Exhibit 10.1


 


EXECUTION COPY


 




 





RESTATED DIP CREDIT AGREEMENT


 


by and among


 


STORM CAT ENERGY (USA) CORPORATION,


 


as a debtor and debtor-in-
possession,


as Borrower,


 


EACH
SUBSIDIARY OF STORM CAT ENERGY (USA) CORPORATION


LISTED AS A
GUARANTOR SIGNATORY HERETO,


 


as a debtor and debtor-in-possession,

as Guarantors,


 


STORM CAT ENERGY CORPORATION,


 


as non-debtor Guarantor,


 


THE LENDERS THAT ARE SIGNATORIES
HERETO,


 


as the Lenders,


 


and


 


REGIMENT CAPITAL SPECIAL SITUATIONS
FUND III, L.P.,


 


as Agent


 


 


Dated as of January 30, 2009




 





 

















 


TABLE OF CONTENTS


 


	
   

  	
   

  	
  Page

  
	
   

  	
   

  	
   

  
	
  1.

  	
  DEFINITIONS AND
  CONSTRUCTION

  	
  2

  
	
   

  	
  1.1

  	
  Definitions,
  Restatement of Interim DIP Credit Agreement

  	
  2

  
	
   

  	
  1.2

  	
  Accounting
  Terms

  	
  2

  
	
   

  	
  1.3

  	
  Code

  	
  2

  
	
   

  	
  1.4

  	
  Construction

  	
  2

  
	
   

  	
  1.5

  	
  Schedules
  and Exhibits

  	
  3

  
	
   

  	
   

  	
   

  	
   

  
	
  2.

  	
  LOAN AND TERMS OF PAYMENT

  	
  3

  
	
   

  	
  2.1

  	
  Revolver
  Advances

  	
  3

  
	
   

  	
  2.2

  	
  [Intentionally
  Deleted]

  	
  4

  
	
   

  	
  2.3

  	
  Borrowing
  Procedures and Settlements

  	
  4

  
	
   

  	
  2.4

  	
  Payments

  	
  7

  
	
   

  	
  2.5

  	
  Overadvances

  	
  11

  
	
   

  	
  2.6

  	
  Interest
  Rates: Rates, Payments, and Calculations

  	
  11

  
	
   

  	
  2.7

  	
  Cash
  Management

  	
  12

  
	
   

  	
  2.8

  	
  Crediting
  Payments

  	
  13

  
	
   

  	
  2.9

  	
  Designated
  Account

  	
  13

  
	
   

  	
  2.10

  	
  Maintenance
  of Loan Account; Statements of Obligations

  	
  13

  
	
   

  	
  2.11

  	
  Fees

  	
  14

  
	
   

  	
  2.12

  	
  Letters
  of Credit

  	
  14

  
	
   

  	
  2.13

  	
  [Intentionally
  Deleted]

  	
  16

  
	
   

  	
  2.14

  	
  Capital
  Requirements

  	
  16

  
	
   

  	
  2.15

  	
  Securitization

  	
  17

  
	
   

  	
  2.16

  	
  Registered
  Notes

  	
  17

  
	
   

  	
   

  	
   

  	
   

  
	
  3.

  	
  SECURITY AND
  ADMINISTRATIVE PRIORITY

  	
  18

  
	
   

  	
  3.1

  	
  Collateral;
  Grant of Lien and Security Interest

  	
  18

  
	
   

  	
  3.2

  	
  Administrative
  Priority

  	
  18

  
	
   

  	
  3.3

  	
  Grants,
  Rights and Remedies

  	
  18

  
	
   

  	
  3.4

  	
  No
  Filings Required

  	
  18

  
	
   

  	
  3.5

  	
  Survival

  	
  19

  
	
   

  	
  3.6

  	
  Further
  Assurances

  	
  19

  
	
   

  	
   

  	
   

  	
   

  
	
  4.

  	
  CONDITIONS; TERM OF
  AGREEMENT

  	
  20

  
	
   

  	
  4.1

  	
  Conditions
  Precedent to Final Facility Effectiveness

  	
  20

  
	
   

  	
  4.2

  	
  Conditions
  Precedent to all Extensions of Credit

  	
  20

  
	
   

  	
  4.3

  	
  Term

  	
  20

  
	
   

  	
  4.4

  	
  Effect
  of Termination

  	
  20

  
	
   

  	
  4.5

  	
  Early
  Termination by Borrower

  	
  21

  
	
   

  	
   

  	
   

  	
   

  
	
  5.

  	
  REPRESENTATIONS AND
  WARRANTIES

  	
  21

  
	
   

  	
  5.1

  	
  No
  Encumbrances

  	
  21

  
	
   

  	
  5.2

  	
  Margin
  Stock

  	
  22

  
	
   

  	
  5.3

  	
  Brokers

  	
  22

  
	
   

  	
  5.4

  	
  Jurisdiction
  of Organization; Location of Chief Executive Office; Organizational
  Identification Number; Commercial Tort Claims

  	
  22

  
	
   

  	
  5.5

  	
  Due
  Organization and Qualification; Compliance with Laws; Subsidiaries

  	
  22

  
	
   

  	
  5.6

  	
  Due
  Authorization; No Conflict

  	
  24

  
	
   

  	
  5.7

  	
  Litigation

  	
  25

  



 


i

















 


	
   

  	
  5.8

  	
  No
  Material Adverse Change

  	
  26

  
	
   

  	
  5.9

  	
  Fraudulent
  Transfer

  	
  26

  
	
   

  	
  5.10

  	
  Employee
  Benefits

  	
  26

  
	
   

  	
  5.11

  	
  Environmental
  Condition

  	
  26

  
	
   

  	
  5.12

  	
  Intellectual
  Property

  	
  27

  
	
   

  	
  5.13

  	
  Leases

  	
  27

  
	
   

  	
  5.14

  	
  Deposit
  Accounts and Securities Accounts

  	
  28

  
	
   

  	
  5.15

  	
  Complete
  Disclosure

  	
  28

  
	
   

  	
  5.16

  	
  Indebtedness

  	
  28

  
	
   

  	
  5.17

  	
  Material
  Contracts

  	
  28

  
	
   

  	
  5.18

  	
  Government
  Regulation

  	
  29

  
	
   

  	
  5.19

  	
  Foreign
  Assets Control Regulations, Etc.

  	
  29

  
	
   

  	
  5.20

  	
  Insurance
  and Bonds

  	
  29

  
	
   

  	
  5.21

  	
  Government
  Contracts

  	
  30

  
	
   

  	
  5.22

  	
  Taxes

  	
  30

  
	
   

  	
  5.23

  	
  Gas,
  Imbalances, Prepayments

  	
  30

  
	
   

  	
  5.24

  	
  Swap
  Agreements

  	
  30

  
	
   

  	
  5.25

  	
  Location
  of Real Property and Leased Premises

  	
  31

  
	
   

  	
  5.26

  	
  Nature
  of Business

  	
  31

  
	
   

  	
  5.27

  	
  Seismic
  Licenses

  	
  31

  
	
   

  	
  5.28

  	
  Marketing
  of Production

  	
  32

  
	
   

  	
  5.29

  	
  Senior
  Indebtedness

  	
  32

  
	
   

  	
  5.30

  	
  Administrative
  Priority; Lien Priority

  	
  32

  
	
   

  	
  5.31

  	
  Appointment
  of Trustee or Examiner; Liquidation

  	
  32

  
	
   

  	
  5.32

  	
  Performance
  of Agreements

  	
  33

  
	
   

  	
   

  	
   

  	
   

  
	
  6.

  	
  AFFIRMATIVE COVENANTS

  	
  33

  
	
   

  	
  6.1

  	
  Accounting
  System

  	
  33

  
	
   

  	
  6.2

  	
  Collateral
  Reporting

  	
  33

  
	
   

  	
  6.3

  	
  Financial
  Statements, Reports, Certificates

  	
  33

  
	
   

  	
  6.4

  	
  Parent
  and Debtor Guarantor Reports

  	
  33

  
	
   

  	
  6.5

  	
  Inspection

  	
  33

  
	
   

  	
  6.6

  	
  Maintenance
  of Properties

  	
  34

  
	
   

  	
  6.7

  	
  Taxes

  	
  34

  
	
   

  	
  6.8

  	
  Insurance

  	
  35

  
	
   

  	
  6.9

  	
  Compliance
  with Laws

  	
  36

  
	
   

  	
  6.10

  	
  [Intentionally
  Deleted]

  	
  36

  
	
   

  	
  6.11

  	
  Existence

  	
  36

  
	
   

  	
  6.12

  	
  Environmental

  	
  36

  
	
   

  	
  6.13

  	
  Disclosure
  Updates

  	
  37

  
	
   

  	
  6.14

  	
  Control
  Agreements

  	
  37

  
	
   

  	
  6.15

  	
  Formation
  of Subsidiaries

  	
  38

  
	
   

  	
  6.16

  	
  Further
  Assurances

  	
  38

  
	
   

  	
  6.17

  	
  Material
  Contracts

  	
  39

  
	
   

  	
  6.18

  	
  Intellectual
  Property

  	
  39

  
	
   

  	
  6.19

  	
  Exercise
  of Rights

  	
  39

  
	
   

  	
  6.20

  	
  Reserve
  Reports

  	
  39

  
	
   

  	
  6.21

  	
  Title
  Information

  	
  40

  
	
   

  	
  6.22

  	
  Swap
  Agreements

  	
  41

  
	
   

  	
  6.23

  	
  Post
  Closing Obligations

  	
  41

  
	
   

  	
   

  	
   

  	
   

  
	
  7.

  	
  NEGATIVE COVENANTS

  	
  41

  
	
   

  	
  7.1

  	
  Indebtedness

  	
  41

  



 


ii

















 


	
   

  	
  7.2

  	
  Liens

  	
  42

  
	
   

  	
  7.3

  	
  Restrictions
  on Fundamental Changes

  	
  42

  
	
   

  	
  7.4

  	
  Disposal
  of Assets

  	
  42

  
	
   

  	
  7.5

  	
  Change
  of Jurisdiction, Corporate Name or Location

  	
  42

  
	
   

  	
  7.6

  	
  Nature
  of Business

  	
  43

  
	
   

  	
  7.7

  	
  Prepayments
  and Amendments

  	
  43

  
	
   

  	
  7.8

  	
  Change
  of Control

  	
  43

  
	
   

  	
  7.9

  	
  [Intentionally
  Deleted]

  	
  43

  
	
   

  	
  7.10

  	
  Distributions

  	
  43

  
	
   

  	
  7.11

  	
  Accounting
  Methods; Fiscal Year

  	
  43

  
	
   

  	
  7.12

  	
  Investments

  	
  43

  
	
   

  	
  7.13

  	
  Transactions
  with Affiliates

  	
  44

  
	
   

  	
  7.14

  	
  Use
  of Proceeds

  	
  44

  
	
   

  	
  7.15

  	
  [Intentionally
  Deleted]

  	
  44

  
	
   

  	
  7.16

  	
  Forward
  Sales

  	
  44

  
	
   

  	
  7.17

  	
  Oil
  and Gas Imbalances

  	
  44

  
	
   

  	
  7.18

  	
  Marketing
  Activities

  	
  44

  
	
   

  	
  7.19

  	
  Sale-Leasebacks

  	
  45

  
	
   

  	
  7.20

  	
  Cancellation
  of Indebtedness

  	
  45

  
	
   

  	
  7.21

  	
  No
  Amendment of Governing Documents; Intercompany Note

  	
  45

  
	
   

  	
  7.22

  	
  No
  Impairment of Intercompany Transfers; Negative Pledge

  	
  45

  
	
   

  	
  7.23

  	
  Bankruptcy
  Court Orders; Administrative Priority; Lien Priority; Payment of Claims

  	
  45

  
	
   

  	
  7.24

  	
  Swap
  Agreements

  	
  46

  
	
   

  	
  7.25

  	
  Limitation
  on Prepayments of Pre-Petition Obligations

  	
  46

  
	
   

  	
  7.26

  	
  Lien
  Prosecution

  	
  46

  
	
   

  	
   

  	
   

  	
   

  
	
  8.

  	
  EVENTS OF DEFAULT

  	
  47

  
	
   

  	
   

  	
   

  	
   

  
	
  9.

  	
  THE LENDER GROUP’S RIGHTS
  AND REMEDIES

  	
  50

  
	
   

  	
  9.1

  	
  Rights
  and Remedies

  	
  50

  
	
   

  	
  9.2

  	
  Remedies
  Cumulative

  	
  50

  
	
   

  	
   

  	
   

  
	
  10.

  	
  TAXES AND EXPENSES

  	
  51

  
	
   

  	
   

  	
   

  	
   

  
	
  11.

  	
  WAIVERS; INDEMNIFICATION

  	
  51

  
	
   

  	
  11.1

  	
  Demand;
  Protest; etc.

  	
  51

  
	
   

  	
  11.2

  	
  The
  Lender Group’s Liability for Collateral

  	
  51

  
	
   

  	
  11.3

  	
  Indemnification

  	
  51

  
	
   

  	
   

  	
   

  	
   

  
	
  12.

  	
  NOTICES

  	
  52

  
	
   

  	
   

  	
   

  	
   

  
	
  13.

  	
  CHOICE OF LAW AND VENUE;
  JURY TRIAL WAIVER

  	
  53

  
	
   

  	
   

  	
   

  	
   

  
	
  14.

  	
  ASSIGNMENTS AND
  PARTICIPATIONS; SUCCESSORS

  	
  54

  
	
   

  	
  14.1

  	
  Assignments
  and Participations

  	
  54

  
	
   

  	
  14.2

  	
  Successors

  	
  57

  
	
   

  	
   

  	
   

  
	
  15.

  	
  AMENDMENTS; WAIVERS

  	
  57

  
	
   

  	
  15.1

  	
  Amendments
  and Waivers

  	
  57

  
	
   

  	
  15.2

  	
  Replacement
  of Lenders

  	
  58

  
	
   

  	
  15.3

  	
  No
  Waivers; Cumulative Remedies

  	
  58

  



 


iii

















 


	
  16.

  	
  AGENT; THE LENDER GROUP

  	
  59

  
	
   

  	
  16.1

  	
  Appointment
  and Authorization of Agent

  	
  59

  
	
   

  	
  16.2

  	
  Delegation
  of Duties

  	
  59

  
	
   

  	
  16.3

  	
  Liability
  of Agent

  	
  59

  
	
   

  	
  16.4

  	
  Reliance
  by Agent

  	
  60

  
	
   

  	
  16.5

  	
  Notice
  of Default or Event of Default

  	
  60

  
	
   

  	
  16.6

  	
  Credit
  Decision

  	
  60

  
	
   

  	
  16.7

  	
  Costs
  and Expenses; Indemnification

  	
  61

  
	
   

  	
  16.8

  	
  Agent
  in Individual Capacity

  	
  61

  
	
   

  	
  16.9

  	
  Successor
  Agent

  	
  62

  
	
   

  	
  16.10

  	
  Lender
  in Individual Capacity

  	
  62

  
	
   

  	
  16.11

  	
  Collateral
  Matters

  	
  62

  
	
   

  	
  16.12

  	
  Restrictions
  on Actions by Lenders; Sharing of Payments

  	
  63

  
	
   

  	
  16.13

  	
  Agency
  for Perfection

  	
  64

  
	
   

  	
  16.14

  	
  Payments
  by Agent to the Lenders

  	
  64

  
	
   

  	
  16.15

  	
  Concerning
  the Collateral and Related Loan Documents

  	
  64

  
	
   

  	
  16.16

  	
  Field
  Audits and Examination Reports; Confidentiality; Disclaimers by Lenders;
  Other Reports and Information

  	
  64

  
	
   

  	
  16.17

  	
  Several
  Obligations; No Liability

  	
  65

  
	
   

  	
   

  	
   

  	
   

  
	
  17.

  	
  WITHHOLDING TAXES

  	
  65

  
	
   

  	
   

  	
   

  	
   

  
	
  18.

  	
  GENERAL PROVISIONS

  	
  67

  
	
   

  	
  18.1

  	
  Effectiveness

  	
  67

  
	
   

  	
  18.2

  	
  Section Headings

  	
  67

  
	
   

  	
  18.3

  	
  Interpretation

  	
  67

  
	
   

  	
  18.4

  	
  Severability
  of Provisions

  	
  67

  
	
   

  	
  18.5

  	
  Bank
  Product Providers

  	
  67

  
	
   

  	
  18.6

  	
  Lender-Creditor
  Relationship

  	
  67

  
	
   

  	
  18.7

  	
  Counterparts;
  Electronic Execution

  	
  68

  
	
   

  	
  18.8

  	
  Revival
  and Reinstatement of Obligations

  	
  68

  
	
   

  	
  18.9

  	
  Confidentiality

  	
  68

  
	
   

  	
  18.10

  	
  Lender
  Group Expenses

  	
  69

  
	
   

  	
  18.11

  	
  USA
  PATRIOT Act

  	
  69

  
	
   

  	
  18.12

  	
  Integration

  	
  69

  
	
   

  	
  18.13

  	
  Parties
  Including Trustees; Bankruptcy Court Proceedings

  	
  69

  
	
   

  	
  18.14

  	
  [Intentionally
  Deleted]

  	
  69

  
	
   

  	
   

  	
   

  	
   

  
	
  19.

  	
  GUARANTY

  	
  69

  
	
   

  	
  19.1

  	
  Debtor
  Guaranty

  	
  69

  
	
   

  	
  19.2

  	
  Debtor
  Guaranty Absolute

  	
  70

  
	
   

  	
  19.3

  	
  Waiver

  	
  70

  
	
   

  	
  19.4

  	
  Continuing
  Debtor Guaranty; Assignments

  	
  70

  
	
   

  	
  19.5

  	
  Subrogation

  	
  71

  
	
   

  	
  19.6

  	
  Parent
  Guaranty

  	
  71

  



 


iv

















 


RESTATED
DIP CREDIT AGREEMENT


 


THIS RESTATED DIP CREDIT AGREEMENT (this “Agreement”), is entered into
as of January 30, 2009, by and among the lenders identified on the
signature pages hereof (such lenders, together with their respective
successors and permitted assigns, are referred to hereinafter each individually
as a “Lender” and collectively as the “Lenders”), REGIMENT
CAPITAL SPECIAL SITUATIONS FUND III, L.P.,
a Delaware limited partnership, as administrative agent for the Lenders (in
such capacity, together with its successors and assigns in such capacity, “Agent”),
STORM CAT ENERGY (USA) CORPORATION, a Colorado corporation, as a debtor and
debtor-in-possession (“Borrower”), STORM CAT ENERGY CORPORATION, a
company incorporated under the laws of British Columbia, Canada (“Parent”),
as a non-debtor guarantor, and each subsidiary of Borrower listed as a
guarantor on the signature pages hereof, each as a debtor and
debtor-in-possession.


 


RECITALS


 


A.            Borrower
and its subsidiaries have commenced cases (the “Chapter 11 Cases”) under
Chapter 11 of Title 11 of the United States Bankruptcy Code in the United
States Bankruptcy Court for the District of Colorado, Denver Division (the “Bankruptcy
Court”), and Borrower and each of its subsidiaries have retained possession
of their assets and are authorized under the Bankruptcy Code to continue the
operation of their businesses as debtors-in-possession.


 


B.            Pursuant
to a Credit Agreement dated as of November 26, 2008 (the “Interim DIP
Credit Agreement”) by and among the Agent, Wells Fargo Foothill, LLC (“WFF”)
in its capacity as the interim revolving lender (the “Interim Lender”)
and as agent for the other lenders, Regiment Capital Special Situations Fund
III, L.P. (“Regiment”), the Borrower, the Parent and each subsidiary of
Borrower listed as a guarantor on the signature pages thereto, each as a
debtor and debtor in possession, the Interim Lender has made post petition
advances (the “Interim Advances”) to the Borrower in an aggregate
principal amount of $2,700,000 (the “Interim DIP Loan”).


 


C.            Pursuant
to an Assignment and Assumption dated as of January 30, 2009, between the
Interim Lender and Regiment, the Interim Lender assigned its rights and
obligations under the Interim DIP Credit Agreement to Regiment and Regiment
agreed to assume such obligations from the Interim Lender.  Additionally, WFF resigned as agent under the
Interim DIP Credit Agreement and has been replaced by Regiment.


 


D.            Borrower
has asked the Lenders to make additional post-petition loans and advances
consisting of a revolving credit facility in an aggregate principal amount
(when aggregated with the Interim DIP Loan) not to exceed $12,500,000, which
will include a subfacility for the issuance of letters of credit.  The proceeds of the revolving credit facility
shall be used for general working capital purposes of Borrower and to pay fees
and expenses related to this Agreement. 
The letters of credit will be used for general working capital purposes.  The Lenders are severally, and not jointly,
willing to extend such credit to Borrower subject to the terms and conditions
hereinafter set forth.


 


E.             The
Interim DIP Credit Agreement is being restated in its entirety as set forth
herein.


 


The
parties agree as follows:


 

















 


1.                                       DEFINITIONS AND CONSTRUCTION


 


1.1           Definitions, Restatement
of Interim DIP Credit Agreement.


 


(a)           Capitalized
terms used in this Agreement shall have the meanings specified therefor on Schedule
1.1 attached hereto.


 


(b)           This
Agreement restates and replaces the Interim DIP Credit Agreement in its
entirety.  Any reference in any Loan
Document to the “Credit Agreement” shall be a reference to this Agreement. Any
reference in any Loan Document to the “Revolver Commitment” shall be a
reference to the “Commitment” as defined herein, any reference in any Loan
Document to the “Term A Loan Commitment” shall be a reference to the “Pre-Petition
Revolver Commitment” as defined herein, any reference in any Loan Document to
the “Term B Loan Commitment” shall be a reference to the “Pre-Petition Term
Commitment as defined herein, any reference in any Loan Document to the “Term A
Loans” shall be a reference to the “Pre-Petition Revolver Loans” as defined
herein and any reference in any Loan Document to the “Term B Loans” shall be a
reference to the “Pre-Petition Term Loans as defined herein.


 


1.2           Accounting Terms.  All accounting terms not specifically defined
herein shall be construed in accordance with GAAP.  When used herein, the term “financial
statements” shall include the notes and schedules thereto.  Whenever the term “Borrower” is used in
respect of a financial covenant or a related definition, it shall be understood
to mean Borrower and its Subsidiaries on a consolidated basis, unless the
context clearly requires otherwise.


 


1.3           Code.  Any terms used in this Agreement that are
defined in the Code shall be construed and defined as set forth in the Code
unless otherwise defined herein; provided, however, that to the
extent that the Code is used to define any term herein and such term is defined
differently in different Articles of the Code, the definition of such term
contained in Article 9 of the Code shall govern.


 


1.4           Construction.  Unless the context of this Agreement or any
other Loan Document clearly requires otherwise, references to the plural include
the singular, references to the singular include the plural, the terms “includes”
and  “including” are not limiting, and
the term “or” has, except where otherwise indicated, the inclusive meaning
represented by the phrase “and/or.”  The
words “hereof,” “herein,” “hereby,” “hereunder,” and similar terms in this
Agreement or any other Loan Document refer to this Agreement or such other Loan
Document, as the case may be, as a whole and not to any particular provision of
this Agreement or such other Loan Document, as the case may be.  Section, subsection, clause, schedule, and
exhibit references herein are to this Agreement unless otherwise
specified.  Any reference in this Agreement
or in any other Loan Document to any agreement, instrument, or document shall
include all alterations, amendments, changes, extensions, modifications,
renewals, replacements, substitutions, joinders, and supplements, thereto and
thereof, as applicable (subject to any restrictions on such alterations,
amendments, changes, extensions, modifications, renewals, replacements,
substitutions, joinders, and supplements set forth herein).  Any reference herein or in any other Loan
Document to the satisfaction or repayment in full of the Obligations shall mean
the repayment in full in cash (or, in the case of Bank Products, the cash
collateralization or support by a standby letter of credit in accordance with
the terms hereof) of all Obligations other than unasserted contingent
indemnification Obligations and other than any Bank Product Obligations that,
at such time, are allowed by the applicable Bank Product Provider to remain
outstanding and that are not required by the provisions of this Agreement to be
repaid or cash collateralized.  Any
reference herein to any Person shall be construed to include such Person’s
successors and assigns.  Any requirement
of a writing contained herein or in any other Loan Document shall be satisfied
by the transmission of a Record and any Record so transmitted shall 


 


2

















 


constitute
a representation and warranty as to the accuracy and completeness of the
information contained therein.


 


1.5           Schedules and Exhibits.  Except as specifically set forth herein, all
of the schedules and exhibits attached to the Interim DIP Credit Agreement
shall be deemed incorporated herein by reference, and any reference in such
schedules or exhibits to the Interim DIP Credit Agreement shall be deemed to be
a reference to this Agreement.


 


2.                                       LOAN AND TERMS OF PAYMENT.


 


2.1           Revolver Advances.


 


(a)           Subject
to the terms and conditions of this Agreement and the Bankruptcy Court Orders,
and on and after the Final Facility Effective Date and until the Final Maturity
Date, each Lender agrees (severally, not jointly or jointly and severally) to
make advances (collectively with the Interim Advances, the “Advances”)
to Borrower in an amount at any one time outstanding not to exceed such Lender’s
Pro Rata Share of an amount equal to the
lesser of (i) the Maximum Revolver Amount less the Letter of Credit Usage at such
time less the sum of (A) the
Bank Product Reserve, (B) the Priority Professional Expenses Reserve and (C) the
aggregate amount of reserves, if any, established by Agent under Section 2.1(c),
and (ii) for any week, an amount equal to 110% of the cumulative “Revolving
Credit Debt + Advances / (Paydown)” line item set forth in the Budget through
such week.


 


(b)           [Intentionally
Deleted]


 


(c)           Anything
to the contrary in this Section 2.1 notwithstanding, Agent shall
have the right to establish reserves against amounts Borrower is entitled to
borrow under Section 2.1(a) in such amounts, and with respect
to such matters, as Agent in its Permitted Discretion shall determine to be
necessary or appropriate, including, without limitation, reserves with respect
to (i) the Professional Expense Cap, (ii) sums that Borrower or its
Subsidiaries are required to pay under any Section of this Agreement or
any other Loan Document (such as taxes, assessments, insurance premiums, or, in
the case of leased assets, rents or other amounts payable under such leases)
and has failed to pay, (iii) amounts owing by Borrower or its Subsidiaries
to any Person to the extent secured by a Lien on, or trust over, any of the
Collateral (including proceeds thereof or collections from the sale of
Hydrocarbons which may from time to time come into the possession of Lenders or
their agent(s)) (other than a Permitted Priority Lien), which Lien or trust, in
the Permitted Discretion of Agent likely would have a priority superior to Agent’s
Liens (such as Liens or trusts in favor of landlords, warehousemen, carriers,
mechanics, materialmen, laborers, or suppliers, or Liens or trusts for ad valorem, excise, sales, or other taxes
where given priority under applicable law) in and to such item of the
Collateral, (iv) the Bank Product Reserve and (v) the Priority
Professional Expenses Reserve.


 


(d)           [Intentionally
Deleted]


 


(e)           [Intentionally
Deleted]


 


(f)            [Intentionally
Deleted]


 


(g)           Amounts
borrowed pursuant to this Section 2.1 may be repaid and, subject to
the terms and conditions of this Agreement, reborrowed at any time during the
term of this Agreement.  The outstanding
principal amount of the Advances, together with interest accrued and unpaid
thereon, shall be due and payable on the Final Maturity Date or, if earlier, on
the date on which they are declared due and payable pursuant to the terms of
this Agreement.


 


3
















 


2.2                                 [Intentionally Deleted]


 


2.3                                 Borrowing Procedures and
Settlements.


 


(a)                                  Procedure for Borrowing. 
Each Borrowing shall be made by an irrevocable written request executed
by an Authorized Person and the Consultant delivered to Agent.  Such notice must be received by Agent no
later than 10:00 a.m. (New York time) on the Business Day prior to the
date that is the requested Funding Date specifying (i) the amount of such
Borrowing, and (ii) the requested Funding Date, which shall be a Business
Day.  At Agent’s election, in lieu of
delivering the above-described written request, any Authorized Person may give
Agent telephonic notice of such request by the required time.  In such circumstances, Borrower agrees that
any such telephonic notice will be confirmed in writing within 24 hours of the
giving of such telephonic notice, but the failure to provide such written
confirmation shall not affect the validity of the request.


 


(b)                                 [Intentionally Deleted]


 


(c)                                  Making of Loans.


 


(i)                                     Promptly after receipt of a request for a
Borrowing pursuant to Section 2.3(a), Agent shall notify the
Lenders, not later than 1:00 p.m. (New York time) on the Business Day
immediately preceding the Funding Date applicable thereto, by telecopy,
telephone, or other similar form of transmission, of the requested
Borrowing.  Each Lender shall make the
amount of such Lender’s Pro Rata Share of the requested Borrowing available to
Agent in immediately available funds, to Agent’s Account, not later than 1:00 p.m.
(New York time) on the Funding Date applicable thereto.  After Agent’s receipt of the proceeds of such
Advances, Agent shall make the proceeds thereof available to Borrower on the
applicable Funding Date by transferring immediately available funds equal to
such proceeds received by Agent to the Designated Account; provided, however,
that, subject to the provisions of Section 2.3(d)(ii), Agent shall
not request any Lender to make, and no Lender shall have the obligation to
make, any Advance if Agent shall have actual knowledge that (A) one or
more of the applicable conditions precedent set forth in Section 4
will not be satisfied on the requested Funding Date for the applicable
Borrowing unless such condition has been waived, or (B) the requested
Borrowing would exceed the Availability on such Funding Date.


 


(ii)                                  Unless Agent receives notice from a
Lender prior to 9:00 a.m. (New York time) on the date of a Borrowing, that
such Lender will not make available as and when required hereunder to Agent for
the account of Borrower the amount of that Lender’s Pro Rata Share of the
Borrowing, Agent may assume that each Lender has made or will make such amount
available to Agent in immediately available funds on the Funding Date and Agent
may (but shall not be so required), in reliance upon such assumption, make
available to Borrower on such date a corresponding amount.  If and to the extent any Lender shall not
have made its full amount available to Agent in immediately available funds and
Agent in such circumstances has made available to Borrower such amount, that
Lender shall on the Business Day following such Funding Date make such amount
available to Agent, together with interest at the Defaulting Lender Rate for
each day during such period.  A notice
submitted by Agent to any Lender with respect to amounts owing under this
subsection shall be conclusive, absent manifest error.  If such amount is so made available, such
payment to Agent shall constitute such Lender’s Advance on the date of
Borrowing for all purposes of this Agreement. 
If such amount is not made available to Agent on the Business Day
following the Funding Date, Agent will notify Borrower of such failure to fund
and, upon demand by Agent, Borrower shall pay such amount to Agent for Agent’s
account, together with interest thereon for each day elapsed since the date of
such Borrowing, at a rate per annum equal to the interest rate applicable at
the time to the Advances comprising such Borrowing.  The failure of any Lender to make any Advance
on any Funding Date shall not relieve any other Lender of any obligation
hereunder to make 


 


4

















 


an
Advance on such Funding Date, but no Lender shall be responsible for the
failure of any other Lender to make the Advance to be made by such other Lender
on any Funding Date.


 


(iii)                               Agent shall not be obligated to transfer
to a Defaulting Lender any payments made by Borrower to Agent for the
Defaulting Lender’s benefit, and, in the absence of such transfer to the
Defaulting Lender, Agent shall transfer any such payments to each other
non-Defaulting Lender member of the Lender Group ratably in accordance with
their Commitments (but only to the extent that such Defaulting Lender’s Advance
was funded by the other members of the Lender Group) or, if so directed by
Borrower and if no Default or Event of Default had occurred and is continuing
(and to the extent such Defaulting Lender’s Advance was not funded by the
Lender Group), retain same to be re-advanced to Borrower as if such Defaulting
Lender had made Advances to Borrower. 
Subject to the foregoing, Agent may hold and, in its Permitted
Discretion, re-lend to Borrower for the account of such Defaulting Lender the
amount of all such payments received and retained by Agent for the account of
such Defaulting Lender.  Solely for the
purposes of voting or consenting to matters with respect to the Loan Documents,
such Defaulting Lender shall be deemed not to be a “Lender” and such Lender’s
Commitment shall be deemed to be zero. 
This Section shall remain effective with respect to such Lender
until (x) the Obligations under this Agreement shall have been declared or
shall have become immediately due and payable, (y) the non-Defaulting
Lenders, Agent, and Borrower shall have waived such Defaulting Lender’s default
in writing, or (z) the Defaulting Lender makes its Pro Rata Share of the
applicable Advance and pays to Agent all amounts owing by Defaulting Lender in
respect thereof.  The operation of this Section shall
not be construed to increase or otherwise affect the Commitment of any Lender,
to relieve or excuse the performance by such Defaulting Lender or any other
Lender of its duties and obligations hereunder, or to relieve or excuse the
performance by Borrower of its duties and obligations hereunder to Agent or to
the Lenders other than such Defaulting Lender. 
Any such failure to fund by any Defaulting Lender shall constitute a
material breach by such Defaulting Lender of this Agreement and shall entitle
Borrower at its option, upon written notice to Agent, to arrange for a
substitute Lender to assume the Commitment of such Defaulting Lender, such
substitute Lender to be acceptable to Agent. 
In connection with the arrangement of such a substitute Lender, the
Defaulting Lender shall have no right to refuse to be replaced hereunder, and
agrees to execute and deliver a completed form of Assignment and Acceptance in
favor of the substitute Lender (and agrees that it shall be deemed to have
executed and delivered such document if it fails to do so) subject only to
being repaid its share of the outstanding Obligations (other than Bank Product
Obligations, but including an assumption of its Pro Rata Share of the Risk
Participation Liability) without any premium or penalty of any kind whatsoever;
provided, however, that any such assumption of the Commitment of
such Defaulting Lender shall not be deemed to constitute a waiver of any of the
Lender Groups’ or Borrower’s rights or remedies against any such Defaulting
Lender arising out of or in relation to such failure to fund.


 


(d)                                 Protective Advances and
Optional Overadvances.


 


(i)                                     Agent hereby is authorized by Borrower
and the Lenders, from time to time in Agent’s sole discretion, (A) after
the occurrence and during the continuance of a Default or an Event of Default,
or (B) at any time that any of the other applicable conditions precedent
set forth in Section 4 are not satisfied, to make Advances to
Borrower on behalf of the Lenders that Agent, in its Permitted Discretion deems
necessary or desirable (1) to preserve or protect the Collateral, or any
portion thereof, (2) to enhance the likelihood of repayment of the
Obligations (other than the Bank Product Obligations), or (3) to pay any
other amount due and payable by Borrower pursuant to the terms of this
Agreement, including, without duplication, Lender Group Expenses (when due and
payable in accordance with Section 18.10) and the costs, fees, and
expenses described in Section 10 (any of the Advances described in
this Section 2.3(d)(i) shall be referred to as “Protective
Advances”).


 


(ii)                                  Any contrary provision of this Agreement
notwithstanding, the Lenders hereby authorize Agent and Agent may, but is not
obligated to, knowingly and intentionally,


 


5

















 


continue
to make Advances to Borrower notwithstanding that an Overadvance exists or
thereby would be created, so long as after giving effect to such Advances, the
outstanding Revolver Usage (except for and excluding amounts charged to the
Loan Account for interest, fees, or Lender Group Expenses) does not exceed the
Maximum Revolver Amount.  In the event
Agent obtains actual knowledge that the Revolver Usage exceeds the amounts
permitted by the immediately foregoing provisions, regardless of the amount of,
or reason for, such excess, Agent shall notify the Lenders as soon as
practicable (and prior to making any (or any additional) intentional
Overadvances (except for and excluding amounts charged to the Loan Account for
interest, fees, or Lender Group Expenses) unless Agent determines that prior
notice would result in imminent harm to the Collateral or its value), and the
Lenders thereupon shall, together with Agent, jointly determine the terms of
arrangements that shall be implemented with Borrower intended to reduce, within
a reasonable time, the outstanding principal amount of the Advances to Borrower
to an amount permitted by the preceding sentence.  In such circumstances, if any Lender objects
to the proposed terms of reduction or repayment of any Overadvance, the terms
of reduction or repayment thereof shall be implemented according to the
determination of the Required Lenders. 
Each Lender shall be obligated to settle with Agent as provided in Section 2.3(e) for
the amount of such Lender’s Pro Rata Share of any unintentional Overadvances by
Agent reported to such Lender, any intentional Overadvances made as permitted
under this Section 2.3(d)(ii), and any Overadvances resulting from
the charging to the Loan Account of interest, fees, or Lender Group Expenses.


 


(iii)                               Each Protective Advance and each
Overadvance shall be deemed to be an Advance hereunder.  The Protective Advances and Overadvances
shall be repayable on demand, secured by Agent’s Liens, constitute Obligations
hereunder, and bear interest at the rate applicable from time to time to
Advances.  The provisions of this Section 2.3(d) are
for the exclusive benefit of Agent and the Lenders and are not intended to
benefit Borrower in any way.


 


(e)                                  Settlement. 
It is agreed that each Lender’s funded portion of the Advances is
intended by the Lenders to equal, at all times, such Lender’s Pro Rata Share of
the outstanding Advances.  Such agreement
notwithstanding, Agent and the other Lenders agree (which agreement shall not
be for the benefit of Borrower) that in order to facilitate the administration
of this Agreement and the other Loan Documents, settlement among the Lenders as
to the Advances and the Protective Advances shall take place on a periodic
basis in accordance with the following provisions:


 


(i)                                     Agent shall request settlement (“Settlement”)
with the Lenders on a weekly basis, or on a more frequent basis if so
determined by Agent (1) for itself, with respect to the outstanding
Protective Advances, and (2) with respect to Borrower’s or its
Subsidiaries’ Collections or payments received, as to each by notifying the
Lenders by telecopy, telephone, or other similar form of transmission, of such
requested Settlement, no later than 2:00 p.m. (New York time) on the
Business Day immediately prior to the date of such requested Settlement (the
date of such requested Settlement being the “Settlement Date”).  Such notice of a Settlement Date shall
include a summary statement of the amount of outstanding Advances and
Protective Advances for the period since the prior Settlement Date.  Subject to the terms and conditions contained
herein (including Section 2.3(c)(iii)): (y) if a Lender’s
balance of the Advances (including Protective Advances) exceeds such Lender’s
Pro Rata Share of the Advances (including Protective Advances) as of a
Settlement Date, then Agent shall, by no later than 3:00 p.m. (New York
time) on the Settlement Date, transfer in immediately available funds to a
Deposit Account of such Lender (as such Lender may designate), an amount such
that each such Lender shall, upon receipt of such amount, have as of the
Settlement Date, its Pro Rata Share of the Advances (including Protective
Advances), and (z) if a Lender’s balance of the Advances (including
Protective Advances) is less than such Lender’s Pro Rata Share of the Advances
(including Protective Advances) as of a Settlement Date, such Lender shall no
later than 12:00 p.m. (New York time) on the Settlement Date transfer in
immediately available funds to Agent’s Account, an amount such that each such
Lender shall, upon transfer of such amount, have as of the Settlement Date, its
Pro Rata Share of the Advances (including Protective Advances).  Such


 


6

















 


amounts
made available to Agent under clause (z) of the immediately preceding
sentence shall be applied against the amounts of the applicable Protective
Advances and shall constitute Advances of such Lenders.  If any such amount is not made available to
Agent by any Lender on the Settlement Date applicable thereto to the extent
required by the terms hereof, Agent shall be entitled to recover for its
account such amount on demand from such Lender together with interest thereon
at the Defaulting Lender Rate.


 


(ii)                                  In determining whether a Lender’s balance
of the Advances and Protective Advances is less than, equal to, or greater than
such Lender’s Pro Rata Share of the Advances and Protective Advances as of a
Settlement Date, Agent shall, as part of the relevant Settlement, apply to such
balance the portion of payments actually received in good funds by Agent with
respect to principal, interest, fees payable by Borrower and allocable to the
Lenders hereunder, and proceeds of Collateral. 
To the extent that a net amount is owed to any such Lender after such
application, such net amount shall be distributed by Agent to that Lender as
part of such next Settlement.


 


(iii)                               Between Settlement Dates, Agent, to the
extent Protective Advances are outstanding, may pay over to Agent any
Collections or payments received by Agent, that in accordance with the terms of
this Agreement would be applied to the reduction of the Advances, for
application to the Protective Advances. 
During the period between Settlement Dates, Agent with respect to
Protective Advances, and each Lender (subject to the effect of agreements
between Agent and individual Lenders) with respect to the Advances and
Protective Advances, shall be entitled to interest at the applicable rate or
rates payable under this Agreement on the daily amount of funds employed by
Agent or the Lenders, as applicable.


 


(f)                                    Notation. 
Agent shall record on its books the principal amount of the Advances
owing to each Lender and Protective Advances owing to Agent, and the interests
therein of each Lender, from time to time and such records shall, absent
manifest error, conclusively be presumed to be correct and accurate.


 


(g)                                 Lenders’ Failure to
Perform.  All Advances (other than Protective Advances)
shall be made by the Lenders contemporaneously and in accordance with their Pro
Rata Shares.  It is understood that (i) no
Lender shall be responsible for any failure by any other Lender to perform its
obligation to make any Advance (or other extension of credit) hereunder, nor
shall any Commitment of any Lender be increased or decreased as a result of any
failure by any other Lender to perform its obligations hereunder, and (ii) no
failure by any Lender to perform its obligations hereunder shall excuse any
other Lender from its obligations hereunder.


 


2.4                                 Payments.


 


(a)                                  Payments by Borrower.


 


(i)                                     Except as otherwise expressly provided
herein, all payments by Borrower shall be made to Agent’s Account for the
account of the Lender Group and shall be made in immediately available funds,
no later than 2:00 p.m. (New York time) on the date specified herein. Any
payment received by Agent later than 2:00 p.m. (New York time) shall be
deemed to have been received on the following Business Day and any applicable
interest or fee shall continue to accrue until such following Business Day.


 


(ii)                                  Unless Agent receives notice from Borrower
prior to the date on which any payment is due to the Lenders that Borrower will
not make such payment in full as and when required, Agent may assume that
Borrower has made (or will make) such payment in full to Agent on such date in
immediately available funds and Agent may (but shall not be so required), in


 


7

















 


reliance
upon such assumption, distribute to each Lender on such due date an amount
equal to the amount then due such Lender. 
If and to the extent Borrower does not make such payment in full to
Agent on the date when due, each Lender severally shall repay to Agent on
demand such amount distributed to such Lender, together with interest thereon
at the Defaulting Lender Rate for each day from the date such amount is
distributed to such Lender until the date repaid.


 


(b)                                 Apportionment and
Application.


 


(i)                                     Except as otherwise provided with respect
to Defaulting Lenders who would otherwise be entitled to receive such payments
as provided herein, all principal and interest payments shall be apportioned
ratably among the applicable Lenders (according to the unpaid principal balance
of the Obligations to which such payments relate held by each Lender) and all
payments of fees and expenses (other than fees or expenses that are for Agent’s
separate account) shall be apportioned ratably among the Lenders having a Pro
Rata Share of the type of Commitment or Obligation to which a particular fee or
expense relates.  All payments to be made
hereunder by Borrower shall be remitted to Agent, and all such payments, and
all proceeds of Collateral received by Agent, shall be applied as set forth in Section 2.4(b)(ii) below.


 


(ii)                                  Except as otherwise provided with respect
to Defaulting Lenders, all payments remitted to Agent and all proceeds of
Collateral received by Agent shall be applied as follows:


 


(A)                              first, to pay any Lender Group Expenses (including
cost or expense reimbursements) or indemnities then due to Agent under the Loan
Documents, until paid in full,


 


(B)                                second, to pay any fees or premiums then due to Agent
under the Loan Documents until paid in full,


 


(C)                                third, to pay interest due in respect of all
Protective Advances until paid in full,


 


(D)                               fourth, to pay the principal of all Protective
Advances until paid in full,


 


(E)                                 fifth, ratably to pay any Lender Group Expenses
(including cost or expense reimbursements) or indemnities then due to any of
the Lenders under the Loan Documents, until paid in full,


 


(F)                                 sixth, ratably to pay any fees or premiums then due
to any of the Lenders, until paid in full,


 


(G)                                seventh, ratably to pay interest due in respect of the
Advances (other than Protective Advances) until paid in full,


 


(H)                               eighth, ratably (1) to pay the principal of all
Advances (other than Protective Advances) until paid in full, (2) to
Agent, to be held by Agent, for the ratable benefit of Issuing Lender and the
Lenders, as cash collateral in an amount up to one hundred five percent (105%)
of the Letter of Credit Usage, (3) to Agent, to be held by Agent, for the
benefit of the Bank Product Providers, as cash collateral in an amount up to
one hundred five percent (105%) of the amount of Bank Product Obligations in
respect of Swap Agreements, and (4) to Agent to be held by Agent for the
benefit of the Bank Product Obligations as cash collateral in an amount not to
exceed


 


8

















 


the
amount of the Bank Product Reserve established prior to the occurrence of, and
not in contemplation of, the subject Event of Default,


 


(I)                                    ninth, to pay any other Obligations (including the
provision of amounts to Agent, to be held by Agent, for the benefit of the Bank
Product Providers, as cash collateral in an amount up to the amount determined
by Agent in its Permitted Discretion as the amount necessary to secure Parent’s
and its Subsidiaries’ obligations in respect of Bank Products) until paid in
full, and


 


(J)                                   tenth, to Borrower (to be wired to the Designated
Account) or such other Person entitled thereto under applicable law


 


(iii)                               Agent promptly shall distribute to each
Lender, pursuant to the applicable wire instructions received from each Lender
in writing, such funds as it may be entitled to receive, subject to a
Settlement delay as provided in Section 2.3(e).


