exv10w1



 





 



AMENDED AND RESTATED

CREDIT AGREEMENT


dated as of December 20, 2005


among


NEG OPERATING LLC

as the Borrower,


AREP OIL & GAS LLC,

as the Lender,


AREP OIL & GAS LLC,

as Administrative Agent for the Lender


and


CITICORP USA, INC,

as Collateral Agent for the Lender and the Hedging Counterparties


 




 




 









 








AMENDED AND RESTATED CREDIT AGREEMENT




     THIS AMENDED AND RESTATED CREDIT AGREEMENT, dated as of December 20, 2005, is among NEG
OPERATING LLC, a Delaware limited liability company (the “Borrower”), AREP Oil & Gas LLC, a
Delaware limited liability company (“AREP O&G” and the “Lender”), AREP O&G, as administrative agent
for the Lenders, successor to MIZUHO CORPORATE BANK, LTD. (in such capacity together with any
successors thereto, the “Administrative Agent”), and CITICORP USA, INC., as collateral agent for
the Lenders and Hedging Counterparties, successor to BANK OF TEXAS, N.A. (in such capacity together
with any successors thereto, the “Collateral Agent”).



W I T N E S S E T H:




     WHEREAS, the Borrower entered into a Credit Agreement dated as of December 29, 2003 with,
among others, Mizuho Corporate Bank, Ltd., as Administrative Agent for the Lenders, Bank of Texas,
N.A. and The Bank of Nova Scotia, as co-agents for the Lenders and Bank of Texas as Collateral
Agent for the Lenders (the “Original Credit Agreement”).



     WHEREAS, on or prior to the Closing Date, with the consent of Borrower, each Lender under the
Original Credit Agreement has assigned all of its respective rights and obligations under the
Original Credit Agreement and the other Loan Documents to AREP Oil & Gas LLC (“AREP”), as lender
and AREP has assumed all such rights and obligations.



     WHEREAS, on or prior to the Closing Date, with the consent of AREP as the sole Lender, Mizuho
Corporate Bank, Ltd., has assigned all of its rights and obligations as administrative agent under
the Original Credit Agreement and the other Loan Documents to the Administrative Agent, and the
Administrative Agent has assumed all such rights and obligations.



     WHEREAS, on or prior to the Closing Date, with the consent of AREP as the sole Lender, Bank of
Texas, N.A., has assigned all of its Liens, rights and remedies as collateral agent under the
Original Credit Agreement and the other Loan Documents to the Collateral Agent, and the Collateral
Agent has accepted all such Liens, rights and remedies.



     WHEREAS, the Borrower, the Lender, the Administrative Agent and the Collateral Agent desire to
restated and amend the Original Credit Agreement in its entirety on the terms and conditions
hereof.



     WHEREAS, the Lender is willing to provide such Loans and other financial accommodations to the
Borrower on the terms and conditions hereof.



     NOW, THEREFORE, the parties hereto agree as follows:



 









 





ARTICLE I




DEFINITIONS




     SECTION 1.1. Defined Terms. The following terms (whether or not underscored) when
used in this Agreement, including its preamble and recitals, shall, except where the context
otherwise requires, have the following meanings:



     “Adjusted Base Rate” means, on any day, the Base Rate for such day plus the Applicable Margin
for Base Rate Loans for such day, provided that the Adjusted Base Rate charged by any Person shall
never exceed the Highest Lawful Rate.



     “Adjusted Eurodollar Rate” means, for any Eurodollar Loan for any day during any Interest
Period therefor, the rate per annum equal to the sum of (a) the Applicable Margin for Eurodollar
Loans for such day plus (b) the rate per annum (rounded upwards, if necessary, to the nearest 1/100
of 1%) determined by Collateral Agent to be equal to the quotient obtained by dividing (i) the
Eurodollar Rate for such Eurodollar Loan for such Interest Period by (ii) 1 minus the Reserve
Requirement for such Eurodollar Loan for such Interest Period, provided that no Adjusted Eurodollar
Rate charged by any Person shall ever exceed the Highest Lawful Rate. The Adjusted Eurodollar Rate
for any Eurodollar Loan shall change whenever the Eurodollar Margin or the Reserve Requirement
changes.



     “Administrative Agent” means AREP O&G in its capacity as administrative agent hereunder, and
includes each other Person as shall have subsequently been appointed as the successor
Administrative Agent pursuant to Section 9.4.



     “Affiliate” of any Person means any other Person that, directly or indirectly, controls, is
controlled by or is under common control with, such Person (excluding any trustee under, or any
committee with responsibility for administering, any Plan). A Person shall be deemed to be
“controlled by” any other Person if such other Person possesses, directly or indirectly, power (a)
to vote ten percent (10%) or more of the Equity Interests (on a fully diluted basis) having
ordinary voting power for the election of directors or managing general partners; or (b) to direct
or cause the direction of the management and policies of such Person whether by contract or
otherwise.



     “Affirmation of Obligations” mean an affirmation by each Obligor as to all of its obligations
under each Loan Document executed by it prior to the Closing Date, which shall include the
acknowledgement and agreement of each Obligor that all Security Documents at any time executed by
such Obligor shall be deemed to be for the benefit of each Secured Party.



     “Agents” means each of the Administrative Agent and the Collateral Agent.



     “Agreement” means this Amended and Restated Credit Agreement, as it may be further amended,
supplemented, restated or otherwise modified and in effect from time to time.



     “Applicable Margin” means, on any date, with respect to any Eurodollar Loans or Base Rate
Loans then outstanding or payable hereunder, as applicable, the applicable per annum



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percentage set forth below under the caption “Eurodollar Loans,” or “Base Rate Loans” as the
case may be, based on the Borrowing Base Utilization on such date:



	 	 	 	 	 	 	 	 	 
	Borrowing Base	 	Eurodollar Loans	 	Base Rate Loans
	Utilization	 	(in basis points)	 	(in basis points)
	< 33%
	 	 	175.0	 	 	 	75.0	 
	> 33% and < 66%
	 	 	200.0	 	 	 	100.0	 
	> 66% and < 85%
	 	 	225.0	 	 	 	125.0	 
	> 85%
	 	 	250.0	 	 	 	150.0	 






     For purposes of the foregoing, any change in the Applicable Margin will occur automatically
without prior notice upon any change in the Borrowing Base Utilization, and each change in the
Applicable Margin shall apply during the period commencing on the effective date of such change and
ending on the date immediately preceding the effective date of the next such change,
provided, however, that for so long as the rights of Lender under this Agreement
are pledged to the AREP Agent: (a) the Applicable Margin from time to time in effect under this
Agreement with respect to Eurodollar Loans will be the lower of (i) the Applicable Margin as set
out above for Eurodollar Loans and (ii) the “Eurodollar Margin” in effect at such time under the
AREP O&G Facility and (b) the Applicable Margin from time to time in effect under this Agreement
with respect to Base Rate Loans will be the lower of (i) the Applicable Margin as set out above for
Base Rate Loans and (ii) the “Base Rate Margin” in effect at such time under the AREP O&G Facility.



     “AREP Agent” means the “Administrative Agent” as defined in the AREP O&G Facility.



     “AREP Lender” means any “Lender” as defined in the AREP O&G Facility.



     “AREP O&G” is defined in the preamble.



     “AREP O&G Facility” means the Credit Agreement dated as of the Closing Date by and among AREP
O&G, as borrower, Citicorp USA, Inc., as administrative agent, and the other lenders and financial
institutions from time to time party thereto.



     “Authorized Officer” means, (a) as to the Borrower, the Borrower’s sole member, or any other
Obligor, those of its officers, managing members or managing partners whose signatures and
incumbency shall have been certified to the Agents pursuant to Section 5.1.2, and (b) as to
Borrower, in respect of the execution and delivery, on behalf of Borrower, of Borrowing Requests or
Continuation/Conversion Notices, any two of Randall D. Cooley, Philip D. Devlin, or Bob G.
Alexander.



     “Base Rate” means, for any period, a fluctuating interest rate per annum as shall be in effect
from time to time, which rate per annum shall be equal at all times to the highest of the
following:



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     (a) the rate of interest announced publicly by Collateral Agent in New York, New York, from
time to time, as Collateral Agent’s base rate;



     (b) the sum (adjusted to the nearest 0.25% or, if there is no nearest 0.25%, to the next
higher 0.25%) of (i) 0.5% per annum, (ii) the rate per annum obtained by dividing (A) the latest
three week moving average of secondary market morning offering rates in the United States for three
month certificates of deposit of major United States money market banks, such three week moving
average being determined weekly on each Monday (or, if any such day is not a Business Day, on the
next succeeding Business Day) for the three week period ending on the previous Friday by Collateral
Agent on the basis of such rates reported by certificate of deposit dealers to and published by the
Federal Reserve Bank of New York or, if such publication shall be suspended or terminated, on the
basis of quotations for such rates received by Collateral Agent from three New York certificate of
deposit dealers of recognized standing selected by Collateral Agent, by (B) a percentage equal to
100% minus the average of the daily percentages specified during such three week period by the
Federal Reserve Board for determining the maximum reserve requirement (including any emergency,
supplemental or other marginal reserve requirement) for Collateral Agent in respect of liabilities
consisting of or including (among other liabilities) three month U.S. dollar nonpersonal time
deposits in the United States and (iii) the average during such three week period of the maximum
annual assessment rates estimated by Collateral Agent for determining the then current annual
assessment payable by Collateral Agent to the Federal Deposit Insurance Corporation (or any
successor) for insuring Dollar deposits in the United States; and



     (c) 0.5% per annum plus the Federal Funds Rate.



     “Base Rate Loan” means a Loan bearing interest at a fluctuating rate determined by reference
to the Adjusted Base Rate.



     “Borrower” is defined in the preamble.



     “Borrowing” means each extension of credit made by the Lenders by way of Loans of the same
type, having the same Interest Period made, converted or continued by the same Lenders on the same
Business Day pursuant to the same Borrowing Request.



     “Borrowing Base” means $180,000,000.



     “Borrowing Base Utilization” means, at any time of determination, an amount (expressed as a
percentage) equal to the quotient of (a) the total principal amount of all outstanding Loans,
divided by (b) the Borrowing Base then in effect.



     “Borrowing Request” means a written request by an Authorized Officer of the Borrower for a
Borrowing in accordance with Section 5.2.2, substantially in the form of Exhibit A
hereto.



     “Business Day” means (a) any day that is neither a Saturday or Sunday nor a legal holiday on
which banks are authorized or required to be closed in New York, New York, London, England, or
Houston, Texas; and (b) relative to the making, continuing, prepaying or repaying of any Eurodollar
Loans, any day on which dealings in Dollars are carried on in the New York interbank market.



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     “Capitalized Lease Liabilities” means all monetary obligations of the Borrower or any of its
Subsidiaries under any leasing or similar arrangement which, in accordance with GAAP, would be
classified as capitalized leases, and, for purposes of this Agreement and each other Loan Document,
the amount of such obligations shall be the capitalized amount thereof, determined in accordance
with GAAP, and the stated maturity thereof shall be the date of the last payment of rent or any
other amount due under such lease prior to the first date upon which such lease may be terminated
by the lessee without payment of a penalty.



     “Cash Equivalent Investment” means, at any time: (a) any evidence of Indebtedness, maturing
not more than one year after such time, issued or guaranteed by the United States Government; (b)
commercial paper, maturing not more than nine (9) months from the date of issue, which is issued by
(i) a corporation (other than an Affiliate of the Borrower or any other Obligor) organized under
the laws of any state of the United States or of the District of Columbia and rated A-l by Standard
& Poor’s Corporation or P-l by Moody’s Investors Service, Inc., or (ii) any AREP Lender (or its
holding company); (c) any certificate of deposit or bankers acceptance, maturing not more than one
year after such time, which is issued by either (i) a commercial banking institution that is a
member of the Federal Reserve System and has a combined capital and surplus and undivided profits
of not less than $500,000,000, or (ii) any AREP Lender; or (d) any repurchase agreement entered
into with any AREP Lender (or other commercial banking institution of the stature referred to in
clause (c)(i)) which (i) is secured by a fully perfected security interest in any
obligation of the type described in any of clauses (a) through (c); and (ii) has a
market value at the time such repurchase agreement is entered into of not less than 100% of the
repurchase obligation of such AREP Lender (or other commercial banking institution) thereunder.



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



     “CERCLIS” means the Comprehensive Environmental Response Compensation Liability Information
System List.



     “Change in Control” means the occurrence of any of the following events at any time:



     (a) NEG Holding shall cease to own 100% of the issued and outstanding Equity Interests of the
Borrower;



     (b) any Person or “group” (within the meaning of Section 13(d) or 14(d) of the Exchange Act)
(other than NEG or any Persons(s) the issued and outstanding Equity Interests of which are directly
or indirectly 100% owned by Carl Icahn and his Affiliates, individually or collectively) shall
obtain the power (whether or not exercised) to elect the Borrower’s managing member;



     (c) NEG Holding shall cease being the managing member of the Borrower;




     (d) a plan is adopted relating to the liquidation or dissolution of any of the Borrower, Shana
National, NEG Holding or NEG;



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     (e) the Borrower shall consolidate with or merge into any other Person or convey, transfer or
lease substantially all of its Properties to any Person, or (other than as permitted by Section
7.2.8) any other Person shall consolidate with or merge into the Borrower;



     (f) NEG or any Person(s) the issued and outstanding Equity Interests of which are directly or
indirectly 100% owned by Carl Icahn and his Affiliates, individually or collectively, shall cease
to own 100% of the Equity Interests of NEG Holding;



     (g) Carl Icahn and his Affiliates shall cease to own at least forty percent (40%) of the
Equity Interests of NEG; and



     (h) except as permitted by Section 7.2.8, the Borrower shall cease to own, directly or
indirectly, 100% of the Equity Interests of any Subsidiary.



     “Closing Date” means the date on which all of the conditions precedent set forth in Article V
have been satisfied or waived in accordance with the terms hereof.



     “Code” means the Internal Revenue Code of 1986, as amended, reformed or otherwise modified
from time to time.



     “Collateral” means any and all “Collateral” or “Mortgaged Property,” as defined in any of the
Security Documents.



     “Collateral Agent” means Citicorp USA, Inc., in its capacity as holder of the Liens securing
the Obligations, and includes each other Person as shall have subsequently been appointed as the
successor Collateral Agent pursuant to Section 9.4.



     “Commitment” means, with respect to each Lender, the commitment of such Lender to make Loans
hereunder, expressed as an amount representing the maximum aggregate amount of such Lender’s Loans,
as such commitment may be reduced, increased or terminated in accordance herewith. The initial
amount of each Lender’s Commitment is set forth on Schedule 2.1. The term “Commitments”
means the aggregate Commitments of the Lenders hereunder. The aggregate amount of the Commitments
of all Lenders on the Closing Date is $180,000,000.



     “Commitment Termination Event” means (a) the occurrence of any Default described in
clauses (a) through (d) of Section 8.1.8 with respect to the Borrower, any
of its Subsidiaries or any other Obligor; or (b) the occurrence and continuance of any other Event
of Default and either (i) the declaration of the Loans to be due and payable pursuant to
Section 8.3, or (ii) in the absence of such declaration, the giving of notice by the
Administrative Agent, acting at the direction of the Lenders, to the Borrower that the Commitments
have been terminated.



     “Consolidated Current Assets” means, at any particular time, (i) all amounts that, in
conformity with GAAP, would be included as current assets on a consolidated balance sheet of the
Borrower and its Consolidated Subsidiaries (provided, however, that current assets shall not
include non-cash assets described in, and calculated pursuant to, FASB 133, 142, 143 and 144) plus
(ii) Unused Availability.



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     “Consolidated Current Liabilities” means, at any particular time, all amounts that, in
conformity with GAAP, would be included as current liabilities on a consolidated balance sheet of
the Borrower and its Consolidated Subsidiaries; provided, however, that current liabilities shall
not include (i) the current portion of long-term Indebtedness under this Agreement and the other
Loan Documents and (ii) liabilities described in, and calculated pursuant to, FASB 133, 142, 143
and 144.



     “Consolidated Net Income” means with respect to the Borrower and its Consolidated
Subsidiaries, for any period, the aggregate of the net income (or loss) of the Borrower and its
Consolidated Subsidiaries for such period, determined on a consolidated basis in accordance with
GAAP; provided that there shall be excluded from such net income (to the extent otherwise included
therein) the following: (i) the net income of any Person in which the Borrower or any Consolidated
Subsidiary has an interest (which interest does not cause the net income of such other Person to be
consolidated with the net income of the Borrower and its Consolidated Subsidiaries in accordance
with GAAP), except to the extent of the amount of dividends or distributions actually paid in such
period by such other Person to the Borrower or to a Consolidated Subsidiary, as the case may be,
(ii) the net income (but not loss) of any Consolidated Subsidiary to the extent that the
declaration or payment of dividends or similar distributions or transfers or loans by that
Consolidated Subsidiary is not at the time permitted by operation of the terms of its Organic
Documents or any agreement, instrument or Governmental Rule applicable to such Consolidated
Subsidiary, or is otherwise restricted or prohibited (other than under restrictions or prohibitions
that the Borrower or a Wholly-Owned Subsidiary of the Borrower may waive, in its sole discretion),
in each case determined in accordance with GAAP, (iii) any extraordinary gains or losses, (iv) the
cumulative effect of a change in accounting principles, (v) any gains or losses attributable to
writeups or write downs of assets; and (vi) non-cash gains and losses, including, without
limitation, FASB 133, 142, 143 and 144 non-cash gains and losses.



     “Consolidated Subsidiaries” means each Subsidiary of the Borrower (whether now existing or
hereafter created or acquired) the financial statements of which shall be (or should have been)
consolidated with the financial statements of the Borrower in accordance with GAAP. Unless
otherwise indicated, each reference to the term “Consolidated Subsidiary” means a Subsidiary
consolidated with the Borrower.



     “Contingent Liability” means any agreement, undertaking or arrangement by which any Person
guarantees, endorses or otherwise becomes or is contingently liable upon (by direct or indirect
agreement, contingent or otherwise, to provide funds for payment, to supply funds to, or otherwise
to invest in, a debtor, or otherwise to assure a creditor against loss) the indebtedness,
obligation or any other liability of any other Person (other than by endorsements of instruments in
the course of collection), or guarantees the payment of dividends or other distributions upon the
shares of any other Person. The amount of any Person’s obligation under any Contingent Liability
shall (subject to any limitation set forth therein) be deemed to be the outstanding principal
amount (or maximum principal amount, if larger) of the debt, obligation or other liability
guaranteed thereby.



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     “Continuation/Conversion Notice” means a notice of continuation or conversion and certificate
duly executed by an Authorized Officer of the Borrower, substantially in the form of Exhibit
B hereto.



     “Controlled Group” means all members of a controlled group of corporations and all members of
a controlled group of trades or businesses (whether or not incorporated) under common control
which, together with the Borrower, are treated as a single employer under Section 414(b) or 414(c)
of the Code or Section 4001 of ERISA.



     “Current Ratio” means, at any date of determination, the ratio of (a) Consolidated Current
Assets to (b) Consolidated Current Liabilities.



     “Default” means any Event of Default or any condition, occurrence or event which, after notice
or lapse of time or both, would constitute an Event of Default.



     “Disclosure Schedule” means the Disclosure Schedule attached hereto as Schedule I, as
it may be amended, supplemented or otherwise modified from time to time by the Borrower with the
written consent of the Agents.



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



     “EBITDA” means, for any period of determination thereof, the sum, without duplication, of the
amounts for such period of Consolidated Net Income plus Total Interest Expense, plus depreciation,
depletion and amortization expense, plus federal and state income taxes, and plus other non-cash
charges and expenses deducted from revenues in determining net income.



     “Effective Date” means the date the Original Credit Agreement became effective.



     “Environmental Laws” means all applicable federal, state or local Governmental Rules
pertaining to health or the environment in effect in any and all jurisdictions in which the
Borrower or any Subsidiary or other Obligor is conducting or at any time has conducted business, or
where any Property of the Borrower or any Subsidiary or other Obligor is located, including,
without limitation, OPA, the Clean Air Act, as amended, CERCLA, the Federal Water Pollution Control
Act, as amended, the Occupational Safety and Health Act of 1970, as amended, the Resource
Conservation and Recovery Act of 1976, as amended (“RCRA”), the Safe Drinking Water Act, as
amended, the Toxic Substances Control Act, as amended, the Superfund Amendments and Reauthorization
Act of 1986, as amended, the Hazardous Materials Transportation Act, as amended, and other
environmental conservation or protection laws. The term “oil” shall have the meaning specified in
OPA, the term “release” (or “threatened release”) shall have the meaning specified in CERCLA, and
the term “disposal” (or “disposed”) shall have the meaning specified in RCRA; provided, however,
that (a) in the event either OPA, CERCLA or RCRA is amended so as to broaden the meaning of any
term defined thereby, such broader meaning shall apply subsequent to the effective date of such
amendment and (b) to the extent the laws of the state in which any Property of the Borrower or any
Subsidiary or any other Obligor is located establish a meaning for “oil,” “release,” or “disposal”
that is broader than that specified in either OPA, CERCLA or RCRA, such broader meaning shall
apply.



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



     “Equity Interests” means shares of the capital stock, partnership interests, membership
interest in a limited liability company, beneficial interests in a trust or other equity interests
in the Borrower or any Subsidiary (unless the context requires otherwise) or any warrants, options
or other rights to acquire such interests.



     “ERISA” means the Employee Retirement Income Security Act of 1974, as amended, and any
successor statute of similar import, together with the regulations thereunder, in each case as in
effect from time to time. References to sections of ERISA also refer to any successor sections.



     “ERISA Affiliate” means each Obligor and all members of a controlled group of corporations and
all trades or businesses (whether or not incorporated) under common control that, together with
such Obligor, are treated as a single employer under Section 414 of the Internal Revenue Code.



