presumption of Payment by the Borrower	 	 	51	 
	Section 4.03
	 	Certain Deductions by the Administrative Agent	 	 	51	 
	Section 4.04
	 	Disposition of Proceeds	 	 	51	 






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	 	Article 5	 	 	 	 
	 
	 	Increased Costs; Break Funding Payments; Payments; Taxes; Illegality	 	 	 	 
	 
	 	 	 	 	 	 
	Section 5.01
	 	Increased Costs	 	 	52	 
	Section 5.02
	 	Break Funding Payments	 	 	53	 
	Section 5.03
	 	Taxes	 	 	53	 
	Section 5.04
	 	Mitigation Obligations; Replacement of Lenders	 	 	55	 
	Section 5.05
	 	Illegality	 	 	56	 
	 
	 	 	 	 	 	 
	 
	 	Article 6	 	 	 	 
	 
	 	Conditions Precedent	 	 	 	 
	 
	 	 	 	 	 	 
	Section 6.01
	 	Effective Date	 	 	56	 
	Section 6.02
	 	Each Credit Event	 	 	58	 
	 
	 	 	 	 	 	 
	 
	 	Article 7	 	 	 	 
	 
	 	Representations and Warranties	 	 	 	 
	 
	 	 	 	 	 	 
	Section 7.01
	 	Organization; Powers	 	 	59	 
	Section 7.02
	 	Authority; Enforceability	 	 	59	 
	Section 7.03
	 	Approvals; No Conflicts	 	 	60	 
	Section 7.04
	 	Financial Condition; No Material Adverse Effect	 	 	60	 
	Section 7.05
	 	Litigation	 	 	60	 
	Section 7.06
	 	Environmental Matters	 	 	60	 
	Section 7.07
	 	Compliance with the Laws and Agreements	 	 	61	 
	Section 7.08
	 	Taxes	 	 	61	 
	Section 7.09
	 	Disclosure; No Material Misstatements	 	 	62	 
	Section 7.10
	 	Subsidiaries	 	 	62	 
	Section 7.11
	 	Insurance	 	 	62	 
	Section 7.12
	 	Location of Business and Offices	 	 	62	 
	Section 7.13
	 	Properties; Title, Etc	 	 	62	 
	Section 7.14
	 	Compliance with Benefit Plans; ERISA	 	 	63	 
	Section 7.15
	 	Solvency	 	 	64	 
	Section 7.16
	 	Priority; Security Matters	 	 	64	 
	 
	 	 	 	 	 	 
	 
	 	Article 8	 	 	 	 
	 
	 	Affirmative Covenants	 	 	 	 
	 
	 	 	 	 	 	 
	Section 8.01
	 	Financial Statements; Other Information	 	 	65	 
	Section 8.02
	 	Notices of Material Events	 	 	67	 
	Section 8.03
	 	Existence; Conduct of Business	 	 	68	 
	Section 8.04
	 	Payment of Obligations	 	 	68	 
	Section 8.05
	 	Operation and Maintenance of Properties	 	 	68	 
	Section 8.06
	 	Insurance	 	 	68	 
	Section 8.07
	 	Books and Records; Inspection Rights	 	 	69	 
	Section 8.08
	 	Compliance with Laws	 	 	69	 






ii









 





	 	 	 	 	 	 	 
	Section 8.09
	 	Environmental Matters	 	 	69	 
	Section 8.10
	 	Further Assurances	 	 	70	 
	Section 8.11
	 	Reserve Reports	 	 	70	 
	Section 8.12
	 	[Intentionally left blank]	 	 	71	 
	Section 8.13
	 	Additional Collateral; Additional Guarantors	 	 	71	 
	Section 8.14
	 	ERISA and Benefit Plan Compliance	 	 	73	 
	Section 8.15
	 	Unrestricted Subsidiaries	 	 	74	 
	Section 8.16
	 	Section 1031 Exchange	 	 	74	 
	Section 8.17
	 	Use of Proceeds	 	 	74	 
	Section 8.18
	 	Fiscal Year	 	 	74	 
	Section 8.19
	 	New Parent Joinder	 	 	74	 
	 
	 	 	 	 	 	 
	 
	 	Article 9	 	 	 	 
	 
	 	Negative Covenants	 	 	 	 
	 
	 	 	 	 	 	 
	Section 9.01
	 	Financial Covenants	 	 	75	 
	Section 9.02
	 	Debt	 	 	75	 
	Section 9.03
	 	Liens	 	 	77	 
	Section 9.04
	 	Dividends and Distributions	 	 	79	 
	Section 9.05
	 	Repayment of Debt; Amendment of Indentures	 	 	80	 
	Section 9.06
	 	Investments, Loans and Advances	 	 	81	 
	Section 9.07
	 	Designation and Conversion of Restricted and Unrestricted Subsidiaries	 	 	83	 
	Section 9.08
	 	Nature of Business; International Operations	 	 	84	 
	Section 9.09
	 	Mergers, Etc.	 	 	84	 
	Section 9.10
	 	Sale of Properties and Termination of Oil and Gas Swap Agreements	 	 	85	 
	Section 9.11
	 	Transactions with Affiliates	 	 	87	 
	Section 9.12
	 	Negative Pledge Agreements; Dividend Restrictions	 	 	87	 
	Section 9.13
	 	Swap Agreements	 	 	87	 
	Section 9.14
	 	Ownership of the Borrower and Restricted Subsidiaries	 	 	88	 
	Section 9.15
	 	Amendments to Organizational Documents	 	 	88	 
	 
	 	 	 	 	 	 
	 
	 	Article 10	 	 	 	 
	 
	 	Events of Default; Remedies	 	 	 	 
	 
	 	 	 	 	 	 
	Section 10.01
	 	Events of Default	 	 	88	 
	Section 10.02
	 	Remedies	 	 	90	 
	 
	 	 	 	 	 	 
	 
	 	Article 11	 	 	 	 
	 
	 	The Agents	 	 	 	 
	 
	 	 	 	 	 	 
	Section 11.01
	 	Appointment; Powers	 	 	91	 
	Section 11.02
	 	Duties and Obligations of Administrative Agent	 	 	91	 
	Section 11.03
	 	Action by Administrative Agent	 	 	92	 
	Section 11.04
	 	Reliance by Administrative Agent	 	 	92	 
	Section 11.05
	 	Subagents	 	 	93	 






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	Section 11.06
	 	Resignation of Administrative Agent	 	 	93	 
	Section 11.07
	 	Agents as Lenders	 	 	93	 
	Section 11.08
	 	No Reliance	 	 	93	 
	Section 11.09
	 	Administrative Agent May File Proofs of Claim	 	 	94	 
	Section 11.10
	 	Authority Of Administrative Agent To Release Collateral And Liens	 	 	94	 
	Section 11.11
	 	The Arrangers, Syndication Agent and Co-Documentation Agents	 	 	95	 
	 
	 	 	 	 	 	 
	 
	 	Article 12	 	 	 	 
	 
	 	Miscellaneous	 	 	 	 
	 
	 	 	 	 	 	 
	Section 12.01
	 	Notices	 	 	95	 
	Section 12.02
	 	Waivers; Amendments	 	 	96	 
	Section 12.03
	 	Expenses, Indemnity; Damage Waiver	 	 	97	 
	Section 12.04
	 	Successors and Assigns	 	 	99	 
	Section 12.05
	 	Survival; Revival; Reinstatement	 	 	102	 
	Section 12.06
	 	Counterparts; Integration; Effectiveness	 	 	103	 
	Section 12.07
	 	Severability	 	 	103	 
	Section 12.08
	 	Right of Setoff	 	 	103	 
	Section 12.09
	 	GOVERNING LAW; JURISDICTION	 	 	104	 
	Section 12.10
	 	Headings	 	 	105	 
	Section 12.11
	 	Confidentiality	 	 	105	 
	Section 12.12
	 	Interest Rate Limitation	 	 	105	 
	Section 12.13
	 	EXCULPATION PROVISIONS	 	 	106	 
	Section 12.14
	 	Collateral Matters; Swap Agreements	 	 	107	 
	Section 12.15
	 	No Third Party Beneficiaries	 	 	107	 
	Section 12.16
	 	USA Patriot Act Notice	 	 	107	 
	Section 12.17
	 	Anti-Money Laundering Legislation	 	 	107	 
	Section 12.18
	 	No Fiduciary Duty	 	 	108	 
	 
	 	 	 	 	 	 
	Annex I
	 	List of Maximum Credit Amounts	 	 	 	 
	 
	 	 	 	 	 	 
	Exhibit A
	 	Form of Note	 	 	 	 
	Exhibit B
	 	Form of Borrowing Request	 	 	 	 
	Exhibit C
	 	Form of Interest Election Request	 	 	 	 
	Exhibit D
	 	Form of Compliance Certificate	 	 	 	 
	Exhibit E-1
	 	Security Instruments	 	 	 	 
	Exhibit E-2
	 	Form of Guaranty Agreement	 	 	 	 
	Exhibit F
	 	Form of Assignment and Assumption	 	 	 	 
	Exhibit G
	 	Form of Pledge Agreement	 	 	 	 






iv









 






	 	 	 	 	 	 	 
	Schedule 1.02-a
	 	Initial Guarantors	 	 	 	 
	Schedule 1.02-b
	 	Existing Secured Swap Providers	 	 	 	 
	Schedule 3.05
	 	Grandfathered Letters of Credit	 	 	 	 
	Schedule 7.10
	 	Subsidiaries and Partnerships; Unrestricted Subsidiaries	 	 	 	 
	Schedule 7.11
	 	Insurance	 	 	 	 
	Schedule 9.02
	 	Existing Debt	 	 	 	 
	Schedule 9.03
	 	Liens	 	 	 	 
	Schedule 9.06
	 	Investments	 	 	 	 
	Schedule 9.08
	 	Nature of Business	 	 	 	 







v











 





     THIS CREDIT AGREEMENT dated as of September 6, 2011, is among QUICKSILVER RESOURCES
CANADA INC., a corporation organized under the laws of the Province of Alberta, Canada (the
“Borrower”); each of the Lenders from time to time party hereto; JPMORGAN CHASE BANK, N.A.,
Toronto Branch, as administrative agent for the Lenders (in such capacity, together with its
successors in such capacity, the “Administrative Agent”); THE BANK OF NOVA SCOTIA, as
syndication agent for the Lenders (in such capacity, the “Syndication Agent”); and THE
TORONTO-DOMINION BANK and CANADIAN IMPERIAL BANK OF COMMERCE, as co-documentation agents for the
Lenders (in such capacity, the “Co-Documentation Agents”).  The joint lead arrangers for
the credit facility provided under this Agreement are J.P.  MORGAN SECURITIES LLC and THE BANK OF
NOVA SCOTIA (collectively, the “Joint Lead Arrangers”).  


R E C I T A L S




     A.     The Borrower has requested that the Lenders provide certain loans to and extensions of
credit on behalf of the Borrower.  


     B.     The Lenders have agreed to make such loans and extensions of credit subject to the terms
and conditions of this Agreement.  


     C.     In consideration of the mutual covenants and agreements herein contained and of the loans,
extensions of credit and commitments hereinafter referred to, the parties hereto agree as follows:



ARTICLE 1

Definitions and Accounting Matters




     Section 1.01   Terms Defined Above.  As used in this Agreement, each term defined above
has the meaning indicated above.  


     Section 1.02   Certain Defined Terms.  As used in this Agreement, the following terms
have the meanings specified below:



     “Administrative Questionnaire” means an Administrative Questionnaire in a form
supplied by the Administrative Agent.  


     “Affected Loans” has the meaning assigned such term in Section 5.05.  


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


     “Agents” means, collectively, the Administrative Agent, the Syndication Agent and the
Co-Documentation Agents; and “Agent” means the Administrative Agent, the Syndication Agent
or any Co-Documentation Agent, as the context requires.  


     “Aggregate Maximum Credit Amounts” at any time shall equal the sum of the Maximum
Credit Amounts, as the same may be reduced or terminated pursuant to Section 2.06 or increased
pursuant to Section 2.09.  


     “Agreed Currency” is defined in Section 2.11(a).  


1









 





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


     “Applicable Margin” means, for any day with respect to the commitment fees payable
hereunder, or with respect to any Canadian Prime Loan, CDOR Loan, U.S.  Prime Loan or Eurodollar
Loan, as the case may be, the rate per annum set forth in the appropriate column below under the
caption “Commitment Fee Rate”, “Canadian Prime Spread,” “CDOR Spread,” “U.S.  Prime Spread”, or
“Eurodollar Spread”, as the case may be, for the Borrowing Base Utilization Percentage then in
effect:



	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	 	 	 	 	 	 	Canadian	 	 	 	U.S.	 	 
	Borrowing Base	 	Commitment	 	Prime	 	CDOR	 	Prime	 	Eurodollar
	Utilization Percentage	 	Fee Rate	 	Spread	 	Spread	 	Spread	 	Spread
	Greater than 90%
	 	 	0.500	%	 	 	1.75	%	 	 	2.75	%	 	 	1.75	%	 	 	2.75	%
	Greater than 75% but
less than or equal to
90%
	 	 	0.500	%	 	 	1.50	%	 	 	2.50	%	 	 	1.50	%	 	 	2.50	%
	Greater than 50% and
less than or equal to
75%
	 	 	0.500	%	 	 	1.25	%	 	 	2.25	%	 	 	1.25	%	 	 	2.25	%
	Greater than 25% and
less than or equal to
50%
	 	 	0.500	%	 	 	1.00	%	 	 	2.00	%	 	 	1.00	%	 	 	2.00	%
	Less than or equal to 25%
	 	 	0.500	%	 	 	0.75	%	 	 	1.75	%	 	 	0.75	%	 	 	1.75	%






Each change in the Applicable Margin shall apply during the period commencing on the effective
date of such change and ending on the date immediately preceding the effective date of the next
such change.  



     “Applicable Percentage” means, with respect to any Lender, the percentage of the
Aggregate Maximum Credit Amounts represented by such Lender’s Maximum Credit Amount as such
percentage is set forth on Annex I; provided that in the case of Section 2.10 when a Defaulting
Lender shall exist, “Applicable Percentage” as used in such Section 2.10 shall mean the percentage
of the Aggregate Maximum Credit Amounts (disregarding any Defaulting Lender’s Maximum Credit
Amounts) represented by such Lender’s Maximum Credit Amount.  


     “Approved Counterparty” means (a) any Lender, (b) any Affiliate of a Lender, or (c)
any counterparty with a rating of its senior, unsecured, long-term indebtedness for borrowed money
that is not guaranteed by any other Person or subject to any other credit enhancement of better
than or equal to “BBB-” or “Baa3” by S&P and Moody’s, respectively.  


     “Approved Fund” means any Person (other than a natural person) that is engaged in
making, purchasing, holding or investing in bank loans and similar extensions of credit in the
ordinary course of its business and that is administered or managed by (a) a Lender, (b) an
Affiliate of a Lender or (c) an entity or an Affiliate of an entity that administers or manages a
Lender.  


     “Approved Petroleum Engineers” means (a) LaRoche Petroleum Consultants Limited and (b)
any other independent petroleum engineers or other independent petroleum consultant(s) reasonably
acceptable to the Administrative Agent.  


     “Arrangers” means the Joint Lead Arrangers and Joint Bookrunners.  


     “ASC” means the Financial Accounting Standards Board Accounting Standards
Codification, as in effect from time to time.  


2









 





     “Assignment and Assumption” means an assignment and assumption entered into by a
Lender and an assignee (with the consent of any party whose consent is required by Section
12.04(b)), and accepted by the Administrative Agent, in the form of Exhibit F or any other form
approved by the Administrative Agent.  


     “Availability Period” means the period from and including the Effective Date to but
excluding the Termination Date.  


     “Bank Products” means treasury management services (including, without limitation,
controlled disbursement, automated clearinghouse transactions, return items, overdrafts and
interstate depository network services).  


     “Bank Products Obligation” means an obligation in respect of a Bank Product provided
by a Bank Products Provider.  


     “Bank Products Provider” means any Lender or Affiliate of a Lender that provides Bank
Products to any Credit Party.  


     “Borrowing” means Loans of the same Type, made, converted or continued on the same
date and, in the case of Eurodollar Loans or CDOR Loans, as to which a single Interest Period is in
effect.  


     “Borrowing Base” means at any time an amount determined in accordance with Section
2.07, as the same may be adjusted from time to time pursuant to Section 9.02(n).  


     “Borrowing Base Deficiency” occurs if at any time the total Revolving Credit Exposures
exceeds the Borrowing Base then in effect.  


     “Borrowing Base Utilization Percentage” means, as of any day, the fraction expressed
as a percentage, the numerator of which is the total Revolving Credit Exposures of the Lenders on
such day, and the denominator of which is the Borrowing Base in effect on such day.  


     “Borrowing Request” means a request by the Borrower for a Borrowing in accordance with
Section 2.03.  


     “Business Day” means any day that is not a Saturday, Sunday or a federal holiday or
any other day on which commercial banks in Calgary, Toronto, Montreal or Chicago are closed;
provided that when used in connection with a Eurodollar Loan, the term “Business Day” shall also
exclude any day on which banks are not open for dealings in Dollar deposits in the London interbank
market.  


     “Calgary” means Calgary, Alberta, Canada.  


     “Canadian Base Rate” means, for any day, a rate per annum equal to the greater of (a)
the Canadian Prime Rate in effect on such day and (b) the sum of (i) the CDOR Rate for a one month
interest period beginning on such date and (ii) 100 basis points.  Any change in the Canadian Base
Rate due to a change in the Canadian Prime Rate or the CDOR Rate shall be effective from and
including the effective date of such change in the Canadian Prime Rate or the CDOR Rate,
respectively.  




     “Canadian Benefit Plans” means any employee benefit plan, maintained or contributed to
by any Credit Party that is not a Canadian Pension Plan and which is primarily for the benefit of
the employees or former employees of any Credit Party employed in Canada who participate or are
eligible to



3









 






participate, including all profit sharing, incentive compensation, savings,
supplemental retirement, retiring allowance, severance, deferred compensation, welfare, bonus,
supplementary unemployment benefit plans or arrangements and all life, health, dental and
disability plans and arrangements primarily for the benefit of such employees.  


     “Canadian Dollars” or “C$” refers to lawful money of Canada.  


     “Canadian Lien Searches” means searches for Liens from Alberta, British Columbia, and
such other jurisdictions in which any Oil and Gas Property owned by any Credit Party is located, as
the Administrative Agent may reasonably request, covering the Credit Parties.  


     “Canadian Pension Plan” means any pension plan to which any Credit Party contributes
or has made contributions on behalf of its employees and required to be registered under Canadian
provincial or federal pension benefits standards legislation and which is contributed to by (or to
which there is or may be an obligation to contribute by) the Credit Parties, other than a
multi-employer pension plan as defined under such legislation.  


     “Canadian Pension Plan Termination Event” means an event which would reasonably be
expected to entitle a Person (without the consent of any Credit Party) to wind-up or terminate a
Canadian Pension Plan in full or in part, or the institution of any steps by any Governmental
Authority to terminate or order the termination or wind-up of, in full or in part, any Canadian
Pension Plan, or an event respecting any Canadian Pension Plan which would result in the revocation
of the registration of such Canadian Pension Plan or which could otherwise reasonably be expected
to adversely affect the tax status of any such Canadian Pension Plan.  


     “Canadian Prime”, when used in reference to any Loan or Borrowing, refers to whether
such Loan, or the Loans comprising such Borrowing, are bearing interest at a rate determined by
reference to the Canadian Base Rate.  


     “Canadian Prime Rate” means the rate of interest per annum publicly announced from
time to time by the bank then serving as Administrative Agent as the prime rate it will use to
determine the rates of interest on Canadian Dollar loans to its customers in Canada; each change in
the Canadian Prime Rate shall be effective from and including the date such change is publicly
announced as being effective.  Such rate is set by the bank then serving as Administrative Agent as
a general reference rate of interest, taking into account such factors as the bank then serving as
Administrative Agent may deem appropriate; it being understood that (x) many of the bank then
serving as Administrative Agent’s commercial or other loans are priced in relation to such rate,
(y) it is not necessarily the lowest or best rate actually charged to any customer and (z) the bank
then serving as Administrative Agent may make various commercial or other loans at rates of
interest having no relationship to such rate.  


     “Capital Leases” means, in respect of any Person, all leases that are or should be in
accordance with GAAP recorded as capital leases on the balance sheet of the Person liable (whether
contingent or otherwise) for the payment of rent thereunder.  



     “Casualty Event” means
any loss, casualty or other damage to, or any nationalization, taking under power of eminent domain or by condemnation or
similar proceeding of, any Oil and Gas Property of any Credit Party.



4











 






     “CDOR”, when used in reference to any Loan or Borrowing, refers to whether such Loan,
or the Loans comprising such Borrowing, are bearing interest at a rate determined by reference to
the CDOR Rate.  


     “CDOR Rate” means for the relevant interest period, the Canadian deposit offered rate
which, in turn means on any day the sum of: (a) the annual rate of interest determined with
reference to the arithmetic average of the discount rate quotations of all institutions listed in
respect of the relevant interest period for Canadian Dollar-denominated bankers’ acceptances
displayed and identified as such on the “Reuters Screen CDOR Page” as defined in the International
Swap Dealer Association, Inc.  definitions, as modified and amended from time to time, as of 10:00
a.m.  Toronto local time on such day and, if such day is not a Business Day, then on the
immediately preceding Business Day (as adjusted by the Administrative Agent after 10:00 a.m.  Toronto local time to reflect any error in the posted rate of interest or in the posted average
annual rate of interest); plus (b) solely with respect to a Lender that is not a Schedule I Lender,
0.10% per annum; provided that if such rates are not available on the Reuters Screen CDOR Page on
any particular day, then the Canadian deposit offered rate component of such rate on that day shall
be calculated as the cost of funds quoted by the Administrative Agent to raise Canadian Dollars for
the applicable interest period as of 10:00 a.m.  Toronto local time on such day for commercial loans
or other extensions of credit to businesses of comparable credit risk; or if such day is not a
Business Day, then as quoted by the Administrative Agent on the immediately preceding Business Day.  


     “Change in Control” means (a) prior to a Qualified IPO, QRI shall cease to own,
directly or indirectly, more than 50% of the issued and outstanding Equity Interests of the
Borrower and (b) from and after a Qualified IPO, the occurrence of any of the following: (i) any
“person” or “group” of related persons (as such terms are used in Section 13(d) and 14(d) of the
Exchange Act), other than one or more Permitted Holders, is or becomes the beneficial owner (as
defined in Rules 13d-3 and 13d-5 under the Exchange Act, except that such person or group shall be
deemed to have “beneficial ownership” of all Equity Interests that such person or group has the
right to acquire, whether such right is exercisable immediately or only after the passage of time),
directly or indirectly, of more than 35% of the total voting power of the Equity Interests of New
Parent (or its successor by merger, consolidation or purchase of all or substantially all of its
assets) (for the purposes of this clause (b)(i) such person or group shall be deemed to
beneficially own any Equity Interest of New Parent held by a parent entity of New Parent, if such
person or group “beneficially owns” (as defined above), directly or indirectly, more than 50% of
the voting power of the Equity Interests of such parent entity); (ii) a majority of the members of
the board of directors of the Borrower are not Continuing Directors; (iii) the sale, lease,
transfer, conveyance or other disposition (other than by way of merger or consolidation), in one or
a series of related transactions, of all or substantially all of the assets of the Credit Parties
taken as a whole to any “person” (as such term is used in Sections 13(d) and 14(d) of the Exchange
Act); (iv) the adoption by the stockholders of the Borrower of a plan or proposal for the
liquidation or dissolution of the Borrower; (v) New Parent shall cease to own, directly or
indirectly, 100% of the issued and outstanding Equity Interests of the Borrower; or (vi) a “Change
in Control” or similar event occurs under and as defined in any indenture or similar governing
document in respect of Permitted Additional Debt but only to the extent, in the case of this clause
(vi), the occurrence of any such event gives rise to an obligation of any Credit Party to redeem,
repay or repurchase, or otherwise offer to redeem, repay or repurchase, all or any portion of such
Permitted Additional Debt, which redemption, repayment or repurchase is not otherwise permitted by
the terms of this Agreement.  


     “Change in Law” means (a) the adoption of any law, rule or regulation after the
Effective Date (including, without limitation, any rule or regulation adopted by any
Governmental Authority after the Effective Date under the framework of the U.S.  Dodd-Frank
Wall Street Reform and Consumer Protection Act or in connection with the Bank for International
Settlements, the Basel Committee on



5









 






Banking Supervision or Canadian or foreign regulatory
authorities, in each case, pursuant to Basel III), (b) any change in any law, rule or regulation or
in the interpretation or application thereof by any Governmental Authority after the Effective Date
or (c) compliance by any Lender or any Issuing Bank (or, for purposes of Section 5.01(b), by any
lending office of such Lender or by such Lender’s or such Issuing Bank’s holding company, if any)
with any request, guideline or directive (whether or not having the force of law) of any
Governmental Authority made or issued after the Effective Date (including, without limitation, any
requests, guidelines or directives made or issued after the Effective Date in connection with the
U.S.  Dodd-Frank Wall Street Reform and Consumer Protection Act or promulgated by the Bank for
International Settlements, the Basel Committee on Banking Supervision or Canadian or foreign
regulatory authorities, in each case, pursuant to Basel III).  



     “Chicago” means Chicago, Illinois.  


     “Code” means the United States Internal Revenue Code of 1986, as amended from time to
time, and any successor statute.  


     “Commitment” means, with respect to each Lender, the commitment of such Lender to make
Loans and to acquire participations in Letters of Credit hereunder, expressed as an amount
representing the maximum aggregate amount of such Lender’s Revolving Credit Exposure hereunder, as
such commitment may be (a) modified from time to time pursuant to Section 2.06 or Section 2.09 and
(b) modified from time to time pursuant to assignments by or to such Lender pursuant to Section
12.04(b).  The amount representing each Lender’s Commitment shall be the lesser of such Lender’s
Maximum Credit Amount and such Lender’s Applicable Percentage of the then effective Borrowing Base.  


     “Commitment Fee Rate” has the meaning set forth in the definition of “Applicable
Margin”.  


     “Consolidated Net Income” means with respect to the Borrower (or, from and after the
New Parent Joinder, New Parent) and the Consolidated Restricted Subsidiaries, for any period, the
aggregate of the net income (or loss) of the Borrower (or, from and after the New Parent Joinder,
New Parent) and the Consolidated Restricted Subsidiaries after allowances for taxes for such period
determined on a consolidated basis in accordance with GAAP; provided that there shall be excluded
from such net income (or loss) (to the extent otherwise included therein) the following (without
duplication):



     (a)     the net income (or loss) for such period of any Person which is not a Consolidated
Restricted Subsidiary, except that the amount of dividends, distributions or other payments in
respect of equity actually paid in cash during such period by such other Person to the Borrower
(or, from and after the New Parent Joinder, New Parent) or to a Consolidated Restricted Subsidiary
(or to the extent any non-cash dividend, distribution or other payment made during such period by
such other Person to the Borrower (or, from and after the New Parent Joinder, New Parent) or to a
Consolidated Restricted Subsidiary was converted into cash by the Borrower (or, from and after the
New Parent Joinder, New Parent) or such Consolidated Restricted Subsidiary during such period)
shall be included in such net income (or loss), as the case may be;



     (b)     the net income (but not loss) during such period of any Consolidated Restricted Subsidiary
to the extent that the declaration or payment of dividends or similar distributions or transfers or
loans by that Consolidated Restricted Subsidiary is not at the time permitted by the terms of its
charter
or any agreement, instrument or Governmental Requirement applicable to such Consolidated
Restricted Subsidiary or is otherwise restricted or prohibited;



     (c)     any extraordinary gains (net of extraordinary losses) during such period;



6









 






     (d)     non-cash gains, losses or adjustments, including non-cash gains, losses or adjustments
under authoritative guidance from the FASB as a result of changes in the fair market value of
derivatives and any gains or losses attributable to writeups or writedowns of assets, including
ceiling test writedowns and writedowns under authoritative guidance from the FASB as a result of
accounting for oil and gas activities, goodwill and other intangible assets, and property, plant
and equipment (for the avoidance of doubt, realized gains or losses will be counted in Consolidated
Net Income in the quarter that cash is actually received or paid);



     (e)     any premium or penalty paid, capitalized interest, write off of deferred financing costs
or other financial recapitalization charges in connection with redeeming or retiring any
indebtedness prior to its stated maturity;



     (f)     any non-cash employee, officer or director based compensation; and



     (g)     any gain realized (net of losses) in connection with asset sales.  


     “Consolidated Restricted Subsidiaries” means any Restricted Subsidiaries that are
Consolidated Subsidiaries.  


     “Consolidated Subsidiaries” means each Subsidiary of the Borrower (or, from and after
the New Parent Joinder, New Parent), whether now existing or hereafter created or acquired, the
financial statements of which are or shall be (or should have been) consolidated with the financial
statements of the Borrower (or, from and after the New Parent Joinder, New Parent) in accordance
with GAAP.  


     “Continuing Directors” means the individuals (i) who were members of the board of
directors or other equivalent governing body of the Borrower on the Effective Date, (ii) whose
election or nomination to such board or body was approved by individuals referred to in clause (i)
above constituting at the time of such election or nomination at least a majority of such board or
body or (iii) whose election or nomination to such board or body was approved by individuals
referred to in clauses (i) and (ii) above constituting at the time of such election or nomination
at least a majority of such board or body.  


     “Control” means the power to direct the management and policies of a Person, directly
or indirectly, whether through the ownership of voting securities, by contract or otherwise and the
terms “Controlling” and “Controlled” have meanings correlative of the foregoing.  


     “Credit Parties” means (a) prior to the New Parent Joinder, the Borrower and its
Restricted Subsidiaries and (b) from and after the New Parent Joinder, New Parent, the Borrower and
the other Restricted Subsidiaries.  


     “Criminal Code (Canada)” means the Criminal Code R.S.C.  1985, c.  C-46, as amended
from time to time.  


     “Currency” means, with respect to any Loan or Letter of Credit, whether such Loan or
Letter of Credit is denominated in Canadian Dollars or Dollars.  


     “Debt” means, for any Person, the sum of the following (without duplication):



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



7









 






     (b)     all obligations of such Person (whether contingent or otherwise) in respect of
unreimbursed draws under letters of credit, bankers’ acceptances, surety or other bonds and similar
instruments;



     (c)     all amounts owed by such Person representing the deferred purchase price of Property or
services (other than liabilities of such Person to trade creditors arising in the ordinary course
of business (including guarantees thereof or instruments evidencing such liabilities) that are
either (i) not greater than 90 days past the invoice or billing date or (ii) are being contested in
good faith by appropriate proceedings and adequate reserves therefore have been established under
GAAP);



     (d)     all obligations under Capital Leases;



     (e)     all obligations under all leases which shall have been, or should have been, in accordance
with GAAP, treated as operating leases on the financial statements of the Person liable (whether
contingently or otherwise) for the payment of rent thereunder and which were properly treated as
indebtedness for borrowed money for purposes of federal income taxes, if the lessee in respect
thereof is obligated to either purchase for an amount in excess of, or pay upon early termination
an amount in excess of, 80% of the residual value of the Property subject to such operating lease
upon expiration or early termination of such lease;



     (f)     obligations to deliver commodities, goods or services, including, without limitation,
Hydrocarbons, in consideration of one or more advance payments, other than gas balancing
arrangements in the ordinary course of business;



     (g)     all Debt (as defined in the other clauses of this definition) of others secured by a Lien
on any Property of such Person, whether or not such Debt is assumed by such Person to the extent of
the lesser of the fair market value of the property subject to such Lien and the amount of such
Debt;



     (h)     all Debt (as defined in the other clauses of this definition) of others Guaranteed by such
Person to the extent of the lesser of the amount of such Debt and the maximum stated amount of such
Guarantee;



     (i)     any Debt of a partnership for which such Person is liable either by agreement, by
operation of law or by a Governmental Requirement but only to the extent of such liability;



     (j)     Disqualified Capital Stock; and



     (k)     the undischarged balance of any production payment created by such Person or for the
creation of which such Person directly or indirectly received payment.  


     The Debt of any Person shall include all obligations of such Person of the character described
above notwithstanding that any such obligation is not included as a liability of such Person under
GAAP.  For the avoidance of doubt, “Debt” does not include obligations in respect of Swap
Agreements,
indemnities incurred in the ordinary course of business or in connection with the disposition
of assets, any non-cash employee, officer or director compensation, any compensation paid to
employees, officers or directors pursuant to stock appreciation rights, or, except to the extent
set forth in the foregoing clause (e), obligations under operating leases.  


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


8









 






     “Default Rate” means a rate per annum equal to 2% plus the rate applicable to Canadian
Prime Loans as provided in Section 3.02(a).  


     “Defaulting Lender” means any Lender, as reasonably determined by the Administrative
Agent, that has (a) failed to comply with its obligation to fund any portion of its Loans or
participations in Letters of Credit within two (2) Business Days of the date required to be funded
by it hereunder, (b) notified the Borrower, the Administrative Agent, any Issuing Bank, or any
Lender in writing that it does not intend to comply with any portion of its funding obligations
under this Agreement or has made a public statement to the effect that it does not intend to comply
with any portion of its funding obligations under this Agreement, (c) failed, within three (3)
Business Days after written request by the Administrative Agent, to confirm that it will comply
with the terms of this Agreement relating to its obligations to fund prospective Loans and
participations in the then outstanding Letters of Credit; provided, that any such Lender will cease
to be a Defaulting Lender under this clause (c) upon receipt of such confirmation by the
Administrative Agent, (d) otherwise failed to pay over to the Administrative Agent or any other
Lender any other amount required to be paid by it hereunder within two (2) Business Days of the
date when due, or (e) (i) become or is insolvent or has a parent company that has become or is
insolvent or (ii) become the subject of a bankruptcy or insolvency proceeding, or has had a
receiver, conservator, trustee or custodian appointed for it, or has taken any action in
furtherance of, or indicating its consent to, approval of or acquiescence in any such proceeding or
appointment or has a parent company that has become the subject of a bankruptcy or insolvency
proceeding, or has had a receiver, conservator, trustee or custodian appointed for it, or has taken
any action in furtherance of, or indicating its consent to, approval of or acquiescence in any such
proceeding or appointment; provided that a Lender shall not be a Defaulting Lender solely by virtue
of the ownership or acquisition of an Equity Interest in such Lender or a parent company thereof by
a Governmental Authority or an instrumentality thereof.  For avoidance of doubt (A) an assignee of
a Defaulting Lender shall not be deemed to be a Defaulting Lender solely by virtue of the fact that
it is an assignee of a Defaulting Lender, (B) neither the reallocation of funding obligations
provided for in Section 2.10 as a result of a Lender being a Defaulting Lender nor the performance
by non-Defaulting Lenders of such reallocated funding obligations will by themselves cause the
relevant Defaulting Lender to become a non-Defaulting Lender and (C) when a Defaulting Lender
ceases to be a Defaulting Lender (due to assignment to a new or existing Lender, commitment
reduction pursuant to Section 2.10 or otherwise), all cash collateral deposited with respect to LC
Exposure pursuant to Section 2.10(b) shall be promptly released to the Borrower (unless such cash
collateral is otherwise required to remain on deposit pursuant to any other provision hereof) and
all commitment reallocations under Section 2.10 shall be promptly adjusted.  


     “Disqualified Capital Stock” means any Equity Interest that, by its terms (or by the
terms of any security into which it is convertible or for which it is exchangeable) or upon the
happening of any event, matures or is mandatorily redeemable for any consideration other than other
Equity Interests (which would not constitute Disqualified Capital Stock), pursuant to a sinking
fund obligation or otherwise, or is convertible or exchangeable for Debt or redeemable for any
consideration other than other Equity Interests (which would not constitute Disqualified Capital
Stock) at the option of the holder thereof, in whole or in part, on or prior to the date that is 91
days after the earlier of (a) the
Maturity Date and (b) the date on which there are no Loans, LC Exposure or other obligations
hereunder outstanding and all of the Commitments are terminated.  


     “Dollars” or “$” refers to lawful money of the United States of America.  


     “Domestic Subsidiary” means any Restricted Subsidiary that is organized under the laws
of Canada or any province thereof.  


9









 






     “EBITDAX” means, for any period, the sum of Consolidated Net Income for such period
plus (i) the following expenses or charges to the extent deducted in determining Consolidated Net
Income in such period (without duplication): interest; sales, franchise and income taxes;
depreciation; depletion; amortization; exploration expenses; seismic, geologic and geophysical
services performed in connection with oil and gas exploration; accretion of asset retirement
obligations in accordance with ASC Topic 410, Accounting for Asset Retirement Obligations, and any
similar accounting in prior periods; and other non-cash expenses, adjustments, losses or charges
and minus (ii) all non-cash income included in the calculation of Consolidated Net Income;
provided, however, that if any such Person shall have consummated any Material Acquisition or
Material Disposition during such period, EBITDAX shall be subject to pro forma adjustments for such
acquisition or disposition, as if such acquisition or disposition had occurred on the first day of
such period and shall also include adding back to Consolidated Net Income any non-recurring or
one-time cash or non-cash charges or expenses associated with such acquisition or disposition;
provided, however, that such pro forma adjustments shall be in a manner satisfactory to the
Administrative Agent.  


     “Effective Date” means the date on which the conditions specified in Section 6.01 are
satisfied (or waived in accordance with Section 12.02).  


     “Engineering Reports” has the meaning assigned such term in Section 2.07(c)(i).  


     “Environmental Complaint” means any written complaint, summons, citation, notice,
directive, order, claim, litigation, investigation, proceeding, judgment, letter or other
communication from any federal, provincial, territorial, state or municipal authority or any other
party against any Credit Party involving (a) a Hazardous Discharge from or onto any real property
owned, leased or operated at any time by any Credit Party, or (b) a Hazardous Discharge caused, in
whole or in part, by any Credit Party or by any Person acting on behalf of or at the instruction of
any Credit Party, or (c) any violation of any Environmental Law by any Credit Party.  


     “Environmental Laws” means any and all Governmental Requirements pertaining in any way
to health and safety (with respect to exposure to hazardous substances), the environment or the
preservation or reclamation of natural resources, as applicable in any jurisdictions in which any
Credit Party is conducting or at any time has conducted business, or where any Oil and Gas Property
of any Credit Party is located, including, as applicable, with respect to the Credit Parties
conducting business, or any Oil and Gas Property of any Credit Party located, in Canada, the
Environmental Protection and Enhancement Act, R.S.A.  2000, c.  E-12, as amended, (“EPEA”),
the Oil and Gas Conservation Act, R.S.A.  2000, c.  E-12, as amended (“OGCA”) and the
Canadian Environmental Protection Act, 1999.  S.C.  1999.  c.  33, as amended, and with respect to the
Credit Parties conducting business, or any Oil and Gas Property of any Credit Party located, in the
United States, the Oil Pollution Act of 1990, as amended (“OPA”), the Clean Air Act, as
amended, the Comprehensive Environmental, Response, Compensation, and Liability Act of 1980, as
amended (“CERCLA”), the Federal Water Pollution Control Act, as amended, the Occupational
Safety and Health Act of 1970, as amended, the Resource Conservation and Recovery Act of 1976, as
amended (“RCRA”), the Safe Drinking Water Act, as amended, the Toxic Substances Control
Act, as amended, the Superfund
Amendments and Reauthorization Act of 1986, as amended, the Hazardous Materials Transportation
Act, as amended.  With respect to the Credit Parties conducting business, or any Oil and Gas
Property of any Credit Party located, in Canada, the term “oil” has the meaning specified in OGCA,
the term “release” has the meanings specified in EPEA, the terms “solid waste” and “disposal” (or
“disposed”) have the meanings, or comparable meanings, specified under applicable provincial or
territorial Environmental Law in Canada; provided, however, that to the extent the applicable
Environmental Laws of the province, territory or local jurisdiction in which any Oil and Gas
Property of any Credit Party is located establish an equivalent meaning for “oil”, “release”, or
“disposal” which is



10









 





broader than that specified above, such broader meaning shall apply to the
extent applicable to such province, territory or local jurisdiction.  With respect to the Credit
Parties conducting business, or any Oil and Gas Property of any Credit Party located, in the United
States, the term “oil” has the meaning specified in OPA, the terms “release” (or “threatened
release”) have the meanings specified in CERCLA, the terms “solid waste” and “disposal” (or
“disposed”) have the meanings specified under applicable state Environmental Law in the United
States; provided, however, that to the extent the applicable Environmental Laws of the province,
state or local jurisdiction in which any Oil and Gas Property of any Credit Party is located
establish an equivalent meaning for “oil”, “release”, or “disposal” which is broader than that
specified above, such broader meaning shall apply to the extent applicable to such state or local
jurisdiction.  



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


     “Equity Interests” means shares of capital stock, partnership interests, membership
interests in a limited liability company, beneficial interests in a trust or other equity ownership
interests in a Person, and any warrants, options or other rights entitling the holder thereof to
purchase or acquire any such Equity Interest.  Convertible debt shall not constitute “Equity
Interests” for purposes hereof.  


     “ERISA” means the United States Employee Retirement Income Security Act of 1974, as
amended, and any successor statute.  


     “ERISA Affiliate” means each trade or business (whether or not incorporated) which
together with any Credit Party would be deemed to be a “single employer” within the meaning of
section 4001(b)(1) of ERISA or subsections (b), (c), (m) or (o) of section 414 of the Code.  


     “ERISA Event” means (a) a “Reportable Event” described in section 4043 of ERISA and
the regulations issued thereunder with respect to a Pension Plan, (b) the withdrawal of any Credit
Party or any ERISA Affiliate from a Pension Plan during a plan year in which it was a “substantial
employer” as defined in section 4001(a)(2) of ERISA or from a Multiemployer Plan, (c) the filing of
a notice of intent to terminate a Pension Plan or the treatment of a Pension Plan amendment as a
termination under section 4041 of ERISA, (d) the institution of proceedings to terminate a Pension
Plan by the PBGC, (e) receipt by any Credit Party or any ERISA Affiliate of a notice of withdrawal
liability pursuant to Section 4202 of ERISA, (f) any other event or condition which might
constitute grounds under section 4042 of ERISA for the termination of, or the appointment of a
trustee to administer, any Pension Plan, (g) the incurrence or assumption by any Credit Party or
any ERISA Affiliate of any liability under Title IV of ERISA with respect to any Pension Plan or
Multiemployer Plan (other than to make contributions in the ordinary course of business for the
payment of current premiums which are not past
due), (h) the occurrence of a non-exempt prohibited transaction under section 406 of ERISA or
section 4975 of the Code that is reasonably likely to result in liability to any Credit Party, (i)
the failure with respect to a Pension Plan, to satisfy the minimum funding standard under section
412 of the Code or section 302 of ERISA, or (j) the receipt by any Credit Party or any ERISA
Affiliate of any notice concerning the determination that a Multiemployer Plan is in endangered or
critical status, within the meaning of section 305 of ERISA, or insolvent or in reorganization,
within the meaning of Title IV of ERISA.  



11











 





     “Eurodollar”, when used in reference to any Loan or Borrowing, refers to whether
such Loan, or the Loans comprising such Borrowing, are bearing interest at a rate determined by
reference to the LIBO Rate.  


     “Event of Default” has the meaning assigned such term in Section 10.01.  


     “Excepted Liens” means:



     (a)     Liens for Taxes, assessments or other governmental charges or levies which (i) are not
delinquent or which are being contested in good faith by appropriate action and for which adequate
reserves have been maintained in accordance with GAAP or (ii) result from a failure by the
third-party lessor of any Oil and Gas Property to pay such Taxes, assessments or other governmental
charges or levies owing by such third-party lessor, which is satisfied within 60 days after a
Responsible Officer of the Borrower becomes aware thereof;



     (b)     Liens incurred or deposits made in connection with workers’ compensation, unemployment
insurance or other social security, old age pension or public liability obligations which are not
delinquent or in default (except to the extent that non-payment of such obligations is permitted by
Section 8.04);



     (c)     statutory landlord’s Liens, operators’, vendors’, carriers’, warehousemen’s, repairmen’s,
mechanics’, suppliers’, workers’, materialmen’s, journeymen’s, landlord’s and construction Liens,
Liens on pipelines and pipeline facilities or other like Liens, in each case arising by operation
of law in the ordinary course of business or incident to the exploration, development, operation
and maintenance of Properties each of which is in respect of obligations that are not delinquent or
in default (except to the extent that non-payment of such obligations is permitted by Section
8.04);



     (d)     contractual Liens which arise in the ordinary course of business under operating
agreements, joint venture agreements, oil and gas partnership agreements, oil and gas leases,
farm-out and farm-in agreements, division orders, contracts for the sale, transportation or
exchange of oil and natural gas, unitization and pooling declarations and agreements, area of
mutual interest agreements, overriding royalty agreements, marketing agreements, processing
agreements, net profits agreements, development agreements, gas balancing or deferred production
agreements, injection, repressuring and recycling agreements, salt water or other disposal
agreements, seismic or other geophysical permits or agreements, and other agreements which are
usual and customary in the oil and gas business and are for claims which are not delinquent or
which are being contested in good faith by appropriate action and for which adequate reserves have
been maintained in accordance with GAAP, provided that any such Lien referred to in this clause
does not (i) materially impair the use of the Property covered by such Lien for the purposes for
which such Property is held by any Credit Party or (ii) materially impair the value of such
Property subject thereto;



     (e)     Liens arising solely by virtue of any statutory or common law provision relating to
banker’s liens, rights of set-off or similar rights and remedies and burdening only deposit
accounts or other funds maintained with a creditor depository institution;



     (f)     (i) Immaterial Title Deficiencies and (ii) other minor defects in title which (A) for
purposes of this Agreement, shall include, but not be limited to, easements, restrictions, zoning
restrictions, servitudes, permits, conditions, covenants, exceptions or reservations in any
Property of any Credit Party for the purpose of roads, streets, alleys, highways, telephone lines,
power lines, pipelines, transmission lines, transportation lines, distribution lines for the
removal of gas, oil, coal or other minerals



12









 




or timber, and other like purposes, or for the joint or common use of real estate, rights of way, facilities
and equipment, surface leases and other similar rights in respect of surface operations, (B)
in the aggregate do not materially impair the use of such Property for the purposes of which such
Property is held by any Credit Party and (C) in the aggregate do not materially impair the value of
such Property subject thereto;




     (g)     (i) Liens on cash or securities pledged to secure performance of tenders, surety bonds,
government contracts, performance and return of money bonds, bids, trade contracts, leases,
statutory obligations, regulatory obligations, and other obligations of a like nature incurred, in
each case, in the ordinary course of business, and (ii) Liens on cash or securities pledged to
secure performance of appeal bonds, injunction bonds and other obligations of a like nature,
including, in the case of clauses (i) and (ii), cash on deposit with a court or any Person in lieu
of or in connection with any of the items referenced in this clause (g);



     (h)     judgment and attachment Liens not giving rise to an Event of Default under Section
10.01(k); and



     (i)     Liens arising from or perfected by precautionary United States Uniform Commercial Code
financing statement filings (or similar filings or registrations in other jurisdictions including
Canada) or other similar filings regarding operating leases entered into by the Credit Parties in
the ordinary course of business covering only the Property under lease and accessions thereto,
rights under warranties with respect thereto, proceeds thereof and other similar rights and
interests;



     provided, that (i) no intention to subordinate the first priority Lien in the collateral
granted in favor of the Administrative Agent and the Secured Parties pursuant to the Security
Instruments is to be hereby implied or expressed by the permitted existence of such Excepted Liens,
and (ii) the term “Excepted Liens” shall not include any Lien securing Debt for borrowed money
other than the Secured Indebtedness.  