 


(iv)                              [Intentionally Deleted]


 


(v)                                 For purposes of Section 2.4(b)(ii) (other
than clause (I) thereof), “paid in full” means payment of all amounts
owing under the Loan Documents according to the terms thereof, including loan
fees, service fees, professional fees, interest (and specifically including in
each case interest and such fees accrued after the commencement of any
Insolvency Proceeding), default interest, interest on interest, and expense
reimbursements, whether or not any of the foregoing (other than disallowed interest
and disallowed loan fees, if any) would be allowed or disallowed in whole or in
part in any Insolvency Proceeding; provided however, that for the purposes of Section 2.4(b)(ii)(I),
“paid in full” means payment of all amounts owing under the Loan Documents
according to the terms hereof, including loan fees, service fees, professional
fees, interest (and specifically including interest and fees accrued after the
commencement of any Insolvency Proceeding), default interest, interest on
interest, and expense reimbursements, whether or not any of the foregoing would
be or is allowed or disallowed in whole or in part in any Insolvency
Proceeding.


 


(vi)                              In the event of a direct conflict between
the priority provisions of this Section 2.4 and any other provision
contained in any other Loan Document, it is the intention of the parties hereto
that such provisions be read together and construed, to the fullest extent
possible, to be in concert with each other. 
In the event of any actual, irreconcilable conflict that cannot be
resolved as aforesaid, the terms and provisions of this Section 2.4
shall control and govern, subject to the Bankruptcy Code and any Bankruptcy
Court Orders.


 


(c)                                  Prepayments.


 


(i)                                     Excess Revolver Usage. 
If at any time the sum of the aggregate principal amount of the
outstanding Advances and the outstanding Letters of Credit Usage and the
aggregate amount of reserves, if any, established by Agent under Section 2.1
exceeds the lesser of (A) as of any week, an amount equal to 110% of the
cumulative “Revolving Credit Debt + Advances / (Paydown)” line item set forth
in the Budget through such week, and (B) the Maximum Revolver Amount,
Borrower shall immediately prepay the Obligations in an amount equal to such
excess, which prepayments shall be applied in the manner set forth in Section 2.4(d).


 


(ii)                                  Optional Prepayments. 
The Advances may be voluntarily prepaid in full or in part at any time.


 


9

















 


(iii)                               Mandatory Prepayments.


 


(A)                              Dispositions. Promptly, and in any event not later
than one (1) Business Day following the receipt by Parent or any of its
Subsidiaries of the proceeds of any voluntary or involuntary sale or
disposition by Parent or any of its Subsidiaries of property or assets
(including casualty losses or condemnations), Borrower shall, subject to the
order of the Bankruptcy Court, prepay the outstanding principal amount of the
Obligations in accordance with Section 2.4(d) in an amount
equal to one hundred percent (100%) of such Net Cash Proceeds (including
condemnation awards and payments in lieu thereof) received by such Person in
connection with such sales or dispositions. 
Nothing contained in this Section 2.4(c)(iii)(A) shall
permit Parent or any of its Subsidiaries to sell or otherwise dispose of any
property or assets other than in accordance with Section 7.4.


 


(B)                                Extraordinary Receipts. Promptly, and in any event not later
than one (1) Business Day following the receipt by Parent or any of its
Subsidiaries of any Extraordinary Receipts, Borrower shall prepay the
outstanding principal amount of the Obligations in accordance with Section 2.4(d) in
an amount equal to 100% of such Extraordinary Receipts, net of any reasonable
expenses incurred in collecting such Extraordinary Receipts.


 


(C)                                Debt or Issuances of Disqualified Stock. 
Promptly, and in any event not later than one (1) Business Day,
following the issuance or incurrence by Parent or any of its Subsidiaries of
any Indebtedness (other than Indebtedness permitted under Section 7.1)
or the issuance by Parent or any of its Subsidiaries of any shares of its or
their Stock (other than in the event that Parent or any Subsidiary thereof
forms a Subsidiary in accordance with the terms hereof, the issuance by such
Subsidiary of Stock to Parent or such Subsidiary, as applicable), Borrower
shall prepay the outstanding principal amount of the Obligations in accordance
with Section 2.4(d) in an amount equal to 100% of the Net Cash
Proceeds received by such Person in connection with such incurrence of
Indebtedness or such issuance of Stock. The provisions of this Section 2.4(c)(iii)(C) shall
not be deemed to be implied consent to any such issuance or incurrence
otherwise prohibited by the terms and conditions of this Agreement.


 


(D)                               [Intentionally Deleted]


 


(E)                                 Bankruptcy Actions. Simultaneously with the receipt by any
Loan Party or any of its Subsidiaries of any tax refund or the proceeds of any
judgment, settlement or other consideration of any kind in connection with any
cause of action arising under the Bankruptcy Code or otherwise (excluding
proceeds of Avoidance Actions), Borrower shall prepay the outstanding principal
amount of the Obligations in an amount equal to 100% of the net proceeds
received.


 


(F)                                 [Intentionally Deleted]


 


(G)                                [Intentionally Deleted]


 


(H)                               Sales of Assets. 
In the event a proposed sale of all or substantially all of the Loan
Parties’ assets, including Parent’s property interests located in Elk Valley,
British Columbia, Canada, fails to close solely as a result of any Loan Party’s
failure to take any action in order to consummate such sale, Borrower shall
immediately prepay 100% of the outstanding amount of the Obligations.


 


(d)                                 Application of Payments. 
Each prepayment pursuant to any clause of Section 2.4(c)(iii) above
shall be applied in the manner set forth in Section 2.4(b)(ii).


 


10

















 


2.5                                 Overadvances.  If,
at any time or for any reason, the amount of Obligations owed by Borrower to
the Lender Group pursuant to Section 2.1 or Section 2.12
is greater than any of the limitations set forth in Section 2.1 or Section 2.12,
as applicable (an “Overadvance”), Borrower immediately shall pay to
Agent, in cash, the amount of such excess, which amount shall be used by Agent
to reduce the Obligations in accordance with the priorities set forth in Section 2.4(b).  Borrower promises to pay the Obligations
(including principal, interest, fees, costs, and expenses) in Dollars in full
on the Final Maturity Date or, if earlier, on the date on which the Obligations
are declared due and payable pursuant to the terms of this Agreement.


 


2.6                                 Interest Rates:  Rates, Payments, and Calculations.


 


(a)                                  Interest Rates. 
Except as provided in Section 2.6(c), all Obligations
(except for undrawn Letters of Credit and Bank Product Obligations) that have
been charged to the Loan Account (whether or not paid) pursuant to the terms
hereof shall bear interest on the Daily Balance thereof at a per annum rate
equal to the Base Rate plus the Base Rate Margin.


 


(b)                                 Letter of Credit Fee. 
Borrower shall pay Agent (for the ratable benefit of the Lenders,
subject to any agreements between Agent and individual Lenders), a Letter of
Credit fee (in addition to the charges, commissions, fees, and costs set forth
in Section 2.12(e)) which shall accrue at a rate equal to 5.25% per
annum times the Daily Balance of the undrawn amount of all outstanding Letters
of Credit.


 


(c)                                  Default Rate. 
At the election of Agent or the Required Lenders upon the occurrence and
during the continuation of an Event of Default,


 


(i)                                     all unpaid Obligations (except for
undrawn Letters of Credit and except for Bank Product Obligations) that have
been charged to the Loan Account pursuant to the terms hereof shall bear
interest on the Daily Balance thereof at a per annum rate equal to two (2) percentage
points above the per annum rate otherwise applicable hereunder, and


 


(ii)                                  the Letter of Credit fee provided for in Section 2.6(b) shall
be increased to two (2) percentage points above the per annum rate otherwise
applicable hereunder.


 


(d)                                 Payment. 
Subject to the terms of the Final Bankruptcy Court Order and except as
provided to the contrary in Section 2.6(f) or Section 2.11,
interest, Letter of Credit fees, and all other fees payable hereunder shall be
due and payable monthly, in arrears, on each Interest Payment Date at any time
that Obligations or Commitments are outstanding.  Borrower hereby authorizes Agent to charge
all interest and fees (when due and payable), all Lender Group Expenses (after
the same become due and payable in accordance with Section 18.10),
all charges, commissions, fees, and costs provided for in Section 2.12(e) (as
and when due and payable), all fees and costs provided for in Section 2.11
(as and when due and payable), and all other payments as and when due and
payable under any Loan Document (including any amounts due and payable to the
Bank Product Providers in respect of Bank Products up to the amount of the Bank
Product Reserve) to the Loan Account, which amounts thereafter shall constitute
Advances hereunder and shall accrue interest at the rate then applicable to
Advances.  Any interest not paid when due
shall be compounded by being charged to the Loan Account and shall thereafter
constitute Advances hereunder and shall accrue interest at the rate then
applicable to Advances; provided, however that if, at any time
any amount due and payable to the Bank Product Reserve is charged to the Loan
Account, an Event of Default or Overadvance exists, or would result therefrom,
such amounts shall not constitute Advances but instead shall continue to remain
due and payable to the Bank Product Providers in respect of the Bank Products
up to the amount of the Bank Product Reserve; provided, further, however,
that the failure to make any such payment and the compounding of such interest
shall nonetheless constitute an Event of Default under Section 8.1.


 


11
















 


(e)                                  Computation. 
All interest and fees chargeable under the Loan Documents shall be
computed on the basis of a 360 day year for the actual number of days
elapsed.  In the event the Base Rate is
changed from time to time hereafter, the rates of interest hereunder based upon
the Base Rate automatically and immediately shall be increased or decreased by
an amount equal to such change in the Base Rate.


 


(f)                                    Intent to Limit Charges
to Maximum Lawful Rate.  In no event shall the interest rate or rates
payable under this Agreement, plus any other amounts paid in connection
herewith, exceed the highest rate permissible under any law that a court of
competent jurisdiction shall, in a final determination, deem applicable.  Borrower and the Lender Group, in executing
and delivering this Agreement, intend legally to agree upon the rate or rates
of interest and manner of payment stated within it; provided, however,
that, anything contained herein to the contrary notwithstanding, if said rate
or rates of interest or manner of payment exceeds the maximum allowable under
applicable law, then, ipso facto,
as of the date of this Agreement, Borrower is and shall be liable only for the
payment of such maximum as allowed by law, and payment received from Borrower
in excess of such legal maximum, whenever received, shall be applied to reduce
the principal balance of the Obligations to the extent of such excess.


 


(g)                                 PIK Interest. 
The interest due and payable on each Interest Payment Date (herein
referred to as “PIK Interest”) will be payable in kind as provided in
the next sentence.  On each Interest
Payment Date, any PIK Interest that is then unpaid and that has not been
previously added to the principal amount of the Loan shall be added, on a pro
rata basis, to each Advance, and amounts so added shall thereafter be deemed to
be a part of the principal amount of each such Advance.  If not sooner paid in cash, all accrued
unpaid PIK Interest will be due and payable in cash upon the earliest to occur
of (i) the Final Maturity Date, (ii) the prepayment of the Loan in
accordance with Section 2.4(c), or (iii) the date on which the
Obligations are declared due and payable.


 


2.7                                 Cash Management.


 


(a)                                  On or prior to the Final Facility
Effective Date, Borrower shall and shall cause each of its Subsidiaries to (i) establish
and maintain cash management services of a type and on terms satisfactory to
Agent (it being agreed that the terms in effect on the Interim Facility
Effective Date are satisfactory) at one or more of the banks set forth on Schedule
2.7(a) to the Interim DIP Credit Agreement (each a “Cash Management Bank”),
and shall request in writing and otherwise take such reasonable steps to ensure
that, except as permitted by Section 7.12, all of its and its
Subsidiaries’ Account Debtors forward payment of the amounts owed by them
directly to such Cash Management Bank, and (ii) deposit or cause to be
deposited promptly, and in any event no later than three Business Days after
the date of receipt thereof, all of their Collections (including those sent
directly by their Account Debtors to Borrower or one of its Subsidiaries) into
a bank account (the “Cash Management Accounts”) at one of the Cash
Management Banks.


 


(b)                                 Each Cash Management Bank shall establish
and maintain Cash Management Agreements with Agent and Borrower.  Unless otherwise approved by the Agent, each
such Cash Management Agreement shall provide, among other things, that (i) the
Cash Management Bank will comply with any instructions originated by Agent
directing the disposition of the funds in such Cash Management Account without
further consent by Borrower or its Subsidiaries, as applicable, (ii) the
Cash Management Bank has no rights of setoff or recoupment or any other claim
against the applicable Cash Management Account other than for payment of its
service fees and other charges directly related to the administration of such
Cash Management Account and for returned checks or other items of payment, and (iii) it
will forward by daily sweep all amounts in the applicable Cash Management
Account to the Agent’s Account, which amount shall be applied on and after the
Final Facility Effective Date, to repay any outstanding Advances.


 


12

















 


(c)                                  So long as no Default or Event of Default
has occurred and is continuing, Borrower may amend Schedule 2.7(a) to
add or replace a Cash Management Bank or Cash Management Account; provided,
however, that (i) such prospective Cash Management Bank shall be
reasonably satisfactory to Agent, and (ii) prior to the time of the
opening of such Cash Management Account, Borrower (or its Subsidiary, as
applicable) and such prospective Cash Management Bank shall have executed and
delivered to Agent a Cash Management Agreement. 
Borrower (or its Subsidiaries, as applicable) shall close any of its
Cash Management Accounts (and establish replacement cash management accounts in
accordance with the foregoing sentence) promptly and in any event within thirty
(30) days of notice from Agent that the creditworthiness of any Cash Management
Bank is no longer acceptable in Agent’s reasonable judgment, or as promptly as
practicable and in any event within sixty (60) days of notice from Agent that
the operating performance, funds transfer, or availability procedures or performance
of the Cash Management Bank with respect to Cash Management Accounts or Agent’s
liability under any Cash Management Agreement with such Cash Management Bank is
no longer acceptable in Agent’s reasonable judgment.


 


(d)                                 Each Cash Management Account shall be a
cash collateral account subject to a Control Agreement.


 


(e)                                  Notwithstanding the foregoing, the
requirements set forth in this Section 2.7 are subject to the Final
Bankruptcy Court Order.


 


2.8                                 Crediting
Payments.  The receipt
of any payment item by Agent (whether from transfers to Agent by the Cash
Management Banks pursuant to the Cash Management Agreements or otherwise) shall
not be considered a payment on account unless such payment item is a wire
transfer of immediately available federal funds made to Agent’s Account or
unless and until such payment item is honored when presented for payment.  Should any payment item not be honored when
presented for payment, then Borrower shall be deemed not to have made such
payment and interest shall be calculated accordingly.  Anything to the contrary contained herein
notwithstanding, any payment item shall be deemed received by Agent only if it
is received into Agent’s Account on a Business Day on or before 2:00 p.m.
(Georgia time).  If any payment item is
received into Agent’s Account on a non-Business Day or after 2:00 p.m.
(Georgia time) on a Business Day, it shall be deemed to have been received by
Agent as of the opening of business on the immediately following Business Day.


 


2.9                                 Designated
Account.  Agent is
authorized to make the Advances, and Issuing Lender is authorized to issue or
cause the issuance of the Letters of Credit, under this Agreement based upon
telephonic or other instructions received from anyone purporting to be an
Authorized Person or, without instructions, if pursuant to Section 2.6(d).  Borrower agrees to establish and maintain the
Designated Account with the Designated Account Bank for the purpose of
receiving the proceeds of the Advances requested by Borrower and made by Agent
or the Lenders hereunder.  Unless
otherwise directed in writing by Borrower and agreed to by Agent, any Advance
or Protective Advance requested by Borrower and made by Agent or the Lenders
hereunder shall be made to the Designated Account.


 


2.10                           Maintenance
of Loan Account; Statements of Obligations.  Agent shall maintain an account on its books
in the name of Borrower (the “Loan Account”) on which Borrower will be
charged with all Advances (including Protective Advances) made by Agent or the
Lenders to Borrower or for Borrower’s account, the Letters of Credit issued by
the Issuing Lender for Borrower’s account, and with all other payment
Obligations hereunder or under the other Loan Documents (except for Bank
Product Obligations), including, accrued interest, fees and expenses, and
Lender Group Expenses.  In accordance
with Section 2.8, the Loan Account will be credited with all
payments received by Agent from Borrower or for Borrower’s account, including
all amounts


 


13

















 


received
in Agent’s Account from any Cash Management Bank.  Agent shall render monthly statements
regarding the Loan Account to Borrower, including principal, interest, fees,
and including an itemization in reasonable detail of all charges and expenses
constituting Lender Group Expenses owing, and such statements, absent manifest
error, shall be conclusively presumed to be correct and accurate and constitute
an account stated between Borrower and the Lender Group unless, within 30 days
after receipt thereof by Borrower, Borrower shall deliver to Agent written
objection thereto describing the error or errors contained in any such
statements.


 


2.11                           Fees.  Borrower shall pay to Agent,
as and when due and payable under the terms of the Fee Letter, the fees set
forth in the Fee Letter to the extent such fees are approved by any order of
the Bankruptcy Court.


 


2.12                           Letters of Credit.


 


(a)                                  Subject to the terms and conditions of
this Agreement, the Issuing Lender agrees to cause the Underlying Issuer to issue
letters of credit for the account of Borrower or its Subsidiaries (each, an “L/C”),
whether by purchasing participations, executing indemnities or reimbursement
obligations, or otherwise (each such commitment, an “L/C Undertaking”)
with respect to letters of credit issued by an Underlying Issuer (the
Underlying Issuer shall be Wells Fargo or such other bank acceptable to Agent
and as may be reasonably approved by Borrower) for the account of Borrower; provided,
however, that the Issuing Lender in its sole discretion may decline to
cause the issuance of any L/C so requested. 
Each request for the issuance of a Letter of Credit, or the amendment,
renewal, or extension of any outstanding Letter of Credit, shall be made in
writing by an Authorized Person and delivered to the Issuing Lender and Agent
via hand delivery, telefacsimile, or other electronic method of transmission
reasonably in advance of the requested date of issuance, amendment, renewal, or
extension.  Each such request shall be in
form and substance satisfactory to the Issuing Lender in its Permitted
Discretion and shall specify (i) the amount of such Letter of Credit, (ii) the
date of issuance, amendment, renewal, or extension of such Letter of Credit, (iii) the
expiration date of such Letter of Credit, (iv) the name and address of the
beneficiary thereof (or the beneficiary of the Underlying Letter of Credit, as
applicable), and (v) such other information (including, in the case of an
amendment, renewal, or extension, identification of the outstanding Letter of
Credit to be so amended, renewed, or extended) as shall be necessary to
prepare, amend, renew, or extend such Letter of Credit.  If requested by the Issuing Lender, Borrower
also shall be an applicant under the application with respect to any Underlying
Letter of Credit that is to be the subject of an L/C Undertaking.  The Issuing Lender shall have no obligation
to issue a Letter of Credit if, after giving effect to the issuance of such
requested Letter of Credit, the Letter of Credit Usage would exceed the Maximum
Revolver Amount less the outstanding amount of Advances, and less the aggregate
amount of reserves, if any, established by Agent under Section 2.1(c).


 


Each
Letter of Credit (and corresponding Underlying Letter of Credit) shall be in
form and substance acceptable to the Issuing Lender (in the exercise of its
Permitted Discretion), including the requirement that the amounts payable
thereunder must be payable in Dollars. 
If Issuing Lender is obligated to advance funds under a Letter of
Credit, Borrower immediately shall reimburse such L/C Disbursement to Issuing
Lender by paying to Agent an amount equal to such L/C Disbursement (A) not
later than 2:00 p.m., New York time, on the date that such L/C
Disbursement is made, if Borrower shall have received written or telephonic
notice of such L/C Disbursement prior to 1:00 p.m., Georgia time, on such
date, or, (B) if such notice has not been received by Borrower prior to
such time on such date, then not later than 2:00 p.m., New York time, on
the Business Day that Borrower receives such notice, if such notice is received
prior to 1:00 p.m., New York time, on the date of receipt, and, in the
absence of such reimbursement, the L/C Disbursement immediately and
automatically shall be deemed to be an Advance hereunder and, initially, shall
bear interest at the rate then applicable to Advances.  To the extent an L/C Disbursement is deemed
to be an Advance hereunder, Borrower’s obligation to reimburse such L/C
Disbursement shall be discharged and replaced by the resulting


 


14

















 


Advance.  Promptly following receipt by Agent of any
payment from Borrower pursuant to this paragraph, Agent shall distribute such
payment to the Issuing Lender or, to the extent that Lenders have made payments
pursuant to Section 2.12(b) to reimburse the Issuing Lender,
then to such Lenders and the Issuing Lender as their interests may appear.


 


(b)                                 Promptly following receipt of a notice of
L/C Disbursement pursuant to Section 2.12(a), each Lender agrees to
fund its Pro Rata Share of any Advance deemed made pursuant to the foregoing
subsection on the same terms and conditions as if Borrower had requested such
Advance and Agent shall promptly pay to Issuing Lender the amounts so received
by it from the Lenders.  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
Lender or the Lenders, the Issuing Lender shall be deemed to have granted to
each Lender, and each Lender shall be deemed to have purchased, a participation
in each Letter of Credit, in an amount equal to its Pro Rata Share of the Risk
Participation Liability of such Letter of Credit, and each such Lender agrees to
pay to Agent, for the account of the Issuing Lender, such Lender’s Pro Rata
Share of any payments made by the Issuing Lender under such Letter of
Credit.  In consideration and in
furtherance of the foregoing, each Lender hereby absolutely and unconditionally
agrees to pay to Agent, for the account of the Issuing Lender, such Lender’s
Pro Rata Share of each L/C Disbursement made by the Issuing Lender and not
reimbursed by Borrower on the date due as provided in Section 2.12(a),
or of any reimbursement payment required to be refunded to Borrower for any
reason.  Each Lender acknowledges and
agrees that its obligation to deliver to Agent, for the account of the Issuing
Lender, an amount equal to its respective Pro Rata Share of each L/C
Disbursement made by the Issuing Lender pursuant to this Section 2.12(b) shall
be absolute and unconditional and such remittance shall be made notwithstanding
the occurrence or continuation of an Event of Default or Default or the failure
to satisfy any condition set forth in Section 4.  If any such Lender fails to make available to
Agent the amount of such Lender’s Pro Rata Share of each L/C Disbursement made
by the Issuing Lender in respect of such Letter of Credit as provided in this
Section, such Lender shall be deemed to be a Defaulting Lender and Agent (for
the account of the Issuing Lender) shall be entitled to recover such amount on
demand from such Lender together with interest thereon at the Defaulting Lender
Rate until paid in full.


 


(c)                                  Borrower hereby agrees to indemnify,
save, defend, and hold the Lender Group harmless from any loss, cost, expense,
or liability, and reasonable attorneys fees incurred by the Lender Group
arising out of or in connection with any Letter of Credit; provided, however,
that Borrower shall not be obligated hereunder to indemnify for any loss, cost,
expense, or liability to the extent that it is caused by the gross negligence
or willful misconduct of the Issuing Lender or any other member of the Lender
Group.  Borrower agrees to be bound by
the Underlying Issuer’s regulations and interpretations of any Underlying
Letter of Credit or by Issuing Lender’s interpretations of any L/C issued by
Issuing Lender to or for Borrower’s account, even though this interpretation
may be different from Borrower’s own, and Borrower understands and agrees that
the Lender Group shall not be liable for any error, negligence, or mistake,
whether of omission or commission, in following Borrower’s instructions or
those contained in the Letter of Credit or any modifications, amendments, or
supplements thereto.  Borrower
understands that the L/C Undertakings may require Issuing Lender to indemnify
the Underlying Issuer for certain costs or liabilities arising out of claims by
Borrower against such Underlying Issuer. 
Borrower hereby agrees to indemnify, save, defend, and hold the Lender
Group harmless with respect to any loss, cost, expense (including reasonable
attorneys fees), or liability incurred by the Lender Group under any L/C
Undertaking as a result of the Lender Group’s indemnification of any Underlying
Issuer; provided, however, that Borrower shall not be obligated hereunder to
indemnify for any loss, cost, expense, or liability to the extent that it is
caused by the gross negligence or willful misconduct of the Issuing Lender or
any other member of the Lender Group. 
Borrower hereby acknowledges and agrees that neither the Lender Group
nor the Issuing Lender shall be responsible for delays, errors, or omissions
resulting from the malfunction of equipment in connection with any Letter of
Credit.


 


15

















 


(d)                                 Borrower hereby authorizes and directs
any Underlying Issuer to deliver to the Issuing Lender all instruments,
documents, and other writings and property received by such Underlying Issuer
pursuant to such Underlying Letter of Credit and to accept and rely upon the
Issuing Lender’s instructions with respect to all matters arising in connection
with such Underlying Letter of Credit and the related application.


 


(e)                                  Any and all issuance charges,
commissions, fees, and costs incurred by the Issuing Lender relating to
Underlying Letters of Credit shall be Lender Group Expenses for purposes of
this Agreement and shall be reimbursable by Borrower to Agent for the account
of the Issuing Lender; it being acknowledged and agreed by Borrower that, as of
the Interim Facility Effective Date, the issuance charge imposed by the
Underlying Issuer is 0.825% per annum times the undrawn amount of each
Underlying Letter of Credit, that such issuance charge may be changed from time
to time, and that the Underlying Issuer also imposes a schedule of charges for
amendments, extensions, drawings, and renewals.


 


(f)                                    If by reason of (i) any change after
the Interim Facility Effective Date in any applicable law, treaty, rule, or
regulation or any change in the interpretation or application thereof by any
Governmental Authority, or (ii) compliance by the Underlying Issuer or the
Lender Group with any direction, request, or requirement (irrespective of whether
having the force of law) of any Governmental Authority or monetary authority
including, Regulation D of the Federal Reserve Board as from time to time in
effect (and any successor thereto):


 


(i)                                     any reserve, deposit, or similar
requirement is or shall be imposed or modified in respect of any Letter of
Credit issued hereunder, or


 


(ii)                                  there shall be imposed on the Underlying
Issuer or the Lender Group any other condition regarding any Underlying Letter
of Credit or any Letter of Credit issued pursuant hereto,


 


and
the result of the foregoing is to increase, directly or indirectly, the cost to
the Lender Group of issuing, making, guaranteeing, or maintaining any Letter of
Credit or to reduce the amount receivable in respect thereof by the Lender
Group, then, and in any such case, Agent may, at any time within a reasonable
period after the additional cost is incurred or the amount received is reduced,
notify Borrower, and Borrower shall pay on demand such amounts as Agent may
specify to be necessary to compensate the Lender Group for such additional cost
or reduced receipt, together with interest on such amount from the date of such
demand until payment in full thereof at the rate then applicable to Advances
hereunder.  The determination by Agent of
any amount due pursuant to this Section, as set forth in a certificate setting
forth the calculation thereof in reasonable detail, shall, in the absence of
manifest or demonstrable error, be final and conclusive and binding on all of
the parties hereto.


 


2.13                           [Intentionally Deleted]


 


2.14                           Capital
Requirements.  If, after the date hereof, any Lender
determines that (a) the adoption of or change in any law, rule, regulation
or guideline regarding capital requirements for banks or bank holding
companies, or any change in the interpretation or application thereof by any
Governmental Authority charged with the administration thereof, or (b) compliance
by such Lender or its parent bank holding company with any guideline, request,
or directive of any such entity regarding capital adequacy (whether or not
having the force of law), has the effect of reducing the return on such Lender’s
or such holding company’s capital as a consequence of such Lender’s Commitments
hereunder to a level below that which such Lender or such holding company could
have achieved but for such adoption, change, or compliance (taking into
consideration such Lender’s or such holding company’s then existing policies
with respect to capital adequacy and assuming the full utilization of such
entity’s capital) by any amount deemed by such Lender to be material, then such
Lender may


 


16

















 


notify
Borrower and Agent thereof.  Following
receipt of such notice, Borrower agrees to pay such Lender on demand the amount
of such reduction of return of capital as and when such reduction is
determined, payable within ninety (90) days after presentation by such Lender
of a statement in the amount and setting forth in reasonable detail such Lender’s
calculation thereof and the assumptions upon which such calculation was based
(which statement shall be deemed true and correct absent manifest error).  In determining such amount, such Lender may use
any reasonable averaging and attribution methods.  Failure or delay on the part of any Lender to
demand compensation pursuant to this Section shall not constitute a waiver
of such Lender’s right to demand such compensation; provided that Borrower
shall not be required to compensate a Lender pursuant to this Section for
any reduction in return incurred more than one hundred eighty (180) days prior
to the date that such Lender notifies the Borrower of such law, rule,
regulation or guideline giving rise to such reductions and of such Lender’s
intention to claim compensation therefor; provided further that if such claim
arises by reason of the adoption of or change in any law, rule, regulation or
guideline that is retroactive, then the one hundred eighty (180) day period
referred to above shall be extended to include the period of retroactive effect
thereof.


 


2.15                           Securitization. The Loan Parties hereby acknowledge that the Lenders and their
Affiliates may sell or securitize the Obligations in respect of the Commitment
and the Advances (a “Securitization”) through the pledge of the Obligations
as collateral security for loans to the Lenders or their Affiliates or through
the sale of the Obligations or the issuance of direct or indirect interests in
the Obligations, which loans to the Lenders or their Affiliates or direct or
indirect interests will be rated by Moody’s, S&P or one or more other
rating agencies (the “Rating Agencies”). 
The Loan Parties shall take such actions as the Lenders may reasonably
request in connection with the Securitization including, without limitation, by
(a) amending this Agreement and the other Loan Documents, and executing
such additional documents, as reasonably requested by the Lenders in connection
with the Securitization, provided that (i) any such amendment or
additional documentation does not impose material additional costs on the Loan
Parties and (ii) any such amendment or additional documentation does not
materially adversely affect the rights, or materially increase the obligations,
of the Loan Parties under the Loan Documents or change or affect in a manner
adverse to the Loan Parties the financial terms of the Obligations and (b) providing
such information as may be reasonably requested by the Lenders in connection
with the rating of the Obligations or the Securitization.


 


2.16                           Registered
Notes.  Agent, acting solely for this purpose as a
non-fiduciary agent on behalf of Borrower (or in the case of an assignment not
recorded in the Register in accordance with Section 14.1(h), the
assigning Lender) agrees to record the Commitments and the Advances on the Register
(or in the case of an assignment not recorded in the Register in accordance
with Section 14.1(h), a Related Party Register).  Each Commitment and Advance recorded on the
Register (or Related Party Register) may not be evidenced by promissory notes
other than Registered Notes (as defined below). 
Upon the registration of each Commitment and Advance, Borrower agrees,
at the request of any Lender, to execute and deliver to such Lender a
promissory note, in conformity with the terms of this Agreement, in registered
form to evidence such Registered Loan, in form and substance reasonably
satisfactory to such Lender, and registered as provided in Section 14.1(i) (a
“Registered Note”), payable to such Lender or its registered assigns and
otherwise duly completed.  Once recorded
on the Register (or Related Party Register), no Commitment or Advance may be
removed from the Register (or Related Party Register) so long as it or they
remain outstanding, and a Registered Note may not be exchanged for a promissory
note that is not a Registered Note.


 


17

















 


3.                                       SECURITY AND
ADMINISTRATIVE PRIORITY


 


3.1                                 Collateral; Grant of Lien and
Security Interest


 


(a)                                  As security for the full and timely
payment and performance of all of the Obligations, each of the Loan Parties
assigns, pledges and grants (or causes the assignment, pledge and grant in
respect of any indirectly owned assets) to Agent, for the benefit of Agent,
Bank Product Providers and the Lenders, a security interest in and to and Lien
on all of the property, assets or interests in property or assets of such
Person, of any kind or nature whatsoever, real or personal, now existing or
hereafter acquired or created, including, without limitation, all property of
the “estate” (within the meaning of the Bankruptcy Code) of such Loan Party,
and all accounts, inventory, goods, contract rights, instruments, documents,
chattel paper, patents, trademarks, copyrights and licenses therefor, general
intangibles, payment intangibles, letters of credit, letter-of-credit rights,
supporting obligations, machinery and equipment, real property, fixtures,
leases, all of the Stock of each Subsidiary of such Loan Party, all of the
Stock of all other Persons directly owned by such Loan Party, money, investment
property, deposit accounts, all commercial tort claims and all causes of action
arising under the Bankruptcy Code or otherwise (but excluding any Avoidance
Actions or the proceeds of Avoidance Actions), and all cash and non-cash
proceeds, rents, products and profits of any of collateral described above (all
property of the Loan Parties subject to the security interest referred to in
this Section 3.1(a) being hereafter collectively referred to
as the “Collateral”).


 


(b)                                 Upon entry of the Final Bankruptcy Court
Order, the Agent’s Liens and security interests in favor of Agent, Bank Product
Providers and the Lenders referred to in Section 3.1(a) hereof
shall be valid and perfected Liens and security interests in the Collateral,
with priority as granted in the Final Bankruptcy Court Order.  Such Agent’s Liens and security interests and
their priority shall remain in effect until the Commitments hereunder have been
terminated and the payment to Agent, in cash, of the Obligations (including (i) providing
Letter of Credit Collateralization with respect to then existing Letter of
Credit Usage and (ii) providing Bank Product Collateralization with
respect to the then existing Bank Products), in full.


 


(c)                                  Notwithstanding anything herein to the
contrary (i) all proceeds received by Agent and the Lenders from the
Collateral subject to the Agent’s Liens granted in this Section 3.1,
in each other Loan Document and by the Bankruptcy Court Orders shall be subject
to the prior payment of Carve-Out Expenses to the extent set forth in clause “first”
of the definition of the term “Agreed Administrative Expense Priorities”, and (ii) no
Person entitled to such Carve-Out Expenses shall be entitled to sell or
otherwise dispose, or seek or object to the sale or other disposition, of any
Collateral for its own account.


 


3.2                                 Administrative
Priority.  Each of the Loan Parties agrees for itself
that, subject to the terms of the Bankruptcy Court Orders, the Obligations of
such Person shall constitute allowed administrative expenses in the Chapter 11
Cases, having priority over all administrative expenses of any kind or nature
whatsoever, including, without limitation, all administrative expenses of the
kind specified in Sections 503(b) and 507(b) of the Bankruptcy Code,
subject only to the prior payment of Carve-Out Expenses to the extent set forth
in clause “first” of the definition of the term “Agreed Administrative
Expense Priorities”.


 


3.3                                 Grants,
Rights and Remedies.  The Agent’s Liens and security interests
granted pursuant to Section 3.1(a) hereof and the
administrative priority granted pursuant to Section 3.2 hereof may
be independently granted by the Loan Documents and by other Loan Documents
hereafter entered into.


 


3.4                                 No
Filings Required.  The Agent’s Liens and security interests
referred to herein shall be deemed valid and perfected by entry of the Interim
Bankruptcy Court Order or the Final Bankruptcy Court Order, as the case may
be.  Agent shall not be required to file
any financing statements, mortgages, certificates of title, notices of Lien or
similar instruments in any jurisdiction or filing office or to take any other
action in order to validate or perfect the Lien and security interest granted
by or pursuant to this Agreement, the Interim Bankruptcy Court Order or the
Final 


 


18

















 


Bankruptcy
Court Order, as the case may be, or any other Loan Document; provided, that
Agent shall be permitted to file any financing statements, mortgages,
certificates of title, notices of Lien or similar instruments in any
jurisdiction or filing office or to take any other action with respect to the
Lien and security interest granted by or pursuant to this Agreement.


 


3.5                                 Survival.  The Agent’s Liens, lien
priority, administrative priorities and other rights and remedies granted to
Agent and the Lenders pursuant to this Agreement, the Bankruptcy Court Orders
and the other Loan Documents (specifically including, but not limited to, the
existence, perfection and priority of the Liens and security interests provided
herein and therein, and the administrative priority provided herein and
therein) shall not be modified, altered or impaired in any manner by any other
financing or extension of credit or incurrence of Indebtedness by any Loan Party
(pursuant to Section 364 of the Bankruptcy Code or otherwise), or by any
dismissal or conversion of any of the Chapter 11 Cases, or by any other act or
omission whatsoever.  Without limitation,
notwithstanding any such order, financing, extension, incurrence, dismissal,
conversion, act or omission:


 


(a)                                  except for the Carve-Out Expenses to the
extent set forth in clause “first” of the definition of the term “Agreed
Administrative Expense Priorities” as set forth in Section 3.2, no
costs or expenses of administration which have been or may be incurred in the
Chapter 11 Cases or any conversion of the same or in any other proceedings
related thereto, and no priority claims, are or will be prior to or on parity
with any claim of Agent and the Lenders against any Loan Party in respect of
any Obligation;


 


(b)                                 on and after the Final Bankruptcy Court
Order Entry Date, the Liens in favor of Agent, Bank Product Providers and the
Lenders set forth in Section 3.1(a) hereof shall constitute
valid and perfected Liens and security interests with the priority granted in
the Final Bankruptcy Court Order; and


 


(c)                                  the Agent’s Liens in favor of Agent, Bank
Product Providers and the Lenders set forth herein and in the other Loan
Documents shall continue to be valid and perfected without the necessity that
Agent file financing statements, mortgages, certificates of title or otherwise
perfect its Lien under applicable non-bankruptcy law.


 


3.6                                 Further
Assurances.  The Loan Parties shall take any other actions
reasonably requested by Agent and the Lenders from time to time to cause the
attachment, perfection and first priority of, and the ability of Agent and the
Lenders to enforce, the security interest of Agent and the Lenders in any and
all of the Collateral, including, without limitation, (a) executing and
delivering any requested security agreement, pledge agreement or Mortgage, (b) executing,
delivering and, where appropriate, filing financing statements and amendments
relating thereto under the Uniform Commercial Code or other applicable law, to
the extent, if any, that any Loan Party’s signature thereon is required
therefor, (c) causing Agent’s name to be noted as secured party on any
certificate of title for a titled good if such notation is a condition to
attachment, perfection or priority of, or ability of Agent to enforce, the
security interest of Agent in such Collateral, (d) complying with any
provision of any statute, regulation or treaty of the United States as to any
Collateral if compliance with such provision is a condition to attachment,
perfection or priority of, or ability of Agent to enforce, the security
interest of Agent in such Collateral, and (e) obtaining the consents and
approvals of any Governmental Authority or third party, including, without
limitation, any consent of any licensor, lessor or other person obligated on
Collateral, and taking all actions required by any earlier versions of the
Uniform Commercial Code or by other law, as applicable in any relevant
jurisdiction.


 


19
















 


4.                                       CONDITIONS; TERM OF AGREEMENT.


 


4.1                                 Conditions Precedent to Final
Facility Effectiveness.  The obligation of each Lender to make its
extensions of credit provided for hereunder is subject to the fulfillment, to
the satisfaction of Agent and each Lender, of each of the conditions precedent
to Final Facility Effectiveness set forth on Schedule 4.1 attached to
this Agreement.


 


4.2                                 Conditions Precedent to all
Extensions of Credit.  The obligation of the Lender Group (or any
member thereof) to make any Loan or Advance (or to extend any other credit
hereunder) at any time shall be subject to the following conditions precedent:


 


(a)           the
representations and warranties of the Loan Parties contained in this Agreement
or in any other Loan Document or any certificate or other writing delivered to
Agent or any Lender pursuant hereto or thereto shall be true and correct in all
respects on and as of the date of such extension of credit, as though made on
and as of such date (except to the extent that such representations and
warranties relate solely to an earlier date);


 


(b)           no
Default or Event of Default shall have occurred and be continuing on the date
of such extension of credit, nor shall either result from the making thereof;


 


(c)           no
injunction, writ, restraining order, or other order of any nature restricting
or prohibiting, directly or indirectly, the extending of such credit shall have
been issued and remain in force by any Governmental Authority against Borrower,
Agent, or any Lender;


 


(d)           to
the extent permitted by the Bankruptcy Court Orders, Borrower shall have paid
all Lender Group Expenses and Fees pursuant to Section 2.11 then
payable by Borrower pursuant to this Agreement and the other Loan Documents,
unless otherwise waived by Agent and the Lenders;


 


(e)           the
making of such Loan shall not contravene any law, rule or regulation
applicable to the Agent or any Lender;


 


(f)            Agent
shall have received a notice of borrowing pursuant to Section 2.3
hereof;


 


(g)           no
Material Adverse Change shall have occurred since the Filing Date; and


 


(h)           Agent
shall have received such other agreements, instruments, approvals, opinions and
other documents, each in form and substance satisfactory to Agent, as Agent may
reasonably request.


 


4.3                                 Term.  This
Agreement shall become effective upon the Final Facility Effective Date and
continue in full force and effect for a term ending on the Final Maturity
Date.  The foregoing notwithstanding, the
Lender Group, upon the election of the Required Lenders, shall have the right
to terminate its obligations under this Agreement immediately and without
notice upon the occurrence and during the continuation of an Event of Default.


 


4.4                                 Effect of Termination.  On
the date of termination of this Agreement, all Obligations (including
contingent reimbursement obligations of Borrower with respect to outstanding
Letters of Credit and including all Bank Product Obligations) immediately shall
become due and payable without notice or demand (including the requirement that
Borrower provide (a) Letter of Credit Collateralization and (b) Bank
Product Collateralization).  No
termination of this Agreement, however, shall relieve or discharge Borrower or
its Subsidiaries of their duties, Obligations, or covenants hereunder or under
any other Loan Document and Agent’s Liens in the Collateral shall


 


20

















 


remain
in effect until all Obligations have been paid in full and the Lender Group’s
obligations to provide additional credit hereunder have been terminated.  When this Agreement has been terminated and
all of the Obligations have been paid in full and the Lender Group’s
obligations to provide additional credit under the Loan Documents have been
terminated irrevocably, Agent will, at Borrower’s sole expense, without recourse,
representation or warranty, execute and deliver any payoff letters, termination
statements, lien releases, mortgage releases, re-assignments of trademarks,
discharges of security interests, and other similar discharge or release
documents (and, if applicable, in recordable form) as are reasonably necessary
to release, as of record, Agent’s Liens and all notices of security interests
and liens previously filed by Agent with respect to the Obligations.  Any remaining cash collateral relating to
Letter of Credit Usage and Bank Product Obligations and any back up letter of
credit with an undrawn amount shall be returned to Borrower (a) in the
case of any Letter of Credit surrendered for termination, no later than ten (10) Business
Days following such surrender to Agent or the Issuing Lender of such Letters of
Credit, (b) in the case of any Letter of Credit that expires, no later
than thirty (30) days of the expiration of such Letters of Credit, and (c) in
the case of the Bank Product Reserve, no later than ten (10) Business Days
following the termination of the Bank Product Obligations.


 


4.5                                 Early Termination by Borrower. 
Borrower has the option, at any time upon ten (10) Business Days’
prior written notice to Agent, to terminate this Agreement and terminate the
Commitments hereunder by paying to Agent, in cash, the Obligations (including (a) providing
Letter of Credit Collateralization with respect to the then existing Letter of
Credit Usage and (b) providing Bank Product Collateralization with respect
to the then existing Bank Products), in full. 
If Borrower has sent a notice of termination pursuant to the provisions
of this Section 4.5, then, unless otherwise agreed by the Agent,
the Commitments shall terminate and Borrower shall be obligated to repay the
Obligations (including (a) providing Letter of Credit Collateralization
with respect to the then existing Letter of Credit Usage and (b) providing
Bank Product Collateralization with respect to the then existing Bank
Products), in full on the date set forth as the date of termination of this
Agreement in such notice.