     “ERISA Plan” means any employee pension benefit plan subject to Title IV of ERISA maintained
by any ERISA Affiliate with respect to which any Obligor has a fixed or contingent liability.



     “Eurodollar Loan” means a Loan that bears interest at the Adjusted Eurodollar Rate.



     “Eurodollar Rate” means, with respect to any Interest Period for any Eurodollar Loan within a
Borrowing and with respect to the related Interest Period therefor, the rate of interest determined
by the Collateral Agent to be the rate per annum at which deposits in Dollars are offered by the
principal office of Collateral Agent in London to major banks in the London interbank market at
11:00 a.m. (London time) two Business Days before the first day of such Interest Period in the
amount of $1,000,000 for a period equal to such Interest Period.



     “Event of Default” is defined in Section 8.1.



     “Exchange Act” means the Securities Exchange Act of 1934, as amended, or any successor
provision thereto.



     “Federal Funds Rate” means, for any day, the rate per annum (rounded upwards, if necessary, to
the nearest 1/100th of one percent) equal to the weighted average of the rates on overnight Federal
funds transactions with members of the Federal Reserve System arranged by Federal funds brokers on
such day, as published by the Federal Reserve Bank of Bank of New York on the Business Day next
succeeding such day, provided that (a) if the day for which such rate is to be determined is not a
Business Day, the Federal Funds Rate for such day shall be such



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rate on such transactions on the next preceding Business Day as so published on the next
succeeding Business Day, and (b) if such rate is not so published for any day, the Federal Funds
Rate for such day shall be the average rate quoted to Collateral Agent on such day on such
transactions as determined by Collateral Agent.



     “Fiscal Quarter” means any calendar quarter of a Fiscal Year.



     “Fiscal Year” means any period of twelve (12) consecutive calendar months ending on December
31; references to a Fiscal Year with a number corresponding to any calendar year (e.g. the
“2003 Fiscal Year”) refer to the Fiscal Year ending on the December 31 occurring during such
calendar year.



     “F.R.S. Board” means the Board of Governors of the Federal Reserve System or any successor
thereto.



     “GAAP” means generally accepted accounting principles in the United States of America.



     “Governmental Approval” means (a) any authorization, consent, approval, license, ruling,
permit, tariff, rate, certification, waiver, exemption, filing, variance, claim, order, judgment or
decree of, or with, (b) any required notice to, (c) any declaration of or with, or (d) any
registration by or with, any Governmental Authority.



     “Governmental Authority” means the government of the United States or any other nation or
country or any political subdivision thereof, whether state or local, and any agency, authority,
instrumentality, regulatory body, court, central bank or other entity exercising executive,
legislative, judicial, taxing, regulatory or administrative powers or functions of or pertaining to
government.



     “Governmental Rule” means any statute, law, regulation, ordinance, rule, judgment, order,
decree, permit, concession, grant, franchise, license, agreement, directive, requirement of, or
other governmental restriction or any similar binding form of decision of or determination by, or
any binding interpretation or administration of any of the foregoing by, any Governmental
Authority, whether now or hereafter in effect.



     “Guarantor” means NEG Holding and each Subsidiary of the Borrower, each individually a
Guarantor and collectively, the “Guarantors.”



     “Guaranty” means, collectively, (i) the NEG Holding Guaranty, (ii) each Subsidiary Guaranty
and (iii) each and every Guaranty executed and delivered by a Guarantor hereunder.



     “Hazardous Material” means (a) any “hazardous substance,” as defined by CERCLA (other than as
set forth in clause (c)); (b) any “hazardous waste,” as defined by the RCRA (other than as set
forth in clause (c)); (c) any petroleum, petroleum products or petroleum distillates and associated
oil or natural gas exploration, production and development wastes that are not exempted or excluded
from being defined as “hazardous substances”, “hazardous materials”, “hazardous wastes” and “toxic
substances” under any Environmental Laws; or (d) any pollutant or contaminant or hazardous,
dangerous or toxic chemical, material or substance within the



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meaning of any other applicable federal, state or local law, regulation, ordinance or
requirement (including consent decrees and administrative orders) relating to or imposing liability
or standards of conduct concerning any hazardous, toxic or dangerous waste, substance or material,
all as amended or hereafter amended.



     “Hedging Agreements” means any commodity, interest rate or currency swap, cap, floor, collar,
forward agreement or other exchange or protection agreements or any option with respect to any such
transaction.



     “Hedging Counterparty” means any AREP Lender and any Affiliate of an AREP Lender that is a
counterparty to any Hedging Agreement with Borrower, provided that if such counterparty ceases to
be an AREP Lender or an Affiliate of an AREP Lender, such counterparty shall continue to be a
Hedging Counterparty for the purposes hereof only to the extent of Hedging Obligations arising from
transactions entered prior to the time such counterparty ceases to be an AREP Lender or an
Affiliate of an AREP Lender.



     “Hedging Obligations” means, with respect to any Person, all liabilities (including but not
limited to obligations and liabilities arising in connection with or as a result of early or
premature termination of a Hedging Agreement, whether or not occurring as a result of a default
thereunder) of such Person under a Hedging Agreement.



     “Highest Lawful Rate” is defined in Section 4.11.



     “Hydrocarbon Interests” means all rights, titles, interests and estates now owned or hereafter
acquired by the Borrower or any of its Subsidiaries in any and all oil, gas and other liquid or
gaseous hydrocarbon properties and interests, including without limitation, mineral fee or lease
interests, production sharing agreements, concession agreements, license agreements, service
agreements, risk service agreements or similar Hydrocarbons interests granted by an appropriate
Governmental Authority, farmout, overriding royalty and royalty interests, net profit interests,
oil payments, production payment interests and similar interests in Hydrocarbons, including any
reserved or residual interests of whatever nature.



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



     “including” means including without limiting the generality of any description preceding such
term. For purposes of this Agreement and each other Loan Document, the parties hereto agree that
the rule of ejusdem generis shall not be applicable to limit a general statement,
which is followed by or referable to an enumeration of specific matters, to matters similar to the
matters specifically mentioned.



     “Indebtedness” of any Person means, without duplication: (a) all obligations of such Person
for borrowed money and all obligations of such Person evidenced by bonds, debentures, notes or
other similar instruments; (b) all obligations, contingent or otherwise, relative to the face
amount of all letters of credit, whether or not drawn, and banker’s acceptances issued for the



11









 







account of such Person; (c) all obligations of such Person as lessee under leases which have
been or should be, in accordance with GAAP, recorded as Capitalized Lease Liabilities; (d) all
other items which, in accordance with GAAP, would be included as liabilities on the liability side
of the balance sheet of such Person as of the date at which Indebtedness is to be determined; (e)
whether or not so included as liabilities in accordance with GAAP, all obligations of such Person
to pay the deferred purchase price of Property or services, and indebtedness (excluding prepaid
interest thereon) secured by a Lien on Property owned or being purchased by such Person (including
indebtedness arising under conditional sales or other title retention agreements), whether or not
such indebtedness shall have been assumed by such Person or is limited in recourse; (f) whether or
not so included as liabilities in accordance with GAAP, all obligations of such Person under any
“off balance sheet” transactions, synthetic leases or operating leases; and (g) all Contingent
Liabilities of such Person with respect to any of the foregoing. For all purposes of this
Agreement, the Indebtedness of any Person shall include the Indebtedness of any partnership or
joint venture in which such Person is a general partner or a joint venturer.



     “Indemnified Liabilities” is defined in Section 10.4.



     “Indemnified Parties” is defined in Section 10.4.



     “Interest Period” means, relative to any Eurodollar Loans, the period beginning on (and
including) the date on which such Eurodollar Loan is made or continued as, or converted into, a
Eurodollar Loan pursuant to Section 2.3 or 2.4 and shall end on (but exclude) the
day which numerically corresponds to such date one, two or three months thereafter (or, if such
month has no numerically corresponding day, on the last Business Day of such month), in either case
as the Borrower may select in its relevant notice pursuant to Section 2.3 or 2.4;
provided, however, that (a) the Borrower shall not be permitted to select Interest Periods to be in
effect at any one time which have expiration dates occurring on more than five (5) different dates;
(b) Interest Periods commencing on the same date for Loans comprising part of the same Borrowing
shall be of the same duration; (c) if such Interest Period would otherwise end on a day which is
not a Business Day, such Interest Period shall end on the next following Business Day (unless such
next following Business Day is the first Business Day of a calendar month, in which case such
Interest Period shall end on the Business Day next preceding such numerically corresponding day);
and (d) no Interest Period may end later than the date set forth in clause (a) of the
definition of “Revolving Credit Termination Date”.



     “Investment” means, relative to any Person, (a) the making of any deposit with, or advance,
loan or extension of credit by such Person to any other Person (including the purchase of Property
from another Person subject to an understanding or agreement, contingent or otherwise, to resell
such Property to such Person, but excluding commission, travel and similar advances to officers and
employees made in the ordinary course of business); (b) any Contingent Liability of such Person;
and (c) any acquisition (whether for cash, property, services, securities or otherwise) of Equity
Interests of any other Person or any agreement to make any such acquisition (including, without
limitation, any “short sale” or any sale of any securities at a time when such securities are not
owned by the Person entering into such short sale). The amount of any Investment shall be the
original principal or capital amount thereof less all returns of principal or equity thereon (and
without adjustment by reason of the financial condition of such



12









 







other Person) and shall, if made by
the transfer or exchange of property other than cash, be
deemed to have been made in an original principal or capital amount equal to the fair market
value of such property.



     “Lender” is defined in the preamble, and “Lenders” means the Lender and its permitted
successors and assigns hereunder who, at the time in question, are the holders of any of the Loans.



     “Lien” means any interest in Property securing an obligation owed to, or a claim by, a Person
other than the owner of the Property, whether such interest is based on the common law, statute or
contract, and whether such obligation or claim is fixed or contingent, and including but not
limited to (i) the lien, charge or security interest arising from a mortgage, encumbrance, pledge,
security agreement, conditional sale or trust receipt or a lease, consignment, bailment or margin
account for security purposes or (ii) production payments and the like which constitute
Indebtedness, payable out of Oil and Gas Properties. The term “Lien” shall include reservations,
exceptions, encroachments, easements, rights of way, covenants, conditions, restrictions, leases
and other title exceptions and encumbrances affecting Property. For the purposes of this
Agreement, the Borrower or any Subsidiary shall be deemed to be the owner of any Property that it
has acquired or holds subject to a conditional sale agreement, or leases under a financing lease or
other arrangement pursuant to which title to the Property has been retained by or vested in some
other Person in a transaction intended to create a financing.



     “Loan” is defined in Section 2.1.1.



     “Loan Document” means, collectively, (a) this Agreement, each Security Document, each Note,
each Affirmation of Obligations, each Hedging Agreement between Borrower and any of its
Subsidiaries and any Hedging Counterparty and each Borrowing Request, together, in each case, with
all exhibits, schedules and attachments thereto; and (b) all other agreements, documents or
instruments from time to time executed or delivered in connection with or pursuant to any of the
foregoing.



     “Margin Stock” means “margin stock” within the meaning of Regulation U.



     “Material Adverse Effect” means any material and adverse effect (a) on (i) the business,
condition (financial or otherwise), operations or properties of the Borrower or the Borrower and
its Subsidiaries (taken as a whole) or (ii) the ability of the Borrower or any other Obligor to
perform its obligations under any of the Loan Documents to which it is a party or (b) that purports
to affect the legality, validity or enforceability of this Agreement, the Notes or any other Loan
Documents.



     “MMBtu” means one million British thermal units.



     “Mortgage” means each Mortgage, Deed of Trust, Assignment, Security Agreement and Financing
Statement executed and delivered pursuant to the Loan Documents, executed and delivered by the
Borrower or any Obligor, as the case may be, as amended, supplemented, restated or otherwise
modified from time to time in accordance with the terms of this Agreement and the other Loan
Documents.



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     “Mortgaged Property” means any Oil and Gas Property with respect to which a Lien is granted
pursuant to a Mortgage.



     “NEG” means National Energy Group, Inc., a Delaware corporation.



     “NEG Guaranteed Payment” means any “Guaranteed Payment” (as defined in the NEG Holding
Operating Agreement) payable to NEG by NEG Holding pursuant to Section 6.5 of the NEG Holding
Operating Agreement.



     “NEG Holding” means NEG Holding LLC, a Delaware limited liability company.



     “NEG Holding Guaranty” means the Guaranty dated as of the Effective Date, executed by NEG
Holding in favor of the Administrative Agent, together with any amendments, renewals, restatements
or other modifications thereof from time to time.



     “NEG Holding Operating Agreement” means that certain Operating Agreement for NEG Holding LLC
dated as of May 1, 2001, by and between NEG and Gascon, as amended by that certain Assignment and
Assumption Agreement entered into by and among AREP Oil & Gas LLC (as successor to AREP NEG/MP
LLC), Gascon Partners and certain of their Affiliates on June 30, 2005.



     “NEG Management Agreement” means that certain Second Amendment to Management Agreement dated
as of April 5, 2004, by and among NEG, the Borrower and NGX Energy.



     “NEG Management Fee” means any “Fee” as defined in Section 3.1 of the NEG Management
Agreement.



     “NEG Operating LLC Operating Agreement” means that certain Operating Agreement of NEG
Operating LLC dated as of May 1, 2001, executed by NEG Holding.



     “NGX Energy” means NGX Energy Limited Partnership, a Delaware limited partnership.



     “NGX GP” means NGX GP of Delaware, a Delaware limited liability company.



     “NGX LP” means NGX LP of Delaware, a Delaware limited liability company.



     “Note” means a promissory note of the Borrower payable to any Lender (as such promissory note
may be amended, endorsed or otherwise modified from time to time), and also means all other
promissory notes accepted from time to time in substitution therefor or renewal thereof.



     “Obligations” means (without duplication), at any time, the sum of (a) all obligations
(monetary or otherwise) of the Borrower and each other Obligor arising under or in connection with
this Agreement, the Notes and each other Loan Document plus (b) all Hedging Obligations in
connection with all Hedging Agreements between the Borrower or any of its Subsidiaries and any
Hedging Counterparty plus (c) all other obligations (monetary or otherwise) of the Borrower




14










 





or any Subsidiary to any Lender or any Agent, whether or not contingent, arising under or in
connection with any of the Loan Documents.




     “Obligor” means the Borrower, any Guarantor or any other Person (other than any of the Agents
or any Lender) obligated under any Loan Document.



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



     “Oil and Gas Properties” means Hydrocarbon Interests; the Properties now or hereafter pooled
or unitized with Hydrocarbon Interests; 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; all operating agreements,
contracts and other 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
Interest; all Hydrocarbons in and under and which may be produced and saved or attributable to the
Hydrocarbon Interests, the lands covered thereby and all oil in tanks and all rents, issues,
profits, proceeds, products, revenues and other income from or attributable to the Hydrocarbon
Interests; all tenements, hereditaments, appurtenances and Property in any manner appertaining,
belonging, affixed or incidental to the Hydrocarbon Interests, Properties, rights, titles,
interests and estates described or referred to above, including any and all Property, real or
personal, now owned or hereinafter acquired and situated upon, used, held for use or useful in
connection with the operating, working or development of any of such Hydrocarbon Interests or
Property (excluding drilling rigs, automotive equipment or other personal property which may be on
such premises for the purpose of drilling 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.



     “OPA” means the Oil Pollution Act of 1990, as amended from time to time.



     “Organic Documents” means, for any Person, its articles of incorporation, association,
formation or incorporation (or comparable document), its by-laws, certificate of formation,
regulations, limited liability company agreement, or similar governing document and all



15









 







shareholder, membership, partnership or other similar agreements, voting trusts and similar
arrangements.



     “PBGC” means the Pension Benefit Guaranty Corporation and any entity succeeding to any or all
of its functions under ERISA.



     “Pension Plan” means a “pension plan,” as defined in section 3(2) of ERISA, which is subject
to Title IV of ERISA (other than a multiemployer plan as defined in section 4001(a)(3) of ERISA),
and to which the Borrower or any corporation, trade or business that is, along with the Borrower, a
member of a Controlled Group, may have liability, including any liability by reason of having been
a substantial employer within the meaning of section 4063 of ERISA at any time during the preceding
five years, or by reason of being deemed to be a contributing sponsor under section 4069 of ERISA.



     “Percentage” means, with respect to any Lender, the percentage of the Commitments represented
by such Lender’s Commitment. If the Commitments have terminated or expired, the Percentages shall
be determined based upon the most recent Commitments, giving effect to any assignments made in
accordance with Section 10.12 or any increases or decreases in Commitments made in
accordance with this Agreement.



     “Permitted NEG Affiliate Transactions” means transactions with Affiliates permitted as of the
Closing Date pursuant to the NEG Operating LLC Operating Agreement, the NEG Holding Operating
Agreement and the NEG Management Agreement (including without limitation the NEG Guaranteed
Payment).



     “Person” means any natural person, corporation, limited liability company, partnership, firm,
association, trust, government, governmental agency or any other entity, whether acting in an
individual, fiduciary or other capacity.



     “Plan” means any Pension Plan or Welfare Plan.



     “Pledge Agreement” means each Pledge Agreement and Irrevocable Proxy, executed and delivered
pursuant to the Loan Documents, as amended, supplemented, restated or otherwise modified from time
to time in accordance with the Loan Documents.



     “Property” means all property of any kind, name or nature, real or personal, tangible or
intangible, legal or equitable, whether now owned or hereafter acquired.



     “Proven Reserves” means collectively, “proved oil and gas reserves,” “proved developed
producing oil and gas reserves,” “proved developed non-producing oil and gas reserves” (consisting
of proved developed shut-in oil and gas reserves and proved developed behind pipe oil and gas
reserves), and “proved undeveloped oil and gas reserves,” as such terms are defined by the SEC in
its standards and guidelines.



     “Quarterly Payment Date” means the last day of each March, June, September and December or, if
any such day is not a Business Day, the next succeeding Business Day.



16









 





     “Regulation U” means any of Regulations T, U or X of the F.R.S. Board from time to time in
effect, and any successor or other regulations or official interpretations of the F.R.S. Board or
any successor Person, relating to the extension of credit for the purpose of purchasing or carrying
Margin Stock and that is applicable to member banks of the Federal Reserve System or any successor
Person.



     “Release” means a “release,” as defined in CERCLA.



     “Required Closing Date Hedges” means the Hedging Agreements described in Schedule II.



     “Required Lenders” means the Lenders at any time holding Commitments in the aggregate greater
than or equal to seventy-five percent (75%) of the Commitments under the Loan Documents, or, if the
Commitments have been terminated, an aggregate amount greater than or equal to seventy-five percent
(75%) of the then current aggregate principal amount of all outstanding Loans.



     “Revolving Credit Termination Date” means the earliest of (a) the Stated Maturity Date; (b)
the date on which the Commitments have terminated; and (c) the date on which any Commitment
Termination Event occurs. Upon the occurrence of any event described in clause (c), the
Commitments shall terminate automatically and without further action.



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



     “Secured Parties” means (a) each Lender, (b) each Agent, (c) each Hedging Counterparty, and
(d) the AREP Agent, in its capacity as pledgee of the rights of AREP O&G in all of its capacities
hereunder.



     “Security Agreement” means each Security Agreement executed and delivered pursuant to the Loan
Documents, as amended, supplemented, restated or otherwise modified from time to time in accordance
with the Loan Documents.



     “Security Document” means any Pledge Agreement, Guaranty, Security Agreement or Mortgage, and
each other security agreement or other instrument or document executed and delivered pursuant to
Section 5.1, Section 7.1.6, or any other provision of this Agreement.



     “Shana National” means Shana National LLC, a Delaware limited liability company, and its
successors and assigns.



     “Stated Maturity Date” means the earlier to occur of (i) the date on which the Borrower and
its Subsidiaries become guarantors under the AREP O&G Facility and (ii) December 20, 2010.



     “Subordinated Debt” means all unsecured Indebtedness of the Borrower or its Subsidiaries after
the date of this Agreement that is owing to AREP O&G for money borrowed and which is subordinated,
in such amounts, and upon terms and conditions satisfactory to, the Agents and the Lenders, in
right of payment to the payment in full in cash of all Obligations.



17









 





     “Subsidiary” means, with respect to any Person (the “parent”) at any date any corporation,
limited liability company, partnership (limited or general), association or other entity (a) of
which Equity Interests representing more than 50% or more than 50% of the ordinary voting power or,
in the case of a partnership, more than 50% of the general partnership interests are, as of such
date, owned, controlled or held, or (b) that is, as of such date, otherwise Controlled, by the
parent or one or more subsidiaries of the parent or by the parent and one or more subsidiaries of
the parent. Unless otherwise indicated herein, each reference to the term “Subsidiary” means a
Subsidiary of the Borrower.



     “Subsidiary Guaranty” means each Guaranty in favor of the Administrative Agent, executed and
delivered by a Subsidiary pursuant to the Loan Documents, as amended, supplemented, restated or
otherwise modified from time to time in accordance with the Loan Documents.



     “Taxes” is defined in Section 4.6.



     “Termination Event” means (a) the occurrence with respect to any ERISA Plan of (i) a
reportable event described in Section 4043(c)(5) or (6) of ERISA or (ii) any other reportable event
described in Section 4043(c) of ERISA other than a reportable event not subject to the provision
for 30-day notice to the Pension Benefit Guaranty Corporation pursuant to a waiver by such
corporation under Section 4043(a) or 4043(b)(4) of ERISA, or (b) the withdrawal of any ERISA
Affiliate from an ERISA Plan during a plan year in which it was a “substantial employer” as defined
in Section 4001(a)(2) of ERISA, or (c) the filing of a notice of intent to terminate any ERISA Plan
or the treatment of any ERISA Plan amendment as a termination under Section 4041(c) of ERISA, or
(d) the institution of proceedings to terminate any ERISA Plan by the Pension Benefit Guaranty
Corporation under Section 4042 of ERISA, or (e) any other event or condition which could reasonably
be expected to result in the termination of, or the appointment of a trustee to administer, any
ERISA Plan under Section 4042 of ERISA.