     “Excess Cash” means at any time, the greater of (x) 0 and (y) (a) the aggregate amount
of the Borrower’s (or, from and after the New Parent Joinder, New Parent’s) and the Consolidated
Restricted Subsidiaries’ unrestricted cash and unrestricted Investments of the types described in
Sections 9.06(b), (c), (e), (f), (g), (h) and (i) on hand minus (b) the aggregate amount of
the Borrower’s (or, from and after the New Parent Joinder, New Parent’s) and the Consolidated
Restricted Subsidiaries’ accounts payable, accrued expenses, and liabilities incurred in the
ordinary course of business (x) which are not greater than ninety (90) days past the date of
invoice or billing and (y) excluding any reserves and accruals with respect to amounts which the
Borrower reasonably expects not to be paid minus (c) C$25,000,000.  


     “Exchange Act” the Securities Exchange Act of 1934, as amended.  


     “Excluded Taxes” means, with respect to the Administrative Agent, any Lender, any
Issuing Bank or any other recipient of any payment to be made by or on account of any obligation of
the Borrower or any Guarantor hereunder or under any other Loan Document, (a) taxes imposed on (or
measured by) net income or capital (however denominated) and franchise taxes, in each case imposed
by Canada or such other jurisdiction under the laws of which such recipient is organized or in
which its principal office is located or in which its applicable lending office is located, or in
which it is domiciled, is a resident or national of, or engaged in business or maintaining a
permanent establishment or other physical presence in or otherwise having some present or former
connection with (otherwise than by the mere receipt of payments under the Loan Documents); (b) any
Canadian withholding tax imposed by reason of a Foreign Lender not dealing at arm’s length, within
the meaning of the Income Tax Act



13









 




(Canada), with the Credit Party at the time of such payment; and
(c) any branch profits taxes imposed by
Canada or any similar tax imposed by any other jurisdiction in which the Borrower or any
Guarantor is located.  



     “Existing Credit Agreement” means the Amended and Restated Credit Agreement dated as
of February 9, 2007 among the Borrower, JPMorgan Chase Bank, N.A., Toronto Branch, as
administrative agent and the lenders and other agents party thereto, as amended.  


     “Existing Midstream Assets” means all tangible and intangible property owned by the
Credit Parties on the Effective Date and used in (a) gathering, compressing, treating, processing
and transporting natural gas, crude, condensate and natural gas liquids; (b) fractionating and
transporting natural gas, crude, condensate and natural gas liquids; and (c) marketing natural gas,
crude, condensate and natural gas liquids, including, without limitation, gathering lines,
pipelines, storage facilities, surface leases, rights-of-way, easements and servitudes related to
each of the foregoing, and also including the pipeline known as the Maxhamish Pipeline (as it
exists on the Effective Date, and as it may thereafter exist having regard to the additional
compressors and equipment to be installed and construction and other work to be done for its
completion, and which tangible and intangible property includes all line pipe, compressors and
other tangible equipment and property now or hereafter comprised therein or ancillary thereto, and
all related rights-of-way, easements and similar rights relating to the use of and access to the
surface of the land in or on which the Maxhamish Pipeline is located) and a gathering agreement
signed or to be signed by and between the Borrower and an Unrestricted Subsidiary in respect of the
gathering and other handling of the Borrower’s Hydrocarbons production in the said Maxhamish
Pipeline.  For purposes of clarity, “Existing Midstream Assets” shall be deemed not to include any
Oil and Gas Properties of the types described in clauses (a) through (e) of the definition of Oil
and Gas Properties, other than the said gathering agreement and any other contracts and agreements
that relate to the sale, purchase, transportation, gathering, exchange, or processing of
Hydrocarbons hereinafter entered into by the Borrower or a Subsidiary with the partnership referred
to in the definition of Midstream Joint Venture.  


     “Existing U.S. Credit Agreement” means the Amended and Restated Credit Agreement dated
as of February 9, 2007 among QRI, JPMorgan Chase Bank, N.A., as administrative agent and the
lenders and other agents party thereto, as amended.  


     “FASB” means the Financial Accounting Standards Board.  


     “FCPA” means the Foreign Corrupt Practices Act of 1977, as amended.  


     “Financial Officer” means the chief financial officer, principal accounting officer,
treasurer or controller of the Borrower.  


     “Financial Statements” means the financial statement or statements of the Borrower and
its Consolidated Subsidiaries referred to in Section 7.04(a).  


     “Foreign Lender” means any Lender that is not a resident of Canada or deemed to be a
resident of Canada for purposes of Part XIII of the Income Tax Act (Canada), other than a resident
of the U.S. for purposes of the Canada-United States Income Tax Convention that is fully entitled
to the benefits of such income tax convention with regard to any amounts that may become payable to
it under the Loan Documents.  For purposes of this definition, Canada and each province thereof
shall be deemed to constitute a single jurisdiction.  


14









 





     “Foreign Plan” means any employee benefit plan, program, policy, arrangement or
agreement contributed to by any Credit Party with respect to employees employed outside Canada and
the United States.  


     “GAAP” means generally accepted accounting principles in the United States of America
or Canada, as applicable, as in effect from time to time subject to the terms and conditions set
forth in Section 1.05.  


     “Governmental Authority” means, as applicable, the governments of the United States of
America and/or Canada, any other nation or any political subdivision thereof, whether provincial,
territorial, state or local, and any agency, authority, instrumentality, regulatory body, court,
central bank or other entity exercising executive, legislative, judicial, taxing, regulatory or
administrative powers or functions of government over any Credit Party, any of their Properties,
any Agent, any Issuing Bank or any Lender.  


     “Governmental Requirement” means any applicable law, statute, code, ordinance, order,
determination, rule, regulation, judgment, decree, injunction, franchise, permit, certificate,
license, authorization or other directive or requirement of any Governmental Authority, whether now
or hereinafter in effect, including, without limitation, environmental laws, energy regulations and
occupational, safety and health standards or controls, of any Governmental Authority.  


     “Grandfathered Letters of Credit” means the letters of credit issued by JPMorgan under
the Existing Credit Agreement outstanding on the Effective Date and set forth on Schedule 3.05.  


     “Guarantee” by any Person means any obligation, contingent or otherwise, of such
Person directly or indirectly guaranteeing any Debt or other obligation of any other Person and,
without limiting the generality of the foregoing, any obligation, direct or indirect, contingent or
otherwise, of such Person (a) to purchase or pay (or advance or supply funds for the purchase or
payment of) such Debt or other obligation (whether arising by virtue of partnership arrangements,
by agreement to keep-well, to purchase assets, goods, securities or services, to take-or-pay, or to
maintain financial statement conditions, by “comfort letter” or other similar undertaking of
support or otherwise) or (b) entered into for the purpose of assuring in any other manner the
obligee of such Debt or other obligation of the payment thereof or to protect such obligee against
loss in respect thereof (in whole or in part), provided, that the term “Guarantee” shall
not include (x) endorsements of instruments for collection or deposit in the ordinary course of
business or (y) indemnities given in connection with asset sales or otherwise provided in the
ordinary course of business.  The terms “Guarantee” and “Guaranteed” used as a verb
shall have a correlative meaning.  


     “Guarantors” means the entities listed on Schedule 1.02-a, any other Person that must
guarantee the Secured Indebtedness in order for the Borrower to comply with Section 8.13 and any
other Person that executes the Guaranty Agreement guaranteeing the payment of the Secured
Indebtedness.  QRI shall not be a Guarantor.  


     “Guaranty Agreement” means an agreement executed by the Guarantors in substantially
the form of Exhibit E-2 unconditionally guaranteeing on a joint and several basis, payment of the
Secured Indebtedness, as the same may be amended, modified or supplemented from time to time.  


     “Hazardous Discharge” means any releasing, spilling, leaking, pumping, pouring,
emitting, emptying, discharging, injecting, escaping, leaching, disposing or dumping of any
Hazardous Material



15









 




from or onto any real property owned, leased or operated at any time by any
Credit Party or any real property owned, leased or operated by any other Person.  



     “Hazardous Material” means all explosive or radioactive substances or wastes, all
hazardous or toxic substances, pollutants, asbestos or asbestos containing materials,
polychlorinated biphenyls, radon gas, infectious or medical wastes and all other hazardous or toxic
substances or wastes (including oil and
natural gas exploration, production and development wastes) of any nature, in each case, to
the extent regulated pursuant to any Environmental Law, and any petroleum, petroleum products or
petroleum distillates.  


     “Highest Lawful Rate” means, with respect to each Lender, the maximum nonusurious
interest rate, if any, that at any time or from time to time may be contracted for, taken,
reserved, charged or received on the Notes or on other Secured Indebtedness under laws applicable
to such Lender which are presently in effect or, to the extent allowed by law, under such
applicable laws which may hereafter be in effect and which allow a higher maximum nonusurious
interest rate than applicable laws allow as of the date hereof.  


     “Hydrocarbon Interests” means all rights, titles, interests and estates now or
hereafter acquired in and to Hydrocarbons, oil and gas leases, mineral leases, or other liquid or
gaseous Hydrocarbon leases, mineral fee interests, overriding royalty and royalty interests, net
profit interests and production payment interests, including any reserved or residual interests of
whatever nature.  


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


     “Immaterial Title Deficiencies” means minor defects or deficiencies in title which do
not diminish by more than 5% the aggregate value of the Oil and Gas Properties evaluated in the
Reserve Report used in the most recent determination of the Borrowing Base.  


     “Income Tax Act (Canada)” means the Income Tax Act (Canada) and regulations
promulgated thereunder, as amended from time to time.  


     “Increasing Lender” has the meaning set forth in Section 2.09.  


     “Indemnified Taxes” means Taxes other than Excluded Taxes.  


     “Initial Reserve Report” means the Reserve Report with respect to the value of certain
Oil and Gas Properties of the Borrower and its Restricted Subsidiaries as of July 1, 2011.  


     “Interest Election Request” means a request by the Borrower to convert or continue a
Borrowing in accordance with Section 2.04.  


     “Interest Payment Date” means (a) with respect to any Canadian Prime Loan or U.S. Prime Loan, the last day of each March, June, September and December, and (b) with respect to any
CDOR Loan or Eurodollar Loan, the last day of the Interest Period applicable to the Borrowing of
which such Loan is a part and, in the case of a CDOR Borrowing or Eurodollar Borrowing with an
Interest Period of more than three months’ duration, each day prior to the last day of such
Interest Period that occurs at intervals of three months’ duration after the first day of such
Interest Period.  


16









 





     “Interest Period” means with respect to any CDOR Borrowing or Eurodollar Borrowing,
the period commencing on the date of such Borrowing and ending on the numerically corresponding day
in the calendar month that is one, two, three, six or, if available to all Lenders, nine or 12
months or one or two weeks thereafter, as the Borrower may elect; provided, that (a) if any
Interest Period would end on a day other than a Business Day, such Interest Period shall be
extended to the next succeeding Business Day unless such next succeeding Business Day would fall in
the next calendar month, in which case such Interest Period shall end on the next preceding
Business Day, and (b) any Interest Period pertaining to a CDOR Borrowing or a Eurodollar Borrowing
that commences on the last Business Day of a calendar
month (or on a day for which there is no numerically corresponding day in the last calendar
month of such Interest Period) shall end on the last Business Day of the last calendar month of
such Interest Period.  For purposes hereof, the date of a Borrowing initially shall be the date on
which such Borrowing is made and thereafter shall be the effective date of the most recent
conversion or continuation of such Borrowing.  


     “Interim Redetermination” has the meaning assigned such term in Section 2.07(b).  


     “Interim Redetermination Date” means the date on which a Borrowing Base that has been
redetermined pursuant to an Interim Redetermination becomes effective as provided in Section
2.07(d).  


     “Intermediate HoldCo” means any Restricted Subsidiary of New Parent which owns,
directly or indirectly, any Equity Interests in the Borrower.  


     “Investment” means, for any Person any investment including, without limitation: (a)
the acquisition (whether for cash, Property, services or securities or otherwise) of Equity
Interests of any other Person; (b) the making of any deposit with, or advance, loan or capital
contribution to, purchase or other acquisition of any other Debt or equity participation or
interest in, or other extension of credit to, any other Person; (c) the purchase or acquisition (in
one or a series of transactions) of Property of another Person that constitutes a business unit or
(d) the entering into of any Guarantee of Debt or other liability of any other Person.  


     “IPO Tax Payments” means (a) a payment, whether direct or indirect, to or on behalf of
QRI or any of its Affiliates (other than the Borrower) pursuant to any indemnity or payment
obligations of New Parent to QRI or any of its Affiliates (other than the Borrower) with respect to
any Canadian taxes (including penalties and interest) imposed on QRI or any of its Affiliates
(other than the Borrower) in connection with the Qualified IPO done in connection with the transfer
by QRI to New Parent, directly or indirectly through a Parent HoldCo, of 100% of the Equity
Interests in the Borrower together with any Debt permitted by Section 9.02(t) that may be created
in respect of such Equity Interests in contemplation of the Qualified IPO or any of the
transactions related thereto as permitted hereunder (a “Canadian Tax Payment”), provided
that the Canadian Tax Payment that results from the dividend declared and paid by the Borrower to
QRI as permitted by Section 9.04(h) (the “Dividend Withholding Tax Payment”) will be made
solely from the proceeds of the Qualified IPO, or (b) a payment from the Borrower to New Parent for
the purpose of permitting or enabling New Parent to make a Canadian Tax Payment, other than the
Dividend Withholding Tax Payment.  


     “Issuing Bank” means JPMorgan and each Lender that agrees to act as an issuer of
Letters of Credit hereunder at the request of the Borrower, in each case, in its capacity as an
issuer of Letters of Credit hereunder, and its successors in such capacity as provided in Section
2.08(i).  Any Issuing Bank may, in its discretion, arrange for one or more Letters of Credit to be
issued by Affiliates of such Issuing Bank, in which case the term “Issuing Bank” shall include any
such Affiliate with respect to Letters of Credit issued by such Affiliate.  


17









 





     “Joinder Agreement” has the meaning set forth in Section 2.09(a).  


     “Joint Bookrunners” means J.P.  Morgan Securities LLC and The Bank of Nova Scotia, in
their capacity as the joint bookrunners hereunder.  


     “JPMorgan” means JPMorgan Chase Bank, N.A., Toronto Branch, in its individual
capacity.  


     “Judgment Currency” is defined in Section 2.11(b).  


     “LC Commitment” at any time means C$100,000,000.  


     “LC Disbursement” means a payment made by any Issuing Bank pursuant to a Letter of
Credit issued by such Issuing Bank.  


     “LC Exposure” means, at any time, the sum of (a) the aggregate undrawn and unexpired
stated amount of all outstanding Letters of Credit at such time plus (b) the aggregate amount of
all LC Disbursements that have not yet been reimbursed by or on behalf of the Borrower at such
time.  The LC Exposure of any Lender at any time shall be its Applicable Percentage of the total LC
Exposure at such time.  


     “Lenders” means the Persons listed on Annex I and any Person that shall have become a
party hereto pursuant to Section 2.09 or pursuant to an Assignment and Assumption, other than any
such Person that ceases to be a party hereto pursuant to an Assignment and Assumption.  


     “Letter of Credit” means any letter of credit issued pursuant to this Agreement,
including any Grandfathered Letters of Credit.  


     “Letter of Credit Agreements” means all letter of credit applications and other
agreements (including any amendments, modifications or supplements thereto) submitted by the
Borrower, or entered into by the Borrower, with any Issuing Bank relating to any Letter of Credit
issued by such Issuing Bank.  


     “LIBO Rate” means, with respect to any Eurodollar Borrowing for any Interest Period,
the rate appearing at Reuters Reference Screen LIBOR01 (or on any successor or substitute screen of
such service, or any successor to or substitute for such service, providing rate quotations
comparable to those currently provided on such screen of such service, as determined by the
Administrative Agent from time to time for purposes of providing quotations of interest rates
applicable to Dollar deposits in the London interbank market) at approximately 11:00 a.m., London
time, two Business Days prior to the commencement of such Interest Period, as the rate for Dollar
deposits with a maturity comparable to such Interest Period.  In the event that such rate is not
available at such time for any reason, then the “LIBO Rate” with respect to such Eurodollar
Borrowing for such Interest Period shall be the rate (rounded upwards, if necessary, to the next
1/16 of 1%) at which Dollar deposits in the approximate amount of such Eurodollar Borrowing and for
a maturity comparable to such Interest Period are offered by the principal London office of the
Administrative Agent in immediately available funds in the London interbank market at approximately
11:00 a.m., London time, two Business Days prior to the commencement of such Interest Period.  


     “Lien” means any interest in Property securing an obligation owed to, or a claim by, a
Person other than the owner of the Property, whether such interest is based on the common law,
statute or contract, and whether such obligation or claim is fixed or contingent, and including but
not limited to (a) the lien, security interest or floating charge arising from a mortgage,
debenture, encumbrance, pledge,



18









 




security agreement, conditional sale or trust receipt or a lease,
consignment or bailment for security purposes or (b) production payments and the like payable out
of Oil and Gas Properties.  The term “Lien” shall include easements, restrictions, servitudes,
permits, conditions, covenants, exceptions or reservations.  For the purposes of this Agreement,
the Credit Parties shall be deemed to own subject to a Lien any asset which is acquired or held
subject to the interest of a vendor or lessor under any conditional sale agreement, capital lease
or other title retention agreement relating to such asset.  



     “Loan Documents” means this Agreement, the Notes, all Letter of Credit Agreements, the
Letters of Credit and the Security Instruments.  


     “Loans” means the loans made by the Lenders to the Borrower pursuant to this
Agreement.  


     “Majority Lenders” means, at any time while no Loans or LC Exposure is outstanding,
Lenders having more than 50% of the Aggregate Maximum Credit Amounts; and at any time while any
Loans or LC Exposure is outstanding, Lenders holding more than 50% of the outstanding aggregate
principal amount of the Loans and participation interests in Letters of Credit (without regard to
any sale by a Lender of a participation in any Loan under Section 12.04(c)); provided that the
Maximum Credit Amounts and the principal amount of the Loans and participation interests in Letters
of Credit of the Defaulting Lenders (if any) shall be excluded from the determination of Majority
Lenders.  


     “Material Acquisition” means the acquisition of the Equity Interests of a Person or
the acquisition of assets from a Person, in each case for consideration of at least C$17,500,000.  


     “Material Adverse Effect” means a material adverse effect on (a) the business,
operations, Property or financial condition of the Credit Parties taken as a whole; provided that
changes in the prices of Hydrocarbons will not constitute a Material Adverse Effect, (b) the
validity or enforceability of any of the Loan Documents or the ability of the Credit Parties to
perform any of their respective obligations under any Loan Document or (c) the rights and remedies
of or benefits available to the Administrative Agent, any other Agent, any Issuing Bank or any
Lender under any Loan Document.  


     “Material Debt” means Debt (other than the Loans and Letters of Credit) or obligations
in respect of one or more Swap Agreements, of any one or more of the Credit Parties in an aggregate
principal amount exceeding C$25,000,000.  For purposes of determining Material Debt, the
“principal amount” of the obligations of any Credit Party in respect of any Swap Agreement
at any time shall be the net amount (after giving effect to any netting agreements on collateral
arrangements) that such Credit Party would be required to pay if such Swap Agreement were
terminated at such time.  


     “Material Disposition” means the sale, lease, assignment, conveyance or transfer of
the Equity Interests of a Person or the assets of a Person, in each case for consideration of at
least C$17,500,000.  


     “Material Restricted Subsidiary” means, at any time, each Restricted Subsidiary that
is a Domestic Subsidiary and owns assets representing 7.5% or more of the total assets of the
Credit Parties or whose EBITDAX represents 7.5% or more of the EBITDAX of the Credit Parties.  For
purposes of this definition, the total EBITDAX of the Credit Parties shall be determined as of the
end of the Borrower’s most recent fiscal quarter for which financial statements are available.  


     “Maturity Date” means the fifth anniversary of the Effective Date.  


     “Maximum Credit Amount” means, as to each Lender, the amount set forth opposite such
Lender’s name on Annex I under the caption “Maximum Credit Amounts”, as the same may be (a)



19









 




reduced
or terminated from time to time in connection with a reduction or termination of the Aggregate
Maximum Credit Amounts pursuant to Section 2.06(b), (b) increased pursuant to Section 2.09, (c)
modified from time to time pursuant to any assignment permitted by Section 12.04(b) or (d)
established pursuant to a Joinder Agreement executed by an Increasing Lender pursuant to Section
2.09.  



     “Midstream Joint Venture” means a contemplated transaction on terms substantially
similar (and not materially less favorable to the Borrower than) those disclosed by the Borrower to
the Lenders prior to the Effective Date, that will involve (a) the Investment by the Borrower of
the Existing Midstream Assets and not more than $50,000 cash to two separate formed or to-be-formed
Unrestricted Subsidiaries, (b) the contribution by such formed or to-be-formed Unrestricted
Subsidiaries of the Existing Midstream Assets and such cash to a formed or to-be-formed partnership
into which a third party will contribute cash
in exchange for an interest in the partnership, (c) the entering into of certain agreements
pursuant to which the Borrower will agree to dedicate and to cause its Subsidiaries to dedicate
certain of the production arising from or attributable to their working interest shares of natural
gas to such Unrestricted Subsidiaries or such partnership and to have certain of its Hydrocarbons
production (i) gathered and transported in certain of the Existing Midstream Assets and (ii)
processed and treated in future midstream assets of such partnership and (d) the entering into of
certain operating agreements and transition services agreements with respect to the operations of
such partnership.  


     “Minimum Liquidity” means, as of any date of determination, the sum of (a) the
aggregate unused amount of the Commitments under this Agreement as of such date (but only to the
extent that the Borrower is permitted to borrow such amounts under the terms of this Agreement
including, without limitation, Section 6.02 hereof) plus (b) all unrestricted and unencumbered cash
and Investments of the type described in Section 9.06(b), (c), (e), (f), (g), (h), and (i)
reflected on the Borrower’s balance sheet as of such date.  


     “Montreal” means Montreal, Quebec, Canada.  


     “Moody’s” means Moody’s Investors Service, Inc. and any successor thereto that is a
nationally recognized rating agency.  


     “Mortgaged Property” means any Property owned by the Borrower or any Guarantor which
is subject to the Liens existing and to exist under the terms of the Security Instruments.  


     “Multiemployer Plan” means a Plan which is a multiemployer plan as defined in section
3(37) or 4001(a)(3) of ERISA.  


     “Net Debt” means, with respect to the Borrower (or, from and after the New Parent
Joinder, New Parent) and the Consolidated Restricted Subsidiaries at any time, (a) Total Debt,
minus (b) the amount of Permitted Intercompany Debt outstanding at such time, minus
(c) Excess Cash.  


     “New Borrowing Base Notice” has the meaning assigned such term in Section 2.07(d).  


     “New Parent” means a direct parent of the Borrower (other than QRI) to which 100% of
the Equity Interests in the Borrower will be transferred by QRI in contemplation of a Qualified
IPO; which New Parent will, at all times following a Qualified IPO, own, directly or indirectly
(through one or more Intermediate HoldCos), 100% of the Equity Interests in the Borrower.  


     “New Parent Joinder” has the meaning assigned such term in Section 8.19.  


20









 





     “Non-Recourse Debt” means any Debt of any Subsidiary which does not own any Oil and
Gas Properties included in Borrowing Base in which a Credit Party made an Investment which Debt is
(a) secured solely by the assets acquired with the proceeds of such Debt and (b) with respect to
which (i) no Credit Party shall have any liability to any Person for repayment of all or any
portion of such Debt beyond the assets so secured and (ii) the holders thereof (A) shall have
recourse only to, and the right to require the obligations of such Subsidiary to be performed,
satisfied or paid only out of, the assets so secured and (B) shall have no direct or indirect
recourse (including by way of indemnity or guaranty) to any Credit Party, whether for principal,
interest, fees, expenses or otherwise; provided, however, that any such Debt shall not cease to be
“Non-Recourse Debt” solely as a result of the instrument governing such Debt containing terms
pursuant to which such Debt becomes recourse upon (1) fraud or misrepresentation by the Subsidiary
in connection with such Debt, (2) such Subsidiary failing to pay taxes or other charges that result
in the creation of Liens on any portion of the specific property securing such Debt or failing to
maintain any insurance on such property required under the instruments securing such Debt, (3)
the conversion of any of the collateral for such Debt, (4) such Subsidiary failing to maintain any
of the collateral for such Debt in the condition required under the instruments securing the Debt,
(5) any income generated by the specific property securing such Debt being applied in a manner not
otherwise allowed in the instruments securing such Debt, (6) the violation of any Environmental Law
or otherwise affecting the environmental condition of the specific property securing the Debt or
(7) the rights of the holder of such Debt to the specific property becoming impaired, suspended or
reduced by any act, omission or misrepresentation of such Person; provided further, however, that,
upon the occurrence of any of the foregoing clauses (1) through (7) above, any such Debt shall
cease to be “Non-Recourse Debt”.  


     “Notes” means the promissory notes of the Borrower described in Section 2.02(d) and
being substantially in the form of Exhibit A, together with all amendments, modifications,
replacements, extensions and rearrangements thereof.  


     “OFAC” means the Office of Foreign Assets Control of the United States Department of
Treasury.  


     “Oil and Gas Properties” means (a) Hydrocarbon Interests; (b) the Properties now or
hereafter pooled or unitized with Hydrocarbon Interests; (c) all presently existing or future
unitization, pooling agreements and declarations of pooled units and the units created thereby
(including without limitation all units created under orders, regulations and rules of any
Governmental Authority) which may affect all or any portion of the Hydrocarbon Interests; (d) all
operating agreements, contracts and other agreements, including production sharing contracts and
agreements, which relate to any of the Hydrocarbon Interests or the production, sale, purchase,
transportation, exchange or processing of Hydrocarbons from or attributable to such Hydrocarbon
Interests; (e) all Hydrocarbons in and under and which may be produced and saved or attributable to
the Hydrocarbon Interests, including all oil in tanks, and all rents, issues, profits, proceeds,
products, revenues and other incomes from or attributable to the Hydrocarbon Interests; (f) all
tenements, hereditaments, appurtenances and Properties in any manner appertaining, belonging,
affixed or incidental to the Hydrocarbon Interests and (g) all Properties, rights, titles,
interests and estates described or referred to above, including any and all Property, real or
personal, now owned or hereinafter acquired and situated upon, used, held for use or useful in
connection with the operating, working or development of any of such Hydrocarbon Interests or
Property (excluding drilling rigs, automotive equipment, rental equipment or other personal
Property which may be on such premises for the purpose of drilling a well or for other similar
temporary uses and surface buildings, structures and the contents thereof which contents are not
otherwise Oil and Gas Properties situated on such Hydrocarbon Interests or Property) and (x)
including any and all oil wells, gas wells, injection wells or other wells, fuel separators, liquid
extraction plants, plant compressors, pumps, pumping units, field gathering systems, tanks and tank
batteries, fixtures, valves, fittings, machinery and parts, engines, boilers, meters, apparatus,
equipment,



21









 




appliances, tools, implements, cables, wires, towers, casing, tubing and rods, surface
leases, rights-of-way, easements and servitudes together with all additions, substitutions,
replacements, accessions and attachments to any and all of the foregoing and (y) excluding any of
the foregoing assets described in clause (x) manufactured for sale to third parties to the extent
not used by the manufacturing Person in connection with the operating, working or development of
any of such Hydrocarbon Interests or Property; provided that notwithstanding anything to the
contrary contained herein, “Oil and Gas Properties” shall not include cash, deposit accounts or
securities accounts.  



     “Oil and Gas Swap Agreement” means a Swap Agreement pursuant to which any Person
hedges the price to be received by it for future production of Hydrocarbons.  


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


     “Other Currency” is defined in Section 2.11(a).  


     “Other Taxes” means any and all present or future stamp, court or documentary,
intangible, recording, filing taxes or any other excise or Property taxes, charges or similar
levies arising from any payment made hereunder or from the execution, delivery, performance,
enforcement or registration or, from the receipt or perfection of a security interest under, or
otherwise with respect to, this Agreement and any other Loan Document.  


     “Parent HoldCo” means a direct parent of the New Parent which owns, directly or
indirectly, any Equity Interests in the New Parent.  


     “Participant” has the meaning set forth in Section 12.04(c)(i).  


     “Participant Register” has the meaning set forth in Section 12.04(c)(iii).  


     “PBGC” means the Pension Benefit Guaranty Corporation, or any successor thereto.  


     “Pension Plan” means any employee pension benefit plan as defined in section 3(2) of
ERISA (other than a Multiemployer Plan) subject to the provisions of Title IV of ERISA or Section
302 of ERISA or Section 412 of the Code and in respect of which any Credit Party or any ERISA
Affiliate of the foregoing may have liability, including any liability by reason of having been a
substantial employer pursuant to section 4063 of ERISA at any time during the preceding five years,
or by reason of being deemed to be a contributing sponsor under section 4069 of ERISA.  


     “Permitted Additional Debt” means Debt permitted to be incurred pursuant to Section
9.02(n).  


     “Permitted Holders” means (a) QRI, the Borrower or any Restricted Subsidiary of the
Borrower (or, from and after the New Parent Joinder, New Parent), (b) a trustee or other fiduciary
holding securities under any employee benefit plan (or related trust) sponsored or maintained by
any Credit Party, (c)



22









 




Mercury Exploration Company, Mercury Production Company, Quicksilver Energy,
L.P., The Discovery Fund, Pennsylvania Avenue Limited Partnership, Pennsylvania Management Company,
the estate of Frank Darden, Lucy Darden, Ann Darden Self, Glenn Darden or Thomas Darden, (d) with
respect to the natural persons listed in the foregoing clause (c), their respective successors,
assigns or designees which, in each case, are Controlled Affiliates of any Person referred to in
the foregoing clause (c), and their respective heirs, beneficiaries, trust, estates, and (e) with
respect to the Persons listed in the foregoing clause (c) that are not natural persons, their
respective successors, assigns or designees which, in each case, are Controlled Affiliates of any
Person referred to in the foregoing clause (c).  



     “Permitted Intercompany Debt” means existing intercompany Debt owing from the Borrower
to QRI which is identified and listed on Schedule 9.02 hereof, which Debt (a) shall not exceed an
aggregate principal amount of $250,000,000, (b) shall not accrue interest at a rate greater than 2%
per annum, (c) shall be expressly subordinate to the Secured Indebtedness on terms acceptable to
the Administrative Agent and (d) shall be fully converted to Equity Interests in the Borrower on or
prior to the earliest of (i)
June 30, 2012, (ii) the occurrence of a Qualified IPO, and (iii) the issuance or incurrence of
any Permitted Additional Debt.  


     “Permitted Investments” means the Investments permitted by Section 9.06.  


     “Permitted Liens” means with respect to (a) any Oil and Gas Property of the Credit
Parties of the types described in clauses (a), (b), (c), (e) and (f) of the definition of “Oil and
Gas Properties” evaluated in the Reserve Report used in the most recent determination of the
Borrowing Base, the Liens permitted under clauses (a), (b), (c), (f), (g), and (i) of Section 9.03,
(b) any Equity Interests issued by the Borrower or by any Restricted Subsidiary, Liens of the type
described in clause (a) of the definition of “Excepted Liens” and (c) all property and assets
(other than those referred to in the foregoing clauses (a) and (b)), Liens of the type listed under
Section 9.03.  


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


     “Plan” means any employee pension benefit plan, as defined in section 3(2) of ERISA,
other than a Canadian Pension Plan or Canadian Benefit Plan, which (a) is currently or hereafter
sponsored, maintained or contributed to by a Credit Party or an ERISA Affiliate or (b) was at any
time during the six calendar years preceding the date hereof, sponsored, maintained or contributed
to by a Credit Party or an ERISA Affiliate.  


     “Pledge Agreement” means any Pledge Agreement to be entered into among one or more of
New Parent, any Intermediate HoldCo, the Borrower and the Restricted Subsidiaries (to the extent
that any of the foregoing own Equity Interests in the Borrower or any Restricted Subsidiary) and
the Administrative Agent in substantially the form of Exhibit G with such modifications as may be
necessary or agreeable to account for a pledgor not being organized under the laws of Canada (or a
province thereof) (or otherwise in form and substance acceptable to the Administrative Agent)
granting Liens and a security interest on the Equity Interests issued by the Borrower and
Restricted Subsidiaries in favor of the Administrative Agent for the benefit of the Secured Parties
to secure the Secured Indebtedness, as the same may be amended, modified or supplemented from time
to time.  


     “Principal Office” means the principal office of the Administrative Agent, which on
the date of this Agreement is located at 200 Bay Street, Floor 18, Royal Bank Plaza, South Tower,
Toronto, Ontario M5J 2J2 Canada.  


23









 





     “Property” means any interest in any kind of property or asset, whether real, personal
or mixed, or tangible or intangible, including, without limitation, cash, securities, accounts and
contract rights.  


     “Proposed Borrowing Base” has the meaning assigned to such term in Section 2.07(c)(i).  


     “Proposed Borrowing Base Notice” has the meaning assigned to such term in Section
2.07(c)(ii).  


     “Proved Hydrocarbon Interests” means, collectively, all Hydrocarbon Interests which
constitute “proved reserves,” “proved developed producing reserves,” “proved developed nonproducing
reserves,” and “proved undeveloped reserves,” as such terms are defined from time to time by the
Society of Petroleum Engineers of the American Institute of Mining Engineers.  


     “Proved Producing Hydrocarbon Interests” means all Hydrocarbon Interests which
constitute “proved developed producing reserves” as such term is defined from time to time by the
Society of Petroleum Engineers of the American Institute of Mining Engineers.  


     “QRI” means Quicksilver Resources Inc., a Delaware corporation.  


     “QRI Pledge Agreement” means a pledge agreement in form and substance satisfactory to
the Administrative Agent pursuant to which QRI will pledge as collateral all of the Equity
Interests in the Borrower owned by it (prior to the transfer of such Equity Interests to New
Parent) to the Administrative Agent for the benefit of the Secured Parties to secure the Secured
Indebtedness, which QRI Pledge Agreement shall be non-recourse to QRI except to the extent of the
Equity Interests pledged thereunder.  


     “Qualified IPO” means the first underwritten sale to the public of Equity Interests in
New Parent which results in net cash proceeds to New Parent of not less than C$200,000,000, and
after which the Equity Interests in New Parent are listed on a recognized U.S. or Canadian national
securities exchange or the NASDAQ Stock Market.  


     “Reclassification” means the owner of an Oil and Gas Property evaluated in the Reserve
Report used in the most recent determination of the Borrowing Base changing from a Restricted
Subsidiary to an Unrestricted Subsidiary as a result of either (a) the Borrower designating such
previously Restricted Subsidiary as an Unrestricted Subsidiary in accordance with Section 9.07(b),
or (b) such previously Restricted Subsidiary merging with an Unrestricted Subsidiary, with the
Unrestricted Subsidiary being the continuing or surviving Person in accordance with Section
9.09(a).  “Reclassified” shall have the correlative meaning thereto, and an Oil and Gas Property is
“Reclassified” if a Reclassification occurs with respect to its owner.  


     “Recognized Value” means, (a) with respect to Oil and Gas Properties evaluated in the
most recently delivered Reserve Report, the discounted present value of the estimated net cash flow
to be realized from the production of Hydrocarbons from such Oil and Gas Properties as determined
by the Administrative Agent for purposes of determining the portion of the then effective Borrowing
Base which it attributes to such Oil and Gas Properties in accordance with Section 2.07, and (b)
with respect to any other Oil and Gas Properties, the discounted present value of the estimated net
cash flow to be realized from the production of Hydrocarbons from such Oil and Gas Properties as
determined by the Administrative Agent in the same manner as if it were evaluating such Oil and Gas
Properties for purposes of determining the Borrowing Base.  


     “Redemption” means with respect to any Debt, the repurchase, redemption, prepayment,
repayment, defeasance or any other acquisition or retirement for value (or the segregation of funds
with



24









 




respect to any of the foregoing) of such Debt; provided that any conversion of Permitted
Intercompany Debt into Equity Interests of the Borrower shall not constitute a Redemption of such
Permitted Intercompany Debt.  “Redeem” has the correlative meaning thereto.  



     “Redetermination Date” means, with respect to any Scheduled Redetermination or any
Interim Redetermination, the date that the redetermined Borrowing Base related thereto becomes
effective pursuant to Section 2.07(d).  


     “Register” has the meaning assigned such term in Section 12.04(b)(iv).  


     “Related Parties” means, with respect to any specified Person, such Person’s
Affiliates and the respective directors, officers, employees, partners, agents and advisors
(including attorneys, accountants and experts) of such Person and such Person’s Affiliates.  


     “Required Lenders” means, at any time while no Loans or LC Exposure is outstanding,
Lenders having at least 66 2/3% of the Aggregate Maximum Credit Amounts; and at any time while any
Loans or LC Exposure is outstanding, Lenders holding at least 66 2/3% of the outstanding aggregate
principal
amount of the Loans and participation interests in Letters of Credit (without regard to any
sale by a Lender of a participation in any Loan under Section 12.04(c)); provided that the Maximum
Credit Amounts and the principal amount of the Loans and participation interests in Letters of
Credit of the Defaulting Lenders (if any) shall be excluded from the determination of Required
Lenders.  


     “Reserve Report” means a report, in form and substance reasonably satisfactory to the
Administrative Agent, setting forth, as of the dates set forth in Section 8.11(a) (or such other
date in the event of an Interim Redetermination), the oil and gas reserves attributable to the Oil
and Gas Properties of the Credit Parties, together with a projection of the rate of production and
future net income, taxes, operating expenses and capital expenditures with respect thereto as of
such date, based upon the pricing assumptions consistent with SEC reporting requirements at the
time.  For the avoidance of doubt, any reference in this Agreement (including Section 8.13 and
Section 9.10) to Oil and Gas Properties described, included or evaluated in a Reserve Report shall
be deemed to refer solely to Proved Hydrocarbon Interests and to exclude possible or probable oil
and gas reserves attributable to such Oil and Gas Properties.  


     “Responsible Officer” means, as to any Person, the Chief Executive Officer, the
President, any Financial Officer or any Vice President of such Person (a “Specified Responsible
Officer”) or any (a) other officer specified as such to the Administrative Agent in writing by
a Specified Responsible Officer, or (b) other employee specified as such to the Administrative
Agent in writing by the chief financial officer and by one other Financial Officer; provided that
any written designation of any officer or employee other than a Specified Responsible Officer as a
“Responsible Officer” shall include a specimen signature of such other officer or employee which is
certified by a Specified Responsible Officer.  Unless otherwise specified, all references to a
Responsible Officer herein shall mean a Responsible Officer of the Borrower.  


     “Restricted Payment” means any dividend or other distribution (whether in cash,
securities or other Property) with respect to any Equity Interests in any Credit Party, or any
payment (whether in cash, securities or other Property), including any sinking fund or similar
deposit, on account of the purchase, redemption, retirement, acquisition, cancellation or
termination of any such Equity Interests in any such Credit Party or any option, warrant or other
right to acquire any such Equity Interests in any such Credit Party; provided that cash payments in
connection with restricted stock units, phantom stock plans or similar compensation arrangements
shall not constitute Restricted Payments.  



25











 





     “Restricted Subsidiary” means any Subsidiary of the Borrower (or, from and after
the New Parent Joinder, New Parent) that is not an Unrestricted Subsidiary.  


     “Revolving Credit Exposure” means, with respect to any Lender at any time, the sum of
(i) the outstanding principal amount of such Lender’s Loans and (ii) its LC Exposure, in each case
at such time.  


     “S&P” means Standard & Poor’s Ratings Group, a division of The McGraw-Hill Companies,
Inc., and any successor thereto that is a nationally recognized rating agency.  


     “Schedule I Lender” means a Lender which is a Canadian chartered bank listed on
Schedule I to the Bank Act (Canada), as amended from time to time.  


     “Scheduled Redetermination” has the meaning assigned such term in Section 2.07(b).  


     “Scheduled Redetermination Date” means the date on which a Borrowing Base that has
been redetermined pursuant to a Scheduled Redetermination becomes effective as provided in Section
2.07(d).  


     “SEC” means the Securities and Exchange Commission or any successor Governmental
Authority.  


     “Section 1031 Counterparty” means an entity that is not an Affiliate of the Borrower
and that will serve as an exchange accommodation titleholder in connection with the Section 1031
Exchange.  


     “Section 1031 Exchange” means a transaction intended to qualify for nonrecognition of
gain or loss under Section 1031 of the Code pursuant to which a Credit Party would exchange Oil and
Gas Properties owned by it for Oil and Gas Properties owned by a third party.  


     “Secured Indebtedness” means any and all amounts owing or to be owing by any Credit
Party or any non-Credit Party Guarantor (whether direct or indirect (including those acquired by
assumption), absolute or contingent, due or to become due, now existing or hereafter arising): (a)
to any Agent, any Issuing Bank or any Lender under any Loan Document, including, without
limitation, all interest on any of the Loans (including any interest that accrues after the
commencement of any case, proceeding or other action relating to the bankruptcy, insolvency or
reorganization of any Credit Party or any non-Credit Party Guarantor (or could accrue but for the
operation of applicable bankruptcy or insolvency laws), whether or not such interest is allowed or
allowable as a claim in any such case, proceeding or other action); (b) to any Secured Swap
Provider under any Swap Agreement, but excluding any additional transactions or confirmations
entered into (i) after such Secured Swap Provider ceases to be a Lender or an Affiliate of a Lender
or (ii) after assignment by a Secured Swap Provider to a Person that is not a Lender or an
Affiliate of a Lender at the time of such assignment; (c) to any Bank Products Provider in respect
of Bank Products; and (d) all renewals, extensions and/or rearrangements of any of the above.  


     “Secured Parties” means the Lenders, Bank Product Providers and the Secured Swap
Providers.  


     “Secured Swap Provider” means (a) any Person that is a party to a Swap Agreement with
any Credit Party that entered into such Swap Agreement (whether at the time the
transaction was entered into or thereafter by novation) while such Person was a Lender or an
Affiliate of a Lender (or a lender or an Affiliate of a lender under the Existing Credit Agreement
or the Existing U.S.  Credit Agreement), whether or not such Person at any time ceases to be a
Lender or an Affiliate of a Lender, as the case may be, (b) certain counterparties to existing Swap
Agreements with QRI or the Borrower (and who were lenders or affiliates of lenders under the
Existing Credit Agreement), which Swap Agreements and



26









 







counterparties are set forth on Schedule
1.02-b, whether or not such counterparty is a Lender or an Affiliate of a Lender on or after the
Effective Date (provided, that such counterparties shall only remain Secured Swap Providers
pursuant to this clause (b) for a period of ninety (90) days following the Effective Date (which
period shall continue thereafter if an Event of Default exists on such 90th day until
such Event of Default is cured or waived in accordance with Section 12.02), or (c) any assignee of
any Person described in clauses (a) and (b) above so long as such assignee is a Lender or an
Affiliate of a Lender at the time of such assignment.  


     “Security Instruments” means the Guaranty Agreement, each Pledge Agreement, the QRI
Pledge Agreement, debentures, mortgages, deeds of trust and other agreements, instruments or
certificates described or referred to in Exhibit E-1, and any and all other agreements, instruments
or certificates now or hereafter executed and delivered by the Borrower or any other Person (other
than Swap Agreements with the Lenders or any Affiliate of a Lender or participation or similar
agreements between any Lender and any other lender or creditor with respect to any Secured
Indebtedness pursuant to this Agreement and other than agreements in respect of Bank Products
Obligations) in connection with, or as security for the payment or performance of the Secured
Indebtedness, the Notes, this Agreement, or reimbursement obligations under the Letters of Credit,
as such agreements may be amended, modified, supplemented or restated from time to time.  


     “Subsidiary” means: (a) any Person of which at least a majority of the outstanding
Equity Interests having by the terms thereof ordinary voting power to elect a majority of the board
of directors, managers or other governing body of such Person (irrespective of whether or not at
the time Equity Interests of any other class or classes of such Person have or might have voting
power by reason of the happening of any contingency) is at the time directly or indirectly owned or
controlled by the Borrower (or, from and after the New Parent Joinder, New Parent) or one or more
of its Subsidiaries or by the Borrower (or, from and after the New Parent Joinder, New Parent) and
one or more of its Subsidiaries and (b) any partnership of which the Borrower (or, from and after
the New Parent Joinder, New Parent) or any of its Subsidiaries is a general partner.  Unless
otherwise indicated herein, each reference to the term “Subsidiary” shall mean a Subsidiary of the
Borrower (or, from and after the New Parent Joinder, New Parent).  


     “Swap Agreement” means any agreement with respect to any financial derivative
transaction, including any swap, forward, future or similar agreement, whether exchange traded,
“over-the-counter” or otherwise, involving, or settled by reference to, one or more rates,
currencies, commodities, equity or debt instruments or securities, or economic, financial or
pricing indices or measures of economic, financial or pricing risk or value or any similar
transaction or any combination of these transactions; provided that stock option or other benefit
or compensation plans providing for payments only on account of services provided by current or
former directors, officers, employees or consultants of any Credit Party shall not constitute a
Swap Agreement.  