 


5.                                       REPRESENTATIONS AND WARRANTIES.


 


In
order to induce the Lender Group to enter into this Agreement, the Loan Parties
make the following representations and warranties to the Lender Group which
shall be true, correct, and complete, in all respects, as of the date hereof,
and at and as of the date of the making of each Advance (or other extension of
credit) made thereafter, as though made on and as of the date of such Advance
(or other extension of credit) (except to the extent that such representations
and warranties relate solely to an earlier date which shall have been true,
correct and complete as of such earlier date) and such representations and
warranties shall survive the execution and delivery of this Agreement:


 


5.1                                 No Encumbrances.  Schedule
5.1 to the Interim DIP Credit Agreement (as updated from time to time) sets
forth all Real Property (other than Oil and Gas Properties) owned, leased,
subleased or used by the Loan Parties. 
The Loan Parties have good and indefeasible title to, or a valid
leasehold interest in, their personal property assets and good and marketable
title to, or a valid leasehold interest in, their Real Property (other than Oil
and Gas Properties), in each case, free and clear of Liens except for Permitted
Liens.  Schedule 5.1 to the
Interim DIP Credit Agreement (as updated from time to time) also describes any
purchase options, rights of first refusal or other similar contractual rights
in favor of any Loan Party pertaining to any Real Property (other than Oil and
Gas Properties) owned or leased by such Loan Party.  As of the Interim Facility Effective Date, no
portion of any Real Property (other than Oil and Gas Properties) has suffered
any material damage by fire or other casualty loss which has not heretofore
been repaired and restored in all material respects to its original condition
or otherwise remedied.  Except as could
not reasonably be expected to cause a Material Adverse Change, all permits
required to have been issued or appropriate to enable the Real Property (other
than Oil and Gas Properties) to be lawfully occupied and used for all of the
purposes


 


21

















 


for
which they are currently occupied and used have been lawfully issued and are in
full force and effect in all respects.


 


5.2                                 Margin Stock.   No
Loan Party is engaged, nor will it engage, principally or as one of its
important activities, in the business of extending credit for the purpose of “purchasing”
or “carrying” any “margin security” as such terms are defined in Regulation U
of the Federal Reserve Board as now and from time to time hereafter in effect
(such securities being referred to herein as “Margin Stock”).  No Loan Party owns any Margin Stock, and none
of the proceeds of the Advances or other extensions of credit under this
Agreement will be used, directly or indirectly, for the purpose of purchasing
or carrying any Margin Stock, for the purpose of reducing or retiring any
Indebtedness which was originally incurred to purchase or carry any Margin
Stock or for any other purpose which might cause any of the Advances or other
extensions of credit under this Agreement to be considered a “purpose credit”
within the meaning of Regulation T, U or X of the Federal Reserve Board.


 


5.3                                 Brokers.   No
broker or finder acting on behalf of any Loan Party brought about the
obtaining, making or closing of the Loans and no Loan Party has any obligation
to any Person in respect of any finder’s or brokerage fees in connection
therewith.


 


5.4                                 Jurisdiction of Organization; Location of
Chief Executive Office; Organizational Identification Number; Commercial Tort
Claims.


 


(a)           The
name of (within the meaning of Section 9-503 of the Code) and jurisdiction
of organization of each Loan Party is set forth on Schedule 5.4(a) to
the Interim DIP Credit Agreement or as otherwise notified to the Agent pursuant
to and as permitted by Section 7.5.


 


(b)           The
chief executive office of each Loan Party is located at the address indicated on
Schedule 5.4(b) to the Interim DIP Credit Agreement or as otherwise
notified to the Agent pursuant to and as permitted by Section 7.5.


 


(c)           Each
Loan Party’s tax identification number and organizational identification
number, if any, are identified on Schedule 5.4(c) to the Interim
DIP Credit Agreement or as otherwise notified to the Agent pursuant to and as
permitted by Section 7.5.


 


(d)           As
of the Interim Facility Effective Date, no Loan Party holds any commercial tort
claims, except as set forth on Schedule 5.4(d) to the Interim DIP
Credit Agreement.


 


5.5                                 Due Organization and Qualification;
Compliance with Laws; Subsidiaries.


 


(a)           Each
Loan Party is duly organized and existing and in good standing under the laws
of the jurisdiction of its organization and qualified to do business in any
state where the failure to be so qualified reasonably could be expected to
result in a Material Adverse Change.


 


(b)           Set
forth on Schedule 5.5(b) to the Interim DIP Credit Agreement is a
complete and accurate description of the authorized capital Stock of Parent, by
class, as of the Interim Facility Effective Date, and a description of the
number of shares of each such class that are issued and outstanding as of the
Interim Facility Effective Date.  As of
the Interim Facility Effective Date, other than relating to the Convertible
Subordinated Notes and other than as described on Schedule 5.5(b) to
the Interim DIP Credit Agreement, there are no subscriptions, options,
warrants, or calls relating to any shares of Parent’s capital Stock, including
any right of conversion or exchange under any outstanding security or other
instrument.  Other than relating to the
Convertible Subordinated Notes and other than as described on Schedule 5.5(b) to
the Interim DIP Credit Agreement, Parent is not subject to any obligation
(contingent or otherwise) to repurchase or otherwise acquire or retire any
shares of its capital Stock or any security convertible into or exchangeable
for any of its capital Stock.


 


22

















 


(c)           Set
forth on Schedule 5.5(c) to the Interim DIP Credit Agreement is a
complete and accurate description of the authorized capital Stock of Borrower,
by class, and a description of the number of shares of each such class that are
issued and outstanding.  There are no
subscriptions, options, warrants, or calls relating to any shares of Borrower’s
capital Stock, including any right of conversion or exchange under any
outstanding security or other instrument. 
Borrower is not subject to any obligation (contingent or otherwise) to
repurchase or otherwise acquire or retire any shares of its capital Stock or
any security convertible into or exchangeable for any of its capital
Stock.  Set forth on Schedule 5.5(c) to
the Interim DIP Credit Agreement or as otherwise notified to the Agent pursuant
to Section 6.15, is a complete and accurate list of Borrower’s
direct and indirect Subsidiaries, showing: (i) the jurisdiction of their
organization, (ii) the number of shares of each class of common and preferred
Stock authorized for each of such Subsidiaries, and (iii) the number and
the percentage of the outstanding shares of each such class owned directly or
indirectly by Borrower.  Borrower has no
joint ventures or similar arrangements with any Person.  All of the outstanding capital Stock of each
such Subsidiary has been validly issued and is fully paid and non-assessable.


 


(d)           Except
as set forth on Schedule 5.5(d) to the Interim DIP Credit
Agreement, there are no subscriptions, options, warrants, or calls relating to
any shares of Borrower’s Subsidiaries’ capital Stock, including any right of
conversion or exchange under any outstanding security or other instrument.  Neither Borrower nor any of its Subsidiaries
is subject to any obligation (contingent or otherwise) to repurchase or
otherwise acquire or retire any shares of Borrower’s Subsidiaries’ capital
Stock or any security convertible into or exchangeable for any such capital
Stock.


 


(e)           (i)            No Loan Party is in violation of any
law, statute, regulation, ordinance, judgment, order, or decree applicable to
it (other than Environmental Law which is addressed in Section 5.11
below), which violation could reasonably be expected to cause a Material
Adverse Change.


 


(ii)           No
Loan Party has violated any law in any respect or failed to obtain any license,
permit, franchise or other authorization from any Governmental Authority (other
than pursuant to any Environmental Law which is addressed in Section 5.11
below) necessary for the ownership of any of its Oil and Gas Properties or the
conduct of its business which failure could not reasonably be expected to cause
a Material Adverse Change.  Except as
could not reasonably be expected to cause a Material Adverse Change, the Oil
and Gas Properties of the Loan Parties (and assets and properties utilized
therewith) have been maintained, operated and developed in a good and
workmanlike manner and in conformity with all applicable laws and all rules,
regulations and orders of all Governmental Authorities having jurisdiction
(other than pursuant to any Environmental Law which is addressed in Section 5.11
below) and in conformity with the provisions of all leases, subleases or other
contracts comprising a part of the Hydrocarbon Interests and other contracts
and agreements forming a part of such Oil and Gas Properties, except such
non-conformity resulting in defaults the enforcement of which is stayed by
virtue of the filing of the Chapter 11 Cases; specifically in this connection, (A) no
Oil and Gas Property of any Loan Party is subject to having allowable
production reduced below the full and regular allowable production (including
the maximum permissible tolerance) because of any overproduction (whether or
not the same was permissible at the time) prior to the Interim Facility
Effective Date and (B) none of the wells comprising a part of any Oil and
Gas Property (or assets and properties utilized therewith) is deviated from the
vertical, except to the extent such deviation could not reasonably be expected
to result in a Material Adverse Change, and such wells are, in fact, bottomed
under and are producing from, and the well bores are wholly within, such Oil
and Gas Properties (or in the case of wells located on Real Property utilized
therewith, such utilized Real Property) covered by the leases.


 


23

















 


5.6                                 Due Authorization; No Conflict.


 


(a)           The
execution, delivery, and performance by Borrower of this Agreement and the Loan
Documents to which it is a party have been duly authorized by all necessary
action on the part of Borrower and Borrower, subject to the entry and terms of
the Final Bankruptcy Court Order, has full power and authority to own and hold
under lease its property and to conduct its business substantially as currently
conducted by it.


 


(b)           The
execution, delivery, and performance by Borrower of this Agreement and the
other Loan Documents to which it is a party do not and will not (i) violate
any provision of federal, state, or local law or regulation applicable to Borrower,
the Governing Documents of Borrower, or any order, judgment, or decree of any
court or other Governmental Authority binding on Borrower, (ii) conflict
with, result in a breach of, or constitute (with due notice or lapse of time or
both) a default under any Material Contract of Borrower (other than defaults,
the enforcement of which will be stayed by virtue of the filing of the Chapter
11 Cases) or require any approval or consent of any Person under any Material
Contract of Borrower, other than consents or approvals that have been obtained
and that are still in force and effect, (iii) result in or require the
creation or imposition of any Lien of any nature whatsoever upon any properties
or assets of Borrower, other than Permitted Liens, or (iv) require any
approval of Borrower’s interest holders, other than approvals that have been
obtained and that are still in force and effect.


 


(c)           Except
for the Bankruptcy Court Orders, no authorization, approval or other action by,
and no notice to or filing with, any Governmental Authority is required for (i) the
execution, delivery and performance by Borrower of this Agreement and the other
Loan Documents to which it is a party, (ii) the pledge or grant by
Borrower or any or its Subsidiaries of the Liens created in favor of Agent,
Bank Product Providers and the Lenders pursuant to this Agreement or any of the
Loan Documents or (iii) the exercise by Agent of any rights or remedies in
respect of any Collateral (whether specifically granted or created pursuant to
this Agreement, any of the Loan Documents or created or provided for by
applicable law), except as may be required, in connection with the disposition
of any pledged Collateral, by laws generally affecting the offering and sale of
securities.


 


(d)           Subject
to the entry of the Bankruptcy Court Orders, this Agreement and the other Loan
Documents to which Borrower is a party, and all other documents contemplated
hereby and thereby, when executed and delivered by Borrower, will be the
legally valid and binding obligations of Borrower, enforceable against Borrower
in accordance with their respective terms, except as enforcement may be limited
by equitable principles or by bankruptcy, insolvency, reorganization,
moratorium, or similar laws relating to or limiting creditors’ rights
generally.


 


(e)           [Intentionally
Deleted]


 


(f)            The
execution, delivery, and performance by Parent and each Debtor Guarantor of the
Loan Documents to which it is a party have been duly authorized by all
necessary action on the part of Parent and each Debtor Guarantor, and Parent
and each Debtor Guarantor, subject to the entry and terms of the Bankruptcy
Court Orders, has full power and authority to own and hold under lease its
property and to conduct its business substantially as currently conducted by
it.


 


(g)           The
execution, delivery, and performance by Parent and each Debtor Guarantor of the
Loan Documents to which it is a party do not and will not (i) violate any
provision of federal, state, or local law or regulation applicable to Parent or
such Debtor Guarantor, the Governing Documents of Parent or such Debtor
Guarantor, or any order, judgment, or decree of any court or other Governmental
Authority binding on Parent or such Debtor Guarantor, (ii) conflict with,
result in a breach of, or constitute (with due notice or lapse of time or both)
a default under any Material Contract of Parent or such Debtor Guarantor (other
than with respect to Material Contracts of such Debtor Guarantor, defaults, the
enforcement of which will be stayed by virtue of the filing of the Chapter 11
Cases) or require any approval or consent of any Person under any Material
Contract of


 


24

















 


Parent
or such Debtor Guarantor, other than consents or approvals that have been obtained
and that are still in force and effect, (iii) result in or require the
creation or imposition of any Lien of any nature whatsoever upon any properties
or assets of Parent or such Debtor Guarantor, other than Permitted Liens, or (iv) require
any approval of Parent’s or such Debtor Guarantor’s interest holders other than
approvals that have been obtained and that are still in force and effect.


 


(h)           Except
for the Final Bankruptcy Court Order, no authorization, approval or other
action by, and no notice to or filing with, any Governmental Authority is
required for (i) the execution, delivery and performance by each Debtor
Guarantor of this Agreement and the other Loan Documents to which such Debtor
Guarantor is a party, (ii) the pledge or grant each Debtor Guarantor or
any or its Subsidiaries of the Liens created in favor of Agent, Bank Product
Providers and the Lenders pursuant to this Agreement or any of the Loan
Documents or (iii) the exercise by Agent of any rights or remedies in
respect of any Collateral (whether specifically granted or created pursuant to
this Agreement, any of the Loan Documents or created or provided for by
applicable law), except as may be required, in connection with the disposition
of any pledged Collateral, by laws generally affecting the offering and sale of
securities


 


(i)            Other
than the filing of financing statements, the recordation of Mortgages, and
other filings or actions necessary to perfect Liens granted to Agent in the
Collateral owned by Parent, no authorization, approval or other action by, and
no notice to or filing with, any Governmental Authority is required for (i) the
execution, delivery and performance by Parent of this Agreement and the other
Loan Documents to which it is a party, (ii) the pledge or grant by Parent
of the Liens created in favor of Agent, Bank Product Providers and the Lenders
pursuant to this Agreement or any of the Loan Documents or (iii) the
exercise by Agent of any rights or remedies in respect of any Collateral owned
by Parent (whether specifically granted or created pursuant to this Agreement,
any of the Loan Documents or created or provided for by applicable law), except
as may be required, in connection with the disposition of any pledged
Collateral, by laws generally affecting the offering and sale of securities.


 


(j)            Subject
to the entry of the Final Bankruptcy Court Order, the Loan Documents to which
each Debtor Guarantor is a party, and all other documents contemplated hereby
and thereby, when executed and delivered by such Debtor Guarantor, will be the
legally valid and binding obligations of such Debtor Guarantor, enforceable
against such Debtor Guarantor in accordance with their respective terms, except
as enforcement may be limited by equitable principles or by bankruptcy,
insolvency, reorganization, moratorium, or similar laws relating to or limiting
creditors’ rights generally.


 


(k)           The
Loan Documents to which Parent is a party, and all other documents contemplated
hereby and thereby, when executed and delivered by Parent, will be the legally
valid and binding obligations of Parent, enforceable against Parent in
accordance with their respective terms, except as enforcement may be limited by
equitable principles or by bankruptcy, insolvency, reorganization, moratorium,
or similar laws relating to or limiting creditors’ rights generally.


 


(l)            No
Default or Event of Default exists.


 


5.7                                 Litigation.  Other
than (x) those matters disclosed on Schedule 5.7 to the Interim DIP
Credit Agreement, (y) actions, suits and proceedings, the collection of
which are stayed by the Chapter 11 Cases and (z) other than matters
arising after the Interim Facility Effective Date that reasonably could not be
expected to result in a Material Adverse Change, there are no actions, suits,
or proceedings pending or, to the best knowledge of the Loan Parties,
threatened against any Loan Party.


 


25

















 


5.8                                 No Material Adverse Change.


 


(a)           All
of Parent’s consolidated financial statements that have been delivered by
Borrower to the Lender Group have been prepared in accordance with GAAP
(except, in the case of unaudited financial statements, for the lack of
footnotes and being subject to year-end audit adjustments) and present fairly
in all material respects the Parent’s and its consolidated Subsidiaries’
financial condition as of the date thereof and results of operations for the
period then ended.  Since the Filing
Date, there has not been a Material Adverse Change.


 


(b)           The
Projections, including any Projections delivered on or before the Interim
Facility Effective Date, when submitted to Agent as required pursuant to the
Loan Documents represent Parent’s and Borrower’s good faith estimate of the
future performance, expenses and receivables of Parent and its consolidated
Subsidiaries for the periods set forth therein. 
The Projections have been prepared on the basis of the assumptions set
forth therein, which Parent and Borrower believe were fair and reasonable in
light of current and reasonably foreseeable business conditions at the time
submitted to Agent.


 


5.9                                 Fraudulent Transfer.  No transfer of property is being made by any Loan Party and no
obligation is being incurred by any Loan Party in connection with the
transactions contemplated by this Agreement or the other Loan Documents with
the intent to hinder, delay, or defraud either present or future creditors of
any Loan Party.


 


5.10                           Employee Benefits.  No
Loan Party, and no ERISA Affiliate of any Loan Party, maintains or contributes
to any Pension Plan, Multiemployer Plan or other Benefit Plan.


 


5.11                           Environmental Condition. 
Except as set forth on Schedule 5.11 to the Interim DIP Credit
Agreement, or after the date of this Agreement otherwise disclosed in writing
pursuant to Section 6.12 by the Loan Parties to the Agent, and
except as would not reasonably be expected to cause a Material Adverse Change:


 


(a)           each
Loan Party’s and its business and operations, including such business and
operations at any Real Property and any former business and operations at real
property formerly owned, leased, operated, managed, or occupied by such Loan
Party or any of its predecessors in interest (the “Former Real Property”)
are and have been in compliance with, and no Loan Party has liability under,
any applicable Environmental Laws;


 


(b)           the
Loan Parties have obtained all permits required for the conduct of their
business and operations, and the ownership, operation and use of the Real
Property, under all applicable Environmental Laws (the “Environmental
Permits”).  The Loan Parties are in compliance
with the terms and conditions of such Environmental Permits, and all such
Environmental Permits are valid and in good standing.  No expenditures or operational adjustments,
other than those in the ordinary course of business, are reasonably anticipated
to be required to remain in compliance with the terms and conditions of, or to
renew or modify such Environmental Permits;


 


(c)           there
has been no Release or threatened Release or any handling, management,
generation, treatment, storage or disposal of Hazardous Materials on, at, under
or from any Real Property or Former Real Property that has resulted in, or is
reasonably likely to result in, a material Environmental Liability for any Loan
Party;


 


(d)           there
is no Environmental Action or Environmental Liability pending or, to the
knowledge of any Loan Party, threatened against any Loan Party, or relating to
the operations of any Loan Party, and, to the knowledge of each Loan Party,
there are no actions, activities, circumstances, conditions, events or incidents
that are reasonably likely to form the basis of such an Environmental Action or
Environmental Liability against any Loan Party, including with respect to
operations at any Real Property and former operations at any Former Real
Property;


 


26

















 


(e)           to
the knowledge of the Loan Parties, no person with an indemnity, contribution or
other obligation to any Loan Party relating to compliance with or liability
under Environmental Law is in default with respect to any such indemnity,
contribution or other obligation;


 


(f)            no
Loan Party is conducting, financing or is obligated to perform any Response
Action or otherwise incur any expense under Environmental Law pursuant to any
Environmental Action or agreement by which it is bound or has expressly assumed
by contract or agreement;


 


(g)           no
Real Property or facility owned, operated or leased by any Loan Party and, to
the knowledge of each Loan Party, no Former Real Property is (i) listed or
proposed for listing on the National Priorities List as defined in and
promulgated pursuant to the Comprehensive Environmental Response, Compensation
and Liability Act, 42 U.S.C. §9601 et seq. (“CERCLA”) or (ii) included
on any similar list maintained by any Governmental Authority that indicates
that any Loan Party has or may have an obligation to undertake any Response
Action;


 


(h)           no
Environmental Lien has been recorded with respect to any owned Real Estate
Property or, to the knowledge of each Loan Party, with respect to any facility
leased or operated by each Loan Party, and to the knowledge of each Loan Party,
no Environmental Lien has been threatened with respect to any Real Property;


 


(i)            each
Loan Party has made available to the Lenders all records and files in the
possession, custody or control of, or otherwise reasonably available to, such
Loan Party concerning compliance with or liability or obligation under
Environmental Law, including those concerning the environmental condition of
the Real Property or the existence of Hazardous Materials at the Real Property
or Former Real Property; and


 


(j)            the
representations and warranties set forth in this Section 5.11 shall
be the sole representations and warranties of the Loan Parties under the Loan
Documents relating to environmental matters.


 


5.12                           Intellectual Property. 
Except with respect to Seismic Licenses, the Loan Parties own, or hold
licenses in, all trademarks, trade names, copyrights, patents, patent rights,
and licenses that are necessary to the conduct of its business as currently
conducted, and attached to the Interim DIP Credit Agreement as Schedule 5.12
to the Interim DIP Credit Agreement (as updated from time to time) is a true,
correct, and complete listing of all material patents, patent applications,
trademarks, trademark applications, copyrights, and copyright registrations as
to which each Loan Party is the owner or is an exclusive licensee; provided,
however, the Loan Parties may amend such Schedule 5.12 to add
additional property so long as such amendment occurs by written notice to Agent
not less than 10 days after the date on which any such Loan Party acquires any
such property after the Interim Facility Effective Date.


 


5.13                           Leases.  The
Loan Parties enjoy peaceful and undisturbed possession under all leases
covering any Proved Oil and Gas Property and any other Real Property material
to their business and to which they are parties or under which they are
operating, and all of such leases are valid and subsisting and no material
default by any Loan Party exists under any of them, except any defaults of
Borrower and the Debtor Guarantors, the enforcement of which is stayed by
virtue of the filing of the Chapter 11 Cases. 
Except as set forth on Schedule 5.13 to the Interim DIP Credit
Agreement, there are no leases, subleases, contracts or other operating
agreements that allocate operating expenses to any Loan Party in excess of its
working interest as reflected in the most recent Reserve Report in the
particular Oil and Gas Property subject to such lease, the sublease, contract
or other operating agreement.


 


27
















 


5.14                           Deposit Accounts and Securities
Accounts.  Set forth on Schedule 5.14 to the
Interim DIP Credit Agreement is a listing of all of the Loan Parties’ Deposit
Accounts and Securities Accounts, including, with respect to each bank or
securities intermediary (a) the name and address of such Person, and (b) the
account numbers of the Deposit Accounts or Securities Accounts maintained with
such Person.  So long as no Default or
Event of Default has occurred and is continuing, the Loan Parties may amend
such Schedule 5.14 to add or replace a Deposit Account or Securities
Account; provided, however, that (a) such prospective bank
or securities intermediary shall be reasonably satisfactory to Agent, and (b) prior
to the time of the opening of such Deposit Account or Securities Account, such
Loan Party and such prospective bank or securities intermediary shall have
executed and delivered to Agent a Control Agreement.


 


5.15                           Complete Disclosure.  None
of the factual information (taken as a whole) furnished by or on behalf of the
Loan Parties in writing to Agent or any Lender (including all information
contained in the Schedules hereto or in the other Loan Documents) for purposes
of or in connection with this Agreement, the other Loan Documents, or any
transaction contemplated herein or therein contains, and none of the other
factual information (taken as a whole) hereafter furnished by or on behalf of
any Loan Party in writing to Agent or any Lender will contain, any material
misstatement of fact or omits, or will omit, to state any fact necessary to
make such information not misleading in any material respect at such time in
light of the circumstances under which such information was provided, it being
understood that the factual information referenced in this sentence shall not
include the Projections or other forecasts or forward looking statements
provided to the Agent or the Lender Group. 
On the Interim Facility Effective Date, the Projections provided
represent, and as of the date on which any other projections are delivered to
Agent, such additional projections represent, Borrower’s good faith estimate of
its and its Subsidiaries future performance, expenses and receivables for the
periods covered thereby based upon assumptions believed by Borrower to be
reasonable at the time of the delivery thereof to Agent (it being understood
that such projections and forecasts are subject to uncertainties and
contingencies, many of which are beyond the control of Borrower and its
Subsidiaries and no assurances can be given that such projections or forecasts
will be realized and further understood that projections concerning reserves or
production volumes attributable to the Oil and Gas Properties and production
and cost estimates contained in the projections are necessarily based upon
professional opinions, estimates and projections and that Borrower and the
Subsidiaries do not warrant that such opinions, estimates and projections will
ultimately prove to have been accurate, provided that all such
projections shall be prepared in good faith based upon assumptions believed by
Borrower to be reasonable at the time of the delivery thereof to Agent and
consistent with industry standards).


 


5.16                           Indebtedness.  Set
forth on Schedule 5.16 to the Interim DIP Credit Agreement is a true and
complete list of all Indebtedness of the Loan Parties (other than the
Pre-Petition Credit Facility) outstanding immediately prior to the Interim
Facility Effective Date that is to remain outstanding after the Interim
Facility Effective Date and such Schedule accurately sets forth the aggregate
principal amount of such Indebtedness as of the Interim Facility Effective
Date.


 


5.17                           Material Contracts.  As of
the Interim Facility Effective Date, set forth on Schedule 5.17 to the
Interim DIP Credit Agreement is a list of all Material Contracts of the Loan
Parties.  The Loan Parties have complied
with their obligations pursuant to Section 6.17.  Except for matters which, either individually
or in the aggregate, could not reasonably be expected to result in a Material
Adverse Change, and except as set forth on Schedule 5.17 to the Interim
DIP Credit Agreement, each Material Contract (other than those that have
expired at the end of their normal terms) (a) is in full force and effect,
and is binding upon and enforceable against each Loan Party, as applicable,
and, to each of the Loan Party’s knowledge, each other Person that is a party
thereto in accordance with its terms, (b) has not been otherwise amended
or modified (other than amendments or modifications permitted by Section 7.7(c))
and (c) is not in default due to the action or inaction of any Loan Party,


 


28

















 


except
any defaults by Borrower or a Debtor Guarantor, the enforcement of which is
stayed by virtue of the filing of the Chapter 11 Cases.


 


5.18                           Government Regulation.  No
Loan Party is an “investment company” or an “affiliated person” of, or “promoter”
or “principal underwriter” for, an “investment company,” as such terms are
defined in the Investment Company Act of 1940 as amended.  No Loan Party is subject to regulation under
the Public Utility Holding Company Act of 2005, the Federal Power Act, or any
other federal or state statute that restricts or limits its ability to incur
Indebtedness or to perform its obligations hereunder. The Advances and the
other transactions contemplated hereunder, the application of the proceeds
thereof and repayment thereof comply in all material respects with any such
statute or any rule, regulation or order issued by the SEC.


 


5.19                           Foreign Assets Control
Regulations, Etc.


 


(a)           No Loan Party is in violation in any
material respect of the Trading with the Enemy Act, as amended, or any of the
foreign assets control regulations of the United States Treasury Department (31
CFR, Subtitle B, Chapter V, as amended) or any enabling legislation or
executive order relating thereto.


 


(b)           No
Loan Party (i) is, or will become, a Person described or designated in the
Specially Designated Nationals and Blocked Persons List of the Office of Foreign
Assets Control or in Section 1 of the Anti-Terrorism Order or (ii) engages
or will engage in any dealings or transactions, or is or will be otherwise
associated, with any such Person.  The
Loan Parties are in compliance, in all material respects, with the USA Patriot
Act.


 


(c)           No
part of the proceeds from the loans made hereunder will be used by any Loan
Party, directly or indirectly, for any payments to any governmental official or
employee, political party, official of a political party, candidate for
political office, or anyone else acting in an official capacity, in order to
obtain, retain or direct business or obtain any improper advantage, in
violation of the United States Foreign Corrupt Practices Act of 1977, as
amended.


 


5.20                           Insurance and Bonds.  Schedule
5.20 to the Interim DIP Credit Agreement lists, as of the Interim Facility
Effective Date, all insurance policies of any nature maintained for current
occurrences by each Loan Party, as well as a summary of the terms of each such
policy.  No Loan Party is in default of
any obligation under any such policy, except any default of Borrower or a
Debtor Guarantor, the enforcement of which is stayed by virtue of the filing of
the Chapter 11 Cases.  Except as set
forth on Schedule 5.20 to the Interim DIP Credit Agreement, all such
policies are in full force and effect, all premiums with respect thereto
covering all periods up to and including the Interim Facility Effective Date
have been paid, and no notice of cancellation or termination has been received
with respect to any such policy.  Schedule
5.20 to the Interim DIP Credit Agreement contains an accurate and complete
description, as of the Interim Facility Effective Date, of all performance
bonds related to operations on or pertaining to the Oil and Gas Properties of
the Loan Parties.  Such bonds and
insurance policies comply with all requirements of law and all agreements to
which the each of the Loan Parties is a party, except to the extent that such
noncompliance cannot reasonably be expected to cause a Material Adverse Change;
are valid, outstanding and enforceable policies; provide adequate coverage in
at least such amounts and against at least such risks (but including in any
event public liability) as are required by Governmental Authorities and/or
usually insured or bonded against in the same general area by companies engaged
in the same or a similar business for the assets and operations of the Loan
Parties in the same or similar locations; will remain in full force and effect
through the respective dates set forth in Schedule 5.20 to the Interim
DIP Credit Agreement without the payment of additional premiums except as set
forth on such Schedule 5.20; and will not in any way be affected by, or
terminate or lapse by reason of, the transactions contemplated by this
Agreement.  No Loan Party has been
refused any bonds or insurance with respect to its assets or


 


29

















 


operations,
nor has its coverage been limited below usual and customary bond or policy
limits, by any bonding company or insurance carrier to which it has applied for
any such bond or insurance or with which it has carried insurance during the
three years prior to the Interim Facility Effective Date.  To the extent any insurance policy has a cash
surrender, rebate or similar value, there is no restriction, Lien or other
encumbrance affecting any Loan Party’s receipt or claim of such value, and no
obligation or agreement to pay, directly or indirectly, such value to any other
party exists other in favor of the Lenders.


 


5.21                           Government Contracts. 
Except as set forth in Schedule 5.21 to the Interim DIP Credit
Agreement and other than leases and other agreements (but not excluding
agreements pursuant to which or by which receivables are created in favor of
any Loan Party) relating to Oil and Gas Properties, no Loan Party is a party to
any contract or agreement with any Governmental Authority and no Loan Party’s
Accounts are subject to the Federal Assignment of Claims Act, as amended  (31 U.S.C. Section 3727).


 


5.22                           Taxes.  All
tax returns, reports and statements, including information returns, required by
any Governmental Authority to be filed by the Loan Parties have been filed with
the appropriate Governmental Authority (and all such returns, reports and
statements accurately reflect in all material respects all liabilities of each
respective Loan Party for the periods covered thereby) and all charges have
been paid prior to the date on which any material fine, penalty, interest or
late charge may be added thereto for nonpayment thereof (or any such fine,
penalty, interest, late charge or loss has been paid), excluding charges or
other amounts that are subject to a Permitted Protest.  Proper and accurate amounts have been
withheld by each Loan Party from its respective employees for all periods in
full and complete compliance with all applicable federal, state, local and
foreign law and such withholdings have been timely paid to the respective
Governmental Authorities.  Schedule
5.22 to the Interim DIP Credit Agreement sets forth as of the Interim
Facility Effective Date those taxable years for which any Loan Party’s tax
returns are currently being audited by the IRS or any other applicable
Governmental Authority and any assessments or threatened assessments in
connection with such audit, or otherwise currently outstanding.  As of the Interim Facility Effective Date and
except as set forth on Schedule 5.22 to the Interim DIP Credit
Agreement, there is no action, suit, proceeding, investigation, audit or claim
now pending or threatened by any authority regarding any taxes relating to any
Loan Party, which, either individually or in the aggregate, could reasonably be
expected to cause a Material Adverse Change or to result in a material
liability to any Loan Party.  Except as
described on Schedule5.22 to the Interim DIP Credit Agreement, no Loan
Party has executed or filed with the IRS or any other Governmental Authority
any agreement or other document extending, or having the effect of extending,
the period for assessment or collection of any charges or other amounts.  No Loan Party nor its respective predecessors
(or to any such Loan Party’s knowledge, as a transferee) is liable for any
charges or other amounts under any tax agreement (including any tax sharing
agreements).  As of the Interim Facility
Effective Date, no Loan Party has agreed or has been requested to make any
adjustment under IRC Section 481(a), by reason of a change in accounting
method or otherwise, which could cause a Material Adverse Change.


 


5.23                           Gas, Imbalances, Prepayments.  As of
the date hereof, except as set forth on Schedule 5.23 to the Interim DIP
Credit Agreement or on the most recent certificate delivered pursuant to Section 6.20(c),
on a net basis there are no gas imbalances, take or pay or other similar
arrangements or any prepayment with respect to any of the Oil and Gas
Properties of any Loan Party, which would require such Person either to make
cash settlements for such production or require such Loan Party to deliver Hydrocarbons
produced from the Oil and Gas Properties at some future time in any case
without then or thereafter receiving full payment therefor exceeding the amount
permitted pursuant to Section 7.17.


 


5.24                           Swap Agreements.  Schedule
5.24 to the Interim DIP Credit Agreement sets forth, as of the Interim
Facility Effective Date, a true and complete list of all Swap Agreements
(including


 


30

















 


any
commodity price swap agreements, forward agreements or contracts of sale which
provide for prepayment for deferred shipment or delivery of Hydrocarbons or
other commodities) of the Loan Parties, the material terms thereof (including
the type, term, effective date, termination date and notional amounts or
volumes), all credit support agreements relating thereto (including any margin
required or supplied), and the counterparty to each such agreement.


 


5.25                           Location of Real Property and Leased
Premises.


 


(a)           Schedule
5.25 to the Interim DIP Credit Agreement lists completely and correctly as
of the Interim Facility Effective Date all material Oil and Gas Properties that
are Real Property whether leased or owned by the Loan Parties and the lands
covered or respective addresses (if any), as applicable, counties and states
thereof.


 


(b)           Each
of the Loan Parties has Defensible Title to all of its Proved Oil and Gas
Properties set forth on Schedule 5.25 to the Interim DIP Credit
Agreement which constitute Real Property and good and indefeasible title to all
of its Proved Oil and Gas Properties which constitute personal property, except
for (i) such imperfections of title which do not in the aggregate
materially detract from the value thereof to, or the use thereof in, the
business of such Loan Party and (ii) Permitted Liens.  The quantum and nature of the interest of the
Loan Parties in and to the Oil and Gas Properties as set forth in the most
recent Reserve Report, as the case may be, includes the entire interest of the
Loan Parties in such Oil and Gas Properties as of the date of such applicable
Reserve Report delivered by Borrower to Agent pursuant to Section 6.20,
as the case may be, and are complete and accurate in all material respects as
of the date of such applicable Reserve Report, as the case may be; and there
are no “back-in” or “reversionary” interests held by third parties which could
materially reduce the interest of any Loan Party in such Oil and Gas Properties
except as expressly set forth in the most recent Reserve Report, as the case
may be.  Except as set forth on Schedule
5.25 to the Interim DIP Credit Agreement, the ownership of the Oil and Gas
Properties by a Loan Party shall not in any material respect obligate any such
Loan Party to bear the costs and expenses relating to the maintenance,
development or operations of any such Oil and Gas Property in an amount in
excess of the working interest of record of such Loan Party in each Oil and Gas
Property set forth in the most recent Reserve Report, as the case may be.


 


(c)           The
Loan Parties’ marketing, gathering, transportation, processing and treating
facilities and equipment, together with any marketing, gathering,
transportation, processing and treating contracts in effect between and/or
among any Loan Party and any other Person, are or are reasonably anticipated to
be sufficient to gather, transport, process and/or treat, volumes of production
of Hydrocarbons from the Oil and Gas Properties of the Loan Parties, as
applicable, that are contemplated by the most recent Reserve Report, as the
case may be.


 


5.26                           Nature of Business.  No
Loan Party is engaged in any business other than the Oil and Gas Business
within the continental United States and Canada.


 


5.27                           Seismic Licenses.  To
the extent not prohibited by the terms thereof, or any confidentiality
agreement, Schedule 5.27 to the Interim DIP Credit Agreement identifies
all of the license agreements relating to the performance of seismic
exploration on the Oil and Gas Properties (“Seismic Licenses”) to which
the each of the Loan Parties are party as of the date hereof.  With respect to the Seismic Licenses: (a) all
Seismic Licenses are in effect and have not expired or terminated; (b) no
Loan Party is in material breach or material default, and there has occurred no
event, fact, or circumstance that, with the lapse of time or the giving of
notice, or both, would constitute such a material breach or material default by
any Loan Party, as applicable, with respect to the terms of any Seismic
License, except any insolvency-related default by Borrower or a Debtor
Guarantor, the enforcement of which is stayed by virtue of the filing of the
Chapter 11 Cases; and (c) no Loan Party nor, to the knowledge of any Loan
Party, any other party to any Seismic License has given


 


31

















 


written
notice of any action to terminate, cancel, rescind, or procure a judicial
reformation of any Seismic License or any provision thereof.


 


5.28                           Marketing of Production. 
Except for contracts listed and in effect on the date hereof on Schedule
5.28 to the Interim DIP Credit Agreement, and thereafter either disclosed
in writing to Agent or included in the most recently delivered Reserve Report
(with respect to all of which contracts Borrower represents that it, Parent and
its Subsidiaries are receiving a price for all production sold thereunder which
is computed substantially in accordance with the terms of the relevant contract
and are not having deliveries curtailed substantially below the subject
Property’s delivery capacity), no material agreements exist which are not
cancelable on sixty (60) days notice or less without penalty or detriment for
the sale of production from any Loan Party’s Hydrocarbons (including, without
limitation, calls on or other rights to purchase, production, whether or not
the same are currently being exercised) that (a) pertain to the sale of
production at a fixed price and (b) have a maturity or expiry date of more
than six (6) months from the date hereof. 
All proceeds from the sale of any Loan Party’s Hydrocarbon Interests
from its Oil and Gas Properties will be paid in full to the applicable party by
the purchaser thereof on a timely basis, and none of such proceeds are
currently being held in suspense by such purchaser or any other Person.  Except as set forth in Schedule 5.28
to the Interim DIP Credit Agreement, none of the Oil and Gas Properties of the
Loan Parties are subject to any contractual or other arrangement whereby
payment for production therefrom is to be deferred for a substantial period of
time after the month in which such production is delivered (i.e., in the case
of oil, not in excess of sixty (60) days, and in the case of gas, not in excess
of ninety (90) days).


 


5.29                           Senior Indebtedness.  The
Obligations constitute “Senior Indebtedness” under the terms of the Subordination
and Intercreditor Agreement, the Loan Documents constitute “Bank Loan Documents”
, the Lenders and Agent constitute “Senior Lenders” and the Bank Product
Providers constitute “Senior Affiliates” each under the terms of the
Subordination and Intercreditor Agreement.


 


5.30                           Administrative Priority; Lien Priority.


 


(a)           Subject
to the terms of the Final Bankruptcy Court Order, after the Final Bankruptcy
Court Order Entry Date, the Obligations of the Loan Parties will constitute
allowed administrative expenses in the Chapter 11 Cases, having priority in
payment over all other administrative expenses of the kind specified in
Sections 503(b) and 507(b) of the Bankruptcy Code, subject only to
the prior payment of Carve-Out Expenses to the extent set forth in the Agreed
Administrative Expense Priorities.


 


(b)           Upon
entry of the Final Bankruptcy Court Order, Agent’s Liens and security interests
of Agent on the Collateral referred to in Section 3.1(a) hereof
shall be valid and perfected Liens with the priority specified in the Final
Bankruptcy Court Order.


 


(c)           On
or after the Interim Bankruptcy Court Order Entry Date and prior to the Final
Bankruptcy Court Order Entry Date, the Interim Bankruptcy Court Order is in
full force and effect, and has not been reversed, modified, amended, stayed or
vacated absent the written consent of Agent, the Lenders and Borrower, and
after the Final Bankruptcy Court Order Entry Date, the Final Bankruptcy Court
Order is in full force and effect, and has not been reversed, modified, amended,
stayed or vacated absent the written consent of Agent, the Lenders and
Borrower.


 


5.31                           Appointment of Trustee or
Examiner; Liquidation.  No order has been entered in any Chapter 11
Case (a) for the appointment of a Chapter 11 trustee, (b) for the appointment
of an examiner with enlarged powers (beyond those set forth in Sections 1106(a)(3) and
(4) of the Bankruptcy Code) under Section 1106(b) of the
Bankruptcy Code or (c) to convert any Chapter 11 Case to a Chapter 7 case
or to dismiss any Chapter 11 Case.


 


32

















 


5.32                           Performance of Agreements.  Storm
Cat Energy (USA) Operating Corporation is not in default of any of its
obligations under any of the following agreements:


 


(a)           Managed
Services Contract dated May 1, 2005, by and between Storm Cat Energy (USA)
Operating Corporation and Baker/MO Services, Inc., as amended by a letter
dated October 29, 2008;


 


(b)           Master
Services Contract dated July 8, 2007, by and between Storm Cat Energy
(USA) Operating Corporation and TXD Services, as amended by a letter dated October 29,
2008; and


 


(c)           Master
Services Contract dated October 15, 2007, by and between Storm Cat Energy
(USA) Operating Corporation and Gossett Welding Inspections, as amended by a
letter dated October 29, 2008.


 


6.                                       AFFIRMATIVE COVENANTS.


 


Each
Loan Party covenants and agrees, until termination of all of the Commitments,
the termination or expiration of all outstanding Letters of Credit, and
repayment in full of the Obligations, to do all of the following:


 


6.1                                 Accounting System. 
Maintain a system of accounting that enables Parent to produce financial
statements in accordance with GAAP and maintain records pertaining to the
Collateral in accordance with customary industry practice.


 


6.2                                 Collateral Reporting. 
Provide Agent (and if so requested by Agent, with copies for each
Lender) with each of the reports and other documents set forth on Schedule
6.2 to the Interim DIP Credit Agreement at the times specified therein.


 


6.3                                 Financial Statements, Reports, Certificates.  Deliver to Agent, with copies to each Lender, each of the financial
statements, reports, or other items set forth on Schedule 6.3 to the
Interim DIP Credit Agreement at the times specified therein.  In addition, Borrower agrees that no Subsidiary
of Borrower or Parent will have a fiscal year different from that of Borrower.


 


6.4                                 Parent and Debtor Guarantor
Reports.  Unless otherwise waived by Agent, cause
Parent and each Debtor Guarantor to deliver its annual financial statements at
the time when Borrower provides its annual audited financial statements to
Agent, but only to the extent Parent’s and such Debtor Guarantor’s financial
statements are not consolidated with Borrower’s financial statements.


 


6.5                                 Inspection. 
Permit Agent, each Lender, and each of their duly authorized
representatives or agents, at the sole cost of Borrower, to visit any of the
properties of Parent or its Subsidiaries and inspect any of the assets or books
and records of Parent or any of its Subsidiaries, to examine and make copies of
the books and records of Parent or its Subsidiaries, and to discuss the
affairs, finances, and accounts with, and to be advised as to the same by, the
officers and employees of Parent or its Subsidiaries at such reasonable times
and intervals as Agent or any such Lender may designate and, so long as no
Event of Default exists, with reasonable prior notice to Borrower; provided,
however, that so long as no Event of Default shall have occurred and be
continuing, Borrower shall not be responsible for the costs of more than two (2) inspection
visits per calendar year.