     “Total Interest Expense” means with respect to any period for which a determination thereof is
to be made, the sum, without duplication, of (i) the aggregate amount of all interest accrued
(whether or not paid) on all Indebtedness of the Borrower and its Subsidiaries on a consolidated
basis plus (ii) the portion of any Capitalized Lease Liabilities allocable to interest expense in
accordance with GAAP. Total Interest Expense shall be calculated quarterly at the end of each
fiscal quarter on a rolling four quarter basis.



     “Transfer” is defined in Section 7.2.10.



     “type” means, relative to any Loan, the portion thereof, if any, being maintained as a Base
Rate Loan or a Eurodollar Loan.



     “UCC Searches” means central and local current financing statement and Lien searches from each
state in which any Collateral is located, and such other jurisdictions as the Collateral Agent may
request, covering the Borrower and each Guarantor, together with copies of all financing statements
listed in such searches.



     “United States” or “U.S.” means the United States of America, its fifty States and the
District of Columbia.



18









 





     “Unused Availability” means at any time an amount equal to the excess of (i) the Commitments
less (ii) the outstanding Loans.



     “Welfare Plan” means a “welfare plan,” as defined in section 3(1) of ERISA.



     “Wholly-Owned Subsidiary” means, as to any Person, any Subsidiary of which all of the
outstanding shares of Equity Interests on a fully-diluted basis, are owned by such Person or one or
more of its Wholly-Owned Subsidiaries or by such Person and one or more of its Wholly-Owned
Subsidiaries. Unless otherwise indicated, each reference to the “Wholly-Owned Subsidiary” means a
Wholly-Owned Subsidiary of the Borrower.



     SECTION 1.2. Use of Defined Terms. Unless otherwise defined or the context otherwise
requires, terms for which meanings are provided in this Agreement shall have such meanings when
used in the Disclosure Schedule and in each Note, Borrowing Request, Continuation/Conversion
Notice, Loan Document, notice and other communication delivered from time to time in connection
with this Agreement or any other Loan Document. The definitions of terms herein shall apply
equally to the singular and plural forms of the terms defined. Whenever the context may require,
any pronoun shall include the corresponding masculine, feminine and neuter forms. The words
“include,” “includes” and “including” shall be deemed to be followed by the phrase “without
limitation”. The word “will” shall be construed to have the same meaning and effect as the word
“shall”. Unless the context requires otherwise (a) any definition of or reference to any
agreement, instrument or other document herein shall be construed as referring to such agreement,
instrument or other document as from time to time amended, supplemented or otherwise modified
(subject to any restrictions on such amendments, supplements or modifications set forth herein),
(b) any reference herein to any Person shall be construed to include such Person’s successors and
assigns, provided such successors and assigns are permitted by the Loan Documents, (c) the words
“herein,” “hereof,” “hereto,” “hereunder” and similar terms contained 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 Section, paragraph or provision of this Agreement or such other
Loan Document. and (d) all references herein to Articles, Sections, Exhibits and Schedules shall be
construed to refer to Articles and Sections of, and Exhibits and Schedules to, this Agreement.



     SECTION 1.3. Accounting and Financial Determinations. Unless otherwise specified, all
accounting terms used herein or in any other Loan Document shall be interpreted, all accounting
determinations and computations hereunder or thereunder shall be made, and all financial statements
required to be delivered hereunder or thereunder shall be prepared in accordance with GAAP.



ARTICLE II




THE COMMITMENTS, BORROWING PROCEDURES, NOTES




     SECTION 2.1. Loan Balance and Commitments. Borrower and Lender acknowledge and agree
that, as of the Closing Date, after giving effect to any transactions occurring on the Closing
Date, the outstanding unpaid principal balance of the Loans is



19









 






$132,357,634.29. On the terms and subject to the conditions of this Agreement (including
Article V), each Lender severally agrees to make additional Loans, as described in this
Section 2.1.



     SECTION 2.1.1. Loan Commitment. Each Lender hereby severally agrees to make loans to
the Borrower (relative to such Lender, and of any type, each a “Loan” and collectively its “Loans”)
from time to time on any Business Day occurring prior to the Revolving Credit Termination Date,
equal to its Percentage of the aggregate amount of the Borrowing requested by the Borrower to be
made on such Business Day, such Loans being in an aggregate amount never to exceed the lesser of
(i) the aggregate Commitments or (ii) the then-current Borrowing Base. The commitment of each
Lender described in this Section 2.1.1 is herein referred to as its “Commitment.” On the
terms and conditions hereof, the Borrower may from time to time borrow, prepay and reborrow Loans.



     SECTION 2.1.2. Lenders Not Permitted or Required to Make Loans. Notwithstanding
anything herein or in any other Loan Document to the contrary, no Lender shall be permitted or
required to make any Loan and the Borrower shall not be permitted to reduce the Commitments, after
giving effect thereto, (a) the aggregate outstanding principal amount of all Loans of all Lenders
would exceed the lesser of (i) the Commitments or (ii) the then-current Borrowing Base, or (b) the
aggregate outstanding principal amount of all Loans of such Lender would exceed such Lender’s
Percentage of the Commitments.



     SECTION 2.2. Reduction of Commitments. The Borrower may not voluntarily reduce the
Commitments.



     SECTION 2.3. Borrowing Procedures for Loans. To request a Borrowing, the Borrower
shall notify the Administrative Agent of such request (a) in the case of a Eurodollar Borrowing,
not later than 11:00 a.m., New York City time, three (3) Business Days prior to the date such
Borrowing is to be made or (b) in the case of a Base Rate Borrowing, not later than 10:00 a.m., New
York City time, one (1) Business Day prior to the date such Borrowing is to be made. At the
commencement of each Interest Period for any Eurodollar Borrowing, such Borrowing shall be in an
aggregate amount that is an integral multiple of $500,000 and not less than $500,000 (including any
continuation or conversion of existing Loans pursuant to Section 2.4 made in connection
therewith). At the time that each Base Rate Borrowing is made, such Borrowing shall be in an
aggregate amount that is an integral multiple of $100,000 and not less than $500,000 (including any
continuation or conversion of existing Loans pursuant to Section 2.4 made in connection
therewith); provided that a Base Rate Borrowing may be in an aggregate amount that is equal to the
entire unused amount of the Commitments, if less. The Administrative Agent at its option may
accept telephonic requests for Loans, provided that such acceptance shall not constitute a waiver
of the Administrative Agent’s right to delivery of a Borrowing Request in connection with
subsequent Loans. Each such telephonic Borrowing Request for a Loan by the Borrower shall be
irrevocable and shall be confirmed promptly by hand delivery or telecopy to the Administrative
Agent of a written Borrowing Request. On the terms and subject to the conditions of this
Agreement, each Borrowing comprised of Loans shall be comprised of the type of Loans, and shall be
made on the Business Day, specified in such Borrowing Request. Borrowings of more than one type
may be outstanding at the same time; provided that there shall not at any time be more than a total
of five (5) Eurodollar Borrowings outstanding. On or before 11:00 a.m. New York time on such
Business Day each Lender shall



20









 







deposit with the Administrative Agent same day funds in an amount equal to such Lender’s
Percentage of the requested Borrowing. Such deposit will be made to an account which the
Administrative Agent shall specify from time to time by notice to the Lenders. To the extent funds
are received from the Lenders, the Administrative Agent shall make such funds available to the
Borrower by wire transfer to the accounts the Borrower shall have specified in its Borrowing
Request. The failure of any Lender to make any Loan required to be made by it shall not relieve
any other Lender of its obligations hereunder; provided that the Commitments of the Lenders are
several and no Lender shall be responsible for any other Lender’s failure to make Loans as
required.



     SECTION 2.4. Continuation and Conversion Elections. By delivering a
Continuation/Conversion Notice to the Administrative Agent on or before 10:00 a.m., New York time,
on a Business Day, the Borrower may from time to time irrevocably elect, on not fewer than three
(3) nor more than five (5) Business Days’ notice that all, or any portion of any Loans, subject to
the requirements of Section 2.3, be, in the case of Base Rate Loans, converted into
Eurodollar Loans, and in the case of Eurodollar Loans, be converted on the last day of the then
current interest period into a Base Rate Loan or continued as a Eurodollar Loan (in the absence of
delivery of a Continuation/Conversion Notice with respect to any Eurodollar Loan at least three (3)
Business Days before the last day of the then current Interest Period with respect thereto, such
Eurodollar Loan shall, on such last day, automatically convert to a Base Rate Loan); provided,
however, that (i) each such conversion or continuation shall be pro rated among the applicable
outstanding Loans of all Lenders to the Borrower, and (ii) no portion of the outstanding principal
amount of any Loans may be so continued as, or be so converted into, Eurodollar Loans when any
Event of Default has occurred and is continuing.



     SECTION 2.5. Funding. Each Lender may, if it so elects, fulfill its obligation to
make, continue or convert Eurodollar Loans hereunder by causing a domestic or foreign branch or an
Affiliate (or an international banking facility created by such Lender) to make or maintain such
Eurodollar Loan; provided, however, that such Eurodollar Loan shall nonetheless be deemed to have
been made and to be held by such Lender, and the obligations of the Borrower to repay such
Eurodollar Loan shall nevertheless be to such Lender for the account of such foreign branch,
Affiliate or international banking facility.



     SECTION 2.6. Notes. Each Lender’s Loans under its Commitment shall be evidenced by a
Note payable to the order of such Lender in a maximum principal amount equal to such Lender’s
Percentage of the Commitments. The Borrower hereby irrevocably authorizes each Lender to make (or
cause to be made) appropriate notations on the grid attached to such Lender’s Note (or on any
continuation of such grid or otherwise in its records), which notations, if made, shall evidence,
inter alia, the date of, the outstanding principal of, and the interest rate and
Interest Period applicable to the Loans evidenced thereby. Such notations shall be conclusive and
binding on the Borrower absent manifest error; provided, however, that the failure of any Lender to
make any such notations shall not limit or otherwise affect any Obligations of the Borrower or any
other Obligor.



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ARTICLE III




REPAYMENTS, PREPAYMENTS, INTEREST AND FEES




     SECTION 3.1. Repayments and Prepayments. The Borrower shall repay in full the unpaid
principal amount of each Loan upon the Revolving Credit Termination Date. Prior thereto, the
Borrower:




     (a) may not make any voluntary prepayment of the Loans that would reduce the
outstanding principal balance thereof to less than $150,000,000;




     (b) shall, on each date when (i) any reduction in or termination of the Commitments
shall become effective or (ii) the outstanding aggregate principal amount of all Loans
exceeds the Commitments, make a mandatory prepayment in an amount at least equal to the
aggregate, outstanding principal amount of all Loans in excess of the Commitments as reduced
or terminated, and, if such mandatory prepayment was not sufficient to reduce the unpaid
principal balance of the Loans to an amount that does not exceed the Commitments as reduced
or terminated, such prepayments to be in an amount equal to the excess, if any, of the
aggregate, outstanding principal amount of all Loans over the Commitments as so reduced or
terminated; and




     (c) shall, immediately upon any acceleration of the Stated Maturity Date of any Loans
pursuant to Section 8.2 or Section 8.3, repay all Loans, unless, pursuant to
Section 8.3, only a portion of all Loans is so accelerated.


Each prepayment of any Loan made pursuant to this Section 3.1 shall be without premium or
penalty, except as may be required by Section 4.4. No voluntary prepayment of principal of
any Loans shall cause a reduction in the Commitments. All amounts paid pursuant to this
Section 3.1 shall be applied first as prepayments on the Loans.




     SECTION 3.2. Interest Provisions. Interest on the outstanding principal amount of
Loans shall accrue and be payable by the Borrower in accordance with this Section 3.2.



     SECTION 3.2.1. Rates. Pursuant to an appropriately delivered Borrowing Request or
Continuation/Conversion Notice, the Borrower may elect that Loans comprising a Borrowing accrue
interest at a rate per annum: (a) on that portion maintained from time to time as a Base Rate Loan,
equal to the Adjusted Base Rate; (b) on that portion maintained as a Eurodollar Loan, during each
Interest Period applicable thereto, equal to the Adjusted Eurodollar Rate for such Interest Period,
provided that no interest shall accrue on any portion of the then outstanding Loan (or portion
thereof) to the extent the Borrower has delivered cash collateral to the Collateral Agent securing
such Loan (or portion thereof).



     All Eurodollar Loans shall bear interest from and including the first day of the applicable
Interest Period to (but not including) the last day of such Interest Period at the interest rate
determined as applicable to such Eurodollar Loan.



     SECTION 3.2.2. Post-Default Rates. After the date (after giving effect to any grace
period) any principal amount of any Loan is due and payable (whether on the Stated Maturity Date,
upon acceleration or otherwise), or after any other monetary Obligation of the Borrower shall have
become due and payable, or after the occurrence of any other Event of Default the Borrower shall
pay, but only to the extent permitted by Governmental Rule, interest (after as



22









 







well as before judgment) at a rate per annum equal to the sum of (x) the Adjusted Base Rate
from time to time in effect for Base Rate Loans plus (y) 2%.



     SECTION 3.2.3. Payment Dates. Interest accrued on each Loan shall be payable, without
duplication by the Borrower: (a) on the Stated Maturity Date therefor; (b) on the date of any
payment or prepayment or cash collateralization in accordance with the proviso in Section
3.2.1, in whole or in part, of principal outstanding on such Loan; (c) with respect to Base
Rate Loans, in arrears on the last Business Day of each calendar month occurring after the
Effective Date; (d) with respect to Eurodollar Loans, in arrears on the last day of each applicable
Interest Period; (e) with respect to any Base Rate Loans converted into Eurodollar Loans on a day
when interest would not otherwise have been payable pursuant to clause (c), on the date of
such conversion; and (f) on that portion of any Loans, the Stated Maturity Date of which is
accelerated pursuant to Section 8.2 or Section 8.3, immediately upon such
acceleration. Interest accrued on Loans or other monetary Obligations arising under this Agreement
or any other Loan Document after the date such amount is due and payable (whether on the Stated
Maturity Date, upon acceleration or otherwise) or after the occurrence shall be payable by the
Borrower upon demand.



ARTICLE IV




CERTAIN EURODOLLAR RATE AND OTHER PROVISIONS




     SECTION 4.1. Fixed Rate Lending Unlawful. If any Lender shall determine (which
determination shall, upon notice thereof to the Borrower and the Lenders, be conclusive and binding
on the Borrower) that the introduction of or any change in or in the interpretation of any law
makes it unlawful, or any central bank or other governmental authority asserts that it is unlawful,
for such Lender to make, continue or maintain any Loan as, or to convert any Loan into, a
Eurodollar Loan of a certain type, the obligations of such Lenders to make, continue, maintain or
convert any such Loans shall, upon such determination, promptly be suspended until such Lender
shall notify the Administrative Agent that the circumstances causing such suspension no longer
exist, and all such Lenders Eurodollar Loans shall automatically convert into Base Rate Loans at
the end of the then-current Interest Periods with respect thereto or sooner, if required by such
law or assertion.



     SECTION 4.2. Deposits Unavailable. If the Administrative Agent shall have determined
that (a) Dollar deposits in the relevant amount and for the relevant Interest Period are not
available to the Administrative Agent in the Administrative Agent’s relevant market; or (b) by
reason of circumstances affecting the interbank dollar market generally adequate means do not exist
for ascertaining the interest rate applicable hereunder to Eurodollar Loans of such type, then,
upon notice from the Administrative Agent to the Borrower and the Lenders, the obligations of all
Lenders under Section 2.3 and Section 2.4 to make or continue any Loans as, or to
convert any Loans into, Eurodollar Loans of such type shall promptly be suspended until the
Administrative Agent shall notify the Borrower and the Lenders that the circumstances causing such
suspension no longer exist; and (c) all Eurodollar Loans shall automatically convert into Base Rate
Loans at the end of the then current Interest Periods with respect thereto.



23









 





     SECTION 4.3. Increased Eurodollar Loan Costs, etc. The Borrower agrees to reimburse
each Lender for any increase in the cost to such Lender of, or any reduction in the amount of any
sum receivable by such Lender with respect to, making, continuing or maintaining (or of its
obligation to make, continue or maintain) any Loans as, or of converting (or of its obligation to
convert) any Loans into, Eurodollar Loans. Such Lender shall promptly notify the Administrative
Agent and the Borrower in writing of the occurrence of any such event, such notice to state, in
reasonable detail, the reasons therefor and the additional amount required fully to compensate such
Lender for such increased cost or reduced amount. Such additional amounts shall be payable by the
Borrower directly to such Lender within five (5) days of its receipt of such notice, and such
notice shall, in the absence of manifest error, be conclusive and binding on the Borrower. The
Borrower will not be responsible for paying any amounts pursuant to this Section 4.3
accruing more than one hundred eighty (180) days prior to the receipt by the Borrower of the notice
referred to in the preceding sentence.



     SECTION 4.4. Funding Losses. In the event any Lender shall incur any loss or expense
(including any loss or expense incurred by reason of the liquidation or reemployment of deposits or
other funds acquired by such Lender to make, continue or maintain any portion of the principal
amount of any Loan as, or to convert any portion of the principal amount of any Loan into, a
Eurodollar Loan) as a result of (a) any conversion or repayment or prepayment of the principal
amount of any Eurodollar Loans on a date other than the scheduled last day of the Interest Period
applicable thereto, whether pursuant to Section 3.1 or otherwise; (b) any Loans not being
made as Eurodollar Loans in accordance with the Borrowing Request therefor; or (c) any Loans not
being continued as, or converted into, Eurodollar Loans in accordance with the
Continuation/Conversion Notice therefor, then, upon the written notice of such Lender to the
Borrower (with a copy to the Administrative Agent), the Borrower shall, within five (5) days of its
receipt thereof, pay directly to such Lender such amount as will (in the reasonable determination
of such Lender) reimburse such Lender for such loss or expense. Such written notice (which shall
include calculations in reasonable detail) shall, in the absence of manifest error, be conclusive
and binding on the Borrower.



     SECTION 4.5. Increased Capital Costs. If any change in, or the introduction,
adoption, effectiveness, interpretation, reinterpretation or phase-in of, any law or regulation,
directive, guideline, decision or request (whether or not having the force of law) of any court,
central bank, regulator or other governmental authority affects or would affect the amount of
capital required or expected to be maintained by any Lender or any Person controlling such Lender,
and such Lender determines (in its sole and absolute discretion) that the rate of return on its or
such controlling Person’s capital as a consequence of its Commitment, or the Loans made by such
Lender is reduced to a level below that which such Lender or such controlling Person could have
achieved but for the occurrence of any such circumstance, then, in any such case upon notice from
time to time by such Lender to the Borrower, the Borrower shall immediately pay directly to such
Lender additional amounts sufficient to compensate such Lender or such controlling Person for such
reduction in rate of return. A statement of such Lender as to any such additional amount or
amounts (including calculations thereof in reasonable detail) shall, in the absence of manifest
error, be conclusive and binding on the Borrower. In determining such amount, such Lender may use
any method of averaging and attribution that it (in its sole and absolute discretion) shall deem
applicable.



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     SECTION 4.6. Taxes. All payments by the Borrower of principal of, and interest on,
the Loans and all other amounts payable hereunder and under any other Loan Document shall be made
free and clear of and without deduction for any present or future income, excise, stamp or
franchise taxes and other taxes, fees, duties, withholdings or other charges of any nature
whatsoever imposed by any taxing authority, but excluding franchise taxes and taxes imposed on or
measured by any Lender’s net income or receipts (such non-excluded items being called “Taxes”). In
the event that any withholding or deduction from any payment to be made by the Borrower hereunder
is required with respect to any Taxes pursuant to any applicable Governmental Rule, then the
Borrower will (a) pay directly to the relevant authority the full amount required to be so withheld
or deducted; (b) promptly forward to the Administrative Agent an official receipt or other
documentation satisfactory to the Administrative Agent evidencing such payment to such authority;
and (c) pay to the Administrative Agent for the account of the Administrative Agent or such Lender
such additional amount or amounts as is necessary to ensure that the net amount actually received
by the Administrative Agent or such Lender will equal the full amount the Administrative Agent or
such Lender would have received had no such withholding or deduction been required. Moreover, if
any Taxes are directly asserted against the Administrative Agent or any Lender with respect to any
payment received by the Administrative Agent or such Lender hereunder, the Administrative Agent or
such Lender may pay such Taxes and the Borrower will promptly pay such additional amounts
(including any penalties, interest or expenses) as is necessary in order that the net amount
received by such Person after the payment of such Taxes (including any Taxes on such additional
amount) shall equal the amount such Person would have received had such Taxes not been asserted.



     If the Borrower fails to pay any Taxes when due to the appropriate taxing authority or fails
to remit to the Administrative Agent, for the account of the Administrative Agent, or any Lender,
the required receipts or other required documentary evidence, the Borrower shall indemnify the
Administrative Agent, or such Lender for any incremental Taxes, interest or penalties that may
become payable by the Administrative Agent or such Lender as a result of any such failure. For
purposes of this Section 4.6, a distribution hereunder by the Administrative Agent or any
Lender to or for the account of the Administrative Agent or any Lender shall be deemed a payment by
the Borrower.



     Each Lender which is organized under the laws of a jurisdiction outside the United States
shall, (i) on the day of the initial borrowing from each such Lender hereunder and (ii) from time
to time thereafter if requested by the Borrower or the Administrative Agent, provide the
Administrative Agent and the Borrower with the forms prescribed by the Internal Revenue Service of
the United States certifying as to such Lender’s status for purposes of determining exemption from
United States withholding taxes with respect to all payments to be made to such Lender hereunder
and under the other Loan Documents or other documents satisfactory to such Lender, the Borrower and
the Administrative Agent and indicating that all payments to be made to such Lender hereunder and
under the other Loan Documents are not subject to United States withholding tax. Unless the
Borrower and the Administrative Agent shall have received such forms or such documents indicating
that payments to such Lender hereunder and under the other Loan Documents are not subject to United
States withholding tax, the Borrower and the Administrative Agent shall be entitled to withhold
United States withholding taxes from such payments at the applicable statutory rate.