     “Sweep Accounts” means deposit accounts, the proceeds of which are transferred nightly
to an interest-bearing concentration account maintained by the Administrative Agent or another
Lender (provided that upon an Event of Default such Lender shall, at the request of the
Administrative Agent, enter into a control agreement with the Administrative Agent and the
applicable Credit Party, as appropriate, in form and substance reasonably satisfactory to the
Administrative Agent),
and re-transferred each morning to such Credit Party’s, as applicable, deposit accounts, all
on terms and conditions reasonably satisfactory to the Administrative Agent.  


     “Taxes” means any and all present or future taxes, levies, imposts, duties,
deductions, charges or withholdings imposed by any Governmental Authority.  


27









 





     “Termination Date” means the earlier of the Maturity Date and the date of termination
of the Commitments.  


     “Toronto” means Toronto, Ontario, Canada.  


     “Total Debt” means at any date, all Debt of the Borrower (or, from and after the New
Parent Joinder, New Parent) and its Consolidated Restricted Subsidiaries, other than the types of
Debt set forth in clauses (e), (f) (to the extent permitted under Section 9.02(q)), and (g) of the
definition thereof, determined on a consolidated basis.  


     “Transactions” means, with respect to (a) the Borrower, the execution, delivery and
performance by the Borrower of this Agreement and each other Loan Document to which it is a party,
the borrowing of Loans, the use of the proceeds thereof and the issuance of Letters of Credit
hereunder, and the grant of Liens by the Borrower on Mortgaged Properties and other Properties
pursuant to the Security Instruments, and (b) each Guarantor, the execution, delivery and
performance by such Guarantor of each Loan Document to which it is a party, the guaranteeing of the
Secured Indebtedness and the other obligations under the Guaranty Agreement by such Guarantor and
such Guarantor’s grant of the security interests and provision of collateral pursuant to the
Security Instruments, and the grant of Liens by such Guarantor on Mortgaged Properties and other
Properties pursuant to the Security Instruments.  


     “Type”, when used in reference to any Loan or Borrowing, refers to whether the rate of
interest on such Loan, or on the Loans comprising such Borrowing, is determined by reference to the
Canadian Base Rate, the CDOR Rate, the U.S.  Base Rate or the LIBO Rate.  


     “Unfunded Current Liability” means the amount, if any, by which (a) the greater of the
solvency liability or the going concern liability of a Canadian Pension Plan as at the date of the
most recently filed actuarial valuation, in either case determined in accordance with the actuarial
methods and assumptions used by the actuary for the Canadian Pension Plan in the most recent
actuarial valuation of the Canadian Pension Plan filed with, and accepted for filing by, the
relevant pension regulatory authority, exceeds (b) the fair market value of the assets of the
Canadian Pension Plan as at the same date.  


     “Unrestricted Subsidiary” means any Subsidiary of the Borrower (or, from and after the
New Parent Joinder, New Parent) designated as such on Schedule 7.10 or which the Borrower (or, from
and after the New Parent Joinder, New Parent) has designated in writing to the Administrative Agent
to be an Unrestricted Subsidiary pursuant to Section 9.07.  


     “U.S.  Base Rate” means, for any day, a rate per annum equal to the greater of (a) the
U.S.  Prime Rate in effect on such day, and (b) the LIBO Rate for a one month Interest Period
beginning on such day plus one hundred basis points (or if such day is not a Business Day, the
immediately preceding Business Day); provided that, for the avoidance of doubt, the LIBO Rate for
any day shall be based on the rate appearing at Reuters Reference Screen LIBOR01 (or on any
successor or substitute screen of such service, or any successor to or substitute for such service,
providing rate quotations comparable to those currently provided on such screen of such service, as
determined by the Administrative Agent from time
to time for purposes of providing quotations of interest rates applicable to Dollar deposits
in the London interbank market) at approximately 11:00 a.m., London time on such day, as the rate
for Dollar deposits with a one-month maturity; provided further that, in the event that such rate
is not available at such time for any reason, then the LIBO Rate for such day shall be based on the
rate (rounded upwards, if necessary, to the next 1/16 of 1%) at which Dollar deposits in the
approximate amount of the applicable U.S.  Prime Borrowing with a one month maturity are offered by
the principal London office of the Administrative Agent in immediately available funds in the
London interbank market at approximately



28









 







11:00 a.m., London time, on such day (or the immediately
preceding Business Days if such day is not a day on which banks are open for dealings in Dollar
deposits in the London interbank market).  Any change in the U.S.  Base Rate due to a change in the
U.S.  Prime Rate or the LIBO Rate shall be effective from and including the effective date of such
change in the U.S.  Prime Rate or the LIBO Rate, respectively.  


     “U.S.  Prime”, when used in reference to any Loan or Borrowing, refers to whether such
Loan, or the Loans comprising such Borrowing, are bearing interest at a rate determined by
reference to the U.S.  Base Rate.  


     “U.S.  Prime Rate” means the rate of interest per annum publicly announced from time to
time by the bank then serving as Administrative Agent as the prime rate in effect at its principal
office in New York City; each change in the U.S.  Prime Rate shall be effective from and including
the date such change is publicly announced as being effective.  Such rate is set by the bank then
serving as Administrative Agent as a general reference rate of interest, taking into account such
factors as the bank then serving as Administrative Agent may deem appropriate; it being understood
that (x) many of the bank then serving as Administrative Agent’s commercial or other loans are
priced in relation to such rate, (y) it is not necessarily the lowest or best rate actually charged
to any customer and (z) the bank then serving as Administrative Agent may make various commercial
or other loans at rates of interest having no relationship to such rate.  


     Section 1.03   Types of Loans and Borrowings.  For purposes of this Agreement, Loans and
Borrowings, respectively, may be classified and referred to by Type (e.g., a “Eurodollar Loan” or a
“Eurodollar Borrowing”).  


     Section 1.04   Terms Generally; Rules of Construction.  The definitions of terms herein
shall apply equally to the singular and plural forms of the terms defined.  Whenever the context
may require, any pronoun shall include the corresponding masculine, feminine and neuter forms.  The
words “include”, “includes” and “including” as used in this Agreement shall be deemed to be
followed by the phrase “without limitation”.  The word “will” shall be construed to have the same
meaning and effect as the word “shall”.  Unless the context requires otherwise (a) any definition
of or reference to any agreement, instrument or other document herein shall be construed as
referring to such agreement, instrument or other document as from time to time amended,
supplemented or otherwise modified (subject to any restrictions on such amendments, supplements or
modifications set forth in the Loan Documents), (b) any reference herein to any law shall be
construed as referring to such law as amended, modified, codified or reenacted, in whole or in
part, and in effect from time to time, (c) any reference herein to any Person shall be construed to
include such Person’s successors and assigns (subject to the restrictions contained in the Loan
Documents), (d) the words “herein”, “hereof” and “hereunder”, and words of similar import, shall be
construed to refer to this Agreement in its entirety and not to any particular provision hereof,
(e) with respect to the determination of any time period, the word “from” means “from and
including” and the word “to” means “to and including” and (f) any reference herein to Articles,
Sections, Annexes, Exhibits and Schedules shall be construed to refer to Articles and Sections of,
and Annexes, Exhibits and Schedules to, this Agreement.  No provision of this Agreement or any
other Loan Document shall be interpreted or construed against any Person solely because such Person
or its legal representative drafted
such provision.  In addition, all terms used herein relating to rules, regulations laws,
taxes, GAAP and other similar items shall be deemed to mean, as applicable, the rules, regulations,
laws, taxes, GAAP or such similar item of the United States, Canada or any other jurisdiction
reasonably acceptable to the Administrative Agent pursuant to Section 9.08, as the context so
requires.  


29









 





     Section 1.05   Accounting Terms and Determinations; GAAP.  Unless otherwise specified
herein, all accounting terms used herein shall be interpreted, all determinations with respect to
accounting matters hereunder shall be made, and all financial statements and certificates and
reports as to financial matters required to be furnished to the Administrative Agent or the Lenders
hereunder shall be prepared, in accordance with GAAP, applied on a basis consistent with the
Financial Statements except for changes in which Borrower’s independent certified public
accountants concur and which are disclosed in such Financial Statements or to the Administrative
Agent on the next date on which financial statements are required to be delivered to the Lenders
pursuant to Section 8.01(a); provided that, if (i) the Borrower notifies the Administrative Agent
that the Borrower requests an amendment to any provision hereof to eliminate the effect of any
change occurring after the date hereof in GAAP or in the application thereof on the operation of or
calculation of compliance with such provision or (ii) the Administrative Agent notifies the
Borrower that the Majority Lenders request an amendment to any provision hereof for such purpose,
regardless of whether any such notice is given before or after such change in GAAP or in the
application thereof, then such provision shall be interpreted on the basis of GAAP as in effect and
applied immediately before such change shall have become effective until such notice shall have
been withdrawn or such provision amended in accordance herewith.  Notwithstanding anything herein
to the contrary, for the purposes of calculating any of the ratios tested under Section 9.01, and
the components of each of such ratios, the following shall be excluded: all Unrestricted
Subsidiaries, and their Subsidiaries (including their assets, liabilities, income, expenses,
losses, cash flows, and the elements thereof), except as set forth in clause (a) of the definition
of Consolidated Net Income.  


ARTICLE 2

The Credits




     Section 2.01   Commitments.  Subject to the terms and conditions set forth herein, each
Lender agrees to make Loans to the Borrower during the Availability Period in an aggregate
principal amount that will not result in (i) such Lender’s Revolving Credit Exposure exceeding such
Lender’s Commitment or (ii) the total Revolving Credit Exposures exceeding the total Commitments.  Within the foregoing limits and subject to the terms and conditions set forth herein, the Borrower
may borrow, repay and reborrow the Loans.  


     Section 2.02   Loans and Borrowings.  (a) Borrowings; Several Obligations.  Each
Loan shall be made as part of a Borrowing consisting of Loans made by the Lenders ratably in
accordance with their respective Commitments.  The failure of any Lender to make any Loan required
to be made by it shall not relieve any other Lender of its obligations hereunder; provided that the
Commitments are several and no Lender shall be responsible for any other Lender’s failure to make
Loans as required.  


     (b)     Types of Loans.  Subject to Section 3.03, each Borrowing shall be comprised
entirely of Canadian Prime Loans, CDOR Loans, U.S.  Prime Loans or Eurodollar Loans as the Borrower
may request in accordance herewith.  Each Lender at its option may make any CDOR Loan or Eurodollar
Loan by causing any domestic or foreign branch or Affiliate of such Lender to make such Loan;
provided that any exercise of such option shall not affect the obligation of the Borrower to repay
such Loan in accordance with the terms of this Agreement.  No such designation or transfer shall
result in any liability on the part of the Borrower for increased costs or expenses resulting
solely from such designation or transfer (except any such transfer which is made by a Lender
pursuant to Section 5.04 or Section 5.05, or otherwise for the purpose of complying with any
Governmental Requirement).  Increased costs for expenses resulting from
a Change in Law occurring subsequent to any such designation or transfer shall be deemed not
to result solely from such designation or transfer.  


30









 





     (c)     Minimum Amounts; Limitation on Number of Borrowings.  Each Canadian Prime
Borrowing shall be in an aggregate amount that is an integral multiple of C$100,000 and not less
than C$500,000; provided that a Canadian Prime Borrowing may be in an aggregate amount that is
equal to the entire unused balance of the total Commitments or that is required to finance the
reimbursement of an LC Disbursement as contemplated by Section 2.08(e).  Each CDOR Borrowing shall
be in an aggregate amount that is an integral multiple of C$1,000,000 and not less than
C$3,000,000.  Each U.S.  Prime Borrowing shall be in an aggregate amount that is an integral
multiple of $100,000 and not less than $500,000; provided that a U.S.  Prime Borrowing may be in an
aggregate amount that is equal to the entire unused balance of the total Commitments or that is
required to finance the reimbursement of an LC Disbursement as contemplated by Section 2.08(e).  Each Eurodollar Borrowing shall be in an aggregate amount that is an integral multiple of
$1,000,000 and not less than $3,000,000.  Borrowings of more than one Type may be outstanding at
the same time; provided that there shall not at any time be more than a total of 10 CDOR Borrowings
or 10 Eurodollar Borrowings outstanding.  Notwithstanding any other provision of this Agreement,
the Borrower shall not be entitled to request, or to elect to convert or continue, any Borrowing if
the Interest Period requested with respect thereto would end after the Maturity Date.  


     (d)     Notes.  If requested by a Lender, the Loans made by such Lender shall be evidenced
by a single promissory note of the Borrower in substantially the form of Exhibit A, dated, in the
case of (i) any Lender party hereto as of the date of this Agreement, as of the Effective Date, and
(ii) any other Lender, as of the date such Lender becomes a party hereto, payable to such Lender in
a principal amount equal to its Maximum Credit Amount as in effect on such date, and otherwise duly
completed.  In the event that any Lender’s Maximum Credit Amount increases or decreases for any
reason (whether pursuant to Section 2.06, Section 2.09, Section 12.04(b) or otherwise), the
Borrower shall deliver or cause to be delivered, to the extent such Lender is then holding a Note
and upon the written request of such Lender, on the effective date of such increase or decrease, a
new Note payable to such Lender in a principal amount equal to its Maximum Credit Amount after
giving effect to such increase or decrease, and otherwise duly completed.  Upon receipt of such
replacement Note, such Lender shall return the replaced Note to the Borrower.  The date, amount,
Type, interest rate and, if applicable, Interest Period of each Loan made by each Lender, and all
payments made on account of the principal thereof, shall be recorded by such Lender on its books
for its Note, and, prior to any transfer, may be endorsed by such Lender on a schedule attached to
such Note or any continuation thereof or on any separate record maintained by such Lender.  Failure
to make any such notation or to attach a schedule shall not affect any Lender’s or the Borrower’s
rights or obligations in respect of such Loans or affect the validity of such transfer by any
Lender of its Note.  


     Section 2.03   Requests for Borrowings.  To request a Canadian Prime Borrowing, a CDOR
Borrowing, a U.S.  Prime Borrowing or a Eurodollar Borrowing, the Borrower shall notify the
Administrative Agent of such request by telephone (a) in the case of a CDOR Borrowing or a
Eurodollar Borrowing, not later than 1:00 p.m., Toronto time, three Business Days before the date
of the proposed Borrowing or (b) in the case of a Canadian Prime Borrowing or a U.S.  Prime
Borrowing, not later than 12:00 p.m.  noon, Toronto time, on the date of the proposed Borrowing;
provided that no such notice shall be required for any deemed request of a Canadian Prime Borrowing
or a U.S.  Prime Borrowing, as applicable, to finance the reimbursement of an LC Disbursement as
provided in Section 2.08(e).  Each such telephonic Borrowing Request shall be irrevocable and shall
be confirmed promptly by hand delivery, electronic mail or telecopy to the Administrative Agent of
a written Borrowing Request substantially in the form of Exhibit B and signed by the Borrower.  Each such telephonic and written Borrowing Request shall specify the following information in
compliance with Section 2.02:




     (i)     the aggregate amount of the requested Borrowing (which amount will be in the
appropriate Currency as required pursuant to the third to last sentence of this Section
2.03);



31









 






     (ii)     the date of such Borrowing, which shall be a Business Day;




     (iii)     whether such Borrowing is to be a Canadian Prime Borrowing, a CDOR Borrowing, a
U.S.  Prime Borrowing or a Eurodollar Borrowing;




     (iv)     in the case of a CDOR Borrowing or a Eurodollar Borrowing, the initial Interest
Period to be applicable thereto, which shall be a period contemplated by the definition of
the term “Interest Period”; and




     (v)     the location and number of the Borrower’s account to which funds are to be
disbursed, which shall comply with the requirements of Section 2.05.  


     If no election as to the Type of Borrowing is specified, then the requested Borrowing shall be
a Canadian Prime Borrowing.  If no Interest Period is specified with respect to any requested CDOR
Borrowing or Eurodollar Borrowing, then the Borrower shall be deemed to have selected an Interest
Period of one month’s duration.  Notwithstanding anything herein to the contrary, (x) Canadian Prime
Loans and CDOR Loans may only be denominated in Canadian Dollars and (y) U.S.  Prime Loans and
Eurodollar Loans may only be denominated in Dollars.  Each Borrowing Request shall be deemed to
constitute a representation and warranty by the Borrower that the matters specified in Section
6.02(a) through (d) will be satisfied on the date of Borrowing specified in such Borrowing Request.  Promptly following receipt of a Borrowing Request in accordance with this Section 2.03, the
Administrative Agent shall advise each Lender of the details thereof and of the amount of such
Lender’s Loan to be made as part of the requested Borrowing.  


     Section 2.04   Interest Elections.  (a) Conversion and Continuance.  Each
Borrowing initially shall be of the Type specified in the applicable Borrowing Request and, in the
case of a CDOR Borrowing or a Eurodollar Borrowing, shall have an initial Interest Period as
specified in such Borrowing Request.  Thereafter, the Borrower may elect to convert such Borrowing
to a different Type or to continue such Borrowing and, in the case of a CDOR Borrowing or a
Eurodollar Borrowing, may elect Interest Periods therefor, all as provided in this Section 2.04.  The Borrower may elect different options with respect to different portions of the affected
Borrowing, in which case each such portion shall be allocated ratably among the Lenders holding the
Loans comprising such Borrowing, and the Loans comprising each such portion shall be considered a
separate Borrowing.  No such conversion or continuation shall be deemed the making of a new
Borrowing for purposes of this Agreement, including without limitation Article 6.  


     (b)     Interest Election Requests.  To make an election pursuant to this Section 2.04,
the Borrower shall notify the Administrative Agent of such election by telephone by the time that a
Borrowing Request would be required under Section 2.03 if the Borrower were requesting a Borrowing
of the Type resulting from such election to be made on the effective date of such election.  Each
such telephonic Interest Election Request shall be irrevocable and shall be confirmed promptly by
hand delivery, electronic mail or telecopy to the Administrative Agent of a written Interest
Election Request in substantially the form of Exhibit C and signed by the Borrower.  


     (c)     Information in Interest Election Requests.  Each telephonic and written Interest
Election Request shall specify the following information in compliance with Section 2.02:




     (i)     the Borrowing to which such Interest Election Request applies and, if different
options are being elected with respect to different portions thereof, the portions thereof to
be
allocated to each resulting Borrowing (in which case the information to be specified
pursuant to Section 2.04(c)(iii) and (iv) shall be specified for each resulting Borrowing);



32









 






     (ii)     the effective date of the election made pursuant to such Interest Election Request,
which shall be a Business Day;




     (iii)     whether the resulting Borrowing is to be a Canadian Prime Borrowing, a CDOR
Borrowing, a U.S.  Prime Borrowing or a Eurodollar Borrowing; and




     (iv)     if the resulting Borrowing is a CDOR Borrowing or a Eurodollar Borrowing, the
Interest Period to be applicable thereto after giving effect to such election, which, subject
to Section 2.04(e)(ii), shall be a period contemplated by the definition of the term
“Interest Period”.  


     If any such Interest Election Request requests a CDOR Borrowing or a Eurodollar Borrowing but
does not specify an Interest Period or the Interest Period specified in such Interest Election
Request is not available to all Lenders, then the Borrower shall be deemed to have selected an
Interest Period of one month’s duration.  


     (d)     Notice to Lenders by the Administrative Agent.  Promptly following receipt of an
Interest Election Request, the Administrative Agent shall advise each Lender of the details thereof
and of such Lender’s portion of each resulting Borrowing.  


     (e)     Effect of Failure to Deliver Timely Interest Election Request and Events of Default
and Borrowing Base Deficiencies on Interest Election.  If the Borrower fails to deliver a
timely Interest Election Request with respect to a CDOR Borrowing or a Eurodollar Borrowing prior
to the end of the Interest Period applicable thereto, then, unless such Borrowing is repaid as
provided herein, at the end of such Interest Period such Borrowing shall be converted to a Canadian
Prime Borrowing or U.S.  Prime Borrowing, as applicable.  Notwithstanding any contrary provision
hereof, if (i) an Event of Default has occurred and is continuing and the Administrative Agent, at
the request of the Majority Lenders, so notifies the Borrower: (A) no outstanding Borrowing may be
converted to or continued as a CDOR Borrowing or a Eurodollar Borrowing (and any Interest Election
Request that requests the conversion of any Borrowing to, or continuation of any Borrowing as, a
CDOR Borrowing or a Eurodollar Borrowing shall be ineffective) and (B) unless repaid, each CDOR
Borrowing and Eurodollar Borrowing shall be converted to a Canadian Prime Borrowing or a U.S.  Prime
Borrowing, as applicable, at the end of the Interest Period applicable thereto and (ii) a Borrowing
Base Deficiency exists and the Administrative Agent, at the request of the Majority Lenders, so
notifies the Borrower, no outstanding Borrowing may be converted to or continued as a CDOR
Borrowing or a Eurodollar Borrowing with an Interest Period longer than one month.  


     Section 2.05   Funding of Borrowings.  


     (a)     Funding by Lenders.  Each Lender shall make each Loan to be made by it hereunder
on the proposed date thereof by wire transfer of immediately available funds (in the appropriate
Currency based on the relevant Borrowing Request) by 2:00 p.m., Toronto time, to the account of the
Administrative Agent most recently designated by it for such purpose by notice to the Lenders.  The
Administrative Agent will make such Loans available to the Borrower by promptly crediting the
amounts so received, in like funds, to an account of the Borrower maintained with the
Administrative Agent and designated by the Borrower in the applicable Borrowing Request; provided
that Canadian Prime Loans or U.S.  Prime Loans, as applicable, made to finance the reimbursement of
an LC Disbursement as provided in Section 2.08(e) shall be remitted by the Administrative Agent to
the Issuing Bank that made such LC Disbursement.  Nothing herein shall be deemed to obligate any
Lender to obtain the funds for its Loan in
any particular place or manner or to constitute a representation by any Lender that it has
obtained or will obtain the funds for its Loan in any particular place or manner.  


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     (b)     Presumption of Funding by the Lenders.  Unless the Administrative Agent shall have
received notice from a Lender prior to the proposed date (or with respect to a Canadian Prime
Borrowing or a U.S.  Prime Borrowing, prior to the proposed time) of any Borrowing that such Lender
will not make available to the Administrative Agent such Lender’s share of such Borrowing, the
Administrative Agent may assume that such Lender has made such share available on such date in
accordance with Section 2.05(a) and may, in reliance upon such assumption, make available to the
Borrower a corresponding amount.  In such event, if a Lender has not in fact made its share of the
applicable Borrowing available to the Administrative Agent, then the applicable Lender and the
Borrower severally agree to pay to the Administrative Agent forthwith on demand such corresponding
amount with interest thereon, for each day from and including the date such amount is made
available to the Borrower to but excluding the date of payment to the Administrative Agent, at (i)
in the case of such Lender, the greater of the costs incurred by the Administrative Agent for
making such Lender’s share of such Borrowing and a rate determined by the Administrative Agent in
accordance with banking industry rules on interbank compensation or (ii) in the case of the
Borrower, the interest rate applicable to Canadian Prime Loans.  If such Lender pays such amount to
the Administrative Agent, then such amount shall constitute such Lender’s Loan included in such
Borrowing.  


     (c)     Borrowings, conversion or continuations of Loans, and prepayments of Loans of different
Currencies at the same time hereunder shall be deemed to be separate Borrowings, continuations,
conversions and prepayments, respectively, one for each Currency.  


     Section 2.06   Termination and Reduction of Aggregate Maximum Credit Amounts.  (a)
Scheduled Termination of Commitments.  Unless previously terminated, the Commitments shall
terminate on the Maturity Date.  If at any time the Aggregate Maximum Credit Amounts are terminated
or reduced to zero, then the Commitments shall terminate on the effective date of such termination
or reduction.  


     (b)     Optional Termination and Reduction of Aggregate Credit Amounts.  (i) The Borrower
may at any time terminate, or from time to time reduce, the Aggregate Maximum Credit Amounts;
provided that (A) each reduction of the Aggregate Maximum Credit Amounts shall be in an amount that
is an integral multiple of C$1,000,000 and not less than C$3,000,000 and (B) the Borrower shall not
terminate or reduce the Aggregate Maximum Credit Amounts if, after giving effect to any concurrent
prepayment of the Loans in accordance with Section 3.04(c), the total Revolving Credit Exposures
would exceed the total Commitments.  



     (ii)     The Borrower shall notify the Administrative Agent of any election to terminate or
reduce the Aggregate Maximum Credit Amounts under Section 2.06(b)(i) at least three Business
Days prior to the effective date of such termination or reduction, specifying such election
and the effective date thereof.  Promptly following receipt of any notice, the Administrative
Agent shall advise the Lenders of the contents thereof.  Each notice delivered by the
Borrower pursuant to this Section 2.06(b)(ii) shall be irrevocable; provided that a notice of
termination of the Aggregate Maximum Credit Amounts delivered by the Borrower may state that
such notice is conditioned upon the effectiveness of other credit facilities, in which case
such notice may be revoked by the Borrower (by notice to the Administrative Agent on or prior
to the specified effective date) if such condition is not satisfied.  Any termination or
reduction of the Aggregate Maximum Credit Amounts shall be permanent and may not be
reinstated.  Each reduction of the Aggregate Maximum Credit Amounts shall be made ratably
among the Lenders in accordance with each Lender’s Applicable Percentage.  


34









 





     Section 2.07   Borrowing Base.  (a) Initial Borrowing Base.  For the period from and
including the Effective Date to but excluding the first Redetermination Date, the amount of the
Borrowing Base shall be C$225,000,000.  Notwithstanding the foregoing, the Borrowing Base may be
subject to further adjustments from time to time, whether before or after such Redetermination
Date, pursuant to Section 9.02(n) or Section 9.10.  


     (b)     Scheduled and Interim Redeterminations.  Subject to Section 2.07(d), the Borrowing
Base shall be redetermined semi-annually (a “Scheduled Redetermination”) on or about the
date that is 45 days following the Borrower’s delivery of a Reserve Report in accordance with
Section 8.11(a).  In addition, (i) the Borrower may, by notifying the Administrative Agent thereof,
and (ii) the Administrative Agent may, at the direction of the Required Lenders, by notifying the
Borrower thereof, each elect to cause the Borrowing Base to be redetermined one time between
Scheduled Redeterminations (an “Interim Redetermination”) in accordance with this Section
2.07.  


     (c)     Scheduled and Interim Redetermination Procedure.  (i) Each Scheduled
Redetermination and each Interim Redetermination shall be effectuated as follows: Upon receipt by
the Administrative Agent of (A) the Reserve Report and the certificate required to be delivered by
the Borrower to the Administrative Agent, in the case of a Scheduled Redetermination, pursuant to
Section 8.11(a) and (c), and, in the case of an Interim Redetermination, pursuant to Section
8.11(b) and (c), and (B) such other reports, data and supplemental information including, without
limitation, the information provided pursuant to Section 8.11(c) as may, from time to time, be
reasonably requested by the Required Lenders (the Reserve Report, such certificate and such other
reports, data and supplemental information being the “Engineering Reports”), the
Administrative Agent shall evaluate the information contained in the Engineering Reports and shall
propose a new Borrowing Base (the “Proposed Borrowing Base”) based upon such information
and such other information that is deemed appropriate by the Administrative Agent in its sole
discretion in good faith and consistent with its normal oil and gas lending criteria as it exists
at the particular time (including, without limitation, the status of title information with
respect to the Oil and Gas Properties as described in the Engineering Reports, if applicable, and
the existence of any other Debt, the Borrower’s other assets, liabilities, fixed charges, cash
flow, business, properties, prospects, management and ownership, hedged and unhedged exposure to
price, price and production scenarios, interest rate and operating cost changes).  In no event
shall the Proposed Borrowing Base exceed the Aggregate Maximum Credit Amounts.  



     (ii)     The Administrative Agent shall notify the Borrower and the Lenders of the Proposed
Borrowing Base (the “Proposed Borrowing Base Notice”):




     (A)     in the case of a Scheduled Redetermination (1) if the Administrative Agent
shall have received the Engineering Reports required to be delivered by the Borrower
pursuant to Section 8.11(a) in a timely and complete manner, then on or before 30
days after the receipt of such Engineering Reports (or as promptly thereafter as may
be reasonably practicable) or (2) if the Administrative Agent shall not have
received the Engineering Reports required to be delivered by the Borrower pursuant
to Section 8.11(a) in a timely and complete manner, then promptly after the
Administrative Agent has received complete Engineering Reports from the Borrower and
has had a reasonable opportunity to determine the Proposed Borrowing Base in
accordance with Section 2.07(c)(i); and




     (B)     in the case of an Interim Redetermination, promptly, and in any event,
within 30 days after the Administrative Agent has received the required Engineering
Reports (or as promptly thereafter as may be reasonably practicable).  


35









 






     (iii)     Any Proposed Borrowing Base that would increase the Borrowing Base then in effect
must be approved or deemed to have been approved by all of the Lenders as provided in this
Section 2.07(c)(iii); and any Proposed Borrowing Base that would decrease or maintain the
Borrowing Base then in effect must be approved or be deemed to have been approved by the
Required Lenders as provided in this Section 2.07(c)(iii).  Upon receipt of the Proposed
Borrowing Base Notice, each Lender shall have 15 days to agree with the Proposed Borrowing
Base or disagree with the Proposed Borrowing Base by proposing an alternate Borrowing Base.  If, at the end of such 15 days, any Lender has not communicated its approval or disapproval
in writing to the Administrative Agent, such silence shall be deemed to be an approval of the
Proposed Borrowing Base.  If, at the end of such 15-day period, all of the Lenders, in the
case of a Proposed Borrowing Base that would increase the Borrowing Base then in effect, or
the Required Lenders, in the case of a Proposed Borrowing Base that would decrease or
maintain the Borrowing Base then in effect, have approved or deemed to have approved, as
aforesaid, then the Proposed Borrowing Base shall become the new Borrowing Base effective on
the date specified in Section 2.07(d).  If, however, at the end of such 15-day period, the
Required Lenders, in the case of a decrease or reaffirmation of the Borrowing Base, or all
Lenders, in the case of an increase to the Borrowing Base, have not approved or deemed to
have approved, as aforesaid, then the Administrative Agent shall poll the Lenders to
ascertain the highest Borrowing Base then acceptable to all Lenders, in the case of an
increase to the Borrowing Base, or to a number of Lenders sufficient to constitute the
Required Lenders, in the case of a decrease or reaffirmation of the Borrowing Base, and such
amount shall become the new Borrowing Base, effective on the date specified in Section
2.07(d).  The consent of the Borrower, in its sole discretion, shall be required for any
increase in the Borrowing Base.  


     (d)     Effectiveness of a Redetermined Borrowing Base.  After a redetermined Borrowing
Base is approved or is deemed to have been approved by the Required Lenders or all Lenders, as
applicable, pursuant to Section 2.07(c)(iii) (and, in the case of an increase, the Borrower), the
Administrative Agent shall notify the Borrower and the Lenders of the amount of the redetermined
Borrowing Base (the “New Borrowing Base Notice”), and such amounts shall become the new
Borrowing Base, effective and applicable to the Borrower, the Agents, each Issuing Bank and the
Lenders:




     (i)     in the case of a Scheduled Redetermination, (A) if the Administrative Agent shall
have received the Engineering Reports required to be delivered by the Borrower pursuant to
Section 8.11(a) and (c) in a timely and complete manner, then on the date of such New
Borrowing Base Notice, or (B) if the Administrative Agent shall not have received the
Engineering Reports required to be delivered by the Borrower pursuant to Section 8.11(a) and
(c) in a timely and complete manner, then on the Business Day next succeeding the date of
such New Borrowing Base Notice; and




     (ii)     in the case of an Interim Redetermination, on the Business Day next succeeding the
date of such New Borrowing Base Notice.  


     Such amount shall then become the Borrowing Base until the next Scheduled Redetermination
Date, the next Interim Redetermination Date or the next adjustment to the Borrowing Base under
Section 9.02(n) or Section 9.10, whichever occurs first.  Notwithstanding the foregoing, no
Scheduled Redetermination or Interim Redetermination shall become effective until the New Borrowing
Base Notice related thereto is received by the Borrower.  


     Section 2.08   Letters of Credit.  


36









 





     (a)     General.  Subject to the terms and conditions set forth herein, the Borrower may
request any Issuing Bank to issue Canadian Dollar or Dollar denominated Letters of Credit for its
own account or for the account of any of its Restricted Subsidiaries, in a form reasonably
acceptable to the Administrative Agent and such Issuing Bank, at any time and from time to time
during the Availability Period; provided, however, that no Letter of Credit shall be issued if,
after such issuance, the LC Exposure would exceed the lesser of (A) the LC Commitment and (B) an
amount equal to the aggregate Commitments minus the aggregate Loans then outstanding.  In the event
of any inconsistency between the terms and conditions of this Agreement and the terms and
conditions of any form of letter of credit application or other agreement submitted by the Borrower
to, or entered into by the Borrower with, an Issuing Bank relating to any Letter of Credit, the
terms and conditions of this Agreement shall control.  


     (b)     Notice of Issuance, Amendment, Renewal, Extension; Certain Conditions.  To request
the issuance of a Letter of Credit (or the amendment, renewal or extension of an outstanding Letter
of Credit), the Borrower shall hand deliver or telecopy (or transmit by electronic communication,
if arrangements for doing so have been approved by the applicable Issuing Bank) to any Issuing Bank
and the Administrative Agent (not less than three Business Days in advance of the requested date of
issuance, amendment, renewal or extension) a notice:




     (i)     requesting the issuance of a Letter of Credit or identifying the Letter of Credit
issued by such Issuing Bank to be amended, renewed or extended;




     (ii)     specifying the date of issuance, amendment, renewal or extension (which shall be a
Business Day);




     (iii)     specifying the date on which such Letter of Credit is to expire (which shall
comply with Section 2.08(c));




     (iv)     specifying the amount and Currency of such Letter of Credit; and




     (v)     specifying the name and address of the beneficiary thereof and such other
information as shall be necessary to prepare, amend, renew or extend such Letter of Credit.  

Each such notice shall be deemed to constitute a representation and warranty by the Borrower that
the matters specified in Section 6.02(a) through (d) will be satisfied on the date specified in
clause (ii) of the immediately preceding sentence and that the LC Exposure will not exceed the LC
Commitment on such date.  No letter of credit issued by an Issuing Bank (if the Issuing Bank is
not the Administrative Agent) shall be deemed to be a “Letter of Credit” issued under this
Agreement unless such Issuing Bank has confirmed with the Administrative Agent that the condition
set forth in Section 6.02(d) hereof is satisfied and that the LC Exposure does not exceed the LC
Commitment (after giving effect to the issuance of such letter of credit).  If requested by any
Issuing Bank, the Borrower also shall submit a letter of credit application on such Issuing Bank’s
standard form in connection with any request for a Letter of Credit.  



     (c)     Expiration Date.  Each Letter of Credit shall expire at or prior to the close of
business on the earlier of (i) the date one year after the date of the issuance of such Letter of
Credit (or, in the case of any renewal or extension thereof, one year after such renewal or
extension) and (ii) the date that is five Business Days prior to the Maturity Date; provided,
however, that any Letter of Credit with a one-year tenor may provide for the renewal thereof for
additional one-year periods (which shall in no event extend beyond the date referred to in clause
(ii) above).  


37









 





     (d)     Participations.  By the issuance of a Letter of Credit (or an amendment to a
Letter of Credit increasing the amount thereof) and without any further action on the part of the
Issuing Bank that issues such Letter of Credit or the Lenders, each Issuing Bank that issues a
Letter of Credit hereunder hereby grants to each Lender, and each Lender hereby acquires from such
Issuing Bank, a participation in such Letter of Credit equal to such Lender’s Applicable Percentage
of the aggregate amount available to be drawn under such Letter of Credit.  In consideration and in
furtherance of the foregoing, each Lender hereby absolutely and unconditionally agrees to pay to
the Administrative Agent, in the Currency in which such Letter of Credit is denominated, for the
account of any Issuing Bank that issues a Letter of Credit hereunder, such Lender’s Applicable
Percentage of each LC Disbursement made by such Issuing Bank and not reimbursed by the Borrower on
the date due as provided in Section 2.08(e), or of any reimbursement payment required to be
refunded to the Borrower for any reason.  Each Lender acknowledges and agrees that its obligation
to acquire participations pursuant to this Section 2.08(d) in respect of Letters of Credit is
absolute and unconditional and shall not be affected by any circumstance whatsoever, including any
amendment, renewal or extension of any Letter of Credit or the occurrence and continuance of a
Default, the existence of a Borrowing Base Deficiency or reduction or termination of the
Commitments, and that each such payment shall be made without any offset, abatement, withholding or
reduction whatsoever.  


     (e)     Reimbursement.  If any Issuing Bank shall make any LC Disbursement in respect of a
Letter of Credit issued by such Issuing Bank, the Borrower shall reimburse such LC Disbursement by
paying to the Administrative Agent an amount (in the Currency in which the applicable Letter of
Credit is denominated) equal to such LC Disbursement not later than 2:00 p.m., Toronto time, on the
date that such LC Disbursement is made, if the Borrower shall have received notice of such LC
Disbursement prior to 11:00 a.m., Toronto time, on such date, or, if such notice has not been
received by the Borrower prior to such time on such date, then not later than 2:00 p.m., Toronto
time, on (i) the Business Day that the Borrower receives such notice, if such notice is received
prior to 11:00 a.m., Toronto time, on the day of receipt, or (ii) the Business Day immediately
following the day that the Borrower receives such notice, if such notice is not received prior to
such time on the day of receipt; provided that the Borrower may request that such payment be
financed with a Canadian Prime Borrowing (with respect to Letters of Credit denominated in Canadian
Dollars) or a U.S.  Prime Borrowing (with respect to Letters of Credit denominated in Dollars) in an
equivalent amount and, to the extent so financed, the Borrower’s obligation to make such payment
shall be discharged and replaced by the resulting Canadian Prime Borrowing or U.S.  Prime Borrowing,
as applicable.  For purposes of the first sentence of Section 2.01, the amount of such Canadian
Prime Borrowing or U.S.  Prime Borrowing, as applicable, shall be considered, but the amount of the
LC Disbursement to be concurrently reimbursed shall not be considered.  If the Borrower fails to
make such payment when due, the Administrative Agent shall notify each Lender of the applicable LC
Disbursement, the payment then due from the Borrower in respect thereof and such Lender’s
Applicable Percentage thereof.  Promptly following receipt of such notice, each Lender shall pay to
the Administrative Agent its Applicable Percentage of the payment then due from the Borrower, in
the same manner as provided in Section 2.05 with respect to Loans made by such Lender (and Section
2.05 shall apply, mutatis mutandis, to the payment obligations of the Lenders), and the
Administrative Agent shall promptly pay to the Issuing Bank that issued such Letter of Credit the
amounts so received by it from the Lenders.  Promptly following receipt by the Administrative Agent
of any payment from the Borrower pursuant to this Section 2.08(e), the Administrative Agent shall
distribute such payment to the Issuing Bank that issued such Letter of Credit or, to the extent
that Lenders have made payments pursuant to this Section 2.08(e) to reimburse such Issuing Bank,
then to such Lenders and such Issuing Bank as their interests may appear.  Any payment made by a
Lender pursuant to this Section 2.08(e) to reimburse an Issuing Bank for any LC Disbursement (other
than the funding of Canadian Prime Loans or U.S.  Prime Loans as contemplated above) shall not
constitute a Loan and shall not relieve the Borrower of its obligation to reimburse such LC
Disbursement.  


38









 





     (f)     Obligations Absolute.  The Borrower’s obligation to reimburse LC Disbursements as
provided in Section 2.08(e) shall be absolute, unconditional and irrevocable, and shall be
performed strictly in accordance with the terms of this Agreement under any and all circumstances
whatsoever and irrespective of (i) any lack of validity or enforceability of any Letter of Credit,
any Letter of Credit Agreement or this Agreement, or any term or provision therein, (ii) any draft
or other document presented under a Letter of Credit proving to be forged, fraudulent or invalid in
any respect or any statement therein being untrue or inaccurate in any respect, (iii) payment by
any Issuing Bank under a Letter of Credit issued by such Issuing Bank against presentation of a
draft or other document that does not comply with the terms of such Letter of Credit or any Letter
of Credit Agreement, or (iv) any other event or circumstance whatsoever, whether or not similar to
any of the foregoing, that might, but for the provisions of this Section 2.08(f), constitute a
legal or equitable discharge of, or provide a right of setoff against, the Borrower’s obligations
hereunder.  Neither the Administrative Agent, the Lenders nor any Issuing Bank, nor any of their
Related Parties shall have any liability or responsibility by reason of or in connection with the
issuance or transfer of any Letter of Credit or any payment or failure to make any payment
thereunder (irrespective of any of the circumstances referred to in the preceding sentence), or any
error, omission, interruption, loss or delay in transmission or delivery of any draft, notice or
other communication under or relating to any Letter of Credit (including any document required to
make a drawing thereunder), any error in interpretation of technical terms or any consequence
arising from causes beyond the control of any Issuing Bank; provided that the foregoing shall not
be construed to excuse any Issuing Bank from liability to the Borrower to the extent of any direct
damages (as opposed to consequential damages, claims in respect of which are hereby waived by the
Borrower to the extent permitted by applicable law) suffered by the Borrower that are caused by
such Issuing Bank’s failure to exercise care when determining whether drafts and other documents
presented under a Letter of Credit comply with the terms thereof.  The parties hereto expressly
agree that, in the absence of gross negligence or willful misconduct on the part of any Issuing
Bank (as finally determined by a court of competent jurisdiction), such Issuing Bank shall be
deemed to have exercised all requisite care in each such determination.  In furtherance of the
foregoing and without limiting the generality thereof, the parties agree that, with respect to
documents presented which appear on their face to be in substantial compliance with the terms of a
Letter of Credit, the Issuing Bank that issued such Letter of Credit may, in its sole discretion,
either accept and make payment upon such documents without responsibility for further
investigation, regardless of any notice or information to the contrary, or refuse to accept and
make payment upon such documents if such documents are not in strict compliance with the terms of
such Letter of Credit.  


     (g)     Disbursement Procedures.  Each Issuing Bank shall, promptly following its receipt
thereof, examine all documents purporting to represent a demand for payment under a Letter of
Credit issued by such Issuing Bank.  Such Issuing Bank shall promptly notify the Administrative
Agent and the Borrower by telephone (confirmed by electronic mail or telecopy) of such demand for
payment and whether such Issuing Bank has made or will make an LC Disbursement thereunder; provided
that any failure to give or delay in giving such notice shall not relieve the Borrower of its
obligation to reimburse such Issuing Bank and the Lenders with respect to any such LC Disbursement.  


     (h)     Interim Interest.  If any Issuing Bank shall make any LC Disbursement, then, until
the Borrower shall have reimbursed such Issuing Bank for such LC Disbursement (either with its own
funds or a Borrowing under Section 2.08(e)), the unpaid amount thereof shall bear interest, for
each day from and including the date such LC Disbursement is made to but excluding the date that
the Borrower reimburses such LC Disbursement, at the rate per annum then applicable to (x) Canadian
Prime Loans (if the related Letter of Credit was denominated in Canadian Dollars) or (y) U.S.  Prime
Loans (if the related Letter of Credit was denominated in Dollars).  Interest accrued pursuant to
this Section 2.08(h) shall be for the account of such Issuing Bank, except that interest accrued on
and after the date of payment by any



39









 




Lender pursuant to Section 2.08(e) to reimburse such Issuing Bank shall be for the account of
such Lender to the extent of such payment.  



     (i)     Replacement of an Issuing Bank.  Any Issuing Bank may be replaced or resign at any
time by written agreement among the Borrower, the Administrative Agent, such retiring or replaced
Issuing Bank and, in the case of a replacement, the successor Issuing Bank.  The Administrative
Agent shall notify the Lenders of any such resignation or replacement of an Issuing Bank.  At the
time any such resignation or replacement shall become effective, the Borrower shall pay all unpaid
fees accrued for the account of the retiring or replaced Issuing Bank pursuant to Section 3.05(b).  In the case of the replacement of an Issuing Bank, from and after the effective date of such
replacement, (i) the successor Issuing Bank shall have all the rights and obligations of the
replaced Issuing Bank under this Agreement with respect to Letters of Credit to be issued
thereafter and (ii) references herein to “Issuing Bank” shall be deemed to refer to such successor
or to any previous Issuing Bank, or to such successor and all previous Issuing Banks, as the
context shall require.  After the resignation or replacement of an Issuing Bank hereunder, the
retiring or replaced Issuing Bank shall remain a party hereto and shall continue to have all the
rights and obligations of an Issuing Bank under this Agreement with respect to Letters of Credit
issued by it prior to such resignation or replacement, but shall not be required to issue
additional Letters of Credit.  