 


33

















 


6.6                                 Maintenance of Properties.  Each
Loan Party will:


 


(a)           prudently
operate its Proved Oil and Gas Properties for the production of Hydrocarbons,
operate its other Properties and, to the extent a Loan Party is not the
operator of a Property in which it has an interest, the Loan Parties shall use
commercially reasonable efforts to cause the operator to operate such Property,
in each case in accordance with the practices of the industry, in material
compliance with all applicable Material Contracts, in the case of Proved Oil
and Gas Properties in accordance with good engineering practices consistent
with industry practice except as could not reasonably be expected to result in
a Material Adverse Change, and in all cases, in compliance with all applicable
laws, including, without limitation, applicable proration requirements (other
than Environmental Laws, which are addressed in Section 6.12
below), and all other applicable laws, rules and regulations of every
other Governmental Authority from time to time constituted to regulate the
development and operation of its Oil and Gas Properties and the production and
sale of Hydrocarbons and other minerals therefrom except for the non-compliance
of which could not reasonably be expected to result in a Material Adverse
Change;


 


(b)           keep
and maintain all Property material to the conduct of its business in good
working order and condition, ordinary wear and tear and casualty events
excepted, preserve, maintain and keep in good repair and working order
(ordinary wear and tear and casualty events excepted) all of its material
Proved Oil and Gas Properties and other material Properties, including, without
limitation, all equipment, machinery, facilities, and marketing, gathering,
transportation and processing assets and, from time to time, will make all the
reasonably necessary repairs, renewals and replacements so that at all times
the state and conditions of such Oil and Gas Properties and other material
Properties will be fully preserved and maintained in a manner sufficient to
permit reasonable operation in accordance with good oilfield practices, except
to the extent a portion of such assets is no longer capable of producing
Hydrocarbons in economically reasonable amounts;


 


(c)           except
for payments subject to a Permitted Protest, promptly pay and discharge prior
to the expiration of any applicable cure period, or make efforts to cause to be
paid and discharged, all material delay rentals, royalties, expenses and
indebtedness accruing under Material Contracts affecting or pertaining to its
Proved Oil and Gas Properties in a manner that could reasonably be expected to
keep unimpaired their material rights with respect thereto and prevent any
forfeiture thereof or other default thereunder, except any default, the
enforcement of which is stayed by the Chapter 11 Cases; and


 


(d)           promptly
perform or make reasonable and customary efforts to cause to be performed, in
accordance with industry standards, the obligations required by each and all of
the Material Contracts affecting its interests in its Proved Oil and Gas
Properties and other material Properties in a manner that could reasonably be
expected to keep unimpaired, except for Permitted Liens, its rights with
respect thereto and prevent any forfeiture thereof, a default thereunder, or
any deficiency payment thereunder, except any default, the enforcement of which
is stayed by the Chapter 11 Cases and to the extent a portion of such
properties is no longer capable of producing Hydrocarbons in economically
reasonable amounts.


 


6.7                                 Taxes.  Cause
all assessments and taxes, whether real, personal, or otherwise, due or payable
by, or imposed, levied, or assessed against any Loan Party or any of their
respective assets to be paid in full, before delinquency or before the
expiration of any extension period, except to the extent that the validity of
such assessment or tax shall be the subject of a Permitted Protest.  Each Loan Party will make timely payment or
deposit of all tax payments and withholding taxes required of it by applicable
laws, including those laws concerning F.I.C.A., F.U.T.A., state disability, and
local, state, and federal income taxes, and will, upon request, furnish Agent
with proof satisfactory to Agent indicating that such Loan Party has made such
payments or deposits.


 


34

















 


6.8                                 Insurance.


 


(a)           At
Borrower’s expense, maintain insurance respecting such Loan Party’s assets
wherever located, covering loss or damage by fire, theft, explosion, and all
other hazards and risks as ordinarily are insured against by other Persons
engaged in the same or similar businesses operating in the same or similar
locations.  Each Loan Party shall
maintain public liability, and product liability insurance, as well as
insurance against larceny, embezzlement, and criminal misappropriation.  In addition, each Loan Party shall maintain
performance bonds in respect of its operations related to its respective Oil
and Gas Properties in such amounts and in such manner as is customary for
companies engaged in the same or similar business operating in the same or
similar locations.  All such policies of
insurance shall be in such amounts and with such insurance companies as are
reasonably satisfactory to Agent, it being agreed that the insurance policies
and amounts maintained by each Loan Party as of the Interim Facility Effective
Date are satisfactory.  Each Loan Party
shall deliver copies of all such policies to Agent with an endorsement naming
Agent (on behalf of the Lenders) as loss payee (under a satisfactory lender’s
loss payable endorsement) or additional insured, as appropriate.  Each policy of insurance or endorsement shall
contain a clause requiring the insurer to give not less than thirty (30) days
prior written notice to Agent in the event of cancellation of the policy for
any reason whatsoever.  During the period
of the drilling of wells and the construction of any other improvements
comprising a part of the Oil and Gas Properties of any Loan Party, such Loan
Party shall, and shall cause its contractors or subcontractors to (and shall
cause its Subsidiaries and their contractors and subcontractors to), obtain and
maintain well control insurance (including coverage for costs and redrilling)
and builder’s risk insurance, as applicable, in such form and amounts as is
customary in the industry (it being understood that such insurance is not
required with respect to drilling and construction associated with coal bed
methane wells in Wyoming)  and
worker’s compensation insurance covering all Persons employed by such Loan
Party or its or their agents or subcontractors of any tier in connection with
any construction affecting such Oil and Gas Properties, including, without
limitation, all agents and employees of such Loan Party and its and their
subcontractors with respect to whom death or bodily injury claims could be
asserted against such Loan Party thereof. 
If any Loan Party at any time or times hereafter shall fail to obtain or
maintain any of the policies of insurance required above or to pay all premiums
relating thereto, Agent may at any time or times thereafter obtain and maintain
such policies of insurance and pay such premiums and take any other action with
respect thereto which Agent deems advisable; provided that prior to a
Default or Event of Default, Agent shall not obtain any new insurance policies
without prior consultation with such Loan Party.  Agent shall have no obligation to obtain
insurance for any Loan Party or pay any premiums therefor.  By doing so, Agent shall not be deemed to
have waived any Default or Event of Default arising from any Loan Party’s
failure to maintain such insurance or pay any premiums therefor.  All sums so disbursed, including reasonable
attorneys’ fees, court costs and other charges related thereto, shall be
payable on demand by Borrower to Agent and shall be additional Obligations
hereunder secured by the Collateral.


 


(b)           Agent
reserves the right at any time upon any material change in any Loan Party’s
risk profile (including any change in laws affecting the potential liability of
such Loan Party) to require additional forms and limits of insurance to, in
Agent’s reasonable opinion, adequately protect both Agent’s and Lenders’
interests in all or any portion of the Collateral and to ensure that each Loan
Party is protected by insurance in amounts and with coverage in compliance with
the requirements of Section 6.8(a). 
If requested by Agent, each Loan Party shall deliver to Agent from time
to time a report of a reputable insurance broker, satisfactory to Agent, with
respect to its insurance policies.


 


(c)           Each
Loan Party shall give Agent prompt notice of any loss exceeding Two Hundred
Fifty Thousand Dollars ($250,000) covered by such insurance.  So long as no Event of Default has occurred
and is continuing, each Loan Party shall have the exclusive right to adjust any
losses payable under any such insurance policies.  Following the occurrence and during the


 


35

















 


continuation
of an Event of Default, Agent shall have the exclusive right to adjust any
losses payable under any such insurance policies, without any liability to any
such Loan Party whatsoever in respect of such adjustments.


 


(d)           Each
Loan Party will not, and will not suffer or permit its Subsidiaries to, take
out separate insurance concurrent in form or contributing in the event of loss
with that required to be maintained under this Section 6.8, unless
Agent is included thereon as an additional insured or loss payee under a lender’s
loss payable endorsement.  Each Loan
Party shall notify Agent promptly whenever such separate insurance is taken
out, specifying the insurer and the type and amount of insurance provided
thereunder as to the policies evidencing the same, and copies of such policies
shall be provided to Agent promptly after receipt by such Loan Party thereof.


 


6.9                                 Compliance with Laws. 
Comply with the requirements of all applicable laws, rules, regulations,
and orders of any Governmental Authority, other than Environmental Laws (which
are addressed in Section 6.12 below) and laws, rules, regulations,
and orders (other than Environmental Laws) the non-compliance with which,
individually or in the aggregate, could not reasonably be expected to result in
a Material Adverse Change.  Each Loan
Party shall obtain and maintain all licenses, permits, franchises, and
governmental authorizations (other than Environmental Permits, which are addressed
in Section 6.12 below) required to own its property and to conduct
its business as conducted on the Interim Facility Effective Date, except as
could not reasonably be expected to result in a Material Adverse Change.


 


6.10                           [Intentionally Deleted].


 


6.11                           Existence.  At
all times preserve and keep in full force and effect each Loan Party’s valid
existence and good standing and, except as could not reasonably be expected
(either individually or in the aggregate) to result in a Material Adverse
Change, any rights, franchises, permits, licenses, accreditations,
authorizations, or other approvals material to their businesses.


 


6.12                           Environmental.


 


(a)           Except
as could not reasonably be expected to result in a Material Adverse Change, (i) keep
any Real Property free of any Environmental Liens or (ii) post bonds or
other financial assurances sufficient to satisfy the obligations or liability
evidenced by such Environmental Liens, in each case, to the extent such
Environmental Liens arise from any Environmental Liability of any Loan Party;


 


(b)           Except
as could not reasonably be expected to result in a Material Adverse Change,
comply with all Environmental Laws and Environmental Permits; obtain and
maintain in full force and effect all Environmental Permits; and conduct all
actions, including Response Actions, required under any Environmental Actions
or applicable Environmental Laws, and in compliance with, the lawful
requirements of any Governmental Authority and applicable Environmental Laws;


 


(c)           Except
as could not reasonably be expected to result in a Material Adverse Change, (i) do
or cause to be taken all commercially reasonable steps necessary to prevent any
Release caused by any Loan Party, or any contractor, employee or agent thereof,
in, on, under, to or from any Real Property except in full compliance with
applicable Environmental Laws or an Environmental Permit, and (ii) ensure
that each Loan Party, and any contractor, employee or agent thereof, shall not
use, store, handle or manage Hazardous Materials in, on, under or from any Real
Property except those that are used, stored, handled and managed in compliance
with applicable Environmental Laws;


 


36
















 


(d)           Except
as could not reasonably be expected to result in a Material Adverse Change,
undertake all commercially reasonable actions, including Response Actions,
necessary, at the sole cost and expense of the Loan Parties, to address (i) any
Environmental Action and any obligations thereunder; (ii) any Release at,
from or onto any Real Property as required pursuant to Environmental Law or the
requirements of any Governmental Authority; and (iii) Environmental
Liability;


 


(e)           Diligently
pursue and use commercially reasonable efforts to cause any Person with an
indemnity, contribution or other obligation to any of the Loan Parties relating
to any Environmental Action or compliance with or liability under Environmental
Law to satisfy such obligations in full and in a timely manner; and shall not
amend in any way or waive any or all rights to such obligations without the
prior written consent of Agent, which shall not be unreasonably withheld;


 


(f)            Upon
Agent’s reasonable request, promptly provide to Agent documentation reasonably
acceptable to Agent of compliance with items (a) through (e), including,
without limitation, within 45 days following a written request of Agent, but no
more frequently than once each year unless an Event of Default exists, pursuant
to Section 6.12(g) below, or a Default caused by reason of a
breach of Sections 5.11 or 6.12 herein, provide Agent with an
environmental assessment, including where appropriate and permitted by the
applicable lease, any soil and/or groundwater sampling, prepared by an
environmental consulting firm reasonably acceptable to Agent, and in form and
substance reasonably acceptable to Agent;


 


(g)           Promptly,
but in any event within ten (10) Business Days of its obtaining knowledge
thereof, provide Agent with written notice of, and all data, information and
reports generated or prepared in connection with, any of the following: (i) an
Environmental Lien that has been filed or is threatened against the Real
Property or any personal property of any Loan Party, (ii) commencement of
any material Environmental Action or notice that a material Environmental
Action will be filed against a Loan Party, and (iii) any Release or
threatened Release in, on, under, at, from or migrating to any Real Property
owned, leased or operated by any Loan Party that requires reporting by such
Loan Party under any Environmental Law, except as otherwise pursuant to and in
compliance with the terms and conditions of an Environmental Permit or any
Environmental Law and not including any report required under the Emergency
Planning and Community Right to Know Act or similar state and local laws, (iv) any
material non-compliance with, or violation of, any Environmental Law applicable
to any Loan Party’s business or Real Property, (v) any Response Action
which could reasonably be expected to result in a material Environmental
Liability to any Loan Party, (vi) any material notice or other material
communication received by any Loan Party from any Person or Governmental
Authority relating to any material Environmental Liability of such Loan
Party.  Notwithstanding the foregoing,
nothing in this Section 6.12 shall require any Loan Party to
provide any notice or communication that would waive any applicable privilege.


 


6.13                           Disclosure Updates. 
Promptly and in no event later than five (5) Business Days after
obtaining knowledge thereof, notify Agent if any written information, exhibit,
or report furnished to the Lender Group contained, at the time it was
furnished, any untrue statement of a material fact or omitted to state any
material fact necessary to make the statements contained therein not materially
misleading in light of the circumstances in which made.  The foregoing to the contrary
notwithstanding, any notification pursuant to the foregoing provision will not
cure or remedy the effect of the prior untrue statement of a material fact or
omission of any material fact nor shall any such notification have the effect
of amending or modifying this Agreement or any of the Schedules hereto; provided,
however, that in no event shall the requirements of this Section 6.13
apply to any Projections, forecasts or other forward looking statements
provided to the Agent or the Lender Group.


 


6.14                           Control Agreements.  To
the extent required under the Loan Documents, take all reasonable steps in
order for Agent to obtain control in accordance with Sections 8-106, 9-104,
9-105, 9-106, and 9-107 of the Code with respect to (subject to the proviso
contained in Section 7.12) all of


 


37

















 


its
Securities Accounts, Deposit Accounts, and all of its electronic chattel paper,
investment property, and letter-of-credit rights other than all such items with
an aggregate value not exceeding Five Hundred Thousand Dollars ($500,000).


 


6.15                           Formation of Subsidiaries.  To
the extent permitted under this Agreement, if at the time that any Loan Party
forms any direct or indirect Subsidiary or acquires any direct or indirect
Subsidiary after the Interim Facility Effective Date, within ten (10) Business
Days following formation or acquisition, such Loan Party shall (a) cause
such new Subsidiary to provide to Agent a joinder to this Agreement, together
with such other security documents (including Mortgages with respect to any
Real Property of such new Subsidiary when required to satisfy the requirements
of Section 6.16), as well as appropriate financing statements (and
with respect to all property subject to a Mortgage, fixture filings), all in
form and substance satisfactory to Agent (including being sufficient to grant
Agent a first priority Lien (subject to Permitted Liens) in and to the assets
of such newly formed or acquired Subsidiary), (b) provide to Agent a
pledge agreement and appropriate certificates and powers or financing
statements, hypothecating all of the direct or beneficial ownership interest in
such new Subsidiary, in form and substance satisfactory to Agent, and (c) provide
to Agent all other documentation, including, if requested by Agent, one or more
opinions of counsel reasonably satisfactory to Agent, which in its opinion is
appropriate with respect to the execution and delivery of the applicable
documentation referred to above (including policies of title insurance or other
documentation with respect to all property subject to a Mortgage, subject to
any limitation expressly set forth in Section 6.21); provided,
however, that the foregoing obligations shall not apply to any
Subsidiary prior to such time as it owns assets with more than a de minimus
value.  Any document, agreement, or
instrument executed or issued pursuant to this Section 6.15 shall
be a Loan Document.


 


6.16                           Further Assurances.  At
any time upon the request of Agent, each Loan Party shall within thirty (30)
days (unless there is an imminent threat to Agent’s or any Lender’s perfection
on any portion of the Collateral, in which case, promptly upon request) execute
or deliver to Agent any and all financing statements, personal property
security act filings, fixture filings, security agreements, pledges,
assignments, endorsements of certificates of title, mortgages, deeds of trust,
opinions of counsel, and all other documents (collectively, the “Additional
Documents”) that Agent may reasonably request in form and substance
reasonably satisfactory to Agent, to create, perfect, and continue perfected or
to better perfect Agent’s Liens with respect to Oil and Gas Properties that are
required to be mortgaged pursuant to this Section 6.16 and all of
the other properties and assets of the Loan Parties (whether now owned or hereafter
arising or acquired, tangible or intangible, real or personal), to create and
perfect Liens in favor of Agent, Bank Product Providers and the Lenders in any
Real Property acquired by any Loan Party after the Interim Facility Effective
Date, and in order to fully consummate all of the transactions contemplated
hereby and under the other Loan Documents, provided that Section 6.21
shall govern the obligation of each Loan Party to deliver title information
with respect to Oil and Gas Properties. 
To the maximum extent permitted by applicable law, each Loan Party
authorizes Agent to file such executed Additional Documents in any appropriate
filing office.  Subject to approval of
the Bankruptcy Court, each Loan Party appoints Agent (such appointment being coupled
with an interest) as such Loan Party’s attorney-in-fact, with full authority in
the place and stead of such Loan Party and in the name of such Loan Party, from
time to time in Agent’s discretion to take any action and to execute any
instrument that Agent may deem reasonably necessary to carry out the provisions
of this Agreement.  If at any time the
aggregate Total Reserve Value of the Proved Oil and Gas Properties evaluated in
the most recent Reserve Report for which the Agent shall have received Mortgages
encumbering such Proved Oil and Gas Properties constitutes less than (a) eighty
percent (80%) of the aggregate Total Reserve Value and (b) ninety percent
(90%) of the aggregate Proved Developed Producing Reserves of all Oil and Gas
Properties of the Loan Parties evaluated in the most recent Reserve Report, it
being agreed that the Proved Reserves not subject to any Mortgage shall not
constitute a Proved Reserve that is reasonably necessary to the integral
operation of the Proved Reserves subject to Mortgages, each Loan Party shall
promptly: (i) execute and deliver to Agent Mortgages covering additional
Oil and Gas Properties, amendments to the


 


38

















 


Mortgages
or such other documents as Agent shall deem necessary or advisable to grant to
Agent, for the benefit of the Agent, Bank Product Providers and the Lenders, a
perfected first priority Lien on such Oil and Gas Properties with (A) a
Total Reserve Value consisting not less than eighty percent (80%) of the
aggregate Total Reserve Value and (B) Proved Developed Producing Reserves
consisting not less than ninety percent (90%) of the aggregate Proved Developed
Producing Reserves of all Oil and Gas Properties of the Loan Parties evaluated
in the most recent Reserve Report; and (ii) take all actions necessary or
advisable to cause such Lien to be duly perfected in accordance with all
applicable law, including, without limitation, the filing of Mortgages, or UCC
financing statements in such jurisdictions as may be reasonably requested by
Agent; provided, however, that in the case of Oil and Gas
Properties, such obligations shall be subject to the obtaining of any necessary
third party consents, which each Loan Party shall use commercially reasonable
efforts to obtain.  The assurances
contemplated by this Section 6.16 shall be given under applicable
non-bankruptcy law (to the extent not inconsistent with the Bankruptcy Code and
the Bankruptcy Court Orders) as well as the Bankruptcy Code, it being the
intention of the parties that Agent may request assurances under applicable
non-bankruptcy law, and such request shall be complied with (if otherwise made
in good faith by Agent) whether or not any of the Bankruptcy Court Orders are
in force and whether or not dismissal of the Chapter 11 Cases or any other
action by the Bankruptcy Court is imminent, likely or threatened.


 


6.17                           Material Contracts. 
Contemporaneously with the delivery of each Compliance Certificate
pursuant hereto, provide Agent with copies of (a) each Material Contract
entered into since the delivery of the previous Compliance Certificate, and (b) each
material amendment or modification of any Material Contract entered into since
the delivery of the previous Compliance Certificate.


 


6.18                           Intellectual Property.  Each
Loan Party shall use all reasonable efforts to conduct its business and affairs
without material infringement of or interference with any intellectual property
of any other Person, and, in the event a Loan Party acquires knowledge of any
such infringement or interference, it will promptly cease such infringement or
interference.


 


6.19                           Exercise of  Rights.  Each
Loan Party shall enforce all of its material rights as appropriate in its
commercially reasonable judgment, including, without limitation, all material
indemnification rights, and pursue as appropriate in its commercially
reasonable judgment all material remedies available to such Loan Party with
diligence and in good faith in connection with the enforcement of any such
rights.


 


6.20                           Reserve Reports.


 


(a)           On
or before March 3rd and September 3rd of each year, commencing March 3,
2009, the Borrower shall furnish to Agent and the Lenders a Reserve Report as
of the immediately preceding January 1 or July 1, as applicable.  The Reserve Report as of January 1 of
each year shall be prepared by Netherland, Sewell & Associates, Inc.
of Houston, Texas or one or more other independent third party Petroleum
Engineers reasonably acceptable to Agent and the Reserve Report as of July 1
of each year shall be prepared by or under the supervision of the chief
engineer of Borrower who shall certify such Reserve Report to be true and
accurate in all material respects and to have been prepared in accordance with
the procedures used in the immediately preceding January 1 Reserve
Report.  Notwithstanding the foregoing,
the Reserve Report for January 1, 2009 shall be prepared and delivered
solely to the extent requested by Agent.


 


(b)           [Intentionally
Deleted]


 


(c)           With
the delivery of each Reserve Report, Borrower shall provide to 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


 


39

















 


therewith
is true and correct, (ii) Borrower or its Subsidiaries owns Defensible
Title to the Proved Oil and Gas Properties evaluated in such Reserve Report, (iii) except
as set forth on an exhibit to the certificate, on a net basis there are no gas
imbalances, take or pay or other prepayments in excess of the volume specified
in Section 5.23 with respect to their Oil and Gas Properties
evaluated in such Reserve Report that would require Borrower or any of its
Subsidiaries 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) none of their Proved Oil and Gas Properties
have been sold since the Interim Facility Effective Date except as set forth on
an exhibit to the certificate, which certificate shall list all of its Proved
Oil and Gas Properties sold and in such detail as reasonably required by Agent,
(v) attached to the certificate is a list of all marketing agreements
entered into by the Loan parties subsequent to the later of the date hereof or
the most recently delivered Reserve Report that Borrower could reasonably be
expected to have been obligated to list on Schedule 5.28 to the Interim
DIP Credit Agreement had such agreement been in effect on the date hereof, (vi) attached
thereto is a schedule of the Oil and Gas Properties evaluated by such Reserve
Report that are Mortgaged Properties and demonstrating the percentage of the
present value that such Mortgaged Properties represent, and (vii) to the
extent required under the Loan Documents, all Proved Oil and Gas Properties are
subject to the legal, valid and duly perfected, first priority security
interests and Liens in favor of Agent, Bank Product Providers and the Lenders in
such properties and in the oil and gas attributable to such properties and
proceeds thereof.


 


6.21                           Title Information.


 


(a)           Each Loan Party shall have delivered
title information in form and substance reasonably acceptable to Agent (which
the Agent acknowledges may be in the form of a title opinion) covering enough
of the Proved Oil and Gas Properties evaluated by the Reserve Report, so that
Agent shall have received, together with title information previously delivered
to Agent, reasonably satisfactory title information on at least eighty percent
(80%) of the Total Reserve Value of the Proved Oil and Gas Properties evaluated
by the Reserve Report.


 


(b)           On
or before the delivery to Agent and the Lenders of each Reserve Report required
by Section 6.20(a), each Loan Party will deliver title to Agent
covering enough of the Proved Oil and Gas Properties evaluated by such Reserve
Report that were not included in the immediately preceding Reserve Report, so
that Agent shall have received together with title information previously
delivered to Agent, reasonably satisfactory title information evidencing
Defensible Title on at least eighty percent (80%) of the Total Reserve Value of
the Proved Oil and Gas Properties evaluated by such Reserve Report.


 


(c)           If
any Loan Party has provided title information for additional Properties under Section 6.21(b),
such Loan Party shall, within sixty (60) days of notice from Agent that title
defects or exceptions exist with respect to such additional Properties which
render such Loan Party’s title not a Defensible Title, either (i) cure to
the satisfaction of Agent any such title defects or exceptions (including
defects or exceptions as to priority) which are not permitted by Section 7.2
raised by such information, (ii) substitute acceptable Mortgaged
Properties with Defensible Title having an equivalent value or (iii) deliver
revised title information in form and substance reasonably acceptable to Agent
so that Agent shall have received, together with title information previously
delivered to Agent, reasonably satisfactory title information on at least
eighty percent (80%) of the Total Reserve Value of the Proved Oil and Gas
Properties evaluated by such Reserve Report. 
For purposes of clarity, Agent shall be permitted to establish reserves
against the Maximum Revolver Amount pursuant to Section 2.1(c) to
the extent that the Agent does not receive satisfactory title as determined in
this clause (c).


 


(d)           If
a Loan Party is unable to cure any title defect requested to be cured pursuant
to Section 6.21(c) within the sixty (60)-day period or such
Loan Party does not comply with


 


40

















 


the
requirements of Section 6.21(b) to provide acceptable title
information covering eighty percent (80%) of the Total Reserve Value of the
Proved Oil and Gas Properties evaluated in the most recent Reserve Report, such
default shall not be a Default, but instead Agent and/or the Required Lenders
shall have the right to exercise the following remedy in their reasonable
discretion from time to time, and any failure to so exercise this remedy at any
time shall not be a waiver as to future exercise of the remedy by Agent or the
Lenders.  To the extent that Agent or the
Required Lenders are not reasonably satisfied with title to any Mortgaged
Property after the 60-day period has elapsed, such unacceptable Mortgaged
Property shall not count towards “the eighty percent (80%) requirement,” and
Agent may send a notice to Borrower and the Lenders that a reserve against the
Maximum Revolver Amount pursuant to Section 2.1(c) will be
applied in an amount as determined by the Required Lenders to cause the Loan
Parties to be in compliance with the requirement to provide acceptable title
information on eighty percent (80%) of the Total Reserve Value of the Proved
Oil and Gas Properties pursuant to this Section 6.21.


 


6.22                           Swap Agreements.  To
the extent Borrower or any other Loan Party enters into Swap Agreements, such
Loan Party shall use (and cause its Subsidiaries to use) such Swap Agreements
solely as a part of their normal business operations as a risk management
strategy and/or to hedge against changes resulting from market conditions
related to their oil and gas operations and not as a means to speculate for
investment purposes on trends and shifts in financial or commodities
markets.  The Loan Parties shall maintain
at all times Swap Agreements for Hydrocarbon Interests in form and substance
satisfactory to Agent and the Required Lenders, with an Approved Counterparty
and the notional volumes for which (when aggregated with all other Swap
Agreements then in effect other than basis differential swaps on volumes
already hedged pursuant to the other Swap Agreements) are in amounts
satisfactory to Agent and the Required Lenders.


 


6.23                           Post Closing Obligations.


 


(a)           No
later than March 1, 2009, Parent shall (i) execute
and deliver Mortgages in favor of Agent with respect to the Oil and Gas
Properties owned by Parent in Alaska, and such Mortgages shall be in full force
and effect, (ii) deliver a copy of the resolutions of Parent, certified as
of the Final Facility Effective Date by an Authorized Officer thereof,
authorizing the execution, delivery and performance by Parent of such Mortgages
and the execution and delivery of the other documents to be delivered by Parent
in connection therewith and (iii) cause opinions
of counsel for the Loan Parties in respect of Parent’s collateral obligations
under such Mortgages, in form and substance reasonably satisfactory to Agent,
to be delivered to Agent; and


 


(b)           If
requested by Agent, the Loan Parties shall promptly enter into Control
Agreements, in form and substance reasonably satisfactory to Agent, as Agent
and the Required Lenders may require in their sole discretion.


 


7.                                       NEGATIVE COVENANTS.


 


Each
Loan Party covenants and agrees that, until termination of all of the
Commitments, the termination or expiration of all outstanding Letters of
Credit, and repayment in full of the Obligations, it will not do any of the
following:


 


7.1                                 Indebtedness.  Create,
incur, assume, suffer to exist, guarantee, or otherwise become or remain,
directly or indirectly, liable with respect to any Indebtedness, except:


 


(a)           any
Indebtedness existing on the Filing Date;


 


41

















 


(b)           Indebtedness
evidenced by this Agreement and the other Loan Documents, together with
Indebtedness owed to Underlying Issuers with respect to Underlying Letters of
Credit;


 


(c)           Indebtedness
relating to the Convertible Subordinated Notes and other Indebtedness set forth
on Schedule 5.16 to the Interim DIP Credit Agreement;


 


(d)           Permitted
Purchase Money Indebtedness and any Refinancing Indebtedness in respect of such
Indebtedness;


 


(e)           endorsement
of instruments or other payment items for deposit;


 


(f)            Indebtedness
associated with bonds or surety obligations required by Governmental
Requirements or otherwise in the ordinary course of business in connection with
the operation of the Oil and Gas Properties; provided, that Indebtedness
permitted by this Section 7.1 will not exceed $2,000,000 in the
aggregate at any one time outstanding;


 


(g)           Indebtedness
composing Permitted Investments; and


 


(h)           intercompany
Indebtedness described in Section 7.12(a).


 


7.2                                 Liens. 
Create, incur, assume, or suffer to exist, directly or indirectly, any
Lien on or with respect to any of its assets, of any kind, whether now owned or
hereafter acquired, or any income or profits therefrom, except for Permitted
Liens.


 


7.3                                 Restrictions on Fundamental Changes.


 


(a)           Consummate
any merger, consolidation, amalgamation, reorganization, or recapitalization,
or reclassification of its Stock;


 


(b)           Liquidate,
wind up, or dissolve itself (or suffer any liquidation or dissolution); provided
that any such transaction shall be permitted with respect to a Subsidiary that
does not own any assets; or


 


(c)           Suspend
or go out of a substantial portion of its business;


 


provided, that any Debtor Guarantor may merge with or
into any other Debtor Guarantor and any Debtor Guarantor may merge with or into
Borrower, so long as (i) in the case of a merger of a Debtor Guarantor
with Borrower, Borrower is the surviving entity, (ii) no other provision
of this Agreement would be violated thereby, (iii) Agent receives at least
thirty (30) days’ prior written notice (or such shorter period as may be
permitted by the Agent) of such merger, (iv) no Default or Event of
Default shall have occurred and be continuing either before or after giving
effect to such transaction, and (v) the Lenders’ rights in any Collateral,
including, without limitation, the existence, perfection and priority of any
Lien thereon, are not adversely affected by such merger or consolidation.


 


7.4                                 Disposal of Assets.  Other
than Permitted Dispositions, convey, sell, lease, license, assign, transfer, or
otherwise dispose of (or enter into an agreement to convey, sell, lease,
license, assign, transfer, or otherwise dispose of) any of the Loan Parties’
assets, including the Stock of any of such Loan Party’s Subsidiaries.


 


7.5                                 Change of Jurisdiction, Corporate
Name or Location.  (a) Change its jurisdiction of
organization and/or organization and/or organizational identification number
(if any), (b) change its corporate name or (c) change its chief
executive office, principal place of business (both in the United States and
Canada), offices or warehouses or locations at which Collateral is held or
stored, or the


 


42

















 


location
of its records concerning the Collateral, in any case without at least thirty
(30) days (or such shorter period as may be permitted by the Agent) prior
written notice to Agent and after completing any action reasonably requested by
Agent in connection therewith, including to continue the perfection of any
Liens in favor of Agent, Bank Product Providers and the Lenders, in any
Collateral, has been completed or taken, and provided that any such new
location shall be in the continental United States (or Canada, in the case of
Parent).  Without limiting the foregoing,
no Loan Party shall change its location, name, identity or corporate structure
in any manner which might make any financing or continuation statement filed in
connection herewith seriously misleading within the meaning of Section 9-506
of the Code or any other then applicable provision of the Code except upon
prior written notice to Agent and the Lenders and after completing any action
reasonably requested by Agent in connection therewith, including to continue
the perfection of any Liens in favor of Agent, Bank Product Providers and the
Lenders, in any Collateral.


 


7.6                                 Nature of Business.  Make
any change in the nature of the business of the Loan Parties, taken as a whole,
as conducted on the Interim Facility Effective Date or, to the extent permitted
hereunder, acquire any properties or assets that are not reasonably related to
the conduct of such business activities.


 


7.7                                 Prepayments and Amendments. 
Except in connection with Refinancing Indebtedness permitted by Section 7.1
and in accordance with Section 7.25,


 


(a)           optionally
prepay, redeem, defease, purchase, or otherwise acquire any Indebtedness of any
Loan Party (including the Convertible Subordinated Notes), other than the
Obligations in accordance with this Agreement;


 


(b)           make
any payment on account of payments (including any payment of interest) with
respect to the Convertible Subordinated Notes, other than payments in the form
of Permitted Junior Securities as defined in the Subordination and
Intercreditor Agreement or make any payment on account of any other
Indebtedness that has been contractually subordinated in right of payment if
such payment is not permitted at such time under the subordination terms and
conditions applicable thereto; or


 


(c)           directly
or indirectly amend, modify, alter, increase, or change any of the terms or
conditions of (i) any agreement, instrument, document, indenture, or other
writing evidencing or concerning Indebtedness permitted under Section 7.1(b) or
(c), or (ii) any other Material Contract except to the extent that
such amendment, modification, alteration, increase, or change could not,
individually or in the aggregate, reasonably be expected to result in a
Material Adverse Change.


 


7.8                                 Change of Control. 
Cause, permit, or suffer, directly or indirectly, any Change of Control.


 


7.9                                 [Intentionally Deleted]


 


7.10                           Distributions.  Make
any distribution or declare or pay any dividends (in cash or other property,
other than Common Stock) on, or purchase, acquire, redeem, or retire any of
Parent’s Stock, of any class, whether now or hereafter outstanding.


 


7.11                           Accounting Methods; Fiscal Year. 
Modify or change its fiscal year or its method of accounting (other than
as may be required to conform to GAAP).


 


7.12                           Investments. 
Except for Permitted Investments, directly or indirectly, make or
acquire any Investment or incur any liabilities (including contingent
obligations) for or in connection with any Investment; provided, however,
that (a) Borrower may make loans and advances to a Debtor


 


43

















 


Guarantor
and a Debtor Guarantor may make loans and advances to Borrower and to another
Debtor Guarantor, in each case, in the ordinary course of business, so long as
such Person shall have executed and delivered to such lender a global demand
note (collectively, the “Intercompany Notes”) to evidence any such loan
and advance by such Person to such other lender, which Intercompany Note shall
be in form and substance reasonably satisfactory to Agent and shall be pledged
and delivered to Agent, and (b) the Loan Parties shall not have Permitted
Investments (other than in the Cash Management Accounts) in Deposit Accounts or
Securities Accounts in an aggregate amount in excess of Fifty Thousand Dollars
($50,000) at any one time unless the Loan Parties, as applicable, and the applicable
securities intermediary or bank have entered into Control Agreements governing
such Permitted Investments in order to perfect (and further establish) Agent’s
Liens in such Permitted Investments. 
Subject to clause (b) of the foregoing proviso, no Loan Party shall
establish or maintain any Deposit Account or Securities Account unless Agent
shall have received a Control Agreement in respect of such Deposit Account or
Securities Account.


 


7.13                           Transactions with Affiliates. 
Directly or indirectly enter into or permit to exist any transaction
with any Affiliate or Parent or any of its Subsidiaries that is not a Loan
Party, except in accordance with the expenditure numbers in the Budget related
to payment to Parent to the extent acceptable to Agent, and except for the
transaction set forth on Schedule 7.13 to the Interim DIP Credit
Agreement.


 


7.14                           Use of Proceeds.  In
accordance with the expenditure line items in the Budget, (a) use the
proceeds of the Advances for any purpose other than (i) to pay transactional
fees, costs, and expenses incurred in connection with this Agreement, the other
Loan Documents and the transactions contemplated hereby and thereby, and (ii) thereafter,
consistent with the terms and conditions hereof, for general corporate purposes,
including the funding of capital expenditures and working capital, provided,
however, not more than $70,000 of proceeds of Advances from and after
the Interim Facility Effective Date may be used for any investigation of
prepetition secured claims and (b) use the proceeds of Letters of Credit
for any purpose other than for general corporate purposes.


 


7.15                           [Intentionally Deleted]


 


7.16                           Forward Sales. 
Except as permitted under Section 6.22, enter into or permit
to exist any advance payment agreement or other arrangement pursuant to which
Borrower or any of its Subsidiaries, having received full or substantial
payment of the purchase price for a specified quantity of Hydrocarbons upon
entering such agreement or arrangement, is required to deliver, in one or more
installments subsequent to the date of such agreement or arrangement, such
quantity of Hydrocarbons pursuant to and during the terms of such agreement or
arrangement.


 


7.17                           Oil and Gas Imbalances.  Enter
into any contracts or agreements which guarantee production of Hydrocarbons
(other than Swap Agreements otherwise permitted under Section 6.22)
or hereafter allow gas imbalances, take-or-pay or other prepayment with respect
to its Oil and Gas Properties which would require Borrower or any of its Subsidiaries
to deliver Hydrocarbons produced on Oil and Gas Properties at some future time
without then or thereafter receiving full payment therefor to exceed, during
any monthly period, two percent (2%) of the current aggregate monthly gas
production for such monthly period from the Oil and Gas Properties of Borrower
and its Subsidiaries.


 


7.18                           Marketing Activities.


 


(a)           Neither
Borrower nor any of its Subsidiaries will engage in marketing activities for
any Hydrocarbons or enter into any contracts related thereto other than (i) contracts
for the sale of Hydrocarbons scheduled or reasonably estimated to be produced
from their Proved Oil and Gas Properties during the period of such contract, (ii) contracts
for the sale of Hydrocarbons scheduled or reasonably estimated to be produced
from Proved Oil and Gas Properties of third parties


 


44

















 


during
the period of such contract associated with the Oil and Gas Properties of
Borrower and its Subsidiaries that Borrower (or its Subsidiaries, as
applicable) has the right to market pursuant to joint operating agreements,
unitization agreements or other similar contracts that are usual and customary
in the oil and gas business and (iii) other contracts for the purchase
and/or sale of Hydrocarbons of third parties (A) that have generally
offsetting provisions (i.e., corresponding pricing mechanics, delivery dates
and points and volumes) such that no “position” is taken and (B) for which
appropriate credit support has been taken to alleviate the material credit
risks of the counterparty thereto.


 


(b)           All
Hydrocarbons produced from the Oil and Gas Properties of Borrower and its
Subsidiaries shall be marketed on an arm’s length basis using one or more
Persons that are not Affiliates of Borrower.


 


7.19                           Sale-Leasebacks. 
Engage in any sale-leaseback, synthetic lease or similar transaction
involving any of its assets.


 


7.20                           Cancellation of Indebtedness. 
Cancel any claim or debt owing to it, except for reasonable
consideration negotiated on an arm’s-length basis.


 


7.21                           No Amendment of Governing
Documents; Intercompany Note.  (a) Amend, modify, supplement, restate or
otherwise change its Governing Documents to the extent adverse to the rights or
interests of the Lenders without the prior written consent of the Agent or (b) add
a Person other than a Loan Party to the Intercompany Note.


 


7.22                           No Impairment of Intercompany
Transfers; Negative Pledge.  (a) Directly or indirectly enter into or
become bound by any agreement, instrument, indenture or other obligation (other
than this Agreement and the other Loan Documents) which directly or indirectly
restricts, prohibits or requires the consent of any Person with respect to the
payment of dividends or distributions or the making or repayment of intercompany
loans by a Subsidiary of Borrower that is not a Debtor Guarantor to Borrower or
(b) directly or indirectly enter into, incur or permit to exist any
agreement or other arrangement (other than (i) this Agreement, (ii) Permitted
Liens under Permitted Purchase Money Indebtedness permitted under this
Agreement, (iii) restrictions on assignment contained in licenses, leases
and other contracts entered into in the ordinary course of business, and (iv) customary
restrictions and conditions contained in agreements relating to the sale of a
Subsidiary pending such sale, provided such restrictions and conditions apply
only to the Subsidiary that is to be sold and such sale is permitted hereunder)
that prohibits, restricts or imposes any condition upon the ability of such
Borrower or Subsidiary to create, incur or permit to exist any Lien upon any of
its property or assets.


 


7.23                           Bankruptcy Court Orders; Administrative
Priority; Lien Priority; Payment of Claims.


 


(a)           At
any time, seek, consent to or suffer to exist any reversal, modification,
amendment, stay or vacation of any of the Bankruptcy Court Orders, except for
modifications and amendments agreed to by Agent and the Lenders;


 


(b)           at
any time, suffer to exist a priority for any administrative expense or
unsecured claim against Borrower or any Debtor Guarantor (now existing or
hereafter arising of any kind or nature whatsoever), including, without
limitation, any administrative expenses of the kind specified in, or arising or
ordered under, Sections 105, 326, 328, 330, 331, 503(b), 506(c), 507(a),
507(b), 546(c) 726 and 1114 of the Bankruptcy Code equal or superior to
the priority of Agent and the Lenders in respect of the Obligations, except as
provided in Section 3.2 and for the Carve-Out Expenses having
priority of payment over the Obligations to the extent set forth in clause “first”
of the


 


45

















 


definition
of the term “Agreed Administrative Expense Priorities” and except as provided
in the Bankruptcy Court Orders;


 


(c)           at
any time, suffer to exist any Lien on the Collateral having a priority equal or
superior to the Lien in favor of Agent, Bank Product Providers and the Lenders
in respect of the Collateral, except as provided in the Bankruptcy Court
Orders;


 


(d)           prior
to the date on which the Obligations have been paid in full in cash, Borrower
and any Debtor Guarantor shall not pay any administrative expense claims except
(i) Priority Professional Expenses and other payments pursuant to
sub-clause (i) of clause “first” of the definition of the term “Agreed
Administrative Expense Priorities”, (ii) Obligations due and payable
hereunder, and (iii) other administrative expense and professional claims
incurred in the ordinary course of the business of Borrower and any Debtor
Guarantor or their respective Chapter 11 Cases, in each case, to the extent and
having the order of priority set forth in the definition of the term “Agreed
Administrative Expense Priorities”; and


 


(e)           except
as otherwise consented to by Agent, neither Borrower nor any Debtor Guarantor
shall make any payment pursuant to Section 361 of the Bankruptcy Code (or
pursuant to any other provision of the Bankruptcy Code authorizing adequate
protection), whether or not permitted by the Bankruptcy Court Orders, at any
time after an Event of Default has occurred and for so long as it is
continuing.


 


7.24                           Swap Agreements.  Enter
into any Swap Agreements with any Person other than Swap Agreements for
Hydrocarbon Interests, in form and substance satisfactory to Agent and the
Required Lenders, in respect of commodities (a) with an Approved
Counterparty and (b) the notional volumes for which (when aggregated with
other Swap Agreements for Hydrocarbon Interests then in effect other than basis
differential swaps on volumes already hedged pursuant to other Swap Agreements)
are in amounts satisfactory to Agent and the Required Lenders.  In no event shall any Swap Agreement contain
any requirement, agreement or covenant for Borrower or any Subsidiary to post
collateral or margin to secure their obligations under such Swap Agreement or
to cover market exposures except to the extent permitted by Section 7.2.


 


7.25                           Limitation on Prepayments of
Pre-Petition Obligations.  Except as otherwise permitted pursuant to the
Bankruptcy Court Orders, as set forth in the Budget, or as consented by Agent, (a) make
any payment or prepayment on or redemption or acquisition for value (including,
without limitation, by way of depositing with any trustee with respect thereto
money or securities before due for the purpose of paying when due) of any
Pre-Petition Obligations of any Loan Party, in each case, incurred prior to the
Filing Date, (b) pay any interest on any Pre-Petition Obligations of any
Loan Party (whether in cash, in kind securities or otherwise), or (c) make
any payment or create or permit any Lien pursuant to Section 361 of the
Bankruptcy Code (or pursuant to any other provision of the Bankruptcy Code
authorizing adequate protection), or apply to the Bankruptcy Court for the authority
to do any of the foregoing; provided, that Borrower and the
Debtor Guarantors (i) subject to the Carve-Out Expenses, may make payments
for administrative expenses that are allowed and payable under Sections 330 and
331 of the Bankruptcy Code, (ii) may make payments permitted by the “first
day” orders and orders approving the assumption of executory contracts and
unexpired leases, in each case, and approved by Agent and (iii) may make
payments in accordance with the Budget. 
In addition, no Loan Party shall permit any of its Subsidiaries to make
any payment, redemption or acquisition which such Loan Party is prohibited from
making under the provisions of this Section 7.25.


 


7.26                           Lien Prosecution.  Use
proceeds of pre-petition Collateral or proceeds of the Loans hereunder to pay
for prosecution of claims against Agent or Lenders.