25









 





     SECTION 4.7. Payments, Computations, etc. Unless otherwise expressly provided, all
payments by the Borrower to the Lenders pursuant to this Agreement, the Notes or any other Loan
Document shall be made by the Borrower to the Administrative Agent for the pro rata
account of the Lenders entitled to receive such payment, provided that during the continuance of
any Event of Default all such payments shall be made by the Borrower to the AREP Agent. All such
payments required to be made to the Agents shall be made, without set off, deduction or
counterclaim, not later than 11:00 a.m., New York time, on the date due, in same day or immediately
available funds, to such account as the applicable Agent shall specify from time to time by notice
to the Borrower. Funds received after that time shall be deemed to have been received on the next
succeeding Business Day. The Administrative Agent shall promptly remit in same day funds to each
Lender its share, if any, of such payments received by the Administrative Agent for the account of
such Lender. All interest and fees shall be computed on the basis of the actual number of days
(including the first day but excluding the last day) occurring during the period for which such
interest or fee is payable over a year comprised of 360 days (or, in the case of interest on a Base
Rate Loan, 365 days or, if appropriate, 366 days). Whenever any payment to be made shall otherwise
be due on a day which is not a Business Day, such payment shall (except as otherwise required by
clause (c) of the definition of the term “Interest Period” with respect to Eurodollar
Loans) be made on the next succeeding Business Day and such extension of time shall be included in
computing interest and fees, if any, in connection with such payment.



     SECTION 4.8. Sharing of Payments. (a) If any Lender shall obtain any payment or other
recovery (whether voluntary, involuntary, by application of set off or otherwise) on account of any
Loan (other than pursuant to the terms of Sections 4.3, 4.4, 4.5 and
4.6) in excess of its pro rata share of payments then or therewith obtained
by all Lenders, such Lender shall purchase from the other Lenders such participations in Loans made
by them as shall be necessary to cause such purchasing Lender to share the excess payment or other
recovery ratably with each of them; provided, however, that if all or any portion of the excess
payment or other recovery is thereafter recovered from such purchasing Lender, the purchase shall
be rescinded and each Lender which has sold a participation to the purchasing Lender shall repay to
the purchasing Lender the purchase price to the ratable extent of such recovery together with an
amount equal to such selling Lender’s ratable share (according to the proportion of (a) the amount
of such selling Lender’s required repayment to the purchasing Lender to (b) the total
amount so recovered from the purchasing Lender) of any interest or other amount paid or payable by
the purchasing Lender with respect to the total amount so recovered. The Borrower agrees that any
Lender so purchasing a participation from another Lender pursuant to this Section 4.8 may,
to the fullest extent permitted by Governmental Rule, exercise all its rights of payment (including
pursuant to Section 4.9) with respect to such participation as fully as if such Lender were
the direct creditor of the Borrower in the amount of such participation. If under any applicable
bankruptcy, insolvency or other similar Governmental Rule, any Lender receives a secured claim in
lieu of a set off to which this Section 4.8 applies, such Lender shall, to the extent
practicable, exercise its rights with respect to such secured claim in a manner consistent with the
rights of the Lenders entitled under this Section 4.8 to share in the benefits of any
recovery on such secured claim.



     SECTION 4.9. Set off. Each Lender shall, upon the occurrence of any Default described
in clauses (a) through (d) of Section 8.1.8 with respect to the Borrower or
any Subsidiary or any other Obligor or, with the consent of the Agents, upon the occurrence of any



26









 







other Event of Default, have the right to appropriate and apply to the payment of the
Obligations owing to it (whether or not then due) any and all balances, credits, deposits, accounts
or moneys of the Borrower then or thereafter maintained with such Lender; provided, however, that
any such appropriation and application shall be subject to the provisions of Section 4.8.
Each Lender agrees promptly to notify the Borrower and the Administrative Agent after any such set
off and application made by such Lender; provided, however, that the failure to give such notice
shall not affect the validity of such set off and application. The rights of each Lender under
this Section 4.9 are in addition to other rights and remedies (including other rights of
set off under applicable Governmental Rule or otherwise) which such Lender may have.



     SECTION 4.10. Use of Proceeds. The Borrower will, and will cause each Subsidiary to,
use the proceeds of the Loans for the Borrower’s and its Subsidiaries’ general limited liability
company, partnership or corporate purposes, including, without limitation, working capital. No
part of the proceeds of any Loan will be used, whether directly or indirectly, to acquire any
equity security of a class that is registered pursuant to Section 12 of the Exchange Act or any
Margin Stock, in violation of Regulation U.



     SECTION 4.11. Maximum Interest. It is the intention of the parties hereto to conform
strictly to applicable usury laws and, anything herein to the contrary notwithstanding, the
obligations of the Borrower to each Lender under this Agreement shall be subject to the limitation
that payments of interest shall not be required to the extent that receipt thereof would be
contrary to provisions of law applicable to such Lender limiting rates of interest which may be
charged or collected by such Lender. Accordingly, if the transactions contemplated hereby would be
usurious under applicable law (including the Federal and state laws of the United States of
America, or of any other jurisdiction whose laws may be mandatorily applicable) with respect to a
Lender then, in that event, notwithstanding anything to the contrary in this Agreement, it is
agreed as follows:




     (a) the provisions of this Section 4.11 shall govern and control;




     (b) the aggregate of all consideration which constitutes interest under applicable law
that is contracted for, charged or received under this Agreement, or under any of the other
aforesaid agreements or otherwise in connection with this Agreement by such Lender shall
under no circumstances exceed the maximum amount of interest allowed by applicable law (such
maximum lawful interest rate, if any, with respect to such Lender herein called the “Highest
Lawful Rate”), and any excess shall be credited to the Borrower by such Lender (or, if such
consideration shall have been paid in full, such excess promptly refunded to the Borrower);




     (c) all sums paid, or agreed to be paid, to such Lender for the use, forbearance and
detention of the indebtedness of the Borrower to such Lender hereunder shall, to the extent
permitted by applicable law, be amortized, prorated, allocated and spread throughout the
full term of such indebtedness until payment in full so that the actual rate of interest is
uniform throughout the full term thereof; and




     (d) if at any time the interest provided pursuant to Section 3.2 together with
any other fees payable pursuant to this Agreement and deemed interest under applicable



27









 







law, exceeds that amount which would have accrued at the Highest Lawful Rate, the
amount of interest and any such fees to accrue to such Lender pursuant to this Agreement
shall be limited, notwithstanding anything to the contrary in this Agreement to that amount
which would have accrued at the Highest Lawful Rate, but any subsequent reductions, as
applicable, shall not reduce the interest to accrue to such Lender pursuant to this
Agreement below the Highest Lawful Rate until the total amount of interest accrued pursuant
to this Agreement and such fees deemed to be interest equals the amount of interest which
would have accrued to such Lender if a varying rate per annum equal to the interest provided
pursuant to Section 3.2 had at all times been in effect, plus the amount of
fees which would have been received but for the effect of this Section 4.11.



ARTICLE V




CONDITIONS TO BORROWING




     SECTION 5.1. Initial Borrowing. The obligations of the Lenders to fund the initial
Borrowing shall be subject to the prior or concurrent satisfaction of each of the conditions
precedent set forth in this Section 5.1.



     SECTION 5.1.1. Agreement and Notes. Each Agent (or its counsel) shall have received
(a) an assignment and assumption agreement between each lender under the Original Credit Agreement
and Lender hereunder assigning each such lender’s rights and obligations under the Original Credit
Agreement to Lender, (b) an assignment and assumption between Bank of Texas, N.A., as collateral
agent under the Original Credit Agreement, assigning all of its rights and obligations in such
capacity under the Original Credit Agreement and the Loan Documents to the Collateral Agent; (b) an
assignment and assumption between Mizuho Corporate Bank, Ltd., as administrative agent under the
Original Credit Agreement, assigning all of its rights and obligations under the Original Credit
Agreement and the Loan Documents to the Administrative Agent (provided that any Liens or other
similar rights shall be assigned to Collateral Agent); (c) from each party hereto, a counterpart of
this Agreement, signed on behalf of such party and (d) a Note for the account of each Lender, duly
executed and delivered by the Borrower.



     SECTION 5.1.2. Organic Documents, Resolutions, etc. Each Agent shall have received
from the Borrower and each other Obligor a certificate from an Authorized Officer of such Obligor
dated as of the Closing Date and certifying:




     (a) that attached to each such certificate are (i) a true and complete copy of all
Organic Documents of such Obligor, as in effect on the date of such certificate and (ii) a
true and complete copy of a certificate from the Governmental Authority of the state of such
Obligor’s organization certifying that such Obligor is duly organized and validly existing
in such jurisdiction;




     (b) that attached to such certificate is a true and complete copy of resolutions then
in full force and effect, adopted by the board of directors or other governing body of such
Obligor, authorizing the execution, delivery and performance of this Agreement, the Notes
and each other Loan Document to be executed by it;



28









 







     (c) that attached thereto is a true and complete copy of a certificate from the
appropriate Governmental Authority of the state of organization or formation, as the case
may be, of such Obligor as to the existence and good standing of such Obligor, each dated
within thirty (30) days prior to the date of delivery pursuant hereto, and that such
certificate of incorporation or certificate of formation, as the case may be, has not been
amended since the date of such certified copy; and a true and complete copy of a certificate
from the appropriate Governmental Authority of each state (without duplication) as to the
good standing of and payment of franchise taxes by the Borrower or each such Obligor, if
applicable, dated within thirty (30) days prior to the date of delivery pursuant hereto; and




     (d) as to the incumbency and signatures of those of its officers authorized to act with
respect to each Loan Document executed by it,



     upon which certificate each Lender may conclusively rely until it shall have received a
further certificate of the Secretary of the Borrower or such other Obligor canceling or amending
such prior certificate.



     SECTION 5.1.3. Required Closing Date Hedges. Each Agent shall be satisfied that
Borrower has in place all Required Closing Date Hedges.



     SECTION 5.1.4. Affirmation of Obligations. Each Agent shall have received from each
Obligor an Affirmation of Obligations.



     SECTION 5.1.5. Pledge Agreements; Certificates and Blank Powers.




     (a) The Collateral Agent shall have received a copy of the Pledge Agreement executed
and delivered by NEG Holding dated as of the Effective Date, together with the following:




     (i) confirmation and evidence satisfactory to the Collateral Agent that the
security interest in such uncertificated Equity Interest of Borrower has been
transferred to and perfected by the Collateral Agent for the benefit of the Lenders
by control in accordance with the Uniform Commercial Code, as in effect in the State
of New York; and




     (ii) all documents and instruments, including Uniform Commercial Code Financing
Statements (Form UCC-1) and an amendment thereto reflecting the new Collateral Agent
as secured party, required by Governmental Rule or reasonably requested by the
Administrative Agent or the Collateral Agent, to be filed, registered or recorded to
create or perfect the Liens intended to be created under the Pledge Agreement.




     (b) The Collateral Agent shall have received a copy of the Pledge Agreements executed
and delivered by NEG, dated as of the Effective Date, together with the following:



29









 






     (i) confirmation and evidence satisfactory to the Administrative Agent or the
Collateral Agent that the security interest in such uncertificated Equity Interest
of NEG Holding have been transferred to and perfected by the Collateral Agent for
the benefit of the Lenders by control in accordance with the Uniform Commercial
Code, as in effect in the State of New York; and




     (ii) all documents and instruments, including Uniform Commercial Code Financing
Statements (Form UCC-1) and an amendment thereto reflecting the new Collateral Agent
as secured party, required by Governmental Rule or reasonably requested by the
Administrative Agent or the Collateral Agent, to be filed, registered or recorded to
create or perfect the Liens intended to be created under the Pledge Agreement.




     (c) The Collateral Agent shall have received a copy of the Pledge Agreement executed
and delivered by the Borrower, dated as of the Effective Date and amended as of April 5,
2004, together with the following:




     (i) confirmation and evidence satisfactory to the Administrative Agent or the
Collateral Agent that the security interest in such uncertificated Equity Interests
of Shana, NGX GP and NGX LP have been transferred to and perfected by the Collateral
Agent for the benefit of the Lenders by control in accordance with the Uniform
Commercial Code, as in effect in the State of New York; and




     (ii) all documents and instruments, including Uniform Commercial Code Financing
Statements (Form UCC-1) and an amendment thereto reflecting the new Collateral Agent
as secured party, required by Governmental Rule or reasonably requested by the
Administrative Agent or the Collateral Agent, to be filed, registered or recorded to
create or perfect the Liens intended to be created under the Pledge Agreement.




     (d) The Collateral Agent shall have received a copy of the Pledge Agreement executed
and delivered by NGX GP and NGX LP dated as of April 5, 2004, together with the following:




     (i) confirmation and evidence satisfactory to the Administrative Agent or the
Collateral Agent that the security interest in such uncertificated Equity Interests
of NGX Energy have been transferred to and perfected by the Collateral Agent for the
benefit of the Lenders by control in accordance with the Uniform Commercial Code, as
in effect in the State of New York; and




     (ii) all documents and instruments, including Uniform Commercial Code Financing
Statements (Form UCC-1) and an amendment thereto reflecting the new Collateral Agent
as secured party, required by Governmental Rule or reasonably requested by the
Administrative Agent or the



30









 






     Collateral Agent, to be filed, registered or recorded to create or perfect the
Liens intended to be created under the Pledge Agreement.



     SECTION 5.1.6. Security Agreements and UCC Filings. The Collateral Agent shall have
received a copy of each Security Agreement executed and delivered by, the Borrower and each of its
Subsidiaries, together with the following:




     (a) executed or authorized Uniform Commercial Code Financing Statements (Form UCC-1)
and an amendment thereto reflecting the new Collateral Agent as secured party, and such
evidence of filing or arrangements for filing as may be acceptable to the Administrative
Agent or the Collateral Agent, naming such Obligor, as applicable, as the debtor and the
Collateral Agent as the secured party, or other similar instruments or documents, filed or
to be under the Uniform Commercial Code of all jurisdictions as may be necessary or, in the
opinion of the Administrative Agent or the Collateral Agent, desirable to perfect the
security interest of the Collateral Agent pursuant to such Security Agreement; and




     (b) executed or authorized copies of proper Uniform Commercial Code Form UCC-3
termination statements, if any, necessary to release all Liens and other rights of any
Person in any Collateral described in the Security Agreement previously granted by any
Person, and together with such other Uniform Commercial Code Form UCC-3 termination
statements as the Administrative Agent or the Collateral Agent may reasonably request.



     SECTION 5.1.7. Mortgages. The Collateral Agent shall have received counterparts of
each of the following, in form acceptable to the Collateral Agent and duly executed by the Borrower
and any other party thereto named below:




     (a) an assignment of each Mortgage to the Collateral Agent from Bank of Texas, N.A., as
collateral agent under the Original Credit Agreement, and




     (b) a restatement of each Mortgage made by the Borrower, the Lender and the Collateral
Agent to refer to this Amended and Restated Credit Agreement and to include as additional
secured indebtedness the Hedging Obligations.


Either or both of the foregoing documents shall also reflect that the Lenders’ rights under such
restated Mortgage have been collaterally assigned by AREP Oil & Gas to the AREP Agent.




     SECTION 5.1.8. Priority; Security Interest. The Collateral shall be free and clear of
all Liens, except Liens permitted by Section 7.2.3. All filings, notices, recordings and
other action necessary to perfect the Liens in the Collateral shall have been made, given or
accomplished or arrangements for the completion thereof satisfactory to the Collateral Agent and
its counsel shall have been made and all filing fees and other expenses related to such actions
either have been paid in full or arrangements have been made for their payment in full which are
satisfactory to the Collateral Agent.



     SECTION 5.1.9. UCC and Lien Searches. The Collateral Agent shall have received (i)
the UCC Searches, all dated reasonably close to the Closing Date, in the discretion of the



31









 







Collateral Agent and in form and substance satisfactory to the Collateral Agent and (ii)
evidence reasonably satisfactory to the Collateral Agent that the Liens indicated by the financing
statements in such UCC Searches are permitted by Section 7.2.3 or have been released.



     SECTION 5.1.10. Satisfactory Review and Legal Form. All legal matters in connection
with this Agreement and the consummation of the transaction contemplated hereby and by the other
Loan Documents shall be approved by each Agent and its legal counsel, and there shall have been
furnished to each Agent by the Borrower, at the Borrower’s expense, such agreements, opinions of
counsel, title opinions, and other records and information, in form, substance, scope and
methodology satisfactory to each Agent in its sole discretion, as it may reasonably have requested
for that purpose.



     SECTION 5.1.11. Other Documents. Each Agent shall have received such other legal
opinions, instruments and documents as any of the Agents or their counsel may have reasonably
requested.



     SECTION 5.2. All Borrowings. The obligation of each Lender to fund any Loan on the
occasion of any Borrowing (including the initial Borrowing) shall be subject to the satisfaction of
each of the conditions precedent set forth in this Section 5.2.



     SECTION 5.2.1. Representations and Warranties, No Default. Both before and after
giving effect to any Borrowing (but, if any Default of the nature referred to in Section
8.1.4 shall have occurred with respect to any other Indebtedness, without giving effect to the
application, directly or indirectly, of the proceeds thereof), the following statements shall be
true and correct:




     (a) the representations and warranties of the Borrower and each other Obligor set forth
in the Loan Documents shall be true and correct in all material respects with the same
effect as if then made (unless stated to relate solely to an earlier date, in which case
such representations and warranties shall be true and correct as of such earlier date); and




     (b) no Default shall have occurred and be continuing.



     SECTION 5.2.2. Borrowing Request. The Collateral Agent shall have received a
Borrowing Request for such Borrowing. The delivery of a Borrowing Request and the acceptance by
the Borrower of the proceeds of such Borrowing shall constitute a representation and warranty by
the Borrower that, on the date of such Borrowing (both immediately before and after giving effect
to such Borrowing and the application of the proceeds thereof), all representations and warranties
of the Borrower and each other Obligor set forth in the Loan Documents are true and correct with
the same effect as if then made (unless stated to relate solely to an earlier date, in which case
such representations and warranties shall be true and correct as of such earlier date).



     SECTION 5.2.3. Satisfactory Legal Form. All documents executed or submitted pursuant
hereto by or on behalf of any Obligor shall be satisfactory in form and substance to each Agent and
its counsel, and each Agent and its counsel shall have received all information, approvals,
opinions, title opinions, documents or instruments as either Agent or its counsel may reasonably
request.



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ARTICLE VI




REPRESENTATIONS AND WARRANTIES




     In order to induce the Agents and the Lenders to enter into this Agreement and to make Loans
hereunder, the Borrower represents and warrants unto the Agents and the Lenders as set forth in
this Article VI.



     SECTION 6.1. Existence, etc. Each Obligor is a corporation, partnership or limited
liability company validly organized and existing and in good standing under the laws of the State
of its organization, incorporation or formation. Each Obligor is duly qualified to do business and
is in good standing as a foreign entity in each jurisdiction where the nature of its business
requires such qualification. Each Obligor has full power and authority, and holds all requisite
governmental licenses, permits and other approvals, (i) to enter into and perform its Obligations
under this Agreement, the Notes and each other Loan Document to which it is a party, and (ii) to
own and hold under lease its property and to conduct its business substantially as currently
conducted by it.



     SECTION 6.2. Due Authorization. Each Obligor has all necessary power and authority to
execute, deliver and perform its obligations under the Loan Documents to which it is a party; and
the execution, delivery and performance by each Obligor of the Loan Documents to which it is a
party, have been duly authorized by all necessary action on its part; and the Loan Documents
constitute the legal, valid and binding obligations of each Obligor thereto, enforceable in
accordance with their terms, except to the extent that enforcement may be subject to any applicable
bankruptcy, insolvency or similar laws generally affecting the enforcement of creditors’ rights.



     SECTION 6.3. Non-Contravention. Neither the execution and delivery of the Loan
Documents, nor compliance with the terms and provisions hereof will conflict with or result in a
breach of, or require any consent which has not been obtained as of the Effective Date under, the
respective Organic Documents of any Obligor, or any Governmental Rule or any material agreement or
instrument to which any Obligor is a party or by which it is bound or to which it or its Properties
are subject, or constitute a default under any such agreement or instrument, or result in the
creation or imposition of any Lien upon any of the revenues or assets of any Obligor pursuant to
the terms of any such agreement or instrument other than the Liens created by the Loan Documents.



     SECTION 6.4. Government Approval, Regulation, etc. Except for filings necessary to
perfect Liens created under the Loan Documents, no Governmental Approvals or third party consents
are necessary for the execution, delivery or performance by any Obligor of the Loan Documents or
for the validity or enforceability thereof.



SECTION 6.5. No Material Adverse Change. Since December 31, 2004,





     (a) there has been no change or event which could reasonably be expected to have a
Material Adverse Effect, nor



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     (b) neither the business nor the Property of the Borrower, any Subsidiary or any other
Obligor has been materially and adversely affected as a result of any fire, explosion,
earthquake, flood, drought, windstorm, accident, strike or other labor disturbance, embargo,
requisition or taking of Property or cancellation of contracts, permits or concessions by
any Governmental Authority, riot, activities of armed forces or acts of God or of any public
enemy.



     SECTION 6.6. Litigation, Labor Controversies, etc. There is no pending or, to the
Borrower’s knowledge, threatened litigation, action, proceeding, or labor controversy affecting the
Borrower or any Subsidiary, or any of their respective properties, businesses, assets or revenues,
which could reasonably be expected to have a Material Adverse Effect, except as disclosed in Item
6.7 of the Disclosure Schedule. There are no outstanding judgments against the Borrower or any
Subsidiary.