     (j)     Cash Collateralization.  If (i) any Event of Default shall occur and be continuing
and the Borrower receives notice from the Administrative Agent or the Majority Lenders demanding
the deposit of cash collateral pursuant to this Section 2.08(j), or (ii) the Borrower is required
to pay to the Administrative Agent the excess attributable to an LC Exposure in connection with any
prepayment pursuant to Section 3.04(c), then the Borrower shall deposit, in an account with the
Administrative Agent, in the name of the Administrative Agent and for the benefit of the Lenders,
an amount in cash (in the applicable Currency) equal to, in the case of an Event of Default, the LC
Exposure, and in the case of a payment required by Section 3.04(c), the amount of such excess as
provided in Section 3.04(c), as of such date plus any accrued and unpaid interest thereon; provided
that the obligation to deposit such cash collateral shall become effective immediately, and such
deposit shall become immediately due and payable, without demand or other notice of any kind, upon
the occurrence of any Event of Default with respect to the Borrower or any Guarantor described in
Section 10.01(h) or Section 10.01(i).  The Borrower hereby grants to the Administrative Agent, for
the benefit of each Issuing Bank and the Lenders, an exclusive first priority and continuing
perfected security interest in and Lien on such account and all cash, checks, drafts, certificates
and instruments, if any, from time to time deposited or held in such account, all deposits or wire
transfers made thereto, any and all investments purchased with funds deposited in such account, all
interest, dividends, cash, instruments, financial assets and other Property from time to time
received, receivable or otherwise payable in respect of, or in exchange for, any or all of the
foregoing, and all proceeds, products, accessions, rents, profits, income and benefits therefrom,
and any substitutions and replacements therefor.  The Borrower’s obligation to deposit amounts
pursuant to this Section 2.08(j) shall be absolute and unconditional, without regard to whether any
beneficiary of any such Letter of Credit has attempted to draw down all or a portion of such amount
under the terms of a Letter of Credit, and, to the fullest extent permitted by applicable law,
shall not be subject to any defense or be affected by a right of set-off, counterclaim or
recoupment which any Credit Party may now or hereafter have against any such beneficiary, any
Issuing Bank, the Administrative Agent, the Lenders or any other Person for any reason whatsoever.  Such deposit shall be held as collateral securing the payment and performance of the Credit
Parties’ obligations under this Agreement and the other Loan Documents.  The Administrative Agent
shall have exclusive dominion and control, including the exclusive right of withdrawal, over such
account.  Other than any interest earned on the investment of such deposits, which investments
shall be made at the option and sole discretion of the Administrative Agent and at the Credit
Parties’ risk and expense, such deposits shall not bear interest.  Interest or profits, if any, on
such investments shall accumulate in such



40









 




account.  Moneys in such account shall be applied by the Administrative Agent to reimburse, on
a pro rata basis, each Issuing Bank for LC Disbursements for which it has not been reimbursed and,
to the extent not so applied, shall be held for the satisfaction of the reimbursement obligations
of the Credit Parties for the LC Exposure at such time or, if the maturity of the Loans has been
accelerated, be applied to satisfy other obligations of the Borrower and the Guarantors under this
Agreement or the other Loan Documents.  In the event of any such payment by the Borrower of amounts
contingently owing under outstanding Letters of Credit and in the event that thereafter drafts or
other demands for payment complying with the terms of such Letters of Credit are not made on or
prior to the respective expiration dates thereof, the Administrative Agent agrees, if no Default is
then continuing and the Borrower does not have any obligation at such time to provide cash
collateral under Section 2.10 hereof, or if no other amounts are then outstanding under this
Agreement, the Notes or the Loan Documents, to remit to the Borrower amounts for which the
contingent obligations evidenced by the Letters of Credit have ceased (but only to the extent of
the amount of cash collateral then on deposit with the Administrative Agent in respect of such
Letters of Credit).  If the Borrower is required to provide an amount of cash collateral hereunder
as a result of the occurrence of an Event of Default, and the Borrower is not otherwise required to
pay to the Administrative Agent the excess attributable to an LC Exposure in connection with any
prepayment pursuant to Section 3.04(c), then such amount (to the extent not applied as aforesaid)
shall be returned to the Borrower within three Business Days after all Events of Default have been
cured or waived.  



     Section 2.09   Increase in the Maximum Credit Amounts.  (a) The Borrower may, with the
consent of the Administrative Agent (such consent not to be unreasonably withheld, conditioned or
delayed), on no more than five occasions during the period beginning on the Effective Date to and
including the date that is six months prior to the Maturity Date, by written notice to the
Administrative Agent executed by the Borrower and one or more financial institutions (any such
financial institution executing such notice being called an “Increasing Lender”), which may
include any Lender, cause the Maximum Credit Amounts to be extended by the Increasing Lenders if
such Increasing Lender is not already a Lender (or cause the Maximum Credit Amounts of the
Increasing Lenders that are already Lenders to be increased, as the case may be) in an amount for
each Increasing Lender set forth in such notice; provided, that (i) each extension of new Maximum
Credit Amounts or increase in existing Maximum Credit Amounts pursuant to this paragraph shall
result in the aggregate Maximum Credit Amounts being increased by no less than C$13,000,000, (ii)
the sum of all new Maximum Credit Amounts and increases in existing Maximum Credit Amounts pursuant
to this paragraph shall not exceed C$250,000,000 without the approval of all Lenders, (iii) each
Increasing Lender, if not already a Lender, shall be subject to the approval of the Administrative
Agent, and each Issuing Bank (which approval shall not be unreasonably withheld, conditioned or
delayed), (iv) each Increasing Lender, if not already a Lender hereunder, shall become a party to
this Agreement by completing and delivering to the Administrative Agent a duly executed joinder
agreement in a form reasonably satisfactory to the Administrative Agent and the Borrower (a
“Joinder Agreement”), (v) any Lender requested by the Borrower to become an Increasing
Lender may elect, or decline, such request in its sole discretion and (vi) no Default has occurred
and is continuing.  


     (b)     Upon the effectiveness of any Joinder Agreement to which any Increasing Lender is a party,
(i) such Increasing Lender shall thereafter be deemed to be a party to this Agreement and shall be
entitled to all rights, benefits and privileges accorded a Lender hereunder and subject to all
obligations of a Lender hereunder and (ii) Annex I shall be deemed to have been amended to reflect
the Maximum Credit Amount of such Increasing Lender as provided in such Joinder Agreement.  Upon
the effectiveness of any increase pursuant to this Section 2.09 in the Maximum Credit Amount of a
Lender already a party hereto, Annex I shall be deemed to have been amended to reflect the
increased Maximum Credit Amount of such Lender.  Notwithstanding the foregoing, no increase in the
Aggregate Maximum Credit Amounts (or in the Maximum Credit Amount of any Lender) shall become
effective under this Section unless, on the date of



41









 




such increase, the Administrative Agent shall have received (i) a certificate, dated as of the
effective date of such increase and executed by a Financial Officer of the Borrower, to the effect
that the conditions set forth in paragraphs (a) and (c) of Section 6.02 shall be satisfied (with
all references in such paragraphs to a Borrowing being deemed to be references to such increase and
attaching resolutions of the Borrower approving such increase) and (ii) if requested by the
Administrative Agent, a legal opinion in form and substance reasonably satisfactory to the
Administrative Agent.  The Administrative Agent shall provide notice to the Borrower and the
Lenders of the effectiveness of any such Joinder Agreement and/or any increase in the Aggregate
Maximum Credit Amounts (or in the Maximum Credit Amount of any Lender) and the foregoing shall be
effective as of the date of such notice.  



     (c)     The Borrower shall prepay any Loans outstanding prior to the effectiveness of such
increase or extension, together with any amounts due pursuant to Section 5.02, with new Loans made
pursuant to Section 2.01 ratably in accordance with the Maximum Credit Amounts in effect following
such extension or increase.  


     Section 2.10   Defaulting Lenders.  Notwithstanding any provision of this Agreement to
the contrary, if any Lender becomes a Defaulting Lender, then the following provisions shall apply
for so long as such Lender is a Defaulting Lender:



     (a)     Commitment fees will cease to accrue on the unfunded portion of the Commitment of the
Defaulting Lender pursuant to Section 3.05(a) and such Defaulting Lender shall not be entitled to
receive any commitment fee pursuant to Section 3.05(a);



     (b)     If any LC Exposure exists at the time a Lender is a Defaulting Lender then solely for
purposes of computing the amount of the obligation of each non-Defaulting Lender to acquire,
refinance or fund participations in Letters of Credit pursuant to Section 2.08:




     (i)     all or any part of the LC Exposure of such Defaulting Lender shall be reallocated
among the non-Defaulting Lenders in accordance with their respective Applicable Percentages
but only to the extent that (x) the sum of all non-Defaulting Lenders’ Revolving Credit
Exposures does not exceed the total of all non-Defaulting Lenders’ Commitments, (y) each
non-Defaulting Lender’s total Revolving Credit Exposure may not in any event exceed the
Commitment of such Non-Defaulting Lender as in effect at the time of such reallocation and
(z) the conditions set forth in Section 6.02 are satisfied at such time;




     (ii)     if the reallocation described in clause (i) above cannot, or can only partially, be
effected, the Borrower shall within three Business Days following notice by the
Administrative Agent given no later than 1:00 p.m., Toronto time cash collateralize such
Defaulting Lender’s LC Exposure (after giving effect to any partial reallocation pursuant to
clause (i) above) in accordance with the procedures set forth in Section 2.08(j) for so long
as such LC Exposure is outstanding;




     (iii)     if the Borrower cash collateralizes any portion of such Defaulting Lender’s LC
Exposure pursuant to this Section 2.10(b), the Borrower shall not be required to pay any fees
to such Defaulting Lender pursuant to Section 3.05(b) with respect to such Defaulting
Lender’s LC Exposure during the period such Defaulting Lender’s LC Exposure is cash
collateralized; if the LC Exposure of the non-Defaulting Lenders is reallocated pursuant to
this Section 2.10, then the fees payable to the Lenders pursuant to Section 3.05(a) and
Section 3.05(b) shall be adjusted in accordance with such non-Defaulting Lenders’ Applicable
Percentages with the balance of such fee, if any, being retained by the Borrower for its own
account or, to the extent any LC Exposure



42









 







shall then be outstanding, being payable to each
applicable Issuing Bank for its own account to the extent such fee relates to the amount of
such LC Exposure; or




     (iv)     if any Defaulting Lender’s LC Exposure is neither cash collateralized nor
reallocated pursuant to this Section 2.10, then, without prejudice to any rights or remedies
of any Issuing Bank or any Lender hereunder, all commitment fees that otherwise would have
been payable to such Defaulting Lender (solely with respect to the portion of such Defaulting
Lender’s Commitment that was utilized by such LC Exposure) and Letter of Credit fees payable
under Section 3.05(b) with respect to such Defaulting Lender’s LC Exposure shall be payable
to each applicable Issuing Bank until such LC Exposure is cash collateralized and/or
reallocated.  


     (c)     Notwithstanding any provision of this Agreement to the contrary, so long as any Lender is
a Defaulting Lender, no Issuing Bank shall be required to issue, amend or increase any Letter of
Credit unless it is satisfied that the related exposure will be 100% covered by the Commitments of
the non-Defaulting Lenders and/or cash collateral will be provided by the Borrower in accordance
with Section 2.08(j), and participating interests in any such newly issued or increased Letter of
Credit shall be allocated among non-Defaulting Lenders in a manner consistent with Section
2.10(b)(i) (and Defaulting Lenders shall not participate therein).  


     (d)     Any amount payable to such Defaulting Lender hereunder (whether on account of principal,
interest, fees or otherwise and including any amount that would otherwise be payable to such
Defaulting Lender pursuant to Section 4.01(c) or Section 10.02(c), but excluding Section 5.04(b))
will, in lieu of being distributed to such Defaulting Lender, be retained by the Administrative
Agent in a segregated account and, subject to any applicable requirements of law, be applied at
such time or times as may be determined by the Administrative Agent (i) first, to the payment of
any amounts owing by such Defaulting Lender to the Administrative Agent hereunder, (ii) second, pro
rata, to the payment of any amounts owing by such Defaulting Lender to each Issuing Bank hereunder,
(iii) third, to cash collateralize such Defaulting Lender’s LC Exposure in accordance with Section
2.08(j), (iv) fourth, as the Borrower may request (so long as no Default exists), to the funding of
any Loan in respect of which such Defaulting Lender has failed to fund its portion thereof as
required by this Agreement, as determined by the Administrative Agent, (v) fifth, if so determined
by the Administrative Agent and the Borrower, held in an interest bearing account and released pro
rata in order to (A) satisfy such Defaulting Lender’s potential future funding obligations with
respect to Loans under this Agreement and (B) cash collateralize such Defaulting Lender’s future LC
Exposure in accordance with Section 2.08(j), (vi) sixth, to the payment of any amounts then owing
to the Lenders or any Issuing Bank as a result of any final and non-appealable judgment of a court
of competent jurisdiction obtained by any Lender or Issuing Bank against such Defaulting Lender as
a result of such Defaulting Lender’s breach of its obligations under this Agreement, (vii) seventh,
to the payment of any amounts then owing to the Borrower as a result of any final and
non-appealable judgment of a court of competent jurisdiction obtained by the Borrower against such
Defaulting Lender as a result of such Defaulting Lender’s breach of its obligations under this
Agreement and (viii) eighth, to such Defaulting Lender or as otherwise directed by a court of
competent jurisdiction; provided that if such payment is (x) a prepayment of the principal amount
of any Loans or reimbursement obligations in respect of LC Disbursement that a Defaulting Lender
has not fully funded its participation obligations and (y) in the case of such Loans which were
made at a time when the conditions set forth in Section 6.02 were satisfied or waived, such payment
will be applied solely to prepay the Loans of, and reimbursement obligations owed to, all
non-Defaulting Lenders pro rata prior to being applied to the prepayment of any Loans, or
reimbursement obligations owed to, any Defaulting Lender.  Any payments, prepayments or other
amounts paid or payable to any Defaulting Lender that are applied (or held) to pay amounts owed by
such Defaulting Lender or to post cash collateral pursuant to Section 2.10 shall be



43









 







deemed paid to
and redirected by such Defaulting Lender, and each Lender irrevocably consents to the foregoing.  


     (e)     If any Lender is a Defaulting Lender, then the Borrower may, at its sole expense and
effort, upon notice to such Lender and the Administrative Agent, require such Lender to be replaced
in accordance with Section 5.04(b).  


     (f)     In the event that the Administrative Agent, the Borrower and the Issuing Banks each agrees
that a Defaulting Lender has adequately remedied all matters that caused such Lender to be a
Defaulting Lender, then the LC Exposure of the Lenders shall be readjusted to reflect the inclusion
of such Defaulting Lender’s Commitment and on such date such Defaulting Lender shall purchase at
par such of the Loans of the other Lenders as the Administrative Agent shall determine may be
necessary in order for such Lender to hold such Loans in accordance with its Applicable Percentage;
provided, that no adjustments will be made retroactively with respect to fees accrued or payments
made by or on behalf of the Borrower while such Lender was a Defaulting Lender; and provided,
further, that except to the extent otherwise expressly agreed by the affected parties, no change
hereunder from Defaulting Lender to Lender will constitute a waiver or release of any claim that
the Borrower, the Administrative Agent, the Issuing Banks, or any other Lender may have against
such Defaulting Lender or cause such Defaulting Lender to be a non-Defaulting Lender except as
expressly set forth above.  


     Section 2.11   Currency Conversion and Currency Indemnity.  


     (a)     Payments in Agreed Currency.  The Borrower shall, and shall cause the other Credit
Parties to, make payment relative to any Secured Indebtedness in the currency (the “Agreed
Currency”) in which such Secured Indebtedness was effected.  If any payment is received on
account of any Secured Indebtedness in any currency (the “Other Currency”) other than the
Agreed Currency (whether voluntarily or pursuant to an order or judgment or the enforcement thereof
or the realization of any collateral under the Security Instruments or the liquidation of the
Borrower or otherwise howsoever), such payment shall constitute a discharge of the liability of the
Credit Parties hereunder and under the other Loan Documents in respect of such obligation only to
the extent of the amount of the Agreed Currency which the relevant Lender or Agent, as the case may
be, is able to purchase with the amount of the Other Currency received by it on the Business Day
next following such receipt in accordance with its normal procedures and after deducting any
premium and costs of exchange.  


     (b)     Conversion of Agreed Currency into Judgment Currency.  If, for the purpose of
obtaining or enforcing judgment in any court in any jurisdiction, it becomes necessary to convert
into a particular currency (the “Judgment Currency”) any amount due in the Agreed Currency
then the conversion shall be made on the basis of the rate of exchange prevailing on the next
Business Day following the date such judgment is given and in any event any Credit Party shall be
obligated to pay the Agents and the Lenders any deficiency in accordance with Section 2.11(c).  For
the foregoing purposes “rate of exchange” means the lowest rate at which the relevant Lender or
Agent, as applicable, in accordance with its normal banking procedures is able on the relevant date
to purchase the Agreed Currency with the Judgment Currency after deducting any premium and costs of
exchange.  


     (c)     Circumstances Giving Rise to Indemnity.  To the fullest extent permitted by
applicable law, if (i) any Lender or any Agent receives any payment or payments on account of the
liability of the Borrower hereunder pursuant to any judgment or order in any Other Currency, and
(ii) the amount of the Agreed Currency which the relevant Lender or Agent, as applicable, is able
to purchase on the Business Day next following such receipt with the proceeds of such payment or
payments in accordance with its normal procedures and after deducting any premiums and costs of
exchange is less than the amount of the



44









 







Agreed Currency due in respect of such liability
immediately prior to such judgment or order, then the Borrower on demand shall, and the Borrower
hereby agrees to, indemnify the Lenders and the Agents from and against any loss, cost or expense
arising out of or in connection with such deficiency; provided
that if the amount of the Agreed Currency so purchased is greater than the amount of the
Agreed Currency due in respect of such liability immediately prior to such judgment or order, then
the Agents or the Lenders, as the case may be, agree to return the amount of any excess to the
Borrower (or to any other Person who may be entitled thereto under applicable law).  


     (d)     Indemnity Separate Obligation.  To the fullest extent permitted by applicable law,
the agreement of indemnity provided for in Section 2.11(c) shall constitute an obligation separate
and independent from all other obligations contained in this Agreement, shall give rise to a
separate and independent cause of action, shall apply irrespective of any indulgence granted by the
Lenders or Agents or any of them from time to time, and shall continue in full force and effect
notwithstanding any judgment or order for a liquidated sum in respect of an amount due hereunder or
under any judgment or order.  


     (e)     Other Currency Conversion.  Any amount of money to be used in determining
compliance with this Agreement may be denominated in either $ or C$ and, in accordance with such
determination, may be converted from $ to C$ or vice-versa, as applicable, at the then-current rate
of exchange on the date thereof.  For the foregoing purposes “rate of exchange” means the rate at
which the Borrower or any other Credit Party, as applicable, in accordance with its normal business
procedures is able on the relevant date to purchase the relevant currency after deducting any
premium and costs of exchange.  


ARTICLE 3

Payments of Principal and Interest; Prepayments; Fees




     Section 3.01   Repayment of Loans.  The Borrower hereby unconditionally promises to pay
to the Administrative Agent for the account of each Lender the then unpaid principal amount of each
Loan on the Termination Date.  


     Section 3.02   Interest.  


     (a)     Canadian Prime Loans.  The Loans comprising each Canadian Prime Borrowing shall
bear interest at the Canadian Base Rate plus the Applicable Margin for Canadian Prime Loans, but in
no event to exceed the Highest Lawful Rate.  


     (b)     CDOR Loans.  The Loans comprising each CDOR Borrowing shall bear interest at the
CDOR Rate for the Interest Period in effect for such Borrowing plus the Applicable Margin for CDOR
Loans, but in no event to exceed the Highest Lawful Rate.  


     (c)     U.S.  Prime Loans.  The Loans comprising each U.S.  Prime Borrowing shall bear
interest at the U.S.  Base Rate plus the Applicable Margin for U.S.  Prime Loans, but in no event to
exceed the Highest Lawful Rate.  


     (d)     Eurodollar Loans.  The Loans comprising each Eurodollar Borrowing shall bear
interest at the LIBO Rate for the Interest Period in effect for such Borrowing plus the Applicable
Margin for Eurodollar Loans, but in no event to exceed the Highest Lawful Rate.  


     (e)     Default Rate.  Notwithstanding the foregoing, but subject to Sections 3.02(h), (i)
and (j), if any principal of or interest on any Loan or any fee or other amount payable by the
Borrower or any



45









 







Guarantor hereunder or under any other Loan Document is not paid when due, whether
at stated maturity, upon acceleration or otherwise, such overdue amount shall bear interest, after
as well as before judgment, at a rate per annum equal to (i) in the case of overdue principal of
any Loan, the lesser of (A) the rate otherwise applicable to such Loan as provided in the preceding
paragraphs of this Section plus 2% or (B)
the Highest Lawful Rate or (ii) in the case of any other amount, the lesser of (A) the Default
Rate or (B) the Highest Lawful Rate.  


     (f)     Interest Payment Dates.  Subject to Sections 3.02(h), (i) and (j), accrued
interest on each Loan shall be payable in arrears on each Interest Payment Date for such Loan and
on the Termination Date; provided that (i) interest accrued pursuant to Section 3.02(e) shall be
payable on demand, (ii) in the event of any repayment or prepayment of any Loan (other than an
optional prepayment of a Canadian Prime Loan or a U.S.  Prime Loan prior to the Termination Date),
accrued interest on the principal amount repaid or prepaid shall be payable on the date of such
repayment or prepayment, and (iii) in the event of any conversion of any CDOR Loan or Eurodollar
Loan prior to the end of the current Interest Period therefor, accrued interest on such Loan shall
be payable on the effective date of such conversion (but only to the extent so converted).  


     (g)     Interest Rate Computations.  Subject to Sections 3.02(h), (i) and (j), all
interest hereunder shall be computed on the basis of a year of 360 days, unless such computation
would exceed the Highest Lawful Rate, in which case interest shall be computed on the basis of a
year of 365 days (or 366 days in a leap year), except that (i) interest computed by reference to
the U.S.  Base Rate at times when the U.S.  Base Rate is based on the U.S.  Prime Rate and (ii)
interest computed by reference to the Canadian Base Rate or the CDOR Rate shall be computed on the
basis of a year of 365 days (or 366 days in a leap year), and in each case shall be payable for the
actual number of days elapsed (including the first day but excluding the last day).  The applicable
Canadian Base Rate, CDOR Rate, U.S.  Base Rate or LIBO Rate shall be determined by the
Administrative Agent, and such determination shall be conclusive absent manifest error, and be
binding upon the parties hereto.  


     (h)     To the extent permitted by applicable law, any provision of the Interest Act (Canada) or
the Judgment Interest Act (Alberta) which restricts any rate of interest set forth herein shall be
inapplicable to this Agreement and is hereby waived by the Borrower.  


     (i)     The theory of deemed reinvestment shall not apply to the calculation of interest or
payment of fees or other amounts hereunder, notwithstanding anything contained in this Agreement,
acceptance or other evidence of indebtedness or in any other Loan Document now or hereafter taken
by any Agent or any Lender for the obligations of the Borrower under this Agreement, or any other
instrument referred to herein, and all interest and fees payable by the Borrower to the Lenders,
shall accrue from day to day, computed as described herein in accordance with the “nominal rate”
method of interest calculation.  


     (j)     Where, in this Agreement, a rate of interest or fees is to be calculated on the basis of a
365/366-day year, such rate is, for the purpose of the Interest Act (Canada), equivalent to the
said rate (i) multiplied by the actual number of days in the one year period beginning on the first
day of the period of calculation and (ii) divided by 365 or 366, as applicable.  


     Section 3.03   Alternate Rate of Interest.  If prior to the commencement of any Interest
Period for a CDOR Borrowing or a Eurodollar Borrowing:



46









 





     (a)     the Administrative Agent determines (which determination shall be conclusive absent
manifest error) that adequate and reasonable means do not exist for ascertaining the CDOR Rate or
the LIBO Rate, as applicable, for such Interest Period; or



     (b)     the Administrative Agent is advised by the Majority Lenders that the CDOR Rate or the LIBO
Rate, as applicable, for such Interest Period will not adequately and fairly reflect the cost to
such Lenders of making or maintaining their Loans included in such Borrowing for such Interest
Period;


then the Administrative Agent shall give notice thereof to the Borrower and the Lenders by
telephone, electronic mail or telecopy as promptly as practicable thereafter and, until the
Administrative Agent notifies the Borrower and the Lenders that the circumstances giving rise to
such notice no longer exist, (i) any Interest Election Request that requests the conversion of any
Borrowing to, or continuation of any Borrowing as, a CDOR Borrowing or a Eurodollar Borrowing, as
applicable, shall be ineffective, and (ii) if any Borrowing Request requests a CDOR Borrowing or a
Eurodollar Borrowing, as applicable, such Borrowing shall be made as a Canadian Prime Borrowing.  



     Section 3.04   Prepayments.  


     (a)     Optional Prepayments.  The Borrower shall have the right at any time and from time
to time to prepay any Borrowing in whole or in part, subject to prior notice in accordance with
Section 3.04(b).  


     (b)     Notice and Terms of Optional Prepayment.  The Borrower shall notify the
Administrative Agent by telephone (confirmed by electronic mail or telecopy) of any prepayment
hereunder (i) in the case of prepayment of a CDOR Borrowing or a Eurodollar Borrowing, not later
than 1:00 p.m., Toronto time, three Business Days before the date of prepayment, or (ii) in the
case of prepayment of a Canadian Prime Borrowing or a U.S.  Prime Borrowing, not later than 1:00
p.m., Toronto time, one Business Day before the date of prepayment.  Each such notice shall be
irrevocable and shall specify the Borrowing to be prepaid, the prepayment date and the principal
amount of each Borrowing or portion thereof to be prepaid; provided that, if a notice of prepayment
is given in connection with a conditional notice of termination of the Commitments as contemplated
by Section 2.06(b), then such notice of prepayment may be revoked if such notice of termination is
revoked in accordance with Section 2.06(b).  Promptly following receipt of any such notice relating
to a Borrowing, the Administrative Agent shall advise the Lenders of the contents thereof.  Each
partial prepayment of any Borrowing shall be in an amount that would be permitted in the case of an
advance of a Borrowing of the same Type as provided in Section 2.02.  The Administrative Agent
shall apply each prepayment of a Borrowing ratably to the Loans included in the Borrowing specified
in the Borrower’s notice of prepayment.  Prepayments shall be accompanied by accrued interest to
the extent required by Section 3.02.  


     (c)     Mandatory Prepayments.  



     (i)     If, after giving effect to any termination or reduction of the Aggregate Maximum
Credit Amounts pursuant to Section 2.06(b), the total Revolving Credit Exposures exceeds the
total Commitments, then the Borrower shall (A) prepay the Borrowings on the date of such
termination or reduction in an aggregate principal amount equal to such excess, and (B) if
any excess remains after prepaying all of the Borrowings as a result of an LC Exposure, pay
to the Administrative Agent on behalf of the Lenders an amount equal to such excess to be
held as cash collateral as provided in Section 2.08(j).  


47









 






     (ii)     Upon any redetermination of or adjustment to the amount of the Borrowing Base in
accordance with Section 2.07 or Section 9.10 (solely as a result of a Casualty Event), if the
total Revolving Credit Exposures exceeds the redetermined or adjusted Borrowing Base, then
the Borrower shall, at its option, either (A) make (or cause to be made) a single payment of
principal in an amount equal to such Borrowing Base Deficiency and, if any Borrowing Base
Deficiency remains after prepaying all of the Borrowings as a result of an LC Exposure, pay
to the Administrative Agent on behalf of the Lenders an amount equal to such remaining excess
to be held as cash collateral as provided in Section 2.08(j), in each case, within thirty
(30) days following its receipt of the New Borrowing Base Notice in accordance with Section
2.07(d) or the date the adjustment occurs (the “Deficiency Notification Date”), (B)
make (or cause to be made) six payments of principal each of which shall be in an amount
equal to one-sixth (1/6th) of such Borrowing Base Deficiency commencing on the 15th day of a
calendar month that is at least thirty (30) days following the Deficiency Notification Date
and on the 15th day of each of the five calendar months thereafter, (C) within forty-five
(45) days following the Deficiency Notification Date, submit (and pledge as Collateral)
additional Oil and Gas Properties owned by a Credit Party which is or shall become a
Guarantor contemporaneously with such submission pursuant to Section 8.13, which Oil and Gas
Properties (x)(1) are located in British Columbia, Alberta or in another province in Canada
that at such time allows for a secured lender to receive the benefit of a floating charge
over real property located in such province and (2) were not previously subject to a floating
charge in favor of the Administrative Agent, or (y) are located in any other province in
Canada, the United States or any other country or jurisdiction reasonably acceptable to the
Administrative Agent; provided that with respect to Oil and Gas Properties submitted and
pledged pursuant to this clause (y), (1) the Administrative Agent shall be reasonably
satisfied that fixed charges, collateral agreements or other Security Instruments create
first priority, perfected Liens (subject only to Permitted Liens) on at least 80% of the
total value of the Proved Hydrocarbon Interests relating to such Oil and Gas Properties
(including any such Oil and Gas Properties subject to floating charges) and (2) the
Administrative Agent shall have received title information as the Administrative Agent may
reasonably require satisfactory to the Administrative Agent setting forth the status of title
to at least 75% of the total value of such Oil and Gas Properties, in either case, for
consideration in connection with the determination of the Borrowing Base which the
Administrative Agent and the Required Lenders deem satisfactory, in their sole discretion, to
eliminate such Borrowing Base Deficiency or (D) within thirty (30) or forty-five (45) days
following the Deficiency Notification Date, as applicable, eliminate such Borrowing Base
Deficiency through a combination of a payment and submission of additional Oil and Gas
Properties as set forth in clauses (A) and (C) above; provided that all payments required to
be made pursuant to this Section 3.04(c)(ii) must be made on or prior to the Termination
Date.  Not later than 15 days following the Deficiency Notification Date, the Borrower shall
provide written notice to the Administrative Agent setting forth its election pursuant to the
immediately preceding sentence.  



     (iii)     Upon any adjustments to the Borrowing Base pursuant to Section 9.02(n) or Section
9.10 (other than adjustments resulting directly from Casualty Events), if the total Revolving
Credit Exposures exceeds the Borrowing Base as adjusted, then the Borrower shall (A) prepay
the Borrowings in an aggregate principal amount equal to such Borrowing Base Deficiency, and
(B) if any excess remains after prepaying all of the Borrowings as a result of an LC
Exposure, pay to the Administrative Agent on behalf of the Lenders an amount equal to such
excess to be held as cash collateral as provided in Section 2.08(j).  The Borrower shall be
obligated to make such prepayment and/or deposit of cash collateral (x) within thirty (30)
days following the effective date of any such adjustment to the Borrowing Base under Section
9.02(n) or (y) prior to or contemporaneously with such adjustment to the Borrowing Base under
Section 9.10 (other than



48









 







adjustments resulting directly from Casualty Events); provided that
all payments required to be made pursuant to this Section 3.04(c)(iii) must be made on or
prior to the Termination Date.  



     (iv)     If, as a result of any currency fluctuation, the total Revolving Credit Exposures
exceeds 105% of the Borrowing Base at any time, then the Borrower shall (A) prepay the
Borrowings in an aggregate principal amount equal to such excess, and (B) if any excess
remains after prepaying all of the Borrowings as a result of an LC Exposure, pay to the
Administrative Agent on behalf of the Lenders an amount equal to such excess to be held as
cash collateral as provided in Section 2.08(j).  



     (v)     Each prepayment of Borrowings pursuant to this Section 3.04(c) shall be applied,
first, ratably to any Canadian Prime Borrowings and U.S.  Prime Borrowings then outstanding,
and, second, to any CDOR Borrowings and Eurodollar Borrowings then outstanding, and if more
than one CDOR Borrowing or Eurodollar Borrowing is then outstanding, to each such CDOR
Borrowing or Eurodollar Borrowing in order of priority beginning with the CDOR Borrowing or
Eurodollar Borrowing with the highest interest rate applicable thereto and ending with the
CDOR Borrowing or Eurodollar Borrowing with the lowest interest rate applicable thereto.  



     (vi)     Each prepayment of Borrowings pursuant to this Section 3.04(c) shall be applied
ratably to the Loans included in the prepaid Borrowings.  Prepayments pursuant to this
Section 3.04(c) shall be accompanied by accrued interest to the extent required by Section
3.02.  


     (d)     No Premium or Penalty.  Prepayments permitted or required under this Section 3.04
shall be without premium or penalty, except as required under Section 5.02.  


     Section 3.05   Fees.  


     (a)     Commitment Fees.  The Borrower agrees to pay to the Administrative Agent for the
account of each Lender (other than a Defaulting Lender to the extent set forth in Section 2.10) a
commitment fee, which shall accrue at the applicable Commitment Fee Rate on the average daily
amount of the unused Commitment of such Lender during the period from and including the Effective
Date to but excluding the Termination Date.  Accrued commitment fees shall be payable in arrears on
the third Business Day following the last day of March, June, September and December of each year
and on the Termination Date, commencing on the first such date to occur after the Effective Date.  All commitment fees shall be computed on the basis of a year of 360 days, unless such computation
would exceed the Highest Lawful Rate, in which case interest shall be computed on the basis of a
year of 365 days (or 366 days in a leap year), and shall be payable for the actual number of days
elapsed (including the first day but excluding the last day).  


     (b)     Letter of Credit Fees.  The Borrower agrees to pay (i) to the Administrative Agent
for the account of each Lender (other than a Defaulting Lender to the extent set forth in Section
2.10) a participation fee with respect to its participations in Letters of Credit, which shall
accrue at the same Applicable Margin used to determine the interest rate applicable to Eurodollar
Loans on the average daily amount of such Lender’s LC Exposure (excluding any portion thereof
attributable to unreimbursed LC Disbursements which has been funded by such Lender) during the
period from and including the Effective Date to but excluding the later of the date on which such
Lender’s Commitment terminates and the date on which such Lender ceases to have any LC Exposure,
(ii) to each Issuing Bank a fronting fee, which shall accrue at the rate per annum agreed to with
such Issuing Bank on the average daily amount of that portion of the LC Exposure attributable to
such Issuing Bank (excluding any portion thereof attributable to unreimbursed LC Disbursements)
during the period from and including the Effective Date to but



49









 







excluding the later of the date of
termination of the Commitments and the date on which there ceases to be any LC Exposure
attributable to such Issuing Bank, provided that (x) if the expiration date of the Letter of Credit
is less than one year after its date of issuance and the aggregate fronting fee otherwise payable
through its expiration would be less than C$500, then the Borrower shall pay to such Issuing Bank
C$500 upon the issuance of such Letter of Credit in lieu of the fronting fee otherwise payable and
(y) no fronting fee shall be payable with respect to any Grandfathered Letters of Credit on the
Effective Date or thereafter, until and unless such Grandfathered Letter of Credit is extended,
renewed or reissued hereunder, and (iii) to each Issuing Bank, for its own account, its standard
fees with respect to the issuance, amendment, renewal or extension of any Letter of Credit or
processing of drawings thereunder.  Participation fees and fronting fees accrued through and
including the last day of March, June, September and December of each year shall be payable in
arrears on the third Business Day following such last day,
commencing on the first such date to occur after the Effective Date; provided that all such
fees shall be payable on the Termination Date and any such fees accruing after the Termination Date
shall be payable on demand.  Any other fees payable to an Issuing Bank pursuant to this Section
3.05(b) shall be payable within 10 days after demand.  All participation fees and fronting fees
shall be computed on the basis of a year of 360 days, unless such computation would exceed the
Highest Lawful Rate, in which case interest shall be computed on the basis of a year of 365 days
(or 366 days in a leap year), and shall be payable for the actual number of days elapsed (including
the first day but excluding the last day).  


     (c)     Administrative Agent Fees.  The Borrower agrees to pay to the Administrative
Agent, for its own account, fees payable in the amounts and at the times separately agreed upon
between the Borrower and the Administrative Agent.  


ARTICLE 4

Payments; Pro Rata Treatment; Sharing of Set-Offs




     Section 4.01   Payments Generally; Pro Rata Treatment; Sharing of Set-offs.  


     (a)     Payments by the Borrower.  The Borrower shall make each payment required to be
made by it hereunder (whether of principal, interest, fees or reimbursement of LC Disbursements, or
of amounts payable under Section 5.01, Section 5.02, Section 5.03 or otherwise) prior to 3:00 p.m.,
Toronto time, on the date when due (for purposes of computing interest and fees, each such payment
made after such time on such due date to be deemed to have been made on the next succeeding
Business Day), in immediately available funds, without defense, deduction, recoupment, set-off or
counterclaim.  Fees, once paid, shall be fully earned and shall not be refundable under any
circumstances, absent manifest error.  Any amounts received after such time on any date may, in the
discretion of the Administrative Agent, be deemed to have been received on the next succeeding
Business Day for purposes of calculating interest thereon.  All such payments shall be made to the
Administrative Agent at its offices specified in Section 12.01, except payments to be made directly
to an Issuing Bank as expressly provided herein and except that payments pursuant to Section 5.01,
Section 5.02, Section 5.03 and Section 12.03 shall be made directly to the Persons entitled
thereto.  The Administrative Agent shall distribute any such payments received by it for the
account of any other Person to the appropriate recipient promptly following receipt thereof.  If
any payment hereunder shall be due on a day that is not a Business Day, the date for payment shall
be extended to the next succeeding Business Day, and, in the case of any payment accruing interest,
interest thereon shall be payable for the period of such extension.  All payments hereunder shall
be made in the Agreed Currency.  


     (b)     Application of Insufficient Payments.  If at any time insufficient funds are
received by and available to the Administrative Agent to pay fully all amounts of principal,
unreimbursed LC Disbursements, interest and fees then due hereunder, such funds shall be applied
(i) first, towards payment




50











 




of interest and fees then due hereunder, ratably among the parties entitled thereto in
accordance with the amounts of interest and fees then due to such parties, and (ii) second, towards
payment of principal and unreimbursed LC Disbursements then due hereunder, ratably among the
parties entitled thereto in accordance with the amounts of principal and unreimbursed LC
Disbursements then due to such parties.  



     (c)     Sharing of Payments by Lenders.  If any Lender shall, by exercising any right of
set-off or counterclaim or otherwise, obtain payment in respect of any principal of or interest on
any of its Loans or participations in LC Disbursements resulting in such Lender receiving payment
of a greater proportion of the aggregate amount of its Loans and participations in LC Disbursements
and accrued interest thereon than the proportion received by any other Lender, then the Lender
receiving such greater proportion shall purchase (for cash at face value) participations in the
Loans and participations in LC Disbursements of other Lenders to the extent necessary so that the
benefit of all such payments shall be shared by the Lenders ratably in accordance with the
aggregate amount of principal of and accrued interest on their respective Loans and participations
in LC Disbursements; provided that (i) if any such participations are purchased and all or any
portion of the payment giving rise thereto is recovered, such participations shall be rescinded and
the purchase price restored to the extent of such recovery, without interest, and (ii) the
provisions of this Section 4.01(c) shall not be construed to apply to any payment made by the
Borrower pursuant to and in accordance with the express terms of this Agreement or any payment
obtained by a Lender as consideration for the assignment of or sale of a participation in any of
its Loans or participations in LC Disbursements to any assignee or Participant, other than to any
Credit Party or Affiliate thereof (as to which the provisions of this Section 4.01(c) shall apply).  The Borrower consents to the foregoing and agrees, to the extent it may effectively do so under
applicable law, that any Lender acquiring a participation pursuant to the foregoing arrangements
may exercise against the Borrower rights of set-off and counterclaim with respect to such
participation as fully as if such Lender were a direct creditor of the Borrower in the amount of
such participation.  


     Section 4.02   Presumption of Payment by the Borrower.  Unless the Administrative Agent
shall have received notice from the Borrower prior to the date on which any payment is due to the
Administrative Agent for the account of the Lenders or any Issuing Bank that the Borrower will not
make such payment, the Administrative Agent may assume that the Borrower has made such payment on
such date in accordance herewith and may, in reliance upon such assumption, distribute to the
Lenders or such Issuing Bank, as the case may be, the amount due.  In such event, if the Borrower
has not in fact made such payment, then each of the Lenders or such Issuing Bank, as the case may
be, severally agrees to repay to the Administrative Agent forthwith on demand the amount so
distributed to such Lender or such Issuing Bank with interest thereon, for each day from and
including the date such amount is distributed to it to but excluding the date of payment to the
Administrative Agent, at a rate determined by the Administrative Agent in accordance with banking
industry rules on interbank compensation.  


     Section 4.03   Certain Deductions by the Administrative Agent.  If any Lender shall fail
to make any payment required to be made by it hereunder, pursuant to Section 2.05(a), Section
2.08(d), Section 2.08(e) or Section 4.02 or otherwise, then the Administrative Agent may, in its
discretion (notwithstanding any contrary provision hereof), apply any amounts thereafter received
by the Administrative Agent for the account of such Lender to satisfy such Lender’s obligations
under such Sections until all such unsatisfied obligations are fully paid.  


     Section 4.04   Disposition of Proceeds.  The Security Instruments contain an assignment
by the Borrower and/or the other Guarantors unto and in favor of the Administrative Agent for the
benefit of the Secured Parties of all of the Borrower’s or each other Guarantor’s interest in and
to production and all proceeds attributable thereto which may be produced from or allocated to the
Mortgaged Property.  The Security Instruments further provide in general for the application of
such proceeds to the satisfaction of



51









 




the Secured Indebtedness and other obligations described
therein and secured thereby.  Notwithstanding
anything to the contrary contained in the Security Instruments, until the occurrence of an
Event of Default, (a) the Administrative Agent and the Lenders agree that they will neither notify
the purchaser or purchasers of production from or allocated to the Mortgaged Property nor take any
other action to cause the proceeds thereof to be remitted to the Administrative Agent or the
Lenders, but the Lenders will instead permit such proceeds to be paid to the Borrower or such other
Credit Party and (b) the Lenders hereby authorize the Administrative Agent to take such actions as
may be necessary to cause such proceeds to be paid to the Borrower and/or such other Credit Party.  



ARTICLE 5

Increased Costs; Break Funding Payments; Payments; Taxes; Illegality



     Section 5.01   Increased Costs.  


     (a)     Changes in Law.  If any Change in Law shall:




     (i)     impose, modify or deem applicable any reserve, special deposit or similar
requirement against assets of, deposits with or for the account of, or credit extended by,
any Lender; or




     (ii)     impose on any Lender or the London interbank market any other condition affecting
this Agreement, CDOR Loans made by such Lender or Eurodollar Loans made by such Lender;


and the result of any of the foregoing shall be to increase the cost to such Lender of making or
maintaining any CDOR Loan or Eurodollar Loan (or of maintaining its obligation to make any such
Loan) or to reduce the amount of any sum received or receivable by such Lender (whether of
principal, interest or otherwise, but not including Excluded Taxes), then the Borrower will pay to
such Lender such additional amount or amounts as will compensate such Lender for such additional
costs incurred or reduction suffered.  



     (b)     Capital Requirements.  If any Lender or any Issuing Bank determines that any
Change in Law regarding capital requirements has or would have the effect of reducing the rate of
return on such Lender’s or such Issuing Bank’s capital or on the capital of such Lender’s or such
Issuing Bank’s holding company, if any, as a consequence of this Agreement or the Loans made by, or
participations in Letters of Credit held by, such Lender, or the Letters of Credit issued by such
Issuing Bank, to a level below that which such Lender or such Issuing Bank or such Lender’s or such
Issuing Bank’s holding company could have achieved but for such Change in Law (taking into
consideration such Lender’s or such Issuing Bank’s policies and the policies of such Lender’s or
such Issuing Bank’s holding company with respect to capital adequacy), then from time to time the
Borrower will pay to such Lender or such Issuing Bank, as the case may be, such additional amount
or amounts as will compensate such Lender or such Issuing Bank or such Lender’s or such Issuing
Bank’s holding company for any such reduction suffered.  


     (c)     Certificates.  A certificate of a Lender or any Issuing Bank setting forth the
amount or amounts necessary to compensate such Lender or such Issuing Bank or its holding company,
as the case may be, as specified in Section 5.01(a) or (b) shall be delivered to the Borrower and
shall be conclusive absent manifest error.  The Borrower shall pay such Lender or such Issuing
Bank, as the case may be, the amount shown as due on any such certificate within 30 days after
receipt thereof.  


52









 





     (d)     Effect of Failure or Delay in Requesting Compensation.  Failure or delay on the
part of any Lender or any Issuing Bank to demand compensation pursuant to this Section 5.01 shall
not constitute a waiver of such Lender’s or such Issuing Bank’s right to demand such compensation;
provided that the
Borrower shall not be required to compensate a Lender or an Issuing Bank pursuant to this
Section 5.01 for any increased costs or reductions incurred more than 180 days prior to the date
that such Lender or such Issuing Bank, as the case may be, notifies the Borrower of the Change in
Law giving rise to such increased costs or reductions and of such Lender’s or such Issuing Bank’s
intention to claim compensation therefor; provided further that, if the Change in Law giving rise
to such increased costs or reductions is retroactive, then the 180-day period referred to above
shall be extended to include the period of retroactive effect thereof.  


     Section 5.02   Break Funding Payments.  In the event of (a) the payment (including
prepayment) of any principal of any CDOR Loan or any Eurodollar Loan other than on the last day of
an Interest Period applicable thereto (including as a result of an Event of Default), (b) the
conversion of any CDOR Loan or any Eurodollar Loan into a Canadian Prime Loan or a U.S.  Prime Loan
other than on the last day of the Interest Period applicable thereto, (c) the failure to borrow as
a result of a failure to satisfy the conditions set forth in Section 6.02, any CDOR Loan or any
Eurodollar Loan on the date specified in any notice delivered pursuant hereto, or (d) the
assignment of any CDOR Loan or any Eurodollar Loan other than on the last day of the Interest
Period applicable thereto as a result of a request by the Borrower pursuant to Section 5.04(a),
then, in any such event, the Borrower shall compensate each Lender for the loss, cost and expense
attributable to such event (exclusive of any lost profits or opportunity costs or processing or
other related fees).  In the case of a CDOR Loan, such loss, cost or expense to any Lender shall be
deemed to include an amount determined by such Lender to be the excess, if any, of (A) the amount
of interest which would have accrued on the principal amount of such Loan had such event not
occurred, at the CDOR Rate that would have been applicable to such Loan, for the period from the
date of such event to the last day of the then current Interest Period therefor (or, in the case of
a failure to borrow, convert or continue, for the period that would have been the Interest Period
for such Loan), over (B) the amount of interest which would accrue on such principal amount for
such period at the interest rate which such Lender would bid were it to bid, at the commencement of
such period, for Canadian Dollar deposits of a comparable amount and period from other banks in the
CDOR market.  In the case of a Eurodollar Loan, such loss, cost or expense to any Lender shall be
deemed to include an amount determined by such Lender to be the excess, if any, of (i) the amount
of interest which would have accrued on the principal amount of such Loan had such event not
occurred, at the LIBO Rate that would have been applicable to such Loan, for the period from the
date of such event to the last day of the then current Interest Period therefor (or, in the case of
a failure to borrow, convert or continue, for the period that would have been the Interest Period
for such Loan), over (ii) the amount of interest which would accrue on such principal amount for
such period at the interest rate which such Lender would bid were it to bid, at the commencement of
such period, for Dollar deposits of a comparable amount and period from other banks in the
eurodollar market.  


     A certificate of any Lender setting forth any amount or amounts that such Lender is entitled
to receive pursuant to this Section 5.02 shall be delivered to the Borrower and shall be conclusive
absent manifest error.  The Borrower shall pay such Lender the amount shown as due on any such
certificate within 10 Business Days after receipt thereof.  


     Section 5.03   Taxes.  