 


46
















 


8.                                       EVENTS OF DEFAULT.


 


Any
one or more of the following events shall constitute an event of default (each,
an “Event of Default”) under this Agreement:


 


8.1                                 if Borrower fails to pay (to the extent
Borrower is permitted by any order of the Bankruptcy Court to make such
payment) when due and payable any of the following (a) all or any portion
of the Obligations consisting of scheduled interest or fees and such failure
continues for three (3) Business Days, (b) other charges due the
Lender Group, reimbursement of Lender Group Expenses, or other amounts (other
than any portion thereof constituting principal) constituting Obligations
within five (5) Business Days after written notice of such failure, or (c) all
or any portion of the principal of the Obligations;


 


8.2                                 any of the Loan Parties:


 


(a)           fails
to perform or observe any covenant or other agreement contained in any of Sections
2.7, 6.2, 6.3,  6.4, 6.5, 6.8, 6.11
(as to Borrower’s existence only), 6.13, 6.14, 6.15, 6.16,
6.20, 6.21, 6.22 and Section 7 of this
Agreement;


 


(b)           fails
to perform or observe any covenant or other agreement contained in any of Sections
6.6, 6.7, 6.9, 6.10, 6.11 (except as set forth
in Section 8.2(a) above), and 6.12 of this Agreement and such
failure continues for a period of ten (10) days after the earlier of (i) the
date on which such failure shall first become known to any Responsible Officer
of Borrower or (ii) written notice thereof is given to Borrower by Agent;
or


 


(c)           fails
to perform or observe any covenant or other agreement contained in this
Agreement, or in any of the other Loan Documents, in each case, other than any
such covenant or agreement that is the subject of another provision of this Section 8
(in which event such other provision of this Section 8 shall
govern), and such failure continues for a period of twenty (20) Business Days
after the earlier of (i) the date on which such failure shall first become
known to any Responsible Officer of Borrower or (ii) written notice
thereof is given to Borrower by Agent;


 


8.3                                 if any material portion of any Loan Party’s
assets are attached, seized, subjected to a writ or distress warrant, or are
levied upon, or come into the possession of any third Person and the same is
not discharged before the earlier of thirty (30) days after the date it first
arises or five (5) days prior to the date on which such property or asset
is subject to forfeiture by such Loan Party;


 


8.4                                 a Material Adverse Deviation shall have
occurred;


 


8.5                                 [Intentionally Deleted];


 


8.6                                 if any Loan Party is enjoined, restrained, or
in any way prevented by court order from continuing to conduct all or any
material part of its business affairs;


 


8.7                                 if one or more judgments, orders, or awards
involving an aggregate amount of Two Hundred Fifty Thousand Dollars ($250,000),
or more (except to the extent covered by insurance pursuant to which the
insurer has not disclaimed liability) shall be entered or filed against
Borrower or any Debtor Guarantor or with respect to any of their respective
assets, and the same is not released, discharged, bonded against, or stayed
pending appeal before the earlier of sixty (60) days after the date it first
arises or five (5) days prior to the date on which such asset is subject
to being forfeited by such Loan Party;


 


47

















 


8.8                                 if there is a default (other than a default
by Borrower or a Debtor Guarantor, the enforcement of which is stayed by virtue
of the filing of the Chapter 11 Cases) in one or more agreements to which
Borrower or any Debtor Guarantor is a party with one or more third Persons
relative to Borrower’s or any such Debtor Guarantor’s Indebtedness involving an
aggregate amount of Two Hundred Fifty Thousand Dollars ($250,000) or more, and
such default (a) occurs at the final maturity of the obligations
thereunder, or (b) results in a right by such third Person(s),
irrespective of whether exercised, to accelerate the maturity of Borrower’s or
any such Debtor Guarantor’s obligations thereunder (for the avoidance of doubt,
any default or event of default arising under the Convertible Subordinated
Notes (other than a default caused by the commencement of the Chapter 11 Cases)
shall constitute an Event of Default hereunder);


 


8.9                                 if any warranty, representation, statement,
or certification made herein or in any other Loan Document or delivered to
Agent or any Lender in connection with this Agreement or any other Loan
Document proves to be untrue in any material respect (except that such
materiality qualifier shall not be applicable to any representations and
warranties that already are qualified or modified by materiality in the text
thereof) as of the date of issuance or making or deemed making thereof;


 


8.10                           if the obligation of Parent under the Parent
Guaranty, the Parent U.S. Security Agreement, the Parent Canadian Pledge and
Security Agreement, the Parent Trademark Security Agreement or any of the
Parent Mortgages, in each case, is limited or terminated by operation of law;


 


8.11                           any of the Loan Documents that purport to
create a Lien shall, for any reason, fail or cease to create a valid and
perfected and, except to the extent permitted by the terms hereof or thereof,
first priority Lien on or security interest in the Collateral covered hereby or
thereby, except as a result of a disposition of the applicable
Collateral in a transaction permitted under this Agreement;


 


8.12                           if any provision of any Loan Document shall
at any time for any reason be declared to be null and void, or the validity or
enforceability thereof shall be contested by any Loan Party, or a proceeding
shall be commenced by any Loan Party, or by any Governmental Authority having
jurisdiction over any Loan Party, seeking to establish the invalidity or
unenforceability thereof, or any Loan Party shall deny that such Loan Party has
any liability or obligation purported to be created under any Loan Document;


 


8.13                           the loss, suspension or revocation of, or
failure to renew, any license or permit now held or hereafter acquired by any
Loan Party, if such loss, suspension, revocation or failure to renew could
reasonably be expected to result in a Material Adverse Change;


 


8.14                           the indictment of any Loan Party thereof
under any criminal statute, or commencement of criminal or civil proceedings
against any Loan Party, pursuant to which statute or proceedings the penalties
or remedies sought or available include forfeiture to any Governmental
Authority of any portion of the property of such Person which would result in a
Material Adverse Change;


 


8.15                           if (i) an ERISA Event shall occur with
respect to a Pension Plan that has resulted or could reasonably be expected to
result in liability of Parent or the Debtor Loan Parties, either individually
or in the aggregate, under Title IV of ERISA to the Pension Plan, Multiemployer
Plan or the PBGC in an aggregate amount in excess of One Hundred Thousand
Dollars ($100,000); (ii) the aggregate amount of Unfunded Pension
Liability among all Pension Plans at any time exceeds One Hundred Thousand
Dollars ($100,000); or (iii) Parent or the Debtor Loan Parties or any
ERISA Affiliate shall fail to pay when due, after the expiration of any
applicable grace period, any installment payment with respect to its withdrawal
liability under Section 4201 of ERISA under a Multiemployer Plan in an
aggregate amount in excess of One Hundred Thousand Dollars ($100,000);


 


48

















 


8.16                           any Material Adverse Change shall have
occurred;


 


8.17                           the Interim Bankruptcy Court Order or the
Final Bankruptcy Court Order shall have been stayed, amended, modified,
reversed or vacated;


 


8.18                           [Intentionally Deleted];


 


8.19                           an order with respect to any of the Chapter
11 Cases shall be entered by the Bankruptcy Court appointing, or Borrower or
any Debtor Guarantor shall file an application for an order with respect to any
Chapter 11 Case seeking the appointment of, (a) a trustee under Section 1104
of the Bankruptcy Code, or (b) an examiner with enlarged powers relating
to the operation of the business (powers beyond those set forth in Section 1106(a)(3) and
(4) of the Bankruptcy Code) under Section 1106(b) of the
Bankruptcy Code;


 


8.20                           an order with respect to any of the Chapter
11 Cases shall be entered by the Bankruptcy Court converting such Chapter 11
Case to cases under Chapter 7 of the Bankruptcy Code;


 


8.21                           an order shall be entered by the Bankruptcy
Court confirming a plan of reorganization in any of the Chapter 11 Cases which
does not (a) contain a provision for termination of the Commitment and
payment in full in cash of all Obligations of Borrower hereunder and under the
other Loan Documents on or before the effective date of such plan or plans upon
entry thereof and (b) provide for the continuation of the Liens and
security interests granted to Agent for the benefit of Agent, Bank Product
Providers and the Lenders and priorities until such plan effective date;


 


8.22                           an order shall be entered by the Bankruptcy
Court dismissing any of the Chapter 11 Cases which does not contain a provision
for termination of the Commitment, and the payment in full in cash of all
Obligations of Borrower hereunder and under the other Loan Documents upon entry
thereof;


 


8.23                           an order with respect to any of the Chapter
11 Cases shall be entered by the Bankruptcy Court without the express prior
written consent of Agent and the Lenders, (a) to revoke, reverse, stay,
modify, supplement or amend any of the Bankruptcy Court Orders, (b) to
permit any administrative expense or any claim (now existing or hereafter
arising, of any kind or nature whatsoever) to have administrative priority as
to the Loan Parties equal or superior to the priority of Agent and the Lenders
in respect of the Obligations, except for allowed administrative expenses
having priority over the Obligations to the extent set forth in the Agreed
Administrative Expense Priorities, or (c) to grant or permit the grant of
a Lien on the Collateral other than a Permitted Lien;


 


8.24                           an order shall be entered by the Bankruptcy
Court granting relief from the automatic stay of Section 362 of the
Bankruptcy Code with respect to Collateral having a value in excess of $50,000
except for such relief agreed to by the Debtors for holders of mechanics’ or
materialmen’s liens in Arkansas, as set forth in Paragraph 16 of the Final
Bankruptcy Court Order;


 


8.25                           an application for any of the orders
described in Section 8.19 through Section 8.24 above
shall be made by a Person and such application is not contested by Borrower and
the Debtor Guarantors in good faith and the relief requested is granted in an
order that is not stayed pending appeal;


 


8.26                           (a) except as permitted under the
Interim Bankruptcy Court Order or the Final Bankruptcy Court Order, any Loan
Party shall attempt to invalidate, reduce or otherwise impair the Liens or
security interests of Agent or the Lenders, claims or rights against such
Person or to subject any Collateral to assessment pursuant to Section 506(c) of
the Bankruptcy Code, (b) any of Agent’s Liens or security interests
created by this Agreement, any other Loan Document or the Bankruptcy


 


49

















 


Court
Orders shall, for any reason, cease to be valid or (c) except as permitted
under the Interim Bankruptcy Court Order or the Final Bankruptcy Court Order,
any action is commenced by any Loan Party which contests the validity,
perfection or enforceability of any of the Agent’s Liens and security interests
of Agent or the Lenders created by any of the Bankruptcy Court Orders, this
Agreement, or any other Loan Document;


 


8.27                           any Bankruptcy Court Order, any security
document related to this Agreement or any Bankruptcy Court Order after delivery
thereof pursuant hereto, shall for any reason fail or cease to create a valid
and perfected and, except to the extent permitted by the terms hereof or
thereof, first priority Lien in favor of Agent, Bank Product Providers and the
Lenders on any Collateral purported to be covered thereby; or


 


8.28                           the Key Person or the Consultant shall have
ceased to have a role in the management decisions of Borrower and such
cessation has continued for a period of thirty (30) days, unless such Key
Person or the Consultant, as the case may be, are replaced with Persons
acceptable to Agent and the Lenders within such 30-day period.


 


9.                                       THE LENDER GROUP’S RIGHTS AND REMEDIES.


 


9.1                                 Rights and Remedies.  Upon
the occurrence, and during the continuation, of an Event of Default, Agent at
the request of the Required Lenders for the benefit of the Lender Group shall
without further notice of, or application to, the Bankruptcy Court, notice or
demand, all of which are authorized by Borrower:


 


(a)           declare
all or any portion of the Obligations, whether evidenced by this Agreement, by
any of the other Loan Documents, or otherwise, immediately due and payable;


 


(b)           cease
advancing money or extending credit to or for the benefit of Borrower under
this Agreement, under any of the Loan Documents, or under any other agreement
between Borrower and the Lender Group;


 


(c)           Agent,
on behalf of the Lender Group and upon receiving relief from the automatic
stay, may foreclose any or all of the Liens on all of the Collateral and sell
the Real Property Collateral or Oil and Gas Properties or cause the Real
Property Collateral or Oil and Gas Properties to be sold in accordance with the
provisions of applicable law, and exercise any and all other rights or remedies
available to Agent, on behalf of the Lender Group, under any of the other Loan
Documents, at law or in equity with respect to the Collateral;


 


(d)           terminate
this Agreement and any of the other Loan Documents as to any future liability
or obligation of the Lender Group, but without affecting any of Agent’s Liens
in the Collateral and without affecting the Obligations; and


 


(e)           the
Lender Group upon receiving relief from the automatic stay shall have all other
rights and remedies available at law or in equity or pursuant to any other Loan
Document.


 


9.2                                 Remedies Cumulative.  The
rights and remedies of the Lender Group under this Agreement, the other Loan
Documents, and all other agreements shall be cumulative.  The Lender Group shall have all other rights
and remedies not inconsistent herewith as provided under the Code, by law, or
in equity.  No exercise by the Lender
Group of one right or remedy shall be deemed an election, and no waiver by the
Lender Group of any Event of Default shall be deemed a continuing waiver.  No delay by the Lender Group shall constitute
a waiver, election, or acquiescence by it.


 


50

















 


10.                                 TAXES AND EXPENSES.


 


If
Borrower or its Subsidiaries fail to pay any monies (whether taxes,
assessments, insurance premiums, or, in the case of leased properties or
assets, rents or other amounts payable under such leases) due to third Persons,
or fails to make any deposits or furnish any required proof of payment or
deposit, all as required under the terms of this Agreement, then Agent, in its
sole discretion, may do any or all of the following:  (a) without prior notice to the
Borrower, make payment of the same or any part thereof, (b) set up such
reserves against the Maximum Revolver Amount as Agent deems necessary to
protect the Lender Group from the exposure created by such failure, or (c) in
the case of the failure to comply with Section 6.8 hereof, obtain
and maintain insurance policies of the type described in Section 6.8
and take such action with respect to such policies as permitted pursuant to Section 6.8.  Any such amounts paid by Agent shall
constitute Lender Group Expenses and any such payments shall not constitute an
agreement by the Lender Group to make similar payments in the future or a
waiver by the Lender Group of any Event of Default under this Agreement.  Agent need not inquire as to, or contest the
validity of, any such expense, tax, or Lien and the receipt of the usual
official notice for the payment thereof shall be conclusive evidence that the
same was validly due and owing.


 


11.                                 WAIVERS; INDEMNIFICATION.


 


11.1                           Demand; Protest; etc.  Each
Loan Party waives demand, protest, notice of protest, notice of default or
dishonor, notice of payment and nonpayment, nonpayment at maturity, release,
compromise, settlement, extension, or renewal of documents, instruments,
chattel paper, and guarantees at any time held by the Lender Group on which
such Loan Party may in any way be liable.


 


11.2                           The Lender Group’s Liability for
Collateral.  Each Loan Party agrees that:  (a) so long as Agent complies with its
obligations, if any, under the Code, the Lender Group shall not in any way or
manner be liable or responsible for:  (i) the
safekeeping of the Collateral, (ii) any loss or damage thereto occurring
or arising in any manner or fashion from any cause, (iii) any diminution
in the value thereof, or (iv) any act or default of any carrier,
warehouseman, bailee, forwarding agency, or other Person, and (b) all risk
of loss, damage, or destruction of the Collateral shall be borne by the Loan
Parties.


 


11.3                           Indemnification.  Each
Loan Party shall pay, indemnify, defend, and hold Agent-Related Persons, the
Lender-Related Persons, and each Participant (each, an “Indemnified Person”)
harmless (to the fullest extent permitted by law) from and against any and all
claims, demands, suits, actions, investigations, proceedings, liabilities,
fines, costs, penalties, and damages, and all reasonable out of pocket fees and
disbursements of attorneys, experts, or consultants and all other costs and
expenses actually incurred in connection therewith or in connection with the
enforcement of this indemnification (as and when they are incurred and
irrespective of whether suit is brought), at any time asserted against, imposed
upon, or incurred by any of them (a) in connection with or as a result of
or related to the execution, delivery, enforcement, performance, or
administration (including any restructuring or workout with respect hereto) of
this Agreement, any of the other Loan Documents, or the transactions
contemplated hereby or thereby or the monitoring of Borrower’s and its
Subsidiaries’ compliance with the terms of the Loan Documents, (b) with
respect to any investigation, litigation, or proceeding related to this
Agreement, any other Loan Document, or the use of the proceeds of the credit
provided hereunder (irrespective of whether any Indemnified Person is a party
thereto), or any act, omission, event, or circumstance in any manner related
thereto, and (c) in connection with or arising out of any presence or
Release of Hazardous Materials, any Environmental Actions, any Environmental
Liabilities or any Response Actions related to any assets or properties of
Borrower or any of its Subsidiaries (each and all of the foregoing, the “Indemnified
Liabilities”).  The foregoing to the
contrary notwithstanding, the Loan Parties shall have no obligation to any
Indemnified Person under this Section 11.3 with respect to any
Indemnified Liability that a court of competent jurisdiction


 


51

















 


finally
determines to have resulted from the gross negligence or willful misconduct of
such Indemnified Person.  This provision
shall survive the termination of this Agreement and the repayment of the
Obligations.  If any Indemnified Person
makes any payment to any other Indemnified Person with respect to an
Indemnified Liability as to which a Loan Party was required to indemnify the
Indemnified Person receiving such payment, the Indemnified Person making such
payment is entitled to be indemnified and reimbursed by such Loan Party with
respect thereto.  WITHOUT LIMITATION, THE FOREGOING INDEMNITY SHALL
APPLY TO EACH INDEMNIFIED PERSON WITH RESPECT TO INDEMNIFIED LIABILITIES WHICH
IN WHOLE OR IN PART ARE CAUSED BY OR ARISE OUT OF ANY NEGLIGENT ACT OR
OMISSION OF SUCH INDEMNIFIED PERSON OR OF ANY OTHER PERSON.


 


12.                                 NOTICES.


 


Unless
otherwise provided in this Agreement, all notices or demands by any of the Loan
Parties or Agent to the other relating to this Agreement or any other Loan
Document shall be in writing and (except for financial statements and other
informational documents which may be sent by first-class mail, postage prepaid)
shall be personally delivered or sent by registered or certified mail (postage
prepaid, return receipt requested), overnight courier, electronic mail (at such
email addresses as the Loan Parties or Agent, as applicable, may designate to
each other in accordance herewith), or telefacsimile to any Loan Party or
Agent, as the case may be, at its address set forth below:


 


	
  If
  to Borrower or any

  other Loan Party:

  	
  Storm Cat Energy (USA) Corporation

  
	
   

  	
  1125
  17th St.,
  Suite 2310

  
	
   

  	
  Denver,
  Colorado 80202

  
	
   

  	
  Attn:
  Chief Financial Officer

  
	
   

  	
  Fax
  No.

  
	
   

  	
   

  
	
  with
  copies to:

  	
  Hogan & Hartson LLP

  
	
   

  	
  One
  Tabor Center, Suite 1500

  
	
   

  	
  1200
  Seventeenth Street

  
	
   

  	
  Denver,
  Colorado 80202

  
	
   

  	
  Attn:
  Richard Mattera, Esq.

  
	
   

  	
  Fax
  No.: (303) 899-7333

  
	
   

  	
   

  
	
   

  	
  Lindquist & Vennum, LLP
 600 17th Street

  Suite 1800 South

  Denver, CO 80202
 Attn: Craig A. Christensen, Esq.
 Fax No.: (303) 573-1956

  
	
   

  	
   

  
	
   

  	
  Alvarez & Marsal

  6th
  Floor

  600 Lexington
  Avenue

  New
  York, NY 10022
 Attn: General Counsel

  Fax No.:
  (212) 759-5532

  



 


52

















 


	
  If to Agent:

  	
  Regiment Capital Special Situations

  Fund III,
  L.P.

  
	
   

  	
  222 Berkeley Street, 12th Floor

  
	
   

  	
  Boston, Massachusetts
  02116

  
	
   

  	
  Attn: Kyle O’Neill

  
	
   

  	
  Fax
  No.: (617) 488-1688

  
	
   

  	
   

  
	
  With
  a copy to:

  	
  Andrews Kurth LLP
 450 Lexington Avenue

  New York, NY 10017

  Attn:
  James Donnell, Esq.

  Fax No.:
  (212) 850-2929

  



 


Agent,
any Lender and any Loan Party may change the address at which they are to
receive notices hereunder, by notice in writing in the foregoing manner given
to the other party.  All notices or
demands sent in accordance with this Section 12, other than notices
by Agent in connection with enforcement rights against the Collateral under the
provisions of the Code, shall be deemed received on the earlier of the date of
actual receipt or three (3) Business Days after the deposit thereof in the
mail.  The Loan Parties acknowledge and
agree that notices sent by the Lender Group in connection with the exercise of
enforcement rights against Collateral under the provisions of the Code shall be
deemed sent when deposited in the mail or personally delivered, or, where
permitted by law, transmitted by telefacsimile or any other method set forth
above.


 


13.                                 CHOICE OF LAW AND VENUE; JURY TRIAL WAIVER.


 


(a)           THE VALIDITY OF THIS AGREEMENT AND THE OTHER LOAN
DOCUMENTS (UNLESS EXPRESSLY PROVIDED TO THE CONTRARY IN ANOTHER LOAN DOCUMENT
IN RESPECT OF SUCH OTHER LOAN DOCUMENT), THE CONSTRUCTION, INTERPRETATION, AND
ENFORCEMENT HEREOF AND THEREOF, AND THE RIGHTS OF THE PARTIES HERETO AND
THERETO WITH RESPECT TO ALL MATTERS ARISING HEREUNDER OR THEREUNDER OR RELATED
HERETO OR THERETO SHALL BE DETERMINED UNDER, GOVERNED BY, AND CONSTRUED IN
ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK EXCEPT AS GOVERNED BY THE
BANKRUPTCY CODE AND EXCEPT AS EXPRESSLY PROVIDED TO THE CONTRARY IN ANOTHER
LOAN DOCUMENT IN RESPECT OF SUCH OTHER LOAN DOCUMENT.


 


(b)           IF THE BANKRUPTCY COURT ABSTAINS FROM HEARING OR
REFUSES TO EXERCISE JURISDICTION OVER ANY OF THE FOLLOWING, THE PARTIES AGREE
THAT ALL ACTIONS OR PROCEEDINGS ARISING IN CONNECTION WITH THIS AGREEMENT AND
THE OTHER LOAN DOCUMENTS SHALL BE TRIED AND LITIGATED ONLY IN THE STATE AND TO
THE EXTENT PERMITTED BY APPLICABLE LAW, FEDERAL COURTS LOCATED IN NEW YORK
STATE; PROVIDED, HOWEVER, THAT ANY SUIT SEEKING ENFORCEMENT
AGAINST ANY COLLATERAL OR OTHER PROPERTY MAY BE BROUGHT, AT AGENT’S
OPTION, IN THE COURTS OF ANY JURISDICTION WHERE AGENT ELECTS TO BRING SUCH
ACTION OR WHERE SUCH COLLATERAL OR OTHER PROPERTY MAY BE FOUND.  EACH LOAN PARTY AND EACH MEMBER OF THE LENDER
GROUP WAIVE, TO THE EXTENT PERMITTED UNDER APPLICABLE LAW, ANY RIGHT EACH MAY HAVE
TO ASSERT THE DOCTRINE OF FORUM NON CONVENIENS OR TO OBJECT TO VENUE TO THE
EXTENT ANY PROCEEDING IS BROUGHT IN ACCORDANCE WITH THIS SECTION 13(b).


 


53

















 


(c)           THE PARTIES HEREBY WAIVE THEIR RESPECTIVE RIGHTS TO A
JURY TRIAL OF ANY CLAIM OR CAUSE OF ACTION BASED UPON OR ARISING OUT OF ANY OF
THE LOAN DOCUMENTS OR ANY OF THE TRANSACTIONS CONTEMPLATED THEREIN, INCLUDING
CONTRACT CLAIMS, TORT CLAIMS, BREACH OF DUTY CLAIMS, AND ALL OTHER COMMON LAW
OR STATUTORY CLAIMS.  EACH OF THE PARTIES
REPRESENTS THAT IT HAS REVIEWED THIS WAIVER AND KNOWINGLY AND VOLUNTARILY
WAIVES ITS JURY TRIAL RIGHTS FOLLOWING CONSULTATION WITH LEGAL COUNSEL.  IN THE EVENT OF LITIGATION, A COPY OF THIS
AGREEMENT MAY BE FILED AS A WRITTEN CONSENT TO A TRIAL BY THE COURT.


 


14.                                 ASSIGNMENTS AND PARTICIPATIONS; SUCCESSORS.


 


14.1                           Assignments and Participations.


 


(a)           Any
Lender may at any time assign and delegate to one or more assignees (each an “Assignee”)
all or any portion of the Obligations, the Commitments and the other rights and
obligations of such Lender hereunder and under the other Loan Documents, in a
minimum amount (unless waived by Agent and, so long as no Event of Default
shall have occurred and be continuing, Borrower) of One Million Dollars
($1,000,000) (except such minimum amount shall not apply to (i) an
assignment or delegation by any Lender to any other Lender or an Affiliate of
any Lender or an Approved Fund, (ii) a group of new Lenders, each of whom
is an Affiliate of each other or a fund or account managed by any such new
Lender or an Affiliate of such new Lender to the extent that the aggregate
amount to be assigned to all such new Lenders is at least One Million Dollars
($1,000,000) or (iii) an Eligible Assignee); provided, however,
that notwithstanding anything contained in this Section 14.1 to the
contrary, (A) a Lender may assign any or all of its rights hereunder to an
Affiliate of such Lender or an Approved Fund of such Lender without (1) providing
any notice to Agent or any other Person or (2) delivering an executed
Assignment and Acceptance to Agent (each a “Related Party Assignment”), (B) Borrower
and Agent may continue to deal solely and directly with the assigning Lender
until an Assignment and Acceptance has been delivered to Agent and the
assigning Lender or Assignee has paid to Agent for Agent’s separate account a
processing fee in the amount of Three Thousand Five Hundred Dollars ($3,500), (C) the
failure of such assigning Lender to deliver an Assignment and Acceptance to
Agent or any other Person shall not affect the legality, validity or binding
effect of such assignment, and (D) an Assignment and Acceptance between an
assigning Lender and its Affiliate or Related Fund shall be effective as of the
date specified in such Assignment and Acceptance and recorded on the Related
Party Register (as defined below).


 


(b)           Except
as otherwise provided in the proviso in Section 14.1(a), from and
after the date that Agent notifies the assigning Lender (with a copy to
Borrower) that it has received an executed Assignment and Acceptance and
payment of any required processing fee (if required) and such assignment is
recorded on the Register, (i) the Assignee thereunder shall be a party
hereto and, to the extent that rights and obligations hereunder have been
assigned to it pursuant to such Assignment and Acceptance, shall have the
rights and obligations of a Lender under the Loan Documents, and (ii) the
assigning Lender shall, to the extent that rights and obligations hereunder and
under the other Loan Documents have been assigned by it pursuant to such
Assignment and Acceptance, relinquish its rights (except with respect to Section 11.3
hereof) and be released from any future obligations under this Agreement (and
in the case of an Assignment and Acceptance covering all or the remaining
portion of an assigning Lender’s rights and obligations under this Agreement
and the other Loan Documents, such Lender shall cease to be a party hereto and
thereto), and such assignment shall effect a novation among Borrower, the
assigning Lender, and the Assignee; provided, however, that
nothing contained herein shall release any assigning Lender from obligations
that survive the termination of this Agreement, including such assigning Lender’s
obligations under Section 16 and Section 18.9(a) of
this Agreement.


 


54

















 


(c)           By
executing and delivering an Assignment and Acceptance, the assigning Lender
thereunder and the Assignee thereunder confirm to and agree with each other and
the other parties hereto as follows:  (i) other
than as provided in such Assignment and Acceptance, such assigning Lender makes
no representation or warranty and assumes no responsibility with respect to any
statements, warranties or representations made in or in connection with this
Agreement or the execution, legality, validity, enforceability, genuineness,
sufficiency or value of this Agreement or any other Loan Document furnished
pursuant hereto, (ii) such assigning Lender makes no representation or
warranty and assumes no responsibility with respect to the financial condition
of Borrower or the performance or observance by Borrower of any of its
obligations under this Agreement or any other Loan Document furnished pursuant
hereto, (iii) such Assignee confirms that it has received a copy of this
Agreement, together with such other documents and information as it has deemed
appropriate to make its own credit analysis and decision to enter into such
Assignment and Acceptance, (iv) such Assignee will, independently and
without reliance upon Agent, such assigning Lender or any other Lender, and
based on such documents and information as it shall deem appropriate at the
time, continue to make its own credit decisions in taking or not taking action
under this Agreement, (v) such Assignee appoints and authorizes Agent to
take such actions and to exercise such powers under this Agreement as are
delegated to Agent by the terms hereof, together with such powers as are
reasonably incidental thereto, and (vi) such Assignee agrees that it will
perform all of the obligations which by the terms of this Agreement are
required to be performed by it as a Lender.


 


(d)           Immediately
upon Agent’s receipt of any required processing fee payment (if required) and
the recordation of the fully executed Assignment and Acceptance on the Register
(or, in the case of Related Party Assignment pursuant to Section 14.1(a),
upon recordation on the Related Party Register), this Agreement shall be deemed
to be amended to the extent, but only to the extent, necessary to reflect the
addition of the Assignee and the resulting adjustment of the Commitments
arising therefrom.  The Commitment
allocated to each Assignee shall reduce such Commitments of the assigning
Lender pro tanto.


 


(e)           Any
Lender may at any time sell to one or more commercial banks, financial
institutions, or other Persons (a “Participant”) participating interests
in all or any portion of its Obligations, its Commitment, and the other rights
and interests of that Lender (the “Originating Lender”) hereunder and
under the other Loan Documents; provided, however, that (i) the
Originating Lender shall remain a “Lender” for all purposes of this Agreement
and the other Loan Documents and the Participant receiving the participating
interest in the Obligations, the Commitments, and the other rights and
interests of the Originating Lender hereunder shall not constitute a “Lender”
hereunder or under the other Loan Documents and the Originating Lender’s obligations
under this Agreement shall remain unchanged, (ii) the Originating Lender
shall remain solely responsible for the performance of such obligations, (iii) Borrower,
Agent, and the Lenders shall continue to deal solely and directly with the
Originating Lender in connection with the Originating Lender’s rights and
obligations under this Agreement and the other Loan Documents and (iv) all
amounts payable by Borrower hereunder shall be determined as if such Lender had
not sold such participation, except that, if amounts outstanding under this
Agreement are due and unpaid, or shall have been declared or shall have become
due and payable upon the occurrence of an Event of Default, each Participant
shall be deemed to have the right of set off in respect of its participating
interest in amounts owing under this Agreement to the same extent as if the
amount of its participating interest were owing directly to it as a Lender
under this Agreement.  The rights of any
Participant only shall be derivative through the Originating Lender with whom
such Participant participates, provided, however, each
Participant shall have the right to participate directly in the making of
decisions by the Lenders and shall have the right to approve any amendment to,
or any consent or waiver with respect to, this Agreement or any other Loan
Document, and shall be entitled to the benefits of Section 17
hereof as if such Participant was a “Lender” hereunder.  The provisions of this Section 14.1(e) are
solely for the benefit of the Lender Group and Borrower shall not have any
rights as third party beneficiaries of any such provisions.


 


55
















 


(f)            In
connection with any such assignment or participation or proposed assignment or
participation, a Lender may, subject to the provisions of Section 18.9,
disclose all documents and information which it now or hereafter may have
relating to Borrower and its Subsidiaries and their respective businesses.


 


(g)           Any
other provision in this Agreement notwithstanding, any Lender may at any time
create a security interest in, or pledge, all or any portion of its rights
under and interest in this Agreement in favor of any Federal Reserve Bank in
accordance with Regulation A of the Federal Reserve Bank or U.S. Treasury
Regulation 31 CFR § 203.24 or any other Person, including, without limitation,
as provided in Section 2.15, and such Person may enforce such
pledge or security interest in any manner permitted under applicable law;
provided, that no such pledge or grant of a security interest shall release a
Lender from any of its obligations hereunder or substitute any such pledgee or
secured party (or any transferee thereof) for such Lender as a party hereto
unless such pledgee or secured party (or transferee) becomes a Lender
hereunder.


 


(h)           Agent
shall, acting solely for this purpose as a non-fiduciary agent of Borrower,
maintain, or cause to be maintained, a register (the “Register”) on
which it shall enter the names and addresses of the Lenders and the Commitments
of, and the principal amount of the Advances (and stated interest thereon) and
Obligations with respect to Letters of Credit owing to, each Lender from time
to time.  Subject to the last sentence of
this Section 14.1(h), the entries in the Register shall be
conclusive and binding for all purposes, absent manifest error, and Borrower,
Agent and Lenders may treat each Person whose name is recorded in the Register
as a Lender hereunder for all purposes of this Agreement.  The Register shall be available for
inspection by Borrower at any reasonable time and from time to time upon
reasonable notice.  In the case of a
Related Party Assignment pursuant to the proviso in Section 14.1(a) as
to which an Assignment and Acceptance is not delivered to Agent, the assigning
Lender shall, acting solely for this purpose as a non-fiduciary agent of
Borrower, maintain a register (the “Related Party Register”) comparable
to the Register on behalf of Borrower. 
The Related Party Register shall be available for inspection by Borrower
at any reasonable time and from time to time upon reasonable notice.


 


(i)            A
Registered Loan (and the Registered Note, if any, evidencing the same) may be
assigned or sold in whole or in part only by registration of such assignment or
sale on the Register or the Related Party Register (and each Registered Note
shall expressly so provide).  Any
assignment or sale of all or part of such Registered Loan (and the Registered
Note, if any, evidencing the same) may be effected only by registration of such
assignment or sale on the Register or the Related Party Register, together with
the surrender of the Registered Note, if any, evidencing the same duly endorsed
by (or accompanied by a written instrument of assignment or sale duly executed
by) the holder of such Registered Note, whereupon, at the request of the
designated assignee(s) or transferee(s), one or more new Registered Notes
in the same aggregate principal amount shall be issued to the designated
assignee(s) or transferee(s) and such requestor shall surrender to
Borrower the Registered Note being replaced. 
Prior to the registration of assignment or sale of any Registered Loan
(and the Registered Note, if any evidencing the same), Agent and Borrower shall
treat the Person in whose name such Registered Loan (and the Registered Note,
if any, evidencing the same) is registered as the owner thereof for the purpose
of receiving all payments thereon, notwithstanding notice to the contrary.


 


(j)            In
the event that a Lender sells participations in the Registered Loan, such
Lender shall, acting solely for this purpose as a non-fiduciary agent of
Borrower, maintain a register on which it enters the name of all participants
in the Registered Loans held by it and the principal amount (and stated
interest thereon) of the portion of the Registered Loan that is the subject of
the participation (the “Participant Register”).  A Registered Loan (and the Registered Note,
if any, evidencing the same) may be participated in whole or in part only by
registration of such participation on the Participant Register (and each
Registered Note shall expressly so provide). 
Any participation 


 


56

















 


of
such Registered Loan (and the Registered Note, if any, evidencing the same) may
be effected only by the registration of such participation on the Participant
Register.  The Participant Register shall
be available for inspection by Borrower at any reasonable time and from time to
time upon reasonable notice.


 


14.2         Successors. 
This Agreement shall bind and inure to the benefit of the respective
successors and assigns of each of the parties; provided, however,
that Borrower may not assign this Agreement or any rights or duties hereunder
without the Lenders’ prior written consent and any prohibited assignment shall
be absolutely void ab initio.  No consent to assignment by the Lenders shall
release Borrower from its Obligations.  A
Lender may assign this Agreement and the other Loan Documents and its rights
and duties hereunder and thereunder pursuant to Section 14.1
hereof.


 


15.                                 AMENDMENTS; WAIVERS.


 


15.1         Amendments and Waivers. 
No amendment or waiver of any provision of this Agreement or any other
Loan Document (other than Bank Product Agreements), and no consent with respect
to any departure by Borrower therefrom, shall be effective unless the same
shall be in writing and signed by the Required Lenders (or by Agent at the
written request of the Required Lenders) and Borrower and then any such waiver
or consent shall be effective, but only in the specific instance and for the
specific purpose for which given; provided, however, that no such
waiver, amendment, or consent shall, unless in writing and signed by all of the
Lenders directly affected thereby and Borrower, do any of the following:


 


(i)            increase
or extend any Commitment of any Lender,


 


(ii)           postpone
or delay any date fixed by this Agreement or any other Loan Document for any
payment of principal, interest, fees, or other amounts due hereunder or under
any other Loan Document,


 


(iii)          reduce
the principal of, or the rate of interest on, any loan or other extension of
credit hereunder, or reduce any fees or other amounts payable hereunder or
under any other Loan Document,


 


(iv)          change
the Pro Rata Share that is required to take any action hereunder,


 


(v)           other
than as permitted by Section 16.11, release Agent’s Lien in and to
any of the Collateral,


 


(vi)          amend
or modify this Section or any provision of this Agreement providing for
consent or other action by all Lenders,


 


(vii)         change
the definition of “Required Lenders” or “Pro Rata Share”,


 


(viii)        contractually
subordinate any of Agent’s Liens or modify, waive or subordinate the super
priority claim status of the Obligations (except as permitted in this Agreement
and the Loan Documents),


 


(ix)           other
than in connection with a merger, liquidation, dissolution or sale of such
Person expressly permitted by the terms hereof or the other Loan Documents,
release Borrower, Parent or any Debtor Guarantor from any obligation for the
payment of money,


 


(x)            amend
any of the provisions of Section 2.4(b)(i) or (ii),


 


57

















 


(xi)           change
the definition of “Budget”, “Maximum Revolver Amount” or change Section 2.1(c),
or


 


(xii)          amend
any of the provisions of Section 15,


 


and,
provided further, however, that no amendment, waiver or consent
shall, unless in writing and signed by Agent, affect the rights or duties of
Agent under this Agreement or any other Loan Document.  The foregoing notwithstanding, any amendment,
modification, waiver, consent, termination, or release of, or with respect to,
any provision of this Agreement or any other Loan Document that relates only to
the relationship of the Lender Group among themselves, and that does not affect
the rights or obligations of Borrower, shall not require consent by or the
agreement of Borrower.


 


15.2         Replacement of Lenders.


 


(a)           If
(i) any action to be taken by the Lender Group or Agent hereunder requires
the consent, authorization, or agreement of all Lenders, and a Lender (“Holdout
Lender”) fails to give its consent, authorization, or agreement, or (ii) any
Lender (an “Increased Cost Lender”; Increased Cost Lenders and Holdout
Lenders are each referred to herein as “Replaceable Lenders”) shall give
notice to Borrowers that such Lender is entitled to receive payments under Section 2.14,  then Agent or Borrower, upon at least 5
Business Days prior irrevocable notice to the Replaceable Lender, may
permanently replace the Replaceable Lender with one or more substitute Lenders
(each, a “Replacement Lender”; provided that neither Borrower, Parent,
any Debtor Guarantor nor any Affiliate of Borrower, Parent or Debtor Guarantor
or of Permitted Holders shall be permitted to become a Replacement Lender), and
the Replaceable Lender shall have no right to refuse to be replaced
hereunder.  Such notice to replace the
Replaceable Lender shall specify an effective date for such replacement, which
date shall not be later than 15 Business Days after the date such notice is
given.


 


(b)           Prior
to the effective date of such replacement, the Replaceable Lender and each
Replacement Lender shall execute and deliver an Assignment and Acceptance, subject
only to the Replaceable Lender being repaid its share of the outstanding
Obligations (including an assumption of its Pro Rata Share of the Risk
Participation Liability) without any premium or penalty of any kind whatsoever.  If the Replaceable Lender shall refuse or
fail to execute and deliver any such Assignment and Acceptance prior to the
effective date of such replacement, the Replaceable Lender shall be deemed to
have executed and delivered such Assignment and Acceptance.  The replacement of any Replaceable Lender
shall be made in accordance with the terms of Section 14.1.  Until such time as the Replacement Lenders
shall have acquired all of the Obligations, the Commitments, and the other
rights and obligations of the Replaceable Lender hereunder and under the other
Loan Documents, the Replaceable Lender shall remain obligated to make the
Replaceable Lender’s Pro Rata Share of Advances and to purchase a participation
in each Letter of Credit, in an amount equal to its Pro Rata Share of the Risk
Participation Liability of such Letter of Credit.


 


15.3         No Waivers; Cumulative
Remedies.  No failure by Agent or any Lender to exercise
any right, remedy, or option under this Agreement or any other Loan Document,
or delay by Agent or any Lender in exercising the same, will operate as a
waiver thereof.  No waiver by Agent or
any Lender will be effective unless it is in writing, and then only to the
extent specifically stated.  No waiver by
Agent or any Lender on any occasion shall affect or diminish Agent’s and each
Lender’s rights thereafter to require strict performance by Borrower of any
provision of this Agreement.  Agent’s and
each Lender’s rights under this Agreement and the other Loan Documents will be
cumulative and not exclusive of any other right or remedy that Agent or any
Lender may have.


 


58

















 


16.                                 AGENT; THE LENDER GROUP.


 


16.1         Appointment and
Authorization of Agent.  Each Lender hereby designates and appoints
Regiment as its representative under this Agreement and the other Loan
Documents and each Lender hereby irrevocably authorizes Agent to execute and
deliver each of the other Loan Documents on its behalf and to take such other
action on its behalf under the provisions of this Agreement and each other Loan
Document and to exercise such powers and perform such duties as are expressly
delegated to Agent by the terms of this Agreement or any other Loan Document,
together with such powers as are reasonably incidental thereto.  Agent agrees to act as such on the express
conditions contained in this Section 16. The provisions of this Section 16
are solely for the benefit of Agent and the Lenders, and Borrower and its
Subsidiaries shall have no rights as a third party beneficiary of any of the
provisions contained herein, except with respect to Borrower’s consultation
rights set forth in Section 16.9 and Borrower’s right to receive
release documentation set forth in Section 16.11(a).  Any provision to the contrary contained
elsewhere in this Agreement or in any other Loan Document notwithstanding,
Agent shall not have any duties or responsibilities, except those expressly set
forth herein, nor shall Agent have or be deemed to have any fiduciary
relationship with any Lender, and no implied covenants, functions, responsibilities,
duties, obligations or liabilities shall be read into this Agreement or any
other Loan Document or otherwise exist against Agent; it being expressly
understood and agreed that the use of the word “Agent” is for convenience only,
that Regiment is merely the representative of the Lenders, and only has the
contractual duties set forth herein. 
Except as expressly otherwise provided in this Agreement, Agent shall
have and may use its sole discretion with respect to exercising or refraining
from exercising any discretionary rights or taking or refraining from taking
any actions that Agent expressly is entitled to take or assert under or
pursuant to this Agreement and the other Loan Documents.  Without limiting the generality of the
foregoing, or of any other provision of the Loan Documents that provides rights
or powers to Agent, Lenders agree that Agent shall have the right to exercise
the following powers as long as this Agreement remains in effect:  (a) maintain, in accordance with its
customary business practices, ledgers and records reflecting the status of the
Obligations, the Collateral, the Collections of Borrower and its Subsidiaries,
and related matters, (b) execute or file any and all financing or similar
statements or notices, amendments, renewals, supplements, documents,
instruments, proofs of claim, notices and other written agreements with respect
to the Loan Documents, (c) make Advances, for itself or on behalf of
Lenders as provided in the Loan Documents, (d) exclusively receive, apply,
and distribute the Collections of Borrower and its Subsidiaries as provided in
the Loan Documents, (e) open and maintain such bank accounts and cash
management arrangements as Agent deems necessary and appropriate in accordance
with the Loan Documents for the foregoing purposes with respect to the
Collateral and the Collections of Borrower and its Subsidiaries, (f) perform,
exercise, and enforce any and all other rights and remedies of the Lender Group
with respect to Borrower or its Subsidiaries, the Obligations, the Collateral,
the Collections of Borrower and its Subsidiaries, or otherwise related to any
of same as provided in the Loan Documents, and (g) incur and pay such
Lender Group Expenses as Agent may deem necessary or appropriate for the
performance and fulfillment of its functions and powers pursuant to the Loan
Documents.


 


16.2         Delegation of Duties. 
Agent may execute any of its duties under this Agreement or any other
Loan Document by or through agents, employees or attorneys in fact and shall be
entitled to advice of counsel concerning all matters pertaining to such
duties.  Agent shall not be responsible
for the negligence or misconduct of any agent or attorney in fact that it
selects as long as such selection was made without gross negligence or willful
misconduct.


 


16.3         Liability of Agent. 
None of Agent-Related Persons shall (a) be liable for any action
taken or omitted to be taken by any of them under or in connection with this
Agreement or any other Loan Document or the transactions contemplated hereby
(except for its own gross negligence or willful misconduct), or (b) be
responsible in any manner to any of the Lenders for any recital, statement,
representation or warranty made by Borrower or any of its Subsidiaries or
Affiliates, or any 


 


59

















 


officer
or director thereof, contained in this Agreement or in any other Loan Document,
or in any certificate, report, statement or other document referred to or
provided for in, or received by Agent under or in connection with, this
Agreement or any other Loan Document, or the validity, effectiveness,
genuineness, enforceability or sufficiency of this Agreement or any other Loan
Document, or for any failure of Borrower or its Subsidiaries or any other party
to any Loan Document to perform its obligations hereunder or thereunder.  No Agent-Related Person shall be under any
obligation to any Lender to ascertain or to inquire as to the observance or
performance of any of the agreements contained in, or conditions of, this
Agreement or any other Loan Document, or to inspect the books and records or
properties of Borrower or its Subsidiaries.