     SECTION 6.7. Subsidiaries. On the Closing Date, neither the Borrower nor any other
Obligor has any Subsidiaries except those Subsidiaries identified in Item 6.8 of the Disclosure
Schedule.



     SECTION 6.8. Location of Business and Offices. The Borrower’s state of organization,
state identification number, principal place of business and chief executive offices are located at
the address stated on the signature page of this Agreement or as otherwise disclosed in writing to
the Collateral Agent and its Federal Taxpayer Identification Number is 75-2958833. The state of
organization, organizational number, principal place of business, chief executive office and
Federal Tax Payer Identification Number of each Subsidiary are described in Item 6.8 of the
Disclosure Schedule or as otherwise disclosed in writing to each Agent.



     SECTION 6.9. Properties, etc.




     (a) Each of the Borrower and its Subsidiaries has good and defensible title to, or
valid leasehold interests in, its Mortgaged Properties and its other material (individually
or in the aggregate) Properties, free and clear of all Liens, and free and clear of all
limitations and restrictions on, and consent requirements for, disposition or transfer,
except as permitted pursuant to Section 7.2.3. Other than those Subsidiaries of the
Borrower that are executing a Mortgage pursuant to this Agreement, no Subsidiary of the
Borrower owns any real property. Except as set forth in Item 6.10 of the Disclosure
Schedule, after giving full effect to the Permitted Liens, the Borrower owns the net
interests in production attributable to the Hydrocarbon Interests that are Collateral and
the ownership of such Properties shall not obligate the Borrower to bear the costs and
expenses relating to the maintenance, development and operations of each such Property in an
amount in excess of the working interest of each such Property.




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



34









 






     (c) The rights, Mortgaged Properties and other assets currently owned, leased or
licensed by the Borrower and its Subsidiaries, including, without limitation, all easements
and rights of way, include all rights, Properties and other assets necessary to permit the
Borrower and its Subsidiaries to conduct their business in all material respects in the same
manner as its business has been conducted prior to the Closing Date.




     (d) All of the assets and Properties of the Borrower and its Subsidiaries that are
reasonably necessary for the operation of its business are in good working condition and are
maintained in accordance with prudent business standards.



     SECTION 6.10. Taxes. The Borrower and each of its Subsidiaries has filed all tax
returns and reports required by Governmental Rule to have been filed by it and has paid all taxes
and governmental charges thereby shown to be owing, except any such taxes or charges which are
being diligently contested in good faith by appropriate proceedings and for which adequate reserves
in accordance with GAAP shall have been set aside on its books. The Borrower knows of no pending
investigation of the Borrower or any Subsidiary by any taxing authority or of any pending but
unassessed tax liability of the Borrower or any Subsidiary.



     SECTION 6.11. Investment Company Act. Neither the Borrower nor any Subsidiary is an
“investment company” within the meaning of and subject to regulation under the Investment Company
Act of 1940, as amended.



     SECTION 6.12. Public Utility Holding Company Act. Neither the Borrower nor any
Subsidiary is a “holding company,” or a “subsidiary company” of a “holding company,” or an
“affiliate” of a “holding company” or of a “subsidiary company” of a “holding company,” or a
“public utility” within the meaning of the Public Utility Holding Company Act of 1935, as amended.



     SECTION 6.13. Environmental Warranties.




     (a) The Borrower and each Subsidiary and all of their respective Properties and
operations are in compliance in all respects with all Environmental Laws, except as could
not reasonably be expected to have a Material Adverse Effect; neither the Borrower nor any
Subsidiary is aware of, and none of the Borrower or any of its Subsidiaries has received
notice of, any past, present or future conditions, events, activities, practices or
incidents which may interfere with or prevent the compliance or continued compliance of any
of them with all Environmental Laws;




     (b) There have been no past, and there are no pending or, to the knowledge of the
Borrower, threatened, (i) claims or complaints, notices or requests for information received
by the Borrower or any of its Subsidiaries with respect to any alleged violation of any
Environmental Law by the Borrower or any of its Affiliates, or (ii) complaints, notices or
inquiries to the Borrower or any of its Affiliates regarding potential liability under any
Environmental Law;




     (c) Except as could not reasonably be expected to have a Material Adverse Effect, there
have been no Releases of Hazardous Materials at, on or under any Property now or previously
owned or leased by the Borrower or any of its Subsidiaries;



35









 






     (d) Except where the failure to take such actions would not have a Material Adverse
Effect: (i) all notices, permits, licenses or similar authorizations, if any, required to be
obtained or filed in connection with the operation or use of any and all Property of the
Borrower and each Subsidiary, including without limitation past or present treatment,
storage, disposal or release of a Hazardous Material into the environment, have been duly
obtained or filed, and (ii) the Borrower and each Subsidiary are in compliance with the
terms and conditions of all such notices, permits, licenses and similar authorizations;




     (e) no Property now or previously owned or leased by the Borrower or any of its
Subsidiaries is listed or proposed for listing (with respect to owned Property only) on the
National Priorities List pursuant to CERCLA, on the CERCLIS or on any similar state list of
sites requiring investigation or clean-up;




     (f) there are no underground storage tanks, active or abandoned, including petroleum
storage tanks, on or under any Property now or previously owned or leased by the Borrower or
any of its Subsidiaries;




     (g) neither the Borrower nor any Subsidiary of the Borrower has directly transported or
directly arranged for the transportation of any Hazardous Material to any location which is
listed or proposed for listing on the National Priorities List pursuant to CERCLA, on the
CERCLIS or on any similar state list or which is the subject of federal, state or local
enforcement actions or other investigations which may lead to claims against the Borrower or
such Subsidiary thereof for any remedial work, damage to natural resources or personal
injury, including claims under CERCLA;




     (h) Except as could not reasonably be expected to have a Material Adverse Effect, there
are no polychlorinated biphenyls or friable asbestos present at any Property now or
previously owned or leased by the Borrower or any Subsidiary of the Borrower; and




     (i) Except as could not reasonably be expected to have a Material Adverse Effect, to
the knowledge of the Borrower, no conditions exist at, on or under any Property now or
previously owned or leased by the Borrower which, with the passage of time, or the giving of
notice or both, would give rise to liability under any Environmental Law.



     SECTION 6.14. Regulation U. The Borrower is not engaged in the business of extending
credit for the purpose of purchasing or carrying Margin Stock, and no proceeds of any Loans will be
used for a purpose that violates, or would be inconsistent with, Regulation U.



     SECTION 6.15. Accuracy of Information. All factual information heretofore or
contemporaneously furnished by or on behalf of the Borrower or any other Obligor in writing to the
Collateral Agent, the Collateral Agent or any Lender for purposes of or in connection with this
Agreement, any Loan Document or any transaction contemplated hereby or thereby is, and all other
such factual information hereafter furnished by or on behalf of any Obligor to the Collateral
Agent, the Collateral Agent or any Lender will be, true and accurate in every material respect on
the date as of which such information is dated or certified and as of the date of execution and
delivery of this Agreement by to the Collateral Agent, the Collateral Agent or such



36









 







Lender, and such information is not, or shall not be, as the case may be, incomplete by
omitting to state any material fact necessary to make such information not misleading. There is no
fact existing with respect to the Borrower or any Subsidiary that could reasonably be expected to
have a Material Adverse Effect and which has not been set forth in this Agreement or the other
documents, certificates and statements furnished to each Agent by or on behalf of the Borrower or
any Subsidiary prior to, or on, the Closing Date in connection with the transactions contemplated
hereby.



     SECTION 6.16. Defaults. Neither the Borrower nor any Subsidiary is in default, nor
has any event or circumstance occurred which, but for the expiration of any applicable grace period
or the giving of notice, or both, would constitute a default, under any material agreement or
instrument to which the Borrower or any Subsidiary is a party or by which the Borrower or any
Subsidiary is bound in any material respect. No Default hereunder has occurred and is continuing.



     SECTION 6.17. Compliance with Law. Neither the Borrower nor any Subsidiary has
violated any Governmental Rule or failed to obtain any Governmental Approval necessary for the
ownership of any of its Properties or the conduct of its business which could reasonably be
expected to have a Material Adverse Effect. The Oil and Gas Properties (and properties unitized
therewith) have been maintained, operated and developed in a good and workmanlike manner and in
conformity with all applicable Governmental Rules of all Governmental Authorities having
jurisdiction 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
the Oil and Gas Properties, except to the extent the same could not reasonably be expected to have
a Material Adverse Effect.



     SECTION 6.18. Direct Benefit. The Borrowings hereunder are or will be, as applicable,
for the direct benefit of the Borrower. The Borrower and each of the Guarantors are engaged as an
integrated group in the business of oil and gas exploration and related fields, and any benefits to
any such Obligor is a benefit to all of them, both directly or indirectly, inasmuch as the
successful operation and condition of any such Obligor is dependent upon the continued successful
performance of the functions of the integrated group as a whole.



     SECTION 6.19. Use of Proceeds. The proceeds of the Loans shall be used in accordance
with the purposes set forth in Section 4.10.



     SECTION 6.20. Priority; Security Matters. The Obligations are and shall be at all
times secured by Liens in all Collateral to the extent perfection has or will occur by the filing
of a UCC financing statement in the States of Texas and Oklahoma, if applicable, the filing of a
Mortgage in real property records of the parish or county in which such real property or fixtures
are located (or adjacent in the case of properties located on the Outer Continental Shelf), or by
possession, and, except for Liens permitted by Section 7.2.3, all such Liens shall be first
priority Liens, subject only to Permitted Liens.





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ARTICLE VII




COVENANTS





     SECTION 7.1. Affirmative Covenants. The Borrower agrees with Collateral Agent, the
Collateral Agent and the Lenders that, until all Commitments have terminated and all Obligations
have been paid and performed in full, the Borrower will, and will cause its Subsidiaries to,
perform the obligations set forth in this Section 7.1.



     SECTION 7.1.1. Notices, etc. The Borrower will furnish, or will cause to be
furnished, to the Agents for distribution to the Lenders, copies of the following notices and
information:




     (a) Default. Immediately upon the Borrower learning of the occurrence of any
Default or anything that could reasonably be expected to have a Material Adverse Effect, a
statement of an Authorized Officer of the Borrower setting forth details of such Default or
Material Adverse Effect and the action that the Borrower or such other Obligor has taken and
proposes to take with respect thereto.




     (b) Litigation. Promptly upon the Borrower learning of (x) the occurrence of
any adverse development with respect to any litigation, action, proceeding, or labor
controversy described in Section 6.6 or (y) the commencement of any labor
controversy, litigation, action, proceeding of the type described in Section 6.6,
notice thereof and copies of all documentation relating thereto.




     (c) Notice of Dispositions of Properties.




     (i) Promptly upon the disposition of any Oil and Gas Properties or Equity
Interests pursuant to Section 7.2.10 or otherwise, and in any event within
five (5) Business Days of such disposition, the Borrower shall provide each Agent
with written notice of such disposition, setting forth a description of the Oil and
Gas Properties or Equity Interests so disposed of and the proceeds received in
connection with such disposition.




     (ii) Prior to the disposition of any Oil and Gas Properties pursuant to
Section 7.2.10(c), the Borrower shall give each Agent written notice at
least 10 days prior to the date of such disposition which sets out the proceeds to
be received by the Borrower or any of its Subsidiaries from such disposition and
certifies that no Default exists or would result from such disposition.




     (d) Notice of Material Adverse Change. As soon as possible and in any event
within five (5) days after the occurrence thereof, written notice of any matter that could
reasonably be expected to have a Material Adverse Effect.




     (e) Other. Such other information respecting the condition or operations,
financial or otherwise, of the Borrower or any of its Subsidiaries as any Agent or any
Lender may from time to time reasonably request, including, without limitation, such
information as may be required by Lender in order to comply with its obligations as borrower
under the AREP O&G Facility.




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     SECTION 7.1.2. Compliance with Laws, Maintenance of Existence, etc. The Borrower will
and will cause each of its Subsidiaries to:




     (a) comply in all material respects with all applicable laws, rules, regulations and
orders;




     (b) do all things necessary and proper to maintain and preserve its respective
corporate or other existence and franchises and privileges in the jurisdiction of its
formation and qualify and remain qualified as a foreign entity authorized to do business in
each jurisdiction in which it conducts business; and




     (c) pay, before the same become delinquent, all taxes, assessments and governmental
charges imposed upon it or upon its Property except to the extent being diligently contested
in good faith by appropriate proceedings and for which adequate reserves in accordance with
GAAP shall have been set aside on its books. The Borrower will conduct, and will cause each
Subsidiary to conduct, its business in an orderly and efficient manner in accordance with
good business practices.



     SECTION 7.1.3. Maintenance of Properties. The Borrower will, and will cause each of
its Subsidiaries to, maintain, preserve, protect and keep its and their respective Properties in
good repair, working order and condition, and make necessary and proper repairs, renewals and
replacements so that its business carried on in connection therewith may be properly conducted at
all times and otherwise do all other things necessary to keep unimpaired, except for Liens
permitted in Section 7.2.3, its rights with respect to its Oil and Gas Properties and
prevent any forfeiture thereof or a default thereunder, except to the extent a portion of such Oil
and Gas Properties is no longer capable of producing Hydrocarbons in economically reasonable
amounts and except for dispositions of Property permitted by Section 7.2.10. The Borrower
will, and will cause each of its Subsidiaries to, operate its and their respective Oil and Gas
Properties or cause or make reasonable efforts to cause such Oil and Gas Properties to be operated
in a reasonable and efficient manner in accordance with the practices of the industry and in
compliance with all applicable contracts and agreements and in compliance in all material respects
with all applicable laws, rules, regulations and orders of any applicable Governmental Authority.



     SECTION 7.1.4. Insurance.




     (a) The Borrower will, and will cause each of its Subsidiaries to, maintain or cause to
be maintained with responsible insurance companies insurance with respect to its and its
Subsidiaries’ Properties and business (including business interruption insurance) against
such casualties and contingencies and of such types and in such amounts as is customary in
the case of similar businesses and will, upon request of either Agent, furnish to the Agents
and the Lenders at reasonable intervals a certificate of an Authorized Officer of the
Borrower setting forth the nature and extent of all insurance maintained by the Borrower and
its Subsidiaries in accordance with this Section 7.1.4(a). Each insurance policy
covering Collateral shall provide that such policy will not be canceled or reduced without
thirty (30) days’ prior written notice to the Collateral Agent. In the event an Event of
Default occurs and continues for a period of thirty (30) consecutive days, the Borrower will
cause, within five (5) days, each insurance policy covering Collateral to name the
Collateral Agent as additional insured and loss payee for the benefit of itself, the Agents
and the Lenders.



39









 






     (b) NEG will maintain or cause to be maintained with responsible insurance companies
insurance with respect to its and its Subsidiaries’ Properties and business (including
business interruption insurance) relating to the Borrower against such casualties and
contingencies and of such types and in such amounts as is customary in the case of similar
businesses and will, upon request of either Agent, furnish to each Lender and each Agent at
reasonable intervals a certificate of an Authorized Officer of NEG setting forth the nature
and extent of all insurance maintained by NEG and its Subsidiaries in accordance with this
Section 7.1.4(b).



     SECTION 7.1.5. Books and Records. The Borrower will, and will cause each of its
Subsidiaries to, keep books and records which accurately reflect all of its business affairs and
transactions and permit the Administrative Agent, the Collateral Agent and each Lender or any of
their respective representatives, at reasonable times and intervals, to visit all of its offices,
to discuss its financial matters with its officers and independent public accountant (and the
Borrower hereby authorizes such independent public accountant to discuss the Borrower’s and its
Subsidiaries financial matters with each Lender or its representatives whether or not any
representative of the Borrower is present) and to examine (and, at the expense of the Borrower,
photocopy extracts from) any of its books or other corporate or organizational records. The
Borrower shall pay any fees of such independent public accountant incurred in connection with the
Administrative Agent’s, the Collateral Agents or any Lender’s exercise of its rights pursuant to
this Section 7.1.5.



     SECTION 7.1.6. Delivery of Security Documents; Perfection and Protection of Security
Interests and Liens; Additional Subsidiaries.




     (a) The Borrower agrees to deliver and to cause its Subsidiaries to deliver, to further
secure the Obligations whenever requested by the Collateral Agent, any Security Documents,
financing statements, continuation statements, extension agreements and other similar
agreements or instruments (in addition to those delivered on the Effective Date) in form and
substance satisfactory to the Collateral Agent for the purpose of granting, confirming and
perfecting first and prior liens or security interests in any real or personal Property
which is at such time Collateral or that was intended to be Collateral pursuant to any Loan
Document previously executed and not then released by the Collateral Agent; or Equity
Interests in each Subsidiary of the Borrower; provided, however, that the Borrower and its
Subsidiaries shall at all times maintain in effect in favor of the Collateral Agent such
Mortgages as are necessary to grant, confirm and perfect first and prior liens or security
interests in at least ninety percent (90%) of the net present value of the Oil and Gas
Properties of the Borrower and its Subsidiaries; and provided, further, however, that in the
event that the Hydrocarbon Interests on which the Collateral Agent has a first priority
perfected Lien shall constitute less than ninety percent (90%) of the net present value of
the Oil and Gas Properties of the Borrower and its Subsidiaries, the Borrower shall promptly
notify the Administrative Agent and the Collateral Agent and execute or cause to be executed
additional Mortgages necessary to increase such percentage to at least ninety percent (90%)
Oil and Gas Properties of the Borrower and its Subsidiaries, as determined by the Collateral
Agent in its reasonable discretion. The Borrower also agrees to deliver, and to cause its
Subsidiaries to deliver, whenever requested by the Collateral Agent, favorable title
opinions (in addition to those



40









 






required to be delivered under Article V) from legal counsel acceptable to the
Collateral Agent, or favorable title insurance policies from insurers acceptable to the
Collateral Agent with respect to any Collateral as to which the Collateral Agent believes
that the record ownership of such Collateral, or the status of Liens securing Obligations,
is in question, based upon abstract or record examinations to date acceptable to the
Collateral Agent, and (i) stating that the Borrower has good and marketable title to such
properties and interest, free and clear of all Liens except for Liens permitted pursuant to
Section 7.2.3; (ii) confirming that such properties and interest are subject to
Security Documents securing Obligations that constitute and create legal, valid and duly
perfected Liens to such properties and interests and the proceeds thereof, and (iii)
covering such other matters as the Collateral Agent may request.




     (b) The Borrower will and will cause its Subsidiaries to from time to time deliver or
cause to be delivered to the Collateral Agent any financing statements, continuation
statements, extension agreements and other documents, properly completed and executed (and
acknowledged when required) by the relevant Person, in form and substance satisfactory to
the Collateral Agent, which the Collateral Agent requests for the purpose of perfecting,
confirming or protecting any Liens or other rights in Collateral.




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




     (d) The Borrower will furnish to the Collateral Agent promptly, and in any event within
thirty (30) days upon becoming aware of the following changes, written notice of any change
(i) in any Subsidiary’s corporate name or in any trade name used to identify such Subsidiary
in the conduct of its business or in the ownership of its Properties, (ii) in the location
of any Subsidiary’s jurisdiction of organization, (iii) in any Subsidiary’s identity or
corporate structure, and (iv) in any Obligor’s Federal Taxpayer Identification Number,
including, without limitation, information regarding the time of such relocation, the items
being relocated and the intended new locality of such items. Borrower also agrees to
provide to the Collateral Agent, from time to time upon reasonable request of the Collateral
Agent, information which is in the possession of the Borrower or its Subsidiaries or
otherwise reasonably obtainable by any of them, reasonably satisfactory to the Collateral
Agent as to the perfection and priority of the Liens created or intended to be created by
the Security Documents. The Security Documents shall remain in effect at all times unless
otherwise released pursuant to the terms of this Agreement.




     (e) If any additional Subsidiary of the Borrower is formed or acquired after the
Closing Date, the Borrower will notify the Agents and the Lenders thereof. The



41









 






Borrower will (i) cause any Subsidiary to execute a Guaranty within 30 days after such
Subsidiary is formed or acquired and (ii) pledge, or cause any Subsidiary to pledge, all
Equity Interests in such newly determined Subsidiary pursuant to a Pledge Agreement.




     (f) The Original Credit Agreement was secured by a pledge and security interest
heretofore made by Lender covering its Equity Interests in NEG Holding. The parties
acknowledge and agree that such pledge and security interest has terminated and is not
collaterally assigned or pledged to Collateral Agent.



     SECTION 7.1.7. Use of Proceeds. The Borrower and its Subsidiaries will use the
proceeds of the Loans only in accordance with the purposes set forth in Section 4.10.



     SECTION 7.1.8. Title to Oil and Gas Properties. The Borrower shall, and shall cause
each Subsidiary to, maintain good and defensible title to its material (individually or in the
aggregate) Oil and Gas Properties, including, the Mortgaged Properties, if any, and to do all
things reasonably necessary to cure any material title defects that are not Liens permitted by
Section 7.2.3 of which the Borrower or any Subsidiary has knowledge or has been provided
notice.



     SECTION 7.2. Negative Covenants. The Borrower agrees with each Agent and each Lender
that, until all Commitments have terminated and all Obligations have been paid and performed in
full, the Borrower will, and will cause its Subsidiaries to, perform the obligations set forth in
this Section 7.2.



     SECTION 7.2.1. Business Activities. The Borrower will not, and will not permit any of
its Subsidiaries to, engage in any business activity except the Oil and Gas Business.