     (a)     Payments Free of Taxes.  Any and all payments by or on account of any obligation
of any Credit Party under any Loan Document shall be made free and clear of and without deduction
for any Indemnified Taxes or Other Taxes; provided that if any Credit Party shall be required to
deduct any



53









 




Indemnified Taxes or Other Taxes from such payments, then (i) the sum payable shall be
increased, as a payment of additional interest, as necessary so that after making all required
deductions (including deductions applicable to additional sums payable under this Section 5.03(a)),
the Administrative Agent, Lender or Issuing Bank (as the case may be) receives an amount equal to
the sum it would have received
had no such deductions been made, (ii) such Credit Party shall make such deductions and (iii)
such Credit Party shall pay the full amount deducted to the relevant Governmental Authority in
accordance with applicable law.  



     (b)     Payment of Other Taxes by the Borrower.  The Borrower shall pay any Other Taxes to
the relevant Governmental Authority in accordance with applicable law.  


     (c)     Indemnification by the Borrower.  The Borrower shall indemnify the Administrative
Agent, each Lender and each Issuing Bank, within 10 days after written demand therefor, for the
full amount of any Indemnified Taxes or Other Taxes paid by the Administrative Agent, such Lender
or such Issuing Bank, as the case may be, on or with respect to any payment by or on account of any
obligation of the Borrower hereunder (including Indemnified Taxes or Other Taxes imposed or
asserted on or attributable to amounts payable under this Section 5.03) and any penalties, interest
and reasonable expenses arising therefrom or with respect thereto, whether or not such Indemnified
Taxes or Other Taxes were correctly or legally imposed or asserted by the relevant Governmental
Authority; provided that the Borrower shall not be required to indemnify the Administrative Agent,
any Lender or any Issuing Bank for any amounts under this Section 5.03(c) to the extent that such
Person fails to notify the Borrower of its intent to make a claim for indemnification under this
Section 5.03(c) within 180 days after a claim is asserted against such Person by the relevant
Governmental Authority.  A certificate of the Administrative Agent, a Lender or an Issuing Bank as
to the amount of such payment or liability under this Section 5.03, together with, to the extent
available, reasonable supporting documentation relating to such payment or liability, shall be
delivered to the Borrower and shall be conclusive absent manifest error.  


     (d)     Evidence of Payments.  As soon as practicable after any payment of Indemnified
Taxes or Other Taxes by the Borrower to a Governmental Authority, the Borrower shall deliver to the
Administrative Agent the original or a certified copy of a receipt issued by such Governmental
Authority evidencing such payment, a copy of the return reporting such payment or other evidence of
such payment reasonably satisfactory to the Administrative Agent.  


     (e)     Each Lender shall severally indemnify the Administrative Agent, within 10 days after
demand therefor, for (i) any Indemnified Taxes attributable to such Lender (but only to the extent
that the Borrower has not already indemnified the Administrative Agent for such Indemnified Taxes
and without limiting the obligation of the Borrower to do so), (ii) any Taxes attributable to such
Lender’s failure to comply with the provisions of Section 12.04(c) relating to the maintenance of a
Participant Register and (iii) any Excluded Taxes attributable to such Lender, in each case, that
are payable or paid by the Administrative Agent in connection with any Loan Document, and any
reasonable expenses arising therefrom or with respect thereto, whether or not such Taxes were
correctly or legally imposed or asserted by the relevant Governmental Authority.  A certificate as
to the amount of such payment or liability delivered to any Lender by the Administrative Agent
shall be conclusive absent manifest error.  Each Lender hereby authorizes the Administrative Agent
to set off and apply any and all amounts at any time owing to such Lender under any Loan Document
or otherwise payable by the Administrative Agent to the Lender from any other source against any
amount due to the Administrative Agent under this paragraph (e).  


     (f)     Tax Refunds.  If the Administrative Agent or a Lender determines, in its sole
discretion, that it has received a refund of any Indemnified Taxes or Other Taxes as to which it
has been indemnified



54









 




by the Borrower or with respect to which the Borrower has paid additional
amounts pursuant to Section 5.03, it shall pay over such refund to the Borrower (but only to the
extent of indemnity payments made, or additional amounts paid, by the Borrower under Section 5.03
with respect to the Indemnified Taxes or Other Taxes giving rise to such refund), net of all
out-of-pocket expenses of the Administrative Agent or such Lender and without interest (other than
any interest paid by the relevant Governmental Authority
with respect to such refund); provided, that the Borrower, upon the request of the
Administrative Agent or such Lender, agrees to repay the amount paid over to the Borrower (plus any
penalties, interest or other charges imposed by the relevant Governmental Authority) to the
Administrative Agent or such Lender in the event the Administrative Agent or such Lender is
required to repay such refund to such Governmental Authority.  This Section 5.03(f) shall not be
construed to require the Administrative Agent or any Lender to make available its tax returns (or
any other information relating to its taxes which it deems confidential) to the Borrower or any
other Person.  



     (g)     Tax Certifications.  The Administrative Agent, each Lender and each Issuing Bank
agrees to provide, upon reasonable request, the Administrative Agent and any Credit Party with (i)
any forms or certifications reasonably necessary for the Administrative Agent or such Credit Party
to determine the applicable rate of any withholding tax, including, if applicable, the availability
of a reduced rate pursuant to an applicable tax treaty and (ii) any other information or documents
reasonably requested in connection with such Lender’s or such Issuing Bank’s status as a Foreign
Lender (or as a Lender that is not a Foreign Lender).  


     Section 5.04   Mitigation Obligations; Replacement of Lenders.  


     (a)     Designation of Different Lending Office.  If any Lender requests compensation
under Section 5.01, or if the Borrower is required to pay any additional amount to any Lender or
any Governmental Authority for the account of any Lender pursuant to Section 5.03, then such Lender
shall use reasonable efforts to designate a different lending office for funding or booking its
Loans hereunder or to assign its rights and obligations hereunder to another of its offices,
branches or affiliates, if, in the judgment of such Lender, such designation or assignment (i)
would eliminate or reduce amounts payable pursuant to Section 5.01 or Section 5.03, as the case may
be, in the future and (ii) would not subject such Lender to any unreimbursed cost or expense and
would not otherwise be disadvantageous to such Lender.  The Borrower hereby agrees to pay all
reasonable costs and expenses incurred by any Lender solely as a result of such designation or
assignment.  


     (b)     Replacement of Lenders.  If (i) any Lender requests compensation under Section
5.01, or (ii) the Borrower is required to pay any additional amount to any Lender or any
Governmental Authority for the account of any Lender pursuant to Section 5.03, or (iii) any Lender
is a Defaulting Lender, or (iv) any Lender has asserted that any adoption or change of the type
described in Section 5.05 has occurred, or (v) any Lender fails to approve an amendment, waiver or
other modification to this Agreement and at least the Required Lenders have approved such
amendment, waiver or other modification, or (vi) any Lender fails to approve an increase of the
Borrowing Base and at least the Required Lenders have approved such increase, then the Borrower
may, at its sole expense and effort, upon notice to such Lender and the Administrative Agent,
require such Lender to assign and delegate, without recourse (in accordance with and subject to the
restrictions contained in Section 12.04(b)), all its interests, rights and obligations under this
Agreement to an assignee that shall (A) assume such obligations and (B) in the case of clauses (v)
and (vi), consent to such amendment, waiver, modification, increase, decrease or reaffirmation
(which assignee may be another Lender, if a Lender accepts such assignment); provided that (i) if
such assignee is not a Lender, the Borrower shall have received the prior written consent of the
Administrative Agent, which consent shall not unreasonably be withheld, (ii) such Lender shall have
received payment of an amount equal to the outstanding principal of its Loans and participations in
LC Disbursements, accrued



55









 




interest thereon, accrued fees and all other amounts payable to it
hereunder, from the assignee (to the extent of such outstanding principal and accrued interest and
fees) or the Borrower (in the case of all other amounts) and (iii) in the case of any such
assignment resulting from a claim for compensation under Section 5.01 or payments required to be
made pursuant to Section 5.03, such assignment will result in a reduction in such compensation or
payments.  A Lender shall not be required to make any such
assignment and delegation if, prior thereto, as a result of a waiver by such Lender or
otherwise, the circumstances entitling the Borrower to require such assignment and delegation cease
to apply.  



     Section 5.05   Illegality.  Notwithstanding any other provision of this Agreement:



     (a)     In the event that it becomes unlawful for any Lender or its applicable lending office to
honor its obligation to make or maintain CDOR Loans or Eurodollar Loans either generally or having
a particular Interest Period hereunder, then (i) such Lender shall promptly notify the Borrower and
the Administrative Agent thereof and such Lender’s obligation to make such CDOR Loans or Eurodollar
Loans, as applicable, shall be suspended (the “Affected Loans”) until such time as such
Lender may again make and maintain such CDOR Loans or Eurodollar Loans, as applicable, and (ii) all
Affected Loans which would otherwise be made by such Lender shall be made instead as Canadian Prime
Loans (and, if such Lender so requests by notice to the Borrower and the Administrative Agent, all
Affected Loans of such Lender then outstanding shall be automatically converted into Canadian Prime
Loans on the date specified by such Lender in such notice) and, to the extent that Affected Loans
are so made as (or converted into) Canadian Prime Loans, all payments of principal which would
otherwise be applied to such Lender’s Affected Loans shall be applied instead to its Canadian Prime
Loans; and



     (b)     If it becomes unlawful for any Lender or its applicable lending office to honor its
obligation to make any Loans to the Borrower, then such Lender shall promptly notify the Borrower
and the Administrative Agent thereof and such Lender’s obligation to make Loans shall be suspended
until such time as such Lender may again make and maintain Loans to the Borrower.  The Borrower
shall have no obligation to pay to such Lender the commitment fee described in Section 3.05(a) that
would otherwise accrue during such period of suspension.  


ARTICLE 6

Conditions Precedent



     Section 6.01   Effective Date.  The obligations of the Lenders to make Loans, and of any
Issuing Bank to issue or assume Letters of Credit hereunder shall not become effective until the
date on which each of the following conditions is satisfied (or waived in accordance with Section
12.02):



     (a)     The Administrative Agent, the Arrangers and the Lenders shall have received all
commitment, facility and agency fees and all other fees and amounts due and payable on or prior to
the Effective Date, including, to the extent invoiced at least one (1) Business Day prior to such
date, reimbursement or payment of all out-of-pocket expenses for which invoices have been presented
required to be reimbursed or paid by the Borrower hereunder (including, without limitation, the
fees and expenses of Vinson & Elkins L.L.P., and Blake, Cassels & Graydon LLP, counsel to the
Administrative Agent).  


     (b)     The Administrative Agent shall have received a certificate of the secretary or an
assistant secretary of the Borrower and of each Guarantor dated as of the Effective Date setting
forth (i) resolutions of its board of directors (or comparable governing body) with respect to the
authorization of the Borrower or such Guarantor to execute and deliver the Loan Documents to which
the Borrower or such Guarantor is a party and to enter into the transactions contemplated in those
documents, (ii) the officers of the Borrower or such Guarantor who are authorized to sign the Loan
Documents to which the Borrower or such



56









 




Guarantor is a party, (iii) specimen signatures of such
authorized officers and (iv) the articles or certificate of incorporation and bylaws (or comparable
organizational documents) of the Borrower and such Guarantor.  The Administrative Agent and the
Lenders may conclusively rely on such certificate until the Administrative Agent receives notice in
writing from the Borrower to the contrary.  



     (c)     The Administrative Agent shall have received certificates of the appropriate governmental
agencies with respect to the existence, qualification and good standing of the Borrower and each
Guarantor.  


     (d)     The Administrative Agent shall have received from each party hereto counterparts (in such
number as may be requested by the Administrative Agent) of this Agreement signed on behalf of such
party.  


     (e)     The Administrative Agent shall have received duly executed Notes payable to each Lender
requesting a Note at least three (3) Business Days prior to such date in a principal amount equal
to its Maximum Credit Amount dated as of the Effective Date.  


     (f)     The Administrative Agent shall have received from each party thereto duly executed
counterparts (in such number as may be requested by the Administrative Agent) of the Security
Instruments, including the Guaranty Agreement, the QRI Pledge Agreement, the debentures and the
other Security Instruments described on Exhibit E-1.  In connection with the execution and delivery
of the Security Instruments, the Administrative Agent shall:




     (i)     be reasonably satisfied that the Security Instruments create first priority,
perfected Liens taken by way of a floating charge (subject only to Permitted Liens) on
substantially all of the total value of the Proved Hydrocarbon Interests of the Borrower and
the Guarantors evaluated in the Initial Reserve Report; and




     (ii)     have received certificates, together with undated, blank stock powers for each such
certificate, representing all of the issued and outstanding Equity Interests of the Borrower
and each Restricted Subsidiary.  


     (g)     The Administrative Agent shall have received evidence reasonably satisfactory to it that
any consent or approval of, registration or filing with, or any other action by, any Governmental
Authority or any other third Person necessary in connection with the Transactions shall have been
obtained and are in full force and effect other than those third party approvals or consents that,
if not made or obtained, would not reasonably be expected to have a Material Adverse Effect.  


     (h)     The Administrative Agent shall have received an opinion of (i) Davis Polk & Wardwell LLP,
special counsel to QRI with respect to the QRI Pledge Agreement and (ii) Bennett Jones LLP, special
Canadian counsel to the Borrower, each dated the Effective Date and in form and substance
reasonably satisfactory to the Administrative Agent.  The Borrower hereby requests Davis Polk &
Wardwell LLP and Bennett Jones LLP to deliver such opinions.  


     (i)     The Administrative Agent shall have received a certificate of insurance coverage of the
Borrower and its Restricted Subsidiaries evidencing that the Borrower and its Restricted
Subsidiaries are carrying insurance in accordance with Section 7.11.  


     (j)     The Administrative Agent shall have received title information as the Administrative Agent
may reasonably require satisfactory to the Administrative Agent setting forth the status of title
to at



57









 




least 75% of the total value of the Proved Hydrocarbon Interests of the Borrower and the
Guarantors evaluated in the Initial Reserve Report.  



     (k)     The Administrative Agent shall have received appropriate Canadian Lien Searches reflecting
no prior Liens encumbering the personal property related to the Oil and Gas Properties of the
Borrower and the Guarantors for Alberta and British Columbia, other than those being assigned
or released on or prior to the Effective Date or Liens permitted by Section 9.03.  


     (l)     The Administrative Agent shall have received (i) the audited consolidated balance sheet
and related statements of operations, stockholders’ equity and cash flows of QRI and its
consolidated subsidiaries for the most recent fiscal year of each ended prior to the Effective Date
as to which such financial statements are available, (ii) the unaudited interim consolidated
balance sheet and related statements of operations, stockholders’ equity and cash flows of QRI and
its consolidated subsidiaries for each quarterly period ended subsequent to the date of the
financial statements delivered pursuant to clause (i) as to which such financial statements are
available and (iii) copies, to the extent of any, of all financial statements (including pro forma
financial statements), reports, notices and proxy statements sent by QRI to its stockholders
concerning this Agreement filed at least one (1) Business Day prior to such date; provided, that,
any documents shall be deemed to have been delivered to the Administrative Agent to the extent any
of the foregoing are publicly available on the SEC’s EDGAR website or QRI’s website on the Internet
at www.qrinc.com.  


     (m)     The Administrative Agent shall have received a certificate, signed by a Responsible
Officer of the Borrower, stating that no event or condition has occurred since December 31, 2010,
which would reasonably be expected to have a Material Adverse Effect.  


     (n)     The Administrative Agent shall have received evidence that the Existing Credit Agreement
has been or concurrently with entry into this Agreement on such date is being terminated and all
Liens securing obligations under the Existing Credit Agreement have been or concurrently with entry
into this Agreement on such date are being released.  


     Without limiting the generality of the provisions of Section 11.04, for purposes of
determining compliance with the conditions specified in this Section 6.01, each Lender that has
signed this Agreement shall be deemed to have consented to, approved or accepted or to be satisfied
with, each document or other matter required under this Section 6.01 to be consented to or approved
by or acceptable or satisfactory to a Lender unless the Administrative Agent shall have received
notice from such Lender prior to the Effective Date specifying its objection thereto.  All
documents executed or submitted pursuant to this Section 6.01 by and on behalf of the Borrower or
any of the Guarantors shall be in form and substance reasonably satisfactory to the Administrative
Agent and its counsel.  The obligations of the Lenders to make Loans and of any Issuing Bank to
issue Letters of Credit hereunder shall not become effective unless each of the foregoing
conditions is satisfied (or waived pursuant to Section 12.02) at or prior to 3:00 p.m., Toronto
time, on September 30, 2011 (and, in the event such conditions are not so satisfied or waived, the
Commitments shall terminate at such time).  The Administrative Agent shall notify the Borrower and
the Lenders of the Effective Date, and such notice shall be conclusive and binding.  


     Section 6.02   Each Credit Event.  The obligation of each Lender to make a Loan on the
occasion of any Borrowing (including the initial funding) (excluding any Loan made pursuant to
Section 2.08(e)), and of any Issuing Bank to issue, amend, renew or extend any Letter of Credit, is
subject to the satisfaction of the following conditions:



58









 





     (a)     At the time of and immediately after giving effect to such Borrowing or the issuance,
amendment, renewal or extension of such Letter of Credit, as applicable, no Default shall have
occurred and be continuing.  


     (b)     At the time of and immediately after giving effect to such Borrowing or the issuance,
amendment, renewal or extension of such Letter of Credit, as applicable, no event or events, which
alone or in the aggregate would reasonably be expected to have a Material Adverse Effect shall have
occurred.  


     (c)     The representations and warranties of the Borrower and the Guarantors set forth in this
Agreement and in the other Loan Documents shall be true and correct in all material respects on and
as of the date of such Borrowing or the date of issuance, amendment, renewal or extension of such
Letter of Credit, as applicable, except that (i) to the extent any such representations and
warranties are expressly limited to an earlier date, in which case, on and as of the date of such
Borrowing or the date of issuance, amendment, renewal or extension of such Letter of Credit, as
applicable, such representations and warranties shall continue to be true and correct in all
material respects as of such specified earlier date and (ii) to the extent that any such
representation and warranty is qualified by materiality, such representation and warranty (as so
qualified) shall continue to be true and correct in all respects.  


     (d)     The pro forma total Revolving Credit Exposures (after giving effect to the requested
Borrowing or the issuance of the requested Letter of Credit (or any amendment, renewal or extension
of any Letter of Credit that increases the LC Exposure)) shall not exceed the aggregate
Commitments.  


     (e)     The receipt by the Administrative Agent of a Borrowing Request in accordance with Section
2.03 or a request for a Letter of Credit (or an amendment, extension or renewal of a Letter of
Credit) in accordance with Section 2.08(b), as applicable.  


     Each Borrowing (excluding any Loan made pursuant to Section 2.08(e)) and each issuance,
amendment, renewal or extension of any Letter of Credit shall be deemed to constitute a
representation and warranty by the Borrower on the date thereof as to the matters specified in
Section 6.02(a) through (d).  


ARTICLE 7

Representations and Warranties



     The Borrower (and, from and after the New Parent Joinder, New Parent) represents and warrants
to the Lenders that:



     Section 7.01   Organization; Powers.  Each of the Credit Parties is duly organized,
validly existing and in good standing under the laws of the jurisdiction of its organization, has
all requisite power and authority, and has all material governmental licenses, authorizations,
consents and approvals necessary, to own its assets and to carry on its business as now conducted,
and is qualified to do business in, and is in good standing in, every jurisdiction where such
qualification is required, except where failure to be in good standing or have such power,
authority, licenses, authorizations, consents, approvals and qualifications would not reasonably be
expected to have a Material Adverse Effect.  


     Section 7.02   Authority; Enforceability.  The Transactions are within each Credit
Party’s corporate, partnership or limited liability company powers and have been duly authorized by
all necessary corporate, partnership or limited liability company and, if required, stockholder,
partner or member action.  Each Loan Document to which any Credit Party is a party has been duly
executed and delivered by such Credit Party and constitutes a legal, valid and binding obligation
of such Credit Party, as



59









 




applicable, enforceable in accordance with its terms, subject to
applicable bankruptcy, insolvency, reorganization, fraudulent transfer or conveyance, moratorium or
other laws affecting creditors’ rights generally and subject to general principles of equity,
regardless of whether considered in a proceeding in equity or at law and an implied covenant of
good faith and fair dealing.  



     Section 7.03   Approvals; No Conflicts.  The Transactions:



     (a)     do not require any consent or approval of, registration or filing with, or any other
action by, any Governmental Authority or any other third Person, nor is any such consent, approval,
registration, filing or other action necessary for the validity or enforceability of any Loan
Document or the consummation of the transactions contemplated thereby, except such as have been
obtained or made and are in full force and effect other than (i) the recording and filing of the
Security Instruments as required by this Agreement and (ii) those approvals or consents that, if
not made or obtained, would not reasonably be expected to have a Material Adverse Effect;



     (b)     will not violate (i) the charter, by-laws or other organizational documents of any Credit
Party or (ii) any applicable Governmental Requirement or any order of any Governmental Authority
applicable to or binding upon any Credit Party, except in the case of clause (ii), violations that
would not reasonably be expected to have a Material Adverse Effect;



     (c)     will not violate or result in a default under any indenture, agreement or other instrument
pursuant to which any Material Debt is outstanding, binding upon any Credit Party or their
Properties, or give rise to a right thereunder to require any payment to be made by the Credit
Parties, except violations that would not reasonably be expected to have a Material Adverse Effect;
and



     (d)     will not result in the creation or imposition of any Lien on any Oil and Gas Property of
any Credit Party (other than the Liens created or permitted by the Loan Documents).  


     Section 7.04   Financial Condition; No Material Adverse Effect.  (a) The financial
statements the Borrower has furnished to the Administrative Agent pursuant to Section 6.01(k)
present fairly, in all material respects, the financial position and results of operations and cash
flows of the Borrower and its Consolidated Subsidiaries as of such dates and for such periods in
accordance with GAAP (subject, in the case of unaudited financial statements, to year end audit
adjustments and the absence of footnotes).  


     (b)     Since December 31, 2010, there has been no event or events, which alone or in the
aggregate would reasonably be expected to have, a Material Adverse Effect.  


     Section 7.05   Litigation.  Except as disclosed in QRI’s Annual Report on Form 10-K for
the fiscal year ended December 31, 2010, there are no actions, suits, investigations or proceedings
by or before any arbitrator or Governmental Authority pending against or, to the knowledge of the
Borrower, threatened against or affecting any Credit Party that (a) would reasonably be expected,
individually or in the aggregate, to result in a Material Adverse Effect or (b) involve any Loan
Document or the Transactions.  


     Section 7.06   Environmental Matters.  Except as disclosed in QRI’s Annual Report on
Form 10-K for the fiscal year ended December 31, 2010, or as would not be reasonably expected to
have a Material Adverse Effect:



     (a)     neither any Oil and Gas Property of any Credit Party nor the operations conducted by any
Credit Party thereon, and, to the knowledge of the Borrower, no operations of any prior owner,
lessee, or



60









 




operator of any such properties (i) is in violation of any order or requirement relating
to Environmental Laws of any court or Governmental Authority or any Environmental Laws or (ii) to
the knowledge of Borrower, has been in violation of any order or requirement relating to
Environmental Laws of any court or Governmental Authority or any Environmental Laws;




     (b)     neither any Credit Party nor any Oil and Gas Property of any Credit Party nor the
operations currently conducted thereon or, to the knowledge of the Borrower, conducted thereon by
any prior owner or operator of such Oil and Gas Property or operation, are subject to any existing,
pending or, to the Borrower’s knowledge, threatened Environmental Complaint;



     (c)     all notices, permits, licenses, exemptions, approvals or similar authorizations, if any,
required by Environmental Laws to be obtained or filed in connection with the operation or use of
any and all Oil and Gas Property of the Credit Parties, including, without limitation, any past or
present treatment, storage, disposal or release into the environment of a Hazardous Material, have
been duly obtained or filed, and each Credit Party is in compliance with the terms and conditions
of all such notices, permits, licenses and similar authorizations;



     (d)     all Hazardous Materials, if any, generated at any and all Oil and Gas Property of the
Credit Parties by any Credit Party in the past have been transported, treated and disposed of in
accordance with Environmental Laws and, to the knowledge of the Borrower, do not pose an imminent
and substantial endangerment to public health or welfare or the environment, and, to the knowledge
of the Borrower, in connection with such transport, treatment and disposal, all such transport
carriers and treatment and disposal facilities have been and are operating in compliance with
Environmental Laws, do not pose an imminent and substantial endangerment to public health or
welfare or the environment and are not the subject of any existing, pending or threatened action,
investigation or inquiry by any Governmental Authority in connection with any Environmental Laws;



     (e)     to the Borrower’s knowledge, there has been no Hazardous Discharge on or to any Oil and
Gas Property of any Credit Party, in each case, except in compliance with Environmental Laws and so
as not to pose an imminent and substantial endangerment to public health or welfare or the
environment; and



     (f)     to the Borrower’s knowledge, no Credit Party has any contingent liability under
Environmental Law in connection with any Hazardous Discharge.  


     Section 7.07   Compliance with the Laws and Agreements.  Each of the Credit Parties is
in compliance with all Governmental Requirements applicable to it or its Oil and Gas Properties
(including, to the extent applicable to them, FCPA and OFAC) and all agreements and other
instruments binding upon it or its Oil and Gas Properties, and possesses all licenses, permits,
franchises, exemptions, approvals and other governmental authorizations necessary for the ownership
of its Oil and Gas Properties and the conduct of its business, except where the failure to do so,
individually or in the aggregate, would not reasonably be expected to result in a Material Adverse
Effect.  


     Section 7.08   Taxes.  Each of the Credit Parties has timely filed or caused to be filed
all Tax returns and reports required to have been filed (or obtained extensions with respect
thereto) and has paid or caused to be paid all Taxes and all remittances required to have been paid
by it, except (a) Taxes that are being contested in good faith by appropriate proceedings and for
which the applicable Credit Party has set aside on its books adequate reserves in accordance with
GAAP or (b) to the extent that the failure to do so would not reasonably be expected to result in a
Material Adverse Effect.  No action to enforce any Tax Lien has been commenced.  


61









 





     Section 7.09   Disclosure; No Material Misstatements.  Taken as a whole, none of the
reports, financial statements, certificates or other written information (other than projections)
furnished by or on behalf of any Credit Party to the Administrative Agent or any Lender or any of
their Affiliates in connection with the negotiation of this Agreement or any other Loan Document or
delivered hereunder or under any other Loan Document (as modified or supplemented by other
information so furnished), when
furnished (and, with respect to any such information delivered to the Administrative Agent or
any Lender or any of their Affiliates prior to the Effective Date, on the Effective Date), contains
any material misstatement of fact or omits to state any material fact necessary to make the
statements therein, in the light of the circumstances under which they were made, not materially
misleading (other than omissions that pertain to matters of a general economic nature or matters of
public knowledge that generally affect any of the industry segments of the Credit Parties);
provided that, with respect to projected financial information, prospect information, geological
and geophysical data and engineering projections, the Borrower represents only that such
information was prepared in good faith based upon assumptions believed to be reasonable at the
time, recognizing that (a) there are industry-wide risks normally associated with the types of
business conducted by the Credit Parties and (b) projections concerning volumes attributable to the
Oil and Gas Properties of the Credit Parties and production and cost estimates contained in each
Reserve Report are necessarily based upon professional opinions, estimates and projections and that
the Credit Parties do not warrant that such opinions, estimates and projections will ultimately
prove to have been accurate.  


     Section 7.10   Subsidiaries.  Schedule 7.10 lists the name, jurisdiction of organization
and organizational identification number of each Subsidiary as of the Effective Date and identifies
each such Subsidiary as either a Restricted or Unrestricted Subsidiary.  


     Section 7.11   Insurance.  All insurance reasonably necessary in the Credit Parties’
ordinary course of business is in effect and all premiums due on such insurance have been paid.  Schedule 7.11 sets forth a list of all such insurance policies maintained by the Borrower and its
Restricted Subsidiaries as of the Effective Date.  


     Section 7.12   Location of Business and Offices.  As of the Effective Date, the
Borrower’s jurisdiction of organization is Alberta, Canada; the name of the Borrower as listed in
the public records of its jurisdiction of organization is Quicksilver Resources Canada Inc.; the
address of the Borrower’s chief executive office is: One Palliser Square, Suite 2000, 125-9th
Avenue, SE, Calgary, Alberta T2G OP8, Canada; and the corporate access number of the Borrower in
Alberta, Canada is 2014451096.  As of the Effective Date, each Restricted Subsidiary’s jurisdiction
of organization, name as listed in the public records of its jurisdiction of organization,
organizational identification number in its jurisdiction of organization, and the location of its
principal place of business and chief executive office is stated on Schedule 7.10.  


     Section 7.13   Properties; Title, Etc.  Except as would not have a Material Adverse
Effect and provided that no representation or warranty is made with respect to any Oil and Gas
Property or interest to which no proved oil or gas reserves are properly attributed:



     (a)     Each of the Credit Parties has good and defensible title to the material Oil and Gas
Properties evaluated in the Reserve Report used in the most recent determination of the Borrowing
Base and good title to all its personal Properties that are necessary to permit the Credit Parties
to conduct their business in all material respects in the same manner as its business has been
conducted prior to the date hereof, in each case, subject to Immaterial Title Deficiencies and free
and clear of all Liens except Liens permitted by Section 9.03 (subject to the penultimate



62









 




sentence
thereof).  Subject to Immaterial Title Deficiencies and after giving full effect to Liens permitted
by Section 9.03 (subject to the penultimate sentence thereof), the Credit Party specified as the
owner owns the net interests in production attributable to the Hydrocarbon Interests as reflected
in the most recently delivered Reserve Report.  The ownership of such Oil and Gas Properties shall
not obligate such Credit Party to bear the costs and expenses relating to the maintenance,
development and operations of each such Oil and Gas Property in an amount materially in excess of
the working interest of each Oil and Gas Property set forth in the most recently delivered Reserve
Report that is not offset by a corresponding proportionate increase in such Credit Party’s net
revenue interest in such Oil and Gas Property; provided that any applicable Credit Party shall
have the right or obligation to bear costs disproportionate to such Credit Party’s working interest
with respect to any Hydrocarbon Interest for a period of time in order to earn, or in connection
with the acquisition of, an interest in such Hydrocarbon Interest as evidenced by written
agreement.  



     (b)     All material leases and agreements necessary for the conduct of the business of the Credit
Parties are valid and subsisting, in full force and effect, and there exists no default or event or
circumstance which with the giving of notice or the passage of time or both would give rise to a
default under any such lease or leases.  


     (c)     The rights and Properties presently owned, leased or licensed by the Credit Parties,
including, without limitation, all easements and rights of way, include all rights and Properties
necessary to permit the Credit Parties to conduct their business in the same manner as its business
has been conducted prior to the date hereof.  


     (d)     Each Credit Party owns, or is licensed to use, (i) all trademarks, tradenames, copyrights,
patents and other intellectual Property material to its business, and the use thereof by each such
Credit Party does not infringe upon the rights of any other Person and (ii) all databases,
geological data, geophysical data, engineering data, seismic data, maps, interpretations and other
technical information the use of which is material to their businesses as presently conducted,
subject to the limitations contained in the agreements governing the use of the same, which
limitations are customary for companies engaged in the business of the exploration and production
of Hydrocarbons.  


     Section 7.14   Compliance with Benefit Plans; ERISA.  Except as could not reasonably be
expected to have a Material Adverse Effect, (a) the Canadian Pension Plans, if any, are duly
registered under the Income Tax Act (Canada) and all applicable provincial or federal pension
benefits standards legislation and no event has occurred which is reasonably likely to cause the
loss of such registered status; (b) all obligations of the Credit Parties (including any applicable
fiduciary, funding, investment and administration obligations) required to be performed in
connection with the Canadian Pension Plans, if any, have been performed in accordance with
applicable laws and regulations; (c) no promises of benefit improvements under the Canadian Pension
Plans, if any, or the Canadian Benefit Plans have been made; (d) all reports and disclosures
relating to the Canadian Pension Plans and Canadian Benefit Plans required by any applicable laws
or regulations have been filed or distributed in accordance with applicable laws and regulations;
(e) no Credit Party has made any improper withdrawals prohibited by applicable law, or applications
of, the assets of any of the Canadian Pension Plans; (f) no Canadian Pension Plan Termination Event
has occurred; (g) no Credit Party has any knowledge that the Canadian Pension Plans, if any, are
the subject of an investigation, any other proceeding, an action or a claim other than a routine
claim for benefits; (h) all contributions or premiums required to be made by any Credit Party to
the Canadian Pension Plans and the Canadian Benefit Plans have been made within the time limits
required by, and in accordance with, the terms of such plans and applicable laws and regulations;
and (i) all employee contributions to the Canadian Pension Plans, if any, required to be made by
way of authorized payroll deduction have been properly withheld and fully paid into such plans
within the time limits required by, and in accordance with, the terms of such plans and applicable
laws and regulations.  No Credit Party contributes or has made contributions on behalf of its
employees to a multi-employer pension



63









 




plan, as such term is defined under applicable Canadian
provincial or federal pension benefits standards legislation.  No Canadian Pension Plan has an
Unfunded Current Liability that would, individually or when taken together with any other
liabilities referenced in this Section 7.14, reasonably be anticipated to have a Material Adverse
Effect.  There has been no failure to administer or operate the Foreign Plans in accordance with
the terms thereof except for any failure to so administer or operate the Foreign Plans as could not
reasonably be expected to have a Material Adverse Effect.  As of the date hereof, neither the
Borrower nor any Subsidiary nor any ERISA Affiliate of the Borrower or any Subsidiary maintains
sponsors, or contributes to (or has at any time in the six-year period preceding the date
hereof, maintained, sponsored, or contributed to) any Pension Plan or Multiemployer Plan.  Except
in such instances where an action, omission or failure would not reasonably be expected to have a
Material Adverse Effect, each Plan maintained by any Credit Party or any ERISA Affiliate of any
Credit Party is in compliance with the terms of such Plan and the applicable provisions of ERISA
and the Code with respect to each Plan.  No ERISA Event has occurred or is reasonably expected to
occur that, when taken together with all other such ERISA Events for which liability is reasonably
expected to occur, would reasonably be expected to result in a Material Adverse Effect.  Except in
such instances where an action, omission or failure would not reasonably be expected to have a
Material Adverse Effect, (i) each Plan that is intended to be “qualified” within the meaning of
Section 401(a) of the Code is, and has been during the period from its adoption to date, so
qualified, both as to form and operation, and all necessary governmental approvals, including a
favorable determination as to the qualification under the Code of such Plan and each amendment
thereto, have been or will be timely obtained, and (ii) the actuarial present value of the benefit
liabilities (within the meaning of section 4041 of ERISA) under each Plan which is subject to Title
IV of ERISA does not, as of the end of the most recently ended fiscal year, 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.  Neither any Credit Party nor any ERISA Affiliate
of any Credit Party maintains or contributes to any Plan that provides a post-employment health
benefit, other than a benefit required under Section 601 of ERISA, or maintains or contributes to a
Plan that provides health benefits that is not fully funded except where the failure to fully fund
such Plan would not reasonably be expected to have a Material Adverse Effect.  As of the date
hereof, neither the Borrower nor any Restricted Subsidiary nor any ERISA Affiliate of the Borrower
or any Restricted Subsidiary maintains a multiple employer welfare benefit arrangement within the
meaning of Section 3(40)(A) of ERISA.  



     Section 7.15   Solvency.  After giving effect to the transactions contemplated hereby,
(a) the aggregate assets (after giving effect to amounts that could reasonably be received by
reason of indemnity, offset, insurance or any similar arrangement), at a fair valuation, of the
Credit Parties, taken as a whole, will exceed the aggregate Debt of the Credit Parties on a
consolidated basis, as the Debt becomes absolute and matures, (b) each of the Credit Parties will
not have incurred Debt beyond its ability to pay such Debt (after taking into account the timing
and amounts of cash to be received by each of the Credit Parties and the amounts to be payable on
or in respect of its liabilities, and giving effect to amounts that could reasonably be received by
reason of indemnity, offset, insurance or any similar arrangement) as such Debt becomes absolute
and matures and (c) each of the Credit Parties will not have unreasonably small capital for the
conduct of its business.  


     Section 7.16   Priority; Security Matters.  The Secured Indebtedness is and shall be at
all times secured by valid, perfected first priority Liens (taken by way of a floating charge over
real property or otherwise) in favor of the Administrative Agent, covering and encumbering the
Mortgaged Properties and other Properties pledged pursuant to the Security Instruments, to the
extent perfection has occurred or will occur, by the recording of a debenture or mortgage, the
filing of a PPSA or UCC financing statement or by possession (in each case, to the extent available
in the applicable jurisdiction); provided, that the priority of the Liens in favor of the
Administrative Agent may be subject to Permitted Liens.  


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ARTICLE 8

Affirmative Covenants




     Until the Commitments have expired or been terminated and the principal of and interest on
each Loan and all fees payable hereunder and all other amounts payable under the Loan Documents
shall have been paid in full and all Letters of Credit shall have expired or terminated and all LC
Disbursements shall have been reimbursed, the Borrower covenants and agrees with the Lenders that:



     Section 8.01   Financial Statements; Other Information.  The Borrower (or, from and
after the New Parent Joinder, New Parent) will furnish to the Administrative Agent:



     (a)     Annual Financial Statements.  (i) Prior to a Qualified IPO, as soon as available,
but in any event in accordance with then applicable law and not later than 20 days after the date
on which QRI files its Annual Report on Form 10-K with the SEC (but in no event more than 120 days
after the end of the applicable fiscal year), (A) the Borrower’s audited consolidated balance sheet
and related statements of operations, stockholders’ equity and cash flows as of the end of and for
the fiscal year most recently ended, setting forth in each case in comparative form the figures for
the previous fiscal year, all reported on by Deloitte & Touche LLP or other independent public
accountants of recognized national standing (without a “going concern” or like qualification or
exception and without any qualification or exception as to the scope of such audit) to the effect
that such consolidated financial statements present fairly in all material respects the financial
condition and results of operations of the Borrower (or, from and after the New Parent Joinder, New
Parent) and its Consolidated Subsidiaries on a consolidated basis in accordance with GAAP
consistently applied and (B) upon the written request of the Administrative Agent, the Borrower’s
unaudited consolidating balance sheet and related statements of operations as of the end of and for
the fiscal year most recently ended (which consolidating statements shall also demonstrate
eliminating entries, if any, with respect to any Consolidated Subsidiaries that are Unrestricted
Subsidiaries).  


     (ii)     From and after a Qualified IPO, as soon as available, but in any event in accordance with
then applicable law and not later than 20 days after the date on which New Parent files its Annual
Report on Form 10-K with the SEC (or applicable Canadian equivalent) (but in no event more than 120
days after the end of the applicable fiscal year), (A) the New Parent’s audited consolidated
balance sheet and related statements of operations, stockholders’ equity and cash flows as of the
end of and for the fiscal year most recently ended, setting forth in each case in comparative form
the figures for the previous fiscal year, all reported on by Deloitte & Touche LLP or other
independent public accountants of recognized national standing (without a “going concern” or like
qualification or exception and without any qualification or exception as to the scope of such
audit) to the effect that such consolidated financial statements present fairly in all material
respects the financial condition and results of operations of the New Parent and its Consolidated
Subsidiaries on a consolidated basis in accordance with GAAP consistently applied and (B) upon the
written request of the Administrative Agent, the New Parent’s unaudited consolidating balance sheet
and related statements of operations as of the end of and for the fiscal year most recently ended
(which consolidating statements shall also demonstrate eliminating entries, if any, with respect to
any Consolidated Subsidiaries that are Unrestricted Subsidiaries).  


     (b)     Quarterly Financial Statements.  (i) Prior to a Qualified IPO, as soon as
available, but in any event in accordance with then applicable law and not later than 10 days after
QRI files each Quarterly Report on Form 10-Q with the SEC (but in no event more than 60 days after
the end of the applicable fiscal quarter), (A) the Borrower’s unaudited consolidated balance sheet
and related statements of operations, stockholders’ equity and cash flows as of the end of and for
the fiscal quarter most recently ended and the then elapsed portion of such fiscal year, setting
forth in each case in comparative form the figures for the corresponding period or periods of (or,
in the case of the balance sheet, as of the end of) the



65









 




previous fiscal year, all certified by one
of its Financial Officers as presenting fairly in all material respects the financial condition and
results of operations of the Borrower (or, from and after the New Parent Joinder, New Parent) and
its Consolidated Subsidiaries on a consolidated basis in accordance with GAAP consistently applied,
subject to normal year-end audit adjustments and the absence of footnotes and (B) upon the written
request of the Administrative Agent, the Borrower’s unaudited consolidating balance sheet and
related statements of operations as of the end of and for the fiscal quarter most recently ended
(which consolidating statements shall also demonstrate eliminating entries, if any, with respect to
any Consolidated Subsidiaries that are Unrestricted Subsidiaries).  



     (ii)     From and after a Qualified IPO, as soon as available, but in any event in accordance with
then applicable law and not later than 10 days after New Parent files each Quarterly Report on Form
10-Q with the SEC (or applicable Canadian equivalent) (but in no event more than 60 days after the
end of the applicable fiscal quarter), (A) New Parent’s unaudited consolidated balance sheet and
related statements of operations, stockholders’ equity and cash flows as of the end of and for the
fiscal quarter most recently ended and the then elapsed portion of such fiscal year, setting forth
in each case in comparative form the figures for the corresponding period or periods of (or, in the
case of the balance sheet, as of the end of) the previous fiscal year, all certified by one of its
Financial Officers as presenting fairly in all material respects the financial condition and
results of operations of New Parent and its Consolidated Subsidiaries on a consolidated basis in
accordance with GAAP consistently applied, subject to normal year-end audit adjustments and the
absence of footnotes and (B) upon the written request of the Administrative Agent, New Parent’s
unaudited consolidating balance sheet and related statements of operations as of the end of and for
the fiscal quarter most recently ended (which consolidating statements shall also demonstrate
eliminating entries, if any, with respect to any Consolidated Subsidiaries that are Unrestricted
Subsidiaries).  


     (c)     Certificate of Financial Officer — Compliance.  Concurrently with any delivery of
financial statements under Section 8.01(a) or Section 8.01(b), a certificate of a Financial Officer
in substantially the form of Exhibit D hereto (i) certifying as to whether a Default has occurred
and, if a Default has occurred, specifying the details thereof and any action taken or proposed to
be taken with respect thereto and (ii) setting forth reasonably detailed calculations demonstrating
compliance with Section 9.01.  


     (d)     Certificate of Insurer — Insurance Coverage.  Within 60 days of the annual
renewal thereof, a certificate of insurance coverage from each insurer with respect to the
insurance required by Section 8.06, in form and substance satisfactory to the Administrative Agent,
and, if requested by the Administrative Agent or any Lender, all copies of the applicable policies.  


     (e)     Notice of Casualty Events.  Prompt written notice, and in any event within five
Business Days, of the occurrence of any Casualty Event with respect to Oil and Gas Properties
having an estimated Canadian Dollar value in excess of C$15,000,000 or the commencement of any
action or proceeding that would reasonably be expected to result in a Casualty Event with respect
to Oil and Gas Properties having an estimated Canadian Dollar value in excess of C$15,000,000.  


     (f)     Notice of Incurrence of Debt Resulting in Borrowing Base Reduction.  Written
notice of the incurrence by any Credit Party of any Debt pursuant to Section 9.02(n) which results
in an automatic reduction in the Borrowing Base pursuant to such Section, which written notice
shall include the stated amount of such Debt and be delivered promptly after the pricing of such
Debt, but in no event later than one (1) day prior to settlement of such Debt.  


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     (g)     Information Regarding Credit Parties.  (i) Prompt written notice (and in any event
within ten (10) days following any such change) of any change (A) in any Credit Party’s corporate
name or (B) in the address of any Credit Party’s chief executive office, and (ii) prompt written
notice (and in any event within thirty (30) days following any such change) of any change (A) in
any Credit Party’s identity or corporate structure or in the jurisdiction in which such Person is
incorporated or formed or (B) in any Credit Party’s jurisdiction of organization or such Person’s
organizational identification number in such jurisdiction of organization.  


     (h)     Other Requested Information.  Promptly following any request therefor, such other
information regarding the operations, business affairs and financial condition of any Credit Party
(including, without limitation, any Canadian Pension Plan, Plan or Multiemployer Plan and any
reports or
other information required to be filed under ERISA), as the Administrative Agent or any Lender
may reasonably request.  


     Documents required to be delivered pursuant to Section 8.01 may be delivered electronically
and if so delivered, shall be deemed to have been delivered on the date (i) on which (A) the
Borrower (or, from and after a Qualified IPO, New Parent) posts such documents, or provides a link
thereto on the Borrower’s (or, from and after a Qualified IPO, New Parent’s) website on the
Internet or (B) such documents are publically available on the SEC’s EDGAR website or, as
applicable, on the website of the System for Electronic Document Analysis and Retrieval (SEDAR) or
(ii) on which such documents are delivered to the Administrative Agent, including in electronic
form.  Once received by the Administrative Agent, the Administrative Agent shall post such
documents on the Borrower’s behalf on an Internet or intranet website, if any, to which each Lender
and the Administrative Agent have access (whether a commercial, third-party website or whether
sponsored by the Administrative Agent); provided that the Borrower shall deliver such documents in
a form acceptable to the Administrative Agent.  Except for such compliance certificates, the
Administrative Agent shall have no obligation to request the delivery or to maintain copies of the
documents referred to above, and in any event shall have no responsibility to monitor compliance by
the Borrower with any such request for delivery, and each Lender shall be solely responsible for
requesting delivery to it or maintaining its copies of such documents.  


     Section 8.02   Notices of Material Events.  Promptly following a Responsible Officer
becoming aware of the occurrence thereof, the Borrower will furnish to the Administrative Agent
written notice of the following:



     (a)     the occurrence of any Default;



     (b)     the filing or commencement of any action, suit, proceeding, investigation or arbitration
by or before any arbitrator or Governmental Authority against or affecting the Borrower or any
Affiliate thereof not previously disclosed in writing to the Lenders or any material adverse
development in any action, suit, proceeding, investigation or arbitration (whether or not
previously disclosed to the Lenders) that, in either case, if adversely determined, would
reasonably be expected to result in a Material Adverse Effect; and



     (c)     the filing or commencement of any action, suit, proceeding, investigation or arbitration
by or before any arbitrator or Governmental Authority involving or relating to the Loan Documents.  