 


16.4         Reliance by Agent. 
Agent shall be entitled to rely, and shall be fully protected in
relying, upon any writing, resolution, notice, consent, certificate, affidavit,
letter, telegram, telefacsimile or other electronic method of transmission,
telex or telephone message, statement or other document or conversation
believed by it to be genuine and correct and to have been signed, sent, or made
by the proper Person or Persons, and upon advice and statements of legal
counsel (including counsel to Borrower or counsel to any Lender), independent
accountants and other experts selected by Agent.  Agent shall be fully justified in failing or
refusing to take any action under this Agreement or any other Loan Document
unless Agent shall first receive such advice or concurrence of the Lenders as
it deems appropriate and until such instructions are received, Agent shall act,
or refrain from acting, as it deems advisable. 
If Agent so requests, it shall first be indemnified to its reasonable
satisfaction by the Lenders against any and all liability and expense that may
be incurred by it by reason of taking or continuing to take any such
action.  Agent shall in all cases be
fully protected in acting, or in refraining from acting, under this Agreement
or any other Loan Document in accordance with a request or consent of the
requisite Lenders and such request and any action taken or failure to act
pursuant thereto shall be binding upon all of the Lenders.


 


16.5         Notice of Default or Event
of Default.  Agent shall not be deemed to have knowledge
or notice of the occurrence of any Default or Event of Default, except with
respect to defaults in the payment of principal, interest, fees, and expenses
required to be paid to Agent for the account of the Lenders and, except with
respect to Events of Default of which Agent has actual knowledge, unless Agent
shall have received written notice from a Lender or Borrower referring to this
Agreement, describing such Default or Event of Default, and stating that such
notice is a “notice of default.”  Agent
promptly will notify the Lenders of its receipt of any such notice or of any
Event of Default of which Agent has actual knowledge.  If any Lender obtains actual knowledge of any
Event of Default, such Lender promptly shall notify the other Lenders and Agent
of such Event of Default.  Each Lender
shall be solely responsible for giving any notices to its Participants, if
any.  Subject to Section 16.4,
Agent shall take such action with respect to such Default or Event of Default
as may be requested by the Required Lenders in accordance with Section 9;
provided, however, that unless and until Agent has received any
such request, Agent may (but shall not be obligated to) take such action, or
refrain from taking such action, with respect to such Default or Event of
Default as it shall deem advisable.


 


16.6         Credit Decision. 
Each Lender acknowledges that none of Agent-Related Persons has made any
representation or warranty to it, and that no act by Agent hereinafter taken,
including any review of the affairs of Borrower and its Subsidiaries or
Affiliates, shall be deemed to constitute any representation or warranty by any
Agent-Related Person to any Lender.  Each
Lender represents to Agent that it has, independently and without reliance upon
any Agent-Related Person and based on such documents and information as it has
deemed appropriate, made its own appraisal of and investigation into the
business, prospects, operations, property, financial and other condition and
creditworthiness of Borrower or any other Person party to a Loan Document, and
all applicable bank regulatory laws relating to the transactions contemplated
hereby, and made its own decision to enter into this Agreement and to extend
credit to Borrower.  Each Lender also
represents that it will, independently and without reliance upon any
Agent-Related Person and based on such documents and 


 


60

















 


information
as it shall deem appropriate at the time, continue to make its own credit
analysis, appraisals and decisions in taking or not taking action under this
Agreement and the other Loan Documents, and to make such investigations as it
deems necessary to inform itself as to the business, prospects, operations,
property, financial and other condition and creditworthiness of Borrower or any
other Person party to a Loan Document. 
Except for notices, reports, and other documents expressly herein
required to be furnished to the Lenders by Agent, Agent shall not have any duty
or responsibility to provide any Lender with any credit or other information
concerning the business, prospects, operations, property, financial and other
condition or creditworthiness of Borrower or any other Person party to a Loan
Document that may come into the possession of any of Agent-Related Persons.


 


16.7         Costs and Expenses;
Indemnification.  Agent may incur and pay Lender Group Expenses
to the extent Agent reasonably deems necessary or appropriate for the
performance and fulfillment of its functions, powers, and obligations pursuant
to the Loan Documents, including court costs, attorneys fees and expenses, fees
and expenses of financial accountants, advisors, consultants, and appraisers,
costs of collection by outside collection agencies, auctioneer fees and
expenses, and costs of security guards or insurance premiums paid to maintain
the Collateral, whether or not Borrower is obligated to reimburse Agent or
Lenders for such expenses pursuant to this Agreement or otherwise.  Agent is authorized and directed to deduct
and retain sufficient amounts from the Collections of Borrower and its
Subsidiaries received by Agent to reimburse Agent for such out-of-pocket costs
and expenses prior to the distribution of any amounts to Lenders.  In the event Agent is not reimbursed for such
costs and expenses by Borrower or its Subsidiaries, each Lender hereby agrees
that it is and shall be obligated to pay to Agent such Lender’s Pro Rata Share
thereof.  Whether or not the transactions
contemplated hereby are consummated, the Lenders shall indemnify upon demand
Agent-Related Persons (to the extent not reimbursed by or on behalf of Borrower
and without limiting the obligation of Borrower to do so), according to their
Pro Rata Shares, from and against any and all Indemnified Liabilities; provided,
however, that no Lender shall be liable for the payment to any
Agent-Related Person of any portion of such Indemnified Liabilities resulting
solely from such Person’s gross negligence or willful misconduct nor shall any
Lender be liable for the obligations of any Defaulting Lender in failing to
make an Advance or other extension of credit hereunder.  Without limitation of the foregoing, each
Lender shall reimburse Agent upon demand for such Lender’s Pro Rata Share of
any costs or out of pocket expenses (including attorneys, accountants,
advisors, and consultants fees and expenses) incurred by Agent in connection
with the preparation, execution, delivery, administration, modification,
amendment, or enforcement (whether through negotiations, legal proceedings or
otherwise) of, or legal advice in respect of rights or responsibilities under,
this Agreement, any other Loan Document, or any document contemplated by or
referred to herein, to the extent that Agent is not reimbursed for such
expenses by or on behalf of Borrower. 
The undertaking in this Section shall survive the payment of all
Obligations hereunder and the resignation or replacement of Agent.


 


16.8         Agent in Individual
Capacity.  Regiment and its Affiliates may make loans
to, issue letters of credit for the account of, accept deposits from, acquire
equity interests in, and generally engage in any kind of banking, trust, financial
advisory, underwriting, or other business with Borrower and its Subsidiaries
and Affiliates and any other Person party to any Loan Documents as though
Regiment were not Agent hereunder, and, in each case, without notice to or
consent of the other members of the Lender Group.  The other members of the Lender Group
acknowledge that, pursuant to such activities, Regiment or its Affiliates may
receive information regarding Borrower or its Affiliates or any other Person
party to any Loan Documents that is subject to confidentiality obligations in
favor of Borrower or such other Person and that prohibit the disclosure of such
information to the Lenders, and the Lenders acknowledge that, in such
circumstances (and in the absence of a waiver of such confidentiality
obligations, which waiver Agent will use its reasonable best efforts to
obtain), Agent shall not be under any obligation to provide such information to
them.  The terms “Lender” and “Lenders”
include Regiment in its individual capacity.


 


61

















 


16.9         Successor Agent. 
Agent may resign as Agent upon forty-five (45) days notice to the
Lenders (unless such notice is waived by the Required Lenders).  If Agent resigns under this Agreement, the Required
Lenders, in consultation with Borrower, shall have the right to appoint a
successor Agent for the Lenders; 
provided that after the occurrence and during the continuation of a
Default or an Event of Default, the Required Lenders shall have no obligation
to consult Borrower prior to appointing a successor Agent. If no successor
Agent is appointed prior to the effective date of the resignation or removal of
Agent, Agent may appoint, after consulting with the Lenders, a successor Agent.  At any time, Agent may be removed upon prior
notice from the Required Lenders to Agent and the other Lenders. If Agent has
been removed by the Required Lenders, Required Lenders may agree in writing to
replace Agent with a successor Agent from among the Lenders.  In any such event, upon the acceptance of its
appointment as successor Agent hereunder, such successor Agent shall succeed to
all the rights, powers, and duties of the retiring Agent and the term “Agent”
shall mean such successor Agent and the retiring Agent’s appointment, powers,
and duties as Agent shall be terminated. 
The fees payable by Borrower to a successor Agent shall be the same as
those payable to its predecessor unless otherwise agreed between Borrower and
such successor.  After any retiring Agent’s
resignation hereunder as Agent, the provisions of this Section 16
shall inure to its benefit as to any actions taken or omitted to be taken by it
while it was Agent under this Agreement. 
If no successor Agent has accepted appointment as Agent by the date
which is forty-five (45) days following a retiring Agent’s notice of
resignation, the retiring Agent’s resignation shall nevertheless thereupon
become effective and the Lenders shall perform all of the duties of Agent
hereunder until such time, if any, as the Lenders appoint a successor Agent as
provided for above.


 


16.10       Lender in Individual
Capacity.  Any Lender and its respective Affiliates may
make loans to, issue letters of credit for the account of, accept deposits
from, acquire equity interests in and generally engage in any kind of banking,
trust, financial advisory, underwriting, or other business with Borrower and
its Subsidiaries and Affiliates and any other Person party to any Loan
Documents as though such Lender were not a Lender hereunder without notice to or
consent of the other members of the Lender Group.  The other members of the Lender Group
acknowledge that, pursuant to such activities, such Lender and its respective
Affiliates may receive information regarding Borrower or its Affiliates or any
other Person party to any Loan Documents that is subject to confidentiality
obligations in favor of Borrower or such other Person and that prohibit the
disclosure of such information to the Lenders, and the Lenders acknowledge
that, in such circumstances (and in the absence of a waiver of such
confidentiality obligations, which waiver such Lender will use its reasonable
best efforts to obtain), such Lender shall not be under any obligation to
provide such information to them.


 


16.11       Collateral Matters.


 


(a)           The
Lenders hereby irrevocably authorize Agent, at its option and in its sole
discretion, to release any Lien on any Collateral or other collateral securing
the Obligations (i) upon the termination of the Commitments, the
termination or expiration of all Letters of Credit and payment and satisfaction
in full by Borrower of all Obligations, (ii) constituting property being
sold or disposed of if a release is required or desirable in connection
therewith and if Borrower certifies to Agent that the sale or disposition is
permitted under Section 7.4 of this Agreement or the other Loan
Documents (and Agent may rely conclusively on any such certificate, without
further inquiry), (iii) constituting property in which Borrower or its
Subsidiaries owned no interest at the time Agent’s Lien was granted nor at any
time thereafter, or (iv) constituting property leased to Borrower or its
Subsidiaries under a lease that has expired or is terminated in a transaction
permitted under this Agreement.  Except
as provided above, Agent will not execute and deliver a release of any Lien on
any Collateral or other collateral securing the Obligations without the prior
written authorization of (A) if the release is of all or substantially all
of the Collateral, all of the Lenders, or (B) otherwise, the Required
Lenders.  Upon request by Agent or
Borrower at any time, the Lenders will confirm in writing Agent’s authority to
release any such Liens on particular types or items of Collateral or other
collateral securing the 


 


62

















 


Obligations
pursuant to this Section 16.11. 
Upon receipt (1)  by Agent of any confirmation from all of the
Lenders or the Required Lenders, as applicable, or (2) the occurrence of
an event described above for which collateral release does not require the
approval of any Lender and upon at least ten (10) Business Days’ (or such
shorter period as may be approved by Agent) prior written request by Borrower,
Agent shall (and is hereby irrevocably authorized by Lenders to) execute such
documents as may be necessary to evidence the release of the Liens granted to
Agent upon such Collateral or other collateral securing the Obligations; provided,
however, that (y) Agent shall not be required to execute any
document necessary to evidence such release on terms that, in Agent’s opinion,
would expose Agent to liability or create any obligation or entail any
consequence other than the release of such Lien without recourse,
representation, or warranty, and (z) such release shall not in any manner
discharge, affect, or impair the Obligations or any Liens (other than those
expressly being released) upon (or obligations of Borrower in respect of) all
interests retained by Borrower, including, the proceeds of any sale, all of
which shall continue to constitute part of the Collateral.


 


(b)           Agent
shall have no obligation whatsoever to any of the Lenders to assure that the
Collateral exists or is owned by Borrower or its Subsidiaries or is cared for,
protected, or insured or has been encumbered, or that Agent’s Liens have been
properly or sufficiently or lawfully created, perfected, protected, or enforced
or are entitled to any particular priority, or to exercise at all or in any
particular manner or under any duty of care, disclosure or fidelity, or to
continue exercising, any of the rights, authorities and powers granted or
available to Agent pursuant to any of the Loan Documents, it being understood
and agreed that in respect of the Collateral, or any act, omission, or event
related thereto, subject to the terms and conditions contained herein, Agent
may act in any manner it may deem appropriate, in its sole discretion given
Agent’s own interest in the Collateral in its capacity as one of the Lenders
and that Agent shall have no other duty or liability whatsoever to any Lender
as to any of the foregoing, except as otherwise provided herein.


 


16.12       Restrictions on Actions by Lenders; Sharing of
Payments.


 


(a)           Each
of the Lenders agrees that it shall not, without the express written consent of
Agent, and that it shall, to the extent it is lawfully entitled to do so, upon
the written request of Agent, set off against the Obligations, any amounts
owing by such Lender to Borrower or its Subsidiaries or any deposit accounts of
Borrower or its Subsidiaries now or hereafter maintained with such Lender.  Each of the Lenders further agrees that it
shall not, unless specifically requested to do so in writing by Agent, take or
cause to be taken any action, including, the commencement of any legal or
equitable proceedings to enforce any Loan Document against Borrower, Parent or
any Debtor Guarantor or to foreclose any Lien on, or otherwise enforce any
security interest in, any of the Collateral.


 


(b)           If,
at any time or times any Lender shall receive (i) by payment, foreclosure,
setoff, or otherwise, any proceeds of Collateral or any payments with respect
to the Obligations, except for any such proceeds or payments received by such
Lender from Agent pursuant to the terms of this Agreement, or (ii) payments
from Agent in excess of such Lender’s Pro Rata Share of all such distributions
by Agent, such Lender promptly shall (A) turn the same over to Agent, in
kind, and with such endorsements as may be required to negotiate the same to
Agent, or in immediately available funds, as applicable, for the account of all
of the Lenders and for application to the Obligations in accordance with the
applicable provisions of this Agreement, or (B) purchase, without recourse
or warranty, an undivided interest and participation in the Obligations owed to
the other Lenders so that such excess payment received shall be applied ratably
as among the Lenders in accordance with their Pro Rata Shares; provided,
however, that to the extent that such excess payment received by the
purchasing party is thereafter recovered from it, those purchases of
participations shall be rescinded in whole or in part, as applicable, and the
applicable portion of the purchase price paid therefor shall be returned to
such purchasing party, but without interest except to the extent that such
purchasing party is required to pay interest in connection with the recovery of
the excess payment.


 


63

















 


16.13       Agency for Perfection. 
Agent hereby appoints each other Lender as its agent (and each Lender
hereby accepts such appointment) for the purpose of perfecting Agent’s Liens in
assets which, in accordance with Article 8 or Article 9, as
applicable, of the Code can be perfected only by possession or control.  Should any Lender obtain possession or
control of any such Collateral, such Lender shall notify Agent thereof, and,
promptly upon Agent’s request therefor shall deliver possession or control of
such Collateral to Agent or in accordance with Agent’s instructions.


 


16.14       Payments by Agent to the
Lenders.  All payments to be made by Agent to the
Lenders shall be made by bank wire transfer of immediately available funds
pursuant to such wire transfer instructions as each party may designate for
itself by written notice to Agent.  Concurrently
with each such payment, Agent shall identify whether such payment (or any
portion thereof) represents principal, premium, fees, or interest of the
Obligations.


 


16.15       Concerning the Collateral
and Related Loan Documents.  Each member of the Lender Group authorizes
and directs Agent to enter into this Agreement and the other Loan
Documents.  Each member of the Lender
Group agrees that any action taken by Agent in accordance with the terms of
this Agreement or the other Loan Documents relating to the Collateral and the
exercise by Agent of its powers set forth therein or herein, together with such
other powers that are reasonably incidental thereto, shall be binding upon all
of the Lenders.


 


16.16       Field Audits and
Examination Reports; Confidentiality; Disclaimers by Lenders; Other Reports and
Information.  By becoming a party to this Agreement, each
Lender:


 


(a)           is
deemed to have requested that Agent furnish such Lender, promptly after it
becomes available, a copy of each field audit or examination report respecting
Borrower or its Subsidiaries (each a “Report” and collectively, “Reports”)
prepared by or at the request of Agent, and Agent shall so furnish each Lender
with such Reports,


 


(b)           expressly
agrees and acknowledges that Agent does not (i) make any representation or
warranty as to the accuracy of any Report, and (ii) shall not be liable
for any information contained in any Report,


 


(c)           expressly
agrees and acknowledges that the Reports are not comprehensive audits or
examinations, that Agent or other party performing any audit or examination
will inspect only specific information regarding Borrower and its Subsidiaries
and will rely significantly upon Borrower’s and its Subsidiaries’ books and
records, as well as on representations of Borrower’s personnel,


 


(d)           agrees
to keep all Reports and other material, non-public information regarding
Borrower and its Subsidiaries and their operations, assets, and existing and
contemplated business plans in a confidential manner in accordance with Section 18.9,
and


 


(e)           without
limiting the generality of any other indemnification provision contained in
this Agreement, agrees: (i) to hold Agent and any other Lender preparing a
Report harmless from any action the indemnifying Lender may take or fail to
take or any conclusion the indemnifying Lender may reach or draw from any
Report in connection with any loans or other credit accommodations that the
indemnifying Lender has made or may make to Borrower, or the indemnifying
Lender’s participation in, or the indemnifying Lender’s purchase of, a loan or
loans of Borrower, and (ii) to pay and protect, and indemnify, defend and
hold Agent, and any such other Lender preparing a Report harmless from and
against, the claims, actions, proceedings, damages, costs, expenses, and other
amounts (including, attorneys fees and costs) incurred by Agent and any such
other Lender preparing a Report as the direct or indirect result of any third
parties who might obtain all or part of any Report through the indemnifying
Lender.


 


64

















 


In
addition to the foregoing: (A) any Lender may from time to time request of
Agent in writing that Agent provide to such Lender a copy of any report or
document provided by Borrower or its Subsidiaries to Agent that has not been
contemporaneously provided by Borrower or such Subsidiary to such Lender, and,
upon receipt of such request, Agent promptly shall provide a copy of same to
such Lender, (B) to the extent that Agent is entitled, under any provision
of the Loan Documents, to request additional reports or information from
Borrower or its Subsidiaries, any Lender may, from time to time, reasonably
request Agent to exercise such right as specified in such Lender’s notice to
Agent, whereupon Agent promptly shall request of Borrower the additional
reports or information reasonably specified by such Lender, and, upon receipt
thereof from Borrower or such Subsidiary, Agent promptly shall provide a copy
of same to such Lender, and (C) any time that Agent renders to Borrower a
statement regarding the Loan Account, Agent shall send a copy of such statement
to each Lender.


 


16.17       Several Obligations; No
Liability.  Notwithstanding that certain of the Loan
Documents now or hereafter may have been or will be executed only by or in
favor of Agent in its capacity as such, and not by or in favor of the Lenders,
any and all obligations on the part of Agent (if any) to make any credit
available hereunder shall constitute the several (and not joint) obligations of
the respective Lenders on a ratable basis, according to their respective
Commitments, to make an amount of such credit not to exceed, in principal
amount, at any one time outstanding, the amount of their respective
Commitments.  Nothing contained herein
shall confer upon any Lender any interest in, or subject any Lender to any
liability for, or in respect of, the business, assets, profits, losses, or
liabilities of any other Lender.  Each
Lender shall be solely responsible for notifying its Participants of any
matters relating to the Loan Documents to the extent any such notice may be
required, and no Lender shall have any obligation, duty, or liability to any
Participant of any other Lender.  Except
as provided in Section 16.7, no member of the Lender Group shall
have any liability for the acts of any other member of the Lender Group.  No Lender shall be responsible to Borrower or
any other Person for any failure by any other Lender to fulfill its obligations
to make credit available hereunder, nor to advance for it or on its behalf in
connection with its Commitment, nor to take any other action on its behalf
hereunder or in connection with the financing contemplated herein.


 


17.                                 WITHHOLDING TAXES.


 


(a)           All
payments made by any Loan Party hereunder or under any note or other Loan
Document will be made without setoff, counterclaim, or other defense.  In addition, all such payments will be made
free and clear of, and without deduction or withholding for, any present or
future Indemnified Taxes and Other Taxes, and in the event any deduction or
withholding of Indemnified Taxes and Other Taxes is required, each Loan Party
shall comply with the penultimate sentence of this Section 17(a).  If any Indemnified Taxes and Other Taxes are
so levied or imposed, each Loan Party agrees to pay the full amount of such
Indemnified Taxes and Other Taxes and such additional amounts as may be
necessary so that every payment of all amounts due under this Agreement, any
note, or Loan Document, including any amount paid pursuant to this Section 17(a) after
withholding or deduction for or on account of any Indemnified Taxes and Other
Taxes, will not be less than the amount provided for herein.  Each Loan Party will furnish to Agent as
promptly as possible after the date the payment of any Indemnified Tax and
Other Tax is due pursuant to applicable law certified copies of tax receipts
evidencing such payment by such Loan Party.


 


(b)           If
a Lender claims an exemption from United States withholding tax, such Lender
shall deliver to Agent (or, in the case of a Related Party Assignment that is
made pursuant to the proviso in Section 14.1(a), the assigning
Lender):


 


(i)            if
such Lender claims an exemption from United States withholding tax pursuant to
its portfolio interest exception, (A) a statement of the Lender, signed
under penalty of perjury, that it is not a (A) a “bank” as described in Section 881(c)(3)(A) of
the IRC, (B) a 10% 


 


65

















 


shareholder
of Borrower (within the meaning of Section 871(h)(3)(B) of the IRC),
or (C) a controlled foreign corporation related to Borrower within the
meaning of Section 864(d)(4) of the IRC, and (B) a properly
completed and executed IRS Form W-8BEN, before receiving its first payment
under this Agreement and at any other time reasonably requested by Agent or the
assigning Lender, as applicable;


 


(ii)           if
such Lender claims an exemption from, or a reduction of, withholding tax under
a United States tax treaty, properly completed and executed IRS Form W-8BEN
before receiving its first payment under this Agreement and at any other time
reasonably requested in writing by Agent or the assigning Lender, as
applicable;


 


(iii)          if
such Lender claims that interest paid under this Agreement is exempt from
United States withholding tax because it is effectively connected with a United
States trade or business of such Lender, two properly completed and executed
copies of IRS Form W-8ECI before receiving its first payment under this
Agreement and at any other time reasonably requested in writing by Agent or the
assigning Lender, as applicable; or


 


(iv)          such
other form or forms, including IRS Form W-9, as may be required under the
IRC or other laws of the United States as a condition to exemption from, or
reduction of, United States withholding or backup withholding tax before
receiving its first payment under this Agreement and at any other time
reasonably requested in writing by Agent or the assigning Lender, as
applicable.


 


Notwithstanding
the foregoing, such Lender may provide a form W-8IMY, where applicable, with
appropriate forms attached thereto.


 


Each
Lender agrees promptly to notify Agent or the assigning Lender, as applicable,
of any change in circumstances which would modify or render invalid any claimed
exemption or reduction.  Notwithstanding
any other provision of this Section 17, no Lender shall be required
to deliver any form that such Lender is not legally able to deliver.


 


(c)           If
a Lender claims an exemption from, or reduction of, withholding tax in a
jurisdiction other than the United States, such Lender shall deliver to Agent
(or, in the case of a Related Party Assignment that is made pursuant to the
proviso in Section 14.1(a), the assigning Lender) any such form or
forms as may be required under the laws of such jurisdiction as a condition to
exemption from, or reduction of, foreign withholding or backup withholding tax
before receiving its first payment under this Agreement and at any other time
reasonably requested in writing by Agent or the assigning Lender, as
applicable.


 


Each
Lender agrees promptly to notify Agent or the assigning Lender, as applicable,
of any change in circumstances which would modify or render invalid any claimed
exemption or reduction.


 


(d)           If
any Lender claims exemption from, or reduction of, withholding tax and such
Lender sells, assigns, or otherwise transfers all or part of the Obligations of
Borrower to such Lender (other than in the case of a transfer to an Affiliate
or Approved Fund), such Lender agrees to notify Agent (or, in the case of a
Related Party Assignment that is made pursuant to the proviso in Section 14.1(a),
the assigning Lender) of the percentage amount in which it is no longer the
beneficial owner of Obligations of Borrower. 
To the extent of such percentage amount, Agent and Borrower will treat
such Lender’s documentation provided pursuant to Sections 17(b) or 17(c) as
no longer valid.  With respect to such
percentage amount, the Assignee of such Lender may provide new documentation,
pursuant to Sections 17(b) or 17(c), if applicable.


 


66
















 


(e)           If
any Lender is entitled to a reduction in the applicable withholding tax, Agent
may withhold from any interest payment to such Lender an amount equivalent to
the applicable withholding tax after taking into account such reduction.  If the forms or other documentation required
by subsection (b) or (c) of this Section 17 are not
delivered in accordance with such subsections, then Agent may withhold from any
interest payment to such Lender not providing such forms or other documentation
an amount equivalent to the applicable withholding tax.


 


(f)            If
the IRS or any other Governmental Authority of the United States or other
jurisdiction asserts a claim that Agent did not properly withhold tax from
amounts paid to or for the account of any Lender due to a failure on the part
of the Lender (because the appropriate form was not delivered, was not properly
executed, or because such Lender failed to notify the proper Person of a change
in circumstances which rendered the exemption from, or reduction of, withholding
tax ineffective) such Lender shall indemnify and hold Agent harmless for all
amounts paid, directly or indirectly, by Agent, as tax or otherwise, including
penalties and interest, and including any Indemnified Taxes and Other Taxes
imposed by any jurisdiction on the amounts payable to Agent under this Section 17.  The obligation of the Lenders under this
subsection shall survive the payment of all Obligations and the resignation or
replacement of Agent.


 


18.                                 GENERAL PROVISIONS.


 


18.1         Effectiveness. 
This Agreement shall be binding and deemed effective (a) when
executed by Borrower, Agent, and each Lender whose signature is provided for on
the signature pages hereof and (b) with respect to the interim and
final facilities hereunder, upon the occurrence of the Interim Facility
Effective Date or the Final Facility Effective Date, as the case may be.


 


18.2         Section Headings. 
Headings and numbers have been set forth herein for convenience
only.  Unless the contrary is compelled
by the context, everything contained in each Section applies equally to
this entire Agreement.


 


18.3         Interpretation. 
Neither this Agreement nor any uncertainty or ambiguity herein shall be
construed against the Lender Group or Borrower, whether under any rule of
construction or otherwise.  On the
contrary, this Agreement has been reviewed by all parties and shall be
construed and interpreted according to the ordinary meaning of the words used
so as to accomplish fairly the purposes and intentions of all parties hereto.


 


18.4         Severability of Provisions. 
Each provision of this Agreement shall be severable from every other
provision of this Agreement for the purpose of determining the legal
enforceability of any specific provision.


 


18.5         Bank Product Providers. 
Each Bank Product Provider shall be deemed a party hereto for purposes
of any reference in a Loan Document to the parties for whom Agent is acting; it
being understood and agreed that the rights and benefits of such Bank Product
Provider under the Loan Documents consist exclusively of such Bank Product
Provider’s right to share in payments and collections out of the Collateral as
more fully set forth herein.  In
connection with any such distribution of payments and collections, Agent shall
be entitled to assume no amounts are due to any Bank Product Provider unless
such Bank Product Provider has notified Agent in writing of the amount of any
such liability owed to it prior to such distribution.


 


18.6         Lender-Creditor
Relationship.  The relationship between the Lenders and
Agent, on the one hand, and Borrower, on the other hand, is solely that of
creditor and debtor.  No member of the
Lender Group has (or shall be deemed to have) any fiduciary relationship or
duty to Borrower arising out of or in connection with, and there is no agency
or joint venture relationship between the 


 


67

















 


members
of the Lender Group, on the one hand, and Borrower, on the other hand, by
virtue of any Loan Document or any transaction contemplated therein.


 


18.7         Counterparts; Electronic
Execution.  This Agreement may be executed in any number
of counterparts and by different parties on separate counterparts, each of
which, when executed and delivered, shall be deemed to be an original, and all
of which, when taken together, shall constitute but one and the same
Agreement.  Delivery of an executed
counterpart of this Agreement by telefacsimile or other electronic method of
transmission shall be equally as effective as delivery of an original executed
counterpart of this Agreement.  Any party
delivering an executed counterpart of this Agreement by telefacsimile or other
electronic method of transmission also shall deliver an original executed
counterpart of this Agreement but the failure to deliver an original executed
counterpart shall not affect the validity, enforceability, and binding effect
of this Agreement.  The foregoing shall
apply to each other Loan Document mutatis
mutandis.


 


18.8         Revival and Reinstatement
of Obligations.  If the incurrence or payment of the Obligations
by Borrower, Parent or any Debtor Guarantor or the transfer to the Lender Group
of any property should for any reason subsequently be declared to be void or
voidable under any state or federal law relating to creditors’ rights,
including provisions of the Bankruptcy Code relating to fraudulent conveyances,
preferences, or other voidable or recoverable payments of money or transfers of
property (each, a “Voidable Transfer”), and if the Lender Group is
required to repay or restore, in whole or in part, any such Voidable Transfer,
or elects to do so upon the reasonable advice of its counsel, then, as to any
such Voidable Transfer, or the amount thereof that the Lender Group is required
or elects to repay or restore, and as to all reasonable costs, expenses, and
attorneys fees of the Lender Group related thereto, the liability of Borrower,
Parent or any Debtor Guarantor automatically shall be revived, reinstated, and
restored and shall exist as though such Voidable Transfer had never been made.


 


18.9         Confidentiality.


 


(a)           Agent
and Lenders each individually (and not jointly or jointly and severally) agree
that material, non-public information regarding Borrower and its Subsidiaries,
their operations, assets, and existing and contemplated business plans shall be
treated by Agent and the Lenders in a confidential manner, and shall not be
disclosed by Agent and the Lenders to Persons who are not parties to this
Agreement, except:  (i) to attorneys
for and other advisors, accountants, auditors, and consultants to any member of
the Lender Group (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), (ii) to Subsidiaries
and Affiliates of any member of the Lender Group (including the Bank Product
Providers), provided that any such Subsidiary or Affiliate shall have agreed to
receive such information hereunder subject to the terms of this Section 18.9,
(iii) as may be required by statute, decision, or judicial or
administrative order, rule, or regulation, including, without limitation, as
may be required by the Chapter 11 Cases, (iv) as may be agreed to in
advance by Borrower or as requested or required by any Governmental Authority
pursuant to any subpoena or other legal process, (v) as to any such
information that is or becomes generally available to the public (other than as
a result of prohibited disclosure by Agent or the Lenders), (vi) in
connection with any assignment, prospective assignment, sale, prospective sale,
participation, prospective participation or pledge or prospective pledge of any
Lender’s interest under this Agreement, provided that any such assignee,
prospective assignee, participant, prospective participant, pledgee or
prospective pledgee shall have agreed in writing to receive such information
hereunder subject to the terms of this Section, and (vii) in connection
with any litigation or other adversary proceeding involving parties hereto
which such litigation or adversary proceeding involves claims related to the
rights or duties of such parties under this Agreement or the other Loan
Documents.  The provisions of this Section 18.9(a) shall
survive for two (2) years after the payment in full of the Obligations.


 


68

















 


(b)           Anything
in this Agreement to the contrary notwithstanding, Agent may provide
information concerning the terms and conditions of this Agreement and the other
Loan Documents to loan syndication and pricing reporting services.


 


18.10       Lender Group Expenses. 
Subject to the terms of the Bankruptcy Court Orders, without prior
application to, or approval by, the Bankruptcy Court, the Lender Group Expenses
shall be due and payable on a monthly basis after receipt of an invoice from
Agent (or from WFF with respect to expenses described in paragraph (k) of
the definition of “Lender Group Expenses”) setting forth in reasonable detail
the Lender Group Expenses for which payment is being demanded unless otherwise
waived by Agent (or WFF with respect to expenses described in paragraph (k) of
the definition of “Lender Group Expenses”), provided, however,
any such expenses are subject to the rights of any party-in-interest in the
Chapter 11 Cases, after such expenses are paid, to seek Bankruptcy Court review
of the reasonableness of such expenses. 
Borrower agrees, subject to the terms of the Bankruptcy Court Orders, to
pay any and all Lender Group Expenses as set forth above and agrees that its
obligations contained in this Section 18.10 shall survive payment
or satisfaction in full of all other Obligations.


 


18.11       USA PATRIOT Act. 
Each Lender that is subject to the requirements of the USA Patriot Act
(Title 111 of Pub. L. 107-56 (signed into law October 26, 2001)) (the “Act”)
hereby notifies Borrower that pursuant to the requirements of the Act, it is
required to obtain, verify and record information that identifies Borrower,
which information includes the name and address of Borrower and other
information that will allow such Lender to identify Borrower in accordance with
the Act.


 


18.12       Integration. 
This Agreement, together with the other Loan Documents, reflects the
entire understanding of the parties with respect to the transactions
contemplated hereby and shall not be contradicted or qualified by any other
agreement, oral or written, before the date hereof.


 


18.13       Parties Including
Trustees; Bankruptcy Court Proceedings.  This Agreement, the
other Loan Documents, and all Liens created hereby or pursuant hereto or to any
other Loan Document shall be binding upon each Loan Party, the estate of each
Loan Party, and any trustee or successor in interest of any Loan Party in any
Chapter 11 Case or any subsequent case commenced under Chapter 7 of the
Bankruptcy Code or any other bankruptcy or insolvency laws, and shall not be
subject to Section 365 of the Bankruptcy Code.  This Agreement and the other Loan Documents
shall be binding upon, and inure to the benefit of, the successors of Agent and
the Lenders and their respective assigns, transferees and endorsees.  The Agent’s Liens created by this Agreement
and the other Loan Documents shall be and remain valid and perfected in the
event of the substantive consolidation or conversion of any Chapter 11 Case or
any other bankruptcy case of any Loan Party to a case under Chapter 7 of the
Bankruptcy Code, or in the event of dismissal of any Chapter 11 Case or the
release of any Collateral from the jurisdiction of the Bankruptcy Court for any
reason, without the necessity that Agent or any of the Lenders file financing
statements or otherwise perfect its security interests or Liens under
applicable law.


 


18.14       [Intentionally
Deleted].


 


19.                                 GUARANTY.


 


19.1         Debtor Guaranty.  Each Debtor Guarantor hereby unconditionally
and irrevocably jointly and severally guarantees the punctual payment when due,
whether at stated maturity, by acceleration or otherwise, of all Obligations of
Borrower now or hereafter existing under any Loan Document, whether for
principal, interest fees, expenses or otherwise (such obligations, to the
extent not paid by Borrower, being the “Debtor Guaranteed Obligations”),
and agrees to pay any and all expenses (including reasonable counsel fees and
expenses) incurred by Agent and the Lender Group 


 


69

















 


in
enforcing any rights under the guaranty set forth in this Section.  The guarantee by each Debtor Guarantor of the
Debtor Guaranteed Obligations is a joint and several obligation of each Debtor
Guarantor.


 


19.2         Debtor Guaranty Absolute.  Each Debtor Guarantor guarantees that the
Debtor Guaranteed Obligations will be paid strictly in accordance with the
terms of the Loan Documents, regardless of any law, regulation or order now or
hereafter in effect in any jurisdiction affecting any of such terms or the
rights of Agent or the Lenders with respect thereto.  The obligations of each Debtor Guarantor
under this Section are independent of the Debtor Guaranteed Obligations,
and a separate action or actions may be brought and prosecuted against each
Debtor Guarantor to enforce such obligations, irrespective of whether any
action is brought against Borrower or whether Borrower is joined in any such
action or actions.  The liability of each
Debtor Guarantor under this Section shall be irrevocable, absolute and
unconditional irrespective of, and each Debtor Guarantor hereby irrevocably
waives any defenses it may now or hereafter have in any way relating to, any or
all of the following:


 


(a)           any
lack of validity or enforceability of any Loan Document or any agreement or
instrument relating thereto;


 


(b)           any
change in the time, manner or place of payment of, or in any other term of, all
or any of the Debtor Guaranteed Obligations, or any other amendment or waiver
of or any consent to departure from any Loan Document, including, without
limitation, any increase in the Debtor Guaranteed Obligations resulting from
the extension of additional credit to Borrower or otherwise;


 


(c)           any
taking, exchange, release or non-perfection of any Collateral, or any taking,
release or amendment or waiver of or consent to departure from any other
guaranty, for all or any of the Debtor Guaranteed Obligations;


 


(d)           any
change, restructuring or termination of the corporate, limited liability
company or partnership structure or existence of Borrower; or


 


(e)           any
other circumstance (including, without limitation, any statute of limitations)
or any existence of or reliance on any representation by Agent, or the Lenders
that might otherwise constitute a defense available to, or a discharge of, any
Debtor Guarantor, Borrower or any other guarantor or surety.


 


This
Section shall continue to be effective or be reinstated, as the case may
be, if at any time any payment of any of the Debtor Guaranteed Obligations is
rescinded or must otherwise be returned by Agent or the Lenders or any other
Person, all as though such payment had not been made.


 


19.3         Waiver.  Each Debtor Guarantor hereby waives
promptness, diligence, notice of acceptance and any other notice with respect
to any of the Debtor Guaranteed Obligations and this Section and any
requirement that Agent, or the Lenders exhaust any right or take any action
against Borrower or any other Person or any Collateral.  Each Debtor Guarantor acknowledges that it
will receive direct and indirect benefits from the financing arrangements
contemplated herein and that the waiver set forth in this Section 19.3
is knowingly made in contemplation of such benefits.  Each Debtor Guarantor hereby waives any right
to revoke this Section, and acknowledges that this Section is continuing
in nature and applies to all Debtor Guaranteed Obligations, whether existing
now or in the future.


 


19.4         Continuing Debtor
Guaranty; Assignments. 
This Section is a continuing guaranty and shall (a) remain in
full force and effect until the later of the cash payment in full of the Debtor
Guaranteed Obligations (other than indemnification obligations as to which no
claim has been made) 


 


70

















 


and
all other amounts payable under this Section and the Final Maturity Date, (b) be
binding upon each Debtor Guarantor, its successors and assigns and (c) inure
to the benefit of and be enforceable by Agent, the Lenders and their
successors, pledgees, transferees and assigns. 
Without limiting the generality of the foregoing clause (c), any
Lender may pledge, assign or otherwise transfer all or any portion of its
rights and obligations under this Agreement (including, without limitation, all
or any portion of its Commitments, its loans, owing to it and any note held by
it) to any other Person, and such other Person shall thereupon become vested
with all the benefits in respect thereof granted such Lender herein or
otherwise, in each case, as provided in Section 14.


 


19.5         Subrogation.  No Debtor Guarantor will exercise any rights
that it may now or hereafter acquire against Borrower or any other insider
guarantor that arise from the existence, payment, performance or enforcement of
such Debtor Guarantor’s obligations under this Section, including, without
limitation, any right of subrogation, reimbursement, exoneration, contribution
or indemnification and any right to participate in any claim or remedy of Agent
and the Lenders against Borrower or any other insider guarantor or any
Collateral, whether or not such claim, remedy or right arises in equity or
under contract, statute or common law, including, without limitation, the right
to take or receive from Borrower or any other insider guarantor, directly or
indirectly, in cash or other property or by set-off or in any other manner,
payment or security solely on account of such claim, remedy or right, unless
and until all of the Debtor Guaranteed Obligations and all other amounts
payable under this Section shall have been paid in full in cash and the
Final Maturity Date shall have occurred. 
If any amount shall be paid to any Debtor Guarantor in violation of the
immediately preceding sentence at any time prior to the later of the payment in
full in cash of the Debtor Guaranteed Obligations and all other amounts payable
under this Section and the Final Maturity Date, such amount shall be held
in trust for the benefit of Agent and the Lenders and shall forthwith be paid
to Agent and the Lenders to be credited and applied to the Debtor Guaranteed
Obligations and all other amounts payable under this Section, whether matured
or unmatured, in accordance with the terms of this Agreement, or to be held as
collateral for any Debtor Guaranteed Obligations or other amounts payable under
this Section thereafter arising.  If
(a) any Debtor Guarantor shall make payment to Agent and the Lenders of
all or any part of the Debtor Guaranteed Obligations, (b) all of the
Debtor Guaranteed Obligations and all other amounts payable under this Section shall
be paid in full in cash and (c) the Final Maturity Date shall have
occurred, Agent and the Lenders will, at such Debtor Guarantor’s request and
expense, execute and deliver to such Debtor Guarantor appropriate documents,
without recourse and without representation or warranty, necessary to evidence
the transfer by subrogation to such Debtor Guarantor of an interest in the
Debtor Guaranteed Obligations resulting from such payment by such Debtor
Guarantor.


 


19.6         Parent Guaranty.  Parent separately guarantees all of the
Obligations of Borrower pursuant to the Parent Guaranty.


 


 


[Signature
pages to follow.]


 


71

















 


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


 


	
   

  	
  STORM CAT
  ENERGY (USA) CORPORATION,

  as debtor,
  debtor-in-possession and Borrower

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ Joseph M.
  Brooker

  
	
   

  	
  Name: Joseph
  M. Brooker

  
	
   

  	
  Title:
  President

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  STORM CAT
  ENERGY CORPORATION,

  as non-debtor guarantor pursuant to the Parent Guaranty

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ Joseph M.
  Brooker

  
	
   

  	
  Name: Joseph
  M. Brooker

  
	
   

  	
  Title: CEO

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  STORM CAT ENERGY (ALASKA)
  LLC,

  as debtor, debtor-in-possession and Guarantor

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ Joseph M.
  Brooker

  
	
   

  	
  Name: Joseph
  M. Brooker

  
	
   

  	
  Title: President

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  STORM CAT ENERGY (POWDER
  RIVER) LLC,

  as debtor, debtor-in-possession and Guarantor

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ Joseph M.
  Brooker

  
	
   

  	
  Name: Joseph
  M. Brooker

  
	
   

  	
  Title:
  President

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  STORM CAT ENERGY
  (FAYETTEVILLE) LLC,

  as debtor, debtor-in-possession and Guarantor

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ Joseph M.
  Brooker

  
	
   

  	
  Name: Joseph
  M. Brooker

  
	
   

  	
  Title:
  President

  



 


DIP Credit Agreement


 

















 


	
   

  	
  TRIPLE CROWN GATHERING
  CORPORATION,

  as debtor, debtor-in-possession and Guarantor

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ Joseph M.
  Brooker

  
	
   

  	
  Name: Joseph
  M. Brooker

  
	
   

  	
  Title:
  President

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  STORM CAT ENERGY (USA)
  OPERATING

  CORPORATION,

  as debtor,
  debtor-in-possession and
  Guarantor

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ Joseph M.
  Brooker

  
	
   

  	
  Name: Joseph
  M. Brooker

  
	
   

  	
  Title:
  President

  



 


DIP Credit Agreement


 

















 


	
   

  	
  REGIMENT
  CAPITAL SPECIAL SITUATIONS

  FUND III, L.P.,

  as Agent and as a Lender

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ Richard
  Miller

  
	
   

  	
  Name: Richard
  Miller

  
	
   

  	
  Title:
  Authorized Signatory

  



 


DIP Credit Agreement


 
















 


Schedule
1.1


 


As used in the Agreement, the
following terms shall have the following definitions:


 


“Account” means an
account (as that term is defined in the Code).


 


“Account Debtor”
means any Person who is obligated on an Account, chattel paper, or a general
intangible.


 


“ACH Transactions”
means any cash management or related services (including the Automated Clearing
House processing of electronic fund transfers through the direct Federal
Reserve Fedline system) provided by a Bank Product Provider for the account of
Parent or its Subsidiaries.


 


“Act” has the meaning
specified therefor in Section 18.11.


 


“Additional Documents”
has the meaning specified therefor in Section 6.16.


 


“Advances” has the
meaning specified therefor in Section 2.1(a).


 


“Affiliate” shall
mean, with respect to any Person, (a) each Person that, directly or
indirectly, owns or controls, whether beneficially, or as a trustee, guardian
or other fiduciary or a joint venturer or partner, ten percent (10%) or more of
the Stock having ordinary voting power in the election of directors of such
Persons, (b) each Person that controls, is controlled by or is under
common control with such Person, (c) each of such Person’s officers,
directors, joint venturers and partners (in the case of joint venturers and
partners, to the extent covered by clause (a)), and (d) in the case of any
Loan Party, the immediate family members, spouses and lineal descendants of
individuals who are Affiliates of any Loan Party.  For the purposes of this definition, “control”
of a Person shall mean the possession, directly or indirectly, of the power to
direct or cause the direction of its management or policies, whether through
the ownership of voting securities, by contract or otherwise; provided, however,
that the term “Affiliate” shall specifically exclude Agent and each
Lender.