     SECTION 7.2.2. Indebtedness. The Borrower will not, and will not permit any of its
Subsidiaries to, create, incur, assume or suffer to exist or otherwise become or be liable with
respect to any Indebtedness other than the following, without duplication:




     (a) Indebtedness with respect to the Loans and other Obligations (including Obligations
under Hedging Agreements);




     (b) Indebtedness in an aggregate principal amount not to exceed $5,000,000 at any time
outstanding which is incurred by the Borrower or any of its Subsidiaries to a vendor of any
assets to finance the acquisition of such assets;




     (c) unsecured accounts payable by the Borrower incurred in the ordinary course of
business (including open accounts extended by suppliers on normal trade terms in connection
with purchases of goods and services, but excluding Indebtedness incurred through the
borrowing of money or Contingent Liabilities) which are not more than 90 days past due;




     (d) Indebtedness with respect to Capitalized Lease Liabilities in an aggregate
principal amount not to exceed $5,000,000 at any time outstanding;



42









 






     (e) Indebtedness of the Borrower with respect to Hedging Obligations; provided, that
(i) such Hedging Obligations with respect to commodities (including oil and gas) do not
exceed volumes with respect to any year in excess of eighty percent (80%) of the projected
production attributable to the Borrower’s then proved developed producing Oil and Gas
Properties with respect to such year, and are not with respect to forward sales of
production, and are included to protect the Borrower against price fluctuations and are not
entered into for the purpose of speculative investments; (ii) any Hedging Obligations with
respect to interest rates, are entered into with the purpose and effect of fixing and
capping interest rates on a principal amount of indebtedness of the Borrower that is
accruing interest at a variable rate; provided that (A) the floating rate index of each such
contract generally matches the index used to determine the floating rates of interest on the
corresponding indebtedness of the Borrower to be hedged by such contract; and (B) the
Borrower shall not establish or maintain any margin accounts with respect to such contracts;
and (iii) in each case, the underlying contracts are with any counterparty (or the parent
entity thereof) who at the time the contract is made has long-term obligations rated BBB+ or
better by Standard & Poor’s Ratings Group or Baa1 or better by Moody’s Investors Services,
Inc.;





     (f) Subordinated Debt of the Borrower; and





     (g) Indebtedness in respect of any letters of credit issued for the benefit of Borrower
or any of its Subsidiaries which do not in the aggregate (taking into account all such
Indebtedness of all Obligors) exceed $1,000,000 at any one time outstanding;


provided, however, that no Indebtedness otherwise permitted by clauses (b), (c),
(d), (e) or (f) shall be permitted if, after giving effect to the
incurrence thereof, any Default shall have occurred and be continuing.




     SECTION 7.2.3. Liens. The Borrower will not, and will not permit any of its
Subsidiaries to, create, incur, assume or suffer to exist any Lien upon any of its Property or
revenues, except, with respect to the Borrower and Shana National only, the following:




     (a) Liens securing payment of the Obligations and any Hedging Obligations owed to a
Lender or a Hedging Counterparty, granted pursuant to any Loan Document;




     (b) Liens securing payment of Indebtedness of the type permitted and described in
clause (g) of Section 7.2.2 and covering only cash collateral;




     (c) Liens granted to secure payment of Indebtedness of the type permitted and described
in clause (b) of Section 7.2.2 and covering only those assets acquired with
the proceeds of such Indebtedness;




     (d) Liens for taxes, assessments or other governmental charges or levies not at the
time delinquent or thereafter payable without penalty or being diligently contested in good
faith by appropriate proceedings and for which adequate reserves in accordance with GAAP
shall have been set aside on its books;




43









 







     (e) Liens of carriers, warehousemen, mechanics, materialmen and landlords incurred in
the ordinary course of business for sums not overdue or being diligently contested in good
faith by appropriate proceedings and for which adequate reserves in accordance with GAAP
shall have been set aside on its books;




     (f) Liens incurred in the ordinary course of business in connection with workmen’s
compensation, unemployment insurance or other forms of governmental insurance or benefits,
or to secure performance of tenders, statutory obligations, leases and contracts (other than
for borrowed money) entered into in the ordinary course of business or to secure obligations
on surety or appeal bonds;




     (g) Judgment Liens in existence fewer than fifteen (15) days after the entry thereof or
with respect to which execution has been stayed or the payment of which is covered in full
(subject to a customary deductible) by insurance maintained with responsible insurance
companies; and




     (h) Liens of operators under joint operating agreements or similar contractual
arrangements with respect to the Borrower’s or such Subsidiary’s proportionate share of the
expense of exploration, development and operation of oil, gas and mineral leasehold or fee
interests owned jointly with others, to the extent that same relate to sums not yet due or
that are being contested in good faith by appropriate action promptly initiated and
diligently conducted and in such manner as not to jeopardize the Administrative Agent’s, the
Collateral Agent’s or any Lender’s rights in and to any Collateral, if cash reserves shall
have been provided therefor.



     SECTION 7.2.4. Financial Covenants.




     (a) EBITDA to Interest Expense Ratio. The Borrower will not permit its ratio
of EBITDA to Total Interest Expense (calculated quarterly at the end of each Fiscal Quarter
on a rolling four quarter basis) to be less than 9.0 to 1.0 at any time.




     (b) Tangible Net Worth. The Borrower will not permit its Tangible Net Worth at
any time to be less than the sum of (1) $139,943,849.40 plus (2) fifty percent (50%) of the
Net Cash Proceeds from the sale of any Equity Interests of the Borrower after the Effective
Date; provided, however, that non-cash gains and losses, including, without limitation, FASB
133, 142, 143 and 144 non-cash gains and losses shall be excluded from the foregoing
calculation (to the extent otherwise included therein).




     (c) Current Ratio. The Borrower will not permit its Current Ratio to be less
than 1.0 to 1.0 at any time.




     (d) Indebtedness to EBITDA Ratio. The Borrower will not permit its ratio of
Indebtedness to EBITDA (calculated quarterly at the end of each Fiscal Quarter on a rolling
four quarter basis) to exceed 3.0 to 1.0 at any time.



     SECTION 7.2.5. Investments. The Borrower will not, and will not permit any of its
Subsidiaries to, make, incur, assume or suffer to exist any Investment in any other Person, except:



44









 






     (a) Investments existing on the Closing Date and identified in Item 7.2.5 of the
Disclosure Schedule;




     (b) without duplication, Investments permitted as Indebtedness pursuant to Section
7.2.2;




     (c) Investments by the Borrower in the ordinary course of business to support the
normal and customary oil and gas operations undertaken by the Borrower through joint
ventures or partnerships engaged in the Oil and Gas Business in an aggregate amount at any
time not to exceed $12,000,000;




     (d) with the approval of the Required Lenders, Investments by the Borrower and its
Subsidiaries (except NGX GP, NGX LP and NGX Energy) in Equity Interests of other Persons
engaged in the Oil and Gas Business which are not Affiliates of the Borrower or any other
Obligor in an aggregate amount at any time not to exceed $5,000,000;




     (e) (i) Investments by the Borrower in Equity Interests of NGX GP and NGX LP and (ii)
Investments by NGX GP and NGX LP in Equity Interests of NGX Energy, in each case as
heretofore made in connection with the formation of NGX GP, NGX LP and NGX Energy; and




     (f) capital contributions by the Borrower in NGX GP and NGX LP, and the immediately
subsequent capital contributions by NGX GP and NGX LP in NGX Energy, in each case solely in
connection with the transfer of a one percent (1%) “beneficial” interest in any newly
acquired assets of the Borrower; provided, however, that, contemporaneously with any such
capital contribution, the Borrower shall cause NGX Energy to execute and deliver any
Security Documents required pursuant to the terms of this Agreement;




provided, however, the purchase price with respect to acquisitions permitted by and effected
pursuant to Section 7.2.8(b) shall reduce dollar per dollar the $12,000,000 Investment
limitation set forth in clause (c) above; provided further, that no Investment otherwise
permitted by clauses (c) and (d) above shall be permitted to be made if, immediately before
or after giving effect thereto, any Default shall have occurred and be continuing; and
provided further that any such Investment shall only be permitted if the Borrower gives the
Administrative Agent written notice of such investment within five (5) Business days of the
making of such Investment; and provided, further, that the Borrower may, in the ordinary
course of business, acquire or make investments in the Oil and Gas Properties of another
Person.



     SECTION 7.2.6. Restricted Payments, etc. On and at all times after the Closing Date,




     (a) except as set forth below, the Borrower will not declare and will not permit any
Subsidiary to pay or make any dividend or distribution (in cash, property or obligations) on
any shares (or other securities) of any class of the Borrower’s Equity Interests (now or
hereafter outstanding) or on any warrants, options or other rights with



45









 






respect to any shares (or other securities) of any class of such Equity Interests (now
or hereafter outstanding) or apply, or permit any of its Subsidiaries to apply, any of its
funds or Property to the purchase, redemption, sinking fund or other retirement of, or agree
or permit any of its Subsidiaries to purchase or redeem, any shares (or other securities) of
any class of the Borrower’s Equity Interests (now or hereafter outstanding), or warrants,
options or other rights with respect to any shares (or other securities) of any class of the
Borrower’s Equity Interests (now or hereafter outstanding);




     (b) except as set forth below, (i) the Borrower will not, and will not permit any
Subsidiary to, pay any portion of the Management Fee to NEG and (ii) the Borrower will not
pay any NEG Guaranteed Payments (as defined in the NEG Holding Operating Agreement) pursuant
to Section 6.5 of the NEG Holding Operating Agreement to NEG;




     (c) the Borrower will not, and will not permit any of its Subsidiaries to (i) make any
payment or prepayment of principal of, or make any payment of interest on, any Subordinated
Debt on any day other than the stated, scheduled date for such payment or prepayment
permitted in the documents and instruments memorializing such Subordinated Debt; (ii) make
any payment or prepayment of principal of, or make any payment of interest on, any
Subordinated Debt which would violate the subordination provisions of such Subordinated
Debt; or (iii) redeem, purchase or defease, any Subordinated Debt; and




     (d) the Borrower will not, and will not permit any Subsidiary to, make any deposit for
any of the foregoing purposes;


provided, however, that the Borrower and its Subsidiaries shall be allowed to effect a dividend or
distribution otherwise restricted by clauses (a) or (b) above (subject at all
times, however, with respect to any payment of a Management Fee, to the limitations set forth in
Section 7.2.13) if and only if, prior to payment of the proposed dividend or distribution,
the Borrower delivers to each Agent a compliance certificate executed by an Authorized Officer of
the Borrower containing a statement to the effect that the Borrower has not become aware of any
Default or Event of Default that has occurred or is continuing.




     SECTION 7.2.7. Take or Pay Contracts. The Borrower will not, and will not permit any
of its Subsidiaries to, enter into or be a party to any arrangement for the purchase of materials,
supplies, other Property or services if such arrangement by its express terms requires that payment
be made by the Borrower or such Subsidiary regardless of whether such materials, supplies, other
Property or services are delivered or furnished to it.



     SECTION 7.2.8. Consolidation, Merger, etc. The Borrower will not, and will not permit
any of its Subsidiaries to, liquidate or dissolve, consolidate with, or merge into or with, any
other Person, or purchase or sell, lease or otherwise dispose of (whether in one transaction or a
series of transactions) all or substantially all of its Property or assets to any other Person
except that:




     (a) (i) (A) any Subsidiary of the Borrower may be merged or consolidated with or into
the Borrower and (B) any Subsidiary of the Borrower (except NGX Energy)



46









 






may be merged or consolidated with or into any Wholly-Owned Subsidiary; (ii) (A) the
Property or Equity Interests of any Subsidiary may be purchased or otherwise acquired by the
Borrower and (B) the Property or Equity Interests of any Subsidiary (except NGX Energy) may
be purchased or otherwise acquired by any Wholly-Owned Subsidiary; provided that in any such
transaction involving the Borrower or any Wholly-Owned Subsidiary, the Borrower or such
Wholly-Owned Subsidiary shall be the surviving or continuing entity; and (iii)(A) any
Subsidiary (except NGX Energy) may sell, lease, transfer or otherwise dispose of any or all
of its assets (upon voluntary liquidation or otherwise) to the Borrower and (B) any
Subsidiary may sell, lease, transfer or otherwise dispose of any or all of its assets (upon
voluntary liquidation or otherwise) to any Wholly-Owned Subsidiary;




     (b) so long as (i) permitted by Section 7.2.5 and (ii) no Default has occurred and is
continuing or would occur after giving effect thereto, the Borrower or Shana National may
purchase all or substantially all of the assets of any Person (except, as to Shana National,
assets of NGX GP, NGX LP or NGX Energy), or acquire such Person by merger (except, as to
Shana National, assets of NGX GP, NGX LP or NGX Energy) that, in the discretion of the
Agents, is engaged in the Oil and Gas Business; provided that in any merger involving the
Borrower or Shana National, the Borrower or Shana National shall be the surviving or
continuing entity; and




     (c) the Borrower may sell, transfer or otherwise dispose of to NGX Energy a one percent
(1%) “beneficial” interest in any or all of its hereafter acquired assets; provided,
however, that, contemporaneously with such sale, transfer or other disposition, the Borrower
shall cause NGX Energy to execute and deliver any Security Documents required pursuant to
the terms of this Agreement.



     SECTION 7.2.9. Sale or Discount of Receivables. Neither the Borrower nor any
Subsidiary will discount or sell (with or without recourse) any of its notes receivable or accounts
receivable.



     SECTION 7.2.10. Asset Dispositions, etc. The Borrower will not, and will not permit
any of its Subsidiaries to, sell, assign, farm-out, transfer, lease, contribute, convey or
otherwise transfer, or grant options, warrants or other rights to any Person (each a “Transfer”)
any of its Property (including, without limitation, accounts receivable, Equity Interests of
Subsidiaries and the Oil and Gas Properties), except for:




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




     (b) the sale or transfer of equipment that is obsolete, worn out, depleted or
uneconomic and disposed of in the ordinary course of business;




     (c) the sale, transfer or other disposition for cash in one or more transactions of
Properties of the Borrower and its Subsidiaries (except NGX GP and NGX LP), to Persons other
than Affiliates of the Borrower, provided that the aggregate proceeds received by the
Borrower or such Subsidiaries from the sale, transfer or disposal of such Properties during
any six month period from any January 1 through the following June 30



47









 






or from any July 1 through the following December 31 shall not exceed four percent (4%)
of the Borrowing Base;




     (d) sales of Equity Interests in the Borrower to NEG Holding; and




     (e) dispositions permitted by Section 7.2.8;


provided, however, that no Transfer shall be permitted pursuant to clause (c) if a Default
or an Event of Default shall have occurred or be continuing or result therefrom.




     SECTION 7.2.11. Modification of Certain Agreements. The Borrower will not consent to
any amendment, supplement or other modification of any of the terms or provisions contained in, or
applicable to any document or instrument evidencing or applicable to any Subordinated Debt, other
than any amendment, supplement or other modification which extends the date or reduces the amount
of any required repayment or redemption. Furthermore, the Borrower will not (a) consent to any
amendment, supplement or other modification of the NEG Management Agreement or (b) amend,
supplement or otherwise modify, or permit any Subsidiary to amend, supplement or otherwise modify,
any Organic Documents of a Subsidiary, unless previously consented to in writing by each Agent.



     SECTION 7.2.12. Transactions with Affiliates. Except for Permitted NEG Affiliate
Transactions and pursuant hereto, neither the Borrower nor any Subsidiary will enter into any
transaction, including, without limitation, any purchase, sale, lease or exchange of Property or
the rendering of any service, with any Affiliate unless such transactions are otherwise permitted
under this Agreement, are in the ordinary course of its business and are upon fair and reasonable
terms no less favorable to it than it would obtain in a comparable arm’s length transaction with a
Person not an Affiliate.



     SECTION 7.2.13. Payment of Management Fee. The Borrower will not, and will not permit
any of its Subsidiaries to, pay to NEG any portion of the NEG Management Fee (i) during any Fiscal
Quarter, to the extent that such NEG Management Fee exceeds ten percent (10%) of the quarterly
gross revenues for the Borrower and its Consolidated Subsidiaries, and (ii) during any Fiscal Year,
to the extent that such NEG Management Fee exceeds ten percent (10%) of the annual gross revenues
for the Borrower and its Consolidated Subsidiaries.



     SECTION 7.2.14. Negative Pledges, Restrictive Agreements, etc. The Borrower will not,
and will not permit any of its Subsidiaries to, enter into any agreement (excluding this Agreement,
any other Loan Document and, with respect to clause (a) below, by clause (b) of
Section 7.2.2 solely as to the assets financed with the proceeds of such Indebtedness)
prohibiting:




     (a) the creation or assumption of any Lien upon its Oil and Gas Properties or other
Property, whether now owned or hereafter acquired; or




     (b) the ability of the Borrower or any other Obligor to amend or otherwise modify this
Agreement or any other Loan Document; or




     (c) the ability of any Subsidiary to make any payments, directly or indirectly, to the
Borrower by way of dividends, advances, repayments of loans or advances,



48









 






reimbursements of management and other intercompany charges, expenses and accruals or
other returns on investments, or any other agreement or arrangement which restricts the
ability of any such Subsidiary to make any payment, directly or indirectly, to the Borrower.



     SECTION 7.2.15. Creation of Subsidiaries. The Borrower will not, and will not permit
any of its Subsidiaries to, create or allow to be created any Subsidiary not already existent and
listed on Item 6.8 of the Disclosure Schedule, without the prior written consent of the each Agent
and each Lender; provided, however, that, in the event that the Borrower deems it necessary or
desirable to effect a corporate restructuring requiring the formation of Subsidiaries, the
Administrative Agent agrees on behalf of itself and the Lenders to reasonably consider and discuss
the feasibility of such restructuring.



     SECTION 7.2.16. Leases. The Borrower will not, and will not permit any of its
Subsidiaries to create, incur, assume or permit to exist any obligation for the payment of rent or
hire of Property of any kind whatsoever (real or personal, but excluding leases of Hydrocarbon
Interests, oil and gas operating agreements and Capitalized Lease Liabilities), under leases or
lease agreements that would cause the aggregate amount of all payments made by the Borrower and its
Subsidiaries pursuant to all such leases or lease agreements to exceed $500,000 in any period of
twelve consecutive calendar months during the life of such leases.



     SECTION 7.2.17. Sale and Leaseback Transactions. Neither the Borrower nor any
Subsidiary will enter into any arrangement, directly or indirectly, with any Person whereby the
Borrower or any Subsidiary shall sell or transfer any of its Property, whether now owned or
hereafter acquired, and whereby the Borrower or any Subsidiary shall then or thereafter rent or
lease as lessee such Property or any part thereof or other Property that the Borrower or any
Subsidiary intends to use for substantially the same purpose or purposes as the Property sold or
transferred.



ARTICLE VIII




EVENTS OF DEFAULT




     SECTION 8.1. Listing of Events of Default. Each of the following events or
occurrences described in this Section 8.1 shall constitute an “Event of Default”.



     SECTION 8.1.1. Non-Payment of Obligations. Any Obligor shall default in the payment
or prepayment when due of any principal of or interest on any Loan; or of any fees or any other
obligation hereunder or under any other Loan Document, and such default other than a default of a
payment or prepayment of principal (which shall have no cure period), shall continue unremedied for
a period of three (3) days.



     SECTION 8.1.2. Breach of Representation or Warranty. Any representation or warranty
of any Obligor made or deemed to be made hereunder or in any other Loan Document executed by it or
any other writing or certificate furnished by or on behalf of any Obligor to either Agent or any
Lender for the purposes of or in connection with this Agreement or any such



49









 




other Loan Document (including any certificates delivered pursuant to Article V) is or
shall be false or in any material respect incorrect when made or deemed made.




     SECTION 8.1.3. Non-Performance of Certain Covenants and Obligations.




     (a) The Borrower shall default in the due performance and observance of any of its
obligations under Section 7.2; or




     (b) The Borrower shall default in the due performance and observance of any of its
obligations under any other Section of this Agreement, or any Obligor shall default in the
performance of its obligations under any other Loan Document (other than the payment of
amounts due which shall be governed by Section 8.1.1) and such default shall
continue unremedied for a period of thirty (30) days after the earlier to occur of (i)
notice thereof to the Borrower by either Agent, or (ii) the Borrower otherwise becoming
aware of such default.



     SECTION 8.1.4. Default on Other Indebtedness. (a) A default shall occur in the
payment when due (subject to any applicable grace period), whether by acceleration or otherwise, of
any Indebtedness (other than Indebtedness described in Section 8.1.1) of the Borrower or
any of its Subsidiaries, or any other Obligor, having a principal amount, individually or in the
aggregate, in excess of $5,000,000, (b) a default shall occur with respect to any Hedging
Obligation to any Hedging Counterparty or any Affiliate of a Hedging Counterparty, such default
being, individually or in the aggregate, in excess of $5,000,000, or (c) a default shall occur in
the performance or observance of any obligation or condition with respect to such Indebtedness if
the effect of such default is to accelerate the maturity of any such Indebtedness or such default
shall continue unremedied for any applicable period of time sufficient to permit the holder or
holders of such Indebtedness, or any trustee or agent for such holders, to cause such Indebtedness
to become or be declared due and payable prior to its expressed maturity.



     SECTION 8.1.5. Judgments. Any judgment or order for the payment of money in excess of
$5,000,000 shall be rendered against the Borrower or any of its Subsidiaries, or any other Obligor,
and either




     (a) enforcement proceedings shall have been commenced by any creditor upon such
judgment or order; or




     (b) there shall be any period of ten (10) consecutive days during which a stay of
enforcement of such judgment or order, by reason of a pending appeal or otherwise, shall not
be in effect.



     SECTION 8.1.6. Pension Plans. Either (i) any “accumulated funding deficiency” (as
defined in Section 412(a) of the Internal Revenue Code) in excess of $1,000,000 exists with respect
to any ERISA Plan, whether or not waived by the Secretary of the Treasury or his delegate, or (ii)
any Termination Event occurs with respect to any ERISA Plan and the then current value of such
ERISA Plan’s benefit liabilities exceeds the then current value of such ERISA Plan’s assets
available for the payment of such benefit liabilities by more than



50









 




$1,000,000 (or in the case of a Termination Event involving the withdrawal of a substantial
employer, the withdrawing employer’s proportionate share of such excess exceeds such amount);




     SECTION 8.1.7. Change of Control. Any Change in Control shall occur.