     (d)     any other development that results in, or would reasonably be expected to result in, a
Material Adverse Effect.  


67









 





     Each notice delivered under this Section 8.02 shall be accompanied by a statement of a
Responsible Officer setting forth the details of the event or development requiring such notice and
any action taken or proposed to be taken with respect thereto.  


     Section 8.03   Existence; Conduct of Business.  The Borrower will, and will cause each
other Credit Party to, do or cause to be done all things necessary to preserve, renew and keep in
full force and effect its legal existence and the rights, licenses, permits, privileges and
franchises material to the conduct of its business and maintain, if necessary, its qualification to
do business in each other jurisdiction in which its Oil and Gas Properties are located or the
ownership of such Properties requires such qualification, except where the failure to so qualify
would not reasonably be expected to have a Material Adverse Effect; provided that the foregoing
shall not prohibit any merger, consolidation, liquidation or dissolution permitted under Section
9.09.  


     Section 8.04   Payment of Obligations.  The Borrower will, and will cause each other
Credit Party to, pay its obligations, including Tax liabilities and remittance liabilities of the
Credit Parties, before the same shall become delinquent or in default, except where (i) (A) the
validity or amount thereof is being contested in good faith by appropriate proceedings, and (B)
such Credit Party has set aside on its books adequate reserves with respect thereto in accordance
with GAAP or (ii) the failure to make payment would not reasonably be expected to result in a
Material Adverse Effect or result in the seizure or levy of any Oil and Gas Property of any Credit
Party that was evaluated in the Reserve Report used in the most recent determination of the
Borrowing Base.  


     Section 8.05   Operation and Maintenance of Properties.  The Borrower will and will
cause each other Credit Party to, in all material respects: (a) promptly pay and discharge, or make
reasonable efforts to cause to be paid and discharged, when due all delay rentals, royalties and
expenses accruing under the leases or other agreements affecting or pertaining to its material Oil
and Gas Properties evaluated in the Reserve Report used in the most recent determination of the
Borrowing Base, provided that, in the case of delay rentals, the Borrower and/or the applicable
Credit Party shall only be required to pay and discharge, or make reasonable efforts to pay and
discharge, delay rentals as and to the extent the Borrower or such other Credit Party determines in
good faith that payment and discharge thereof is in the Borrower’s or such other Credit Party’s, as
applicable, best interest, (b) perform, or make reasonable and customary efforts to cause to be
performed, the obligations of the Borrower or any such other Credit Party required by each and all
of the assignments, deeds, leases, subleases, contracts and agreements affecting its interests in
its material Oil and Gas Properties evaluated in the Reserve Report used in the most recent
determination of the Borrowing Base, (c) do all other things necessary to keep unimpaired, except
for Liens permitted by the Loan Documents, its rights with respect to its material Oil and Gas
Properties evaluated in the Reserve Report used in the most recent determination of the Borrowing
Base and prevent any forfeiture thereof or a default thereunder, (d) keep and maintain all Oil and
Gas Property material to the conduct of its business in good working order and condition, ordinary
wear and tear excepted and (e) to the extent the Borrower is not the operator of any Property, the
Borrower shall use reasonable efforts to cause the operator to comply with this Section 8.05,
except (x) to the extent a portion of such Oil and Gas Properties is no longer capable of producing
Hydrocarbons in economically reasonable amounts, (y) for dispositions permitted by this Agreement
or (z) when the failure to do so would not, in the aggregate, reasonably be expected to have a
Material Adverse Effect.  


     Section 8.06   Insurance.  The Borrower will, and will cause each other Credit Party to,
maintain, with financially sound and reputable insurance companies, insurance in such amounts and
against such risks as are customarily maintained by companies engaged in the same or similar
businesses operating in the same or similar locations.  The loss payable clauses or provisions in
said insurance policy or policies insuring any of the collateral for the Loans shall be endorsed in
favor of the Administrative



68









 




Agent as its interests in the collateral may appear and such policies
shall name the Administrative Agent and the Lenders as “additional insureds” and provide that the
insurer will endeavor to give at least 30 days prior notice of any cancellation to the
Administrative Agent.  



     Section 8.07   Books and Records; Inspection Rights.  The Borrower will, and will cause
each other Credit Party to, keep proper books of record and account in which full, true and correct
entries are made of all dealings and transactions in relation to its business and activities.  The
Borrower will, and will cause each other Credit Party to, permit any representatives designated by
the Administrative Agent or any Lender (coordinated through and together with the Administrative
Agent), upon reasonable prior notice, to visit and inspect its Oil and Gas Properties, to examine
and make extracts from its books and records, and to discuss its affairs, finances and condition
with its officers and independent accountants, all at such reasonable times during the Borrower’s
or such other Credit Party’s normal business hours (and in a manner so as to the extent
practicable, not to unreasonably interfere with the normal business operations
of the Borrower or such other Credit Party) not more than one (1) time per fiscal year;
provided, that to the extent an Event of Default then exists, as often as reasonably requested.  The Lenders shall bear the cost of such inspections and examinations unless an Event of Default
then exists, in which event the Borrower shall bear such cost.  


     Section 8.08   Compliance with Laws.  The Borrower will, and will cause each other
Credit Party to, comply with all Governmental Requirements applicable to it or its Oil and Gas
Properties, except where the failure to do so, individually or in the aggregate, would not
reasonably be expected to result in a Material Adverse Effect.  


     Section 8.09   Environmental Matters.  (a) Except to the extent that the failure to do
so would not reasonably be expected to have a Material Adverse Effect, (i) the Borrower shall, and
shall cause each other Credit Party to, comply with all applicable Environmental Laws, including,
without limitation, (x) all licensing, permitting, notification, and similar requirements of
Environmental Laws, and (y) all provisions of Environmental Laws regarding storage, discharge,
release, transportation, treatment and disposal of Hazardous Materials and (ii) the Borrower shall,
and shall cause each other Credit Party to, promptly pay and discharge when due all claims,
liabilities and obligations with respect to any clean-up or remediation measures necessary to
comply with applicable Environmental Laws, provided that such payment or discharge shall not be
required to the extent that (A) the amount, applicability or validity thereof is being contested in
good faith by appropriate proceedings promptly initiated and diligently conducted and (B) Borrower
or such other Credit Party, as and to the extent required in accordance with GAAP, shall have set
aside on its books reserves (segregated to the extent required by GAAP) deemed by them to be
adequate with respect thereto.  


     (b)     To the extent the Borrower or another Credit Party is not the operator of any Property,
none of the Credit Parties shall be obligated to directly perform any undertakings contemplated by
the covenants and agreements contained in this Section 8.09 which are performable only by such
operators or are beyond the control of the Credit Parties.  Notwithstanding the above and except to
the extent that the failure to do so would not reasonably be expected to have a Material Adverse
Effect, the Borrower shall be obligated to enforce such operators’ contractual obligations to
maintain, develop and operate the Oil and Gas Properties subject to such operating agreements, and
the Borrower shall, and shall cause the other Credit Parties to, use commercially reasonable
efforts to cause the operator to comply with this Section 8.09.  


     (c)     To the extent reasonably requested by the Administrative Agent, the Borrower will, and
will cause each other Credit Party to, provide environmental assessment, audit or test reports of
any Oil and Gas Properties of the Borrower or any other Credit Party, provided an Event of Default
then exists or



69









 




the Administrative Agent has a reasonable suspicion that either an Event of Default
or a breach of any representation or warranty set forth in Section 7.06 hereof then exists.  



     (d)     In connection with any acquisition by Borrower or any other Credit Party of any Oil and
Gas Property for consideration of at least C$17,500,000, other than an acquisition of additional
interests in Oil and Gas Properties in which any Credit Party previously held an interest, to the
extent Borrower or such other Credit Party obtains or is provided with the same, the Borrower
shall, promptly following Borrower’s or such other Credit Party’s obtaining or being provided with
the same, deliver to the Administrative Agent such final and non-privileged material environmental
reports of such Oil and Gas Properties as are reasonably requested by the Administrative Agent.  


     Section 8.10   Further Assurances.  (a) The Borrower at its sole expense will, and will
cause each other Credit Party to, promptly execute and deliver to the Administrative Agent all such
other documents, agreements and instruments reasonably requested by the Administrative Agent to
comply
with, cure any defects or accomplish the conditions precedent, covenants and agreements of the
Borrower or any other Credit Party, as the case may be, in the Loan Documents, including the Notes,
or to further evidence and more fully describe the collateral intended as security for the Secured
Indebtedness, or to correct any omissions in this Agreement or the Security Instruments, or to
state more fully the obligations secured therein, or to perfect, protect or preserve any Liens
created pursuant to this Agreement or any of the Security Instruments or the priority thereof, or
to make any recordings, file any notices or obtain any consents, all as may be reasonably necessary
or appropriate, in the sole discretion of the Administrative Agent, in connection therewith.  


     (b)     The Borrower hereby authorizes the Administrative Agent to file one or more financing or
continuation statements, and amendments thereto, or any equivalent thereto in Canada or any
province thereof relative to all or any part of the Mortgaged Property without the signature of the
Borrower or any other Guarantor where permitted by law.  A carbon, photographic or other
reproduction of the Security Instruments or any financing statement covering the Mortgaged Property
or any part thereof shall be sufficient as a financing statement where permitted by law.  


     Section 8.11   Reserve Reports.  (a) On or before May 1, 2012 and April 1st of each year
thereafter, the Borrower shall furnish to the Administrative Agent a Reserve Report prepared by one
or more Approved Petroleum Engineers (the “Prepared Reserve Report”) as of January
1st of such year.  On or before October 1st of each year, commencing October 1, 2012,
the Borrower shall furnish to the Administrative Agent and the Lenders a Reserve Report as of July
1st of such year prepared by or under the supervision of the chief engineer of the
Borrower in accordance with the procedures used in the most recent Prepared Reserve Report.  It is
understood that projections concerning volumes attributable to the Oil and Gas Properties and
production and cost estimates contained in each Reserve Report are necessarily based upon
professional opinions, estimates and projections and that the Credit Parties do not warrant that
such opinions, estimates and projections will ultimately prove to have been accurate.  


     (b)     In the event of an Interim Redetermination requested by the Administrative Agent or the
Borrower pursuant to Section 2.07(b), the Borrower shall, upon the request of the Administrative
Agent, furnish to the Administrative Agent and the Lenders a Reserve Report (i) prepared by or
under the supervision of the chief engineer of the Borrower and in accordance with the procedures
used in the immediately preceding Prepared Reserve Report delivered pursuant to Section 8.11(a),
and (ii) which shall have an “as of” date as required by the Administrative Agent, no later than a
date mutually agreed to by the Borrower and the Administrative Agent.  If the Administrative Agent
does not request an updated Reserve Report pursuant to the immediately preceding sentence, the
Administrative Agent and the



70









 




Lenders may base such Interim Redetermination on the Reserve Report
most recently delivered by the Borrower hereunder.  



     (c)     With the delivery of each Reserve Report, the Borrower 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) subject to Immaterial Title Deficiencies, the
Borrower 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 Permitted Liens and Liens
securing the Secured Indebtedness, (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 one half bcf
of gas in the aggregate with respect to its Oil and Gas Properties evaluated in such Reserve Report
which would require the Borrower or any Guarantor to deliver Hydrocarbons either generally or
produced from such Oil and Gas Properties at some future time without then or thereafter receiving
full payment therefor, (iv) attached to the certificate is a list of all marketing agreements
entered into subsequent to the later of the date hereof or the most recently
delivered Reserve Report which pertain to the sale of production at a fixed price and have a
maturity date of longer than six (6) months from the date of such certificate and (v) a true and
complete list of all Oil and Gas Swap Agreements of the Borrower and each other Credit Party is
included, which list contains the material terms thereof (including the type, remaining term,
counterparty, mark-to-market value as of the end of the second month immediately preceding the date
of such certificate and notional amounts or volumes), any credit support agreements relating
thereto, any margin required or supplied under any credit support document, and the counterparty to
each such agreement.  


     (d)     The Reserve Reports may only include Oil and Gas Properties that are (x) located in
British Columbia, Canada, Alberta, Canada, or another province in Canada that at such time allows
for a secured lender to receive the benefit of a floating charge over real property located in such
province, and for which such floating charge is created by a debenture or other Security Instrument
and is of record (as necessary) as contemplated under Section 6.01(f)(i) or (y) located in any
other province in Canada, the United States or any other country or jurisdiction reasonably
acceptable to the Administrative Agent; provided that with respect to Oil and Gas Properties set
forth in this clause (y), (i) the Administrative Agent shall be reasonably satisfied that fixed
charges, collateral agreements or other Security Instruments create first priority, perfected Liens
(subject only to Permitted Liens) on at least 80% of the total value of the Proved Hydrocarbon
Interests relating to such Oil and Gas Properties (including any such Oil and Gas Properties
subject to floating charges) and (ii) the Administrative Agent shall have received title
information as the Administrative Agent may reasonably require satisfactory to the Administrative
Agent setting forth the status of title to at least 75% of the total value of such Oil and Gas
Properties; provided, that with respect to such Oil and Gas Properties referred to in the foregoing
clauses (x) and (y), the Administrative Agent shall have received such other closing documents,
certificates, and legal opinions as shall be reasonably requested by, and in form and substance
reasonably satisfactory to, the Administrative Agent.  


     Section 8.12   [Intentionally
left blank].



     Section 8.13   Additional
Collateral; Additional Guarantors.  (a) [Reserved].  


     (b)     If the Borrower or any other Credit Party becomes the owner of a Restricted Subsidiary,
then the Borrower shall, or shall cause such other Credit Party to, promptly, but in any event no
later than 30 days after the date of becoming an owner thereof (or such longer period as the
Administrative Agent may agree in its discretion), (i) pledge 100% of the Equity Interests of such
new Restricted Subsidiary (including, without limitation, delivery of original stock certificates
evidencing the Equity Interests of



71









 




such new Restricted Subsidiary, together with appropriate
undated stock powers for each certificate duly executed in blank by the registered owner thereof)
and (ii) execute and deliver such other additional closing documents, certificates and legal
opinions as shall reasonably be requested by the Administrative Agent.  If any Person other than
QRI (or, from and after the New Parent Joinder, New Parent) at any time acquires or otherwise
possesses any of the Equity Interests issued by the Borrower (including an Intermediate HoldCo),
the Borrower shall cause each such Person to promptly, but in any event no later than 30 days after
the date of becoming an owner thereof (or such longer period as the Administrative Agent may agree
in its discretion), (i) pledge 100% of the Equity Interests in the Borrower owned by such person
pursuant to a Pledge Agreement (including, without limitation, delivery of original stock
certificates evidencing the Equity Interests of the Borrower, together with an appropriate undated
stock power for each certificate duly executed in blank by the registered owner thereof) and (ii)
execute and deliver such other additional closing documents, certificates, and legal opinions as
shall reasonably be requested by the Administrative Agent.  



     (c)     The Borrower shall cause the following Persons to guarantee the Secured Indebtedness
pursuant to the Guaranty Agreement:




     (i)     each Material Restricted Subsidiary;




     (ii)     any Person required to guarantee the Secured Indebtedness in order for the Borrower
to be in compliance with Section 9.05(b);




     (iii)     any Person that guarantees any Permitted Additional Debt;




     (iv)     any Restricted Subsidiary that places a Lien on its Oil and Gas Properties to
secure the Secured Indebtedness;




     (v)     one or more additional Restricted Subsidiaries to the extent necessary to cause (A)
the total assets of the Restricted Subsidiaries that are not Guarantors to be less than 15%
of the combined assets of the Credit Parties and (B) the combined EBITDAX of such Restricted
Subsidiaries to be less than 15% of the combined EBITDAX of the Credit Parties; and




     (vi)     each Intermediate HoldCo, New Parent and, following the occurrence of a Qualified
IPO, any subsequent direct owner of Equity Interests in the Borrower.  


     (d)     In connection with any guaranty required by Section 8.13(c), the Borrower shall, or shall
cause such Subsidiary or other Person to promptly, but in any event no later than 30 days (or such
longer period as the Administrative Agent may agree in its discretion) after the event requiring
such guaranty, execute and deliver (i) a supplement to the Guaranty Agreement and (ii) such other
additional closing documents, certificates and legal opinions as shall reasonably be requested by
the Administrative Agent.  If at any time any Person is not otherwise required to guarantee the
Secured Indebtedness hereunder (whether pursuant to the other provisions of this Section 8.13 or
otherwise) or under any other Loan Document, then upon receipt by the Administrative Agent of
evidence satisfactory to it that such Person has been fully and finally released from its guarantee
obligations in respect of any Permitted Additional Debt, such Person shall be released from its
guarantee obligations with respect to the Secured Indebtedness and the Administrative Agent shall,
at the sole cost and expense of the Borrower, execute such further documents and do all such
further acts so as to reasonably evidence such release.  


     (e)     If a Default or Event of Default has occurred and is continuing and the Majority Lenders
consider it necessary for their adequate protection, the Borrower, at the request of the
Administrative



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Agent, will forthwith grant or cause to be granted to the Administrative Agent for
the benefit of the Secured Parties, a fixed Lien (subject only to Permitted Liens) in such of the
applicable Credit Party’s property as the Administrative Agent, in its sole discretion, determines
as security for all then present and future Secured Indebtedness of the Credit Parties to the
Secured Parties.  In this connection, the Borrower will, and will cause each other Credit Party to:





     (i)     provide the Administrative Agent with such information as is reasonably required by
the Administrative Agent to identify the property to be charged pursuant to this Section
8.13(e);




     (ii)     do all such things as are reasonably required to grant, or cause such Credit Party
to grant, in favor of the Agent, the Secured Parties, a fixed Lien (subject only to Permitted
Liens) in respect of such property to be so charged pursuant to this Section 8.13(e);




     (iii)     provide the Administrative Agent with all corporate or partnership resolutions and
other action, as reasonably required, for any Credit Party to grant the fixed Lien (subject
only to Permitted Liens) in the property identified by the Administrative Agent to be so
charged;




     (iv)     provide the Administrative Agent with such security instruments and other documents
which the Administrative Agent, acting reasonably, deems are necessary to give full force and
effect to the provisions of this Section 8.13(e);




     (v)     assist the Administrative Agent in the registration or recording of such agreements
and instruments in such public registry offices in Canada or any province thereof or any
other jurisdiction as the Administrative Agent, acting reasonably, deems necessary to give
full force and effect to the provisions of this Section 8.13(e); and




     (vi)     pay all reasonable costs and expenses incurred by the Administrative Agent in
connection with the preparation, execution and registration of all agreements, documents and
instruments made in connection with this Section 8.13(e).  


     Section 8.14   ERISA and Benefit Plan Compliance.  The Borrower will promptly furnish to
the Administrative Agent immediately upon becoming aware of the occurrence of any ERISA Event or
Canadian Pension Plan Termination Event that alone or together with any other ERISA Events or
Canadian Pension Plan Termination Events that have occurred, would reasonably be expected to result
in liability of any Credit Party or any ERISA Affiliates in an aggregate amount which would
reasonably be expected to have a Material Adverse Effect, a written notice signed by a Responsible
Officer, specifying the nature thereof, what action the applicable Credit Party or any ERISA
Affiliate is taking or proposes to take with respect thereto, and, when known, any action taken or
proposed by the Internal Revenue Service, the Department of Labor, the PBGC or any equivalent
agency or authority with jurisdiction over Canadian Pension Plans with respect thereto.  With
respect to each Pension Plan, the Borrower will, and will cause each other Credit Party and ERISA
Affiliate to, (a) satisfy in full and in a timely manner, without incurring any late payment or
underpayment charge or penalty that would reasonably be expected to have a Material Adverse Effect
and without giving rise to any Lien securing an amount in excess of C$15,000,000, all of the
contribution and funding requirements of section 412 of the Code (determined without regard to
subsections (d), (e), (f) and (k) thereof) and of section 302 of ERISA (determined without regard
to sections 303, 304 and 306 of ERISA), and (b) pay, or cause to be paid, to the PBGC in a timely
manner, without incurring any late payment or underpayment charge or penalty that would reasonably
be expected to have a Material Adverse Effect, all premiums required pursuant to sections 4006 and
4007 of ERISA.  With respect to each Canadian Pension Plan, the Borrower will not (i) terminate, or
permit any other Credit Party to terminate, any Canadian Pension Plan in a manner, or take



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any
other action with respect to any Canadian Pension Plan, which would reasonably be expected to have
a Material Adverse Effect, (ii) fail to make, or permit any other Credit Party to fail to make,
full payment when due of all amounts which, under the provisions of any Canadian Pension Plan,
agreement relating thereto or applicable law, the Borrower or any other Credit Party is required to
pay as contributions thereto, except where the failure to make such payments could not reasonably
be expected to have a Material Adverse Effect, or (iii) permit to exist, or allow any other Credit
Party to permit to exist, any Unfunded Current Liability, whether or not waived, with respect to
any Canadian Pension Plan in an amount which would reasonably be expected to cause a Material
Adverse Effect.  



     Section 8.15   Unrestricted Subsidiaries.  The Borrower (or, from and after the New
Parent Joinder, New Parent):



     (a)     will cause the management, business and affairs of each of the Borrower (or, from and
after the New Parent Joinder, New Parent) and its Restricted Subsidiaries to be conducted in such a
manner (including, without limitation, by keeping separate books of account, furnishing separate
financial statements of Unrestricted Subsidiaries to creditors and potential creditors thereof and
by not permitting Properties of the Borrower (or, from and after the New Parent Joinder, New
Parent) and its respective Restricted Subsidiaries to be commingled) so that each Unrestricted
Subsidiary that is a corporation will
be treated as a corporate entity separate and distinct from the Borrower (or, from and after
the New Parent Joinder, New Parent) and the Restricted Subsidiaries;



     (b)     will not, and will not permit any of the Restricted Subsidiaries to, incur, assume,
guarantee or be or become liable for any Debt of any of the Unrestricted Subsidiaries; and



     (c)     will not permit any Unrestricted Subsidiary to hold any Equity Interest in, or any Debt
of, the Borrower or any other Credit Party.  


     Section 8.16   Section 1031 Exchange.  If the Borrower elects to participate in a
Section 1031 Exchange with respect to any Oil and Gas Properties, then on or before 180 days
following the acquisition by the Section 1031 Counterparty of such Oil and Gas Properties from the
Borrower, the Borrower shall receive from the Section 1031 Counterparty (a) Oil and Gas Properties
having a substantially equivalent value to the Oil and Gas Properties that the Section 1031
Counterparty acquired from the Borrower, (b) payment in full in cash of the note given by the
Section 1031 Counterparty to the Borrower or (c) any combination of Oil and Gas Properties and a
partial cash prepayment of such note, such that the Oil and Gas Properties received and such
partial cash prepayment have an aggregate value not less than the value of the Oil and Gas
Properties that the Section 1031 Counterparty acquired from the Borrower.  


     Section 8.17   Use of Proceeds.  The Borrower will use the proceeds of the Loans and
will use Letters of Credit for general corporate purposes, including acquisitions, Investments,
working capital, repayment of Debt and the making of Restricted Payments, in each case to the
extent not otherwise prohibited hereunder; provided that the aggregate amount of LC Exposure under
all Letters of Credit used as credit support for any Credit Party’s obligations under any Swap
Agreement shall not exceed an amount equal to (a) C$7,500,000 minus (b) the amount of cash or
treasury securities subject to Liens permitted by Section 9.03(k).  


     Section 8.18   Fiscal Year.  The Borrower’s fiscal year shall end on December 31.  


     Section 8.19   New Parent Joinder.  Promptly, and in any event prior to the earlier to
occur of (a) the date on which 100% of the Equity Interests in the Borrower is transferred from QRI
to New Parent and (b) the date of a Qualified IPO, the Borrower will cause New Parent to execute
and deliver to the



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Administrative Agent (i) a Pledge Agreement (or supplement thereto), (ii) a
Guaranty Agreement (or supplement thereto) as required by Section 8.13(c) and (iii) such other
additional closing documents, certificates, and legal opinions as shall reasonably be requested by
the Administrative Agent.  New Parent’s execution and delivery of the foregoing agreements and
other documentation is herein referred to collectively as the “New Parent Joinder”.  In
order to facilitate the transfer of the Equity Interests in the Borrower from QRI to New Parent,
the Administrative Agent undertakes and agrees that it will promptly redeliver to the Borrower, on
or prior to the date on which such transfer is scheduled to occur but subject to customary escrow
arrangements, the share certificates in the Borrower together with undated, blank stock powers for
each such certificate, in each case previously delivered to the Administrative Agent by QRI.  



ARTICLE 9

Negative Covenants




     Until the Commitments have expired or terminated and the principal of and interest on each
Loan and all fees payable hereunder and all other amounts payable under the Loan Documents have
been paid in full and all Letters of Credit have expired or terminated and all LC Disbursements
shall have been reimbursed, the Borrower covenants and agrees with the Lenders that:



     Section 9.01   Financial Covenants.  (a) Net Debt to EBITDAX Ratio.  The
Borrower (or, from and after the New Parent Joinder, New Parent) will not, as of the last day of
any fiscal quarter, permit its ratio of (i) Net Debt as of the last day of the fiscal quarter then
ending (ii) to EBITDAX for the period of four fiscal quarters then ending, commencing with the four
fiscal quarter period ending September 30, 2011, to be greater than 4.5 to 1.0.  


     (b)     Current Ratio.  The Borrower (or, from and after the New Parent Joinder, New
Parent) will not permit, as of the last day of any fiscal quarter, its ratio of (i) consolidated
current assets (including the unused amount of the total Commitments (but only to the extent that
the Borrower is permitted to borrow such amount under the terms of this Agreement, including,
without limitation, Section 6.02 hereof), but excluding current assets resulting from the
requirements of ASC Topic 815 and ASC Topic 410) to (ii) consolidated current liabilities
(excluding current maturities of long term debt and current liabilities resulting from the
requirements of ASC Topic 815 and ASC Topic 410) to be less than 1.0 to 1.0, commencing with the
fiscal quarter ending September 30, 2011; provided that for purposes of calculating such ratio, the
current assets and current liabilities of all Unrestricted Subsidiaries shall be excluded as set
forth in Section 1.05.  


     Section 9.02   Debt.  The Borrower will not, and will not permit any other Credit Party
to, incur, create, assume or suffer to exist any Debt, except:



     (a)     the Notes or other Secured Indebtedness;



     (b)     the Guarantee by the Borrower or any other Credit Party of any Debt of any other Credit
Party that is otherwise permitted hereunder so long as such Guarantee guarantees not more than the
percentage of such Debt that equals the percentage of common equity owned directly or indirectly by
the Borrower or such other Credit Party in such other Credit Party at the time such Guarantee is
executed;



     (c)     Debt of any Credit Party to any other Credit Party;



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     (d)     Debt outstanding on the date hereof and set forth on Schedule 9.02, including without
limitation the Permitted Intercompany Debt (subject to the limitations in the definition of
“Permitted Intercompany Debt”);



     (e)     Debt of a Person which becomes a Restricted Subsidiary after the date hereof, provided
that (i) such Debt existed at the time such Person became a Restricted Subsidiary and was not
created in anticipation thereof, (ii) immediately after giving effect to the acquisition of such
Person by a Credit Party, no Default or Event of Default shall have occurred and be continuing and
(iii) that all Debt incurred under this clause (e), together with all Debt incurred pursuant to
clause (j) below, does not exceed in the aggregate at any one time outstanding the greater of (x)
C$10,000,000 and (y) 5% of the Borrowing Base then in effect;



     (f)     endorsements of negotiable instruments for collection in the ordinary course of business;



     (g)     Debt consisting of performance bonds, surety bonds, appeal bonds, injunctions bonds and
other obligations of a like nature provided by any Credit Party;



     (h)     Non-Recourse Debt in an aggregate amount outstanding at any time not to exceed
C$5,000,000;



     (i)     Debt constituting Permitted Investments;



     (j)     Debt incurred to finance the acquisition, construction or improvement of fixed or capital
assets (including, without limitation, obligations in connection with Capital Leases) secured by
Liens permitted by Section 9.03(h); provided that all Debt incurred under this clause (j), together
with all Debt incurred pursuant to clause (e) above, does not exceed in the aggregate at any one
time outstanding the greater of (x) C$10,000,000 and (y) 5% of the Borrowing Base then in effect;



     (k)     other Debt not to exceed in the aggregate at any one time outstanding the greater of (x)
C$20,000,000 and (y) 7% of the Borrowing Base then in effect;



     (l)     Debt associated with worker’s compensation claims, unemployment insurance laws or similar
legislation incurred in the ordinary course of business;



     (m)     Taxes, assessments or other governmental charges which are not yet due or are being
contested in good faith in accordance with Section 7.08;



     (n)     Debt and any guarantees thereof by the Guarantors (including any Persons becoming
Guarantors simultaneously with the incurrence of such Debt), provided that: (i) immediately before,
and after giving effect to, the incurrence of any such Debt (and any concurrent repayment of Debt
with the proceeds of such incurrence), no Default exists or would exist, (ii) such Debt is not
secured by any Lien, (iii) such Debt does not have any scheduled amortization of principal prior to
the Maturity Date, (iv) such Debt has a stated maturity no earlier than 91 days after the Maturity
Date, (v) such Debt does not have mandatory redemption events that are not Events of Default
hereunder, (vi) such Debt does not prohibit prior repayment of Loans, and (vii) at the time any
such Debt is incurred, the Borrowing Base then in effect shall be automatically reduced by the
lesser of (A) an amount equal to the product of 0.25 multiplied by the stated principal amount of
such Debt, rounded to the nearest C$1,000,000 and (B) if requested by the Borrower, an amount
(which may be zero) approved by the Required Lenders, and the Borrowing Base as so reduced shall
become the new Borrowing Base immediately upon the date of such issuance or assumption, effective
and applicable to the Borrower, the Agents, each Issuing Bank and the Lenders on



76









 




such date until
the next redetermination or modification thereof hereunder.  For purposes of this Section 9.02(n),
the “stated principal amount” shall mean the stated face amount of such Debt without giving
effect to any original issue discount;




     (o)     Any renewals, refinancings or extensions of (but, except to the extent permitted herein,
not increases in (except to cover premiums or penalties)) any Debt described in clauses (d), (e),
(j) or (n) of this Section 9.02 (other than Permitted Intercompany Debt); provided, however, that
any refinancing of Debt described in clause (n) shall comply with the provisions of such clause
(n);



     (p)     Debt consisting of the financing of insurance premiums if the amount financed does not
exceed the premium payable for the current policy period;



     (q)     Debt consisting of obligations to deliver commodities, goods or services, including,
without limitation, Hydrocarbons, in consideration of one or more advance payments, so long as
delivery of such commodities, goods or services is due within 60 days of such advance payment;



     (r)     Debt consisting of deferred put premiums on Swap Agreements entered into by any Credit
Party with Approved Counterparties;



     (s)     Debt incurred by the Borrower or any Credit Party as a result of credit support (in the
form of cash) provided by, or on behalf of, counterparties pursuant to any Swap Agreement, not to
exceed the amount of such cash held by the Borrower or such other Credit Party; and



     (t)     Debt incurred, created or suffered to exist by the Borrower to or in favor of (i) QRI
prior to the transfer by QRI to New Parent, directly or indirectly through a Parent HoldCo, of 100%
of the Equity Interests of the Borrower in contemplation of the Qualified IPO provided that such
Debt does not exceed the value of the Equity Interests in the Borrower immediately prior to the
first incurrence or creation of such Debt (the “Qualified IPO Related Debt”), (ii) New
Parent (and, as applicable, a Parent HoldCo) upon the transfer of the Qualified IPO Related Debt
from QRI to New Parent, directly or indirectly through a Parent HoldCo, together with 100% of the
Equity Interests in the Borrower; provided that (x) at all times such Debt is subordinated in right
of payment to the Secured Indebtedness on terms satisfactory to the Administrative Agent, acting
reasonably, and (y) such Debt is settled and cancelled promptly after the completion of the
transfer of 100% of the Equity Interests of the Borrower to New Parent.  For greater certainty, the
foregoing proviso will not restrict the Borrower from settling the Qualified IPO Related Debt by
the issuance of Equity Interests in the Borrower.  


     For the avoidance of doubt, to the extent any Debt could be attributable to more than one
subsection of this Section 9.02, the Credit Parties may categorize all or any portion of such Debt
to any one or more subsections of this Section 9.02 as it elects and unless as otherwise expressly
provided, in no event shall (x) the same portion of any Debt be deemed to utilize or be
attributable to more than one subsection of this Section 9.02 or (y) any Credit Party utilize
Section 9.02(k) for the purposes of issuing unsecured senior notes or unsecured subordinated notes
in the capital markets.  


     Section 9.03   Liens.  The Borrower will not, and will not permit any other Credit Party
to, create, incur, assume or permit to exist any Lien on any of its Properties (now owned or
hereafter acquired), except:



     (a)     Liens created by the Security Instruments.  


     (b)     Excepted Liens.  


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     (c)     Lease burdens payable to third parties which are deducted in the calculation of discounted
present value in the Reserve Report including, without limitation, any royalty, overriding royalty,
net profits interest, production payment, carried interest or reversionary working interest in
existence as of the Effective Date or as a result of or in accordance with a Credit Party’s
acquisition of the property burdened thereby.  


     (d)     Liens securing Non-Recourse Debt permitted by Section 9.02(h).  


     (e)     Pledges or deposits in the ordinary course of business securing liabilities to insurance
carriers under insurance or self-insurance arrangements.  


     (f)     Any Lien existing on any Oil and Gas Property or asset prior to the acquisition thereof by
any Credit Party or existing on any Oil and Gas Property or asset of any Person that becomes a
Restricted Subsidiary after the date hereof prior to the time such Person becomes a Restricted
Subsidiary; provided that (i) such Lien is not created in contemplation of or in connection with
such acquisition or such Person becoming a Restricted Subsidiary, as applicable, (ii) such Lien
shall not apply to any other Oil and Gas Property or assets of any Credit Party and (iii) such Lien
shall secure only those obligations which it secures on the date of such acquisition or the date
such Person becomes a Restricted Subsidiary, as applicable, and extensions, renewals and
replacements of such obligations that are not in excess of the outstanding principal amount of such
obligations as of such acquisition date or date such Person becomes a Restricted Subsidiary
(provided, that such obligations and such extensions, renewals, and replacements thereof so secured
by such Lien, together with the Debt secured by Liens described in clause (h) below,
shall at no time exceed in the aggregate the greater of (x) C$10,000,000 and (y) 5% of the
Borrowing Base then in effect).  


     (g)     Liens in existence on the date hereof listed on Schedule 9.03.  


     (h)     Liens on fixed or capital assets acquired, constructed or improved by any Credit Party;
provided that (i) such Liens secure Debt permitted by Section 9.02(j) hereof, (ii) such Liens and
the Debt secured thereby are incurred prior to or within 180 days after such acquisition,
construction or improvement, (iii) the Debt secured thereby does not exceed 100% of the cost of
acquiring, constructing or improving such fixed or capital assets, (iv) such Liens shall not apply
to any other property or assets of any Credit Party, and (v) the Debt secured by such Liens,
together with the obligations and extensions, renewals and replacements of such obligations
described in clause (f) above, shall at no time exceed in the aggregate the greater of (x)
C$10,000,000 and (y) 5% of the Borrowing Base then in effect.  


     (i)     Liens arising pursuant to Section 9.343 of the Texas Uniform Commercial Code or other
similar statutory provisions of other states or provinces with respect to production purchased from
others.  


     (j)     Liens on real property and improvements thereon (other than on Oil and Gas Properties).  


     (k)     Liens relating to any cash or treasury securities used as credit support for any Swap
Agreement in an aggregate amount not to exceed the difference of (i) C$7,500,000 minus (ii)
the aggregate amount of LC Exposure under all Letters of Credit used as credit support for any
Credit Party’s obligations under any Swap Agreement.  


     (l)     Liens not otherwise included in this Section 9.03 so long as the sum of (i) the lesser of
(A) the aggregate outstanding principal amount of the obligations of the Credit Parties secured
thereby and (B) the aggregate fair market value (determined as of the date such Lien is incurred)
of the assets subject thereto (as to the Credit Parties) plus (ii) the amount of cash that
is subject to Liens permitted by Section



78









 




9.03(k) at such time plus (iii) the aggregate
amount of LC Exposure under all Letters of Credit used to post collateral or margin to secure any
Credit Party’s obligations under any Swap Agreement, does not exceed in the aggregate at any one
time the greater of (x) C$10,000,000 and (y) 6.25% of the Borrowing Base then in effect.  



     Notwithstanding the foregoing, (i) no Liens may at any time attach to (A) any Oil and Gas
Properties of the Credit Parties of the types described in clauses (a), (b), (c), (e) and (f) of
the definition of Oil and Gas Properties evaluated in the Reserve Report used in the most recent
determination of the Borrowing Base, or (B) any Equity Interests issued by the Borrower to QRI, New
Parent or to any other Person, or by any Restricted Subsidiary to any other Credit Party other
than, in the case of clause (A) or (B) above, Permitted Liens, and (ii) in no event may any Liens
on any Property of a Credit Party secure any obligation of any Credit Party under any Swap
Agreement other than Liens created pursuant to the Security Instruments and Liens permitted under
Section 9.03(k).  For the avoidance of doubt, to the extent any Lien could be attributable to more
than one subsection of this Section 9.03, the Credit Parties may categorize all or any portion of
such Lien to any one or more subsections of this Section 9.03 as it elects and unless as otherwise
expressly provided, in no event shall the same portion of any Lien be deemed to utilize or be
attributable to more than one subsection of this Section 9.03.  


     Section 9.04   Dividends and Distributions.  The Borrower will not, and will not permit
any of the other Credit Parties to, declare or make, or agree to pay or make, directly or
indirectly, any Restricted Payment, return any capital to its stockholders or make any distribution
of its Property to its Equity Interest holders, except:



     (a)     the Borrower and New Parent may declare and pay dividends with respect to its Equity
Interests payable solely in additional shares of its Equity Interests or any other non-cash form
(other than Disqualified Capital Stock);



     (b)     the Borrower (but only from and after the New Parent Joinder) and Restricted Subsidiaries
may declare and pay unlimited dividends, fees and other amounts ratably with respect to their
Equity Interests and may distribute any other Property to its direct or indirect Equity Interest
holders that are Credit Parties;



     (c)     the Borrower and New Parent may make Restricted Payments pursuant to and in accordance
with stock option plans, equity plans or other benefit or compensation plans providing for payments
on account of services provided by current or former directors, officers, employees or consultants
of the Credit Parties or any of their Affiliates;



     (d)     to the extent not permitted by clauses (a) to (c) above, the Borrower (prior to the New
Parent Joinder), New Parent (from and after the New Parent Joinder) may make (i) Restricted
Payments up to an aggregate amount of C$7,500,000 and (ii) additional Restricted Payments (not
including Restricted Payments made under the foregoing clause (i)) up to an aggregate amount equal
to (1) the greater of (x) C$10,000,000 and (y) 6.25% of the Borrowing Base then in effect
plus (2) an amount equal to fifty percent (50%) of the net proceeds received by New Parent
from the sale or issuance of Equity Interests of New Parent (other than the Qualified IPO) if, in
the case of Restricted Payments made under this clause (ii), (A) no Default has occurred and is
continuing at the time such Restricted Payment is made or would result from the making of such
Restricted Payment, (B) the Borrower’s Minimum Liquidity after giving effect to such Restricted
Payment is not less than the greater of (x) 30% of the Borrowing Base then in effect and (y)
C$65,000,000, and (C) after giving effect to such Restricted Payment, the Borrower is in pro forma
compliance with Section 9.01;



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     (e)     any Credit Party may purchase or otherwise acquire Equity Interests in any Subsidiary
using additional shares of its Equity Interests;



     (f)     any Credit Party may dividend, distribute or transfer the Equity Interests of an
Unrestricted Subsidiary;



     (g)     the Borrower and New Parent may make its respective IPO Tax Payments; and



     (h)     prior to the transfer by QRI to New Parent of 100% of the Equity Interests of the
Borrower, the Borrower may (i) declare and pay a dividend payable solely in Equity Interests of the
Borrower to QRI so as to increase the stated capital of the Borrower to the fair market value of
the Equity Interests immediately prior to such dividend, and (ii) distribute to QRI any Debt
permitted by Section 9.02(t) as a return of capital in respect of the Equity Interests of the
Borrower then held by QRI.  


     For the avoidance of doubt, to the extent any Restricted Payment could be attributable to more
than one subsection of this Section 9.04, the Credit Parties may categorize all or any portion of
such Restricted Payment to any one or more subsections of this Section 9.04 as it elects and unless
as otherwise expressly provided, in no event shall the same portion of any Restricted Payment be
deemed to utilize or be attributable to more than one subsection of this Section 9.04.  


     Section 9.05   Repayment of Debt; Amendment of Indentures.  The Borrower will not, and
will not permit any other Credit Party to:



     (a)     call, make or offer to make any Redemption (whether in whole or in part) of Permitted
Intercompany Debt, or any optional or voluntary Redemption (whether in whole or in part) of any
Permitted Additional Debt, provided, however, that the Credit Parties may (i) Redeem Permitted
Additional Debt up to an aggregate amount of C$7,500,000, (ii) Redeem additional Permitted
Additional Debt if, in the case of Redemptions made under this clause (ii), (A) no Default has
occurred and is continuing at the time such Redemption is made or would result from the making of
such Redemption, (B) the Borrower’s Minimum Liquidity after giving effect to such Redemption is not
less than the greater of (1) 30% of the Borrowing Base then in effect and (2) C$65,000,000 and (C)
after giving effect to such Redemption, the Borrower is in pro forma compliance with Section 9.01,
and (iii) Redeem Permitted Additional Debt in connection with any refinancing thereof permitted
pursuant to Section 9.02(o); provided further that the Borrower shall have the right to (x) prior
to the conversion referred to in clause (y) below, pay current interest on the Permitted
Intercompany Debt at the rate specified therein and (y) convert the Permitted Intercompany Debt
into Equity Interests of the Borrower at any time, which Equity Interests shall not have any
mandatory right or right at the option of the holder thereof to receive cash dividends or other
cash distributions.  


     (b)     amend, modify, waive or otherwise change, consent or agree to any amendment, modification,
waiver or other change to, any of the terms of the Permitted Additional Debt if (i) the effect
thereof would be to shorten its maturity to be less than 91 days after the Maturity Date or average
life or increase the amount of any payment of principal thereof or increase the rate or shorten any
period for payment of interest thereon, (ii) such action requires the payment of a consent fee that
has not been approved by the Administrative Agent (such approval not to be unreasonably withheld),
or (iii) the effect thereof would be to add any guarantor or surety, unless such guarantor or
surety also guarantees the Secured Indebtedness pursuant to the Guaranty Agreement and each of the
Borrower and such guarantor or surety otherwise complies with Section 8.13(c); or




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     (c)     if the Borrower or any other Credit Party issues any Debt that is subordinated in
right of payment to the Secured Indebtedness, designate any other Debt (other than the Secured
Indebtedness, and any Permitted Additional Debt) as “designated senior indebtedness” or “designated
guarantor senior indebtedness” or give any such other Debt any other similar designation for the
purposes of any instrument under which that subordinated Debt is issued.  


     Section 9.06   Investments, Loans and Advances.  The Borrower will not, and will not
permit any other Credit Party to, make or permit to remain outstanding any Investments in or to any
Person, except that the foregoing restriction shall not apply to:



     (a)     Investments made prior to the Effective Date and reflected in the Financial Statements or
which are disclosed to the Lenders in Schedule 9.06.  


     (b)     Readily marketable direct obligations of the United States or Canada or any agency
thereof, or obligations guaranteed by the United States or Canada or any agency thereof (or
investments in mutual funds or similar funds which invest solely in such obligations).  


     (c)     Investments in securities with maturities of six months or less from the date of
acquisition issued or fully guaranteed by any state, province, commonwealth or territory of the
United States or Canada, or by any political subdivision or taxing authority thereof, and rated at
least “A” by S&P or “A” by Moody’s.  


     (d)     Repurchase obligations with a term of not more than 30 days for underlying securities of
the types described in clause (b) above entered into with a bank described in clause (e)     below.  


     (e)     Time deposits maturing within one year from the date of creation thereof with, including
certificates of deposit issued by, any Lender or any other bank or trust company operating in the
United States or Canada that has capital, surplus and undivided profits aggregating at least
C$100,000,000 (as of the date of such bank or trust company’s most recent reports).  


     (f)     All Investments held in the form of cash or cash equivalents.  


     (g)     All Investments in Sweep Accounts.  


     (h)     Commercial paper of a Canadian or U.S.  issuer if at the time of purchase such commercial
paper is rated in one of the two highest ratings categories of S&P or Moody’s.  


     (i)     Money market mutual or similar funds having assets in excess of C$100,000,000, at least
95% of the assets of which are comprised of assets specified in clauses (b), (e), (f), (g), and (h)
above.  


     (j)     Investments (i) made by the Borrower or New Parent in or to any other Credit Party, (ii)
made by any Credit Party in or to the Borrower or any other Credit Party, and (iii) made by any
Credit Party in or to Unrestricted Subsidiaries; provided that, with respect to any Investment
described in clause (iii), the aggregate amount at any one time of all such Investments (valued at
cost as of the date of such Investment) made after the Effective Date shall not exceed the greater
of (x) C$10,000,000 and (y) 5% of the Borrowing Base then in effect; provided that a conversion or
exchange of Debt of an Unrestricted Subsidiary held by a Credit Party to or for equity of such
Unrestricted Subsidiary shall not be considered an incremental Investment for purposes of this
clause (j).  


     (k)     Extensions of customer or trade credit in the ordinary course of business.  


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     (l)     Guarantee obligations permitted by Section 9.02.  


     (m)     All Investments constituting Debt permitted by Section 9.02.  


     (n)     All Investments arising from transactions by any Credit Party in the ordinary course of
business, including endorsements of negotiable instruments, earnest money deposits and deposits to
secure obligations that do not constitute Debt or obligations under Swap Agreements, debt
obligations and other Investments received by any Credit Party in connection with the bankruptcy or
reorganization of customers and in settlement of delinquent obligations of, and other disputes
with, customers.  


     (o)     Any Investments by any Credit Party in any Persons including, without limitation,
Unrestricted Subsidiaries; provided that, the aggregate amount of all such Investments made
pursuant to this clause (o) outstanding at any one time shall not exceed in the aggregate (measured
on a cost basis) the greater of (x) C$15,000,000 and (y) 7% of the Borrowing Base then in effect.  