 


“Agent” has the
meaning specified therefor in the preamble to the Agreement.


 


“Agent-Related Persons”
means Agent, together with its Affiliates, officers, directors, employees,
attorneys, and agents.


 


“Agent’s Account”
means the Deposit Account of Agent identified on Schedule A-1 to the Interim
DIP Credit Agreement.


 


“Agent’s Liens” mean
the Liens granted by Parent or its Subsidiaries to Agent under the Loan
Documents and the Bankruptcy Court Orders.


 


“Agreement” means the
Restated DIP Credit Agreement to which this Schedule 1.1 is attached.


 


“Agreed Administrative
Expense Priorities” means that administrative expenses with respect to the
Loan Parties and, with respect to sub-clause (ii) of clause “first”, any
official committee appointed by the Bankruptcy Court, shall have the following
order of priority:


 


first, (i) amounts payable pursuant to 28
U.S.C. § 1930(a)(6) and (ii) all amounts payable in respect of
Carve-Out Expenses, provided that the amount entitled to priority under this
sub-clause (ii) of this clause first (“Priority Professional Expenses”)
shall not exceed the then effective Priority Professional Expenses Reserve; provided,
(A) to the extent the Carve 


 

















 


Out Expense Reduction Period
commences prior to the Final Facility Effective Date, such Priority
Professional Expenses will be equal to an amount not exceeding the amount of
Priority Professional Expenses that were accrued but not paid prior to the
commencement of such Carve-Out Expense Reduction Period and the amount of the
then effective Priority Professional Expenses Reserve and (B) to the
extent the Carve Out Expense Reduction Period commences on and after the Final
Facility Effective Date, not more than $750,000 in Priority Professional
Expenses may be incurred plus the amount of Priority Professional Expenses that
were accrued but not paid prior to the commencement of the Carve-Out Expense
Reduction Period in an amount not exceeding the then effective Priority
Professional Expenses Reserve (together, the “Professional Expense Cap”);
provided, however, that (1) during any Carve-Out Expense
Reduction Period, any payments actually made in respect of Carve-Out Expenses
shall reduce the Professional Expense Cap on a dollar-for-dollar basis, and
Priority Professional Expenses accrued prior to the commencement of the Carve
Out Expense Reduction Period but paid during the Carve Out Expense Reduction
Period shall continue to reduce the Priority Professional Expenses Reserve, and
(2) for the avoidance of doubt, so long as no Carve-Out Expense Reduction
Period shall be continuing, the payment of Carve-Out Expenses shall not reduce
the Professional Expense Cap (but will reduce the Priority Professional
Expenses Reserve); provided, further, that to the extent the
Professional Expense Cap is reduced by any such payments, and thereafter the
applicable Event of Default or default by any Loan Party in any of its
obligations under any of the Bankruptcy Court Orders, in either case, that
caused the Carve-Out Expense Reduction Period to commence is cured (to the
extent such cure is permitted hereunder) or waived, then effective as of the
effective date of such cure or waiver, the amount of the Professional Expense
Cap shall be increased by an amount equal to the amount by which it has been
reduced by such payments, unless such reduction is as a result of a reduction
in the Priority Professional Expenses Reserve,


 


second, all Obligations in accordance with Section 3.2,
and


 


third, all other allowed administrative expenses.


 


“Approved Counterparty”
means (a) any Lender or any Affiliate of a Lender, or (b) any other
Person whose long term senior unsecured debt rating is A-/A3 by S&P or
Moody’s (or their equivalent) or higher.


 


“Approved Fund” means
any Fund 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.


 


“Assignee” has the
meaning specified therefor in Section 14.1(a).


 


“Assignment and
Acceptance” means an Assignment and Acceptance Agreement substantially in
the form of Exhibit A-1 to the Interim DIP Credit Agreement.


 


“Auction” has the
meaning specified therefor in Section 8.29.


 


“Authorized Person”
means any one of the individuals identified on Schedule A-2 to the
Interim DIP Credit Agreement.


 


“Availability” means,
as of any date of determination, the amount that Borrower is entitled to borrow
as Advances under Section 2.1 of the Agreement (after giving effect
to all then outstanding Obligations (other than Bank Product Obligations) and
all sublimits and reserves then applicable hereunder).


 


2

















 


“Avoidance Actions”
means all causes of action arising under Sections 542, 544, 545, 547, 548, 549,
550, 551, 553(b) or 724(a) of the Bankruptcy Code and any proceeds
therefrom.


 


“Bank Product” means
any financial accommodation extended to Borrower or its Subsidiaries by a Bank
Product Provider (other than pursuant to the Agreement) including:  (a) credit cards, (b) credit card
processing services, (c) debit cards, (d) purchase cards, (e) ACH
Transactions, (f) cash management, including controlled disbursement,
accounts or services, or (g) transactions under Swap Agreements.


 


“Bank Product Agreements”
means those agreements entered into from time to time by Parent or its
Subsidiaries with a Bank Product Provider in connection with the obtaining of
any of the Bank Products.


 


“Bank Product
Collateralization” means providing cash collateral (pursuant to documentation
reasonably satisfactory to Agent) to be held by Agent for the benefit of the
Bank Product Providers in an amount determined by Agent as sufficient to
satisfy the reasonably estimated credit exposure with respect to the then
existing Bank Products.


 


“Bank Product Obligations”
means all obligations, liabilities, contingent reimbursement obligations, fees,
and expenses owing by Parent or its Subsidiaries to any Bank Product Provider
pursuant to or evidenced by the Bank Product Agreements and irrespective of
whether for the payment of money, whether direct or indirect, absolute or
contingent, due or to become due, now existing or hereafter arising, and
including all such amounts that Parent or its Subsidiaries are obligated to
reimburse to Agent or any member of the Lender Group as a result of Agent or
such member of the Lender Group purchasing participations from, or executing
indemnities or reimbursement obligations to, a Bank Product Provider with
respect to the Bank Products provided by such Bank Product Provider to Parent
or its Subsidiaries.


 


“Bank Product Provider”
means any Lender or any Affiliate of a Lender providing one or more Bank
Products to Parent or any of its Subsidiaries.


 


“Bank Product Reserve”
means, as of any date of determination, the lesser of (a) $1,000,000 and (b) an
amount equal to the amount of reserves that Agent has established (based upon
the Bank Product Provider’s reasonable determination of the credit exposure of
Parent and its Subsidiaries in respect of Bank Products) in respect of Bank
Products then provided or outstanding.


 


“Bankruptcy Code”
means title 11 of the United States Code, as in effect from time to time or
under any other bankruptcy or insolvency law (including without limitation, the
Bankruptcy and Insolvency Act (Canada) and the Companies Creditors Arrangement
Act (Canada)).


 


“Bankruptcy Court”
has the meaning specified therefor in the recitals hereto.


 


“Bankruptcy Court Orders”
means the Interim Bankruptcy Court Order and the Final Bankruptcy Court Order.


 


“Base Rate” means the
rate of interest announced, from time to time, within Wells Fargo at its
principal office in San Francisco as its “prime rate”, with the understanding
that the “prime rate” is one of Wells Fargo’s base rates (not necessarily the
lowest of such rates) and serves as the basis upon which effective rates of
interest are calculated for those loans making reference thereto and is
evidenced by the recording thereof after its announcement in such internal
publications as Wells Fargo may designate. Notwithstanding the foregoing, if at
any time the Base Rate is less than 6.25%, the Base Rate shall be deemed to be
6.25% until such time as the Base Rate is at least equal to 6.25%.


 


“Base Rate Margin”
means 10.75%.


 


3

















 


“Benefit Plan” means (i) a
“defined benefit plan” (as defined in Section 3(35) of ERISA) for which
Borrower or any Subsidiary or ERISA Affiliate of Borrower has been an “employer”
(as defined in Section 3(5) of ERISA) within the past six (6) years
or (ii) a “benefit plan” defined under any comparable foreign law that is
or was sponsored, maintained or contributed to by, or required to be
contributed by, Parent, any of its Subsidiaries or any of their respective
ERISA Affiliates.


 


“Board of Directors”
means the board of directors (or comparable managers) of Borrower or any
committee thereof duly authorized to act on behalf of the board of directors
(or comparable managers).


 


“Borrower” has the
meaning specified therefor in the preamble to the Agreement.


 


“Borrowing” means a
borrowing hereunder consisting of Advances made, converted or continued on the
same day by the Lenders (or Agent on behalf thereof) or by Agent in the case of
a Protective Advance.


 


“Budget” means the
Budget attached as Annex I hereto, setting forth cash collections and
disbursements of the Loan Parties (other than Parent) for the periods covered
thereby, through the Final Maturity Date (as defined in clause (b) thereof)
or any other projections or forecasts prepared on a weekly basis by or on
behalf of Borrower and delivered by Borrower to Agent and the Lenders on or
before the Final Facility Effective Date and each week thereafter pursuant to
clause (t) of Schedule 6.3 to the Interim DIP Credit Agreement,
which are in form consistent with the cash requirement forecast heretofore
delivered to Agent and attached as Annex I hereto and shall be in
substance reasonably satisfactory to Agent and the Required Lenders at the time
of delivery thereof; provided, however, if and when an official
committee is appointed in the Chapter 11 Cases, the Budget shall be modified,
if necessary, in a manner satisfactory to the Required Lenders to include a
line item for fees and expenses of such committee’s professionals.


 


“Business Day” means
any day that is not a Saturday, Sunday, or other day on which banks are
authorized or required to close in the state of New York.


 


“Capital Expenditures”
means, with respect to any Person for any period, the aggregate of all
expenditures by such Person and its Subsidiaries during such period that are
capital expenditures as determined in accordance with GAAP, whether such
expenditures are paid in cash or financed.


 


“Capitalized Lease
Obligation” means that portion of the obligations under a Capital Lease
that is required to be capitalized in accordance with GAAP.


 


“Capital Lease” means
a lease that is required to be capitalized for financial reporting purposes in
accordance with GAAP.


 


“Carve-Out Expenses”
means any payments authorized by the Bankruptcy Court to be made by Borrower
and the Debtor Guarantors in respect of (a) any unpaid fees of the Clerk
of the Bankruptcy Court and the Office of the United States Trustee pursuant to
11 U.S.C. § 1930(a) and § 1930(h), (b) before the commencement of the
Carve-Out Expense Reduction Period, professional fees and expenses owed to any
legal and financial advisors retained by any of the Loan Parties pursuant to
Sections 327, 328, 330, 331 and 1103 of the Bankruptcy Code and any statutory
committee appointed in the Chapter 11 Cases, in an amount not to exceed the
then effective Priority Professional Expenses Reserve, and (c) upon and
after the commencement of any Carve-Out Expense Reduction Period, allowed
professional fees and expenses to any legal and financial advisors retained by
any of the Loan Parties pursuant to Sections 327, 328, 330, 331 and 1103 of the
Bankruptcy Code and any statutory committee appointed in the Chapter 11 Cases,
in an amount not to exceed the Professional Expense Cap.


 


4

















 


“Carve-Out Expense
Reduction Period” means upon notice by Agent during any period during which
an Event of Default under this Agreement or a default by any Loan Party in any
of its obligations under any of the Bankruptcy Court Orders, in either case,
shall have occurred and be continuing.


 


“Cash Equivalents”
means (a) marketable direct obligations issued by, or unconditionally
guaranteed by, the United States or issued by any agency thereof and backed by
the full faith and credit of the United States, in each case maturing within
one (1) year from the date of acquisition thereof, (b) marketable
direct obligations issued by any state of the United States or any political
subdivision of any such state or any public instrumentality thereof maturing
within one (1) year from the date of acquisition thereof and, at the time
of acquisition, having one of the two highest ratings obtainable from either
Standard & Poor’s Rating Group (“S&P”) or Moody’s Investors
Service, Inc. (“Moody’s”), (c) commercial paper maturing no
more than two hundred seventy (270) days from the date of creation thereof and,
at the time of acquisition, having a rating of at least A-1 from S&P or at
least P-1 from Moody’s, (d) certificates of deposit, eurodollar-time
deposits, bankers’ acceptances maturing within one (1) year from the date
of acquisition thereof either (i) issued by any bank organized under the
laws of the United States or any state thereof which bank has a rating of A or
A2, or better, from S&P or Moody’s, or (ii) certificates of deposit
less than or equal to Fifty Thousand Dollars ($50,000) in the aggregate issued
by any other bank insured by the Federal Deposit Insurance Corporation, (e) Deposit
Accounts maintained with (i) any bank that satisfies the criteria
described in clause (d)(i) above, or (ii) any other bank
organized under the laws of the United States or any state thereof so long as
the amount maintained with any such other bank is less than or equal to One
Hundred Thousand Dollars ($100,000) and is insured by the Federal Deposit
Insurance Corporation, (f) Investments in money market funds substantially
all of whose assets are invested in the types of assets described in clauses (a) through
(e) above, and (g) repurchase obligations with a term of not more
than one (1) year for underlying securities of the types described in (a) and
(c) above entered into with any bank that satisfies the criteria described
in clause (d)(i) above.


 


“Cash Management Account”
has the meaning specified therefor in Section 2.7(a).


 


“Cash Management
Agreements” means those certain cash management agreements, in form and
substance satisfactory to Agent, each of which is among Borrower or one of its
Subsidiaries, Agent, and one of the Cash Management Banks.


 


“Cash Management Bank”
has the meaning specified therefor in Section 2.7(a).


 


“Change of Control”
means that (a) any “person” or “group” (within the meaning of Sections 13(d) and
14(d) of the Exchange Act), other than Permitted Holder, becomes the
beneficial owner (as defined in Rule 13d-3 under the Exchange Act),
directly or indirectly, of twenty percent (20%), or more, of the Stock of
Parent having the right to vote for the election of members of the Board of
Directors (or, in the case of Permitted Holder only, the Permitted Holder
beneficially owns thirty percent (30%) or more of such Stock), (b) a
majority of the members of the Board of Directors do not constitute Continuing
Directors, (c) Parent shall cease to beneficially own and control,
directly or indirectly, 100% on a fully diluted basis each of the aggregate of
the economic and voting interest in the Stock of Borrower, (d) except to
the extent constituting a transaction permitted pursuant to Section 7.3,
Borrower shall cease to directly or indirectly beneficially own and control
100% on a fully diluted basis of each of the aggregate of the economic and
voting interests in the Stock of any of its Subsidiaries, or (e) a “change
of control” under the Convertible Subordinated Notes has occurred.


 


“Chapter 11 Cases”
has the meaning specified therefor in the recitals hereto.


 


“Code” means the
Uniform Commercial Code, as in effect from time to time, in the State of New
York.


 


“Collateral” has the
meaning specified therefore in Section 3.1(a).


 


5

















 


“Collateral Access
Agreement” means a landlord waiver, bailee letter, or acknowledgement
agreement of any lessor, warehouseman, processor, consignee, or other Person in
possession of, having a Lien upon, or having rights or interests in Parent’s or
its Subsidiaries’ books and records, Equipment, or Inventory, in each case, in
form and substance satisfactory to Agent.


 


“Collections” means all cash, checks, notes, instruments, and
other items of payment (including insurance proceeds, proceeds of cash sales,
rental proceeds, and tax refunds).


 


“Commitment” means,
with respect to each Lender, the Dollar amounts of its commitment as set forth
beside such Lender’s name under the applicable heading on Schedule C-1
to this Agreement or in the Assignment and Acceptance pursuant to which such
Lender became a Lender hereunder, as such amounts may be reduced or increased
from time to time pursuant to assignments made in accordance with the
provisions of Section 14.1.


 


“Common Stock” means
common stock of Parent, without par value per share.


 


“Compliance Certificate”
means a certificate substantially in the form of Exhibit C-1 to the
Interim DIP Credit Agreement delivered by the chief financial officer of
Borrower to Agent.


 


“Consultant” means a
financial consultant acceptable to the Agent.


 


“Continuing Director”
means (a) any member of the Board of Directors who was a director (or
comparable manager) of Parent on the Interim Facility Effective Date, and (b) any
individual who becomes a member of the Board of Directors after the Interim
Facility Effective Date if such individual was appointed or nominated for
election to the Board of Directors by a majority of the Continuing Directors,
but excluding any such individual originally proposed for election in opposition
to the Board of Directors in office at the Interim Facility Effective Date in
an actual or threatened election contest relating to the election of the
directors (or comparable managers) of Parent and whose initial assumption of
office resulted from such contest or the settlement thereof.


 


“Control Agreement”
means a control agreement, in form and substance satisfactory to Agent,
executed and delivered by Parent or one of its Subsidiaries, Agent, and the
applicable securities intermediary (with respect to a Securities Account) or
bank (with respect to a Deposit Account).


 


“Convertible Subordinated
Notes” means the Series A Subordinated Convertible Notes due March 31,
2012 issued by Parent on January 30, 2007 and the Series B
Subordinated Convertible Notes due March 31, 2012 issued by Parent on March 30,
2007.


 


“Daily Balance”
means, as of any date of determination and with respect to any Obligation, the
amount of such Obligation owed at the end of such day.


 


“Debtor Guaranteed
Obligations” has the meaning specified therefore in Section 19.1.


 


“Debtor Guarantors”
means each subsidiary of Borrower listed as a “Guarantor” on the signature pages hereof,
each as a debtor and debtor-in-possession.


 


“Debtor Loan Party”
means any of Borrower or Debtor Guarantors.


 


“Default” means an
event, condition, or default that, with the giving of notice, the passage of
time, or both, would, unless cured or waived, become an Event of Default.


 


“Defaulting Lender”
means any Lender that fails to make any Advance (or other extension of credit)
that it is required to make hereunder on the date that it is required to do so
hereunder.


 


6

















 


“Defaulting Lender Rate”
means (a) for the first three (3) days from and after the date the relevant
payment is due, the Base Rate, and (b) thereafter, the interest rate then
applicable to Advances that are Base Rate Loans (inclusive of the Base Rate
Margin applicable thereto).


 


“Defensible Title”
means that record title of Parent or its Subsidiaries which, subject to clauses
(a), (b), (c), (k) and (m) of the definition of “Permitted Liens”, (a) entitles
Parent or its Subsidiaries, as applicable, to receive from each such Property
not less than the interests shown in the Reserve Report as the “Net Revenue
Interest” of all Hydrocarbons produced, saved and marketed from or allocated to
the formations in such Property, all without reduction, suspension or
termination except as stated in such Reserve Report or otherwise permitted as
Permitted Liens; and (b) obligates Parent or its Subsidiaries, as
applicable, to bear a percentage of the costs and expenses relating to the
maintenance and development of, and operations relating to, the producing
formations in each such Property not greater than the “Working Interest” shown
in the Reserve Report (without a proportionate increase in the Net Revenue
Interest), all without increase except as stated in such Reserve Report or
otherwise permitted under clauses (a), (b), (c), (k) and (m) of the
definition of “Permitted Liens”.


 


“Deposit Account”
means any deposit account (as that term is defined in the Code).


 


“Designated Account”
means the Deposit Account of Borrower identified on Schedule D-1 to the
Interim DIP Credit Agreement.


 


“Designated Account Bank”
has the meaning specified therefor in Schedule D-1 to the Interim DIP
Credit Agreement.


 


“Disqualified Stock”
shall mean any Stock which, 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, (a) matures or is mandatorily redeemable, pursuant to a
sinking fund obligation or otherwise, or is redeemable at the option of the
holder thereof, in whole or in part, on or prior to the date that is one
hundred eighty (180) days following the Final Maturity Date, (b) is
convertible into or exchangeable for (i) debt securities or (ii) any
Stock referred to in (a) above, in each case at any time on or prior to
the date that one hundred eighty (180) days following the Final Maturity Date,
or (c) is entitled to receive a dividend or distribution (other than for
taxes attributable to the operations of the business) prior to the time that
the Obligations are paid in full, or (d) has the benefit of any covenants
or agreements that restrict the payment of any of the Obligations or that are
EBITDA or debt-multiple based (i.e., financial covenants).


 


“Dollars” or “$”
means United States dollars.


 


“Eligible Assignee”
means (a) a Lender, (b) an Affiliate of a Lender, (c) an
Approved Fund, (d) a commercial bank organized under the laws of the
United States, or any state thereof, and having total assets in excess of
$250,000,000, (e) a commercial bank organized under the laws of any other
country which is a member of the Organization for Economic Cooperation and
Development or a political subdivision of any such country and which has total
assets in excess of $250,000,000, provided that such bank is acting through a
branch or agency located in the United States, and (f) a finance company,
insurance company, or other financial institution, or fund that is engaged in
making, purchasing, or otherwise investing in commercial loans in the ordinary
course of its business and having (together with its Affiliates and Approved
Funds) total assets in excess of $250,000,000; provided that notwithstanding
the foregoing and for the avoidance of doubt, “Eligible Assignee” shall not
include Parent, Borrower, any of Parent’s Affiliates or Subsidiaries.


 


“Environmental Actions”
means any written complaint, summons, citation, notice, directive, demand,
suit, order, claim, litigation, governmental investigation, judicial or
administrative proceeding, judgment, letter, or other communication to Parent
or any of its Subsidiaries from any Governmental Authority, or any third party
alleging violations of Environmental Laws or liability for Response Actions
with respect to Releases (a) at, onto or from any assets, properties, or
businesses of Parent, its Subsidiaries, 


 


7

















 


including
the Real Property, (b) from or onto adjoining properties or businesses, or
(c) from or onto any facilities which received Hazardous Materials
generated by Borrowers or its Subsidiaries.


 


“Environmental Law”
means any applicable federal, state, provincial, territorial, foreign or local
statute, law, rule, regulation, ordinance, code, binding and enforceable
guideline, binding and enforceable written policy, or rule of common law
now or hereafter in effect and in each case as amended, or any applicable
judicial or administrative interpretation thereof, including any applicable
judicial or administrative order, consent decree or judgment, issued by a
Governmental Authority, in each case, to the extent binding on Parent or its
Subsidiaries, relating to the environment, health and safety, natural resources
or natural resource damages, or Hazardous Materials, in each case as amended
from time to time.


 


“Environmental
Liabilities” means all liabilities, monetary obligations, losses, damages,
punitive damages, consequential damages, treble damages, costs and expenses
(including all reasonable fees, disbursements and expenses of counsel, experts,
or consultants, and costs of investigation and feasibility studies), fines,
penalties, sanctions, and interest that arise under Environmental Laws or are
incurred as a result of any (a) Environmental Action, (b) Release or (c) Response
Action.


 


“Environmental Lien”
means any Lien in favor of any Governmental Authority or Person for
Environmental Liabilities.


 


“Environmental Permits”
has the meaning specified therefor in Section 5.11(b).


 


“Equipment” means
equipment (as that term is defined in the Code).


 


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


 


“ERISA Affiliate”
means (a) any Person subject to ERISA whose employees are treated as
employed by the same employer as the employees of Parent or its Subsidiaries
under IRC Section 414(b), (b) any trade or business subject to ERISA
whose employees are treated as employed by the same employer as the employees
of Parent or its Subsidiaries under IRC Section 414(c), (c) solely
for purposes of Section 302 of ERISA and Section 412 of the IRC, any
organization subject to ERISA that is a member of an affiliated service group of
which Parent or any of its Subsidiaries is a member under IRC Section 414(m),
or (d) solely for purposes of Section 302 of ERISA and Section 412
of the IRC, any Person subject to ERISA that is a party to an arrangement with
Parent or any of its Subsidiaries and whose employees are aggregated with the
employees of Parent or its Subsidiaries under IRC Section 414(o).


 


“ERISA Event” means,
with respect to Parent or any of its Subsidiaries or any of their ERISA
Affiliates, (a) any event described in Section 4043(c) of ERISA
with respect to a Title IV Plan; (b) the withdrawal of any Loan Party or
ERISA Affiliate from a Title IV Plan subject to Section 4063 of ERISA
during a plan year in which it was a substantial employer, as defined in Section 4001(a)(2) of
ERISA; (c) the complete or partial withdrawal of any Loan Party or any
ERISA Affiliate from any Multiemployer Plan; (d) the filing of a notice of
intent to terminate a Title IV Plan or the treatment of a plan amendment as a
termination under Section 4041 of ERISA; (e) the institution of
proceedings to terminate a Title IV Plan or Multiemployer Plan by the PBGC; (f) the
failure by any Loan Party or ERISA Affiliate to make when due required
contributions to a Multiemployer Plan or Title IV Plan unless such failure is
cured within 30 days; (g) any other event or condition which might
reasonably be expected to constitute grounds under Section 4042 of ERISA
for the termination of, or the appointment of a trustee to administer, any
Title IV Plan or Multiemployer Plan or for the imposition of liability under Section 4069
or 4212(c) of ERISA; (h) the termination of a Multiemployer Plan
under Section 4041A of ERISA or the reorganization or insolvency of a
Multiemployer Plan under Section 4241 of ERISA; or (i) the loss of a
Qualified Plan’s qualification or tax exempt status.


 


8

















 


“Event of Default”
has the meaning specified therefor in Section 8.


 


“Excess Cash Flow”
means, with respect to any fiscal period and with respect to Parent determined
on a consolidated basis in accordance with GAAP (a) EBITDA for such fiscal
period, minus (b) without duplication, the
sum of (i) the cash portion of Interest Expense paid during such fiscal
period, (ii) the cash portion of income taxes paid during such fiscal
period and (iii) the cash portion of Capital Expenditures (net of (A) any
proceeds reinvested in accordance with the proviso to Section 2.4(c)(iii)(A) of
the Agreement, and (B) any proceeds of related financings with respect to
such expenditures) made during such period, and (C) the cash portion of
interest expense paid during the fiscal period of the Convertible Subordinated
Notes.


 


“Exchange Act” means
the Securities Exchange Act of 1934, as in effect from time to time.


 


“Excluded Tax” means,
with respect to Agent, any Lender, the Issuing Lender or any other recipient of
any payment to be made by or on account of any obligation of Borrower
hereunder, the following Taxes, including interest, penalties or other
additions thereto: (a) income or franchise taxes imposed on (or measured
by) its gross or net income by the United States of America, or by the
jurisdiction under the laws of which such recipient is organized or in which
its principal office is located or, in which it is otherwise deemed to be
engaged in a trade or business for Tax purposes or, in the case of any Lender,
in which its applicable lending office is located; (b) any branch profits
taxes imposed by the United States of America or any similar tax imposed by any
other jurisdiction in which Borrower is located; and (c) in the case of a
Foreign Lender, any withholding tax that is imposed on amounts payable to such
Foreign Lender at the time such Foreign Lender becomes a party to this
Agreement (or designates a new lending office) or is attributable to such
Foreign Lender’s failure to comply with Section 17(b), (c) or
(d).


 


“Extraordinary Receipts”
means any cash received by Parent or any of its Subsidiaries not in the
ordinary course of business, including (a) Tax Refunds, (b) pension
plan reversions, (c) proceeds of insurance (including key man life
insurance and business interruption insurance, but excluding any casualty
insurance), (d) judgments, proceeds of settlements or other consideration
of any kind in connection with any cause of action, (e) indemnity payments
arising out of acquisitions, and (f) any purchase price adjustment
received in connection with any purchase agreement following the closing and
funding of any applicable acquisition with the proceeds of any Advance, in
whole or in part.


 


“Fee Letter” means
that certain Restated Fee Letter dated as of the date hereof among the Loan
Parties and Agent, in form and substance satisfactory to Agent.


 


“Filing Date” means November 10,
2008.


 


“Final Bankruptcy Court
Order” means the final order of the Bankruptcy Court with respect to
Borrower and the Debtor Guarantors, in form and substance acceptable to the
Agent and the Required Lenders in their sole and absolute discretion, as the
same may be amended, modified or supplemented from time to time with the
express written joinder or consent of Agent, the Lenders and Borrower.


 


“Final Bankruptcy Court
Order Entry Date” means the date on which the Final Bankruptcy Court Order
shall have been entered by the Bankruptcy Court.


 


“Final Facility Effective
Date” has the meaning specified therefor in Schedule 4.1 to this
Agreement.


 


“Final Maturity Date”
means the date which is the earliest of (a) March 31, 2009, (b) the
date of the substantial consummation (as defined in Section 1101(2) of
the Bankruptcy Code) of a plan of reorganization in the Chapter 11 Cases that
has been confirmed by an order of the Bankruptcy Court, (c) the date of a
sale of substantially all of the assets of Borrower and the Debtor Guarantors
(which may take the form of an asset sale, stock sale or otherwise as approved
by Agent and Lenders), and (d) such earlier date on


 


9

















 


which
all Loans and other Obligations for the payment of money shall become due and
payable in accordance with the terms of this Agreement and the other Loan
Documents.


 


“Final Period” means
the period commencing on the Final Facility Effective Date and ending on the
Final Maturity Date.


 


“Foreign Lender”
means any Lender that is organized under the laws of a jurisdiction other than
the United States of America or any State thereof or the District of Columbia.


 


“Fund” means any
Person (other than a natural person) that is (or will be) engaged in making,
purchasing, holding or otherwise investing in commercial loans and similar
extensions of credit in the ordinary course.


 


“Funding Date” means
the date on which a Borrowing occurs.


 


“GAAP” means
generally accepted accounting principles as in effect from time to time in the
United States, consistently applied.


 


“Governing Documents”
means, with respect to any Person, the certificate or articles of
incorporation, by-laws, or other organizational documents of such Person.


 


“Governmental Authority”
means any federal (including, the federal government of Canada), state, local,
provincial, territorial or other governmental or administrative body,
instrumentality, board, department, or agency or any court, tribunal,
administrative hearing body, arbitration panel, commission, or other similar
dispute-resolving panel or body.


 


“Hazardous Materials”
means (a) chemical, materials or substances that are regulated under any
Environmental Law, or defined or listed in, or otherwise classified pursuant
to, any Environmental Law as “hazardous substances,” “hazardous materials,” “hazardous
wastes,” “toxic substances,” or any other formulation intended to define, list,
or classify substances by reason of deleterious properties such as
ignitability, corrosivity, reactivity, carcinogenicity, reproductive toxicity,
or “EP toxicity,” (b) oil, petroleum, or petroleum derived substances,
natural gas, natural gas liquids, synthetic gas, drilling fluids, produced
waters, and other wastes associated with the exploration, development, or
production of crude oil, natural gas, or geothermal resources, (c) any
flammable substances or explosives, (d) any radioactive materials, (e) asbestos
in any form, (f) oil or dielectric fluid containing levels of
polychlorinated biphenyls in excess of 50 parts per million, (g) lead
based paint, (h) urea formaldehyde, (i) radon, and (j) pesticides.


 


“Holdout Lender” has
the meaning specified therefor in Section 15.2(a).


 


“Hydrocarbon Interests”
means all rights, titles, interests and estates now owned or hereafter acquired
in and to oil and gas leases, oil, gas and mineral leases, oil, gas and
casinghead gas leases, or other liquid or gaseous hydrocarbon leases, mineral
fee or lease interests, farm-outs, overriding royalty and royalty interests,
net profit interests, oil payments, production payment interests and similar
mineral interests, including any reserved or residual interest of whatever
nature.


 


“Hydrocarbons” means,
collectively, oil, gas, coal seam gas, casinghead gas, condensate, distillate,
liquid hydrocarbons, gaseous hydrocarbons, all products and byproducts refined,
separated, settled and dehydrated therefrom and all products and byproducts
refined therefrom, including, without limitation, kerosene, liquefied petroleum
gas, refined lubricating oils, diesel fuel, drip gasoline, natural gasoline,
helium, sulfur, geothermal steam, water, carbon dioxide, and all other
minerals.


 


“Indebtedness” of any
Person means, without duplication, (a) all obligations for borrowed money,
(b) all obligations evidenced by bonds, debentures, notes, or other similar
instruments and all


 


10

















 


reimbursement
or other obligations in respect of letters of credit, bankers acceptances,
interest rate swaps, or other financial products, (c) all obligations as a
lessee under Capital Leases, (d) all obligations or liabilities of others
secured by a Lien on any asset of a Person or its Subsidiaries, irrespective of
whether such obligation or liability is assumed, (e) all obligations to
pay the deferred purchase price of assets (other than trade payables incurred
in the ordinary course of business and repayable in accordance with customary
trade practices provided that such obligations are not more than ninety (90)
days past due), (f) all obligations owing under Swap Agreements, (g) all
Disqualified Stock, and (h) any obligation guaranteeing or intended to
guarantee (whether directly or indirectly guaranteed, endorsed, co-made,
discounted, or sold with recourse) any obligation of any other Person that
constitutes Indebtedness under any of clauses (a) through (g) above.


 


“Indemnified Liabilities”
has the meaning specified therefor in Section 11.3.


 


“Indemnified Person”
has the meaning specified therefor in Section 11.3.


 


“Indemnified Taxes”
means Taxes other than Excluded Taxes.


 


“Insolvency Proceeding”
means any proceeding commenced by or against any Person under any provision of
the Bankruptcy Code or under any other state or federal bankruptcy or
insolvency law, assignments for the benefit of creditors, formal or informal
moratoria, compositions, extensions generally with creditors, or proceedings
seeking reorganization, arrangement, or other similar relief.


 


“Intercompany Note”
means that certain Intercompany Note, dated as of December 27, 2007, by
and among Borrower, Parent and the Debtor Guarantors, as may be amended,
restated, supplemented, renewed, extended, replaced or otherwise modified from
time to time.


 


“Interest Payment Date”
means the first day of each calendar month.


 


“Interim Advances”
has the meaning specified in the recitals to this Agreement.


 


“Interim Bankruptcy Court
Order” means the order of the Bankruptcy Court entered on November 24,
2008 with respect to the Interim DIP Credit Agreement.


 


“Interim Bankruptcy Court
Order Entry Date” means November 24, 2008.


 


“Interim DIP Credit
Agreement” has the meaning specified in the recitals to this Agreement.


 


“Interim DIP Loan”
has the meaning specified in the recitals to this Agreement.


 


“Interim Facility
Effective Date” means November 26, 2008.


 


“Interim Lender” has
the meaning specified in the recitals to this Agreement.


 


“Interim Period” means the period
commencing on the Interim Facility Effective Date and ending on the earlier to
occur of (a) the Final Facility Effective Date and (b) the Final
Maturity Date.


 


“Inventory” means
inventory (as that term is defined in the Code).


 


“Investment” means,
with respect to any Person, any investment by such Person in any other Person
(including Affiliates) in the form of loans, guarantees, advances, or capital
contributions (excluding bona fide
Accounts arising in the ordinary course of business consistent with past
practice), purchases or other acquisitions of Indebtedness, Stock, or all or
substantially all of the assets of such other Person (or of any division or
business line of such other Person), and any other items that are or would be
classified as investments on a balance sheet prepared in accordance with GAAP.


 


11
















 


“IRC” means the
Internal Revenue Code of 1986, as in effect from time to time.


 


“IRS” shall mean the
Internal Revenue Service, or any successor thereto.


 


“Issuing Lender”
means Regiment or any other Lender that, at the request of Borrower and with
the consent of Agent, agrees, in such Lender’s sole discretion, to become an
Issuing Lender for the purpose of issuing L/Cs or L/C Undertakings pursuant to Section 2.12.


 


“Key Person” means,
as of the Interim Facility Effective Date, Joseph M. Brooker, the Chief
Executive Officer of Borrower.


 


“L/C” has the meaning
specified therefor in Section 2.12(a).


 


“L/C Disbursement”
means a payment made by the Issuing Lender pursuant to a Letter of Credit.


 


“L/C Undertaking” has
the meaning specified therefor in Section 2.12(a).


 


“Lender” and “Lenders”
have the respective meanings set forth in the preamble to the Agreement, and
shall include any other Person made a party to the Agreement in accordance with
the provisions of Section 14.1.


 


“Lender Group” means,
individually and collectively, each of the Lenders (including the Issuing
Lender), the Participants and Agent.


 


“Lender Group Expenses”
means all (a) costs or expenses (including taxes, and insurance premiums)
required to be paid by Parent or its Subsidiaries under any of the Loan
Documents that are paid, advanced, or incurred by the Lender Group, (b) out-of-pocket
fees or charges paid or incurred by Agent in connection with the Lender Group’s
transactions with Parent or its Subsidiaries, including fees or charges for photocopying,
notarization, couriers and messengers, telecommunication, public record
searches (including tax lien, litigation, and UCC searches and including
searches with the patent and trademark office, the copyright office, or the
department of motor vehicles), filing, recording, publication, appraisal
(including periodic collateral appraisals or business valuations to the extent
of the fees and charges (and up to the amount of any limitation contained in
this Agreement or the Fee Letter), real estate surveys, real estate title
policies and endorsements, and environmental audits, (c) out-of-pocket
costs and expenses incurred by Agent in the disbursement of funds to Borrower
or other members of the Lender Group (by wire transfer or otherwise), (d) charges
paid or incurred by Agent resulting from the dishonor of checks, (e) reasonable
out-of-pocket costs and expenses paid or incurred by the Lender Group to
correct any Default or Event of Default or enforce any provision of the Loan
Documents, or in gaining possession of, maintaining, handling, preserving,
storing, shipping, selling, preparing for sale, or advertising to sell the
Collateral, or any portion thereof, irrespective of whether a sale is
consummated, (f) out-of-pocket audit fees and expenses of Agent related to
any inspections or audits to the extent of the fees and charges (and up to the
amount of any limitation) contained in the Agreement or the Fee Letter, (g) reasonable
costs and expenses of third party claims or any other suit paid or incurred by
the Lender Group in enforcing or defending the Loan Documents or in connection
with the transactions contemplated by the Loan Documents or the Lender Group’s
relationship with Parent or any its Subsidiaries, (h) Agent’s and each
Lender’s reasonable out-of-pocket costs and expenses (including attorneys fees)
incurred in advising, structuring, drafting, reviewing, administering, or
amending the Loan Documents (whether or not consummated), including the
reasonable costs and expenses of any independent engineers and consultants
retained by Agent and each Lender in connection herewith, (i) Agent’s and
each Lender’s reasonable costs and expenses (including attorneys, accountants,
consultants, and other advisors fees and expenses) incurred in terminating,
enforcing (including attorneys, accountants, consultants, and other advisors
fees and expenses incurred in connection with the Chapter 11 Cases or a “workout,”
a “restructuring,” or an Insolvency Proceeding concerning Parent or in
exercising rights or remedies under the Loan Documents), or 


 


12

















 


defending
the Loan Documents, irrespective of whether suit is brought, or in taking any
Remedial Action concerning the Collateral, (j) each Lender’s reasonable
costs and expenses incurred in connection with the rating (whether public or
private) of the Loans by one or more Rating Agencies in connection with any
Lender’s Securitization, and (k) out-of pocket-expenses incurred by WFF,
in its capacity as agent and lender under the Interim DIP Credit Agreement,
which (1) would have been “Lender Group Expenses” as defined in the
Interim DIP Credit Agreement and (2) which were incurred prior to the date
of this Agreement or which relate to the assignment by WFF to Regiment of its rights
and obligations as agent and lender under the Interim DIP Credit Agreement.


 


“Lender-Related Person”
means, with respect to any Lender, such Lender, together with such Lender’s
Affiliates, Approved Funds, officers, directors, employees, attorneys, and
agents.


 


“Letter of Credit”
means an L/C or an L/C Undertaking, as the context requires.


 


“Letter of Credit
Collateralization” means either (a) providing cash collateral
(pursuant to documentation reasonably satisfactory to Agent, including
provisions that specify that the Letter of Credit fee set forth in the
Agreement will continue to accrue while the Letters of Credit are outstanding)
to be held by Agent for the benefit of the Lenders in an amount equal to one
hundred five percent (105%) of the then existing Letter of Credit Usage, (b) causing
the Underlying Letters of Credit to be returned to the Issuing Lender, or (c) providing
Agent with a standby letter of credit, in form and substance reasonably
satisfactory to Agent, from a commercial bank acceptable to Agent (in its sole
discretion) in an equal to one hundred five percent (105%) of the then existing
Letter of Credit Usage (it being understood that the Letter of Credit fee set
forth in the Agreement will continue to accrue while the Letters of Credit are
outstanding and that any such fee that accrues must be an amount that can be
drawn under any such standby letter of credit).


 


“Letter of Credit Usage”
means, as of any date of determination, the aggregate undrawn amount of all
outstanding Letters of Credit.


 


“Lien” means any
mortgage, deed of trust, pledge, hypothecation, assignment, charge, deposit
arrangement, encumbrance, easement, lien (statutory or other), security
interest, or other security arrangement and any other preference, priority, or
preferential arrangement of any kind or nature whatsoever, including any
conditional sale contract or other title retention agreement, the interest of a
lessor under a Capital Lease and any synthetic or other financing lease having
substantially the same economic effect as any of the foregoing, including (a) any
interest in an asset securing an obligation owed to, or a claim by, any Person
other than the owner of the asset, whether such interest shall be based on the
common law, statute or contract, whether such interest shall be recorded or
perfected, and whether such interest shall be contingent upon to occurrence of
some future event or events or the existence of some future circumstance or
circumstances and (b) any of the preceding, in addition to any purchase
options, reservations, exceptions, encroachments, easements, rights of way,
covenants, conditions, restrictions, leases and other title exceptions and
encumbrances affecting any Oil and Gas Properties or Real Property.


 


“Loan” means any of
the Advances.


 


“Loan Account” has
the meaning specified therefor in Section 2.10.


 


“Loan Documents”
means this Agreement, the Bank Product Agreements, the Cash Management
Agreements, the Control Agreements, the Fee Letter, the Parent Guaranty, the
Parent U.S. Security Agreement, the Parent Canadian Pledge and Security
Agreement, the Parent Trademark Security Agreement, the Letters of Credit, the
Fee Letter, any mortgage, pledge agreement or other security document executed
by a Loan Party in connection with this Agreement, any note or notes executed
by Borrower in connection with the Agreement and payable to a member of the
Lender Group, the Interim Bankruptcy Court Order, the Final Bankruptcy Court
Order  and any other agreement entered into,
now or in the future, by Borrower or any of its Subsidiaries and the Lender
Group in connection with this Agreement.


 


13

















 


“Loan Party” means
Borrower, Parent and any Debtor Guarantor.


 


“Margin Stock” shall
have the meaning specified therefor in Section 5.2.


 


“Material Adverse Change”
means (a) a material adverse change in the business, operations, results
of operations, net operating income, value of Collateral, assets, liabilities
or condition (financial or otherwise) of the Loan Parties, taken as a whole
(except for the commencement of the Chapter 11 Cases and events that typically
result from the commencement of cases under Chapter 11 of the Bankruptcy Code),
(b) a material impairment of any Loan Party’s ability to perform its obligations
under any Loan Document to which it is a party or of the Lender Group’s ability
to enforce the Obligations or realize upon the Collateral, or (c) subject
to Permitted Priority Liens, a material impairment of the enforceability or
priority of Agent’s Liens with respect to the Collateral as a result of an
action or failure to act on the part of any Loan Party.


 


“Material Adverse
Deviation” means, as of any date of determination, a deviation (downward,
in the case of clause (b) below, and upward, in the case of clause (a) below):


 


(a) calculated on a
cumulative basis from and after the Filing Date, of more than 10% from the
amounts for each of the following line items set forth in the Budget for such
period: (i) “Total GCT Cash Payments” set forth on line 4 of the Budget, (ii) “Disbursements
and Royalties to Third Party WI Owners” set forth in line 6 of the Budget, (iii) “Powder
Operating Lease Disbursements” set forth on line 11 of the Budget, (iv) “Fayetteville
Operating Lease Disbursements” set forth on line 12 of the Budget, (v) “General
and Administrative Expenses” set forth on line 15 of the Budget, (vi) “CapEx—Non-Optional”
set forth on line 17 of the Budget, (vii) “Capitalized GAAP OpEx—Elk
Valley (Parent)” set forth on line 18 of the Budget, (viii) “2007 Ad
Valorem Taxes” set forth on line 19 of the Budget, (ix) “Leasehold CapEx—US”
set forth on line 20 of the Budget, and (x) “Leasehold CapEx—Canada
(Parent)” set forth on line 21 of the Budget; and


 


(b) calculated at the
end of each calendar month from and after the Filing Date, of more than 10%
from the amount set forth in the Budget for such period, in each case, with
respect to “Total NG Volume” set forth on line 2 of the Budget.