     SECTION 8.1.8. Bankruptcy, Insolvency, etc. The Borrower, any of its Subsidiaries, or
any other Obligor, shall:




     (a) be liquidated or become insolvent or generally fail to pay, or admit in writing its
inability or unwillingness to pay, debts as they become due;




     (b) apply for, consent to, or acquiesce in, the appointment of a trustee, receiver,
sequestrator or other custodian for the Borrower or any of its Subsidiaries, or any other
Obligor, or any Property of any thereof, or make a general assignment for the benefit of
creditors;




     (c) in the absence of such application, consent or acquiescence, permit or suffer to
exist the appointment of a trustee, receiver, sequestrator or other custodian for the
Borrower or any of its Subsidiaries, or any other Obligor, or for a substantial part of the
Property of any thereof, and such trustee, receiver, sequestrator or other custodian shall
not be discharged within sixty (60) days, provided that the Borrower, its Subsidiaries, and
the other Obligors hereby expressly authorizes each Agent and each Lender to appear in any
court conducting any relevant proceeding during such 60-day period to preserve, protect and
defend their rights under the Loan Documents;




     (d) permit or suffer to exist the commencement of any bankruptcy, reorganization,
liquidation, debt arrangement or other case or proceeding under any bankruptcy or insolvency
law, or any dissolution, winding up or liquidation proceeding, with respect to the Borrower
or any of its Subsidiaries, or any other Obligor, and, if any such case or proceeding is not
commenced by the Borrower or such Subsidiary or such other Obligor, such case or proceeding
or winding up shall be consented to or acquiesced in by the Borrower or such Subsidiary or
such other Obligor or shall result in the entry of an order for relief or shall remain for
sixty (60) days undismissed, provided that each Obligor and each Subsidiary hereby expressly
authorizes each Agent and each Lender to appear in any court conducting any such case or
proceeding during such 60-day period to preserve, protect and defend their rights under the
Loan Documents; or




     (e) take any action authorizing, or in furtherance of, any of the foregoing.



     SECTION 8.1.9. Impairment of Security, etc. Any Loan Document or any Lien granted
thereunder shall (except in accordance with its terms), in whole or in part, terminate, cease to be
effective or cease to be the legally valid, binding and enforceable obligation of any Obligor party
thereto (for any reason other than its release or subordination by the Collateral Agent); any
Obligor or any other party shall, directly or indirectly, contest in any manner such effectiveness,
validity, binding nature or enforceability; or any Lien securing any Obligation shall, in whole or
in part, cease to be a perfected first priority Lien, subject only to those exceptions expressly
permitted by such Loan Document.



51









 





     SECTION 8.1.10. NEG Management Agreement. The NEG Management Agreement is terminated,
cancelled or otherwise deemed unenforceable.



     SECTION 8.1.11. Attachment, etc. The Borrower or any of its Subsidiaries, or any
other Obligor, suffers a writ or warrant of attachment or any similar process to be issued by any
Governmental Authority against all or any substantial part of its assets or any part of the
Collateral, and such writ or warrant of attachment or any similar process is not stayed or released
within thirty days after the entry or levy thereof or after any stay is vacated or set aside.



     SECTION 8.2. Action if Bankruptcy. If any Event of Default described in clauses
(a) through (d) of Section 8.1.8 shall occur, the Commitments (if not
theretofore terminated) shall automatically terminate and the outstanding principal amount of all
outstanding Loans and all other Obligations shall automatically be and become immediately due and
payable, without notice or demand.



     SECTION 8.3. Action if Other Event of Default. If any Event of Default (other than
any Event of Default described in clauses (a) through (d) of Section 8.1.8
with respect to the Borrower or any Subsidiary or any other Obligor) shall occur for any reason,
whether voluntary or involuntary, and be continuing, the Administrative Agent may by notice to the
Borrower declare all or any portion of the outstanding principal amount of the Loans and other
Obligations to be due and payable without further notice, demand or presentment, and/or the
Commitments (if not theretofore terminated) to be terminated, whereupon the full unpaid amount of
such Loans and other Obligations which shall be so declared due and payable shall be and become
immediately due and payable, without further notice, demand or presentment, and/or, as the case may
be, the Commitments shall terminate.



     SECTION 8.4. Application of Proceeds. Notwithstanding any provision of this Credit
Agreement or the Security Documents to the contrary, in the case of any sale of any Collateral,
whether voluntary sale or foreclosure under any Security Documents, the proceeds and all other
proceeds that then may be held or recovered by the Administrative Agent or the Collateral Agent for
the benefit of Lenders, shall be applied in the following order:




     (a) First, to the payment of the costs and expenses of the sale and of the collection
or enforcement of the Collateral, and reasonable compensation to Administrative Agent and
Collateral Agent, their agents and attorneys, and of all expenses and liabilities incurred
and advances made by Administrative Agent and Collateral Agent in connection therewith;




     (b) Second, to the payment of all expenses of Lenders (or Affiliates of Lenders) which
the Borrower is obligated to pay pursuant to this Credit Agreement or any other Loan
Document;




     (c) Third, to the payment ratably of the sum of (i) amounts due for principal and
interest on all Loans then outstanding, and (ii) amounts owed as the Hedging Obligations to
any Hedging Counterparty, without preference or priority of the indebtedness owing to one
Lender or Hedging Counterparty over another, or of Loans over Hedging Obligations, or of
principal over interest; and



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     (d) Fourth, after payment in full in cash of all of the Obligations, the termination of
all Commitments and all other commitments by all Lenders, to the Borrower and the other
Obligors, to the payment of the surplus of such cash or cash proceeds, if any, to the
Borrower, or to whomsoever may be lawfully entitled to receive the same, or as a court of
competent jurisdiction may direct.



ARTICLE IX




THE AGENTS




     SECTION 9.1. Actions. Each of the Lenders hereby irrevocably appoints AREP O&G as the
Administrative Agent under this Agreement, and each of the Lenders hereby irrevocably appoints
Citicorp USA, Inc. as the Collateral Agent under and for purposes of this Agreement, the Notes and
each other Loan Document. Each Lender authorizes each such Agent to act as contemplated under this
Agreement, the Notes and each other Loan Document and to exercise such powers hereunder and
thereunder as are specifically delegated to or required of such Agents by the terms hereof and
thereof, together with such powers as may be reasonably incidental thereto. Each Lender hereby
indemnifies (which indemnity shall survive any termination of this Agreement) the Administrative
Agent and the Collateral Agent pro rata according to such Lender’s percentage of
all of the outstanding Obligations owing to all Lenders, whether or not related to any
singular, joint or concurrent negligence of the Administrative Agent or the Collateral
Agent, from and against any and all liabilities, obligations, losses, damages, claims,
costs or expenses of any kind or nature whatsoever which may at any time be imposed on, incurred
by, or asserted against, the Administrative Agent or the Collateral Agent in any way relating to or
arising out of this Agreement, the Notes and any other Loan Document, including reasonable
attorneys’ fees, and as to which the Administrative Agent or the Collateral Agent, as the case may
be, is not reimbursed by the Borrower; provided, however, that no Lender shall be liable for the
payment of any portion of such liabilities, obligations, losses, damages, claims, costs or expenses
which are determined by a court of competent jurisdiction in a final proceeding to have resulted
solely from the Collateral Agent’s or the Collateral Agent’s gross negligence or willful
misconduct. Neither the Administrative Agent nor the Collateral Agent shall be required to take
any action hereunder, under the Notes or under any other Loan Document, or to prosecute or defend
any suit with respect to this Agreement, the Notes or any other Loan Document, unless it is
indemnified hereunder to its satisfaction. If any indemnity in favor of the Administrative Agent
or the Collateral Agent shall be or become inadequate, in the Administrative Agent’s or the
Collateral Agent’s determination, as the case may be, the Administrative Agent or the Collateral
Agent may call for additional indemnification from the Lenders and cease to do the acts indemnified
against hereunder until such additional indemnity is given. Notwithstanding any provision to the
contrary contained elsewhere in this Agreement or in any other Loan Document, neither the
Administrative Agent nor the Collateral Agent shall have any duties or responsibilities, except as
expressly set forth herein, nor shall the Administrative Agent or the Collateral Agent have or be
deemed to have any fiduciary relationship with any Lender or Hedging Counterparty, as applicable,
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 the Administrative
Agent or the Collateral Agent. Without limitation of the foregoing, each of Borrower and Lenders
acknowledges and agrees that the Collateral Agent



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has no duty or obligation to them that in any way restricts the Collateral Agent from
exercising its rights and remedies, and carrying out any duties that it may have, in its various
capacities as Hedging Counterparty, AREP Agent, or AREP Lender.




     SECTION 9.2. Funding Reliance, etc. Unless the Administrative Agent shall have been
notified by telephone, confirmed in writing, by any Lender by 5:00 p.m., New York time, on the day
prior to a Borrowing that such Lender will not make available the amount which would constitute its
Percentage of such Borrowing on the date specified therefor, the Administrative Agent may assume
that such Lender has made such amount available to the Administrative Agent and, in reliance upon
such assumption, make available to the Borrower a corresponding amount. If and to the extent that
such Lender shall not have made such amount available to the Administrative Agent, such Lender and
the Borrower severally agree to repay the Administrative Agent immediately on demand such
corresponding amount together with interest thereon, for each day from the date the Administrative
Agent made such amount available to the Borrower to the date such amount is repaid to the
Administrative Agent, at the interest rate applicable at the time to Loans comprising such
Borrowing.



     SECTION 9.3. Exculpation. Neither the Administrative Agent nor the Collateral Agent
(in their capacities as such), nor any of their respective directors, officers, employees or
agents, shall be liable to any Lender for any action taken or omitted to be taken by it under this
Agreement or any other Loan Document, or in connection herewith or therewith, except for its own
willful misconduct or gross negligence, nor responsible for any recitals or warranties herein or
therein, nor for the effectiveness, enforceability, validity or due execution of this Agreement or
any other Loan Document, nor for the creation, perfection or priority of any Liens purported to be
created by any of the Loan Documents, or the validity, genuineness, enforceability, existence,
value or sufficiency of any collateral security, nor to make any inquiry respecting the performance
by the Borrower of its obligations hereunder or under any other Loan Document. Any such inquiry
that may be made by the Administrative Agent or the Collateral Agent shall not obligate it to make
any further inquiry or to take any action. Each of the Administrative Agent and the Collateral
Agent shall be entitled to rely upon advice of counsel concerning legal matters and upon any
notice, consent, certificate, statement or writing which the Administrative Agent or the Collateral
Agent believes to be genuine and to have been presented by a proper Person.*



     SECTION 9.4. Successors.




     (a) Subject to the appointment of a successor as provided below, the Administrative
Agent or the Collateral Agent may resign as such at any time upon at least thirty (30) days’
prior notice to the Borrower, all Lenders and all Hedging Counterparties. If the
Administrative Agent at any time shall resign, the Lenders may appoint another Lender as the
successor Administrative Agent, which shall thereupon become the Administrative Agent
hereunder. If the Collateral Agent shall at any time resign, the resigning Collateral Agent
may appoint a Hedging Counterparty as the successor





 




			
	1	 	Since the Hedging Counterparties will not
be parties to this Agreement, they need to give this exculpation to the
Collateral Agent in the Mortgages.





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Collateral Agent, which shall thereupon become the Collateral Agent hereunder. If a
successor Administrative Agent or Collateral Agent shall have been so appointed, but shall
not have accepted such appointment, within thirty (30) days after notice of resignation of
the retiring Administrative Agent or Collateral Agent, as the case may be, then the retiring
Administrative Agent or Collateral Agent, as the case may be, may appoint a successor
Administrative Agent or Collateral Agent, respectively, which shall be one of the Hedging
Counterparties or a commercial banking institution organized under the laws of the U.S. (or
any State thereof) or a U.S. branch or agency of a commercial banking institution, and
having a combined capital and surplus of at least $100,000,000. Upon the acceptance of any
appointment as Administrative Agent or Collateral Agent hereunder by a successor
Administrative Agent or Collateral Agent, respectively, such successor Administrative Agent
or Collateral Agent shall be entitled to receive from the retiring Administrative Agent or
Collateral Agent such documents of transfer and assignment as such successor Administrative
Agent or Collateral Agent may reasonably request, and shall thereupon succeed to and become
vested with all rights, powers, privileges and duties of the retiring Administrative Agent
or Collateral Agent, and the retiring Administrative Agent or Collateral Agent shall be
discharged from its duties and obligations under this Agreement. After any retiring
Administrative Agent’s or Collateral Agent’s resignation hereunder as the Administrative
Agent or Collateral Agent, respectively, the provisions of this Article IX shall
inure to its benefit as to any actions taken or omitted to be taken by it while it was the
Administrative Agent or Collateral Agent under this Agreement; and Section 10.3 and
Section 10.4 shall continue to inure to its benefit.




     (b) Each of the Borrower, the Lenders, the Administrative Agent, and the Collateral
Agent:




     (i) acknowledges and agrees that AREP O&G has pledged and granted a security
interest in all of its rights and powers under the Loan Documents, whether as Lender
or as Administrative Agent, to the AREP Agent,




     (ii) consents to and approves such pledge and security agreement,




     (iii) agrees that it will accept the AREP Agent as the Person entitled to
exercise the rights and powers of AREP O&G under the Loan Documents at any time when
the AREP Agent has declared that an “Event of Default” exists under the AREP O&G
Facility, and agrees further that the AREP Agent may possess and exercise such
rights and powers without assuming or otherwise becoming liable for any liabilities
or duties of AREP O&G in any of its capacities under the Loan Documents, and




     (iv) agrees that the AREP Agent is an express third party beneficiary of the
Loan Documents.



     SECTION 9.5. Extensions of Credit by the Agents. Each of the Agents shall have the
same rights and powers with respect to (x) the Loans made by it or any of its Affiliates, (y)



55









 




the Notes held by it or any of its Affiliates, and (z) the rights and powers held by it as
lender to or pledgee of AREP O&G, as any other Lender or Hedging Counterparty, as applicable, and
may exercise the same as if it were not an Agent. Each of the Agents and their respective
Affiliates may accept deposits from, lend money to, and generally engage in any kind of business
with the Borrower or any Subsidiary or Affiliate of the Borrower as if it were not an Agent
hereunder, as the case may be.




     SECTION 9.6. Credit Decisions. Each Lender acknowledges that it has, independently of
the Agents and each other Lender and Hedging Counterparty, and based on such Person’s review of the
financial information and reserve based information of the Borrower and its Subsidiaries, this
Agreement, the other Loan Documents (the terms and provisions of which being satisfactory to such
Lender) and such other documents, information and investigations as such Person has deemed
appropriate, made its own credit decision to extend its Commitment. Each Lender also acknowledges
that it will, independently of the Agents and each other Lender and Hedging Counterparty, and based
on such other documents, information and investigations as it shall deem appropriate at any time,
continue to make its own credit decisions as to exercising or not exercising from time to time any
rights and privileges available to it under this Agreement or any other Loan Document.



     SECTION 9.7. Copies, etc. The Administrative Agent shall give prompt notice to the
Collateral Agent, each Lender and Hedging Counterparty of each notice or request required or
permitted to be given to the Administrative Agent by the Borrower pursuant to the terms of this
Agreement (unless concurrently delivered to the Lenders by the Borrower). The Administrative Agent
will distribute to the Collateral Agent, each Lender and each Hedging Counterparty each document or
instrument received for its account and copies of all other communications received by the
Administrative Agent from the Borrower for distribution to the Collateral Agent and the Lenders in
accordance with the terms of this Agreement.



ARTICLE X




MISCELLANEOUS PROVISIONS




     SECTION 10.1. Waivers, Amendments, etc. The provisions of this Agreement and of each
other Loan Document may from time to time be amended, modified or waived, if such amendment,
modification or waiver is in writing and consented to by the Borrower, the Lenders and the Agents.
No failure or delay on the part of any Agent, any Lender, any Hedging Counterparty or the holder of
any Note in exercising any power or right under this Agreement or any other Loan Document shall
operate as a waiver thereof, nor shall any single or partial exercise of any such power or right
preclude any other or further exercise thereof or the exercise of any other power or right. No
notice to or demand on the Borrower in any case shall entitle it to any notice or demand in similar
or other circumstances. No waiver or approval by any Agent, any Lender, any Hedging Counterparty or
the holder of any Note under this Agreement or any other Loan Document shall, except as may be
otherwise stated in such waiver or approval, be applicable to subsequent transactions. No waiver
or approval hereunder shall require any similar or dissimilar waiver or approval thereafter to be
granted hereunder.



56









 





     SECTION 10.2. Notices. All notices and other communications provided to any party
hereto under this Agreement or any other Loan Document shall be in writing or by facsimile and
addressed, delivered or transmitted to such party at its address or facsimile number set forth
below its signature hereto or at such other address or facsimile number as may be designated by
such party in a notice to the other parties. Any notice, if mailed and properly addressed with
postage prepaid or if properly addressed and sent by pre-paid courier service, shall be deemed
given when received; any notice, if transmitted by facsimile, shall be deemed given when
transmitted and a receipt, demonstrating successful transmission, is received by the Sender.
Delivery by telecopier of an executed counterpart of any amendment or waiver of any provision of
this Agreement or any other Loan Document shall be effective as delivery of an original executed
counterpart hereof.



     SECTION 10.3. Payment of Costs and Expenses. The Borrower agrees to pay on demand all
expenses of the Administrative Agent and the Collateral Agent in connection with




     (a) the negotiation, preparation, execution and delivery of this Agreement and of each
other Loan Document, including schedules and exhibits, and any amendments, waivers,
consents, supplements or other modifications to this Agreement or any other Loan Document as
may from time to time hereafter be required, whether or not the transactions contemplated
hereby are consummated;




     (b) the filing, recording, refiling or rerecording of each of the Security Documents
and/or any Uniform Commercial Code financing statements relating thereto and all amendments,
supplements and modifications to any thereof and any and all other documents or instruments
of further assurance required to be filed or recorded or refiled or rerecorded by the terms
hereof or of the Security Documents; and




     (c) the preparation and review of the form of any document or instrument relevant to
this Agreement or any other Loan Document. Each Lender and Hedging Counterparty agrees to
reimburse the Administrative Agent, the Collateral Agent and each Lender and Hedging
Counterparty on demand for such Lender’s (or Hedging Counterparty, as applicable) pro rata
share (based upon its respective percentage of all of the outstanding Obligations
represented by such Person’s outstanding Obligations) of any such costs or expenses not paid
by the Borrower. The Borrower further agrees to pay, and to save the Administrative Agent,
the Collateral Agent, the Lenders and the Hedging Counterparties harmless from all liability
for, any stamp or other taxes which may be payable in connection with the execution or
delivery of this Agreement, the Borrowings hereunder, or the issuance of the Notes or any
other Loan Documents. The Borrower also agrees to reimburse the Administrative Agent, the
Collateral Agent, the Lenders and the Hedging Counterparties upon demand for all
out-of-pocket expenses (including reasonable attorneys’ fees and legal expenses) incurred by
the Administrative Agent, the Collateral Agent, such Lender or such Hedging Counterparty in
connection with (x) the negotiation of any restructuring or “work-out,” whether or not
consummated, of any Obligations and (y) the enforcement of any Obligations.



     SECTION 10.4. Indemnification. In consideration of the execution and delivery of this
Agreement by the Administrative Agent, the Collateral Agent, each Lender and each



57









 




Hedging Counterparty, and the extension of the Commitments, and the arrangement of the
facility represented by this Agreement, the Borrower hereby indemnifies, exonerates and holds the
Administrative Agent, the Collateral Agent, each Lender and each Hedging Counterparty and each of
their respective Affiliates, officers, directors, employees and agents (collectively, the
"Indemnified Parties”) free and harmless from and against any and all actions, causes of action,
suits, losses, costs, liabilities and damages, and expenses incurred in connection therewith
(irrespective of whether any such Indemnified Party is a party to the action for which
indemnification hereunder is sought), including reasonable attorneys’ fees and disbursements
(collectively, the “Indemnified Liabilities”), incurred by the Indemnified Parties or any of them
as a result of, or arising out of, or relating to





     (a) any transaction financed or to be financed in whole or in part, directly or
indirectly, with the proceeds of any Borrowing;




     (b) the entering into and performance of this Agreement and any other Loan Document by
any of the Indemnified Parties (including any action brought by or on behalf of the Borrower
as the result of any determination by the Lenders pursuant to Article V not to fund
any Borrowing);




     (c) any investigation, litigation or proceeding related to any environmental cleanup,
audit, compliance or other matter relating to the protection of the environment or the
Release by the Borrower or any of its Subsidiaries or any Obligor of any Hazardous Material;




     (d) the presence on or under, or the escape, seepage, leakage, spillage, discharge,
emission, discharging or releases from, any real property owned or operated by the Borrower
or any of its Subsidiaries or by any other Obligor of any Hazardous Material (including any
losses, liabilities, damages, injuries, costs, expenses or claims asserted or arising under
any Environmental Law); or




     (e) any misrepresentation or inaccuracy or breach of Section 6.13 without
giving effect to any knowledge qualification therein contained, regardless of whether caused
by, or within the control of, the Borrower or such Obligor or such Subsidiary; in each case
except for any such Indemnified Liabilities arising for the account of a particular
Indemnified Party by reason of the relevant Indemnified Party’s gross negligence or willful
misconduct, as determined by a court of competent jurisdiction in a final non-appealable
judgment, or such Indemnified Party’s own unexcused breach of any provision of any Loan
Document (as determined by the final non-appealable judgment of a court of competent
jurisdiction), PROVIDED THAT IT IS THE INTENTION OF THE PARTIES HERETO THAT THE INDEMNIFIED
PARTIES BE INDEMNIFIED IN THE CASE OF THEIR OWN NEGLIGENCE, REGARDLESS OF WHETHER SUCH
NEGLIGENCE IS SOLE OR CONTRIBUTORY, ACTIVE OR PASSIVE, IMPUTED, JOINT OR TECHNICAL. If and
to the extent that the foregoing undertaking may be unenforceable for any reason, the
Borrower hereby agrees to make the maximum contribution to the payment and satisfaction of
each of the Indemnified Liabilities which is permissible under applicable law.