     (p)     All Investments by any Credit Party in Persons in which such Credit Party owns an Equity
Interest (i) that own, lease, hold and/or are party to (A) any Oil and Gas Properties, (B) any
processing, gathering or treating systems, (C) any farm-out, farm-in, joint operating, joint
venture or area of mutual interest agreements, (D) any pipelines or other mid-stream activities, in
each case located within or related to the geographic boundaries of North America and any other
country or jurisdiction reasonably acceptable to the Administrative Agent and/or (E) any facility
or activity related to compressed or liquefied natural gas or (ii) the purpose of which is to act
as a direct or indirect holding company for any Person that satisfies one or more provisions of
subclause (i) of this clause (p), provided, as to Investments made under this clause (p) (measured
on a cost basis), (x) the Credit Parties do not make in the aggregate more than the greater of (1)
C$10,000,000 and (2) 5% of the Borrowing Base then in effect of any such Investments during any
fiscal year and (y) the total amount of any such Investments at any one time does not exceed in the
aggregate the greater of (x) C$25,000,000 and (y) 10% of the Borrowing Base then in effect.  


     (q)     Entry into operating agreements, working interests, royalty interests, mineral leases,
processing, gathering and treating agreements, farm-in and farm-out agreements, development
agreements, contracts for the sale, transportation or exchange of oil, natural gas or CO2,
unitization agreements, pooling arrangements, service contracts, area of mutual interest
agreements, production sharing agreements, pipeline agreements or other similar or customary
agreements, transactions, properties, interests or arrangements, and Investments and expenditures
in connection therewith or pursuant thereto, in each case made in the ordinary course of any
businesses permitted under this Agreement.  


     (r)     Loans and advances to directors, officers and employees in the ordinary course of business
consistent with prior practice, not to exceed an aggregate amount of C$2,000,000 at any one time
outstanding.  


     (s)     Indemnities permitted under this Agreement.  


     (t)     Investments consisting of Swap Agreements entered into for non-speculative purposes,
subject to compliance with Section 9.03 and Section 9.13.  


     (u)     So long as no Default exists or results therefrom, loans to the Section 1031 Counterparty
participating in a Section 1031 Exchange provided that (i) the amount of any such loan does not
exceed the sum of (A) purchase price to be paid by the recipient of such loan for the purchase
price of the assets



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subject to the related Section 1031 Exchange, and (B) estimated capital
expenditures and operating
expenses to be incurred with respect to such assets during the 180 day period during which
such Section 1031 Exchange is to be completed, (ii) such loan is secured by a first priority
security interest in the assets to be acquired by such recipient pursuant to the Section 1031
Exchange, (iii) the Administrative Agent has a perfected first priority security interest in such
loan and any note or other document evidencing or securing such loan, (iv) the documentation
relating to such Section 1031 Exchange and the related Section 1031 Counterparty are satisfactory
to the Administrative Agent in its reasonable discretion and (v) the Administrative Agent shall
have received an opinion from Borrower’s counsel in form and substance satisfactory to the
Administrative Agent.  



     (v)     Guarantees by any Credit Party of operating leases or of other obligations that do not
constitute Debt, in each case entered into by any Credit Party in the ordinary course of business.  


     (w)     Investments of any Person that becomes a Restricted Subsidiary after the Effective Date to
the extent that such Investments were not made in contemplation of or in connection with such
acquisition, merger, consolidation or amalgamation and were in existence on the date of such
acquisition, merger or consolidation.  


     (x)     Any Investment by the Borrower, New Parent or one or more of their respective Restricted
Subsidiaries in a Person, if as a result of such Investment such Person becomes a Restricted
Subsidiary or such Person is merged, consolidated or amalgamated with or into, or transfers or
conveys substantially all of its assets to, a Credit Party.  


     (y)     Any Investment constituting non-cash consideration received in any asset sale permitted by
Section 9.10.  


     (z)     Investments in Unrestricted Subsidiaries in the form of Equity Interests issued by such
Unrestricted Subsidiaries as consideration for the contribution, assignment or transfer of up to
$50,000 and the Existing Midstream Assets to such Unrestricted Subsidiaries in connection with the
consummation of the Midstream Joint Venture; provided that the consideration received directly or
indirectly by the Borrower is fair from a financial point of view.  


     (aa)     Investments in any aboriginal or other tribe in any territory or province of Canada in an
amount not to exceed $5,000,000 in the aggregate at any one time outstanding.  


     (bb)     Investments resulting from the delivery of credit support provided by, or on behalf of,
the Borrower or any Credit Party to counterparties pursuant to any Swap Agreement, in each case to
the extent permitted by Section 8.17 and Section 9.03.  


     For the avoidance of doubt, to the extent any Investment could be attributable to more than
one subsection of this Section 9.06, the Credit Parties may categorize all or any portion of such
Investment to any one or more subsections of this Section 9.06 as it elects and unless as otherwise
expressly provided, in no event shall the same portion of any Investment be deemed to utilize or be
attributable to more than one subsection of this Section 9.06.  For purposes of Section 9.06(j),
(o) and (p), the aggregate Investments thereunder shall be determined net of the cost of any such
Investment (x) that is subsequently sold, redeemed or repaid or (y) in an Unrestricted Subsidiary
that is subsequently designated as a Restricted Subsidiary.  


     Section 9.07   Designation and Conversion of Restricted and Unrestricted Subsidiaries.  (a) Unless designated as an Unrestricted Subsidiary on Schedule 7.10 as of the Effective Date or
thereafter,



83









 




assuming compliance with Section 9.07(b), any Person that becomes a Domestic Subsidiary
shall be classified as a Restricted Subsidiary.  



     (b)     The Borrower (or, from and after the New Parent Joinder, New Parent) may designate by
written notification thereof to the Administrative Agent, any Restricted Subsidiary, including a
newly formed or newly acquired Subsidiary, as an Unrestricted Subsidiary if (i) prior, and after
giving effect, to such designation, neither a Default nor a Borrowing Base Deficiency would exist
and (ii) such designation is deemed to be an Investment in an Unrestricted Subsidiary in an amount
equal to the fair market value as of the date of such designation of the Borrower’s (or, from and
after the New Parent Joinder, New Parent’s) direct and indirect ownership interest in such
Subsidiary and such Investment would be permitted to be made at the time of such designation under
Section 9.06(j), (p) or (q).  


     (c)     The Borrower (or, from and after the New Parent Joinder, New Parent) may designate any
Unrestricted Subsidiary to be a Restricted Subsidiary if after giving effect to such designation,
(i) the representations and warranties of the Credit Parties contained in each of the Loan
Documents are true and correct on and as of such date as if made on and as of the date of such
redesignation (or, if stated to have been made expressly as of an earlier date, were true and
correct as of such date), (ii) no Default would exist and (iii) the Borrower (or, from and after
the New Parent Joinder, New Parent) complies with the requirements of Section 8.13 and Section
8.15.  


     Section 9.08   Nature of Business; International Operations.  The Borrower will not, and
will not permit any other Credit Party to, engage in any business or activity other than businesses
or activities typical of an integrated energy company or businesses or activities reasonably
related thereto.  Notwithstanding the foregoing, this Section 9.08 shall not prohibit the Credit
Parties from holding and developing the Properties or engaging in any business or activity
described on Schedule 9.08.  From and after the date hereof, the Credit Parties will not acquire or
make any other expenditure (whether such expenditure is capital, operating or otherwise) in or
related to, any Oil and Gas Properties not located in North America or in another country or
jurisdiction reasonably acceptable to the Administrative Agent.  


     Section 9.09   Mergers, Etc.  The Borrower will not, and will not permit any other
Credit Party to, merge into or with or consolidate with any other Person, or sell, lease or
otherwise dispose of (whether in one transaction or in a series of transactions) all or
substantially all of its Property to any other Person (whether now owned or hereafter acquired) any
such transaction, a “consolidation”), or liquidate or dissolve; provided that



     (a)     any Restricted Subsidiary may (i) participate in a consolidation with (A) the Borrower
(provided that the Borrower shall be the continuing or surviving corporation), (B) any other
Restricted Subsidiary (provided that if a Guarantor is a party to such transaction, the survivor is
a Guarantor or becomes a party to the Guaranty Agreement as a Guarantor) or (C) any other
Subsidiary (provided that either (x) a Restricted Subsidiary shall be the continuing or surviving
Person or (y) if an Unrestricted Subsidiary is the continuing or surviving Person, (1) the
representations and warranties of the Credit Parties contained in each of the Loan Documents are
true and correct on and as of such date as if made on and as of the date of such consolidation (or,
if stated to have been made expressly as of an earlier date, were true and correct as of such
date), (2) no Default or Borrowing Base Deficiency would exist and (3) the Borrower is in
compliance with the requirements of Section 8.13 and Section 8.15) or (ii) transfer all or
substantially all of its assets to a Guarantor or a Person that becomes a party to the Guaranty
Agreement as a Guarantor;



     (b)     Any Credit Party may participate in a consolidation (other than as described in clause (a)
above) if, at the time thereof and immediately after giving effect thereto, no Default shall occur
and be



84









 




continuing and no Borrowing Base Deficiency would result therefrom and, such Credit Party is
the surviving entity or the recipient of any such sale, lease or other disposition of Property,
provided that no such consolidation shall have the effect of releasing the Borrower or any
Guarantor from any of its obligations under this Agreement or any other Loan Document;




     (c)     any sale of all or substantially all of the assets of any Restricted Subsidiary provided
that such sale is permitted by Section 9.10; and



     (d)     any Restricted Subsidiary may liquidate or dissolve if (i) the continued existence and
operation of such Restricted Subsidiary is no longer in the best interests of the Credit Parties
taken as a whole (as reasonably determined by a Responsible Officer of the Borrower), (ii) such
liquidation and dissolution is not disadvantageous in any material respect to the Lenders, and
(iii) at the time thereof and immediately after giving effect thereto, no Default shall occur and
be continuing and no Borrowing Base Deficiency would result therefrom.  


     Section 9.10   Sale of Properties and Termination of Oil and Gas Swap Agreements.  The
Borrower will not, and will not permit any other Credit Party to, sell, assign, farm-out, convey or
otherwise transfer (including by way of a Reclassification) any Oil and Gas Property evaluated in
the Reserve Report used in the most recent determination of the Borrowing Base or any interest
therein or any Restricted Subsidiary owning any such Oil and Gas Property or terminate, unwind,
cancel or otherwise dispose of any Oil and Gas Swap Agreement except for:



     (a)     the sale of Hydrocarbons in the ordinary course of business;



     (b)     farmouts of undeveloped acreage and assignments in connection with such farmouts or the
abandonment, farm-out, exchange, lease, sublease or other disposition of Oil and Gas Properties not
containing Proved Hydrocarbon Interests which were not evaluated in the Reserve Report used in the
most recent determination of the Borrowing Base in the ordinary cause of business;



     (c)     the sale or transfer of equipment or other assets that are no longer necessary or useful
or are obsolete for the business of the Credit Parties or are replaced by equipment or other assets
usable in the ordinary course of business, of at least comparable value;



     (d)     the sale or other disposition (including Casualty Events and Reclassifications) of such
Oil and Gas Property or any interest therein or any Restricted Subsidiary owning such Oil and Gas
Property or the termination, unwinding, cancelation or other disposition of Oil and Gas Swap
Agreements; provided that:




     (i)     except in the case of a Reclassification, the consideration received in respect of
such sale or other disposition shall be equal to or greater than the fair market value of
the Oil and Gas Property (other than in the case of a Casualty Event), interest therein or
Restricted Subsidiary subject of such sale or other disposition (as reasonably determined by
any Responsible Officer of the Borrower);




     (ii)     no Event of Default or Borrowing Base Deficiency exists or results from such
termination, unwind, cancellation, sale or disposition (including any Casualty Event or
Reclassification);




     (iii)     if during any period between two successive Redetermination Dates the aggregate
amount of (A) the net cash proceeds received by the Borrower from the termination,



85









 






unwind,
cancelation or other disposition of such Oil and Gas Swap Agreements plus (B) the Recognized
Value of such Oil and Gas Properties sold or disposed of (including by way of Casualty
Events and Reclassifications) exceeds five percent (5%) of the Borrowing Base in effect
during such period, then the Borrowing Base shall be automatically reduced, effective
immediately upon such termination, unwind, cancellation, sale or disposition (including any
Casualty Event or Reclassification) by the amount that (x) aggregate value that the
Administrative Agent attributed to such Oil and Gas Swap Agreements and Oil and Gas
Properties in connection with the most recent determination of the Borrowing Base exceeds
(y) five percent (5%) of the Borrowing Base in effect immediately prior to such
redetermination, and the Borrowing Base as so reduced shall become the new Borrowing Base
immediately upon the date of such termination, unwind, cancellation, sale or disposition
(including Casualty Events and Reclassifications), effective and applicable to the Borrower,
the Agents, each Issuing Bank and the Lenders on such date until the next redetermination or
modification thereof hereunder;




     (iv)     if such termination, unwind, cancellation, sale or disposition (including
Reclassifications, but excluding Casualty Events) would result in an automatic
redetermination of the Borrowing Base pursuant to this Section 9.10, the Borrower shall have
delivered reasonable prior written notice thereof to the Administrative Agent;




     (v)     if a Borrowing Base Deficiency would result from such termination, unwind,
cancellation, sale or disposition (including Reclassifications but excluding Casualty
Events) as a result of an automatic redetermination of the Borrowing Base pursuant to this
Section 9.10, the Borrower prepays Borrowings, prior to or contemporaneously with the
consummation of such termination, unwind, cancellation, sale or disposition (including
Reclassifications but excluding Casualty Events), to the extent that such prepayment would
have been required under Section 3.04(c)(iii) (without giving effect to any 30-day period
for payment contained therein) after giving effect to such automatic redetermination of the
Borrowing Base; and




     (vi)     if a Borrowing Base Deficiency would directly result from a Casualty Event as a
result of an automatic redetermination of the Borrowing Base pursuant to this Section 9.10,
Section 3.04(c)(ii) shall apply.  

For purposes of this clause (d), such five percent (5%) shall be determined without giving effect
to any asset swaps of Oil and Gas Properties evaluated in the Reserve Report used in the most
recent determination of the Borrowing Base for other Oil and Gas Properties of equal or greater
Recognized Value;




     (e)     the sale of Oil and Gas Properties in connection with tax credit transactions complying
with §29 of the Code or any other analogous provision of the Code or of Canadian tax law whether
now existing or hereafter enacted, which sale does not result in a reduction in the right of any
Credit Party to receive the cash flow from such Oil and Gas Properties and which sale is on terms
reasonably acceptable to the Administrative Agent;



     (f)     transfers and other dispositions among the Borrower and the other Credit Parties subject
to compliance with Section 8.13;



     (g)     transfers permitted by Section 9.09; and



     (h)     transfer or assignment of the Existing Midstream Assets by the Borrower to an Unrestricted
Subsidiary in connection with the consummation of the Midstream Joint Venture.  


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     Section 9.11   Transactions with Affiliates.  The Borrower will not, and will not permit
any other Credit Party to, enter into any transaction, including, without limitation, any purchase,
sale, lease or exchange of Property or the rendering of any service, with any Affiliate (other than
the Guarantors), unless such transactions are not otherwise prohibited under this Agreement and are
upon fair and reasonable terms no less favorable to it than it would obtain in a comparable arm’s
length transaction with
a Person not an Affiliate and provided that the Midstream Joint Venture (including the ongoing
transactions contemplated thereunder) and the IPO Tax Payments shall be permitted.  


     Section 9.12   Negative Pledge Agreements; Dividend Restrictions.  The Borrower will
not, and will not permit any other Credit Party to, create, incur, assume or suffer to exist any
contract, agreement or understanding which in any way prohibits or restricts the granting,
conveying, creation or imposition of any Lien on any of its Oil and Gas Property or its Equity
Interests in Restricted Subsidiaries in favor of the Administrative Agent and the Secured Parties
or restricts any Restricted Subsidiary from paying dividends or making distributions to the
Borrower or any Guarantor, or which requires the consent of or notice to other Persons in
connection therewith; provided, however, that the preceding restrictions will not apply to
encumbrances or restrictions arising under or by reason of (a) this Agreement or the Security
Instruments, (b) Debt permitted by Section 9.02 secured by Liens permitted by Section 9.03 (subject
to the penultimate sentence thereof and only to the extent related to the Property on which such
Liens were created), or any contract, agreement or understanding creating Liens permitted by
Section 9.03 (subject to the penultimate sentence thereof and only to the extent related to the
Property on which such Liens were created), (c) any leases or licenses or similar contracts as they
affect any Oil and Gas Property or Lien subject to a lease or license, (d) any restriction with
respect to a Restricted Subsidiary imposed pursuant to an agreement entered into for the direct or
indirect sale or disposition of all or substantially all the equity or Oil and Gas Property of such
Restricted Subsidiary (or the Oil and Gas Property that is subject to such restriction) pending the
closing of such sale or disposition, or (e) customary provisions with respect to the distribution
of Oil and Gas Property in joint venture agreements.  


     Section 9.13   Swap Agreements.  The Borrower will not, nor will the Borrower permit any
other Credit Party to, enter into any new Oil and Gas Swap Agreements which would cause the volume
of Hydrocarbons with respect to which a settlement payment is calculated under all Oil and Gas Swap
Agreements (including such new transactions) to which the Borrower and/or any other Credit Party is
a party as of the date such Oil and Gas Swap Agreements are entered into to exceed (a) (i) for the
calendar year in which such new Oil and Gas Swap Agreements are entered into (the “Initial
Measurement Period”), eighty-five percent (85%) of the aggregate of the Credit Parties’
anticipated production from Proved Hydrocarbon Interests for each of oil and gas (including natural
gas liquids), calculated separately, (ii) for the calendar year immediately following the end of
the Initial Measurement Period (the “Second Measurement Period”), eighty percent (80%) of
the aggregate of the Credit Parties’ anticipated production from Proved Hydrocarbon Interests for
each of oil and gas (including natural gas liquids), calculated separately, (iii) for the calendar
year immediately following the end of the Second Measurement Period (the “Third Measurement
Period”), seventy-five percent (75%) of the aggregate of the Credit Parties’ anticipated
production from Proved Hydrocarbon Interests for each of oil and gas (including natural gas
liquids), calculated separately and (iv) for the calendar year immediately following the end of the
Third Measurement Period and for each calendar year thereafter, one hundred percent (100%) of the
aggregate of the Credit Parties’ anticipated production from Proved Producing Hydrocarbon Interests
for each of oil and gas (including natural gas liquids), calculated separately, plus, in each case,
(b) an amount not to exceed one hundred percent (100%) of associated royalty owners’ oil, gas
and/or natural gas liquids produced from the same wells, and which oil, gas and/or natural gas
liquids the Borrower has the authority to market and sell, during the applicable measurement
period; provided that the Borrower will not, nor will the Borrower permit any other Credit Party
to, permit its production from Proved Producing Hydrocarbon Interests (whether or not included or
reflected in the most recent Reserve Report delivered



87









 




to the Administrative Agent and the Lenders
pursuant to Section 8.11) during the then current month to be less than the aggregate amount of
production from Proved Producing Hydrocarbon Interests which are subject to Oil and Gas Swap
Agreements during such month; provided further that the Borrower will not, nor will the Borrower
permit any other Credit Party to, (x) enter into any Oil and Gas Swap Agreements
except in the ordinary course of business (and not for speculative purposes), (y) enter into
any Swap Agreement for speculative purposes or with a counterparty that is not an Approved
Counterparty or (z) terminate, unwind, cancel or otherwise dispose of any Oil and Gas Swap
Agreement except to the extent permitted by Section 9.10.  For purposes of this Section 9.13, no
basis swap agreement, put option, or options to purchase put options shall constitute a Swap
Agreement.  



     Section 9.14   Ownership of the Borrower and Restricted Subsidiaries.  Except as
otherwise permitted hereunder, (a) the Borrower shall not own, directly or indirectly, less than
100% of the issued and outstanding Equity Interests of each Restricted Subsidiary and (b) no
Unrestricted Subsidiary shall at any time own any direct or indirect Equity Interests in the
Borrower.  


     Section 9.15   Amendments to Organizational Documents.  The Borrower shall not, and
shall not permit any other Credit Party to, amend, supplement or otherwise modify (or permit to be
amended, supplemented or modified) its Organization Documents in any manner that would be
reasonably expected to result in a Material Adverse Effect.  


ARTICLE 10

Events of Default; Remedies




     Section 10.01   Events of Default.  One or more of the following events shall constitute
an “Event of Default”:



     (a)     the Borrower shall fail to pay any principal of any Loan, or any reimbursement obligation
in respect of any LC Disbursement when and as the same shall become due and payable, whether at the
due date thereof or at a date fixed for prepayment thereof, by acceleration or otherwise.  


     (b)     the Borrower shall fail to pay any interest on any Loan, or any fee or any other amount
(other than an amount referred to in Section 10.01(a)) payable under any Loan Document, when and as
the same shall become due and payable, and such failure shall continue unremedied for a period of
five days.  


     (c)     any representation or warranty made or deemed made by or on behalf of QRI (solely with
respect to the QRI Pledge Agreement and solely prior to the New Parent Joinder) or any Credit Party
in or in connection with any Loan Document or any amendment or modification of any Loan Document or
waiver under such Loan Document, or in any report, certificate, financial statement or other
document furnished pursuant to the provisions hereof or any Loan Document or any amendment or
modification thereof or waiver thereunder, shall prove to have been incorrect in any material
respect when made or deemed made (or, to the extent that any such representation and warranty is
qualified by materiality, any such representation and warranty (as so qualified) shall proved to
have been incorrect in any respect when made or deemed made).  


     (d)     any Credit Party shall fail to observe or perform any covenant, condition or agreement
contained in Section 8.01(g), Section 8.02, Section 8.03 (as to the existence of such Credit Party
only), Section 8.13, Section 8.19, or Article 9.  


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     (e)     QRI (solely with respect to the QRI Pledge Agreement and solely prior to the New Parent
Joinder), the Borrower, or any other Credit Party shall fail to observe or perform any covenant,
condition or agreement contained in this Agreement (other than those specified in Section 10.01(a),
Section 10.01(b) or Section 10.01(d)) or any other Loan Document, and such failure shall continue
unremedied for a period of 30 days after the earlier to occur of (i) notice thereof from the
Administrative Agent to the Borrower
(which notice will be given at the request of any Lender) and (ii) a Responsible Officer of
QRI (solely with respect to the QRI Pledge Agreement and solely prior to the New Parent Joinder),
the Borrower, or such other Credit Party otherwise becoming aware of such failure; provided that,
for the avoidance of doubt, if the Borrower fails to deliver any financial statements, certificates
or other information within the time period required by Sections 8.01, 8.02, 8.11 or 8.13 and
subsequently delivers such financial statements, certificates or other information as required by
such Sections prior to acceleration or the exercise of any remedy by the Lenders, then such Event
of Default shall be deemed to have been cured and/or waived without any further action by the
Administrative Agent or Lenders.  


     (f)     the Borrower or any other Credit Party shall fail to make any payment of principal in
respect of any Material Debt, when and as the same shall become due and payable, beyond any
applicable grace period provided with respect thereto and which failure shall continue uncured or
unremedied.  


     (g)     any event or condition occurs that results in any Material Debt becoming due prior to its
scheduled maturity or that enables or permits (with or without the giving of notice, but after the
expiration of any applicable grace period provided with respect thereto) the holder or holders of
any Material Debt or any trustee or agent on its or their behalf to cause any Material Debt to
become due, or to require the Redemption thereof, prior to its scheduled maturity or require any
Credit Party to make an offer in respect thereof; provided that this clause (g) shall not apply to
secured Debt that becomes due as a result of the voluntary sale or transfer of the property or
assets securing such Debt or to the obligations of the Borrower, any Credit Party or any Guarantor
in respect of any Swap Agreement unless such Person is the defaulting party under such Swap
Agreement and as a result thereof such Swap Agreement has been terminated.  


     (h)     an involuntary proceeding shall be commenced or an involuntary petition shall be filed
seeking (i) liquidation, reorganization or other relief in respect of any Credit Party or its
debts, or of a substantial part of its assets, under any Federal, state or foreign bankruptcy,
insolvency, receivership or similar law now or hereafter in effect, including, without limitation,
under the Bankruptcy and Insolvency Act (Canada), the Companies Creditors Arrangement Act (Canada)
or the Winding-up and Restructuring Act (Canada), or (ii) the appointment of a receiver, trustee,
custodian, sequestrator, conservator or similar official for any Credit Party or for a substantial
part of its assets, and, in any such case, such proceeding or petition shall continue undismissed
for 60 consecutive days or an order or decree approving or ordering any of the foregoing shall be
entered.  


     (i)     any Credit Party shall (i) voluntarily commence any proceeding or file any petition
seeking liquidation, reorganization or other relief under any Federal, state or foreign bankruptcy,
insolvency, receivership or similar law now or hereafter in effect, including, without limitation,
under the Bankruptcy and Insolvency Act (Canada), the Companies Creditors Arrangement Act (Canada)
or the Winding-up and Restructuring Act (Canada), (ii) consent to the institution of, or fail to
contest in a timely and appropriate manner, any proceeding or petition described in Section
10.01(h), (iii) apply for or consent to the appointment of a receiver, trustee, custodian,
sequestrator, conservator or similar official for any Credit Party or for a substantial part of its
assets, (iv) file an answer admitting the material allegations of a petition filed against it in
any such proceeding, (v) make a general assignment for the benefit of creditors or (vi) take any
action for the purpose of effecting any of the foregoing.  


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     (j)     any Credit Party shall admit in writing its inability or fail generally to pay its debts
as they become due.  


     (k)     one or more final, non-appealable judgments for the payment of money in an aggregate
amount in excess of C$25,000,000 shall be rendered against any Credit Party or any combination
thereof and the same shall remain undischarged for a period of 60 consecutive days during which
execution shall not be effectively stayed, bonded or satisfied.  


     (l)     any of the Loan Documents after delivery thereof shall for any reason, except to the
extent permitted by the terms thereof, cease to be in full force and effect and valid, binding and
enforceable in accordance with their terms against the Borrower or a Guarantor party thereto or
shall be repudiated by any of them in writing, or any of the Security Instruments cease to create a
valid and perfected Lien of the priority required thereby on any of the collateral purported to be
covered thereby, except to the extent permitted by the terms of this Agreement, or any Credit Party
or any of their Affiliates shall so state in writing.  


     (m)     an ERISA Event or Canadian Pension Plan Termination Event shall have occurred that, in the
opinion of the Majority Lenders, when taken together with all other ERISA Events or Canadian
Pension Plan Termination Events that have occurred, would reasonably be expected to result in a
Material Adverse Effect.  


     (n)     a Change in Control shall occur.  


     Section 10.02   Remedies.  (a) In the case of an Event of Default other than one
described in Section 10.01(h), Section 10.01(i) or Section 10.01(j), at any time thereafter during
the continuance of such Event of Default, the Administrative Agent may, and at the request of the
Majority Lenders, shall, by notice to the Borrower, take either or both of the following actions,
at the same or different times: (i) terminate the Commitments, and thereupon the Commitments shall
terminate immediately, and (ii) declare the Notes and the Loans then outstanding to be due and
payable in whole (or in part, in which case any principal not so declared to be due and payable may
thereafter be declared to be due and payable), and thereupon the principal of the Loans so declared
to be due and payable, together with accrued interest thereon and all fees and other obligations of
the Borrower and the Guarantors accrued hereunder and under the Notes and the other Loan Documents
(including, without limitation, the payment of cash collateral to secure the LC Exposure as
provided in Section 2.08(j)), shall become due and payable immediately, without presentment,
demand, protest, notice of intent to accelerate, notice of acceleration or other notice of any
kind, all of which are hereby waived by the Borrower and each Guarantor; and in case of an Event of
Default described in Section 10.01(h), Section 10.01(i) or Section 10.01(j), the Commitments shall
automatically terminate and the Notes and the principal of the Loans then outstanding, together
with accrued interest thereon and all fees and the other obligations of the Borrower and the
Guarantors accrued hereunder and under the Notes and the other Loan Documents (including, without
limitation, the payment of cash collateral to secure the LC Exposure as provided in Section
2.08(j)), shall automatically become due and payable, without presentment, demand, protest or other
notice of any kind, all of which are hereby waived by the Borrower and each Guarantor.  


     (b)     In the case of the occurrence of an Event of Default, the Administrative Agent and the
Lenders will have all other rights and remedies available at law and equity.  


     (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:



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     (i)     first, pro rata to payment or reimbursement of that portion of the Secured
Indebtedness constituting fees, expenses and indemnities payable to the Administrative Agent,
Arrangers and other Agents, each in their capacity as such;




     (ii)     second, pro rata to payment or reimbursement of that portion of the Secured
Indebtedness constituting fees, expenses and indemnities payable to the Lender;




     (iii)     third, pro rata to payment of accrued interest on the Loans;




     (iv)     fourth, pro rata to payment of principal outstanding on the Loans and Secured
Indebtedness referred to in clause (b) of the definition of Secured Indebtedness owing to a
Secured Party;




     (v)     fifth, pro rata to any other Secured Indebtedness;




     (vi)     sixth, to serve as cash collateral to be held by the Administrative Agent to secure
the LC Exposure; and




     (vii)     seventh, any excess, after all of the Secured Indebtedness shall have been
indefeasibly paid in full in cash or cash collateralized, shall be paid to the Borrower or as
otherwise required by any Governmental Requirement.  


ARTICLE 11

The Agents




     Section 11.01   Appointment; Powers.  Each of the Lenders and each Issuing Bank 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.  


     Section 11.02   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 have no
duty to take any discretionary action or exercise any discretionary powers, except as provided in
Section 11.03, and (c) except as expressly set forth herein, the Administrative Agent shall not
have any duty to disclose, and shall not be liable for the failure to disclose, any information
relating to the Borrower, New Parent or any of their respective Subsidiaries that is communicated
to or obtained by the bank 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 Borrower 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



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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 6 or elsewhere herein, other than to confirm receipt of items
expressly required to be delivered to the Administrative Agent or 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
Borrower, New Parent and their respective Subsidiaries or any other obligor or guarantor, or (vii)
any failure by the Borrower 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.  For purposes of determining compliance with the conditions specified in Article 6, each Lender
shall be deemed to have consented to, approved or accepted or to be satisfied with, each document
or other matter required thereunder to be consented to or approved by or acceptable or satisfactory
to a Lender unless the Administrative Agent shall have received written notice from such Lender
prior to the proposed closing date specifying its objection thereto.  



     Section 11.03   Action by Administrative Agent.  The Administrative Agent shall have no
duty to take any discretionary action or exercise any discretionary powers, except discretionary
rights and powers expressly contemplated hereby or by the other Loan Documents that the
Administrative Agent is required to exercise in writing as directed by the Majority Lenders, 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 in Section 12.02) 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 (a) receive written instructions from the Majority Lenders,
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 in Section 12.02) specifying the
action to be taken and (b) 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 requisite Lenders in the written instructions (with indemnities) described
in this Section 11.03, 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.  If a Default has occurred and is
continuing, neither the Syndication Agent nor the Co-Documentation Agents shall have any obligation
to perform any act in respect thereof.  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 Majority Lenders or the Lenders
(or such other number or percentage of the Lenders as shall be necessary under the circumstances as
provided in Section 12.02), and otherwise the Administrative Agent shall not be liable for any
action taken or not taken by it in its capacity as the Administrative Agent hereunder or under any
other Loan Document 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.  


     Section 11.04   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



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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 each of the Borrower, the Lenders and
each Issuing Bank hereby waives 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
Borrower), 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.  



     Section 11.05   Subagents.  The Administrative Agent may perform any and all of 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 of
its duties and exercise its rights and powers through their respective Related Parties.  The
exculpatory provisions of the preceding Sections of this Article 11 shall apply to any such
sub-agent and to the Related Parties 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.  


     Section 11.06   Resignation of Administrative Agent.  Subject to the appointment and
acceptance of a successor Administrative Agent as provided in this Section 11.06, the
Administrative Agent may resign at any time by notifying the Lenders, each Issuing Bank and the
Borrower.  Upon any such resignation, the Majority Lenders shall have the right, in consultation
with the Borrower, to appoint a successor.  If no successor shall have been so appointed by the
Majority Lenders and shall have accepted such appointment within thirty (30) days after the
retiring Agent gives notice of its resignation, then the retiring Agent may, on behalf of the
Lenders and each Issuing Bank, appoint a successor Agent which shall be a bank with an office in
Canada or the United States, or an Affiliate of any such bank.  Upon the acceptance of its
appointment as Agent hereunder by a successor, such successor shall succeed to and become vested
with all the rights, powers, privileges and duties of the retiring Agent, and the retiring Agent
shall be discharged from its duties and obligations hereunder.  The fees payable by the Borrower to
a successor Agent shall be the same as those payable to its predecessor unless otherwise agreed
between the Borrower and such successor.  After the Agent’s resignation hereunder, the provisions
of this Article 11 and Section 12.03 shall continue in effect for the benefit of such retiring
Agent, its sub-agents and their respective Related Parties in respect of any actions taken or
omitted to be taken by any of them while it was acting as Agent.  


     Section 11.07   Agents as Lenders.  Each bank serving as an Agent hereunder 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 an Agent, and such bank and its Affiliates may accept deposits from,
lend money to and generally engage in any kind of business with the Borrower, New Parent or any
Subsidiary or other Affiliate thereof as if it were not an Agent hereunder.  


     Section 11.08   No Reliance.  Each Lender acknowledges that it has, independently and
without reliance upon the Administrative Agent, any other 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, any other 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



93









 




this Agreement, any other Loan Document, any related agreement or any
document furnished hereunder or thereunder.  The Agents shall not be required to keep themselves
informed as to the performance or observance by the Borrower, New Parent or any of their respective
Subsidiaries 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 Borrower, New Parent or their respective
Subsidiaries.  Except for notices, reports and other documents and information expressly required
to be furnished to the Lenders by the Administrative Agent hereunder, no Agent or Arranger shall
have any duty or responsibility to provide any Lender with any credit or other information
concerning the affairs, financial condition or business of the Borrower (or any of its Affiliates)
which may come into the possession of such Agent or any of its Affiliates.  In this
regard, each Lender acknowledges that Vinson & Elkins L.L.P.  and Blake, Cassels & Graydon LLP
are 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.  



     Section 11.09   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 Borrower, New Parent or any of their
respective Subsidiaries, 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 Borrower) 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 Secured 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 12.03) 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 12.03.  



     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 Secured 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.  


     Section 11.10   Authority Of Administrative Agent To Release Collateral And Liens.  Each
Lender and each Issuing Bank hereby authorizes the Administrative Agent to release or subordinate
any Oil and Gas Property (other than, in the case of any such subordination, any Oil and Gas
Property of the type described in clauses (a), (b), (c), (e) and (f) of the definition thereof
evaluated in the Reserve Report



94









 




used in the most recent determination of the Borrowing Base) or
other collateral that is permitted to be sold, Reclassified or released or be subject to a Lien
pursuant to the terms of the Loan Documents.  Each Lender and each Issuing Bank hereby authorizes
the Administrative Agent to execute and deliver to the Borrower, at the Borrower’s sole cost and
expense, any and all releases of Liens, termination statements, assignments or other documents
reasonably requested by the Borrower in connection with any sale, Reclassification or other
disposition of Oil or Gas Property to the extent such sale, Reclassification or other disposition
is permitted by the terms of Section 9.10 or is otherwise authorized by the terms of the Loan
Documents.  



     Section 11.11   The Arrangers, Syndication Agent and Co-Documentation Agents.  The
Arrangers, the Syndication Agent and the Co-Documentation Agents shall have no duties,
responsibilities or liabilities under this Agreement and the other Loan Documents other than their
duties, responsibilities and liabilities in their capacity as Lenders hereunder.  


ARTICLE 12

Miscellaneous




     Section 12.01   Notices.  (a) Except in the case of notices and other communications
expressly permitted to be given by telephone (and subject to Section 12.01(b)), all notices and
other communications provided for shall be in writing and shall be delivered by hand or overnight
courier service, mailed by certified or registered mail or sent by telecopy, as follows:




     (i)     if to the Borrower, to it at One Palliser Square, Suite 2000, 125-9th
Avenue, SE, Calgary, Alberta T2G OP8, Canada, Attention of Vice President — Finance (Telecopy
No.  (403) 262-6115), with a copy to Quicksilver Resources Inc., 801 Cherry St, Suite 3700,
Unit 19, Fort Worth, Texas 76102, Attention: Vice President — Treasurer (Telecopy No.  (817)
665-5016), with a copy to General Counsel (Telecopy No.  (817) 668-5012);




     (ii)     if to the Administrative Agent or to JPMorgan as Issuing Bank, to it at 10 South
Dearborn, Chicago, Illinois 60603-2003, Attention of Kevin Berry (Telecopy No.  (312)
385-7101), and for all other correspondence other than borrowings, continuation, conversion
and Letter of Credit requests 2200 Ross Avenue, 3rd Floor, Mail Code TX1-2911, Dallas, Texas
75201, Attention: Kimberly A.  Bourgeois (Telecopy No.  (214) 965-3280); and




     (iii)     if to any other Lender, in its capacity as such, or any other Lender in its
capacity as an Issuing Bank, to it at its address (or telecopy number) set forth in its
Administrative Questionnaire.  


     (b)     Notices and other communications to the Lenders hereunder may be delivered or furnished by
electronic communications pursuant to procedures approved by the Administrative Agent; provided
that the foregoing shall not apply to notices pursuant to Article 2, Article 3, Article 4 and
Article 5 unless set forth herein or otherwise agreed by the Administrative Agent and the
applicable Lender.  The Administrative Agent or the Borrower may, in its discretion, agree to
accept notices and other communications to it hereunder by electronic communications pursuant to
procedures approved by it; provided that approval of such procedures may be limited to particular
notices or communications and any such approval of procedures in respect of electronic
communications by any Lender or the Administrative Agent may be revoked at any time by any such
Lender or by the Administrative Agent.  In connection with any such revocation, if such Lender or
the Administrative Agent elects not to receive electronic communications (including those by
electronic mail), then such electronic communications (including



95









 




electronic mail) shall not be a
valid method of delivering notices hereunder to such Person notwithstanding any provision hereof to
the contrary.  



     (c)     Any party hereto may change its address or telecopy number for notices and other
communications hereunder by notice to the other parties hereto.  All notices and other
communications given to any party hereto in accordance with the provisions of this Agreement shall
be deemed to have been given on the date of receipt if received by the recipient during its normal
business hours.  


     Section 12.02   Waivers; Amendments.  (a) No failure on the part of any party hereto to
exercise and no delay in exercising, and no course of dealing with respect to, any right, power or
privilege, or any abandonment or discontinuance of steps to enforce such right, power or privilege,
under any of the Loan
Documents shall operate as a waiver thereof, nor shall any single or partial exercise of any
right, power or privilege under any of the Loan Documents preclude any other or further exercise
thereof or the exercise of any other right, power or privilege.  The rights and remedies of the
Administrative Agent, any other Agent, each Issuing Bank and the Lenders hereunder and under the
other Loan Documents are cumulative and are not exclusive of any rights or remedies that they would
otherwise have.  No waiver of any provision of this Agreement or any other Loan Document or consent
to any departure by the Borrower therefrom shall in any event be effective unless the same shall be
permitted by Section 12.02(b), and then such waiver or consent shall be effective only in the
specific instance and for the purpose for which given.  Without limiting the generality of the
foregoing, the making of a Loan or issuance of a Letter of Credit shall not be construed as a
waiver of any Default, regardless of whether the Administrative Agent, any other Agent, any Lender
or any Issuing Bank may have had notice or knowledge of such Default at the time.  


     (b)     Neither this Agreement nor any provision hereof nor any Security Instrument nor any
provision thereof may be waived, amended or modified except pursuant to an agreement or agreements
in writing entered into by the Borrower and the Majority Lenders or by the Borrower and the
Administrative Agent with the consent of the Majority Lenders; provided that no such agreement
shall




     (i)     increase the Commitment or the Maximum Credit Amount of any Lender without the
written consent of such Lender;




     (ii)     increase the Borrowing Base without the written consent of all of the Lenders,
decrease or maintain the Borrowing Base without the consent of Required Lenders or modify
Section 2.07 or 2.09 without the written consent of all of the Lenders (other than any
Defaulting Lender); provided that a Scheduled Redetermination may be postponed by the
Required Lenders;




     (iii)     reduce the principal amount of any Loan or LC Disbursement or reduce the rate of
interest thereon, or reduce any fees payable hereunder, or reduce any other Secured
Indebtedness hereunder or under any other Loan Document, without the written consent of each
Lender affected thereby;




     (iv)     postpone the scheduled date of payment or prepayment of the principal amount of any
Loan or LC Disbursement (which, for the avoidance of doubt, shall not include any mandatory
prepayment pursuant to Section 3.04(c)), or any interest thereon, or any fees payable
hereunder, or any other Secured Indebtedness hereunder or under any other Loan Document, or
reduce the amount of, waive or excuse any such payment, or postpone or extend the Termination
Date without the written consent of each Lender affected thereby;



96









 






     (v)     change Section 4.01(b) or Section 4.01(c) in a manner that would alter the pro rata
sharing of payments required thereby, or change Section 10.02(c), in each case, without the
written consent of each Lender;




     (vi)     waive or amend Section 3.04(c), Section 6.01, or Section 12.14, without the written
consent of each Lender (other than any Defaulting Lender);




     (vii)     release any Guarantor (except as set forth in the Guaranty Agreement, Section
8.13(d), Section 9.10(d) or Section 12.16) or release all or substantially all of the
collateral (other than as provided in Section 11.10), without the written consent of each
Lender (other than any Defaulting Lender);




     (viii)     change any of the provisions of this Section 12.02(b) or any other provision
hereof specifying the number or percentage of Lenders required to waive, amend or modify any
rights hereunder or under any other Loan Documents or make any determination or grant any
consent hereunder or any other Loan Documents, in each case to the extent that such provision
specifies that all Lenders (including Defaulting Lenders) must make any determination or
grant any consent hereunder or under any other Loan Documents, without the written consent of
each Lender; or




     (ix)     change the definitions of “Required Lenders” or “Majority Lenders” or any other
provisions hereof specifying the number or percentage of Lenders required to waive, amend or
modify any rights hereunder or under any other Loan Documents or make any determination or
grant any consent hereunder or any other Loan Documents to the extent that such provision
does not require the approval or consent of a Defaulting Lender, in each case without the
written consent of each Lender (other than any Defaulting Lender);



     provided, further, that no such agreement shall amend, modify or otherwise affect the rights
or duties of the Administrative Agent, any other Agent, or any Issuing Bank hereunder or under any
other Loan Document without the prior written consent of the Administrative Agent, such other
Agent, or such Issuing Bank, as the case may be.  Notwithstanding the foregoing, any supplement to
Schedule 7.10 (Subsidiaries) shall be effective, after compliance with the requirements of Section
12.17, simply by delivering to the Administrative Agent a supplemental schedule clearly marked as
such and, upon receipt, the Administrative Agent will promptly deliver a copy thereof to the
Lenders.  


     Section 12.03   Expenses, Indemnity; Damage Waiver.  (a) The Borrower shall pay (i) all
reasonable and substantiated out-of-pocket expenses incurred by the Administrative Agent and its
Affiliates, including, without limitation, the reasonable and substantiated fees, charges and
disbursements of one (1) outside U.S.  counsel, one (1) outside Canadian counsel (on a solicitor and
his own client full indemnity basis), applicable local counsel and other outside consultants for
the Administrative Agent, the reasonable travel, photocopy, mailing, courier, telephone and other
similar expenses, and the cost of environmental audits and surveys and appraisals, in connection
with the syndication of the credit facilities provided for herein, the preparation, negotiation,
execution, delivery and administration (both before and after the execution hereof and including
advice of counsel to the Administrative Agent as to the rights and duties of the Administrative
Agent and the Lenders with respect thereto) of this Agreement and the other Loan Documents and any
amendments, modifications or waivers of or consents related to the provisions hereof or thereof
(whether or not the transactions contemplated hereby or thereby shall be consummated), (ii) all
reasonable and substantiated out-of-pocket costs, expenses, Taxes, assessments and other charges
incurred by any Agent or any Lender in connection with any filing, registration, recording or
perfection of any security interest contemplated by this Agreement or any Security Instrument or
any other document




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referred to therein, (iii) all reasonable and substantiated out-of-pocket expenses
incurred by each Issuing Bank in connection with the issuance, amendment, renewal or extension of
any Letter of Credit issued by such Issuing Bank or any demand for payment thereunder, (iv) all
out-of-pocket expenses incurred by any Agent, any Issuing Bank or any Lender, including the fees,
charges and disbursements of any counsel for any Agent, any Issuing Bank or any Lender (on a
solicitor and his own client full indemnity basis), in connection with the enforcement or
protection of its rights in connection with this Agreement or any other Loan Document, including
its rights under this Section 12.03, or in connection with the Loans made or Letters of Credit
issued hereunder, including, without limitation, all such out-of-pocket expenses incurred during
any workout, restructuring or negotiations in respect of such Loans or Letters of Credit.  