 


“Material Contract”
means, with respect to any Person, (a) each contract or agreement to which
such Person or any of its Subsidiaries is a party that is (i) a bond or
surety obligation or (ii) an employment agreement with an officer or a
director and (b) all other contracts or agreements to which such Person or
any of its Subsidiaries is a party for which breach, non-performance,
cancellation or failure to renew could reasonably be expected to result in a
Material Adverse Change or operate to materially reduce the “Net Revenue
Interest” below the interest described in the most recently delivered Reserve
Report for Proved Oil and Gas Properties.


 


“Maximum Revolver Amount”
means $12,500,000.


 


“Moody’s” has the
meaning specified therefor in the definition of Cash Equivalents.


 


“Mortgaged Property”
means any Property owned by a Loan Party which is subject to the Liens existing
and to exist under the terms of the Loan Documents.


 


 “Multiemployer Plan” means a “multiemployer
plan” as defined in Section 4001(a)(3) of ERISA, and to which
Borrower, any Subsidiary of Borrower or ERISA Affiliate of Borrower is making,
is obligated to make, has made or been obligated to make, contributions on
behalf of participants who are or were employed by any of them.


 


14

















 


“Net Cash Proceeds”
means:


 


(a)           with respect to any sale or disposition by Parent or any
of its Subsidiaries of property or assets, the amount of cash proceeds (other
than escrowed funds to support obligations reasonably expected to be payable)
received (directly or indirectly) from time to time (whether as initial
consideration or through the payment of deferred consideration) by or on behalf
of Parent or its Subsidiaries, in connection therewith after deducting
therefrom only (i) the amount of any Indebtedness secured by any Permitted
Lien on any asset (other than (A) Indebtedness owing to Agent or any
Lender under the Agreement or the other Loan Documents and (B) Indebtedness
assumed by the purchaser of such asset) which is required to be, and is, repaid
in connection with such sale or disposition, (ii) fees, commissions, and
expenses related thereto and required to be paid by Parent or such Subsidiary
in connection with such sale or disposition and (iii) taxes paid or
payable to any taxing authorities by Parent or such Subsidiary in connection
with such sale or disposition, in each case to the extent, but only to the
extent, that the amounts so deducted are, at the time of receipt of such cash,
actually paid or payable to a Person that is not an Affiliate of Parent or any
of its Subsidiaries, and are properly attributable to such transaction; and


 


(b)           with respect to the issuance or incurrence of any
Indebtedness by Parent or any of its Subsidiaries, or the issuance by Parent or
any of its Subsidiaries of any shares of its Stock, the aggregate amount of
cash (other than escrowed funds to support obligations reasonably expect to be
payable) received (directly or indirectly) from time to time (whether as
initial consideration or through the payment or disposition of deferred
consideration) by or on behalf of Borrower or such Subsidiary in connection
with such issuance or incurrence, after deducting therefrom only (i) 
fees, commissions, and expenses related thereto and required to be paid by
Parent or such Subsidiary in connection with such issuance or incurrence, (ii) taxes
paid or payable to any taxing authorities by Parent or such Subsidiary in
connection with such issuance or incurrence, in each case to the extent, but
only to the extent, that the amounts so deducted are, at the time of receipt of
such cash, actually paid or payable to a Person that is not an Affiliate of
Parent or any of its Subsidiaries, and are properly attributable to such
transaction.


 


“Obligations” means (a) all
loans, Advances, debts, principal, interest (including any interest that
accrues after the commencement of an Insolvency Proceeding, regardless of
whether allowed or allowable in whole or in part as a claim in any such
Insolvency Proceeding), contingent reimbursement obligations with respect to
outstanding Letters of Credit, premiums, liabilities (including all amounts
charged to Borrower’s Loan Account pursuant to the Agreement), obligations
(including indemnification obligations), fees (including the fees provided for
in the Fee Letter), charges, costs, Lender Group Expenses (including any fees
or expenses that accrue after the commencement of an Insolvency Proceeding,
regardless of whether allowed or allowable in whole or in part as a claim in
any such Insolvency Proceeding), guaranties, covenants, and duties of any kind
and description owing by any Loan Party to the Lender Group pursuant to or
evidenced by the Loan Documents and irrespective of whether for the payment of
money, whether direct or indirect, absolute or contingent, due or to become
due, now existing or hereafter arising, and including all interest not paid
when due and all other expenses or other amounts that any Loan Party is
required to pay or reimburse by the Loan Documents or by law or otherwise in
connection with the Loan Documents, and (b) all Bank Product
Obligations.  Any reference in the
Agreement or in the Loan Documents to the Obligations shall include all or any
portion thereof and any extensions, modifications, renewals, or alterations
thereof, both prior and subsequent to any Insolvency Proceeding.


 


“Oil and Gas Business”
means (a) the acquisition, exploration, exploitation, development,
operation and disposition of interests in Oil and Gas Properties and
Hydrocarbons, (b) the gathering, marketing, treating, processing, storage,
selling and transporting of any production from such interests or properties,
including, without limitation, the marketing of Hydrocarbons obtained from
unrelated Persons, (c) any business relating to or arising from
exploration for or development, production, treatment, processing, storage,
transportation or marketing of oil, gas and other minerals and products
produced in association therewith, (d) any business relating to oilfield
sales and service, and (e) any activity that is ancillary or necessary or
desirable to facilitate the activities described in clauses (a) through (d) of
this definition.


 


15

















 


“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, 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,
service rigs, trailers, backhoes, automotive equipment, rental equipment or
other personal Property which may be on such premises for the purpose of
drilling and servicing a well or for other similar temporary uses) and
including any and all oil wells, gas wells, injection wells or other wells,
buildings, structures, 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, 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.


 


“Originating Lender”
has the meaning specified therefor in Section 14.1(e).


 


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


 


“Overadvance” has the
meaning specified therefor in Section 2.5.


 


“Parent” means Storm
Cat Energy Corporation, a company incorporated under the laws of British
Columbia, Canada.


 


“Parent Canadian Pledge and Security Agreement”
means that certain Pledge and Security Agreement, dated as of November 26,
2008, by the Parent in favor of the Agent.


 


“Parent Guaranty”
means that certain Guaranty dated as of November 26, 2008 executed and
delivered by Parent in favor of Agent, for the benefit of the Lender Group and
the Bank Product Providers.


 


“Parent Mortgages”
means, collectively, (a) the Debenture executed and delivered by Parent in
favor of Agent with respect to Oil and Gas Properties owned by Parent in
Alberta, Canada, (b) the Debenture executed and delivered by Parent in
favor of Agent with respect to Oil and Gas Properties owned by Parent in
British Columbia, Canada and (c) the Mortgages executed and delivered by
Parent in favor of Agent with respect to Oil and Gas Properties owned by Parent
in Alaska.


 


“Parent Trademark
Security Agreement” means that certain Trademark Security Agreement, dated as of November 26, 2008, by the
Parent in favor of the Agent.


 


“Parent U.S. Security Agreement” means that
certain Security Agreement, dated as of November 26, 2008, by the Parent
in favor of the Agent.


 


“Participant” has the
meaning specified therefor in Section 14.1(e).


 


16

















 


“Participant Register”
has the meaning specified therefor in Section 14.1(j).


 


“PBGC” shall mean the
Pension Benefit Guaranty Corporation or any successor thereto.


 


“Pension Plan” shall
mean, at any time, an employee benefit plan, as defined in Section 3(3) of
ERISA, which Parent or any of its Subsidiaries maintains, contributes to or has
an obligation to contribute to on behalf of participants who are or were
employed by any Loan Party (or, if such plan were terminated at such time,
would under Section 4069 of ERISA be deemed to be an employee benefit plan
of such Loan Party).


 


“Permitted Discretion”
means a determination made in the exercise of reasonable (from the perspective
of a secured lender) business judgment.


 


“Permitted Dispositions”
means (a) sales or other dispositions of Equipment that is substantially
worn, damaged, surplus or obsolete in the ordinary course of business; (b) sales
of Inventory to buyers in the ordinary course of business; (c) the use or
transfer of money or Cash Equivalents in a manner that is not prohibited by the
terms of the Agreement or the other Loan Documents; (d) the licensing, on
a non-exclusive basis, of patents, trademarks, copyrights, and other
intellectual property rights in the ordinary course of business; and (e) the
sale of Hydrocarbons in the ordinary course of business.


 


“Permitted Holder”
means the Person identified on Schedule P-1 to the Interim DIP Credit
Agreement.


 


“Permitted Investments”
means (a) Investments in cash and Cash Equivalents, (b) Investments
in negotiable instruments for collection, (c) advances made in connection
with purchases of goods or services in the ordinary course of business, (d) Investments
received in settlement of amounts due to Parent or any of its Subsidiaries
effected in the ordinary course of business or owing to Parent or any of its
Subsidiaries as a result of Insolvency Proceedings involving an Account Debtor
or upon the foreclosure or enforcement of any Lien in favor of Borrower or its
Subsidiaries, (e) subject to the limits in Section 7.6,
Investments in direct ownership interests in additional Oil and Gas Properties
and gas gathering systems related thereto or related to farm-out, farm-in,
joint operating, joint venture or area of mutual interest agreements, gathering
systems, pipelines or other similar arrangements which are usual and customary
in the oil and gas exploration and production business located within the
geographic boundaries of the United States of America; provided that for
purposes of this clause (e), an investment in capital stock, partnership
interests, joint venture interests, limited liability company interests or
other similar equity interests in a Person shall not constitute a Permitted
Investment, (f) commission, travel and similar advances and loans to
employees, officers or directors in the ordinary course of business of the Parent
or any of its Subsidiaries, in each case only as permitted by applicable law,
including Section 402 of the Sarbanes Oxley Act of 2002, as amended, but
in any event not to exceed  Twenty Five
Thousand Dollars ($25,000) in the aggregate at any time, (g) any guarantee
permitted under Section 7.1, (h) any Swap Agreement permitted
under Section 7.24, (i) Investments (A) made by the
Parent consisting of common equity in or to the other Debtor Guarantors and (B) made
by any Subsidiary of Borrower in or to the Borrower or any Debtor Guarantor,
and (j) deposits in the ordinary course of business to secure the
performance of (A) letters of credit, (B) bids, tenders, or obtaining
of any license from of Governmental Authority, (C) indemnification
obligations, or (D) operating leases.


 


“Permitted Liens”
means (a) Liens held by Agent to secure the Obligations, (b) Liens
for unpaid taxes, assessments, or other governmental charges or levies that
either (i) are not yet delinquent, or (ii) (A) either (1) do
not have priority over Agent’s Liens, or (2) secure taxes,
assessments, charges or levies in an aggregate amount not in excess of Two
Hundred Fifty Thousand Dollars ($250,000) and after the Agent establishes
reserves against the then-existing Maximum Revolver Amount in such aggregate
amount and at least One Dollar ($1.00) of Availability exists, and (B) the
underlying taxes, assessments, or charges or levies are the subject of
Permitted Protests, (c) judgment Liens that do not constitute an Event of
Default under Section 8.7 of the Agreement, (d) Liens existing
on the Filing Date as set forth on Schedule P-2 to the Interim 


 


17

















 


DIP
Credit Agreement, provided that any such Lien only secures the Indebtedness
that it secures on the Interim Facility Effective Date and any Refinancing
Indebtedness in respect thereof, (e) the interests of lessors under
operating leases, (f) purchase money Liens or the interests of lessors
under Capital Leases after the Interim Facility Effective Date which are
permitted under Section 7.1(d) to the extent that such Liens
or interests secure Permitted Purchase Money Indebtedness and so long as (i) such
Lien attaches only to the asset purchased, acquired, constructed or improved
and the proceeds thereof, and (ii) such Lien only secures the Indebtedness
that was incurred to acquire the asset purchased, acquired, constructed or
improved or any Refinancing Indebtedness in respect thereof, (g) Liens
arising by operation of law in favor of warehousemen, landlords, carriers,
mechanics, materialmen, laborers, or suppliers, incurred in the ordinary course
of business and not in connection with the borrowing of money, and which Liens
either (i) are for sums not yet delinquent, or (ii) are the subject
of Permitted Protests or as to which payment and enforcement is stayed under
the Bankruptcy Code or pursuant to orders of the Bankruptcy Court, (h) Liens
on amounts deposited in connection with obtaining worker’s compensation or
other unemployment insurance, (i) Liens on amounts deposited in the
ordinary course of business in connection with letters of credit, bids, tenders
or leases, obtaining any license from a Governmental Authority, (j) Liens
on amounts deposited as security for surety or appeal bonds in connection with
obtaining such bonds in the ordinary course of business, (k) with respect
to any Real Property, easements, rights of way, and zoning restrictions and
other similar encumbrances that do not materially interfere with or impair the
use or operation thereof, (l) 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, (m) 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 agreements, division orders, contracts for sale,
transportation or exchange of oil and natural gas, unitization and pooling
declarations and 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 materially impair the use of the Property covered by such Lien for the
purposes of which such Property is held by the Borrower or any of its
Subsidiaries or materially impair the value of material Property subject
thereto, (n) Liens securing Pre-Petition Obligations pursuant to the
Pre-Petition Credit Facility; provided that any such Liens securing the
Pre-Petition Term Loans are junior and subordinate in all respect to the Agent’s
Liens securing the Obligations with respect to all Collateral pursuant to the
Bankruptcy Court Orders and (o) Liens granted by Borrower solely to the
extent such Liens are expressly permitted by orders of the Bankruptcy Court in
the Chapter 11 Cases.


 


“Permitted Pari Passu
Liens” means all valid, enforceable and perfected mechanics’ and
materialmen’s liens (whether filed or perfected prepetition or postpetition) covering
the Debtor Loan Parties’ property located in Wyoming with respect to which the
Bankruptcy Court has made a valid, final and binding determination (without
giving effect to the lien priorities granted by reason of the Bankruptcy Court
Orders) that such Liens have priority over the Liens securing the Pre-Petition
Credit Facility, provided, however, such Liens shall not include any Liens that
are contractually subordinated to the Obligations.


 


“Permitted Priority Liens”
means (a) Liens permitted under clauses (h) and (i) of the
definition of the term “Permitted Liens,” (b) Liens securing the
Pre-Petition Revolver Loans and (c) all valid, enforceable and perfected
mechanics’ and materialmen’s liens (whether filed or perfected prepetition or
postpetition) covering the Debtor Loan Parties’ property located in Arkansas,
provided, however, such Liens shall not include any Liens that are
contractually subordinated to the Obligations.


 


“Permitted Protest”
means the right of any Loan Party to protest any Lien (other than any Lien that
secures the Obligations), taxes (other than payroll taxes or taxes that are the
subject of a United States federal tax lien), or rental payment, provided that (a) a
reserve with respect to such obligation is established on such Loan Party’s
books and records in such amount as is required under GAAP, (b) any such


 


18

















 


protest
is instituted promptly and prosecuted diligently by such Loan Party in good
faith, and (c) Agent is satisfied that, while any such protest is pending,
there will be no impairment of the enforceability, validity, or priority of any
of Agent’s Liens.


 


“Permitted Purchase Money
Indebtedness” means, as of any date of determination, Purchase Money
Indebtedness incurred after the Interim Facility Effective Date in an aggregate
principal amount outstanding at any one time not in excess of One Million
Dollars ($1,000,000).


 


“Person” means
natural persons, corporations, limited liability companies, limited
partnerships, general partnerships, limited liability partnerships, joint
ventures, trusts, land trusts, business trusts, or other organizations,
irrespective of whether they are legal entities, and governments and agencies
and political subdivisions thereof.


 


“Petroleum Engineers”
means such petroleum engineers of recognized national standing as may be
selected by Loan Parties with the prior consent of Agent.


 


“PIK Interest” has
the meaning assigned to such term in Section 2.6(g).


 


“Pre-Petition Credit
Facility” means the Credit Agreement dated as of December 27, 2007 (as
amended, restated, supplemented, or otherwise modified) by and among the
Borrower, Wells Fargo Foothill, LLC, administrative agent, and the lenders
party thereto.


 


“Pre-Petition Obligations”
means all indebtedness, obligations (including obligations in respect of any
letters of credit, bank products and hedging agreements) and liabilities of the
Loan Parties incurred prior to the Filing Date plus fees, expenses, and
indemnities due thereunder and interest thereon accruing both before and after
the Filing Date to the extent allowable under the Bankruptcy Code, whether such
indebtedness, obligations or liabilities are direct or indirect, joint or
several, absolute or contingent, due or to become due, whether for payment or
performance, now existing or hereafter arising.


 


“Pre-Petition Revolver
Commitment” means the “Revolver Commitment” as defined in the Pre-Petition
Credit Facility.


 


“Pre-Petition
Revolver Lenders” means lenders holding Pre-Petition Revolver Commitments.


 


“Pre-Petition Revolver
Loans” means the “Advances” as defined in the Pre-Petition Credit Facility.


 


“Pre-Petition
Revolver Obligations” means all Pre-Petition Revolver Loans, indebtedness,
obligations (including obligations in respect of any letters of credit) and
liabilities of the Loan Parties owing to the Pre-Petition Revolver Lenders
under the Pre-Petition Credit Facility, plus fees, expenses, costs and other
charges, indemnities and reimbursement obligations due thereunder and interest
thereon, whether such indebtedness, obligations or liabilities are direct or
indirect, joint or several, absolute or contingent, due or to become due,
whether for payment or performance, now existing or hereafter arising.


 


“Pre-Petition Term Loans”
means the “Term Loans” as defined in the Pre-Petition Credit Facility.


 


“Priority Professional
Expenses” means those Carve-Out Expenses entitled to priority as set forth
in sub-clause (ii) of the clause “first” of the definition of the
term “Agreed Administrative Expense Priorities”.


 


19

















 


“Priority Professional
Expenses Reserve” means, at any time before the occurrence and continuance
of a Carve-Out Expense Reduction Period, (a) during the Interim Period, an
amount equal to zero and (b) during the Final Period, an amount equal to
the sum of (i) the total amount of “Legal and prof fees and expenses—Debtors”
set forth in line 25 of the Budget through the Final Maturity Date, and (ii) the
total amount of “Legal and prof fees and expenses—UCC” set forth in line 26 of
the Budget through the Final Maturity Date, in either case, which amount shall
be reduced on a dollar-for-dollar basis to the extent that such expenses are
incurred, allowed to be paid by the Bankruptcy Court and paid by the Loan
Parties from and after the Filing Date until the occurrence and continuance an
Event of Default; provided, however, in the case of clause (b) above,
immediately upon the commencement of a Carve-Out Expense Reduction Period, such
amount shall be automatically reduced by the amounts set forth in each line
item for amounts that were projected to be paid from the date of the
commencement of such Carve-Our Expense Reduction Period through the duration of
the period set forth in the Budget.


 


“Professional Expense Cap”
has the meaning given that term in sub-clause (ii) of the clause “first”
of the definition of the term “Agreed Administrative Expense Priorities.”


 


“Pro Rata Share” means, as of any date of determination:


 


(a)           with respect to a Lender’s obligation to make Advances and
right to receive payments of principal, interest, fees, costs, and expenses
with respect thereto, (i) prior to the Commitments being terminated or
reduced to zero, the percentage obtained by dividing (A) such Lender’s Commitment,
by (B) the aggregate Commitments of all Lenders, and (ii) from and
after the time that the Commitments have been terminated or reduced to zero,
the percentage obtained by dividing (A) the aggregate outstanding
principal amount of such Lender’s Advances by (B) the aggregate
outstanding principal amount of all Advances;


 


(b)           with respect to a Lender’s obligation to participate in
Letters of Credit, to reimburse the Issuing Lender, and right to receive
payments of fees with respect thereto, (i) prior to the Commitments being
terminated or reduced to zero, the percentage obtained by dividing (A) such
Lender’s Commitment, by (B) the aggregate Commitments of all Lenders, and (ii) from
and after the time that the Commitments have been terminated or reduced to
zero, the percentage obtained by dividing (A) the aggregate outstanding
principal amount of such Lender’s Advances by (B) the aggregate
outstanding principal amount of all Advances;


 


(c)           [Intentionally Deleted]


 


(d)           [Intentionally Deleted]


 


(e)           with respect to all other matters as to a particular
Lender (including the indemnification obligations arising under Section 16.7),
the percentage obtained by dividing (i) such Lender’s Commitment by (ii) the
aggregate amount of Commitments of all Lenders; provided, however,
that in the event the Commitments have been terminated or reduced to zero, Pro
Rata Share under this clause shall be the percentage obtained by dividing (A) the
outstanding principal amount of such Lender’s Advances plus such Lender’s
ratable portion of the Risk Participation Liability with respect to outstanding
Letters of Credit by (B) the outstanding principal amount of all Advances
plus the aggregate amount of the Risk Participation Liability with respect to
outstanding Letters of Credit.


 


“Projections” means
the Budget.


 


“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.


 


“Protective Advances”
has the meaning specified therefor in Section 2.3(d)(i).


 


20
















 


“Proved Oil and Gas
Properties” means Oil and Gas Properties that are Proved Reserves.


 


“Proved Reserves”
means “Proved Reserves” as defined in the Definitions for Oil and Gas Reserves
(in this paragraph, the “Definitions”) promulgated by the Society of Petroleum
Engineers (or any generally recognized successor) as in effect at the time in
question.  “Proved Developed Producing
Reserves” means Proved Reserves which are categorized as both “Developed”
and “Producing” in the Definitions, “Proved Developed Nonproducing Reserves”
means Proved Reserves which are categorized as both “Developed” and “Nonproducing”
in the Definitions, and “Proved Undeveloped Reserves” means Proved
Reserves which are categorized as “Undeveloped” in the Definitions.


 


“Purchase Money Indebtedness”
means Indebtedness (other than the Obligations, but including Capitalized Lease
Obligations), incurred at the time of, or within thirty (30) days after, the
acquisition, construction or improvement by Borrower of any capital or fixed
assets for the purpose of financing all or any part of the acquisition,
construction or improvement cost thereof.


 


“Rating Agencies” has
the meaning specified therefor in Section 2.15.


 


“Register” has the
meaning specified therefor in Section 14.1(h).


 


“Registered Loan”
means a loan recorded on the Register (or Related Party Register) pursuant to Section 14.1(h).


 


“Registered Note” has
the meaning specified therefor in Section 2.16.


 


“Related Party Assignment”
has the meaning specified therefore in Section 14.1(a).


 


“Related Party Register”
has the meaning specified therefor in Section 14.1(h).


 


“Real Property” means
any estates or interests in real property owned, leased or operated by Parent
or its Subsidiaries and the improvements thereto.


 


“Real Property Collateral”
means the Real Property identified on Schedule R-1 to the Interim
DIP Credit Agreement and any Real Property hereafter acquired by Parent or its
Subsidiaries.


 


“Record” means
information that is inscribed on a tangible medium or that is stored in an electronic
or other medium and is retrievable in perceivable form.


 


“Refinancing Indebtedness”
means refinancings, renewals, or extensions of Indebtedness so long as: (a) the
terms and conditions of such refinancings, renewals, or extensions do not, in
Agent’s reasonable judgment, materially impair the prospects of repayment of
the Obligations by Borrower or materially impair Loan Party’s creditworthiness,
(b) such refinancings, renewals, or extensions do not result in an
increase in the principal amount of the Indebtedness so refinanced, renewed, or
extended, (c) such refinancings, renewals, or extensions do not result in
an increase in the interest rate with respect to the Indebtedness so
refinanced, renewed, or extended, (d) such refinancings, renewals, or
extensions do not result in a shortening of the average weighted maturity of
the Indebtedness so refinanced, renewed, or extended, nor are they on terms or
conditions that, taken as a whole, are materially more burdensome or
restrictive to any Loan Party, (e) if the Indebtedness that is refinanced,
renewed, or extended was subordinated in right of payment to the Obligations,
then the terms and conditions of the refinancing, renewal, or extension must
include subordination terms and conditions that are at least as favorable to
the Lender Group as those that were applicable to the refinanced, renewed, or
extended Indebtedness, and (f) the Indebtedness that is refinanced,
renewed, or extended is not recourse to any Person that is liable on account of
the Obligations other than those Persons which were obligated with respect to
the Indebtedness that was refinanced, renewed, or extended.


 


21

















 


“Regiment” means
Regiment Capital Special Situations Fund III, L.P. together with its permitted
successors and assigns.


 


“Release” means any
spilling, leaking, seepage, pumping, pouring, emitting, emptying, discharging,
injecting, escaping, leaching, dumping, disposing, depositing, dispersing,
emanating or migrating of any Hazardous Materials in, into, onto, from or
through the environment or any Real Property.


 


“Replacement Lender”
has the meaning specified therefor in Section 15.2(a).


 


“Report” has the
meaning specified therefor in Section 16.16(a).


 


“Required Lenders”
means Regiment and such other Lenders whose aggregate Pro Rata Share
(determined pursuant to clause (e) of such definition), when added to the
Pro Rata Share of Regiment, exceeds 50.0%. 
Notwithstanding anything contained in this Agreement, solely for
purposes of determining “Required Lenders”, a Participant shall be deemed to be
a Lender with respect to such Participant’s participating interest in the
Obligations or the Commitment.


 


“Reserve Report”
means a report, in form and substance reasonably satisfactory to Agent, setting
forth, as of the Interim Facility Effective Date (a) the volumetric
quantity and the PV-10 of the oil and gas reserves estimated to be attributable
to the Oil and Gas Properties of the Loan 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, and (b) such
other information customarily contained in such reports as Agent may reasonably
request.


 


“Response Action”
means all actions taken to (a) clean up, remove, remediate, contain,
treat, monitor, assess, investigate, evaluate, correct or in any way address
any violation of or non-compliance with Environmental Law, any Environmental
Liability, any Release or any Hazardous Materials in the indoor or outdoor
environment, (b) prevent or minimize a release or threatened release of
Hazardous Materials so they do not migrate or endanger or threaten to endanger
public health or welfare or the indoor or outdoor environment, (c) restore
or reclaim natural resources or the environment, or (d) perform any
pre-remedial studies, investigations, or post-remedial operation and
maintenance activities.


 


“Responsible Officer”
means, as to any Person, the Chief Executive Officer, the President, any
Financial Officer or any Vice President of such Person.  Unless otherwise specified, all references to
a Responsible Officer herein shall mean a Responsible Officer of Borrower.


 


“Revolver Usage”
means, as of any date of determination, the sum of (a) the amount of
outstanding Advances, plus (b) the amount of the Letter of Credit Usage.


 


“Risk Participation
Liability” means, as to each Letter of Credit, all reimbursement
obligations of Borrower to the Issuing Lender with respect to an L/C
Undertaking, consisting of (a) the amount available to be drawn or which
may become available to be drawn, (b) all amounts that have been paid by
the Issuing Lender to the Underlying Issuer to the extent not reimbursed by
Borrower, whether by the making of an Advance or otherwise, and (c) all
accrued and unpaid interest, fees, and expenses payable with respect thereto.


 


“SEC” means the
United States Securities and Exchange Commission and any successor thereto.


 


“Securities Account”
means a securities account (as that term is defined in the Code).


 


“Securitization” has
the meaning specified therefor in Section 2.15.


 


22

















 


“Settlement” has the
meaning specified therefor in Section 2.3(e)(i).


 


“Settlement Date” has
the meaning specified therefor in Section 2.3(e)(i).


 


“S&P” has the
meaning specified therefor in the definition of Cash Equivalents.


 


“Stock” means all
shares, options, warrants, membership interests, participations, or other
equivalents (regardless of how designated) of or in a Person, whether voting or
nonvoting, including common stock, preferred stock, or any other “equity
security” (as such term is defined in Rule 3a11-1 of the General Rules and
Regulations promulgated by the SEC under the Exchange Act).


 


“Subordination and
Intercreditor Agreement” means that certain Subordination and Intercreditor
Agreement by and among JP Morgan Chase Bank, N.A. and the other signatories
thereto.


 


“Subsidiary” of a
Person means a corporation, partnership, limited liability company, or other
entity in which that Person directly or indirectly owns or controls the shares
of Stock having ordinary voting power to elect a majority of the board of
directors (or appoint other comparable managers) of such corporation,
partnership, limited liability company, or other entity.


 


“Swap Agreement”
means any agreement with respect to any swap, forward, future or derivative
transaction or option 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 no phantom stock or similar plan providing for payments only on
account of services provided by current or former directors, officers,
employees or consultants of Borrower or any of its Subsidiaries shall be a Swap
Agreement.


 


“Tax Refund” means
foreign, United States, state or local tax refunds.


 


“Taxes” means any
taxes, levies, imposts, duties, fees, assessments or other charges of whatever
nature now or hereafter imposed by any jurisdiction or by any political
subdivision or taxing authority thereof or therein with respect to such
payments (but excluding any tax imposed by any jurisdiction or by any political
subdivision or taxing authority thereof or therein measured by or based on the
net income or net profits of any Lender) and all interest, penalties or similar
liabilities with respect thereto.


 


“Total Debt” means,
at any date, all Indebtedness, except for Letters of Credit, of the Parent and
its Subsidiaries on a consolidated basis, excluding (a) non-cash
obligations under FAS 133 or 143, (b) all obligations owing under Swap
Agreements, (c) accounts payable and other accrued liabilities (for the
deferred purchase price of property or services) from time to time incurred in
the ordinary course of business which are not greater than sixty (60) days past
the date of invoice or delinquent or which are being contested in good faith by
appropriate action and for which adequate reserves have been maintained in
accordance with GAAP, and (d) all obligations related to the Convertible
Subordinated Notes.


 


“Total Reserve Value”
means, with respect to any Proved Reserves expected to be produced from any Oil
and Gas Properties, the net present value, discounted at ten percent (10%) per
annum, of the future net revenues expected to accrue to the Parent and its
Subsidiaries during the remaining expected economic lives of such reserves, as
estimated in the most recently delivered Reserve Report with respect to such
Oil and Gas Properties.  Each calculation
of such expected future net revenues shall be made in accordance with the then
existing standards of the Society of Petroleum Engineers; provided, that
in any event (a) appropriate deductions shall be made for estimated
severance and ad valorem taxes, and for estimated operating, gathering, transportation,
marketing, capital and capital expenditure costs required for the production
and sale of such reserves, (b) appropriate adjustments shall be made for
hedging operations, 


 


23

















 


provided
that Swap Agreements with non-investment grade counterparties shall not be
taken into account to the extent that such Swap Agreements improve the position
of or otherwise benefit the Borrower or any of its Subsidiaries, (c) the
pricing assumptions used in determining Total Reserve Value for any particular
reserves shall be based upon the following price decks: (i) for natural
gas, the lesser of (A) 85% of Platts’ Inside FERC Gas Market Report —
index futures price for the nearest market index point and (B) $6.00/Mcf,
and (ii) for crude oil, the lesser of (A) 85% of West Texas
Intermediate crude oil from the New York Mercantile Exchange for Cushing,
Oklahoma futures price, and (B) $65.00/Bbl and (d) the cash-flows
derived from the pricing assumptions set forth in clauses (b) and (c) above
shall be further adjusted to account for heat content, gas shrinkage,
transportation costs, gathering and compression charges, Btu adjustments, basis
differentials and other historical adjustments, in each case, in a manner
acceptable to Agent and estimated on the basis of the information available to
Borrower; provided that for purposes of this calculation, Proved
Developed Reserves shall constitute not less than 60% of the Total Reserve
Value.


 


“Triggering Event”
means, as of any date of determination, the occurrence of an Event of Default.


 


“Unfunded Pension
Liability” shall mean, at any time, the aggregate amount, if any, of the
sum of (a) the amount by which the present value of all accrued benefits
under each Title IV Plan exceeds the fair market value of all assets of such
Title IV Plan allocable to such benefits in accordance with Title IV of ERISA,
all determined as of the most recent valuation date for each such Title IV Plan
using the actuarial assumptions for funding purposes in effect under such Title
IV Plan, and (b) for a period of five (5) years following a
transaction which might reasonably be expected to be covered by Section 4069
of ERISA, the liabilities (whether or not accrued) that could be avoided by any
Loan Party or any ERISA Affiliate as a result of such transaction.


 


“Underlying Issuer”
means a third Person which is the beneficiary of an L/C Undertaking and which
has issued a letter of credit at the request of the Issuing Lender for the
benefit of Borrower.


 


“Underlying Letter of
Credit” means a letter of credit that has been issued by an Underlying
Issuer.


 


“United States” means
the United States of America.


 


“Voidable Transfer”
has the meaning specified therefor in Section 18.8.


 


“Wells Fargo” means
Wells Fargo Bank, National Association, a national banking association.


 


“WFF” means Wells
Fargo Foothill, LLC, a Delaware limited liability company.


 


24

















 


Schedule 6.2


 


Collateral Reporting


 


Provide Agent (with copies for
each Lender) with each of the documents set forth below at the following times
in form satisfactory to Agent:


 


	
  Quarterly (as soon as
  possible and in any event not later than forty-five (45) days after end of
  each quarter)

  	
   

  	
  (a)      lease
  operating statements as historically reported by Parent on a consolidated
  basis, showing (i) the gross proceeds from the sale of Hydrocarbon
  products produced from any of the Oil and Gas Properties of Parent and its
  Subsidiaries, (ii) the quantity of Hydrocarbon products sold,
  (iii) the aggregate severance, ad valorem, conservation, gross
  production, or other production related taxes deducted from or paid out of
  the proceeds, and (iv) the lease operating expenses;

  
	
   

  	
   

  	
   

  
	
  On or before March 3
  and September 3 of each fiscal year of Borrower, pursuant to Sections6.20
  and 6.21

  	
   

  	
  (b)      subject
  to Section 6.20(a), (i) a Reserve Report, prepared by (A) in
  the case of the Reserve Report due March 1, Netherland,
  Sewell & Associates, Inc. or another qualified independent
  third party Petroleum Engineer reasonably acceptable to Agent, and
  (B) in the case of the Reserve Report due September 1, the chief
  engineer or chief operating officer of Borrower and its Subsidiaries, in each
  case in accordance with the procedures used in the Initial Reserve Report,
  and together with each such Reserve Report, a certificate of a Responsible
  Officer certifying as to the matters required under Section 6.20(c) and
  attaching such exhibits as are required by Section 6.20(c) and
  (ii) such title information in respect of the Oil and Gas Properties of
  Borrower and its Subsidiaries as is required by Section 6.21 in
  respect of at least eighty percent (80%) of the Total Reserve Value of the
  Proved Oil and Gas Properties evaluated by the Reserve Report described in
  clause (i);

  
	
   

  	
   

  	
   

  
	
  Promptly upon request by
  Agent

  	
   

  	
  (c)      notification
  of prepayment of Hydrocarbons by any customer of Borrower or any of its
  Subsidiaries, together with a reasonably detailed summary of the terms of
  such transaction, including, without limitation, the amount of such
  prepayment, the quantity of Hydrocarbons to be delivered, the delivery
  schedule of such Hydrocarbons and such other information as may be reasonably
  requested by Agent; 

   

  (d)      proof
  of payment of applicable Taxes, including Real Property, ad valorem
  and production Taxes; 

   

  (e)      such
  other reports as to the Collateral of Borrower or any of its Subsidiaries, as
  Agent may reasonably request; and

  
	
   

  	
   

  	
   

  
	
  within three
  (3) Business Days after the end of each week,

  	
   

  	
  (f)      a
  schedule, in form and substance acceptable to Agent and the Required Lenders,
  of the natural gas production from wells operated by the Loan Parties, (and
  to include the Loan Parties best available information and estimates of net
  production) during such week and such natural gas production projected to be
  produced as indicated in the “Total NG Volume (MMcf) Net/day” line item set
  forth in the Budget for such week, pro-rated for such week based on the
  Budget.

  



 


1

















 


Schedule 6.3


 


Financial Statements; Reports; Certificates


 


Deliver
to Agent, with copies to each Lender, each of the financial statements,
reports, or other items set forth set forth below at the following times in
form satisfactory to Agent:


 


	
  Monthly (as soon as
  possible and in any event within ten (10) days following receipt by
  Borrower of reports from swap counterparties)

  	
   

  	
  (a)      a
  report setting forth as of the last Business Day of such month, a summary of
  its hedging positions under all Swap Agreements (including commodity price
  swap agreements, forward agreements or contracts of sale which provide for
  prepayment for deferred shipment or delivery of Hydrocarbons of Parent or any
  of its Subsidiaries), including the type, term, effective date, termination
  date and notional principal amounts or volumes, the hedged price(s), interest
  rate(s) or exchange rate(s), as applicable, the net market to marked
  value thereof and any credit support agreements relating thereto (including
  any margin required or supplied), and the counterparty to each such
  agreement;

  
	
   

  	
   

  	
   

  
	
  as soon as available, but
  in any event within thirty (30) days after the end of each month during each
  of Borrower’s fiscal years

  	
   

  	
  (b)      report
  setting forth, on a consolidated basis, for the trailing twelve (12) months,
  the volume of production and sales attributable to production (and the prices
  at which such sales were made and the revenues derived from such sales) for
  each such calendar month from the Oil and Gas Properties, and setting forth
  the (i) aggregate related ad valorem, severance and production taxes,
  lease operating expenses, (ii) Capital Expenditures, and
  (iii) Total Debt attributable thereto and incurred for each such month
  presented; and 

   

  (c)      a
  summary aging, by vendor, of all accounts payable of Parent and its
  Subsidiaries and any book overdraft, including lease operating expenses and
  royalty payments, together with such other documentation as my reasonably be
  requested by Agent, to demonstrate that such royalty payments are being paid
  on a timely basis; 

   

  (d)      a
  Compliance Certificate;

  
	
   

  	
   

  	
   

  
	
  as soon as available, but
  in any event within thirty (30) days after the end of each of the first three
  quarters during each of Borrower’s fiscal years

  	
   

  	
  (e)      an
  unaudited consolidated balance sheet, income statement, and statement of cash
  flow covering the operations of Parent and its Subsidiaries during such
  quarterly period, and that portion of the fiscal year ending as of the close
  of such quarter and providing (i) a comparison to the corresponding
  period in the prior fiscal year, and (ii) a management report describing
  the performance of Parent and its Subsidiaries for such fiscal quarter and
  such period of the fiscal year then ended and explaining any variances between
  such results and the results for the comparable quarter and fiscal period in
  the prior year and the Projections delivered to Agent hereunder; provided,
  that so long as Borrower shall be a reporting company under the Securities
  Exchange Act of 1934, as amended, the requirement to provide the information
  required under clauses (i) and (ii) above shall be satisfied to the
  extent Borrower complies with the requirements pursuant to clause
  (i) below; and 

   

  (f)      a
  Compliance Certificate;

  



 


2

















 


	
  as soon as available, but
  in any event within ninety (90) days after the end of each of Borrower’s
  fiscal years

  	
   

  	
  (g)      consolidated
  financial statements of Parent and its Subsidiaries for each such fiscal
  year, audited by Hein & Associates LLP or another independent
  certified public accountants reasonably acceptable to Agent and certified,
  without any qualification or exception as to the scope of such audit, by such
  accountants to have been prepared in accordance with GAAP (such audited
  financial statements to include a balance sheet, income statement, and
  statement of cash flow and, if prepared, such accountants’ letter to
  management); and 

   

  (h)      a
  Compliance Certificate;

  
	
   

  	
   

  	
   

  
	
  within fifteen (15) days
  prior to the start of each of Borrower’s fiscal years,

  	
   

  	
  (i)       [intentionally
  Omitted]

  
	
   

  	
   

  	
   

  
	
  if and when filed by
  Parent (or the Borrower, as applicable), notice of any of the following,

  	
   

  	
  (j)       Form 10-Q
  quarterly reports, Form 10-K annual reports, and Form 8-K current
  reports; 

   

  (k)      any
  other material public filings made by Parent or the Borrower, as applicable,
  with the SEC or any corresponding Canadian or provincial Governmental
  Authority to the extent not duplicative of SEC filings; 

   

  (l)      any
  other information that is provided by Parent to its shareholders generally;

  
	
   

  	
   

  	
   

  
	
  promptly, but in any event
  within five (5) days after any Loan Party has knowledge of (i) any
  event or condition that constitutes a Default or an Event of Default, and
  (ii) any termination or cancellation of any Material Contract that could
  reasonably be expected to result in a Material Adverse Change, in each case,
  that does not otherwise constitute a Default or an Event of Default,

  	
   

  	
  (m)    notice
  of such event or condition and a statement of the curative action that such
  Loan Party proposes to take with respect thereto;

  
	
   

  	
   

  	
   

  
	
  promptly after the
  commencement thereof, but in any event within five (5) days after the
  service of process with respect thereto on any Loan Party,

  	
   

  	
  (n)      notice of all
  actions, suits, or proceedings brought by or against Parent or any of its
  Subsidiaries before any Governmental Authority in which the party bringing
  such action, suit or proceeding seeks damages in excess of Two Hundred Fifty
  Thousand Dollars ($250,000) or seeks injunctive relief or alleges any
  violation of any Environmental Law or seeks remedies in connection with any
  Environmental Liabilities;

  



 


3

















 


	
  promptly upon the request
  of Agent,

  	
   

  	
  (o)      copies
  of all management letters, exception reports or similar reports or letters
  received by Parent and its Subsidiaries from its independent certified public
  accountants in connection with the preparation or filing of Form 10-Q
  quarterly reports and Form 10-K annual reports or similar reports in
  connection with the Parent being a Canadian public company; 

   

  (p)      copies
  of any material notice or other correspondence sent to, or received from, any
  Governmental Authority related to the Oil and Gas Properties of Parent or any
  of its Subsidiaries, including, without limitation, notice of any new
  plugging and abandonment or other performance or other assurance bond
  requirements related to such Oil and Gas Properties; 

   

  (q)      copies
  of any material notices or notices of default that Parent or any of its
  Subsidiaries receives from or sends to any person in connection with any
  Material Contract;

  
	
   

  	
   

  	
   

  
	
  contemporaneously with the
  delivery of each Compliance Certificate pursuant to the Credit Agreement,

  	
   

  	
  (r)      any
  amendments or modifications, waivers or other changes to any Material
  Contract;

  
	
   

  	
   

  	
   

  
	
  on Tuesday of each week,

  	
   

  	
  (s)      a
  written and oral report by the Chief Executive Officer or the Chief Financial
  Officer and the Consultant of Borrower setting forth a summary detail
  reasonably satisfactory to the Lenders of the status of (including, but not
  limited to) the sale or disposition of the Oil and Gas Properties located in
  the “Powder River Basin” and “Fayetteville”, the status of vendors,
  production, work conducted by the investment banking advisory firm, and any
  other information the Agent or any Lender may reasonably request from time to
  time;

  
	
   

  	
   

  	
   

  
	
  on or about the 5th day of
  each week

  	
   

  	
  (t)      a
  Budget for the next succeeding 13-week period, prepared on a weekly basis and
  otherwise in form and substance satisfactory to the Agent and the Required
  Lenders, which Budget, when delivered and as so updated, shall be
  (A) consistent with the Budget delivered to the Agent on or prior to the
  Interim Facility Effective Date, (B) believed by the Borrower at the
  time furnished to be reasonable, (C) prepared on a reasonable basis and
  in good faith, and (D) based on assumptions believed by the Borrower to
  be reasonable at the time made and upon the best information then reasonably
  available to the Borrower, and shall be accompanied by a certificate of the
  chief financial officer of the Borrower and an authorized officer of the
  Consultant, certifying as to the matters set forth in subclauses (A), (B),
  (C) and (D) above;

  
	
   

  	
   

  	
   

  
	
  within three
  (3) Business Days after the end of each week,

  	
   

  	
  (u)      a
  reconciliation, in form and substance acceptable to the Agent and the
  Required Lenders, of the actual cash collections and disbursements of the
  Loan Parties for such week to the budgeted line item amounts set forth in the
  Budget for such week;

  
	
   

  	
   

  	
   

  
	
  promptly after the filing
  thereof,

  	
   

  	
  (v)      copies
  of all pleadings, motions, applications, financial information and other
  papers and documents filed by Parent or any Loan Party in the Chapter 11 Cases,
  which papers and documents shall also be given or served on Agent’s counsel;

  



 


4

















 


	
  promptly after the sending
  thereof,

  	
   

  	
  (w)      copies
  of all written reports given by Parent or any Loan Party to any official or
  unofficial creditors’ committee in the Chapter 11 Cases, other than any such
  reports subject to privilege, provided that such Person may redact any
  confidential information contained in any such report if it provides a
  summary of the nature of the information redacted;

  
	
   

  	
   

  	
   

  
	
  upon the request of Agent
  or any Lender,

  	
   

  	
  (x)      any
  other information reasonably requested relating to the financial condition of
  Parent or any of its Subsidiaries; and

  
	
   

  	
   

  	
   

  
	
  Promptly upon the
  occurrence thereof

  	
   

  	
  (y)      copies
  of invoices constituting Priority Professional Expenses upon receipt, notice
  approved by the Bankruptcy Court to pay such invoices upon approval and the
  payment of such invoices upon payment.

  



 


5