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     SECTION 10.5. Survival. The obligations of the Borrower under Sections 4.3,
4.4, 4.5, 4.6, 9.3, 10.3 and 10.4, as well as any
other indemnification or exculpation provisions of any Loan Document, and the obligations of the
Lenders under Section 9.1, shall in each case survive any termination of this Agreement,
the payment in full of all Obligations and the termination of all Commitments. The representations
and warranties made by the Borrower and each other Obligor in this Agreement and in each other Loan
Document shall survive the execution and delivery of this Agreement and each such other Loan
Document.



     SECTION 10.6. Hedging Counterparties Are Third Party Beneficiaries. The benefit of
the Security Documents and of the provisions of this Agreement relating to the Collateral shall
also extend to and be available to the Hedging Counterparties with respect to any Hedging
Obligations of the Borrower or any of its Subsidiaries that are in effect, and the Hedging
Counterparties are express third party beneficiaries of the Loan Documents.



     SECTION 10.7. Severability. Any provision of this Agreement or any other Loan
Document which is prohibited or unenforceable in any jurisdiction shall, as to such provision and
such jurisdiction, be ineffective to the extent of such prohibition or unenforceability without
invalidating the remaining provisions of this Agreement or such Loan Document or affecting the
validity or enforceability of such provision in any other jurisdiction.



     SECTION 10.8. Headings. The various headings of this Agreement and of each other Loan
Document are inserted for convenience only and shall not affect the meaning or interpretation of
this Agreement or such other Loan Document or any provisions hereof or thereof.



     SECTION 10.9. Execution in Counterparts, Effectiveness, etc. This Agreement may be
executed by the parties hereto in several counterparts, each of which shall be deemed to be an
original and all of which shall constitute together but one and the same agreement. This Agreement
shall become effective when counterparts hereof executed on behalf of the Borrower and each Lender
and Agent (or notice thereof satisfactory to the Administrative Agent) shall have been received by
the Administrative Agent.



     SECTION 10.10. Governing Law; Entire Agreement. THIS AGREEMENT, THE NOTES AND EACH
OTHER LOAN DOCUMENT SHALL EACH BE DEEMED TO BE A CONTRACT MADE UNDER AND GOVERNED BY, AND CONSTRUED
IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK (WITHOUT GIVING EFFECT TO THE PRINCIPLES
THEREOF RELATING TO CONFLICT OF LAW, EXCEPT SECTION 5-1401 OF THE NEW YORK GENERAL OBLIGATIONS LAW)
AND EXCEPT TO THE EXTENT THAT THE LAWS OF ANOTHER JURSIDICATION ARE EXPRESSLY ELECTED IN ANOTHER
LOAN DOCUMENT. This Agreement, the Notes and the other Loan Documents constitute the entire
understanding among the parties hereto with respect to the subject matter hereof and supersede any
prior agreements, written or oral, with respect thereto.



     SECTION 10.11. Successors and Assigns. This Agreement shall be binding upon and shall
inure to the benefit of the parties hereto and their respective successors and assigns; provided,
however, that:



59









 






     (a) none of the Borrower or any Lender may assign or transfer its rights or obligations
hereunder without the prior written consent of each other party hereto, provided, however,
that for purposes of this Section 10.11 if the survivor of a merger is obligated
with respect to all obligations of the Borrower hereunder and under all other Loan
Documents, a merger permitted pursuant to Section 7.2.8 hereof shall not be an
assignment or transfer of the Borrower’s rights or obligations hereunder; and




     (b) notwithstanding the preceding subsection (a), AREP O&G may pledge and collaterally
assign all of its rights under the Loan Documents (in whatever capacities) to AREP Agent
(including any successor AREP Agents), and upon enforcement of such pledge and collateral
assignment any purchaser or other successor to AREP O&G (whether at a foreclosure sale,
under a deed in lieu of foreclosure, or otherwise) may thereafter freely assign all of its
rights under the Loan Documents.



     SECTION 10.12. [Reserved]




     SECTION 10.13. Other Transactions. Nothing contained herein shall preclude the
Administrative Agent, the Collateral Agent or any other Lender from engaging in any transaction, in
addition to those contemplated by this Agreement or any other Loan Document, with the Borrower or
any of its Affiliates in which the Borrower or such Affiliate is not restricted hereby from
engaging with any other Person.



     SECTION 10.14. Confidentiality. In the event that the Borrower provides to the
Administrative Agent or the Lenders confidential information belonging to the Borrower or any of
the other Obligors, then the Administrative Agent and the Lenders shall thereafter maintain such
information in confidence in accordance with the standards of care and diligence that each utilizes
in maintaining its own confidential information. This obligation of confidence shall not apply to
such portions of the information that (a) are in the public domain, (b) hereafter become part of
the public domain without the Administrative Agent or the Lenders breaching their obligation of
confidence hereunder, (c) are previously known by the Administrative Agent or the Lenders from some
source other than the Borrower, (d) are hereafter developed by the Administrative Agent or the
Lenders without using the Borrower’s information, (e) are hereafter obtained by or available to the
Administrative Agent or the Lenders from a third party who owes no obligation of confidence to the
Borrower with respect to such information or through any other means other than through disclosure
by the Borrower, (f) are disclosed with the Borrower’s consent (it being acknowledged that the
Borrower consents to Lender’s provision of such information to the Collateral Agent, the AREP Agent
and the AREP Lenders), (g) must be disclosed either pursuant to any Governmental Rule or to Persons
regulating the activities of the Administrative Agent or the Lenders, or (h) as may be required by
law or regulation or order of any Governmental Authority in any judicial, arbitration or
governmental proceeding. Furthermore, the Administrative Agent or a Lender may disclose any such
information to any other Lender, any independent petroleum engineers or consultants, any
independent certified public or chartered accountants, any legal counsel employed by such Person in
connection with this Agreement or any other Loan Document, including without limitation, the
enforcement or exercise of all rights and remedies thereunder, or any assignee or participant
(including prospective assignees and participants) in the Loans; provided, however, that the
Administrative Agent or the Lenders shall receive a confidentiality agreement from the Person to
whom such



60









 







information is disclosed such that said Person shall have the same obligation to maintain the
confidentiality of such information as is imposed upon the Administrative Agent or the Lenders
hereunder. Notwithstanding anything to the contrary provided herein, this obligation of confidence
shall cease one (1) year from the Effective Date, unless the Borrower requests in writing at least
thirty (30) days prior to the expiration of such three-year period, to maintain the confidentiality
of such information for an additional three-year period. The Borrower waives any and all other
rights it may have to confidentiality as against the Administrative Agent and the Lenders arising
by contract, agreement, statute or law except as expressly stated in this Section 10.14.



     SECTION 10.15. Non-Recourse to Officers and Directors. This Agreement and the
Obligations are fully recourse to Borrower and the other Obligors. Notwithstanding anything to the
contrary contained in this Agreement or in any other Loan Document, no recourse under or upon any
Obligation, representation, warranty or covenant shall be had against any of the officers,
directors, employees, agents or representatives of the Borrower or any other Obligor; provided,
however, that nothing in this Section 10.15 shall be deemed to constitute a waiver of any
Obligation evidenced or secured by, or contained in, this Agreement or any other Loan Document, or
affect in any way the validity or enforceability of this Agreement or any other Loan Document.



     SECTION 10.16. Forum Selection and Consent to Jurisdiction. ANY LITIGATION BASED
HEREON, OR ARISING OUT OF, UNDER, OR IN CONNECTION WITH, THIS AGREEMENT OR ANY OTHER LOAN DOCUMENT,
OR ANY COURSE OF CONDUCT, COURSE OF DEALING, STATEMENTS (WHETHER VERBAL OR WRITTEN) OR ACTIONS OF
THE ADMINISTRATIVE AGENT, THE COLLATERAL AGENT, THE LENDERS OR THE BORROWER MAY BE BROUGHT AND
MAINTAINED IN THE COURTS OF THE STATE OF NEW YORK OR IN THE UNITED STATES DISTRICT COURT FOR THE
SOUTHERN DISTRICT OF NEW YORK; PROVIDED, HOWEVER, THAT ANY SUIT SEEKING ENFORCEMENT AGAINST ANY
COLLATERAL OR OTHER PROPERTY MAY BE BROUGHT, AT THE ADMINISTRATIVE AGENT’S OPTION, IN THE COURTS OF
ANY JURISDICTION WHERE SUCH COLLATERAL OR OTHER PROPERTY MAY BE FOUND. EACH OF THE ADMINISTRATIVE
AGENT, THE COLLATERAL AGENT, THE LENDERS AND THE BORROWER HEREBY EXPRESSLY AND IRREVOCABLY SUBMITS
TO THE JURISDICTION OF THE COURTS OF THE STATE OF NEW YORK AND OF THE UNITED STATES DISTRICT COURT
FOR THE SOUTHERN DISTRICT OF NEW YORK FOR THE PURPOSE OF ANY SUCH LITIGATION AS SET FORTH ABOVE AND
IRREVOCABLY AGREES TO BE BOUND BY ANY JUDGMENT RENDERED THEREBY IN CONNECTION WITH SUCH LITIGATION.
EACH OF THE ADMINISTRATIVE AGENT, THE COLLATERAL AGENT, THE LENDERS AND THE BORROWER FURTHER
IRREVOCABLY CONSENTS TO THE SERVICE OF PROCESS BY REGISTERED MAIL, POSTAGE PREPAID, OR BY PERSONAL
SERVICE WITHIN OR WITHOUT THE STATE OF NEW YORK. EACH OF THE ADMINISTRATIVE AGENT, THE COLLATERAL
AGENT, THE LENDERS AND THE BORROWER HEREBY EXPRESSLY AND IRREVOCABLY WAIVES, TO THE FULLEST EXTENT
PERMITTED BY LAW, ANY OBJECTION WHICH IT MAY HAVE OR HEREAFTER



61









 







MAY HAVE TO THE LAYING OF VENUE OF ANY SUCH LITIGATION BROUGHT IN ANY SUCH COURT REFERRED TO
ABOVE AND ANY CLAIM THAT ANY SUCH LITIGATION HAS BEEN BROUGHT IN AN INCONVENIENT FORUM. TO THE
EXTENT THAT THE BORROWER HAS OR HEREAFTER MAY ACQUIRE ANY IMMUNITY FROM JURISDICTION OF ANY COURT
OF FROM ANY LEGAL PROCESS (WHETHER THROUGH SERVICE OR NOTICE, ATTACHMENT PRIOR TO JUDGMENT,
ATTACHMENT IN AID OF EXECUTION OR OTHERWISE) WITH RESPECT TO ITSELF OR ITS PROPERTY, THE BORROWER
HEREBY IRREVOCABLY WAIVES SUCH IMMUNITY WITH RESPECT TO ITS OBLIGATIONS UNDER THIS AGREEMENT AND
THE OTHER LOAN DOCUMENTS.



     SECTION 10.17. Waiver of Jury Trial. EACH PARTY HERETO HEREBY IRREVOCABLY WAIVES, TO
THE FULLEST EXTENT PERMITTED BY APPLICABLE LAW, (A) ANY RIGHT IT MAY HAVE TO A TRIAL BY JURY IN ANY
LEGAL PROCEEDING DIRECTLY OR INDIRECTLY ARISING OUT OF OR RELATING TO THIS AGREEMENT OR ANY OTHER
LOAN DOCUMENT OR THE TRANSACTIONS CONTEMPLATED HEREBY OR THEREBY (WHETHER BASED ON CONTRACT, TORT
OR ANY OTHER THEORY, AND (B) ANY RIGHT IT MAY HAVE TO CLAIM OR RECOVER IN ANY SUCH LEGAL PROCEEDING
ANY “SPECIAL DAMAGES,” AS DEFINED BELOW. EACH PARTY HERETO (X) CERTIFIES THAT NO REPRESENTATIVE,
AGENT OR ATTORNEY OF ANY OTHER PERSON HAS REPRESENTED, EXPRESSLY OR OTHERWISE, THAT SUCH OTHER
PERSON WOULD NOT, IN THE EVENT OF LITIGATION, SEEK TO ENFORCE THE FOREGOING WAIVER AND (Y)
ACKNOWLEDGES THAT IT AND THE OTHER PARTIES HERETO HAVE BEEN INDUCED TO ENTER INTO THIS AGREEMENT
AND THE OTHER LOAN DOCUMENTS BY, AMONG OTHER THINGS, THE MUTUAL WAIVERS AND CERTIFICATIONS IN THIS
SECTION. AS USED IN THIS SECTION, “SPECIAL DAMAGES” INCLUDES ALL SPECIAL, CONSEQUENTIAL,
EXEMPLARY, OR PUNITIVE DAMAGES (REGARDLESS OF HOW NAMED), BUT DOES NOT INCLUDE ANY PAYMENTS OR
FUNDS WHICH ANY PARTY HERETO HAS EXPRESSLY PROMISED TO PAY OR DELIVER TO ANY OTHER PARTY HERETO.



     SECTION 10.18. No Oral Agreements. THIS AGREEMENT AND THE OTHER LOAN DOCUMENTS
REPRESENT THE FINAL AGREEMENT BETWEEN THE PARTIES AND MAY NOT BE CONTRADICTED BY EVIDENCE OF PRIOR
CONTEMPORANEOUS OR SUBSEQUENT ORAL AGREEMENTS OF THE PARTIES.



     THERE ARE NO UNWRITTEN ORAL AGREEMENTS AMONG THE PARTIES.



[Signature Pages Follow]




62









 








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



	 	 	 	 	 	 	 
	 	 	BORROWER	 	 
	 
	 	 	 	 	 	 
	 	 	NEG OPERATING LLC
	 
	 	 	 	 	 	 
	 	 	By:	 	NEG Holding LLC, its sole Member
	 
	 	 	 	 	 	 
	 	 	By:	 	AREP Oil & Gas LLC, its Sole Member
	 
	 	 	 	 	 	 
	 
	 	 	 	 	 	 
	 	 	By:	 	/s/ Philip D. Devlin
	 	 	 	 	 
	 	 	 	 	Philip D. Devlin
	 	 	 	 	Vice President and Secretary
	 
	 	 	 	 	 	 
	 	 	Address:	 	1400 One Energy Square
	 

	 	 	 	 	 	4925 Greenville Avenue
	 

	 	 	 	 	 	Dallas, TX 75206
	 	 	Attention:	 	Philip D. Devlin
	 	 	Telephone:	 	(214) 692-9211
	 	 	Telecopy:	 	(214) 692-5055






S-1









 






	 	 	 	 	 
	 	 	CITICORP USA, INC., as Collateral Agent
	 
	 	 	 	 
	 

	 	By:
	 	/s/ David E. Hunt
	 

	 	Name:
	 	David E. Hunt
	 

	 	Title:
	 	Vice President
	 
	 	 	 	 
	 	 	Address:
	 	 	388 Greenwich Street
	 	 	New York, NY 10013






S-2









 






	 	 	 	 	 
	 	 	AREP OIL & GAS LLC., as a Lender and as
	 	 	Administrative Agent
	 
	 	 	 	 
	 

	 	By
	 	/s/ Philip D. Devlin
	 

	 	 	 	 
	 	 	Name:   Philip D. Devlin
	 

	 	Title:
	 	Vice President and Secretary
	 
	 	 	 	 
	 	 	Address:
	 
	 	 	 	 
	 	 	1400 One Energy Square
	 	 	4925 Greenville Avenue
	 	 	Dallas, TX 75206






S-3









 






EXHIBIT A




FORM OF BORROWING REQUEST




     CITICORP USA, INC..



[___]




[___]




Attention: __________________




NEG OPERATING LLC




Gentlemen and Ladies:




     This Borrowing Request is delivered to you pursuant to Section 2.3 of the Amended and Restated
Credit Agreement dated as of December 20, 2005 (together with all amendments and other
modifications, if any, from time to time thereafter made thereto, the “Credit Agreement”), among
the Borrower, the various financial institutions as are or may become parties thereto (including
the Lender) (collectively, the “Lenders”), AREP Oil & Gas LLC, as administrative agent (in such
capacity together with any successors thereto, the “Administrative Agent”) for the Lenders, and the
other agents and lenders party thereto. Unless otherwise defined herein or the context otherwise
requires, capitalized terms used herein have the meanings provided in the Credit Agreement.



     The Borrower hereby requests that a Loan be made in the aggregate principal amount of
$                     on                     , 20___as a [Eurodollar Loan having an Interest Period of
___months] [Base Rate Loan].



     The Borrower hereby acknowledges that, pursuant to Section 5.2.2 of the Credit
Agreement, each of the delivery of this Borrowing Request and the acceptance by the Borrower of the
proceeds of the Loans requested hereby constitute a representation and warranty by the Borrower
that, on the date of such Loans, and before and after giving effect thereto and to the application
of the proceeds therefrom, all statements set forth in Section 5.2.1 are true and correct
in all material respects.



     The Borrower agrees that if prior to the time of the Borrowing requested hereby any matter
certified to herein by it will not be true and correct at such time as if then made, it will
immediately so notify the Administrative Agent. Except to the extent, if any, that prior to the
time of the Borrowing requested hereby the Administrative Agent shall receive written notice to the
contrary from the Borrower, each matter certified to herein shall be deemed once again to be
certified as true and correct at the date of such Borrowing as if then made.





 




			
	 	 	*Select appropriate interest rate option.




Exhibit A - Page 1









 










     Please wire transfer the proceeds of the Borrowing to the accounts of the following persons at
the financial institutions indicated respectively:



	 	 	 	 	 	 	 
	Amount to be	 	Person to be Paid	 	Name, Address, etc.
	Transferred	 	Name	 	Account No.	 	of Transferee Lender
	 
	 	 	 	 	 	 
	$
	 	 	 	 	 	 
	 
	 	 	 	 	 	 
	 
	 	 	 	 	 	 
	 

	 	 	 	 	 	 
	 

	 	 	 	 	 	Attention:
	 

	 	 	 	 	 	 
	 
	 	 	 	 	 	 
	$
	 	 	 	 	 	 
	 
	 	 	 	 	 	 
	 
	 	 	 	 	 	 
	 

	 	 	 	 	 	 
	 

	 	 	 	 	 	Attention:
	 

	 	 	 	 	 	 
	 
	 	 	 	 	 	 
	Balance of such

	 	The Borrower	 	 	 	 
	 

	 	 	 	 
	 	 
	proceeds

	 	 	 	 	 	Attention:
	 

	 	 	 	 	 	 
	 
	 	 	 	 	 	 
	 

	 	 	 	 	 	 





     The Borrower has caused this Borrowing Request to be executed and delivered, and the
certification and warranties contained herein to be made, by its duly Authorized Officer this ___
day of                                         , 20___.



	 	 	 	 	 
	 	 	NEG OPERATING LLC
	 
	 	 	 	 
	 	 	By: NEG Holding LLC, sole member
	 
	 	 	 	 
	 
	 	 	 	 
	 	 	By:
	 

	 	 	 	 
	 	 	Name:
	 	 	Title:






Exhibit A - Page 2









 






EXHIBIT B




FORM OF CONTINUATION/CONVERSION NOTICE




CITICORP USA, INC..




[___]




[___]




Attention: __________________




NEG OPERATING LLC




Gentlemen and Ladies:




     This Continuation/Conversion Notice is delivered to you pursuant to Section 2.4 of the Amended
and Restated Credit Agreement dated as of December 20, 2005 (together with all amendments and other
modifications, if any, from time to time thereafter made thereto, the “Credit Agreement”), among
the Borrower, the various financial institutions as are or may become parties thereto (including
the Lender) (collectively, the “Lenders”), AREP Oil & Gas LLC, as administrative agent (in such
capacity together with any successors thereto, the “Administrative Agent”) for the Lenders, and the
other agents and lenders party thereto. Unless otherwise defined herein or the context otherwise
requires, terms used herein have the meanings provided in the Credit Agreement.



     The Borrower hereby requests that on                                         , 20___,




(1) $                                         of the presently outstanding principal amount of
the Loans originally made on                                         , 20___[and $                               &nb
sp;         of
the presently outstanding principal amount of the Loans originally
made on                                         , 20___],




(2) and all presently being maintained as [Base Rate
Loans] [Eurodollar Loans],




(3) be [converted into] [continued as],




(4) [Eurodollar Loans having an Interest Period of ___months]
[Base Rate Loans].



The Borrower hereby:






 




			
	 	 	*Select appropriate interest rate option.




Exhibit B - Page 1









 











     (a) certifies and warrants that no Event of Default has occurred and is continuing; and




     (b) agrees that if prior to the time of such continuation or conversion any matter
certified to herein by it will not be true and correct at such time as if then made, it will
immediately so notify the Administrative Agent.


Except to the extent, if any, that prior to the time of the continuation or conversion requested
hereby the Administrative Agent shall receive written notice to the contrary from the Borrower,
each matter certified to herein shall be deemed to be certified at the date of such continuation or
conversion as if then made.




     The Borrower has caused this Continuation/Conversion Notice to be executed and delivered, and
the certification and warranties contained herein to be made, by its Authorized Officer this ___
day of                                         , 20___.



	 	 	 	 	 
	 	 	NEG OPERATING LLC
	 
	 	 	 	 
	 	 	By: NEG Holding LLC, sole member
	 
	 	 	 	 
	 	 	By:
	 

	 	 	 	 
	 	 	Name:
	 	 	Title:







Exhibit B - Page 2