     (b)     THE BORROWER SHALL INDEMNIFY EACH AGENT, EACH ARRANGER, EACH ISSUING BANK AND EACH LENDER,
AND EACH RELATED PARTY OF ANY OF THE FOREGOING PERSONS (EACH SUCH PERSON BEING CALLED AN
“INDEMNITEE”) AGAINST, AND DEFEND AND HOLD EACH INDEMNITEE HARMLESS FROM, ANY AND ALL
LOSSES, CLAIMS, DAMAGES, PENALTIES, LIABILITIES AND RELATED EXPENSES, INCLUDING THE FEES, CHARGES
AND DISBURSEMENTS OF ANY COUNSEL (ON A SOLICITOR AND HIS OWN CLIENT FULL INDEMNITY BASIS) FOR ANY
INDEMNITEE, INCURRED BY OR ASSERTED AGAINST ANY INDEMNITEE ARISING OUT OF, IN CONNECTION WITH, OR
AS A RESULT OF (i) THE EXECUTION OR DELIVERY OF THIS AGREEMENT OR ANY OTHER LOAN DOCUMENT OR ANY
AGREEMENT OR INSTRUMENT CONTEMPLATED HEREBY OR THEREBY, THE PERFORMANCE BY THE PARTIES HERETO OR
THE PARTIES TO ANY OTHER LOAN DOCUMENT OF THEIR RESPECTIVE OBLIGATIONS HEREUNDER OR THEREUNDER OR
THE CONSUMMATION OF THE TRANSACTIONS CONTEMPLATED HEREBY OR BY ANY OTHER LOAN DOCUMENT, (ii) THE
FAILURE OF ANY CREDIT PARTY TO COMPLY WITH THE TERMS OF ANY LOAN DOCUMENT, INCLUDING THIS
AGREEMENT, OR WITH ANY GOVERNMENTAL REQUIREMENT, (iii) ANY INACCURACY OF ANY REPRESENTATION OR ANY
BREACH OF ANY WARRANTY OR COVENANT OF THE BORROWER OR ANY GUARANTOR SET FORTH IN ANY OF THE LOAN
DOCUMENTS OR ANY INSTRUMENTS, DOCUMENTS OR CERTIFICATIONS DELIVERED IN CONNECTION THEREWITH, (iv)
ANY LOAN OR LETTER OF CREDIT OR THE USE OF THE PROCEEDS THEREFROM, INCLUDING, WITHOUT LIMITATION,
(a) ANY REFUSAL BY ANY ISSUING BANK TO HONOR A DEMAND FOR PAYMENT UNDER A LETTER OF CREDIT IF THE
DOCUMENTS PRESENTED IN CONNECTION WITH SUCH DEMAND DO NOT STRICTLY COMPLY WITH THE TERMS OF SUCH
LETTER OF CREDIT, OR (b) THE PAYMENT OF A DRAWING UNDER ANY LETTER OF CREDIT NOTWITHSTANDING THE
NON-COMPLIANCE, NON-DELIVERY OR OTHER IMPROPER PRESENTATION OF THE DOCUMENTS PRESENTED IN
CONNECTION THEREWITH, (v) ANY OTHER ASPECT OF THE LOAN DOCUMENTS, (vi) THE OPERATIONS OF THE
BUSINESS OF THE BORROWER, NEW PARENT AND THEIR RESPECTIVE SUBSIDIARIES, (vii) ANY ASSERTION THAT
THE LENDERS WERE NOT ENTITLED TO RECEIVE THE PROCEEDS RECEIVED PURSUANT TO THE SECURITY
INSTRUMENTS, (viii) ANY ENVIRONMENTAL LAW APPLICABLE TO ANY CREDIT PARTY OR ANY OF THEIR PROPERTIES
OR OPERATIONS, INCLUDING, THE PRESENCE, GENERATION, STORAGE, RELEASE, THREATENED RELEASE, USE,
TRANSPORT, DISPOSAL, ARRANGEMENT OF DISPOSAL OR TREATMENT OF HAZARDOUS MATERIALS ON OR AT ANY OF
THEIR PROPERTIES, (ix) ANY ENVIRONMENTAL LIABILITY RELATED IN ANY WAY TO THE CREDIT PARTIES, OR (x)
ANY ACTUAL OR PROSPECTIVE CLAIM, LITIGATION, INVESTIGATION OR PROCEEDING RELATING TO ANY OF THE
FOREGOING, WHETHER BASED ON CONTRACT, TORT OR ANY OTHER THEORY AND REGARDLESS OF WHETHER ANY
INDEMNITEE IS A PARTY THERETO, AND SUCH INDEMNITY SHALL EXTEND TO EACH INDEMNITEE NOTWITHSTANDING
THE SOLE OR CONCURRENT NEGLIGENCE OF EVERY



98









 




KIND OR CHARACTER WHATSOEVER, WHETHER ACTIVE OR PASSIVE, WHETHER AN AFFIRMATIVE ACT OR AN
OMISSION, INCLUDING WITHOUT LIMITATION, ALL TYPES OF NEGLIGENT CONDUCT IDENTIFIED IN THE
RESTATEMENT (SECOND) OF TORTS OF ONE OR MORE OF THE INDEMNITEES OR BY REASON OF STRICT LIABILITY
IMPOSED WITHOUT FAULT ON ANY ONE OR MORE OF THE INDEMNITEES; PROVIDED THAT SUCH INDEMNITY SHALL
NOT, AS TO ANY INDEMNITEE, BE AVAILABLE TO THE EXTENT THAT SUCH LOSSES, CLAIMS, DAMAGES,
LIABILITIES OR RELATED EXPENSES (X) ARE DETERMINED BY A COURT OF COMPETENT JURISDICTION BY FINAL
AND NONAPPEALABLE JUDGMENT TO HAVE RESULTED FROM THE GROSS NEGLIGENCE OR WILLFUL MISCONDUCT OF SUCH
INDEMNITEE, (Y) RELATE TO CLAIMS BETWEEN OR AMONG ANY OF THE LENDERS, THE ADMINISTRATIVE AGENT, THE
ARRANGERS OR ANY OF THEIR AFFILIATES, SHAREHOLDERS, PARTNERS OR MEMBERS OR (Z) ARE IN RESPECT OF
ANY PROPERTY FOR ANY OCCURRENCE ARISING FROM THE ACTS OR OMISSIONS OF THE ADMINISTRATIVE AGENT OR
ANY LENDER DURING THE PERIOD AFTER WHICH SUCH PERSON, ITS SUCCESSORS OR ASSIGNS HAVE OBTAINED
POSSESSION OF SUCH PROPERTY (WHETHER BY FORECLOSURE OR DEED IN LIEU OF FORECLOSURE, AS
MORTGAGEE-IN-POSSESSION OR OTHERWISE).  



     (c)     To the extent that the Borrower fails to pay any amount required to be paid by it to any
Agent, any Arranger, or any Issuing Bank under Section 12.03(a) or (b), each Lender severally
agrees to pay to such Agent, such Arranger, or such Issuing Bank, as the case may be, such Lender’s
Applicable Percentage (determined as of the time that the applicable unreimbursed expense or
indemnity payment is sought) of such unpaid amount; provided that the unreimbursed expense or
indemnified loss, claim, damage, liability or related expense, as the case may be, was incurred by
or asserted against such Agent, such Arranger, or such Issuing Bank in its capacity as such.  


     (d)     To the extent permitted by applicable law, the Borrower shall not assert, and hereby
waives, any claim against any Indemnitee, on any theory of liability, for special, indirect,
consequential or punitive damages (as opposed to direct or actual damages) arising out of, in
connection with, or as a result of, this Agreement, any other Loan Document or any agreement or
instrument contemplated hereby or thereby, the Transactions, any Loan or Letter of Credit or the
use of the proceeds thereof.  


     (e)     All amounts due under this Section 12.03 shall be payable not later than 30 days after
written demand therefor.  


     Section 12.04   Successors and Assigns.  (a) The provisions of this Agreement shall be
binding upon and inure to the benefit of the parties hereto and their respective successors and
assigns permitted hereby (including any Affiliate of any Issuing Bank that issues any Letter of
Credit), except that (i) the Borrower may not assign or otherwise transfer any of its rights or
obligations hereunder without the prior written consent of each Lender (and any attempted
assignment or transfer by the Borrower without such consent shall be null and void) and (ii) no
Lender may assign or otherwise transfer its rights or obligations hereunder except in accordance
with this Section 12.04.  Nothing in this Agreement, expressed or implied, shall be construed to
confer upon any Person (other than the parties hereto, their respective successors and assigns
permitted hereby (including any Affiliate of any Issuing Bank that issues any Letter of Credit),
Participants (to the extent provided in Section 12.04(c)) and, to the extent expressly contemplated
hereby, the Related Parties of each of the Administrative Agent, each Issuing Bank, and the
Lenders) any legal or equitable right, remedy or claim under or by reason of this Agreement.  


     (b)     Subject to the conditions set forth in Section 12.04(b)(ii), any Lender may assign to one
or more assignees all or a portion of its rights and obligations under this Agreement (including
all or a



99









 




portion of its Commitment and the Loans at the time owing to it) with the prior written
consent (such consent not to be unreasonably withheld) of:





     (A)     the Borrower, provided that no consent of the Borrower shall be required if
such assignment is to a Lender, an Affiliate of a Lender, an Approved Fund or, if an
Event of Default has occurred and is continuing, is to any other assignee; and




     (B)     the Administrative Agent, provided that no consent of the Administrative
Agent shall be required for an assignment to an assignee that is a Lender, Affiliate
of a Lender or an Approved Fund of a Lender immediately prior to giving effect to
such assignment.  



     (ii)     Assignments shall be subject to the following additional conditions:




     (A)     except for an assignment of the entire remaining amount of the assigning
Lender’s Commitment or Loans, (1) in the case of an assignment to a Lender or an
Affiliate of a Lender, the amount of the unused Commitment and Loans of the
assigning Lender subject to each such assignment (determined as of the date the
Assignment and Assumption with respect to such assignment is delivered to the
Administrative Agent) shall not be less than C$2,500,000 and the amount of the
Commitment or Loans of the assigning Lender after such assignment shall not be less
than C$2,500,000 unless each of the Borrower and the Administrative Agent otherwise
consent, provided that no such consent of the Borrower shall be required if an Event
of Default has occurred and is continuing and (2) in the case of an assignment to an
assignee other than a Lender or an Affiliate of a Lender, the amount of the
Commitment or Loans of the assigning Lender subject to each such assignment
(determined as of the date the Assignment and Assumption with respect to such
assignment is delivered to the Administrative Agent) shall not be less than
C$5,000,000 and the amount of the unused Commitment and Loans of the assigning
Lender after such assignment shall not be less than C$5,000,000 unless each of the
Borrower and the Administrative Agent otherwise consent, provided that no such
consent of the Borrower shall be required if an Event of Default has occurred and is
continuing;




     (B)     each partial assignment shall be made as an assignment of a proportionate
part of all the assigning Lender’s rights and obligations under this Agreement;




     (C)     the parties to each assignment shall execute and deliver to the
Administrative Agent an Assignment and Assumption, together with a processing and
recordation fee of C$3,500;




     (D)     the assignee, if it shall not be a Lender, shall deliver to the
Administrative Agent an Administrative Questionnaire;




     (E)     in no event may any Lender assign all or a portion of its rights and
obligations under this Agreement to the Borrower or any Affiliate of the Borrower or
to any other Person that does not deal at arm’s length, within the meaning of the
Income Tax Act (Canada), with the Borrower; and




     (F)     the assignee must not be a Defaulting Lender.  


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     (iii)     Subject to Section 12.04(b)(iv) and the acceptance and recording thereof, from and
after the effective date specified in each Assignment and Assumption the assignee thereunder
shall be a party hereto and, to the extent of the interest assigned by such Assignment and
Assumption, have the rights and obligations of a Lender under this Agreement, and the
assigning Lender thereunder shall, to the extent of the interest assigned by such Assignment
and Assumption, be released from its obligations under this Agreement (and, in the case of an
Assignment and Assumption covering all of the assigning Lender’s rights and obligations under
this Agreement, such Lender shall cease to be a party hereto but shall continue to be
entitled to the benefits of Section 5.01, Section 5.02, Section 5.03 and Section 12.03).  Any assignment or transfer by a Lender of rights or obligations under this Agreement that
does not comply with this Section 12.04 shall be treated for purposes of this Agreement as a
sale by such Lender of a participation in such rights and obligations in accordance with
Section 12.04(c).  



     (iv)     The Administrative Agent, acting for this purpose as an agent of the Borrower,
shall maintain at one of its offices a copy of each Assignment and Assumption delivered to it
and a register for the recordation of the names and addresses of the Lenders, and the Maximum
Credit Amount of, and principal amount of the Loans and LC Disbursements owing to, each
Lender pursuant to the terms hereof from time to time (the “Register”).  The entries
in the Register shall be conclusive absent manifest error, and the Borrower, the
Administrative Agent, each Issuing Bank and the Lenders may treat each Person whose name is
recorded in the Register pursuant to the terms hereof as a Lender hereunder for all purposes
of this Agreement, notwithstanding notice to the contrary.  The Register shall be available
for inspection by the Borrower, any Issuing Bank and any Lender, at any reasonable time and
from time to time upon reasonable prior notice.  In connection with any changes to the
Register, if necessary, the Administrative Agent will reflect the revisions on Annex I and
forward a copy of such revised Annex I to the Borrower, each Issuing Bank and each Lender.  



     (v)     Upon its receipt of a duly completed Assignment and Assumption executed by an
assigning Lender and an assignee, the assignee’s completed Administrative Questionnaire
(unless the assignee shall already be a Lender hereunder), the processing and recordation fee
referred to in Section 12.04(b) and any written consent to such assignment required by
Section 12.04(b), the Administrative Agent shall accept such Assignment and Assumption and
record the information contained therein in the Register.  No assignment shall be effective
for purposes of this Agreement unless it has been recorded in the Register as provided in
this Section 12.04(b).  


     (c) (i)     Any Lender may, without the consent of the Borrower, the Administrative Agent, or any
Issuing Bank, sell participations to one or more banks or other entities (a “Participant”)
in all or a portion of such Lender’s rights and obligations under this Agreement (including all or
a portion of its Commitment and the Loans owing to it); provided that (A) no such Participant shall
be a Person with whom the Borrower does not deal at arm’s length, within the meaning of the Income
Tax Act (Canada), (B) such Lender’s obligations under this Agreement shall remain unchanged, (C)
such Lender shall remain solely responsible to the other parties hereto for the performance of such
obligations and (D) the Borrower, the Administrative Agent, each Issuing Bank and the other Lenders
shall continue to deal solely and directly with such Lender in connection with such Lender’s rights
and obligations under this Agreement.  Any agreement or instrument pursuant to which a Lender sells
such a participation shall provide that such Lender shall retain the sole right to enforce this
Agreement and to approve any amendment, modification or waiver of any provision of this Agreement;
provided that such agreement or instrument may provide that such Lender will not, without the
consent of the Participant, agree to any amendment, modification or waiver described in the proviso
to Section 12.02 that affects such Participant.  In addition such agreement must provide that the
Participant be bound by the provisions of Section 12.03.  


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Subject to Section 12.04(c)(ii), the Borrower agrees that each Participant
shall be entitled to the benefits of Section 5.01, Section 5.02 and Section 5.03 to the same
extent as if it were a Lender and had acquired its interest by assignment pursuant to Section
12.04(b), provided that such Participant’s entitlements shall be no greater than the entitlements
of the Lender which sold such participation.  To the extent permitted by law, each Participant also
shall be entitled to the benefits of Section 12.08 as though it were a Lender, provided such
Participant agrees to be subject to Section 4.01(c) as though it were a Lender.  




     (ii)     A Participant shall not be entitled to receive any greater payment under Section
5.01 or Section 5.03 than the applicable Lender would have been entitled to receive with
respect to the participation sold to such Participant, unless the sale of the participation
to such Participant is made with the Borrower’s prior written consent.  



     (iii)     Each Lender that sells a participation shall, acting solely for this purpose as a
non-fiduciary agent of the Borrower, maintain a register on which it enters the name and
address of each participant and the principal amounts (and related interest amounts) of each
participant’s interest in the Loans or other obligations under this Agreement (the
“Participant Register”).  The entries in the Participant Register shall be
conclusive, absent manifest error, and such Lender shall treat each person whose name is
recorded in the Participant Register as the owner of such participation for all purposes of
this Agreement notwithstanding any notice to the contrary.  No Lender shall have any
obligation to disclose all or any portion of the Participant Register to the Borrower or any
other Person (including the identity of any participant or any information relating to a
participant’s interest in any obligations under any Loan Document) except to the extent that
such disclosure is necessary to establish that such commitment, loan, letter of credit or
other obligation is in registered form under Section 5f.103-1(c) of the United States
Treasury Regulations (or the Canadian equivalent).  For the avoidance of doubt, the
Administrative Agent (in its capacity as Administrative Agent) shall have no responsibility
for maintaining a Participant Register.  


     (d)     Any Lender may at any time pledge or assign a security interest in all or any portion of
its rights under this Agreement to secure obligations of such Lender, including, without
limitation, any pledge or assignment to secure obligations to a Federal Reserve Bank (or the
Canadian equivalent) or central bank, and this Section 12.04(d) shall not apply to any such pledge
or assignment of a security interest; provided that no such pledge or assignment of a security
interest shall release a Lender from any of its obligations hereunder or substitute any such
pledgee or assignee for such Lender as a party hereto.  


     (e)     Notwithstanding any other provisions of this Section 12.04, no transfer or assignment of
the interests or obligations of any Lender or any grant of participations therein shall be
permitted if such transfer, assignment or grant would require the Borrower and the Guarantors to
file a registration statement with the SEC (or the Canadian equivalent) or to qualify the Loans
under the “Blue Sky” laws of any state or province.  


     Section 12.05   Survival; Revival; Reinstatement.  (a) All covenants, agreements,
representations and warranties made by the Borrower herein and in the certificates or other
instruments delivered in connection with or pursuant to this Agreement or any other Loan Document
shall be considered to have been relied upon by the other parties hereto and shall survive the
execution and delivery of this Agreement and the making of any Loans and issuance of any Letters of
Credit, regardless of any investigation made by any such other party or on its behalf and
notwithstanding that the Administrative Agent, any other Agent, any Issuing Bank or any Lender may
have had notice or knowledge of any Default or any incorrect representation or warranty at the time
any credit is extended hereunder, and shall continue in full force and effect as long as the
principal of or any accrued interest on any Loan or any fee



102









 




or any other amount payable under this Agreement is outstanding and unpaid or any Letter of Credit is
outstanding and so long as the Commitments have not expired or terminated.  The provisions of
Section 5.01, Section 5.02, Section 5.03 and Section 12.03 and Article 11 shall survive and remain
in full force and effect regardless of the consummation of the transactions contemplated hereby,
the repayment of the Loans, the expiration or termination of the Letters of Credit and the
Commitments or the termination of this Agreement, any other Loan Document or any provision hereof
or thereof.  



     (b)     To the extent that any payments on the Secured Indebtedness or proceeds of any collateral
are subsequently invalidated, declared to be fraudulent or preferential, set aside or required to
be repaid to a trustee, debtor in possession, receiver or other Person under any bankruptcy law,
common law or equitable cause, then to such extent, the Secured Indebtedness so satisfied shall be
revived and continue as if such payment or proceeds had not been received and the Administrative
Agent’s and the Lenders’ Liens, security interests, rights, powers and remedies under this
Agreement and each Loan Document shall continue in full force and effect.  In such event, each Loan
Document shall be automatically reinstated and the Borrower shall take such action as may be
reasonably requested by the Administrative Agent and the Lenders to effect such reinstatement.  


     Section 12.06   Counterparts; Integration; Effectiveness.  (a) This Agreement may be
executed in counterparts (and by different parties hereto on different counterparts), each of which
shall constitute an original, but all of which when taken together shall constitute a single
contract.  


     (b)     This Agreement, the other Loan Documents and any separate letter agreements with respect
to fees payable to the Agents and other matters constitute the entire contract among the parties
relating to the subject matter hereof and thereof and supersede any and all previous agreements and
understandings, oral or written, relating to the subject matter hereof and thereof.  THIS AGREEMENT
AND THE OTHER LOAN DOCUMENTS REPRESENT THE FINAL AGREEMENT AMONG THE PARTIES HERETO AND THERETO 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.  


     (c)     Except as provided in Section 6.01, this Agreement shall become effective when it shall
have been executed by the Administrative Agent and when the Administrative Agent shall have
received counterparts hereof which, when taken together, bear the signatures of each of the other
parties hereto, and thereafter shall be binding upon and inure to the benefit of the parties hereto
and their respective successors and assigns.  Delivery of an executed counterpart of a signature
page of this Agreement by telecopy or electronic mail shall be effective as delivery of a manually
executed counterpart of this Agreement.  


     Section 12.07   Severability.  Any provision of this Agreement or any other Loan
Document held to be invalid, illegal or unenforceable in any jurisdiction shall, as to such
jurisdiction, be ineffective to the extent of such invalidity, illegality or unenforceability
without affecting the validity, legality and enforceability of the remaining provisions hereof or
thereof; and the invalidity of a particular provision in a particular jurisdiction shall not
invalidate such provision in any other jurisdiction.  If it becomes illegal for any Lender to hold
or benefit from a Lien over real property pursuant to any law, such Lender shall notify the
Administrative Agent and disclaim any benefit of such security interest to the extent of such
illegality, but such illegality shall not invalidate or render unenforceable such Lien for the
benefit of each of the other Lenders.  


     Section 12.08   Right of Setoff.  If an Event of Default shall have occurred and be
continuing, each Lender and each of its Affiliates is hereby authorized at any time and from time
to time, to the fullest



103









 




extent permitted by law, to set off and apply any and all deposits (general
or special, time or demand, provisional or final) at any time held and other obligations (of
whatsoever kind, including, without limitation, obligations under Swap Agreements) at any time owing by such Lender or Affiliate
to or for the credit or the account of any Credit Party against any of and all the obligations of
any Credit Party owed to such Lender now or hereafter existing under this Agreement or any other
Loan Document, irrespective of whether or not such Lender shall have made any demand under this
Agreement or any other Loan Document and although such obligations may be unmatured.  The rights of
each Lender under this Section 12.08 are in addition to other rights and remedies (including other
rights of setoff) which such Lender or its Affiliates may have.  



     Section 12.09   GOVERNING LAW; JURISDICTION.  (a) THIS AGREEMENT, THE NOTES AND ALL
CLAIMS OR CAUSES OF ACTION (WHETHER IN CONTRACT, TORT OR OTHERWISE) THAT MAY BE BASED UPON, ARISE
OUT OF OR RELATE IN ANY WAY TO THIS AGREEMENT OR THE NEGOTIATION, EXECUTION OR PERFORMANCE OF THIS
AGREEMENT OR THE TRANSACTIONS CONTEMPLATED HEREBY SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE
WITH, THE LAWS OF THE PROVINCE OF ALBERTA AND OF THE FEDERAL LAWS OF CANADA APPLICABLE THEREIN.  


     (b)     ANY LEGAL ACTION OR PROCEEDING WITH RESPECT TO THE LOAN DOCUMENTS SHALL BE BROUGHT IN THE
COURTS OF THE PROVINCE OF ALBERTA, AND, BY EXECUTION AND DELIVERY OF THIS AGREEMENT, EACH PARTY
HEREBY ACCEPTS FOR ITSELF AND (TO THE EXTENT PERMITTED BY LAW) IN RESPECT OF ITS PROPERTY,
GENERALLY AND UNCONDITIONALLY, THE JURISDICTION OF THE AFORESAID COURTS.  EACH PARTY HEREBY
IRREVOCABLY WAIVES ANY OBJECTION, INCLUDING, WITHOUT LIMITATION, 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 SUCH ACTION OR PROCEEDING IN SUCH RESPECTIVE JURISDICTIONS.  THIS SUBMISSION TO
JURISDICTION IS NON-EXCLUSIVE AND DOES NOT PRECLUDE A PARTY FROM OBTAINING JURISDICTION OVER
ANOTHER PARTY IN ANY COURT OTHERWISE HAVING JURISDICTION.  


     (c)     EACH PARTY IRREVOCABLY CONSENTS TO THE SERVICE OF PROCESS OF ANY OF THE AFOREMENTIONED
COURTS IN ANY SUCH ACTION OR PROCEEDING BY THE MAILING OF COPIES THEREOF BY REGISTERED OR CERTIFIED
MAIL, POSTAGE PREPAID, TO IT AT THE ADDRESS SPECIFIED IN SECTION 12.01 OR SUCH OTHER ADDRESS AS IS
SPECIFIED PURSUANT TO SECTION 12.01 (OR ITS ASSIGNMENT AND ASSUMPTION), SUCH SERVICE TO BECOME
EFFECTIVE THIRTY (30) DAYS AFTER SUCH MAILING.  NOTHING HEREIN SHALL AFFECT THE RIGHT OF A PARTY OR
ANY HOLDER OF A NOTE TO SERVE PROCESS IN ANY OTHER MANNER PERMITTED BY LAW OR TO COMMENCE LEGAL
PROCEEDINGS OR OTHERWISE PROCEED AGAINST ANOTHER PARTY IN ANY OTHER JURISDICTION.  


     (d)     EACH PARTY HEREBY (i) IRREVOCABLY AND UNCONDITIONALLY WAIVES, TO THE FULLEST EXTENT
PERMITTED BY LAW, TRIAL BY JURY IN ANY LEGAL ACTION OR PROCEEDING RELATING TO THIS AGREEMENT OR ANY
OTHER LOAN DOCUMENT AND FOR ANY COUNTERCLAIM THEREIN; (ii) IRREVOCABLY WAIVES, TO THE MAXIMUM
EXTENT NOT PROHIBITED BY LAW, ANY RIGHT IT MAY HAVE TO CLAIM OR RECOVER IN ANY SUCH LITIGATION ANY
SPECIAL, EXEMPLARY, PUNITIVE OR CONSEQUENTIAL DAMAGES, OR DAMAGES OTHER THAN, OR IN ADDITION TO,
ACTUAL DAMAGES; (iii) CERTIFIES THAT NO PARTY HERETO NOR ANY REPRESENTATIVE OR AGENT OR COUNSEL



104









 




FOR ANY PARTY HERETO HAS REPRESENTED, EXPRESSLY OR OTHERWISE, OR IMPLIED THAT SUCH PARTY WOULD NOT, IN
THE EVENT OF LITIGATION, SEEK TO ENFORCE THE FOREGOING WAIVERS, AND (iv) ACKNOWLEDGES THAT IT HAS
BEEN INDUCED TO ENTER
INTO THIS AGREEMENT, THE LOAN DOCUMENTS AND THE TRANSACTIONS CONTEMPLATED HEREBY AND THEREBY
BY, AMONG OTHER THINGS, THE MUTUAL WAIVERS AND CERTIFICATIONS CONTAINED IN THIS SECTION 12.09.  



     Section 12.10   Headings.  Article and Section headings and the Table of Contents used
herein are for convenience of reference only, are not part of this Agreement and shall not affect
the construction of, or be taken into consideration in interpreting, this Agreement.  


     Section 12.11   Confidentiality.  Each of the Administrative Agent, each Issuing Bank
and the Lenders agrees to maintain the confidentiality of the Information (as defined below),
except that Information may be disclosed (a) to its and its Affiliates’ directors, officers,
employees and agents, including accountants, legal counsel and other advisors (it being understood
that the Persons to whom such disclosure is made will be informed of the confidential nature of
such Information and instructed to keep such Information confidential), (b) to the extent requested
by any regulatory authority, (c) to the extent required by applicable laws or regulations or by any
subpoena or similar legal process, (d) to any other party to this Agreement or any other Loan
Document, (e) in connection with the exercise of any remedies hereunder or under any other Loan
Document or any suit, action or proceeding relating to this Agreement or any other Loan Document or
the enforcement of rights hereunder or thereunder, (f) subject to an agreement containing
provisions substantially the same as those of this Section 12.11, to (i) any assignee of or
Participant in, or any prospective assignee of or Participant in, any of its rights or obligations
under this Agreement (provided that such Person agrees in writing to be bound by the provisions of
this Section 12.11) or (ii) any actual or prospective counterparty (or its advisors) to any
securitization or Swap Agreement relating to the Borrower and its obligations (provided that such
Person agrees in writing to be bound by the provisions of this Section 12.11), (g) with the consent
of the Borrower or (h) to the extent such Information (i) becomes publicly available other than as
a result of a breach of this Section 12.11 or (ii) becomes available to the Administrative Agent,
any Issuing Bank or any Lender on a nonconfidential basis from a source other than the Borrower.  For the purposes of this Section 12.11, “Information” means all information received from
any Credit Party relating to any Credit Party and their businesses, other than any such information
that is available to the Administrative Agent, any Issuing Bank or any Lender on a nonconfidential
basis prior to disclosure by a Credit Party; provided that, in the case of information received
from any Credit Party after the date hereof, such information is clearly identified at the time of
delivery as confidential.  Any Person required to maintain the confidentiality of Information as
provided in this Section 12.11 shall be considered to have complied with its obligation to do so if
such Person has exercised the same degree of care to maintain the confidentiality of such
Information as such Person would accord to its own confidential information.  


     Section 12.12   Interest Rate Limitation.  It is the intention of the parties hereto
that each Lender shall conform strictly to usury laws applicable to it.  Accordingly, if the
transactions contemplated hereby would be usurious as to any Lender under laws applicable to it
(including the laws of Canada, the United States of America and the State of Texas or any other
jurisdiction whose laws may be mandatorily applicable to such Lender notwithstanding the other
provisions of this Agreement), then, in that event, notwithstanding anything to the contrary in any
of the Loan Documents or any agreement entered into in connection with or as security for the
Notes, it is agreed as follows: (i) the aggregate of all consideration which constitutes interest
under law applicable to any Lender that is contracted for, taken, reserved, charged or received by
such Lender under any of the Loan Documents or agreements or otherwise in connection with the Loans
shall under no circumstances exceed the maximum amount allowed by such applicable law, and any
excess shall be canceled automatically and if theretofore paid shall be credited by



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such Lender on the principal amount of the Secured Indebtedness (or, to the extent that the principal amount of
the Secured Indebtedness shall have been or would thereby be paid in full, refunded by such Lender
to the Borrower); and (ii) in the event that the maturity of the Loans is accelerated by reason of
an election of the holder thereof resulting from any Event of Default under this Agreement or
otherwise, or in the event of any required or permitted prepayment, then such consideration that
constitutes interest under law applicable to any Lender may never include more than the maximum
amount allowed by such applicable law, and excess interest, if any, provided for in this Agreement
or otherwise shall be canceled automatically by such Lender as of the date of such acceleration or
prepayment and, if theretofore paid, shall be credited by such Lender on the principal amount of
the Secured Indebtedness (or, to the extent that the principal amount of the Secured Indebtedness
shall have been or would thereby be paid in full, refunded by such Lender to the Borrower).  All
sums paid or agreed to be paid to any Lender for the use, forbearance or detention of sums due
hereunder shall, to the extent permitted by law applicable to such Lender, be amortized, prorated,
allocated and spread throughout the actual full term of the Loans until payment in full so that the
rate or amount of interest on account of any Loans hereunder does not exceed the maximum amount
allowed by such applicable law.  If at any time and from time to time (A) the amount of interest
payable to any Lender on any date shall be computed at the Highest Lawful Rate applicable to such
Lender pursuant to this Section 12.12 and (B) in respect of any subsequent interest computation
period the amount of interest otherwise payable to such Lender would be less than the amount of
interest payable to such Lender computed at the Highest Lawful Rate applicable to such Lender, then
the amount of interest payable to such Lender in respect of such subsequent interest computation
period shall continue to be computed at the Highest Lawful Rate applicable to such Lender until the
total amount of interest payable to such Lender shall equal the total amount of interest which
would have been payable to such Lender if the total amount of interest had been computed without
giving effect to this Section 12.12.  To the extent that Chapter 303 of the Texas Finance Code is
relevant for the purpose of determining the Highest Lawful Rate applicable to a Lender, such Lender
elects to determine the applicable rate ceiling under such Chapter by the weekly ceiling from time
to time in effect.  Chapter 346 of the Texas Finance Code does not apply to the Borrower’s
obligations hereunder.  



     Notwithstanding any provision herein to the contrary, in no event will the aggregate
“interest” (as defined in section 347 of the Criminal Code (Canada)) payable under this Agreement
exceed the maximum effective annual rate of interest on the “credit advanced” (as defined in that
section) permitted under that section and, if any payment, collection or demand pursuant to this
Agreement in respect of “interest” (as defined in that section) is determined to be contrary to the
provisions of that section, such payment, collection or demand will be deemed to have been made by
mutual mistake of the Borrower, any Guarantor, the Lenders, any Issuing Bank and any Agent, as the
case may be, and the amount of such excess payment or collection will be refunded to the Borrower
or such Guarantor, as the case may be.  For purposes of this Agreement, the effective annual rate
of interest will be determined in accordance with generally accepted actuarial practices and
principles over the term of the Loans on the basis of annual compounding of the lawfully permitted
rate of interest and, in the event of dispute, a certificate of a Fellow of the Canadian Institute
of Actuaries appointed by the Administrative Agent will be prima facie evidence, for the purposes
of such determination.  


     Section 12.13   EXCULPATION PROVISIONS.  EACH OF THE PARTIES HERETO SPECIFICALLY AGREES
THAT IT HAS A DUTY TO READ THIS AGREEMENT AND THE OTHER LOAN DOCUMENTS AND AGREES THAT IT IS
CHARGED WITH NOTICE AND KNOWLEDGE OF THE TERMS OF THIS AGREEMENT AND THE OTHER LOAN DOCUMENTS; THAT
IT HAS IN FACT READ THIS AGREEMENT AND IS FULLY INFORMED AND HAS FULL NOTICE AND KNOWLEDGE OF THE
TERMS, CONDITIONS AND EFFECTS OF THIS AGREEMENT; THAT IT HAS BEEN REPRESENTED BY INDEPENDENT LEGAL
COUNSEL OF ITS CHOICE THROUGHOUT THE NEGOTIATIONS PRECEDING ITS EXECUTION OF THIS



106









 




AGREEMENT AND THE OTHER LOAN DOCUMENTS; AND HAS RECEIVED THE ADVICE OF ITS ATTORNEY IN ENTERING INTO THIS AGREEMENT
AND THE OTHER LOAN DOCUMENTS; AND THAT IT RECOGNIZES THAT CERTAIN OF THE TERMS OF THIS AGREEMENT
AND THE OTHER LOAN DOCUMENTS RESULT IN ONE PARTY ASSUMING THE LIABILITY INHERENT IN SOME ASPECTS OF THE TRANSACTION AND RELIEVING THE OTHER PARTY OF ITS
RESPONSIBILITY FOR SUCH LIABILITY.  EACH PARTY HERETO AGREES AND COVENANTS THAT IT WILL NOT CONTEST
THE VALIDITY OR ENFORCEABILITY OF ANY EXCULPATORY PROVISION OF THIS AGREEMENT AND THE OTHER LOAN
DOCUMENTS ON THE BASIS THAT THE PARTY HAD NO NOTICE OR KNOWLEDGE OF SUCH PROVISION OR THAT THE
PROVISION IS NOT “CONSPICUOUS.”




     Section 12.14   Collateral Matters; Swap Agreements.  The benefit of the Security
Instruments and of the provisions of this Agreement relating to any collateral securing the Secured
Indebtedness shall also extend to and be available to the Secured Swap Providers (on a pro rata
basis in respect of any such obligations of any Credit Party to them) with respect to any Swap
Agreement, but excluding any additional transactions or confirmations entered into (a) after such
Secured Swap Provider ceases to be a Lender or an Affiliate of a Lender or (b) after assignment by
a Secured Swap Provider to a Person that is not a Lender or an Affiliate of a Lender at the time of
such assignment.  No Lender or any Affiliate of a Lender shall have any voting rights under any
Loan Document as a result of the existence of obligations owed to it under any such Swap
Agreements.  


     Section 12.15   No Third Party Beneficiaries.  This Agreement, the other Loan Documents,
and the agreement of the Lenders to make Loans and the Issuing Banks to issue, amend, renew or
extend Letters of Credit hereunder are solely for the benefit of the Borrower, and no other Person
(including, without limitation, any Subsidiary of the Borrower, any obligor, contractor,
subcontractor, supplier or materialsman) shall have any rights, claims, remedies or privileges
hereunder or under any other Loan Document against the Administrative Agent, any other Agent, any
Issuing Bank, or any Lender for any reason whatsoever.  There are no third party beneficiaries.  


     Section 12.16   USA Patriot Act Notice.  Each Lender hereby notifies the Borrower that
pursuant to the requirements of the USA Patriot Act (Title III of Pub.  L.  107-56 (signed into law
October 26, 2001)) (the “Act”), it is required to obtain, verify and record information
that identifies the Borrower, which information includes the name and address of the Borrower and
other information that will allow such Lender to identify the Borrower in accordance with the Act.  


     Section 12.17   Anti-Money Laundering Legislation.  (a) The Borrower acknowledges that,
pursuant to the Proceeds of Crime (Money Laundering) and Terrorist Financing Act (Canada) and other
applicable anti-money laundering, anti-terrorist financing, government sanction and “know your
client” Laws, whether within Canada or elsewhere (collectively, including any guidelines or orders
thereunder, “AML Legislation”), the Lenders and the Administrative Agent may be required to
obtain, verify and record information regarding each Credit Party, its directors, authorized
signing officers, direct or indirect shareholders or other Persons in control of the applicable
Credit Party, and the transactions contemplated hereby.  Borrower shall promptly provide all such
information, including supporting documentation and other evidence, as may be reasonably requested
by any Lender or the Administrative Agent, or any prospective assign or participant of a Lender or
the Administrative Agent, in order to comply with any applicable AML Legislation, whether now or
hereafter in existence.  

(b)     If the Administrative Agent has ascertained the identity of any Credit Party or any authorized
signatories of the applicable Credit Party for the purposes of applicable AML Legislation, then the
Administrative Agent:



107









 








     (i)     shall be deemed to have done so as an agent for each Lender, and this Agreement
shall constitute a “written agreement” in such regard between each Lender and the
Administrative Agent within the meaning of applicable AML Legislation; and




     (ii)     shall provide to each Lender copies of all information obtained in such regard
without any representation or warranty as to its accuracy or completeness.  

Notwithstanding the preceding sentence and except as may otherwise be agreed in writing, each of
the Lenders agrees that the Administrative Agent has no obligation to ascertain the identity of any
Credit Party or any authorized signatories of the applicable Credit Party on behalf of any Lender,
or to confirm the completeness or accuracy of any information it obtains from the applicable Credit
Party or any such authorized signatory in doing so.  



     Section 12.18   No Fiduciary Duty.  Each Agent, Lender and their respective Affiliates
(collectively, solely for purposes of this paragraph, the “Banks”), may have economic
interests that conflict with those of the Borrower and the other Credit Parties, their stockholders
and/or their Affiliates (collectively, solely for purposes of this paragraph, the
“Obligors”).  The Borrower agrees that nothing in the Agreement or the Loan Documents or
otherwise will be deemed to create an advisory, fiduciary or agency relationship or fiduciary or
other implied duty between any Bank, on the one hand, and any Obligor, on the other.  The Borrower
acknowledges and agrees that (a) the transactions contemplated by the Loan Documents (including the
exercise of rights and remedies hereunder and thereunder) are arm’s-length commercial transactions
between the Banks, on the one hand, and the Obligors, on the other, and (ii) in connection
therewith and with the process leading thereto, (x) no Bank has assumed an advisory or fiduciary
responsibility in favor of any Obligor with respect to the transactions contemplated hereby (or the
exercise of rights or remedies with respect thereto) or the process leading thereto (irrespective
of whether any Bank has advised, is currently advising or will advise any Obligor on other matters)
or any other obligation to any Obligor except the obligations expressly set forth in the Loan
Documents and (y) each Bank is acting solely as principal and not as the agent or fiduciary of any
Obligor, its management, stockholders, creditors or any other Person.  The Borrower acknowledges
and agrees that it has consulted its own legal and financial advisors to the extent it deemed
appropriate and that it is responsible for making its own independent judgment with respect to such
transactions and the process leading thereto.  The Borrower agrees that it will not claim that any
Bank has rendered advisory services of any nature or respect, or owes a fiduciary or similar duty
to any Obligor, in connection with such transaction or the process leading thereto.  


[SIGNATURES BEGIN NEXT PAGE]





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     The parties hereto have caused this Agreement to be duly executed as of the day and year
first above written.  


	 	 	 	 	 
	 	QUICKSILVER RESOURCES CANADA INC.,
 an Alberta,
Canada corporation
 
	 
	 	By:   	/s/ Vanessa Gomez LaGatta
 	 
	 	 	Vanessa Gomez LaGatta, 	 
	 	 	Vice President - Treasurer 	 
	 





[Signature
Page to Credit Agreement – Quicksilver Resources Canada Inc.]



 









 






	 	 	 	 	 
	 	JPMORGAN CHASE BANK, N.A., 
TORONTO
BRANCH, as a Lender, Issuing 
Bank, and as
Administrative Agent
 
	 
	 	By:   	/s/ Michael N.  Tam
 	 
	 	 	Michael N.  Tam, 	 
	 	 	Authorized Officer 	 
	 



[Signature
Page to Credit Agreement – Quicksilver Resources Canada Inc.]



 









 





	 	 	 	 	 
	 	THE BANK OF NOVA SCOTIA,
as a
 Lender
and as Syndication Agent
 	 
	 
	 	By:  	/s/ John Frazell
 	 
	 	 	John Frazell, 	 
	 	 	Director 	 
	 





[Signature
Page to Credit Agreement – Quicksilver Resources Canada Inc.]




 









 







	 	 	 	 	 
	 	THE TORONTO-DOMINION BANK,
 as a
Lender and as Co-Documentation Agent
 
	 
	 	By:   	/s/ Debbi L.  Brito
 	 
	 	 	Debbi L.  Brito, 	 
	 	 	Authorized Signatory 	 
	 




[Signature
Page to Credit Agreement – Quicksilver Resources Canada Inc.]



 









 









	 	 	 	 	 
	 	CANADIAN IMPERIAL BANK OF COMMERCE, 
as a Lender and
as Co-Documentation Agent
 
	 
	 	By:  	/s/ Randy Geislinger
 	 
	 	 	Randy Geislinger, 	 
	 	 	Executive Director 	 



	 	 	 	 	 
	 
	 	By:  	                         /s/ Chris Perks
 	 
	 	 	Chris Perks, 	 
	 	 	Managing Director 	 



[Signature
Page to Credit Agreement – Quicksilver Resources Canada Inc.]



 









 







	 	 	 	 	 



	 	 	 	 	 
	 	BANK OF AMERICA, N.A.  (by its Canada Branch), 
as a
Lender
 
	 
	 	By:  	/s/ Clara McGibbon
 	 
	 	 	Clara McGibbon, 	 
	 	 	Assistant Vice President 	 
	 



[Signature
Page to Credit Agreement – Quicksilver Resources Canada Inc.]




 









 






	 	 	 	 	 
	 	BRANCH BANKING & TRUST COMPANY, as a 
Lender
 
	 
	 	By:  	/s/ Ryan K.  Michael
 	 
	 	 	Ryan K.  Michael, 	 
	 	 	Senior Vice President 	 
	 




[Signature
Page to Credit Agreement – Quicksilver Resources Canada Inc.]



 









 







	 	 	 	 	 
	 	BNP PARIBAS (CANADA), as a

Lender
 
	 
	 	By:  	/s/ David Foltz
 	 
	 	 	David Foltz, 	 
	 	 	Managing Director 	 



	 	 	 	 	 
	 
	 	By:  	                           /s/ Cory Wallin
 	 
	 	 	Cory Wallin, 	 
	 	 	Director 	 



[Signature
Page to Credit Agreement – Quicksilver Resources Canada Inc.]



 









 








	 	 	 	 	 



	 	 	 	 	 
	 	CITIBANK, N.A., CANADIAN BRANCH, as a

Lender
 
	 
	 	By:  	/s/ Niyousha Zarinpour
 	 
	 	 	Niyousha Zarinpour, 	 
	 	 	Authorized Signatory 	 
	 




[Signature
Page to Credit Agreement – Quicksilver Resources Canada Inc.]



 









 






	 	 	 	 	 
	 	COMERICA BANK, CANADA BRANCH, as a

Lender
 
	 
	 	By:  	/s/ Omer Ahmed
 	 
	 	 	Omer Ahmed, 	 
	 	 	Portfolio Manager 	 
	 




[Signature
Page to Credit Agreement – Quicksilver Resources Canada Inc.]



 









 







	 	 	 	 	 
	 	CREDIT AGRICOLE CORPORATE AND 

INVESTMENT BANK, as a

Lender
 
	 
	 	By:  	/s/ Tom Byargeon
 	 
	 	 	Tom Byargeon, 	 
	 	 	Managing Director 	 



	 	 	 	 	 
	 
	 	By:  	                           /s/ Sharada Manne
 	 
	 	 	Sharada Manne, 	 
	 	 	Director 	 



[Signature Page to Credit Agreement – Quicksilver Resources Canada Inc.]



 









 







	 	 	 	 	 



	 	 	 	 	 
	 	CREDIT SUISSE AG, TORONTO BRANCH, as a

Lender

 
	 
	 	By:  	/s/ Alain Daoust
 	 
	 	 	Alain Daoust, 	 
	 	 	Director 	 



	 	 	 	 	 
	 
	 	By:  	                           /s/ Jane Brean
 	 
	 	 	Jane Brean, 	 
	 	 	Director 	 






[Signature Page to Credit Agreement – Quicksilver Resources Canada Inc.]



 









 





	 	 	 	 	 
	 	DEUTSCHE BANK AG CANADA BRANCH, as a

Lender
 
	 
	 	By:  	/s/ Rod O'Hara
 	 
	 	 	Rod O'Hara 	 
	 	 	Director 	 



	 	 	 	 	 
	 
	 	By:  	                       /s/ Marcellus Leung
 	 
	 	 	Marcellus Leung, 	 
	 	 	Assistant Vice President 	 





[Signature Page to Credit Agreement – Quicksilver Resources Canada Inc.]




 









 







	 	 	 	 	 
	 	THE ROYAL BANK OF SCOTLAND N.V., 

(CANADA) BRANCH, as a Lender
 
	 
	 	By:  	/a/ Brad Crilly
 	 
	 	 	Brad Crilly, 	 
	 	 	Managing Director 	 
	 






[Signature Page to Credit Agreement – Quicksilver Resources Canada Inc.]




 









 






	 	 	 	 	 
	 	UBS AG, CANADA BRANCH, as a Lender
 
	 
	 	By:  	/s/ Mary E.  Evans
 	 
	 	 	Mary E.  Evans, 	 
	 	 	Associate Director 	 



	 	 	 	 	 
	 
	 	By:  	                          /s/ Irja R.  Otsa
 	 
	 	 	Irja R.  Otsa, 	 
	 	 	Associate Director 	 






[Signature Page to Credit Agreement – Quicksilver Resources Canada Inc.]




 









 







	 	 	 	 	 



	 	 	 	 	 
	 	WELLS FARGO FINANCIAL CORPORATION 
CANADA, as a Lender
 
	 
	 	By:  	/s/ Catherine Stacy
 	 
	 	 	Catherine Stacy, 	 
	 	 	Vice President 	 
	 





[Signature Page to Credit Agreement – Quicksilver Resources Canada Inc.]